Good day. Welcome to the Synaptics second quarter fiscal year 2019 conference call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Ms. Jennifer Jarman of The Blueshirt Group. Please go ahead.
Thanks very much, Stephanie. Good afternoon. Thank you for joining us today on Synaptics' second quarter fiscal 2019 conference call. With me on today's call are Rick Bergman, President and CEO, Kermit Nolan, newly named interim CFO, and Wajid Ali, outgoing CFO, as announced in this afternoon's press release. This call is also being broadcast live over the web and can be accessed from the investor relations section of the company's website at synaptics.com. A quick reminder that we have posted a supplemental slide presentation on our investor relations website. The supplementary slides have also been furnished as an exhibit to our current report on Form 8-K, filed with the SEC earlier today, add additional color on our financial results.
In addition to the company's GAAP results, management will also provide supplementary results on a non-GAAP basis, which excludes share-based compensation, acquisition-related costs, and certain other non-cash or recurring or non-recurring items. Please refer to the press release issued after market close today for a detailed reconciliation of GAAP and non-GAAP results. We would like to remind you that during the course of this conference call, Synaptics will make forward-looking statements. Forward-looking statements give our current expectations and projections relating to our financial condition, results of operations, plans, objectives, future performance, and business. Although Synaptics believes our estimates and assumptions to be reasonable, they are subject to a number of risks and uncertainties beyond our control and may prove to be inaccurate. Synaptics cautions that actual results may differ materially from any future performance suggested in the company's forward-looking statements.
We refer you to the company's current and periodic reports filed with the SEC, including the Synaptics Form 10-K for the fiscal year ended June 30th, 2018, for important risk factors that could cause actual results to differ materially from those contained in any forward-looking statement. Synaptics expressly disclaims any obligation to update this forward-looking information. I'll now turn the call over to Rick Bergman. Rick?
Thanks, Jennifer. I'd like to welcome everyone to today's call. Synaptics posted another strong quarter and a positive first half of our fiscal 2019. Revenue was right on the mark, within our guidance range and up 2% sequentially. I'm very pleased to report that we handily exceeded our projections for non-GAAP EPS, posting year-over-year growth of 40%. This was driven by our sixth consecutive quarter of improvement in non-GAAP gross margins, which are up 300 basis points over the year-ago period, as we continue to inch closer towards our medium-term target of 40%. Our favorable operating performance provides further validation of the positive impact of the Synaptics 3.0 strategy on our company and our financial results. We have made disciplined, smart decisions as we transition into a more diverse company with decreasing reliance on mobile and shifting greater focus to IoT.
This has allowed us to steadily improve our margins and amplify our earnings power, boosting our profitability profile and business model. As we enter the new calendar year, we believe the significance of this transition is even more evident in light of the current conditions affecting certain areas of our business. As widely reported in mobile, a couple of leading OEMs have publicized significant softness in demand. Like others in the supply chain, Synaptics is not insulated from these trends. However, the value of our diverse customer base and strong position with several China OEMs that continue to post growth is helping to somewhat lessen the impact. We remain a clear leader in the field as we continue to deliver innovation that our customers highly value across OLED DDIC, touch, and TDDI. In IoT, we are excited to be sampling our next-generation AudioSmart solution to key customers.
This is the industry's first 22-nanometer purpose-built solution for the voice market, providing low power, cost efficiency, and the ability for higher-level integration. As previously noted, we are seeing near-term weakness in the broader consumer IoT market. The catalysts for growth remain very attractive, and we continue to set ourselves up for strong leadership and success across the multiple opportunities we are addressing with a growing pipeline of design wins. The PC market is a bright spot for Synaptics, generating year-over-year growth and demonstrates the staying power of our investments in innovations even in mature markets where we have been operating for a long time. While we are not immune to component shortages across the industry, we are benefiting from increased content per PC through growing attach rates for our capacitive fingerprint solutions.
Lastly, we remain very well-positioned in automotive, where we will remain on a trajectory to double our revenue by 2021. Armed with the ability to better navigate downward market cycles under Synaptics 3.0, we remain very excited about the main growth drivers of our business, including IoT, OLED, and automotive, where we continue to invest to support our broad solutions platform and premium customer base. In addition, we are laser-focused on strong execution as we deliver our next generation of products, which I will now discuss as we review recent progress across our four key markets. Let's begin with our IoT division. Synaptics-powered devices continue to proliferate in areas from smart speakers to set-top boxes and sound bars, to voice-enabled car accessories and high-fidelity digital headsets in high-end smartphones.
In fact, it is now common to have multiple products powered by Synaptics in your home, office, and car. Our new series of Smart Edge AudioSmart solutions leveraging 22 nanometers is now sampling at key customers and is expected to begin shipping in fiscal Q4. These include the world's first fully integrated SOCs, comprising neural network acceleration, our proprietary wake word engine, our highly advanced far-field voice processing. Targeting a broad variety of voice-enabled smart home devices, including hubs, Wi-Fi repeaters, speakers, and appliances, the AudioSmart AS3xx product family incorporates a new powerful machine learning engine. Ensuring a high level of device and system security is a fundamental differentiator of this new set of products. This ranges from a dedicated security processor to architecting every element of the SOC and system implementation.
The AS371 solution with SyNAP on-device intelligence, it enhances consumer privacy by greatly reducing the need to continuously send personal data to the cloud. Voice is rapidly becoming the preferred interface for interacting with devices. Recently at CES, two of our product partners launched the first car accessories with Google Assistant and our far-field voice solution, the JBL Link Drive and the Anker Roav Bolt. Another success in the IoT space includes a selection of our VideoSmart and AudioSmart technologies by SK Broadband in Korea for its upcoming B tv consumer devices to be launched in 2019. This partnership is expected to power next-generation services to four million subscribers. Synaptics VideoSmart technologies have a leading market position in the fastest-growing segment in the IPTV OTT industry, where service providers have adopted Android as a software platform.
Industry analysts report that over 70% of TV operators worldwide are considering Android and that there will be over 100 million devices shipped by calendar year 2022 with Android TV. In addition to the latest 4K HDR video and security technologies, our VideoSmart family has added AI to its differentiating feature set. Our AudioSmart far-field voice DSP technologies are also being adopted by TV providers for enabling consumers to use their voice to control their TV and home automation services. Let's turn to our mobile division. Our strategic investments and timing of product rollouts and smartphone displays are really paying off as the TDDI market continues to grow rapidly and as broader OLED capacity begins to materialize. Our ClearView OLED display driver leveraging flexible chip-on-film packaging, or COF, has been widely adopted by several major smartphone OEMs.
As we move into the next generation of solutions, we believe that we are now sampling the industry's lowest power OLED DDIC, which consumes 40% less power than the prior version. Synaptics continues to lead the evolution towards bezel-free and brilliantly immersive infinity displays for both OLED and LCD smartphones with our innovative COF designs, highlighted by over 20 projects already in mass production, including the world's largest OEMs. Our close partnership with key display manufacturers in China, Japan, and Korea are arming global smartphone OEMs with state-of-the-art touch and display technology across all resolutions, whether OLED or LCD panels. We have built a mature COF supply chain to address the rapid trend toward bezel-free phones in our early innovations in TouchView TDDI and discrete DDICs are enabling the market to flourish with vivid smartphone displays showcasing our feature-rich technology.
Some of the latest adopters of Synaptics TDDI include Huawei, who selected our TouchView technology for multiple models, including the P20, the Honor 8, and 10 Lite, as well as five other models. Oppo chose our TDDI for its new F5 and Vivo for its new V9 models. Synaptics' leadership in OLED has also led to several discrete touch wins, including two new models from Oppo and three new Vivo phones. Our VR portfolio is also gaining traction with our R63455 DDIC being selected for the latest Qualcomm reference headset design. The 2K resolution of our solution helps eliminate the screen door effect and enables higher resolution content to be sent over existing data protocols like USB Type-C. Now let's move to another key growth area, automotive, where the connected car is driving market trends towards more and larger displays.
In the prior quarter, we talked about several display manufacturers building full in-cell automotive panels using Synaptics TDDI solution. I'm pleased to say that we are now seeing those efforts transforming into design wins across Japan, Europe, China, and the U.S., demonstrating wide adoption of the technology and industry recognition of Synaptics' strength in display and touch integration. We had several automotive TDDI display panels at CES this year, which were well-received by OEMs and tier 1s, and likewise, Synaptics solutions were also displayed by multiple OEMs in their booths. We lit up the first OEM production panel using Synaptics TDDI this month. We expect cars with Synaptics TDDI technology to roll out of assembly lines toward the end of calendar year 2020.
Now let's turn to our PC division, where our strong touchpad business continues to command market share leadership and our PC fingerprint business is strong and growing. Our newest match-in-sensor fingerprint solution will be shipping in leading PC OEMs products starting this quarter. Our footprint in PC also includes Skype-certified audio codecs and display interface technologies. Our leadership in these areas, along with key partnerships with leaders such as Microsoft, AMD, Intel, and standards such as FIDO, continue to define the roadmaps of PC OEMs globally.
We announced that Clevo, a leading OEM ODM notebook manufacturer for a variety of global consumer brands, is featuring Synaptics' state-of-the-art SecurePad Gamma technology for several of its new high-performance notebook series. An industry first, the Clevo SecurePad Gamma integration merges Synaptics' newest glass-based touchpad technology with our new cutting-edge, OXi-based Clear ID optical fingerprint sensor into a single module for notebook PCs. We are glad to be able to demo one of these models at CES. You may recall in 2016, we announced an exclusive partnership with OXi Technology, a Shanghai-based developer of unique and patented optical fingerprint technology. The collaboration includes combining technology from each company in the development of new proprietary optical sensing solutions, and we are pleased to see this starting to accumulate in innovative new user interfaces.
Before we move to a discussion of the financials, I'd like to address the CFO transition announced today, as Wajid has decided to pursue an executive-level opportunity at another publicly held company. On behalf of the board, I'd like to thank him for his numerous contributions to Synaptics over the last several years, and we wish him well with his next venture. We're pleased to announce that our longtime VP of Finance and Corporate Controller, Kermit Nolan, who has been with the company for nearly 15 years, has been promoted to Corporate VP, Chief Accounting Officer, and Interim CFO. We've also begun a search for a new CFO. With that, I'd like to give Wajid an opportunity to say a few words.
Thanks, Rick. This is a very bittersweet transition, as I've made a personal decision to pursue an opportunity that makes a lot of sense for me from a professional development standpoint. It's been quite a privilege to work with Synaptics these past four years, along with such a talented executive team, and I'm truly thankful to have played a role in the company's transformation and expanded growth and profit potential. Having worked very closely with Kermit during my tenure here, I have the utmost faith in his abilities as Interim CFO, and it's my pleasure to now introduce him to walk you through the Q2 financial results and outlook.
Thank you, Wajid, for your support and confidence. Hello, everyone. Synaptics posted solid second quarter results with revenues of $425.5 million at the midpoint of our guidance range and up 2% sequentially. As reflected in the presentation materials that were released in advance of this call, revenue from mobile, IoT, and PC products was approximately 65%, 20%, and 15% respectively. Revenue from mobile products was up 5% compared with the year-ago quarter and up 4% sequentially. Revenue from IoT products was down 18% year-over-year and up 1% sequentially. As we discussed last quarter, we have shifted a large portion of our investment dollars from in-display fingerprint to IoT to enable stronger growth of IoT over the midterm, which we believe will become more evident towards the end of the fiscal year. Revenue from PC products was up 4% year-over-year and down 7% sequentially.
During the quarter, we had two customers above 10% of revenue at 14% and 20%. For the December quarter, our GAAP gross margin was 35.2%, which includes $15.1 million in intangible asset amortization and $800,000 of share-based compensation costs. GAAP operating expenses in the December quarter were $124.8 million, which includes share-based compensation of $15.4 million, acquisition-related costs of $3.3 million, consisting primarily of intangibles amortization and some transitory compensation program costs, and restructuring expenses of $2.1 million. Our GAAP tax rate for the second quarter was 36.2%. In the December quarter, we had GAAP net income of $12.8 million or $0.36 per diluted share. On a non-GAAP basis, our December quarter non-GAAP gross margin of 38.9% was near the high end of our guidance range and primarily reflects overall product mix.
December quarter non-GAAP operating expenses were $104 million, which was below the low end of our guidance range. For the second quarter, our non-GAAP tax rate was 12%. Non-GAAP net income for the December quarter was $54.4 million, or $1.55 per diluted share, an increase of 42% year-over-year compared with $38.2 million, or $1.11 per diluted share in the December quarter of last fiscal year. Turning to our balance sheet. We ended the quarter with $283 million of cash, an increase of $20 million from the preceding quarter, which reflects approximately $59 million of cash flow from operations, net of $38 million used to repurchase approximately 988,000 shares during the quarter. We expect to continue to be active on an opportunistic basis with regard to our stock repurchase program. Receivables at the end of December were $326 million, and DSOs were 69 days, reflecting a back-end loaded quarter.
Inventories were $146 million, and inventory turns were 7.1. Capital expenditures for the quarter were $4.4 million, and depreciation was $9.2 million. I will make a few comments regarding our quarterly outlook, which reflects the broader market factors that Rick mentioned earlier. Based on our backlog of approximately $255 million entering the March quarter, subsequent bookings, customer forecasts, product sell-in and sell-through timing patterns, as well as expected product mix, we anticipate revenue for the March quarter to be in the range of $340 million to $380 million. We expect the revenue mix from mobile, IoT, and PC products to be approximately 62%, 20%, and 18%, respectively. I will now provide GAAP outlook data for our March quarter and will follow with non-GAAP outlook data. We anticipate the stock-based compensation charge in the third quarter to be in the range of $16.5 million to $17.5 million.
In addition, March quarter GAAP expenses will include non-cash charges of approximately $18 million related to intangibles amortization, of which approximately $15 million will be reflected in cost of sales. Finally, we expect our GAAP tax rate for fiscal 2019 to be in the range of 25%-30% for the fiscal year. I will now provide non-GAAP outlook data for our March quarter. Taking into account our overall revenue mix, we expect non-GAAP gross margin in the March quarter to be between 38% and 39%. We expect non-GAAP operating expenses in the March quarter to be in the range of $102 million to $106 million. We anticipate our non-GAAP long-term tax rate for fiscal 2019 to be in the range of 11%-13%. Non-GAAP net income per diluted share for the March quarter is anticipated to be in the range of $0.70 to $1 per share.
In closing my comments, I'd like to point out that we continue to diversify our product mix with greater focus on maximizing profitability. We are operating within our short-term model for gross margins and operating profit as we look at the fiscal year. As you know, historically, the March quarter is our seasonally lowest period, with the back half of the calendar year generally being much stronger. While quarterly patterns may be more volatile due to global economic factors, we continue to focus on our short-term model with an eye towards the midterm. With that, I'll hand the call back to Rick.
Thanks, Kermit. While we can't control the broader market conditions, we continue to march forward with our disciplined strategy and targeted investments under Synaptics 3.0, which has better equipped us to weather gyrations in our markets by expanding our product portfolio and diversifying our customer base, while pressing ahead in voice and other growth areas of the business. Ultimately, we are investing to win. As shown at CES, Synaptics is number one in numerous key areas across our technology portfolio, and we intend to expand our share. We are well-positioned for leadership in IoT with solutions based on vertically integrated software, firmware, and hardware, and as a strategic supplier to key market leaders. We continue to innovate and lead in the mobile market with strong growth opportunities across LCD, TDDI, and OLED display and touch.
We are forging a strong growth path in automotive, where we are leading the transition to TDDI and expect to benefit as the connected car drives a revolution in the need for displays. Lastly, we continue to innovate in the PC market, where we remain the leader in touch and are capitalizing on additional growth opportunities through fingerprint as well as voice and audio solutions. Our investments are focused on driving technology and product leadership in high-growth markets, as well as rapidly increasing our dollar content per box. By carefully developing our product roadmap, we are successfully executing to our financial targets with expanding margins and profitability. With that, we will now turn the call over to the operator to start the Q&A session. Operator?
Thank you. If you would like to ask a question, please signal by pressing star one on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, please press star one to ask a question. We'll pause for just a moment to allow everyone an opportunity to signal for questions. We'll take our first question from Kevin Cassidy from Stifel. Please go ahead.
Thanks for taking my questions. Congratulations on the good results, and good luck with Wajid. Maybe you had mentioned it slightly, you don't know what kind of a snapback we would see in the coming quarters. Can you give us an idea of what are channel inventories like, and maybe even the situation on TDDI wafers?
Sure, Kevin. I think as we've discussed in the past, for the majority of our business, the idea of a channel isn't a huge concept. Certainly for our new IoT businesses where they're smaller companies, that starts to play a bigger and bigger role for us. For our mobile customers, we kind of manage it. We indirectly have some of that effect with the display manufacturers. For the most part, we're comfortable, and we've accounted for any of that certainly in the guidance that we have. As we march forward, certainly there's additional opportunity. That kind of leads into your second question, which is TDDI. There, any inventory is very lean. We have now at this point, I can say supply is meeting demand. We believe we have adequate support from several of our sources to meet the demand out there.
It's somewhat unfortunate, though, because we had to pass on a few opportunities last fall that we would otherwise be rolling with if we had the wafer supply. At this juncture, we're ready to continue forward and grow that business.
Okay, great. Maybe just gross margin seems to be holding up very well, even with weakness. Is IoT driving that, and is there room for gross margin expansion still?
Yeah. Kevin, I put out there the goal for the company is to get to 40%, we're going to have to work at it, we have six in a row, we're not committing that we'll continue to hit that going up every quarter, because ultimately, we're focused on increasing earnings per share. As you can tell just from the percentages, IoT isn't the number 1 reason anymore that our gross margin's going up. I would say it's two things. Our product mix has been somewhat favorable across all three businesses, then the second factor is just the incredible focus that we have internally on that and recognizing the need that we want to continue to have gross margins go up across the company.
Okay, great. Congratulations again. Thanks.
Thank you.
Okay.
Once again, it is star one on your telephone keypad to ask a question. We'll move on to Vijay Rakesh from Mizuho. Please go ahead.
I guess, good quarter and good year, and best of luck. Just on the inventory side, I was wondering if you could give us a little more color on how inventories look in the channel and distributors.
Hey, Vijay. Thanks for the question, but we kind of heard the first part, but then you said inventory and the line broke up quite a bit. Could you repeat it, please?
Just inventories in the channel at the distributors.
Inventory in the channel at distributors.
If you're asking about do we have inventory in the channel or at distributors, someone answered that question for Kevin. We aren't like a lot of our semiconductor peers that have the large international distributors. We run pretty lean, with the exception of our IoT business, which for a portion of that business with the smaller customers, we do stock inventory. Now we do have somewhat of a channel through the display manufacturers. As an example with TDDI right now, it's very lean because of our ability to meet the market demands through the winter. Overall, the general channel or inventory that we've already sold, so to speak, is fairly lean for Synaptics.
Got it. Just on the gross margin side, obviously, you guys are executing well. As you look at 2019, how do you think the gross margin plays out through the rest of the year?
Sure. I'll start, then if Kermit wants to add some comments as well. A lot of it still, as I said, comes down to mix, so as we kind of look out through the calendar year, you start to see seasonality. We have big hopes for our IoT business, and that tends to be a second half of the calendar year business. We'll continue to work the gross margins. You saw our guidance for this quarter. As I mentioned on Kevin's question, from a focus perspective, the company will do our best to continue to inch it up as we move forward.
Got it. Thanks.
Once again, it is star one on your telephone keypad if you wish to ask a question. Please remember if you're using a speakerphone to make sure your mute function is turned off to allow your signal to reach our equipment. Again, please press star one to ask a question. We'll pause for just a few more moments to allow everyone the opportunity to signal for questions. Again, once more, it is star one to ask a question. It looks like we have a question from Kevin Cassidy from Stifel. Please go ahead.
Hi. Yeah, thanks for taking my follow-up. Just on the OpEx, it looks like it was very good control. Can we expect that going forward, or are there some one-time changes there?
Well, I think, again, we've taken actions over the last two and a half years to bring our OpEx in line with our revenues. We're definitely anticipating this quarter to be in that range of 102-106. I'd like to think that we will maintain that. Obviously, there's also investment into IoT. My expectation is we'll keep the OpEx down in the 102-106 range, hopefully this quarter and next quarter for sure.
Okay, great. Maybe as a follow-up, Rick, you mentioned the 22-nanometer devices. Does that give you a cost advantage also, or is Moore's Law not work out as well as for just driving cost but maybe more for performance?
No, Kevin, we recognize we're in consumer devices, which there's always cost pressure on those type of devices. When we made that selection, we really felt 22-nanometer was a sweet spot, especially the GlobalFoundries process which is an SOI type of process, which gives better performance power than some of the other CMOS technologies out there. Also because it's not quite in the 12-nanometer or 14-nanometer node where you talk some pretty darn expensive wafers and mask costs and so forth. We really felt it gave us a notch up from what was 28-nanometer, the right cost point, and the right power performance ratio, as well as the ability to continue to integrate.
Okay, great. Thank you.
Up next is Ari Shusterman from Needham & Company. Please go ahead.
Hello, this is Ari. I'm taking this question from Rajvindra Gill at Needham & Company. Within consumer IoT for auto, who are your key partners right now, and what new partners are you trying to attract to your platform? Same goes for consumer IoT for smart home.
Our key partners, and let me start with automotive. As you can imagine, it's a bit of a combination. We really have to meet with three different entities. One is the classic branded OEMs, and until some of these products are announced, I can't really go into who they are. They want to understand, and it's so important to them now with the connected car about where display technology is, that we meet with them. In some cases, they'll use a Tier 1, or in other cases, they'll go directly to a display manufacturer, and the display manufacturers are starting to look more and more like Tier 1s. We have to work with those Tier 1s or display manufacturers to get our product designed in. You can imagine who the display manufacturers are in the world out there.
It's all the names you know, whether it's Samsung, LGD, BOE, AUO, et cetera, that participate in the automobile market. As we shift to IoT, it's a much more fragmented ecosystem. We work with all of the key ecosystem players. Of course, Google is a big customer, but we've been a strong supporter of their initiatives around Android and what they've done just globally, whether it's smartphones or anything. We also, of course, work with Amazon as one of their certified partners on Voice, and many of the Amazon third-party solutions are based on our technology that you see available out there. When you move into China, Baidu, Tencent, Alibaba, who we also work with, but for very similar reasons. With IoT, you shift into, there's also the server provider market. You're asking kind of a broad question.
I guess in some ways, we did a presentation at CES, we list many of those partners and customers in that presentation if you go out to our investor relations website. The server provider platforms are all the providers out there worldwide, so they're quite a worldwide audience, Bouygues Telecom. We mentioned SK Broadband on this particular call. That's a smattering of the partners that we work with in those two spaces.
Yeah. Thank you for your answer. Just one quick follow-up. When it comes to OLED, can you give a bit more color and some updates on the roadmap?
As much as that's publicly available. Today we have a QHD solution for OLED, as well as a full HD, those can be used either with flexible or rigid OLED panels. We hinted very strongly in the script that we've done a lower power version of those devices, which has now begun sampling in the marketplace. Beyond that, you can expect us to continue to innovate around display quality, power, and higher levels of integration.
next we have Charlie Anderson from Dougherty & Company.
Yeah, thanks for taking my questions. I'm hopping between calls here, so sorry if some of this has been asked. Just on the IoT, it looks like where you're guiding to in the March quarter will be down maybe 19% or so, after down 18% or so in December, if my math's right. I guess I'm just curious what you see as potentially turning that around. I know you have a bunch of new products specifically within IoT. As it turns around, I'm kind of curious how the margin profile changes. I know the Marvell business you bought and the Conexant business you bought had very different gross margins. In terms of when you do see that growing, is it helpful on the gross margin? I've got a follow-up.
Okay, thanks, Charlie. In some ways, I think we should examine, why is our Q3 guidance down year-over-year? The two kind of reasons there, and it's persisted from what we said about Q2, so kind of no news there, is that a lot of our business was in the smart speaker business, and it just had a fantastic year, kind of came out of the chute there. That weakness is persisting into Q3. That's kind of one factor. The other factor is just more broadly, the whole IoT market is slower, as you've heard, I'm sure, the last few weeks. Those two factors have the lower year-over-year growth. We kind of expect it to grow from here.
As I mentioned in my prepared remarks, we will be in mass production with our 22 nanometer products in our fiscal Q4, and that certainly gives us a nice boost. They tend to be a little higher ASP products. As we swing into more seasonality in the back half of the year, I think the year-over-year compares will be much more favorable. We certainly expect that business to grow going forward. In terms of gross margin, Charlie, you're right. Conexant gross margins were a bit higher. The Marvell margins were a bit lower than 50%. They kind of balanced out a bit above 50% gross margin. That's where we expect our IoT business to continue to operate going forward.
Okay, great. Rick, just sort of a big-picture question. You have exposure on the LCD side and then also exposure on the OLED side. I'm curious just as sort of the consumer tastes shift and sort of what you're seeing real time in terms of what people are after, has anything changed in your view of what you need to invest in from a LCD versus OLED perspective? Internally. Thanks.
Sure. Again, as I mentioned to a previous caller, we actually have our best look at the trends between the two in terms of % of the marketplace, in the investor relations site with a presentation we did at CES, where we showed OLED non-Korean suppliers being a little less than $100 million displays this year. Nothing to change that over the past month. We're real excited about the OLED ramp, and we think it'll continue to be a higher and higher percentage of the smartphone marketplace. Kind of balancing that, though, of course, I think consumers are speaking in terms of price points that they want for their phones. LCD continues to have a substantial cost advantage versus OLED displays, at least for the next couple of years. We're kind of sticking with that mix going forward.
As you can imagine, we are shifting more of our investment dollars to OLED because there's higher growth rates there, while we also want to maintain our share and position in the LCD market.
Okay, great. Thanks so much.
I guess I should add there, Charlie, as well, that's independent of automotive, where we certainly are picking up our investment in automotive, where the vast majority of that will be LCD for the next decade.
Once again, it is star one on your telephone keypad to ask a question. If you're using speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. We will move on to Brett Simpson from Arete Research. Please go ahead.
Thanks very much. Rick, I just had a follow-up on the mobile business. I don't know if you could give us a sense for how you see TDDI as a market opportunity this year. Do you think in calendar 2019 TDDI will grow? Just bearing in mind there's a transition to OLED underway. Then just on the OLED side, can you give us a sense for what portion of your mobile business is OLED today? Help us sort of size this and how you think the ramp will play out. It's helpful knowing that you're seeing non-Korean OLED at like 100 million units this year, any market share projections or anything you can help us just sort of figure out where you're positioned and how you think it plays out over the course of calendar 2019, that would be very helpful.
Sure. Let me see if I can kind of address each of those questions. On the TDDI side, clearly the market will be bigger in 2019 than 2018. One of the challenges, of course, we have is we have pretty good share in 2018, and so our goal is to maintain that share as best we can. It won't be a huge growth driver for us, but we still see the opportunity in calendar year 2019 to grow that business year-over-year. Today, most of the TDDI market's in the full HD segment. The HD segment, for example, is still a mix of discrete type of solutions, but that's going to change very quickly as everybody's getting the benefits of TDDI finally. A pretty rapid shift.
That's in the presentation that I mentioned as well, our view on what percentage of the market or what opportunity we have in TDDI. On OLED, I have to remind myself there's a couple pieces to OLED. One is the display drivers, which I tend to talk most about. The business as part of the company is, sorry, I'm doing some quick math here. It's still relatively small, think in the 5% area of our quarterly results, maybe even a hair a bit lower than that. As we move forward, of course, we expect that to be higher, the 5% with the display driver comment. Of course, we sell touch controllers, there we participate much more broadly in the OLED market. I mentioned three design wins that we had with OPPO and Vivo, those are all with Samsung Display as an example.
That business is even bigger than the kind of the 5% category that I talked about. We're a fairly reasonable-sized participant in the OLED market today.
Great. Rick, just to follow up on that, as you look at the sort of the year playing out for OLED calendar 2019, how do you see that non-Korean display, that OLED opportunity, the 100 million-unit market that you described, how do you think your market share plays out, can you give us a sense as to how that business evolves as we go through the year?
Well, it'll ramp through the year, of course, as these various suppliers are bringing on capacity. I don't know if I can give you a Q1 is this and Q4 is that type of number.
Sure.
I will say it is a bit less than 100 million units, as best as we can tell. Our market share, again, it's really hard for me to peg down a particular product line, especially when we're in the early stages. It's kind of historically in the small display market, we've been in the 30-ish% market share.
Great. Thanks very much. That's helpful. Cheers.
Of our SAM.
It looks as though there are no further.
Sorry. No, go for it
There are no further questions. Again, as a reminder, it is star one on your telephone keypad to ask a question. We'll pause for just a few more moments. I apologize, would you mind clarifying that last answer? I apologize I interrupted.
Certainly. I just wanted to make it clear as part of our SAM, we're the non-Korean OLED display manufacturers.
Okay, perfect. Thank you. As another reminder, it is star one on your telephone keypad to ask a question. We'll pause for just a few more moments. There are no further questions. I'd like to turn it back over to management for closing remarks.
Okay. Thank you everyone for joining us on the call today. We look forward to seeing some of you again soon at Mobile World Congress in the latter part of the month. Goodbye.
This concludes today's call. Thank you for your participation. You may now disconnect.