Good morning, everyone. My name is Alex Wellins, and I've had the great pleasure to work with Synaptics for many years in Investor Relations. So I I want to welcome everybody to the Synaptics Analyst and Investor Day 2017. Thanks very much for everyone for coming. A couple of housekeeping items before we start.
There's power strips under the tables, Wi Fi instructions information is at the bottom of the agenda on your sheet, so everybody should be able to connect pretty easily. There are I want to make sure for those in the room, there are Google Home Mini devices out on the table. So I want to make sure everybody gets one. Synaptics technology is embedded in that device. So I want to make sure that everybody gets one and really appreciate everybody coming out here in person and welcome to those that are on the webcast.
We've got an exciting day planned for everyone today. Company put some news out this morning, which you should see on the wire. So we are webcast and we'll be pushing the slides live as the presenters go through them for those on the webcast. And then we will also be posting PDFs of the presentation on the Investor Relations website at some point during this morning, so you'll be able to see all the slides and download those as well. So before we get started, I do want to mention the obligatory Safe Harbor statement.
Synaptics Management will be making some forward looking statements today. We encourage you to look at our SEC filings on the website and as filed with the SEC for forward looking information and any factors that could change our could influence our results. So with that said, we're going to show a quick introductory video here and then we're going to have a kickoff from CEO, Rick Berkman. So with that
said, we'll
get rolling here. So thanks very much for coming and we'll be back throughout the session here when we'll be running Q and A later in the program. So thanks very much.
We are innovators, innovators who have changed the way people interface with technology for over 30 years. For decades, we've delivered winning solutions for notebook PCs and smartphones. We invented the touchpad, which continues to enhance mobile computing today and we designed the 1st capacitive touchscreen for mobile phones. Today, we're at the forefront of new technologies such as OLED and in display fingerprint sensing. And we're not stopping there.
We're always one step ahead. It's the dawn of the consumer IoT era where opportunities abound. The home is becoming a smart home with intelligence built in that responds to your voice and anticipates your needs. The number of connected devices in the home is exploding, and we're making these devices smarter with artificial intelligence and machine learning for reliable wake words, accurate command recognition, better privacy and security. Over 30 years ago, we set out to build electronic circuits that worked as well as the human brain.
The vision was embodied in our name, Synaptics, and the journey took us from touchpads to touch screens and now to voice. We are Synaptics.
All right. Well, good morning, everyone. It's great. And thank you all for coming. And those that are on the webcast, thank you for participating.
I thought I first would kick off with an introduction of my executive team. If you haven't met them at this juncture, kind of in order of presentation, Kevin Barber, who is responsible for our mobile products Heibert, who is responsible for our consumer IoT products Wodgett, our CFO, who many of you know and then Patrick, who will also present, our CTO David and John, both responsible for our engineering organization John McFarland, our GC Adnan, Corp. Dev, responsible for the acquisitions we did and then Mark, our Head of Sales. And then also and Sean, GM for our PC product, kind of hiding there in the back. And then Saleel, who will be responsible for our consumer IoT products and Ensignium Automotive products.
So first is title of my presentation is Synaptics 3.0. So why 3.0? So in some ways, it's amazing just 10 years ago, we were basically a PC company defined into the PCs with our touchpad. And even just a year ago, we characterized the company as 88% mobile. And today, you'll hear that our consumer IoT business already is substantial part of the company moving forward.
And it doesn't mean we're giving up on our PC business and certainly we're not giving up on our mobile business. As you saw the 2 announcements this morning that came out and then Kevin is going to show the world's first demo of a mass production of home with in display fingerprint. And as we look forward for the company, this is just the beginning of a really exciting future. And so we're real pleased to outline this strategy today, and I think we'll shed some light on how we have both growth as well as a great deal of future opportunity for the company. So one thing that is clearly happening as well is it's kind of interesting while we're going to talk about our future products and so on, Patrick will actually take us back 31 years ago to the founding of the company as a neural networking company.
And that very foundation 31 years ago is a key part of our strategy moving forward as we're going to talk about the intelligence to the edge. And clearly, there's a proliferation of devices out there in the consumer IoT market and those devices require a very rich human interface. I was talking to a few of you this morning, I already mentioned I've bought 8 voice enabled products in the last 3 or 4 weeks as part of this holiday period, a couple for myself and then a half dozen is gifts. And as Alex mentioned, we have a small gift for each of you The Google Home Mini, which from what I understand, is available as low as $19.99 at Target during Black Friday, which makes it a wonderful stocking stuff. Buy a few more yourself.
And so when that happens, of course, certainly the cloud is a very important part of bringing intelligence to these devices, certainly with training on AI out there. But when it comes back to the homework performance, latency, security, privacy, all those things are critical on these edge devices, the human interface. That's Synaptics' backyard. That's what we do best to take this proliferation of devices and more or less bring it home. And just to give you a simple example, so many of us have children.
And so about 1 year old, they get their voice, so to speak, and can start communicating. That certainly doesn't mean they stop touching, certainly doesn't mean they stop seeing. Maybe when they become teenagers, they stop listening. But nevertheless, we as humans like this rich interface. And so our technologies are building on themselves and we're seeing these tremendous opportunities now of where our OEM, our ecosystem partners just don't want to talk to us about one technology.
It's about the complete suite of human interface technologies. And there's really no other company position like Synaptics that can bring these capabilities forward. We are uniquely focused in this particular area. There's other companies focused on community connectivity and processing and so on, but from a human interface perspective, we are kind of at the center of this smart device bringing intelligence to the edge.
This is the exact slide I showed
a year ago. So when I showed this slide a year ago, we had no deals that we were about to close. There was no connection. There was no Marvell Multimedia business knocking down our door at the time. But we recognized that if we were going to be the major player in human interface, we had to have voice, we had to have SoC capabilities to be participate in this AI revolution, We had to have video capabilities if we're going to be a player in the smart home.
But most importantly, we looked at these trend lines and said, boy, we better be playing in the next growth platform out in our industry. We had to play in consumer IoT. And we knew to do that, we needed certain building blocks. And so just 5 years ago, all Synaptics had was touch. It's quite good to us, but it was touch.
5 years ago, we acquired a small division from IDT. It brought critical talent into the company. Innovation allowed us to put our toe in the video interface market for the first time. 4 years ago, we acquired Validity. That brought in authentication, biometric and of course fingerprint technology into the company as well.
Just 3 years ago, we acquired RSP, which of course brought in leadership display technology. And then this past summer, we made a couple other acquisitions, bringing in, as I mentioned, critical SoC technology, almost 700 patents in this space, key products, Imaging Smart, Video Smart, Audio Smart and then of course, along with that, critical customer and ecosystem relationships, which I'll show in a minute. But those are the principal building blocks that we need now to compete in the consumer IoT in our other markets going forward. From a market perspective, prior to the acquisitions, we played in a pretty robust almost $8,000,000,000 market, quite exciting. Now that we're able to play in the consumer IoT market, we've grown our addressable market by over a third up to $10,600,000,000 really giving us a great runway for growth from where the company currently is.
And of course, if we get beyond the numbers and talk about our customer base, It used to be our success was dependent on a handful of customers and their success. Clearly now you can see with this new customer base, we've become much, much more diversified. Major players around the world, different market segments, different product lines, really adjusting to the risk and adding to the diversification that was critical for us going forward. And of course, there's customers, but then there's also what kind of player are you in the industry. We had to foster new ecosystem relationships.
Again, it's a very worldwide footprint. Of course, there's Microsoft, there's Google, but now Baidu and Tencent or Docomo. Suddenly, we are in the forefront. We are the key human interface partner for these very large influential companies around the world. It's really hard to think of anyone that has a broader footprint with these different partners than Synaptics at this point.
And we're working with all of them and you can see our demos along the side on how we're making an impact around the world in a
whole new set of product categories.
This slide in some ways is for me
the most important slide as it outlines what we've been doing for the past 5 years and how this positions us for the next 5 years as a company. At first, it starts with 2 pillars of the company. The first pillar you're well acquainted with and that's mobile. And so what happens in the mobile market, tremendous innovation, fast time to market, technology, innovation, this pipeline, but most importantly is scale. So there's really no room for small players in the mobile market anymore, has to be of certain scale.
So we've built that capability. We have that asset. And then on the other side, of course, now we have consumer IoT. That brings the diversification that I just talked about, a new set of customers, different pattern, and also a
new set of technologies.
And as those two pillars along with our sales and marketing channel allow us to enter adjacent markets. And those adjacent markets certainly have the opportunity to continue to drive growth, leverage our technologies, have a different profile in terms of gross margin, ultimately allowing us to drive to better bottom line profits. If you think about some of the niche players that we compete against, life is going to get a little bit tougher, as we do have this tremendous pipeline of technology and innovation coming from our mobile or from our IoT business. We can leverage that scale. We can leverage that technology.
Those human interface experiences that we create on the cutting edge of consumer technologies really bring it into new adjacent markets. And you'll see an example of that with automotive later today. We've been investing in that 3 or 4 years ago. It's taken a while, but you'll see our success is now accelerating because we're uniquely positioned bring those consumer technologies into automotive, where some of our existing competitors just don't have that pipeline of technology and our OEM customers want to have that leading edge technology right out of the gate. Okay.
So let's talk about that was kind of the overall picture. Now let's start to drill down on some specifics. Of course, Synaptics, when we enter market segments, our goal is to be number one. We want to lead. And of course, the top half of this chart that you see is our historic strength, whether it's touch, fingerprint or display technologies.
So we aren't given any ground there. We're holding, continue to advance state of the art in our leadership.
Look at the bottom half, of
course, that's the new technology to markets that we've acquired. And certainly, we feel like we're well positioned. We're in the red hot, sizzling hot voice category right now, which is I really think that category of products for this holiday season and rolling into 2018 is the category for this season. Certainly, Android TV, again, we've managed to immediately get a leadership position there. And then VR, virtual reality, again, coming out of the gate with a leadership position.
So we're really pleased where we are in terms of our market segmentation. We always talk about where our best growth opportunities and you'll hear for the next couple of hours, you'll hear really about where we have the best opportunities for growth from the GMs. Starts with the display solutions. So TDDI, great growth over the past year. You'll hear from Kevin the ride is continuing on.
We'll introduce a new concept called chip on film. And then third, where we've made a lot of investments on OLED display drivers, we'll start to see it as payoff time for us now. We shift to the middle category, in display fingerprint. That's the star of the show today. So there'll be a lot of excitement around that and we're real pleased again our investments are paying off with critical design wins with our in display fingerprint.
And then 3rd, the consumer IoT business, I already mentioned the success in design that we've had in automotive and then the growth opportunities certainly in the smartphone. So let's now drill down on some numbers. So OLED, already a big segment out there in terms of the number of displays shipping into the marketplace, 18% CAGR, certainly a very nice growth considering the size of the market segment already. In 2018, we'll have certainly a pretty good opportunity as initial ramps occur. And by 2019, again, you'll see the detailed data on this.
The other OLED suppliers will be very substantial and will be the major player supplying OLED DDICs to the other players in the OLED market. Likewise, in display fingerprints, tremendous CAGR 80%. Of course, that's starting from a real small base. The exciting part for us is that small base is starting now and it is starting in calendar 2017. Again, a year ago, we told you we would be in mass production by the end of 2017.
We are right up to the edge there, but we made it. So I think the whole team is proud. There's a great deal of effort. There's fundamental challenges with in display fingerprint and our technical team was able to solve those problems. And now we have a top 5 OEM utilizing this product in a smartphone, which you'll see shortly.
You'll see not explosive numbers here because we want to keep our expectations appropriate for planning purposes. Automotive, 16% CAGR, nice, solid, strong, steady growth. And again, from a year ago, we will raise expectations in terms of our outlook on how we can do in this particular market based on a very strong design and funnel across all of our products. And then finally, the growth monster, the consumer IoT. You can see already 600, 700 unit opportunity per year, growing at 23% CAGR.
Our opportunities for Heibert's title of his presentation are boundless. There's tremendous opportunities. We have to figure out where we're going to focus because right now the opportunities are just incredible. So what does that mean for Synaptics as we look forward? So again, as I mentioned, it seems like yesterday we were a PC company.
This quarter, as we guided, about a quarter of our business is IoT, little over 60% is mobile and the balance is PC. So our PC number didn't come down, That's not how we were able to change the mix. If you look back on our peak of our PC business in 2010, today's volume or revenue isn't that far off from our peak PC revenue. We've been able to increase our footprint with additional solutions or higher value solutions. Now as we look forward to the future, that's going to be the same goal.
We expect our PC business, we expect our mobile business to continue with solid progress. Certainly, we expect the IoT business to start to have a very robust growth going forward given all the opportunities that we have, But we are still very excited about the mobile and PC business. And then you see another slice in there, the new slice that's undefined. At some point in the future, I'll be talking about Synaptics 4.0. It's not exactly what that is, but as you can imagine, being Synaptics, we have a few tricks up our sleeve yet where we'll be able to identify the next human interface and be the 1st in the market and kind of lead that next revolution there.
So in wrapping up my section, we're right in the middle of the transformation of Synaptics. We feel like we are a much more diversified technology company, much more diversified from a customer perspective. This is leading to a strong sustainable business funnel going forward, and certainly you're going to hear about growth, growth moving forward as a company, not only in the consumer IoT business, but also our core business as well. And with that, I would like to ask Kevin Barber come up and talk about our solutions for Infinity Displays. Thank you, Rick.
Good morning. I'm very excited to be here today to talk about the trends in the market that we are seeing in the mobile devices, which is particularly strong in this whole idea of the Infinity Display, and in particular, the multiple opportunities that Synaptics has to enjoy growth and deliver leadership and innovation into this market. Specifically, as Rick has shown and you may have read in the morning press, we're very excited to show our leadership and innovation by announcing that we're shipping the world's 1st TruvIn display solution into a mobile phone. I'll talk about more about that in a minute. We continue our leadership in our OLED touch position that we've had for several years.
The second announcement we made this morning is our new to production OLED DDIC serving both the full HD resolution, wide quad resolution display. And as the other display manufacturers grow and increase their capacity over these next couple of years, we expect tremendous opportunity to grow in this space. And we're very excited to announce that we already have more than 10 design ins with leading LCMs around the world. And as well, our TDDI business continues to be a huge opportunity, and I'll talk about how that plays into the Infinity Display trend that not only is an OLED trend, but as well as the market trend that is influencing the LCD segment as well. And we have a full portfolio of TDDI solutions going forward and we continue to lead with more than 60% of the market.
So the mobile market is large. It has served us well to continue to play and lead in this market, but the opportunity for growth is still growing. And so as we look at the dollar market opportunity over these next number of years, there's growth opportunities in biometrics, there's growth opportunities with the trend in OLED, and there continues to be growth in our TDDI segment. But to be more specific, as we look at the biometrics segment, this trend from capacitive buttons on the back of the phone to now in display fingerprint is a very important opportunity for us as that market is now transforming through 2018 and beyond. And we see the OLED DDIC opportunity as a very significant opportunity as that market continues to grow as well.
And then LCD, I'm going to talk about several opportunities in that space where resolutions and the aspect ratios are changing, growing our TDDI opportunity as well as a new trend of chip on film affecting both our DDIC as well as the TDDI market opportunity. So as we look specifically at the OLED growth, Rick has just shown this slide, this is already a fairly sizable market serving largely the flagship market, But as this Infinity Display trend continues, we expect the use of OLED displays in phones to grow at about an 18% CAGR, especially as more and more capacity comes online from more diverse customers from around Asia. I think what's important now as we set the stage for our opportunities is this inflection infects all of our technologies. This is both our fingerprint technology as we move from a capacitive button opportunities to now the in display technology that enables a true Infinity display where the fingerprint can be placed anywhere in the display as well as experience a great user experience as we're going to demonstrate here shortly. It involves our touch business where the technology of Flexible increasingly demands higher and higher performance, increasingly demands better and better support for these unique shapes and sizes of the phones.
And so our technology lead continues to provide an opportunity in our traditional touch business. And third, the display, where we have had a very strong position in the LCD display market, continue to do that. It provides us an opportunity to demonstrate and deliver that technology into the OLED market as well. And so we can now look at the trend that this OLED display is enabling, and that is this whole idea of specifically Infinity Display. And this shows you some history of how the industry is racing towards the display everywhere industrial design.
Several years ago, it was in the mid-sixty percent where the display was as a percentage of the phone with the Galaxy S2, and has continually made progress over these last several years and to today the modern phones being shipped in the market are in the mid 80% both represented by the S8 from Samsung and the iPhone 10. This trend we believe will continue and it provides the opportunity for the innovations that I'm speaking of. So specifically, in display fingerprint, and we're very excited about the announcement we made today that we believe is the inflection point of what is the new biometric for 2018. Our OLED display technology, and the growth opportunities for LCD opportunities. So today you may have read our press release Synaptics announcing the world's 1st in display fingerprint sensors for smartphones shipping to a top 5 global OEMs.
This has been a long journey of hard work, as Rick mentioned, of
technical delivery. It's a very difficult problem to solve, and
we're very proud to be standing here today announcing that we are now producing in mass production these devices for a key partner. Our ClearID solution on optical sensors are faster and they're more convenient and they're more secure than alternative biometrics in the market today. It enables true Infinity Display and what we mean by that is that we have no limits on the shape of industrial design of how that Infiniti display is implemented. The implementation of the phone design is flexible and how that Infiniti display is designed. It has a one touch secure identification.
Its ease of use of only media requires simple touch as a great user experience and one that delivers high levels of authentication security. It's flexible. It works both with flexible as well as rigid OLED displays. Not all solutions in the market today are able to do that, and so our ability to deliver this technology with either display for OLED is a great accomplishment. So not only am I excited to announce our 1st in display fingerprint sensor shipping and production, I'm very proud to be able to present the world's first phone with Synaptics SuriD.
And we have the actual phone here, so invite Neve up into the front of the room. And so this is a beautiful Infinity Display phone that is disguised and you will see we won't be able to mention the brand today, but you'll see on the display an on screen icon where the fingerprint goes and when the icon is pressed, the phone unlocks instantly. You can see how simple it is. It's fast, it's convenient, and it's secure. Thank you, Neve.
And so we're excited about this first design, and we'll be excited to talk about future designs in the coming period of time, but we believe this is a trend that is just now beginning. This is what we believe to be the biometric solution for 2018. So we put together a video to show you the history of the unlock and mobile devices. Enjoy. And so we think that's a pretty exciting trend.
You can see the user experience have reduced the latency as the industry has evolved and technology did it today. It's an instant response and the highest degree of ease of use in the front of the phone. And it's the latest technology that we believe will be the primary one moving forward for authenticating your device. So what is Synaptics Clear ID? It's fast.
Its latency, we believe, is 2 times faster than an alternative technology of facial. It's secure. Synaptics' adaptive quantum matcher enables high degrees of security with its authentication and has adaptability to deal with changing finger conditions and real world use cases. And as convenient, the ability to be used in discrete and flexible manners and challenging and normal use cases is really quite exciting. And so with that, I want to show you another video to demonstrate its convenience of use.
So we believe this technology is really advanced and we're very excited to be able to show that to you this morning. And so the opportunity, as Rick showed you, we believe is quite real and one that is going to begin to start in earnest next year. And so as you can see, we're forecasting somewhere around 70,000,000 phones will be enabled with this type of technology in the calendar 2018 with significant growth over the coming several years. And so this is a really great first driver of growth for our business going forward. And we're not going to stop there.
This is our roadmap. And while we're announcing today the world's first in display fingerprint solution, we have a lot of work well underway this year that's well underway in development to expand its affordability and to expand the tiers of the market that it can address. You can imagine that in initial phases, it will largely be in the higher end of the phone segments, but we want to drive this increasingly into a broader set of phone models and we have a roadmap to do this that. Ultimately, we've talked about the vision of the technology that we have in research in developing that will enable fingerprint anywhere and the more flexible implementation architecturally and ease of use and ease of display. So in summary, for our in display fingerprint, Infinity displays are here.
They're shipping and they're growing and they'll become increasingly a part of the industrial design of phones going forward. Synaptics has delivered another world's first with our Clear ID technology and it demonstrates continued innovation that Synaptics has been the leader in the human interface in mobile phones. And as well, our Synaptics Clear ID delivers the potential for a true Infinity experience. The flexibility of how this is enabled and the phone is designed has no limit and that provides a true Infinity experience. So on our second opportunity for growth in the mobile space is around the OLED display, and it has again another opportunity for growth as the market adopts more and more OLED displays going forward.
And we predict that we'll see about an 18% growth rate over these next several years. So first let me set the stage. So it comes as no surprise today the primary display manufacturer for OLED displays is Samsung and today they have a lion's share of that capacity and capability to deliver to the mobile market. But that's rapidly changing and we see with the forecast that we can see and predict that by 2019 around 38% of the display capacity for OLED will be represented by other manufacturers in the market. And so that's the growth opportunity that you see on the right, the growth opportunity of that 38% of that expanded market coming from other suppliers.
And it's not only just a couple of suppliers, it's actually quite diverse set of suppliers of which we can partner with and deliver advanced technical solutions to serve them in the marketplace. And so this is a really meaningful opportunity for us to grow over these next several years. So what are the challenges that are facing this market? When we look at OLED displays, what are the unique challenges that only Synaptics can engage in where we lead, where we innovate? First is that they're thin and they're flexible.
And technically that's a challenging problem to deliver a flexible, very thin display with high quality and high performance. 2nd is the industrial designs. You can see in the marketplace each OEM has its own signature design and its shape and the round and whether it has a notch or does not have a notch. It actually introduces challenges into how that display is enabled and how it is delivered. And third, the whole manufacturing OLED is an actual difficult process, very high degree of chemical processing but challenging yield, challenging image processing and stability and how can we help them with that image quality and manufacturing as they improve their manufacturing capability.
And so we are delivering technologies and what we're excited about and the capabilities that we have in our display team is the technologies that can help solve those imaging processing problems. So first, we have the technology that's quite unique to enable quite flexibly multiple industrial designs for round corner processing and delivering smooth and pleasing to the eye geometry. We have our own Demura technology and technology that deals with compensating for IR drop, which is a natural variation in the manufacturing of OLED and allows to compensate so that from the eye of the human, the visual display looks uniform and of high quality, effectively improving the yields and manufacturability of the display partner. We deliver our technology around smooth dimming. The state of the art in the industry today is actually step dimming and it's an unnatural, not very pleasing experience and our technology allows for a very pleasing smooth dimming and how the light changes in a video application or in a static image where it's changing but that natural change is quite smooth and pleasing.
And on the lower left, the flexibility of our solution that we're able to deliver same device to multiple LCMs and deliver what their technology requires with high quality, we can support multiple sub pixel rendering. What that means is how a panel is designed is able to be enabled with different manufacturers and deliver a given resolution with ease and great flexibility. And so this is the unique way that we're getting a lot of positive response from our customers because we're solving their technology challenges. So you also saw the second announcement this morning, which is the announcing of our 2 MP devices, the R66451 and the R66455, each serving a different resolution in the marketplace. They both support 20:nine aspect ratios, which is well in the space of Infinity displays.
They both support both flexible and rigid displays. Most exciting is that we already have 10 design ins in the midst of just now sampling these devices for China and Japan LCMs, and we expect initial revenue in the first half of this next calendar year. And we won't stop here. And so this last early of the year, we announced the device on the left, our Generation 1 OLED device, which is what you'll see on the demos, I believe on the side of the room over here is the demos from multiple display manufacturers demonstrating this device. Posters are Generation 1 OLED device.
And now today we're announcing the ones in the middle, our flexible OLED and rigid OLED 2018 devices for both resolutions of QHD and full HD. And now we're beginning to define and develop an integrated solution around changing the way OLED touch and display are integrated and we'll be expecting to sample that device at the end of next calendar year. The same time, we expect to continue to innovate and we'll be delivering for the discrete solution our Generation 2 OLED display drivers as well during 2018 supporting 2019 business. So the key takeaways as we look at the direct OLED display opportunity is number 1, the market opportunity is real. It's a growing market opportunity as more and more investment is going into the OLED market for Synaptics to benefit and grow our display business.
We have leading OLED technology that the customers and our market care about and are getting very positive response. And number 3, we will be generating revenue in this segment starting this next calendar year. Now a lot of talk is around the whole Infinity Display always talks about OLED and then the fact it's really the premise that Infinity Display is an OLED enabled phenomenon. But in fact, we are seeing a large opportunity for the enablement of infinite displays with LCD technology. So I want to talk about that because that is really also an important growth opportunity for Synaptics.
So first, we're very excited and proud that Synaptics successfully created this growing TDDI market these last several years and it will continue to grow. We've cable and we shipped 200,000,000 units. Not only that, we have 9 of the top 10 OEMs that are today buying Synaptics TDDI solutions. But it won't stop here. We have prediction here that you'll see that the TDDI market in unit terms will continue to grow.
And it's going to grow because it's going to be driven by the Infinity Display trend and the opportunity to integrate into TDDI solutions that trend. Number 2 is the inherent cost advantage that we continue to see for discrete versus TDDI solutions, integrated solutions will continue to take share. So this is growth factor number 1 for the LCD market that our TDDI business will continue to be a meaningful part of our business. But specifically then, Infinity Display is why is this trend occurring? There's really multiple reasons.
Number 1, the LCD manufacturers are not so easily going to give up their business to the OLED manufacturers and they're motivated to extend their existing installed capacity. Number 2 is the OLED business is facing supply constraints. Today it is a supply constrained market and it likely will be for these next couple of years. But as well and most importantly, there are price premiums for buying an OLED display relative to an LCD display and that motivates an OEM for certain segments of their market to look for alternatives if it delivers the industrial design that they desire for their phone. And these two trends are resulting in major customers requesting alternatives to OLED for Infiniti Display using LCD.
And so this is a trend we think will also drive meaningful growth for Synaptics in these next couple of years. So first, TDDI. As the leader in this market, we haven't stopped investing in these new technologies and the new trends. And so this shows you the number of products, the number of solutions that we have today or will have shortly to support 2018 in the various aspect ratios going from the historical 16x9 resolution excuse me, aspect ratios, all the way up to 20 by 9 as well as by various resolution. And you can see we have a significant portfolio of products that serve each of the segments of our customers' requirement.
And so we're really well positioned in terms of technology and products to meet market demand. But one of the new trends in addition to the idea of aspect ratios of moving from 16x9 to 20x9 is the addition of a
chip on film. And the benefit of this chip on film is
that while traditionally the DDIC or the TDDI would be mounted with the chip onto the glass of the display, which you see represented on the left with a flexible print circuit board coming off of that display to the main board. The alternative manufacturing that you'll begin to see more and more of in the coming year is placing the DDIC or the TDDI onto the film itself and taking it off of the glass. What is the benefit of that? The benefit is that actually reduces the amount of space necessary to enable that display driver, allowing a narrower bezel. So this is increasingly being a game of millimeters.
So every millimeter of a narrower bezel is one more way for an OEM to differentiate in the market to create this Infinity Display experience. And so this is real. This is a real trend. Today, we have more than 20 COF engagements with various customers and partners. We already have 1 shipping in production today.
And so this will lift our ASPs as well as extend the size of the market for LCD as it enables the ability to compete with Infinity displays coming from the OLED solution. So we're very excited about this second trend within LCD of the chip on film marketplace. So we put the slides on this, here is what we would predict over these next over years is that the chip on film opportunity will grow as a percentage of the LCD segment significantly. In particular, we believe you'll see a meaningful uptick in calendar 2018. As you'll see in the COG segment, TDDI itself plays a larger and larger portion of the remaining COG business rather than DDIC.
So both
of those trends, chip on film
and inherently TDDI, are tremendous growth drivers for our LCD business. So the key takeaways for our LCD growth opportunities is we continue to be successful in TDDI and it will continue to be a meaningful and growing part of our business. Number 2 is the non intuitive reality that LCD is going to play a meaningful part in the reality of Infinity Supply. And number 3 is that there is a new opportunity for us with chip on film in growing our top line as well as our units in the coming couple of years. So in summary, we're very excited about the growth opportunities in mobile driven by this macro trend of Infinity displays across our new in display fingerprint technology, the opportunity that that represents to grow share as well as to grow top line as we deliver that solution to market.
The opportunity to play a bigger role in the display market in the OLED segment as well as continue to lead in the LCD market both with TDDI and now this emerging chip on film. With that,
Thank you, Kevin, and good morning. I'm excited to be talking to you for the first time about our consumer IoT strategy and focus. I think there are a lot of devices you've already seen at the end, and I'll be talking about that intelligent end, how these devices are not individually very important, interesting and why we are a leader in that field, but also how the intelligence that he has will enable us to have a seamless experience in our home and beyond. So as Rick mentioned, we certainly started this IoT business not quite a year ago by just looking at the graph and saying we should be in the consumer IoT business, but also then looking at how would we put an IoT business together that would holistically fit with our key expertise at Synaptics, but also look at the trends in both audio and voice as well as in video. And that led to the acquisition of Connexion as well as mobile multimedia and the combination with our video interface business, which was very synergistic with its efforts as well as our automotive business.
In doing so, we acquired the leaders in both voice and audio, a very quickly emerging field of connection and the video processing specifically in a number of devices in the home that do casting as well as with devices that deliver your video in your home through devices that are moving from set top boxes into service provider platforms. In doing so also, which is very important, we diversified tremendously, as Rick showed, our number of customers and our number of partners. In many cases, these partners and these customers are looking for total solutions. They're looking for more than just one point solution. They are looking for us to enable them to go to market quickly with devices that are inherently more intelligent that work seamlessly with the cloud.
When we talk today and in general about our product areas in the IoT space, we have divided them in 3 different areas. The AudioSmart area on the top includes the Farfug voice systems that you all are aware of right now, but also our personal voice solutions which are solutions that enable to work well in the transition from a analog headset to digital headset, but also move towards the hearable, having a device in your ear that will allow you to interact with devices while you whisper as opposed to having the partner done. VideoSmart focuses on a number of different platforms. 1 is the in home retail driven platforms, whether those are the casting devices or the ARVR headsets and it focuses on the devices that are provided to service providers. As you can imagine, a whole different ecosystem where there's a lot of focus on security because in that case we're delivering high value content.
4 ks moves into the home in an open platform is a very specific challenge that we had to address and where we today are the lead. On the bottom right, you will see some devices where Salil will talk later also about the ODIS smart, the Imaging Smart, which are devices that are optimized for some of the new printing technologies. And Salil will talk briefly about why it's a very interesting business also from a financial perspective. So, on the installed base side of IoT, I think the numbers certainly vary depending on which report you subscribe to. The numbers are all in the high teens of 1,000,000,000.
In this case, we believe that in 2025, the total IoT installed base will have about 60,000,000,000 devices. Now the question certainly for Synaptics is where do we put our initial focus entering the IoT space and we decided to put our focus in the green bar, the consumer IoT space. That certainly aligns very well up with the acquisition that we did. It also lines up with our existing customer base and our focus at Snapix on Human Interface. If you look then specifically in the consumer IoT and more narrowly at the smart home, you will see that even today the number of devices and if you look at 2018 will cost 750,000,000 devices forecasted in 2021 to go to 1,500,000,000 devices roughly.
So this in the smart home for us is a same opportunity with a CAGR of 23% starting off in already a large space. Now, it's not just about, as I said, the devices individually. It's about how those devices are going to become more intelligent, how you're going to work seamlessly with those devices. And as that happens, you will see that the content of the solutions, both on the human interface as well as on the smartness, the machine learning that Rick alluded to, that content from a dollar perspective will go up. So you will see that while the certainly the unit growth is already very, very significant, the same dollar growth we expect between that same year of 2017 2021 to be 39%, driven by not just more devices in the home that have the raw capability to interface with you, but the devices that will work together that have a smarter edge, and a smarter device and talented edge.
So to just ground your house may look different. I'm sure it will. But if you take an inventory of devices that are today perhaps already in your home and that will be
in your home really soon there are
a number of devices that are obviously connected. I did a count over the weekend on things in my home that are connected. I ended up with 43 devices. I think Rick is well on his way with buying 6 new audio devices quickly to surpass that. All these devices fall in very different form factors.
You see some of them lined up there, right? You will see more of the assistants, the smart speakers. You see certainly more security devices in and around the home. In many cases, those devices are cloud connected and they're local as well as cloud intelligence. You will see devices that make your home more comfortable with thermostats that are anticipating whether you're there, your living patterns, the desires that you have as far as temperature goes in the home.
You will certainly see your central entertainment device on the video side or maybe it's multiple devices that allow you to stream different content. And then in some cases, we have customers where they today make voice enabled labs or in some cases go as far as voice enabled light bulbs. So the my situation of 43 devices in the home that are connected is actually going to go over very quickly. And certainly, then you're going to garage your whole separate high speed connected device, which is your car, which in many cases is connected from a basic level today. Sunil will talk certainly more about how the device is going to be connected much more profoundly in the future.
So what is it all about from this whole enabling devices at the edge, the intelligence at smarter devices. If you go back not too far ago when Rick talked about certainly us leading on the PC side, if you look holistically at that, your PC at some point became an Internet connected device. And maybe initially there wasn't that much content, but that grew over time and you went to your device to have your smart experience in the home. Now that seems very far away from where we are today because then certainly we standard evolution of mobile devices showing up. And that has helped the user to be mobile as it is a mobile device.
But also in the home, there's more than one central point, right? You could be sitting on your couch to look at content as well as to get information.
You could have multiple devices, right?
You could be juggling your phone as you type on your iPad and then on top of that you could have your 16 remote controls that maybe at some point drove you to buy a smart combined smart control. But that's really not
what it's about. What it's about right
now is that as a user I do not expect to have to learn how to use my FortiFi connected devices. I expect my connected devices to be around me and do what I want them to do. Now certainly voice there is an important modality as an improved modality. I don't have to go up and type square. I don't necessarily want to type set.
I'm sitting on the couch. Although I want to have the ability to type square, that may be a more convenient user interface in other situations. But the importance is I expect those devices to adapt to me. I expect them to know me walking to my house. I expect those devices to know what radio station or music I wanted to play, what light level I want to my house.
This is about the fundamental transition for many devices that are connected to a user experience where those devices adjust to what you would like to do in a secure way. So that brings us then to the next topic. Those devices are connected because at the end there's a lot of things you can do in the cloud. Certainly, there is a lot of information that the devices can use. There's a lot of processing that can be done specifically in the cloud to make the voice experience better, to have the natural language processing be an experience that you actually like as opposed to maybe when you sat in your car 5 years ago and you hit the voice button and you try to make phone call and things didn't go so well.
So we also talk about that. So the cloud is actually is a very integral part of what we deliver with our partners. But on the other end, the smart devices that feed data into the cloud that is incredibly critical for 2 aspects. 1 is the human interface side of things. You're sitting in your home and you want to interface with those devices locally inherently and in different modalities as Rick pointed out.
But on top of that, if you think about the fact that today when you talk to one of the voice available devices, you speak a wakeboard, the device now interacts with the cloud, you get the response back. That certainly is a modality where I think people have become comfortable that not the whole day is their voice 10 minutes to the cloud, it's when you speak a wakeboard, you want an action, you get a response. Now envision the house where you also have your video capability, not just from a security perspective phasing out, but also looking at in the house, how can the user be perceived in the house by things that the house needs to adjust to. Some of those camera solutions today are in your house and sometimes you will read about some of those camera solutions not being particularly secure, streaming video that could be intercepted. Having high definition video streams in your house going to the cloud, people are inherently a little bit more nervous about that concept.
What people are asking them certainly is what is that conversion of voice and video, but also can you provide more processing locally in the actual device or maybe in some cases in one of the central boxes that provide the rest of entertainment. So, sort of at least your house, actually it's content that you're comfortable with leaving the house and going into the cloud. You can also imagine if you stream 4 ks content that the data stream is just tremendously large. So the latency and the performance aspect of just streaming raw data to the cloud is a significant challenge and local processing there can also help streaming information, not just data. And then certainly as you take the example of a car, if you drive through a tunnel for an amount of period of time, the device is not connected to the cloud, right?
So you want basic functionality still to be there if the device happens to be not connected for a period of time. All these challenges require more intelligence as the intelligent dance with smart devices that Synaptics will enable. So bringing that back, as a company, certainly, we have a rich heritage in offering a superior human interface. Now with the combination and the acquisition of the parties that we've brought in, certainly more expertise in the interface also on the voice audio side as well as the video side. In those cases, we don't just go to our customer with a piece of silicon.
We go to the customers with reference designs, total solutions, software and a system level focus where customers can go to market quickly. As you can imagine in these markets that as Rick said are super hot, how quickly you can go to market with a solution that really, really works well is important. Users have become accustomed how to device on the voice side that work well, but you can imagine the device that you have in front of you is a captive first party device from Google. There are hundreds of people in Asia who are cranking out devices right now that have to work well that we enable through our system level expertise working through our partners. And those partnerships go very deep.
It's not just the guys you are familiar with in North America. It is certainly also the leading players in China who have very big plans on having intelligent homes communicate with their clouds. 1 of these partners actually is delivering pool houses with 50 pre installed intelligent devices today, where these devices inherently work together with AirCloud. And this is just the North America view and the China view. There is also, as Rick showed in some of the logos there, localized view within Europe as well as Korea.
So, our challenge, our opportunity and certainly what we brought in partly through the acquisition of both Marvell Multimedia and Connexent is making sure that we have that broad market reach. Enabling not just one customer quickly with a solution that works well, but enabling many customers, which comes with an ecosystem, many different cloud backends we have to work with and we work with as tech based partners, the distribution channels, the near term key solutions and the kits that we deliver as well as the scalable infrastructure that had to be built to make sure that we can address those customers in a way that is commensurate with the size of the business that we are supporting. So, these graphs show directionally from a pipeline perspective over the last 3 years when we measured both the Connections and McDonald's and Media business the number of engagements we have in that pipeline and it certainly shows that trend is going up in 2017 and beyond, but also the number of partners, right? This is a play, as I said, where it is the smart device combined with many partners on the ecosystem side. So as a result, this IoT business is about diversification and growth as we've talked about.
So also in the IoT business today, we have 3 customers that account for a significant part of revenue, 18% in one case, 10% and 10% in
the other cases. Those customers are big
partners that in many cases don't focus on one technology with us. They focus on our holistic view of how together we can bring great things in this space to market. But then 62% of our revenue today is split out over 300 plus customers, A very broad swath of customers, not just in one geography, in many geographies with many different partners on the cloud back end. So for the IoT business and for Synaptics, having those more customers come on board, being able to scale to support them and having a mix of blend of customers who engage with us very broadly on the larger customer side and have customers who can very quickly go to market with our solutions on the 300 plus side is very, very critical. So what I would like to do now is for the remainder part because certainly this is the first time we present to you not just the strategy but also the products that fall in the consumer IoT space.
I will have Salil, who is our EPGM of our Audio and Imaging business talk about the AudioSmart and Imaging Smart products, partners and strategy and I will come back about the video and talk about VideoSmart and we'll close it out.
Thanks, Haiv. Hello, everyone. My name is Salil Lousray. I'm very excited to be part of Sedaptics and the dream team as I call it, the IoT dream team that I've joined. And I've been here for just about 4 months.
And prior to joining Synaptics, I was President of Connexit. As Hybern mentioned, I'm going to spend some time talking about our AudioSmart business and just a little time spent on ImagingSpire and then hand it back
to Heilah to talk about our video business.
Yes, got it. The AudioSmart business, as our CEO mentioned, it's sizzling hot. He personally, I think, bought 6 or 10 devices over the holidays. We all are. And by the way, we've got a break right after Hybrid and I finish.
Go to your favorite Amazon, walmart.com, buy the devices. We all thank you for that. So our AudioSmart business really has 2 very exciting areas, far field voice. And what do
I mean by far field voice?
When I talk about far field voice, I mean I can talk to a device sitting up to 5 meters away. Justin, who does the demos for us, can go as far as 8 to 10 meters away in a noisy condition, and it still knows what you're saying. And I'll get into why it works and we'll spend a little bit of time on that. And this technology didn't just happen. Connexcent and now Synaptics has been working on this technology for over 6 years and we've perfected it.
And this is an area where our audio SoCs, our algorithms and our deep expertise of the market has allowed us to show all the solutions that are in the market right now. With a focus really on an end user experience that is meaningful. The second area, also extremely exciting, is our personal voice. Heibert briefly mentioned it. I believe there is a once in a life type opportunity where the 3.5 millimeter audio jack is going away through digital interfaces like USB Type C or Lightning.
And we are extremely well positioned again because of our audio SoCs and our algorithms to really drive that and provide a user experience that matters. And in the future, we believe that this technology can get us to a hearable. I would mention that, but a hearable that is a digital assistant in New Year. So you can speak far field, you can speak near field, and we can provide all those solutions for that. Everybody's been talking about the ecosystem partnerships.
I think this is really what differentiates Synaptics today. We are extremely well positioned with various large cloud companies. Let me start first with Amazon and some of you I've met in the past before know that Connexion and now Synaptics was 1st to market with Amazon. We released our first products on the Amazon 3rd party ecosystem late last year, and we are still the only vendor who has both a 2 microphone and a 4 microphone solution in the market. So that's a company that you know well about.
But let me talk a little bit more about what we've also done in the rest of the world. In Korea, I've put a few of the telcos right SK Telecom, LG New Plus KT, all of their first party solutions that use far field voice use a synaptic solution. In Japan, we were again first to market, like Rick mentioned with DOCOMO. DOCOMO just announced its $30 Dot Light product for the Japanese market. Line Naver, which owns the brand Line, again announced a product in Japan.
It's called the Clova Speaker. So that's in Japan, Korea and the U. S. Now speaking about China, this one is extremely exciting. We are well positioned with what we call BAT or Baidu, Alibaba and Tencent, not only on the ecosystem.
I was honored to be on stage with Robin, who is the CEO of Baidu on July 4th. While you guys were enjoying July 4th, I was in Beijing on stage with them announcing a Synaptics plus Baidu partnership around their ecosystem. But we are also announcing products within the next few months that are going to be planted by all 3, Baidu, Alibaba, and Tencent. So really extremely well positioned with all our partnerships and our technology here. So this really comes to why we win.
What is the stickiness and differentiation? We've talked a lot about our ecosystem partnerships and this means that we are the vendor with devices across all partners. But that's just a portion of what we have done. It's our audio SoCs as I've been mentioning, which we've been working on for 6 plus years. Our algorithms and it's based on a technology called blind source separation, which
is inherently different than what you have seen
in the market, which allows you to have the same user experience with 2 microphones that a competitive device might be 7 to 8 microphones. We put that all together with great firmware, a wake word, and finally, deep acoustic expertise. It is not trivial to get a Far Field device to work. It requires a lot of understanding of where the speaker placement needs to be, where the mic placement needs to be, and we are the only ones who have shown over different modalities. You've got a light there, you've got big speakers, small speakers, thermostats and it's all synaptics.
So this is really exciting that we are one of the few we are the only one I know that we put it all together. And on the right hand side, we've talked a lot about the clouds, but again, we've done that. And we can work with each cloud and our technology is tuned for each one of those. These are just a high level list of some of the products that have been released in the market. Smart speakers, we've got lots of smart speakers coming out in the market.
Carmen just announced their 4 mic speaker. It's available on Amazon.com. Anchor, dollars 19 ihomesclock, jd.com just announced a new speaker today in the China market. I just saw that. So you will be I think we can demo a few of those later today.
PCs, we've been in the space where our technology as a software solution enables you to have a better Skype call, a better conference call. And it's in some of the PCs that you have there, you'll see Connexion Synaptics AudioSmart technology in there. Service provider platform, this is very exciting personally to me and obviously now being a part of the IoT team where we now have not only the Marvel Multimedia business we have, the X Connects and we're now Synaptics voice business. There's a big push now for having voice enablement. We were able to do it in Korea.
I just see this going all over the place. This is the way you're going to communicate with the device in your home. Smart appliances, Samsung's TVs, I mean Samsung's refrigerators, the GE Soul lamp that's sitting over there, ecobee's thermostat, many more coming. And finally, I won't take Sunil's thunder away. He's going to talk about automotive, but this is something again where this technology is so well suited.
All of us have cars. They don't recognize what you're saying. You want the same experience that you have in the home, that you have on the phone, that you should have that on your car. So he's going to talk about that and we'll show you where that goes in the future. So having spent time on Far Field Voice and we've been very well known for Far Field Voice, let me now step into our 2nd business which is personal voice.
Again, I believe as I said a major, major inflection point where market analysis shows, market analysts say that this is going to be a 400 plus 1,000,000 units in 2020, 2021. Synaptics is so well positioned because we have a leader in the digital headset space. We have been providing solutions in the digital headset space for a very long time, probably 8 to 10 years when we were at ConXit. So we are an established leader. We understand the technology.
And the big thing that I'm excited about, Synaptics knows how to do business in the mobile space. If this market is going to take off the way the analysts are saying, we are extremely well positioned. We have the channels. We have the customers. And we've got a great story.
Okay? And we do believe this will go eventually from a wired USB Type C headset with a lot of technology like noise cancellation into hearables, as I say, a digital assistant in the year. Similarly, as I talked about Farfir voice, in personal voice, it's not just enough to provide a check. Many people can do that. We do that with not only our integrated audio SoC, which is the guts of a headset.
We provide best in class power, which is very important as you're using this as a portable device. Single chip, very small form factor. This is a USB I'm sorry, this is one of the USB headsets that are out in the market today and it's probably 2 millimeters wide with our chip in there doing all the In addition, as we look at the market, as it moves into hearables, as it moves into different modalities, we are going to provide active noise cancellation. We are going to provide a wake word, which is then you can say Alexa, Siri, you can say whatever and the headset turns on. And our expertise again in audio, in voice, allowing the tuning, allowing the certification and some of these you need to have Skype certification.
We know how to do all that. We've got the infrastructure in place. We've got the chambers in place to do that. So again, a full package solution that allows us to be successful in the market. Again, a long list of customers.
Most of you know who they are. We've been very if you've got children, especially boys, teenage boys, they probably have a gaming headset from one of these vendors. Probably high probability, it's a Synaptics SoC that drives it. The up and coming USB Type C market, few customers already out there with USB Type C headsets using our technology and 3 solutions. Unified Communications, a great market.
We've been in this a long time. Call centers, your office headsets, companies like TimeTronics, Jabra, Sennheiser, all using our solutions primarily because not only do we pass all the certifications like Skype for Business and all the other things, we know how to give it great user experience. And lastly, we've taken this technology into the docking space. So some of you might have docks at the office where, perfect example, the Microsoft Surface Dock uses our USB Type C solution. And this is another area where the synergy of Synaptics and now Connects has come into Synaptics where I think Rick mentioned earlier, they got into some video interface area in the talking space.
Again, more content is provided by Synaptics in this space. It's a great space. We know all the customers that have been with them for many years. So I talked about our sizzling hot audio smart business. Let me talk about our imaging smart business.
Again, a great area. The printer side, we've been in the printer SoC business quite a while. We provide all the software. We provide Google Airprint. You might be familiar with that.
But a great gem that has happened in the last 18 to 24 months is these portable printers. If you've gone to a wedding, you've seen the latest printers on the table, you take pictures, it's got D'ish girls, they're pasting it on their little mirrors. It's really nice and we've got a Polaroid printer, Polaroid back on there. And we've got HP. And as HybriD likes to say, sprocket.
It's called sprocket. It's sprocket in your pocket. So, it's grid market and we are the main SoC that drives it. So, it's portable printers and portable printers. And really lastly, the fax modem solutions.
This came as a part of our imaging business. This is deep heritage from Rockwell and Connex Ende. Great business for us because we have been increasing market share over the last few years. We are now the fax solution in all the top 5 printer companies. That might not sound as exciting, but I tell you, you've done really well with it and we see our business growing with it.
So with that, I'll pass it on to Hubert to talk about our video business. Thank
you, Salil. So Salil gave you a little bit of a look in our in 2 of our businesses, the Audio Smart Imaging Smart Businesses. And certainly, he talked about why this is not just about a slap something quickly together and make it work. These technologies require a lot of expertise that the team brought in. It requires a lot of very specific partnerships that we have.
Now if you look on the VideoSmart side, a similar story holds there. A lot of expertise build up over many years in 2 different areas. 1 is specifically on how you consume your media in your home in a slightly different way from what you used to in the past, which is devices like a Chromecast, ARVR coming up in many different cases. So these devices are typically sold to retail channels as are the smart speakers. These devices also I will show later are powered by our SoCs.
So this is not a device where we have a component in there. We are actually fundamentally powering those devices and giving them the quality and the differentiation. On the second side, for those of you who have been following the TV delivering into the home story over the last couple of years, A number of things there are happening, in some cases a little bit transparent, in some cases very openly. If you look at the number of boxes that are deployed worldwide, somewhere in the 175,000,000 boxes, these boxes traditionally used to be very captive boxes, right? Your cable company or your provider would install them.
It would have a connector on the back where your cable coming in and you would hook up your TV on the other side. That is fundamentally changing very, very rapidly. Those boxes are going to an open standard, an open software standard. In many cases, that is Android. In some cases, this is RDK.
For example, if you look at Comcast Global. The opportunity here is for us and initially for Mobile Multimedia to be the central SoC and the software stack that enables you to have a great TV experience for the customers and many customers still expect that box to do TV, but also to have applications come into the home. So what we provide there is a solution that allows many of our customers to use a standardized Android TV on our SoC for us to work with our partners on the middleware and to give each of those partners, each of those service providers a differentiated experience. That transition from captive boxes to open source boxes is happening tremendously fast and we today are the market leader in that space. The goal for the service provider certainly is to have a box that is updatable to give users more content, to give them different content, to give them application, to give them a more modern experience than they've had in the past and for them to increase the events revenue per user as you can imagine.
So the picture here shows what we bring to the party here on both the top which is a retail platform, in this case a Chromecast 4 ks platform as well as a service provider platform. In both cases, we provide the full solution from an SRC intelligence perspective, both cases. This includes the basic software stack in getting these customers to production. We have perfected, I would say, the ways to deal with our partners there, which, as you can imagine was initially an emerging field. Big players there like Google who rely on us to work with them to roll out new Android versions which is important for their experience but also for service providers like, for example, a Swisscom to roll out an experience that is very much optimized for what they want to do in Switzerland with video delivery.
If you look at that, the one little lock there is incredibly important, security. If you look at the people who provide the content, the movie content, as you can imagine, for those of you who have interacted with Hollywood, people are very, very picky about how that content is delivered. You can imagine if you deliver it on an open standard box, that's how you deal with security, The encryption at many different levels, the certification is absolutely critical. In one of our buildings here, we have rooms where only very few people have access because that's where the keys are being generated for encryption of that content to be delivered on open source boxes. This is not just making an SoC and putting it in a box.
It's the whole infrastructure of delivering content securely to the end user. And there on top of that, certainly the time to market. Every service provider is switching quickly, so enabling those customers to move quickly into this new space is incredibly important. Therefore, also if you look on the customer side, Salil talked about some customers in common between the voice side in Korea and the multimedia side. Those customers have moved very quickly and actually converging into one solution, far field voice with the TP experience.
We are seeing that the Soluvant is also now happening in different locations. But if you look at our customer base here, certainly it's a worldwide picture. It's not just a single location where people are moving to open source. It's happening in North America. It's happening in Korea.
It's happening in the broader Asia space. It's happening in Europe. These customers are the service providers who we have worked with for a long time to have them understand how the transition is going to work for them to help them with that, but also the OEMs in the middle who implement our solutions in the boxes that eventually ship to keep partnerships. And that's certainly Google from an Android ecosystem perspective, but it's also the people who are the big people in building boxes that eventually go to the service provider. Again, the expertise of working with service providers, OEMs and the bottom two guys who you may not recognize, people whose whole business model is to implement security to make sure that the 7 steps of decrypting 4 ks video are being followed.
So again, this took years of expertise and now we're in a phase where this is scaling up very quickly to convert those 175,000,000 cable boxes into an experience that is an open source experience that delivers video as well as applications. So now finally, I talked a lot about technologies and specific markets, right? And in some cases, that came in through the connection side, in some cases, with the mobile multimedia. In some cases, customers were common, in some cases also common with the core Synaptics business. But now if you look at how customers look at us specifically in some of the newer markets, they look at us not as a video supplier or a voice supplier.
They actually look at what we bring to the party. And for example, in this space, the ARVR space, that is bringing together the video interface business that we briefly talked about, how do you get data, gigabits per second of data through that headset. It's talking about display drivers that Kevin talked about specifically for OLED. In ARVR, the requirements of having displays very close to the eye, the resolution, the persistence are very specific. So company now look at us and say, hey, you're the leader in video installation side, display driver side.
We want these things to 3 d audio. You are a leader there. Video processing, how this is being rendered, how you minimize data being transported is incredibly critical. And certainly, in many cases, you still have the custom functionality on the side of those devices. So all of a sudden this is not about point technologies.
This is about the convergence of different technologies in emerging markets as well as in some of our existing markets. People are looking fundamentally different at Synaptics than they did in the past and they look across our full portfolio of products of solutions. And I think that is tremendously exciting because also here this is not about enabling an experience by growing components together. It's fundamental architect discussion with the people who make those solutions. It's about having them pick solutions that work seamlessly together.
So you will see more and more of those devices come out. Certainly today we already have a leadership role in I would say the highest shipping VR solution on the market, but you will see that proliferate over the next couple of years very, very aggressively. So, to bring it all back, if you look at what Wix had in motion by showing you a slide a year ago about Consumer IoT, We follow through on that by actually bringing together components that form a consumer IoT core that are synergistic. It's not about a point technology. Within those products coming into Synaptics, within the customers, the expanded customer base, we are seeing a rapid diversification of our total customers.
We are seeing customers going to market quickly with our total solutions, not just with an SoC solution. And we see customers working with us not just on proliferating the product in the home, but also working with us on how these smart devices form an intelligent app. It is not about one point device, it is about providing great human interface technology with smarter devices that form an intelligent edge. So this is certainly the first look that we gave you in our consumer IoT business. I hope you walked away certainly with a view that this is about tying devices and capabilities together.
During the break, you can take a look at a number of the devices. Some of those will be familiar to you. Some of them will be informed back this way and say, hey, I hadn't thought about that as a device that will make claim to your home. I can predict that over the next couple of years, your home is going to fundamentally change in the way you interact with your home and the home interacts with you. Thank you.
Great. Thank you, Heiberg. Due to the great efficiency and execution of the Synaptics team, we're a few minutes ahead of schedule. So why don't we do about 10 minutes of Q and A now, hopefully focusing on what you've seen so far, and then we'll take a break and do some demos. So my colleagues Jennifer and Ralph are in the back with microphones.
So if somebody has questions, you can just raise your hand and we'll get a microphone to you.
Yes. This is a question for Kevin. So I wanted to find out about this in line display solution that you have for the biometric part of it. How much of an ASP uplift are you likely to see? And what is the competitive landscape that you're seeing at this point of time?
Thank you.
Okay. So just to repeat the question, so I heard the ASP uplift and then what is the competitive landscape. So I'll start with the competitive landscape. So there are a couple other players looking to enter this idea of enabling a fingerprint display. I think by the announcement we made today, I think it's clear that we are leading that transition of the market.
But in all markets, there will come competition, so we'll see how that unfolds in the coming timeframe. In terms of ASP uplift, as you can imagine, this is a complete module that goes under the display. So the ASP uplift is quite meaningful relative to our capacitive fingerprint. But I would probably not be giving exact numbers today. But you can imagine a more significant ASP than today's capacity fingerprint.
Yes. So staying on the optical fingerprint sensor. So imagine if I'm an OEM today and I'm building a flagship, my choices for the next couple of years are, I can go with this, I can go with some sort of facial, I can do capacitive on the back for fairly cheap. Do you view these as competitive in the sense that I think in the past there's been talk about multimodal biometrics? Is it a sense that you have where you are just competing directly against the facial three d sensing opportunity that's 1 or the other?
Is there room for both, just how those dynamics play out over time, given all the dollars they're going
to be need to be spent necessitate all these things? Thanks.
Okay. Sorry. So we see clearly that the in display fingerprint and the facials are going to be addressing the higher end of the market in the near term. But as I said in my presentation, I do believe that over time, the in display fingerprint solution that we are offering will enter into the mid tier as well as the solution becomes more and more optimized. As relative to capacitive fingerprints, that today is very focused on the low end of the market.
It's really a very different user experience than its convenience and its experience and really is the alternative to an infinity display. So I think you'll see an increasing connection between in display fingerprint as well as the implementation of the display technology. So those are kind of hand in hand.
So I had
a question for you, Kevin, as well on the chip on film. You talked about having 20 engagements, 1 in production and then you showed us the other matrix of TDDI products by various resolution. So how does chip on film map to your various products? Can you package any of your chips that way?
Yes. So the answer is yes.
So our TDDI or DDIC device properly designed, which all of our chips are, can be enabled in both the COG or a COF implementation. That's an OEM industrial design choice as they're designing their phone which of those 2 paths they choose to take. So as I mentioned, the growth opportunity for us is both the inherent Infiniti Display trend that will be enabled by our TDDI chips as well as on top of that, the growth of the use of chip on film enabling the narrower bezel, which will give us an additional ASP upfront.
So looking at the competitive aspects of that, one of your competitors in the display drivers who's also talked about entering TDDI with what they say is an alternative solution better because they have a different approach to packaging, which again is aimed at narrower bezel. How significant a competitive differentiator is Chip on film for you?
I think it's an inherent one that we will lead. I don't think the unique packaging you're referring to is one that will keep the market. I think you'll see that initially it will be similar to yes, sorry, the question was what will chip on film do for margins. So I think net net you'll see an uplift in margins with chip on film.
Kevin, a couple of questions for me. Just now that you're in mass production with this in display fingerprint sensing, how do we think about kind of the timing and follow on design win and opportunities in ramp in 2018? And then my second question is you talked about OLED TDDI on the roadmap coming next year. I think early on the process, you guys had acknowledged it wasn't clear to you what the value proposition is as it was for LCD. Do you have a better sense of what that value proposition now that you're further into it?
Okay, great question. So let me just repeat one more time. So the first question is what do we see next year as the unfolding of new in display phones that may be announced in the market? So let me address that first. So in that respect, I think you'll see the natural evolution of the leading OEMs' normal life cycles.
And each OEM has their own characteristics of when they traditionally announce phones. I think you'll see that build over time following that same cadence. I don't think you'll see out of cycle announcements. So you have the early in the year, you kind of have the fall releases. I think you'll see a building of opportunities in each of those 2 phases of releases.
That's number 1. And the second question, what do we see on the OLED TDDI front? So it's a great point. We have been very carefully studying taking our well proven display and touch integration technology into the OLED market and where does it add value. And I would say that today
as you saw, we see it more
in the high end as the emerging OLED display manufacturers build over time. So we see the value in the flexible touch enabled display. There probably are some other interesting integration ideas that we have. And so we're being thoughtful about how we're architecting that solution. That's why we're intending on not delivering our initial sample for the end of next year, connected to both the market opportunity and where we see the market intersecting with the value proposition that we're building to.
Great. Maybe one more question. Okay. Well then, why don't we we go to a break here. Demos will be open and available.
There's also some more food outside if anyone needs that.
Testing? Okay. Okay. Good morning. For those of you who don't know me, my name is Sunil Thomas.
I joined Synaptics about 2.5 years ago, and I manage the automotive business for Synaptics. So let's talk about cars. We heard a lot about displays, a lot about boys. Cars are more interesting, isn't it?
So I want to take you back the history of Synaptics
in terms of automotive. So Rick mentioned we acquired Renesys display driver products about 4 years ago, 3 years ago actually in 2004. And with that, we inherited display driver business. Okay. So that was the base of building a water quality business from.
And in 2006, we added test solutions to it. So it's a natural extension of the business we were already in, in display drivers and we add touch controllers to it. And then we want to look into the future on what are the other things that we need to build to address the human machine interface within the car, that evolution of technology there. So TDDI, a natural progression from where we are. We got the display driver, we got the touch controller and then the next thing is naturally TDDI and we'll talk more about it today.
And then if you look a few more years into the future, there will be OLED displays in the car. Today, there is no OLED displays in the car and there is no TDDI in the car either. But a few more years from now, car technology always 3 to 4 years behind consumer technologies. So 3, 4 years from now, you will start seeing integrated displays as well as OLED. And then why fingerprint?
So in a couple of years ago, we started working with many of the OEMs in Europe and Japan looking at identifying the driver and the passenger. And this is very key because the cars are evolving every day and you hear a lot about autonomous driving. And car companies wanted to see, okay, if the market is going that direction, where else can I expand my services to? I need to identify the people who are in the car, so I can try to figure out a way to monetize that information. So Fingerprints was a natural way of identifying the driver and the passengers within the car.
Now all of us as I can personalize my services in the car, I can add payment to it. So there is a new revenue stream for me. And I can add services within the car when the driver is not driving and he's sitting there. I want to channel entertainment information into the car and I need to know who that is so I can target it well. So fingerprint is a natural evolution of the next phase of autonomous cars and being able to identify who is driving and who is in the car.
And you will start seeing cars with our fingerprint modules in the car starting 2020 on the road, both in Europe and in Asia. And then we go to the next level. The next level is voice and multimodal interaction with the car. So again, we are talking about cars that are becoming more and more autonomous and you have several ways of you don't just have one way of interfacing with the car. Today, it's either off or touch and little bit of voice, but we want to have a much more robust way of looking at the interacting with the driver and the car and that will be based on audio and also computer vision.
So we'll talk a little bit about audio as well later in the presentation. So this market, Rick talked about being a very steady growing market, 16% in unit shipment, CAGR, And that is going to continue on for the next few more years. So this is between the units that I mentioned here is between display touch and fingerprint and it doesn't include audio. So we started our journey in 2015 and quite a lot of design ends in the last few years. You can see very familiar OEM names over there that we won several sockets over the last year in terms of design ins.
Again, these are design design in automotive means the customer has selected your product to build the final platform. So the delay between the design in and revenue stream is about roughly 3 years. Used to be 5, but now it's 3, maybe coming down a little bit more. And on the right hand side, you can see the portfolio. So we started with display driveways as I mentioned.
Then we added touch tool in 2016. 2017, we added fingerprint and also we came up with some SafeView, which is more safety enhanced display drivers. There is a demo over there. If you haven't seen that, you could do it after the presentation there, which enhances the image processing in the display driver itself, so you don't need another MCU to process the image, for example, for rearview cameras. And then 2018, we are adding 2 more product lines to automotive, which is TDDI and VoIP as well.
So TDDI, so you would think we shipped 200,000,000 units this year, right Kevin? And not a single one to automotive. So this is the way automotive works. It takes a long time for automotive companies to adopt a new technology. So what do we do about it?
So the number one thing is that the Tier 1s and the OEM has to need to know that the risk is very low. So when you look at the companies that are playing in that display and touch market today, we are the only semiconductor player that knows both display in automotive and touch in automotive. Our traditional competitors either have display or automotive touch. We can combine those 2. So that's risk reduction.
That's number 1. Number 2, whenever a new technology is introduced into the market in automotive, they want to make sure there is an assurance of supply. So there has to be more than 1 supplier. And we are addressing that. You see we engaged with 6 major automotive display companies.
Now these 6 major companies cover about 90% of the display market in automotive. So this shows that this is serious. We are building a chip for automotive. We're going to combine the display and the touch and already 6 companies signed up with us to evaluate it and build panels and supply it to Tier 1. Number 3, there has to be a really good reason for them to change.
Otherwise, patchwork's okay in today. Now why do you have to change? And that comes in terms of system savings, dollars 10 to $15 on display. This is substantial. In mobile, it's not as much, but in automotive, the sensors are pretty expensive.
You get rid of the sensor and you combine the display driver and the touch interface to get touch IC together, all of a sudden you have a lower cost system. You have a much more simplified supply chain. This is also very key in automotive. You need you don't want a lot of tiers. You want to limit it to Tier 3, Tier 4.
That's about it. And then finally, it also gives you better optical performance, so you don't have to like brighten up your screen so much that you can see it in sunlight. So this is about enabling a new market. So we want to do it with a new chip and it has to address various aspect ratios as well as resolution. In mobile, it's very standard.
You have phone sizes standardized pretty much. Automotive, it is not. Every OEM has a different aspect ratio, different resolution, different sizes. So we have to be able to address all this and we are doing we are going to do it with 1 chip that we are introducing to the market. And that chip enables startup production.
So in automotive terms, startup production is when the supply chain gets started on building the products that you need for
cars on
the road in 'twenty one, for example, it will start in 'twenty. So this will enable start of production with this new tip in 2020, 2021 timeframe. And we can go all the way up to 4 ks. Believe me, there are a couple of OEMs who want to put 4 ks by 2 ks resolution displays into the car and we're going to enable that. So, now let's talk about voice control.
How many of you use voice to interact with the car today? You guys all happy with it? No. Okay. All right.
So let's look at how if this is a video we pulled off the web, but I thought it was entertaining, so let's take a listen.
Maria. Maria. Mike. Hey, John.
TV. This device is not available.
I'm not going to turn on my TV. I'm going to play
You can operate many functions of the MMI quickly and easily with a speech dialogue system. You can interrupt a speech dialogue at any time by pressing the talk button on the steering wheel to enter a command. You can
say
I'm sure many of us can relate to it. And this is an exaggerated video, I agree. But again, you cannot communicate with the car in a contextual environment today. There is no natural language understanding of the car today. And this happens for two reasons.
1, there is no cloud connection where you can actually figure out what this guy is trying to talk about. So he can actually shut up and listen. It doesn't happen. And secondly, there is so much noise, so there is no clear signal that is being fed into the car either. So we thought, okay, what can we do?
How do we make it better? So I want to introduce John Brady. So John Brady is the Marketing Manager for Automotive. He's probably one of the most passionate guy you can meet about automotive with Synaptics. So he's actually in Europe, parking an OEM today.
That's why he's not here today. But he said, okay, let's go say what we can do with the technology we just acquired. So take a listen.
Alexa, what's the weather?
Right now in San Jose, it's 60 2 degrees with partly sunny skies. Today's forecast has intermittent clouds with a high of 60 6 degrees and a low of 47 degrees. The fastest route to San Francisco International Airport, SFO at San Francisco takes about 49 minutes via I880 and U. S. 101.
Okay. So that was done with this device, just an off the shelf OOFY device built with Synaptics technology. So normally, when you introduce when you implement voice recognition within the call, there's so much tuning you have to do. There's so much mic positioning you have to do. In some of those cars, like very high end cars, you can find like 20 plus microphone listening to you.
This was done with 2 mic and this thing sitting just on the center console. So imagine so this is again this is just a demonstration of what the technology can do. I think we have to use a little bit of imagination here too. With the Far Feed technology, we are able to suppress all kind of wind noise, road noises, the tire noises, engine noise, all those noises are suppressed, even the kids in the back seat. Now you don't have to say, I'm going to talk to the car.
Please keep quiet back there. You don't have to do that anymore. So you can talk while there is music, while there is other kind of noise. And actually, the car will take those we can suppress that and just listen to the person who is talking. That's number 1.
Number 2 is with the Farfetch technology, we can also identify who is talking, so if it is a driver, passenger or the back seat passengers.
So what we
can do with this type of technology in a car is to give a completely new user experience in how you interact with car. So what we're going to do is 2018, we will introduce products that are specifically targeted to this market, the audio market. And this would be based on the existing tips, but with new algorithms tuned for performance within the card. So you will start seeing more engagements between Synaptics and OEMs. Actually, there is a couple of engagements that have already started in the very early stages of defining what the requirements are with some premium OEMs today already.
So, we are very excited about the possibilities and the opportunity this presents to us. We can revolutionize how we will be talking, we will be interacting with the car in the future. So this is all good, but how does it turn into revenue and customers revenue? So let's talk about I want to take you back to 2015. So this is where we officially said we're going to enter the automotive market.
And at the time, our business was primarily driven by through the LCMs who make displays for automotive market. So we sold products into these customers and they sold it into the Tier 1s who make the displays and then they sold it into the OEMs and we didn't even know where these products ended up. So fast forward 5 years, 2020, this is what our customer base will look like. These are based on the design ins that we have had in the last year. So 2020 on the road, this kind of shows you the customer landscape at the time with the products that are on the road at that time.
Now this gives us a broader presence within the market as well as the scale that is necessary to service this type of industry. Now we've got a wider footprint. We can get new engagements in newer technologies. We can actually have conversations with the OEM as well as Tier 1s. So it's not a passive business anymore.
We can actually proactively approach all these customers in broadening our scale and scope in this business. Now how does that translate into revenue? So this is what we told you last year. We said we will double the revenue in 2020 and we'll triple it in 2022. But today, we talked about 2 more products.
And we talked about TDDI and we talked about audio that we're going to introduce to the market. And we can see that there is a much broader customer base today that we are confident in terms of revenue. So based on the design wins, we already believe we've filled 95% of what we said we will achieve in 2020. Again, we have to execute through it like in any other program. But so revenue in 2020, that means the revenue in 2022 is also kind of designed in.
So, with the 2 new products that we introduced to the market today, we are actually raising our target in 2022 to 4x. Yes. So that's about it. Thank you very much. So next you will hear from Patrick on innovation.
Good morning, everybody. It's my pleasure to address you all today and I'm going to talk about achieving our founders' vision and reflect a little bit on what they are doing with the company when they created it
a little over 30 years ago.
But first, before I talk about that, I will reflect on what our vision is today for our human machine interaction. And it's fairly simple. We're talking about an interface that is so ubiquitous, intuitive and natural that we lose conscious awareness of our interactions. And what this means really is the omnipresence of smart devices, so that you can trivially access information, communicate, control and use computation. So that's where we are today.
And this guides our vision for our strategy for investment in new technologies around human interface to enable this vision in the world where we work, where we play and where we relax at home. So going back to the very beginning, Synaptics was founded in 1986 by industry luminaries Federico Fajin and Carvan Mead. And they had a realization and perhaps not a huge realization, but they understood that the brain processed information significantly more efficiently and effectively than any computer did at that point in time. They were pioneers in artificial intelligence, machine learning and neural networks, And their vision was to create analog neural network chips that work like the brain did to address problems in computer vision and voice recognition, which were at that time sort of the outstanding goals for artificial intelligence. They created Synaptics and we were named after the synapse, which is a structure in neurons that allows 1 neuron to communicate with the next neuron.
They wanted to create first products
that did ultra low power patent matching. And one of the first products that this company made was a bank check reader. So very simple, just scan the check going by and automatically will read that check. And that was the state of the art for machine learning, artificial intelligence and neural networks 30 years ago. And they had success in those applications.
But today, we would see very limited because in the past 30 years, if you think about the growth in computational capabilities that allows us to gather and process huge amounts of data plus the accompanying knowledge that we have gained about how to train neural networks, in particular to do deep neural networks, then the opportunity today to be able to do ultra low power patent matching to solve problems of a whole different magnitude. So let me talk a little bit about how Synaptics has come from those early days. So in the early 90s, we leveraged the analog circuits and patent recognition expertise that we had designed into the very first neural network products, the analog neural network chips that we've been working on to build the world's very first touchpad. We were addressing the problem that the trackballs that were currently in PCs were too large to make the PC any thinner, the laptop any thinner. The ball needs to be shrunk and when you shrunk it, you couldn't use anymore.
So we're looking for a flat trackball and that was the touchpad. The other interesting thing about the touchpad is that it increased the richness of interaction. So not only could you move the mouse pointer around, but you could we actually introduced gestures on those very first touchpads. These are gestures that are all common that we use today for scrolling, for pinching and stretching. So a new richness of interaction was introduced in those touchpads.
And it is basically patent recognition technology implemented in these little chips to control the touchpads. We leveraged our success on the touchpad into touchscreen technologies and in 2007 launched the world's 1st capacitive touchscreen in a smartphone, this is in the LG Prada phone. Once again, over the years, we've applied this pattern recognition, not only we put on the analog sensing and the pattern recognition to build the capabilities of that touch controller to make it smarter to add the multi touch. The initial ones were just one finger and they could do a very limited 2 finger rig, do some limited gestures there. But of course, nowadays, you all know you can do 10 fingers or more, basically depends on the size of the display, we're limited to.
You can do multiple gestures. You can interact with proximity, so a little bit above the display and a variety of other features. So we've made these touch controllers smarter and smarter, but all the time having to be very sensitive to power. So today you can have a touch screen sensor in a mobile phone that is always on, it's operating all the time, looking for gesture, for example, to wake up with negligible impact on the power consumption, the battery life of that phone. So we've been putting more and more processing capabilities to do has as much processing capabilities as the original Cray supercomputer.
Has as much processing capabilities as
the original Cray supercomputer, all at
low power, tiny little device in this handheld product. In 2013, we acquired Validity Centers, which launched this into the biometric authentication space. It also enabled us to operate in what I call the 2nd dimension of human interface technology. So the first dimension is about interacting with devices. So really this is input technology.
The old days there were keyboards and mouse and then touchpads and touch screens that we played in. The second dimension is identification of users. So fundamentally different, but still important to make these authentication applications, but it allows personalization of that device. And that is a big step towards making the interaction easier for the individual because it is personalized to the individual. These fingerprint sensors, our state of the art technology does all the matching in the sensor itself, and it probably will come as no surprise to you if I tell you that our fingerprint matcher contains a neural network.
We've got custom hardware to accelerate the implementation of that match technology. And then our anti spoof algorithms also contain a neural network. So because this classic pattern recognition software and algorithms are implemented on our hardware in very low power custom silicon for low latency and high performance reasons. The story continues as we acquired Connexion this past summer as a reaction to this new era of digital personal assistance, but also the next step in our vision for human machine interface technology. So the voice technology that you've been hearing about today is really built on 4 building blocks.
You've heard about the far field voice and that enables the interaction from across the room and canceling out noise, the echo cancellation that comes from the device playing music itself, the de reverberation from the voice bouncing off the walls and other objects. That's Barfield voice. There's a trigger word technology. So that is the device being in a low power state, listening for a particular keyword to wake up and then operate in full power. This is typically done this triggerware technology is done locally on the device as opposed to sending all the audio to the cloud for all the reasons that we understand about security and privacy.
The 3rd technology that enables these digital personal assistants is automatic speech recognition. So this is the voice to text technology. And this in the leading products and the most powerful products is done in the cloud today. The 4th technology is natural language processing. So that is going from the text to the meaning, what does the user ask for.
These technologies, 3 of the 4, are really all based on neural network technology, the trigger word, the automatic speech recognition, natural language processing. Speech recognition and natural language processing have been foundational challenges for artificial intelligence since the early days.
Today, these are, as I
said, evaluated in the primary platforms in the cloud, but in the future, this will all move to the edge. And I think if you reflect on some of the automotive stuff, you want to make sure that your vehicle works all the time under voice control independent of connectivity to the cloud and what may be going on and the same with a variety of other devices. So for a range of reasons for security, for latency performance reasons, privacy reasons and then to reduce the reliability on robust networks or to improve the performance in the lack of those environments, you want to move this technology to the edge. And so this will happen over time. We'll be moving this neural network based learning to the edge device.
The voice technology fits into the first two dimensions of human interface that I discussed, but also a third dimension. So obviously, we use voice to control devices. Voice biometrics are very powerful. It's important when you talk to the device and knows who's talking to it. As I was talking to someone during the break, the young child very quickly learned how to order things on Amazon and voice technology can help address that challenge, whether it be purchasing things or starting and driving and controlling your autonomous vehicle.
You sort of want to know who is doing that and voice is obviously very natural. Personalization is not a big thing. I want my shopping list, my e mail, my calendar. But then the big third dimension of human and face technology that voice and audio enable is contextual awareness. So contextual awareness is the device knowing about its environment and what is going on around it.
In the case of audio, it can listen and determine there's a conversation going on. It doesn't need to be understanding the conversation, but it knows there's a conversation. It can recognize the sounds of breaking glass, police sirens. By fusing information coming from multiple sensors, the device can get a real understanding of what you are doing, what is going around. It knows that you're in a car, a train, a plane, and it can respond and react differently in those situations.
It knows that you're in discussion with somebody and will interrupt you by vibrating potentially rather than making loud noises on barging in. So a variety of value to the device knowing what's going on around. And these are all neural network technology. And when you move it to the end device, it needs to be low power and high performance. Now that we've taught our devices to feel and to hear, the next big step is the device needs to see, so imaging and computer vision technology.
So computer vision and seeing on setting scenes, that is another area where the brain does it incredibly well. And in the past, it's been an almost impossible problem to do with computers. But the advances in deep machine learning over the last few years have been phenomenal and once again enabled by the corresponding increases in processing power. And we've all heard about what is going on with autonomous driving, plus medical vision and imaging, so huge benefits across a wide range of different areas. The imaging will work both as an interaction input device, the gesture technology to control devices, obviously works as a biometric to identify the users, both through things like optical fingerprint imaging, through iris recognition or facial recognition.
And then the contextual awareness, as the device sees what is going on around it, then it can understand the context and aid in making that device conform to the environment. So these are all foundational challenges in machine learning artificial intelligence. There's even more challenge in the imaging space of doing it all in the cloud. Think about the bandwidth requirements to move multiple video streams to the cloud as well as the processing requirements in the cloud. And so here more than anything else, you will need to move the processing to the edge as you have a wide array of devices that you want them to be smart, you want your privacy and security, you want the high performance and once again, the robustness of operating without a reliable network connection all the time.
So this is another opportunity to put more intelligence at the edge to make these devices that we're surrounded with even smarter. I will claim today that we are in a transition point for these smart devices. In the past, humans have made a huge effort to learn to use machines through enhancing the human interface technology and we can see this with some early indications. Machines are able to learn to communicate with humans. The early indications are very simple.
It's obvious over the last decade that touch and a touchscreen is natural. People or children of any age can easily interact with an iPad device or tablet computer. They just see what they want and they touch it. It makes sense. We're also seeing with the digital personal assistants the naturalness of voice recognition where you have natural language processing because you just ask the device what you want.
You don't need to craft carefully chosen words and phrases to string together to get what you want. So we're truly at this era where machines, because of deep neural networks and pushing this out to the edge of the network so they can be reliably bust and perform for you in that place will make interaction that much simpler, trivial and effortless. The changes we have seen from our smartphones in the last decade have been significant, But as we surround ourselves with these devices that today are not smart, they're just dumb devices around the home, as each one of them becomes smart and today's smart devices become even smarter, I think we're going to see even bigger changes going forward than we've seen over the last decade. So to wrap it up, our founders' vision for ultra low power patent matching, this is the cause of neural network technology, is as relevant today as it was then. And the problems that it can solve today because of the new computation power and deep learning are even greater than it was than they were 30 years ago.
Synapticians were still inspired by our mission to develop and refine world class human interface technology that really allow humans and machines to work side by side and leverage the best of both or really for the machines to be our servants, if you like. And we will continue to push this vision and advance the technology that allows advanced human interface to become omnipresent surrounding us in this wealth of smart devices. And so the interaction becomes trivial and effle us. And that's where we're going to go. And now our CFO, Wajid, will tell you
how much money we're going
to make achieving this vision.
Thanks, Patrick.
All right. Good morning, everyone. To all of those here present at Snaptics, as well as those that are on the webcast, welcome and thank you for joining us today and listening to the story that all of our operational leaders have been telling you about so far. So what I'm going to do is spend a couple of minutes and just recap where we are today just so that we're all on the same page with respect to what we've just kind of gone through where FY 2018 looks like. And then I'm sure all of you are very excited to know, well, based on all these growth opportunities that we've heard about morning, how do the numbers actually add up and what can we expect for the company to operate at both in the near term as well as in the midterm.
Okay. So just a little bit about FY2017. So FY2017, the way I think about FY 2017 is it was the 2nd year of our transition. So the transition of the company started in fiscal year 2016 as we saw some drop off in our display driver demand because of a large customer. We went through that again in fiscal year 2017.
We instituted a restructuring program within fiscal year 2017 as we work through that. And the year kind of ended up right where we had called it. We expected it to be around 1,700,000,000 dollars in revenue. We expected operating expenses to come down quarter over quarter during the year and exit fiscal Q4 significantly less than where we had entered in fiscal Q1. And probably the only sore point that I think we would all agree on that we had in fiscal year 2017 was that margins came down significantly as we transitioned into new product lines and we started ramping those product lines and getting through some of the customer mix issues as well as the normal manufacturing variances that you see.
We kind of went through that probably I'd say in the last three quarters of
fiscal 2017. But I'm sure
all of you have noticed over the last couple of quarters that trend seems to have changed and we've seemed to see a bit of a kink in our gross margin curve that had been coming down for a number of quarters during fiscal 2017 like I just mentioned, but has now both in fiscal Q1 and where we've guided fiscal Q2 has been trending up nicely. And some of that is because of the new IoT businesses that have entered within the framework of Synaptics. And some of that has to do with just the fact that we've been getting more experience with the products that we've been shipping and getting much better at ramping new TDDI products as they've been coming out. And you'll see in at least the near term model that we expect kind of margins to be able to hold within a very small band, but above the ranges that we had talked about last year, again, driven by both of those things. So fiscal year 2018 financial progress.
Really these are all the metrics that we look at and communicate every single quarter. We communicated commentary on where we thought fiscal year 2018 would be at our last earnings call just 4, 6 weeks ago. And things are pretty much tracking to what we had called out both about fiscal year Q2, as well as where we thought fiscal year 2018 would hold out. So really the commentary that we had supplied at the earnings call still holds today. So that's kind of the first takeaway.
The second one is that we had instituted a $40,000,000 restructuring program. I'm sure all of you saw the release that we made a few weeks back that we've implemented that. We've started to take out some of the costs related to our legacy product lines. And our expectation is that we should be able to exit the next fiscal Q4 running around $105,000,000 of OpEx a quarter. So again, very much like fiscal year 2017, started through a program, works through the restructuring, exit is on targets and that's what we expect to happen in fiscal year 2018 as well as we work through that.
Okay. So, each one of the business leaders talked a lot about the growth areas that we're expecting to drive the business forward in fiscal 2018, 2019 2020. And one of it was around the umbrella of Infinity Display, both from an OLED perspective as well as from an LCD perspective. And you can see what we've got here is kind of our breakout of R and D investments within each one of the major product lines that we call out externally. And within the mobile group, you can see that we're staying true to that form in terms of where we see the growth and where we're actually putting our R and D dollars.
The majority of the money is going through TDDI and chip on film, followed by our investments in in display and then followed by investments in OLED DDIC. We're not shying away from opportunities and touch because that provides a lot of the baseline technology that we need for other groups as well as continuing to invest a little bit in capacitive fingerprint to keep a stake in that market. On the PC side, Sean didn't get a chance to talk today, but you'll see in a couple of slides that we're actually doing quite well with our capacitive fingerprint business within the PC space, so much so that the investments that we're making in capacitive fingerprint within PC outstrip the investments that we're making on the touch side for the PC group. And that's directly linked to some of the success that we've had within the PC group and some of the opportunities we see in fiscal 2019 and where we see that market going. So we're again lining up investments where we see the market moving to and where we see revenue and customer traction for the PC market.
On the IoT side of the house, we've got the R and D that we've got for the acquired businesses and we said this on the earnings call in Q2 and I'll say it again, we're adding in that area. And so some of the restructuring dollars that we've got, we're reinvesting some of that savings back into the acquired businesses because we see lots of opportunity there.
And also on the automotive side as well. One side of
the business that we didn't talk a lot about is the interface business, but we've started breaking out portions of that in our earnings calls, at least in Q2. We're continuing to invest heavily in that business and you'll see as we talk about our growth profile in fiscal year 2020 that will line up with some of the revenue increases we expect to see. Okay. So let's spend a couple of minutes on this chart. So this is we showed similar chart to this last year.
And this really kind of points to the transition that we've been talking about in our business. And it also talks to the amount of diversification we're now moving to in our business as well. As well as it helps all of us understand where we continue to expect to see some declines in our business as we move forward in fiscal 'nineteen and where we see some of the growth areas. So let me just walk over and kind of talk about fiscal year 'eighteen. So fiscal year 'eighteen, we've seen that we've had decreases in our DDIC business, no surprises there.
We've also seen some decreases in our capacitive fingerprint business versus fiscal year 2017. Again, no surprises there. That trend is expected to continue into fiscal year 2019. On the PC touch business, we've seen some growth there in fiscal year 2018. We continue to expect to see a little bit of growth there moving into fiscal year 2019.
Moving on to CDDI, again, we've seen growth there in fiscal year we expect to see growth there in fiscal year 2018 versus fiscal year 2017. And moving into fiscal year 2019, we continue to expect to see growth in TDDI. Now you start to see some new colors that you haven't seen in previous years. And so what you've got is chip on film, which Kevin talked about earlier. We've already got one phone shipping.
We expect to have more chip on film products shipping in our fiscal Q4 of 2018. And so that thin green bar that you see there in fiscal year 2018 represents some of those chip on film shipments actually happening within this fiscal year and then becoming much more material in fiscal year 2019 as some of the 20 COF engagements
sorry, I'm calling
a COF, chip on film engagements that Kevin talked about earlier actually come to fruition and start generating revenue for the company. Bless you. All right. Then I'm going to skip over all the DDIC for a moment and then you see in display. So we're counting on in display revenue within this fiscal year.
We'll see hopefully a little bit in fiscal in the 1st fiscal sorry, 3rd fiscal quarter of this year and then it'll be more material in fiscal Q4 of 2018. And again, you see as that business or that product line moves into fiscal year 2019, it becomes more material as a part of our overall product mix. And then IoT, IoT is fairly straightforward. We've got automotive in there, our interface business as well as the 2 businesses we've acquired and we're just calling out how big we expect that to be versus our overall business in fiscal year 2019. And the growth that we've got to the very right, at least to my very right, represent fiscal 2019 over fiscal 2018.
So fiscal 2019 over fiscal 2018 where we expect negative growth, where we expect growth between 0% 10% and then where we expect 15% plus growth year over year.
Okay. And this will all
be on our website after the call, so you can take a look at it a little bit more in detail. But again, a much more diversified business as we move into fiscal year 'nineteen, many growth opportunities for us at a product line level as we move forward. All right. So, one of
the questions that we ask ourselves is, okay, so
we've got all these opportunities in front of us. How do you add it up and how do we get to a company that organically can deliver $2,000,000,000 of revenue annually. And so what we've done here is to my very right, you've got fiscal year 2018 kind of where we expect to end up this year. And then the pluses and minuses from fiscal year 2018 to fiscal year 2020, what are the areas of the company that we expect will decline and what are the areas of the company that we expect will increase in order to be able to get us to $2,000,000,000 model that we've got up there. And I don't think there's any surprises up there.
Automotive, we've got some growth expectations built in based on what Sunil showed. Obviously, the automotive play is a little bit more longer term. And so you'll see a little bit more of that after fiscal year 2020. We expect our interface product line to continue growing. PC capacitive fingerprint with the investments that I showed you on the R and D chart to flow through.
TDDI is an interesting one because some of the growth you'll see in TDDI and some of the growth you'll see on chip and film, right. So some of the growth that you see within the TDDI number is subdued a little bit because some of that is actually showing up in the chip on film bucket that we've got up there. And then growth in in display based on the numbers that we showed, increases in opportunities in the acquired businesses that we've got, where we see opportunities on OLED DDIC and then a fairly reasonable sized growth driver for
2020.
Okay. All right. So here's the model. So to my very right, I've got the model that we showed you previously last year And that represents the mid term model that we presented to you a year ago pretty well. I think it was this week last year.
And then we've got 2 other models. We've got the near term model, which is kind of what we see right in front of us based on how we think the mix of the business is going to work, where we think the revenue metrics are going to play out. And then our midterm model is more based on the opportunities for the product line growth areas that we've got. You can see that in both the near term model and the mid term model, the margins are higher versus the previous model that we showed last year. We expect margins to be better than what we showed you a year ago.
However, the infrastructure and investment requirements that are happening within the IoT business are causing operating expenses to be higher than what we had shown last year. So we still see a path to getting to the target operating model that we had shown last year. But it'll have a little bit of a different mix to it with gross margins being a little bit higher and operating expenses also being a little bit higher, but still delivering the kind of bottom line operating profit growth that we expect to see from the company. Okay. So, key takeaways.
So revenue, I think you can see is pretty clear. The entire management team is quite confident that we see a return to solid top line growth. You can see from the product line chart that I showed you, we expect a lot of diversification in our product lines. We're investing to where we think the opportunities are. So even though we are going through some restructuring, we're still putting the money where we think it makes sense and it's still investing heavily where we think there are multiple opportunities.
And the 4th point is a little bit obvious. We continue to generate meaningful cash on a quarterly and annual basis for the company given where we are.
Okay. Great. Thank you, Wajid. We'll now open it up for your questions.
Questions?
So Wajid, going back to the slide where we talked about sort of the 2019 revenue mix, obviously a very large forecast for chip on film. If we think about that, plus the LCD, DDIC and then obviously TDDI, It does look like it's pretty significant in the context of where your DDIC business is today. Right. And we there's an obvious headwind to there that we all know about. Right.
So how should we think about what you're assuming there in terms of is this a market share gain dynamic or how much of this is ASP increases that's going to drive that within chip on film? And then maybe just also within chip on film, how much of it is TDDI versus classic DDIC within that chip on film? Thanks.
Okay, sure. So I might ask where did Kevin go? I might ask
Kevin to help me. I think
he ran away. Oh, he stepped away. Okay. So the chip on film product has got a higher BOM cost. There's an obvious BOM cost adder to that solution.
And so because of that, there's a higher ASP for that product. So that helps from a top line standpoint. And then Kevin
called out
the fact that there's 20 COF engagements that the team is currently working on right now, and we're seeing very positive momentum on a number of them. And again, it's being driven by the desire for those smartphone OEMs to move to a solution that's got Infinity display. So, it's a combination of both of those things. The ASPs are higher because of that bond cost adder, but there is broad based demand coming from the industry for that product line. At this point in time, probably wouldn't break out It's tough enough forecasting kind of all of those levels of products.
So probably wouldn't want to drill down on how much of that is DDIC and how much of that is TDDI. But as we get closer to delivering more meaningful revenue, we can certainly do that for you when it's
appropriate. Okay?
Hey, Wajid. A couple of questions on my end. First, when you look at the projections of fiscal 2019, it looked like
you had
relatively modest projections for growth on the in display fingerprint sensor. And Kevin in his presentation showed that the market was more than doubling for 2018 2019. I was wondering if you could reconcile that. And also, I just want to also confirm, anytime you have a new product, typically you're kind of ramping yields and things like that. So obviously with an in display being a very new technology, that incorporated into your near term gross margin guidance?
Yes, that's a great question.
Yes, it is. So on the
gross margin question, yes, we've kind of taken our best guess as to what type of volatility we expect to see within our in display products and we've reflected that in the near term margin model as well as in the midterm margin model. So that's the answer on gross margins. On revenue and Kevin's come back in, you might want to add to it a little bit. I don't like to use the word that we're being conservative on it. But yes, the opportunity is greater than what you see from a revenue standpoint.
A little bit of it is because of when we expect to see the timing. Kevin talked about kind of the launch timing and everything else. And so a little bit of it is outside of our hands in terms of how fiscal year 2019 looks because whenever products get launched, that's when we expect to be in the product and then it'll ramp up. So I would actually say fiscal year 2019 doesn't reflect a full fair year in terms of revenue growth. And then Kevin also talked about some competition.
So we're trying to reflect that as well into the model. But yes, I mean we're trying to be prudent with the numbers we're showing for fiscal 2019. Kevin? Okay.
Raj, another observation on that last comment that you're showing fiscal years and the market charts were all calendar years? Yes.
That's a good point. That's a very good point. Yes, that's true. So the calendar year 2018 number, I think, Kevin showed was about 70,000,000 units. And so and that's really kind of back end loaded.
And then yes, you're right. We only get half of the benefit of the impact on fiscal year 2019 versus calendar year 2019.
So my first question Wajid is when is midterm?
So when is midterm? So we've got to kind of get to a $450,000,000 a quarter run rate. And so once we get to a $450,000,000 quarter run rate, we should be able to get to the bottom of the model. So the bottom of the model is 13% operating profit that you should start seeing that at $450,000,000 in revenue outside of kind of just something wonky happening and then growth from there to get to the higher ends of the model.
Okay. And your growth spectrum sort of went up to 15% or more. IoT businesses have been growing faster than you first guided at the time of the acquisition. Right. How do you think about the secular opportunity for that market?
Is it essentially going to accelerate as you add all these different technologies into Interface? So, there's a couple of things. So, first of all, we've had the businesses for a few months now. Yes, we had and we had the seasonal right quarters right at the beginning. And so, yes, the business has taken off better than we expected.
We'd like to see a couple more quarters of traction in there before we start calling out how fiscal year 2019 looks like. You can see that the business has diversified. Hyburt showed a page with kind of what the customer diversification is, but there's still 3 large customers that make up 38% of the revenue. And so there's a little bit of that as well that's also in there. So we're accounting for all that and the projections
that we're showing. And so to hit on a little broader picture, since I've been here, we've always said 15% growth per year. And so I'm not comfortable with anything less, I guess, the size of the company. I believe we've got a consent to you to consolidate, look aggressively at opportunities to grow both organically and inorganically. If we claim we're a growth company and at $1,700,000,000 or so on, to me there's still plenty of runway in a $400,000,000,000 semiconductor industry.
So the goal and mission is still out there hit that 15% between organic and inorganic.
Any other questions for the group?
Yes, sir. I think on fiscal year 2020, you put out a $2,000,000,000 number. That confuses the midpoint of your margin model like $7.70 or almost $8 I did a quick back of envelope math.
Of course, if you grow, you think you'll get there? I mean, if that's the case, you should be buying back your stock like this, go tomorrow. Right. So, very good question. So, we bought back a lot of stock over the last 2 years.
I think we've bought over $400,000,000 worth of stock in the last 2 years or 2.5 years. And we've been we like to be at about $250,000,000 to $300,000,000 cash balance. And we exited last quarter at $200,000,000 and we'll generate cash this quarter. So we'll now be kind of back into the position of making what I would call the right time for a capital deployment decision. Rick showed you a slide where he had the yellow new as part of his pie chart.
And I can assure you that our Head of Corporate Development Adnan is quite busy at looking at those news. And so we just want to be prudent in terms of our debt to EBITDA ratios as we move forward while looking at those opportunities. And that's really the reason we have not gone out and done additional share repurchases. We do have authorization from the Board for another $225,000,000 $226,000,000 So but yes, I think your math on EPS computes correctly.
Just a quick question, Wajid. On how sustainable are the margins in the IoT business? And what levers do you have in terms of keeping those margins at that level or even increasing it? Thank you.
I'm actually going to hand that question to Heibert and him and Salil both can help me out in answering that question.
Yes. So the question is, in the consumer business, is there pressure on margins? And there always is, right? I think what we have found on specifically voice, but also on the multimedia side is that what we do is actually incredibly hard to do. And that in some cases, what Sunil explained, doing with 2 microphones, but needed to be done before with 7 microphones, actually at a system level gives system cost reduction by going with a more expensive silicon solution.
Now certainly, our goal, as Rick always says, is to innovate, right? And as I show the fusion of different modalities, we have to stay ahead of that curve of enabling more fusion on the ASMI side as well as the intelligence that Patrick alluded to in the systems. So certainly, this is a consumer business where there are more people who see this as a growth market. We have a head start and we believe that we have all the ingredients to keep how innovating and we are bringing system cost and performance advantages that you don't get today with other solutions.
And just to add a little bit to that. So, this is our consumer IoT business, as you saw, was a great mix of different things. Unlike their mobile business where we kind of got to win the battle every year, there's some consumer IoT businesses, the headphones or even enterprise like that go 2, 3 years and those are much higher than the average IoT business. And then of course, we have some of the fast moving stuff like voice right now is moving very quickly. There is the pressures that hybrid is taking.
So to get to the bottom line answer, we do think it's a sustainable model because we have a mix of margins in that very diversified business.
That's the right answer also on that side. And we have one customer, frankly, the cycle time, XT, the new cycle time, we have one customer who's on a 7 year cycle with very high protein product. So it is a much more diverse mix than we would see in our traditional core businesses. That's correct.
Maybe time for one more question from the
group, if we have one.
Okay. Well, I think we're wrapping up. I want to thank the Synaptics management team. I want to thank everybody in the audience here and out in the webcast. And then we'll have demonstrations available.
There are lunches outside, so you can feel free to grab one and please stick around to see some of the demos. And thanks again for attending today and we look forward to seeing you out on the road and in conferences, NDRs, and we will be at CES as well. Thank you.