Good day, and welcome to the Synaptics Second Quarter Fiscal 2018 Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Jennifer German. Please go ahead.
Thank you, Shannon. Good afternoon, and thank you for joining us today on Synaptics' Q2 2018 conference call. With me on today's call are Rick Bergman, President and CEO and Wajid Ali, CFO. 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 Relations website.
The supplementary slides have also been furnished as an exhibit to our current report on Form 8 ks filed with the SEC earlier today and 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. Additionally, 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 ks for the fiscal year ended June 24, 2017, 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. And with that, I will now turn the call over to Rick Bergman.
Rick?
Thanks, and I'd like to welcome everyone to today's call. I'm pleased to report that total revenue for the 2nd fiscal quarter of $430,400,000 was in line with our projected range. As expected, our consumer IoT business accounted for roughly 25 percent of total revenue during the period. On the bottom line, we posted a GAAP loss per share of 2 point $4 was and customer base and to highlight the boundless opportunities ahead of us through consumer IoT. Essentially, we are already starting to see the benefits of this transformation materialize.
As you've heard from many of our industry counterparts, Synaptics is not immune to the softer than expected mobile demand trends that have recently surfaced in China, yet we are forecasting only a 7% sequential revenue decline at the midpoint for fiscal Q3 during the weakest seasonal quarter of our fiscal year. This is being aided by anticipated year over year growth of over 35% from our newly acquired IoT businesses. We expect growth to resume in fiscal Q4 due to normal seasonality and the ramp of new products. Synaptics is now uniquely positioned at the center of the smart device market from a human interface perspective, capitalizing on the sharp growth and adoption of voice and bringing intelligence to the edge. We believe this bolsters our winning strategy with our well established core mobile business providing the level of scale and technologies that are crucial for and consumer IoT providing a new customer base, markets and products along with key ecosystem partners.
Combined with our sales and marketing channel, we are also primed to leverage these assets in adjacent At CES this year, we showcased the world's first ClearID in display fingerprint solution on the new Vivo flagship smartphone, the X20 plus UD, which is available now at retail. Synaptics ClearID was arguably the biggest mobile phone innovation featured at CES. Reporters from around the world swarmed our booth for 4 days to witness what is clearly a very highly desired feature in innovation for Infinity Display Phones. In fact, ClearID won 10 Best in Show Awards at CES and garnered 100 of positive headlines. I'd like to pause to thank our team for all of the hard work to get this exciting product to market.
Synaptics is extremely proud to be the pioneer bringing this technology to market and it was a truly groundbreaking effort. The public announcement of the technology in the Vivo phone has driven substantial interest in design engagements with other marquee mobile OEMs and we expect to see multiple product launch with ClearID in calendar 2018. Now let's drill down into the specifics around Q2, starting with our mobile business. Some of the newest technologies we introduced in the quarter are our TDDI and DDIC chip on film solutions or COF. Chip on film creates a new growth opportunity for us that enables Infinity displays on LCD phones.
Specifically, chip on film is a key enabler of very narrow bezels by folding the TDDI chip or DDIC underneath the LCD panel. We believe LCD panels will remain an important part of the smartphone market for the foreseeable future in light of the inherently higher price points for OLED panels, which also continue to be in limited supply. Chip chip on film further lengthens the runway for as display manufacturers are motivated to extend existing capacities. LCD Infinity displays are a top request from our major customers and Synaptics is quickly establishing itself as a leader in this market. We already have 20 chip on film engagements underway.
Our first design is in production today and we expect to deliver meaningful volumes early in the September quarter. We also announced the expansion of our OLED DDIC portfolio with 2 new solutions, the R66455 for Full HD Plus Panels and the R66451 for QHD Plus Panels. These new DDICs leverage the company's best in class image processing and state of the art technologies designed to enhance OLED displays. Key features of both solutions include support for the trend of extra long displays up to 20 to 9 and processing for rounded corners already have over 10 design ins at major display manufacturers with initial revenue expected in the June quarter, as we have just received our 1st mass production orders. I'll now move to our IoT business, which has encompassed our AudioSmart, ImagingSmart and VideoSmart platforms.
At CES, we showcased a myriad of products from smart speakers to headphones with Whisper technology products. You are well aware that we are at a key inflection point here with voice representing one of the most exciting trends in the consumer electronics market in recent years. With our audio smart solution, Synaptics is well poised to capitalize on significant growth opportunities as voice continues to rapidly proliferate on all the major global voice service platforms, including those from Microsoft, Amazon, Google, Baidu, Line and others. We jointly announced an initiative with Microsoft to facilitate fast, cost effective deployment of voice enabled solutions with Microsoft Cortana that leverages Synaptics' audio smart far field voice DSP technology. The collaboration includes ODM partner programs, reference design and rapid development kits specifically tuned to support the Microsoft Cortana ecosystem, including Skype.
This includes intelligent home speakers, PCCs, mobile devices, smart home appliances, automotive and beyond. During CES, we also announced that our AudioSmart far field voice DSPs have been selected by Harman International for the Harman Kardon Allure and the Allure portable voice activated smart speaker family. We continue to lead the industry with far field integration into different types of consumer IoT devices and we over 30 new customer product launches in calendar Q1. During CES, several Alexa enabled products were announced that are powered by Synaptics' voice DSPs, highlighting the diversification of products integrating voice. This includes smart bathroom mirrors by Kohler, a television soundbar from Polk, a smoke alarm by First Alert, a Wi Fi router by ASUS and a plug in charger for cars by Anker for enabling navigation, hands free calling and music streaming.
In China, there were also 2 announcements tied to our collaboration with Tencent. 1 is its set top box with our voice DSP and another is a home assistant with a display. Regarding our AudioSmart business for personal audio for headphones and earbuds, we announced that we are partnering with Goertek, a large ODM based in China focused on acoustic components. Goertek has adopted our innovative hybrid active noise canceling technology for a range of new USB C headphones. At CES, we also showcased our imaging smart technology with both Polaroid and HP.
These companies are using our image processing expertise for fun and portable instant digital cameras and printers, including the Polaroid Snap and Pop and the HP Sprocket family. On the video smart side of our IoT business, products continue to ship in a number of platforms worldwide ranging from IP, TV and OTT solutions for service provider platforms to personal digital assistant platforms and platforms like the Sony PlayStation VR. Also last quarter, we saw significant sell through and adoption of the Google Home Mini, which utilizes our SoC. We also expanded our footprint in the service provider TV market. Our video solutions are enabling the recently announced Canal Plus Mini Decoder used for multi room TV deployments.
Canal Plus is one of the largest satellite operators in Europe. In addition, we see continued worldwide adoption of Android TV set top boxes, including Foxtel in Australia, who is now using our SoC to enable their recently announced 4 ks Ultra HD set top box manufactured by Technicolor. Moving to our notebook PC business, we continue to lead in market share with our touchpad fingerprint sensors and audio solutions. New designs in the quarter includes our natural ID capacitive fingerprint solution on products from Acer, Dell and Lenovo. And HP, Dell and Lenovo have adopted our touchpad and click back solutions on 9 different new models.
Let's touch on our automotive business, where we are making strong progress in leveraging our touch display, fingerprint and Now Voice technologies. While the design cycles are long, we are achieving strong momentum in automotive design line cycles. Our success is accelerating because SnapNyx is uniquely positioned to bring a broad array of consumer technologies to this market, setting us apart from many of our competitors who don't have as extensive a pipeline of technology. Based on this progress, at our Analyst and Investor Day, we were able to share that we now expect to quadruple our revenue from the auto market over a 5 year time horizon. While smartphone trends and seasonality are temporary in results in the first half of the calendar year, we have a lot to be excited about as we look at the broader picture for growth in calendar 2018.
A little over a year ago, we had just begun to talk about our investments in Infini displays. We began sampling products in the second half of calendar twenty seventeen. Now we've begun initial mass production and expect to ramp to full mass production in the second half of the calendar year. Coupled with our strong product introductions in OLED and chip on film, we expect momentum stemming from our investments in Infinity Displays and Consumer IoT to become clear in the second half of the calendar year. As we said at Analyst Day, we believe these are also among the multiple vectors of organic growth towards reaching a $2,000,000,000 plus model by fiscal 2020.
With the transformation of our company to support a strong sustainable business model and a differentiated technology portfolio along with positive diversification of our customers and products, we believe we are well positioned to achieve growth within both our core business and new consumer IoT platform. Along with our resolute focus on expense management and the proper alignment of our investments, we expect this target model to result in continued generation of meaningful cash and substantial growth in EPS. With that, let me hand it over to Wajid. Thanks, Rick. Revenue for the December quarter was $430,400,000
in line with our guidance range. 2nd quarter revenue was up 3% sequentially, primarily reflecting the anticipated increase in IoT revenue from our Q1 acquisitions of Connexcent and the Marvell Multimedia Business, partially offset by declines in our mobile and PC product revenues. Year over year, December quarter revenue was down 7%, again reflecting the declines in our mobile and PC product revenues, partially offset by an increase in IoT revenue, driven primarily from our acquisitions. During the quarter, we had customers above the 10% revenue threshold, both at approximately 12%. As reflected in the presentation materials released in advance of this call, revenue from mobile, IoT and PC were 61%, 25% and 14% respectively in the December quarter.
Revenue from mobile products was down 11% sequentially and down 30% compared with the year ago quarter. Revenue from PC products was down 6% sequentially and 3% year over year. Revenue from IoT products was up 81% sequentially and 4 12% compared with the year ago quarter. I will now provide a high level review of certain of our December quarter GAAP results and will follow with the corresponding non GAAP results. For the December quarter, our GAAP gross margin was 26.8%, which includes $20,200,000 of intangible asset amortization, dollars 18,200,000 of inventory fair value adjustment charges and $700,000 of share based compensation costs.
GAAP operating expenses in the December quarter were $139,200,000 which includes share based compensation of 17 dollars restructuring and severance related costs of $6,600,000 and acquisition related costs of 5,400,000 dollars Our GAAP tax of $53,000,000 for the quarter primarily reflects a $54,000,000 discrete tax charge for both the impact of the one time transition tax on our accumulated foreign earnings and write down of deferred tax assets for tax law changes under the recently passed Tax Act. In the December quarter, we had a GAAP loss of $82,400,000 or a loss of $2.42 per share. Now turning to certain of our December quarter non GAAP results. Our December quarter non GAAP gross margin of 35.9% was in line with our guidance range and primarily reflects our overall product mix. December quarter non GAAP operating expenses came in towards the low end of our guidance.
Non GAAP operating expenses were $110,100,000 up $4,000,000 from the preceding quarter. The increase primarily reflects the incremental operating costs of the acquired businesses. Our non GAAP tax rate was 13% for the quarter, unchanged from our guidance and excludes the impact of the one time transition tax on our accumulated foreign earnings. Non GAAP net income for the December quarter was 38,200,000 or $1.11 per diluted share, an 8% sequential increase, but down 26% year over year. Turning to our balance sheet.
We ended the quarter with $252,000,000 of cash, an increase of $52,000,000 from the preceding quarter. The increase in cash during the quarter was primarily driven by $63,000,000 of cash flow from operations. On the topic of cash, we expect to have freer access to our foreign cash as a result of the Tax Act. While we had mechanisms in place to access foreign cash, that access had been subject to certain restrictions that have been removed under the Tax Act. Further, despite the GAAP tax impact of the Tax Act that I mentioned earlier, the cash impact is expected to be about $11,000,000 after utilization of business credits and will be payable over 8 years.
Receivables at the end of December were $236,000,000 and DSOs were 49 days, while inventory turns were 8 and inventories were $141,000,000 which included $5,000,000 of fair value adjustments. Capital expenditures for the quarter were $15,800,000 and depreciation was 8,800,000 Now I will make a few comments regarding our quarterly outlook. Based on our backlog of approximately $252,000,000 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 $380,000,000 to $420,000,000 We expect the revenue mix for mobile, consumer IoT and PC products in the March quarter to be As Rick indicated, we expect the seasonally low fiscal third quarter to be a trough with a return to sequential growth in fiscal Q4. I will now provide GAAP outlook data for our March quarter and will follow with non GAAP outlook of data.
We anticipate the stock based compensation charge in the Q2 to be in the range of $17,500,000 to $18,000,000 GAAP operating expenses in the March quarter are expected to be $125,000,000 to 135 $1,000,000 and are expected to include restructuring charges in the range of $2,000,000 amortization, of which approximately $20,000,000 is expected to be reflected in cost of sales. In addition, fair value inventory adjustments to be reflected in cost of sales are expected to be approximately $5,000,000 Finally, we expect our GAAP tax rate for the next quarter to reflect any adjustments to our current quarter provisional estimate of the Tax Act impact. I will now provide non GAAP outlook data for our March quarter. We expect non GAAP gross margin in the March quarter to be between 35% to 37%. We expect non GAAP operating expenses in the March quarter to decline to approximately $106,000,000 to $110,000,000 reflecting quarter over quarter cost savings from our restructuring initiated in mid November of last year.
Regarding our long term non GAAP tax rate, for now we will maintain our guidance in the range of 12% to 14%. While the federal corporate tax rate has been reduced, there are provisions of tax reform that will offset some of the potential savings and some savings will be muted by our existing tax operating structure. As technical guidance and interpretation of the Tax Act solidifies, we will complete our assessment of our non GAAP tax rate and we'll provide an update at that time. Per diluted share for the March quarter is anticipated to be in the range of $0.83 to $1 per share. To conclude my remarks, we are pleased with our Q2 results and our outlook for fiscal Q3.
We are incredibly excited about how our product and customer roadmaps are expected to unfold, creating the opportunity for strong success as in calendar 20 18. With that, we will now turn the call over to the operator to start the Q and A session. Operator?
Yes, sir. Thank you. We'll first move to Jon Vinn with KeyBanc.
Hi. Thanks for taking my question. My first question is on mobile. You've talked about your mobile outlook. It looks like it's going to be down 7%.
Given the weakness in China, it looks like many of your peers have talked about China being down in the 20% to 30% range. And then you've also got the Samsung business falling off in the March quarter. Can you talk about what the offsets were in your mobile business that you expect to be better than seasonal there?
So actually let me start off. So the overall business is coming down by about 7%. The mobile business sequentially is actually coming down by more than that. So we've got the capacitive business that's expected to come down sequentially, probably a little bit more than we expected, but our new products are expected to offset that a little bit.
Got it. Thanks. And then my follow-up question is related to your chip on film business. You talked about being in mass production in calendar Q3 this year. Can you talk about where you expect your initial design wins in types of phones and types of customers?
Are we talking kind of Tier 1 customers, flagship phones, are these mid tier phones? And then just also related to the chip on film business, I just wanted to understand what sort of competitive differentiation do you have in cost or is this a market that many of your display driver of your peers can also kind of be fast followers on?
Sure. Thanks, John. In some ways, COP or chip on film is a very broad initiative that's happening in the industry. So kind of my broad answer to all your questions was yes, that it's impacting almost all segments, both LCD and OLED, given the importance of maximizing the screen display on any type of display. So to kind of step through your different pieces of your question, yes, we're seeing it with large customers as well as midsize customers which tend to work closely with both on LCD and OLED panels, both DDIC and TDDI as well.
Now it's not 100% of course of our business, but it will be very meaningful. And as I mentioned in the prepared, Mark, we're actually in mass production now with 1 midsized smartphone OEM and expect a real uptick in business early in calendar Q3. Now in terms of differentiation, chip on film is generally available out there. We'll add additional price to our solutions. There are some complexities, especially when you get to the higher resolution or OLED type of phones.
And so we feel like we're establishing the right relationships first in the supply chain to give us a preferred position to from a technology as well as potentially a capacity perspective. Thanks.
We'll go ahead and take our next question. We'll take Kevin Cassidy with Stifel.
Yes. Thanks for taking my question. Can you maybe give us a little more details around the gross margin lift that you might be seeing through 2018?
Yes, sure. So Kevin, we've outlined our gross margin profile to be 34% to 37% in the near term and then for it to improve over time at a model level. You'll probably note for the last two quarters, we've actually been operating more in the 35% to 37% structure for the last 6 months or so. And that a lot of that benefit has really kind of come from our IoT business being a greater proportion of our revenues as well as some of the new products that we're launching in the mobile space. So now how quickly that moves from our near term model to our mid term model that we presented at the Analyst Day still remains to be seen as the quarters go and kind of the new products ramp.
But that's what we've been seeing for the last couple of quarters and we certainly expect it to remain at least at that level in the foreseeable future and hopefully improving.
Okay, great. And maybe just other detail on the chip on film design wins that you had. Are they all with the LCD manufacturers? Or are you working with handset manufacturers also?
Okay. Well, Kevin, that's to a certain degree, it's dependent. Again, like I answered John, both. In some cases, the LCD manufacturers want to extend the capacity and life of their LCD manufacturing facilities and they've worked closely with us on how to with the technology to bring the Infinity displays to LCDs. Conversely, some of the OEMs have seen that opportunity and they've worked with us to then work with multiple LCMs with this type of solution.
Okay, great. Thanks.
Next question comes from Rob Stone with Cowen and Company.
Hi, guys. The first thing I wanted to ask about is sort of your segment mix guidance in March. You announced a bunch of IoT wins, but PC is meant to be up a little bit in the mix and IoT down. Should we see sort of a stair step seasonal pattern for IoT from here in terms of the way the volume from those design wins builds?
Yes, Rob, good question. As I mentioned in the script, year over year, we had 35 we project 35 percent growth. So overall our IoT business is growing pretty strong. That's from the acquisition based growth. We had some existing IoT business with Synaptics which that number did not include.
So we're still learning this business to a certain degree, but based on all the design wins and the momentum that we see, certainly we would expect this quarter for IoT as everybody kind of takes a pause after the holiday purchases to be our lowest quarter and then the momentum or natural overall growth kicking in on IoT helping out calendar Q2. And then of course it is a seasonal business with some of those products that I talked about really leading up to a strong second half for our IoT business.
Okay. A question for Wajid on operating expenses came in at the low end of the range this quarter just reported and you're guiding down again for March. I know you're not giving full details for Q4, but I think you alluded to revenues rebounding sequentially. Will you still be getting benefits from restructuring that could take OpEx lower in the fiscal Q4?
Yes. So our plan right now is for fiscal Q4 to exit at about $105,000,000 a quarter of OpEx. Now that can kind of range a little bit, but that's basically our target for fiscal Q4. Our second quarter didn't get the full impact of the restructuring benefit because the restructuring happened in November. And so what you really see happening in fiscal Q3 is more of a fuller impact on a full quarter for our operating expenses.
And then we have a couple more things that we're enacting that we have planned on enacting that will actually favorably impact the P and L in fiscal Q4. But our plan is to exit fiscal Q4 at about $105,000,000 a quarter.
Okay. I'll squeeze in just one more quick one. You alluded several times to inventory fair value adjustments. Is that ongoing? Can you let us know what product severance has been?
Yes. I mean, that's just related to the acquisitions. It's related to the IoT business. So when we acquired them, we had to step up a fair value on the inventory and that gets amortized generally for 6 to 9 months. And so that should go away next quarter or maybe
a little bit in Q4, but most likely
it should all go away by fiscal Q3.
Great. Thank you. Next question
Just wondering as you ramp your OLED in display, there's been some commentary on yield and supply tightness there. So just wondering how that ramp looks. And if you can update what your full year looks like now on the top line?
Okay. So I'll talk about the OLED transition and Wajid can talk about the overall year. So in terms of OLED, in some ways, it's rolled out pretty much on target to what we've been talking about for at least the last year and a half or so. So we've been working with multiple OLED partners, providing actually now 2 generations of samples to them. And as you heard from our prepared remarks are also in our press release, we now have mass purchase orders, which means we have been qualified, which is a very significant step.
A and B, that also means at least a couple of those OLED panel manufacturers are also prepared to go to mass production later in calendar Q2 and then significantly ramping up in the second half of the year. So we feel we're well positioned that's rolling out kind of as we expected. There is tightness in the market, but with additional OLED panel suppliers coming on in China, Japan and Korea, it certainly presents opportunities for our technology as we go through the back half of calendar year 'eighteen and then certainly in 'nineteen.
Yes. So, Vijay, on your other question regarding the year, it's a little early to bracket Q4, especially with the number of product transitions that we have got occurring. As we said in the prepared remarks, our Q3 is our seasonal trough and we expect fiscal Q4 to grow sequentially over Q3. It's probably a little lighter than what we had thought a couple of months ago, primarily because we have had some sizable ship on film implementations that have moved from fiscal Q4 to our fiscal Q1. So the customer is still there.
The demand is still there. The product is but we do see some sequential growth into fiscal Q4 simply because of seasonality and new product ramps.
Sure. Got it. Just on the voice side, obviously impressive list of design wins there. Just looks like you guys got everybody carpeted there. But just wondering how sticky is that business?
I mean you're seeing some of the Amazon, Alexa, where Qualcomm is kind of coming in with a connectivity voice solution
sitting still on our roadmap. And at the end of the day, in a lot of ways, it's our algorithms and audio expertise that's been built up over a decade that came in from our Connexion acquisition that provides some pretty good differentiation. I don't want to call it bracket at any particular competitors, but there's some call it processor companies and some communication companies that certainly have strength in those areas, but that's not what's differentiating voice solutions. It's the ability to do far field voice, echo cancellation, managing the microphones in all different environments with different setups with a round speaker, all those different things you don't learn overnight. And so again, the team has been accumulating that knowledge.
In terms of stickiness, it depends on the customer, certainly some high volume. They're going to refresh annually. But there's other things that I mentioned as voice becomes prolific across many industries, they're looking for a known good solution and they want to design the mirror that I talked about for a couple of years, 2, 3 years. And so once we get those design ins, they're not huge volumes like the personal digital assistants, but as you heard me rattle off some of those names, you know those names well, Kohler or Polk, very well known in their own particular industries. And so we got a nice lead there that will and it will be quite sticky.
Thanks.
Next question comes from Rajvindra Gill, Needham and Company.
Thank you, and congratulations with all these new products and end markets that you're going into. Rick, a question on OLED. You talked about kind of the non Koreans, the Japanese, the Chinese ramping up panel capacity to support demand. Can you characterize the competitive landscape on the merchant display driver side? How you're positioned against the competition there?
That will be my first question. Thank you.
Sure, Raj. Great question. As we've seen from the capital investment from the Chinese and to a lesser extent the Japanese vendors, they're going to be major players in the OLED market going forward. However, they're inventing technology kind of as they go. And so as part of that, they want to work with a technology leader in Synaptics.
Thanks to the RSP acquisition that we did several years ago. We have the true experts in display drivers in the industry that understand display. In some cases, 20, 30 years of working with displays when I go visit our Japanese team. And that innovation and technology is exactly what the OLED manufacturers want to work with is they want the known technology as they ramp up. And so I would say we're kind of the de facto answer right now as these companies are bringing up their OLED manufacturing facilities.
So I really like our position and we're anxious to see these guys get to high volume production over the coming 18 months.
And on the in display fingerprint sensor, could you maybe talk about the feedback that you're getting from handset OEMs as they implement in display fingerprint sensors, say as an alternative to face ID or sorry, facial recognition or is it complementary? But it would seem that, in display fingerprint sensor is much cheaper, but offers a lot of the same benefits that you would get with facial IDD in the sense that you can remove the bezel and you have larger displays, but at a much lower cost. So just wondering if you're seeing that type of demand from that angle?
Yes, Raj, you kind of answered your own question. So yes, that's the feedback we're getting is it's a very, very compelling solution. We have the or right now have a Vivo X20 plus production phone and it is fantastic. The display is markedly bigger than my other solution that I have. And the price point is quite a bit lower.
And so price point is ultimately driven by cost. And certainly, at least right now, that's an advantage that an in display solution has. But kind of to drill down on it, what we really talk about when we talk about in display is the convenience, the speed and the security of the solution. And I think that is unmatched by any other authentication technology in the industry. Thank you.
We next move to Charlie Anderson with Dougherty and Company.
Yes. Thanks for taking my questions. Chip, on film, it sounds like a lot of exciting things going on there. I wonder if you could talk about the you're obviously talking about increasing units, but also increasing content, what you're expecting in terms of ASP lift versus your standard LCD display drivers? And then
I've got a follow-up.
Sure, Charlie. So kind of let me answer the specific question and then broaden it because we're getting a lot of questions around Chipon Flex. So certainly it provides an opportunity for an ASP lift because we're delivering our DDIC along with the chip on with the film. So I don't want to get into the whether it's 10%, percent or whatever that number is, but it's a nice incremental ASP lift. It tends to be a little more high resolution DDICs in terms of where it's targeted as well.
So that certainly helps. But not only do we have opportunity for growth with our chip on film solutions in the second half, I don't people forget our in display solution is set up for some real nice growth, our OLED DDIC is certainly set up for growth and then our consumer IoT business is also set up for some real nice growth along with the chip on
film. Great. And then as it relates to in display fingerprint sensor, I wonder if you could just maybe talk about where you feel you are in terms of lead the competition, maybe competitive differentiation as this plays out over the course of the next year or 2? Thanks.
Sure. So it's always hard to get a good competitive feel, frankly, because we know where our solution is. So it's now been qualified and in production, available at retail. Anybody can test it and play with it from a top 5 worldwide OEM. I don't know of anybody else that will be able to say that in the first half of the year.
So we stand alone from that perspective. That doesn't mean we aren't hearing about competition and of course the OEM customers that are considering us for design wins certainly want to keep the competitive fires burning as hot as possible. So we're not under estimating competition. We've been in this rodeo for a number of years in the mobile business. So we aren't sitting still.
We have a whole roadmap of optical and display fingerprints, both from a technology as well as from a cost perspective. And we expect to compete through the course of this calendar year next year. But we feel right now we have the best solution in the industry and we have a nice little lead.
Great. Thanks so much.
We will take a follow-up from Rob Stone with Cowen and Company.
Yes. I had a geeky question about the optical in display fingerprint sensor, which is, Rick, does it have to be specifically tuned to the thickness of the display and the cover glass that's being used? And if that's the case, if the end user has a screen protector, is that going to affect the performance?
So one of the beauties of our optical solution and I'll say this more broadly and maybe this plays a little on the question I just got from Charlie about differentiation is I'm also to my knowledge right now at least we're the only one with really active design ins with rigid OLED displays. And the reason we can say that is our particular solution works through a much thicker when you include the display thickness in the cover glass as well as any screen protector. Our solution is more robust than you probably will see from other optical solutions and especially something like ultrasonic that's very susceptible to changes in material. So can we work with the screen protectors? Yes, with high quality screen protectors, certainly we can sense through those as well.
Great. Thanks.
With no further questions in queue, I'd like to turn the conference back over to management for closing remarks.
Okay. Well, thank you, everyone. As you can see, we've got a very exciting calendar 'twenty eight in front of us. And once again, thanks for participating in our call and I look forward to either seeing you on the road or talking to you in the near future. Thank you.
Thank you. Ladies and gentlemen, that does conclude today's conference.