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Operator: Good day, and thank you for standing by. Welcome to Silicon Motion Technology Corporation’s First Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] This conference call contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 as amended. Such forward-looking statements include, without limitation, statements regarding trends in the semiconductor industry and our future results of operations, financial conditions and business prospects. Although such statements are based on our own information and information from other sources, we believe to be reliable, you should not place undue reliance on them.

These statements involve risks and uncertainties and actual market trends and our results may differ materially from those expressed or implied in these forward-looking statements for a variety of reasons. Potential risks and uncertainties include, but are not limited to, continued competitive pressure in the semiconductor industry and the effect of such pressures on prices, unpredictable changes in technology and consumer demand for multimedia consumer electronics, the state of and any change in our relationship with our major customers and changes in political, economic, legal and social conditions in Taiwan. For additional discussions of these risks and uncertainties and other factors, please see the documents we file from time-to-time with the Securities and Exchange Commission.

We assume no obligations to update any forward-looking statements, which apply only as of the date of this conference call. Please be advised that today’s conference is being recorded. It is now my pleasure to hand you over to Mr. Tom Sepenzis, Senior Director of IR and Strategy. Please go ahead, sir.

Tom Sepenzis: Good morning, everyone, and welcome to Silicon Motion’s first quarter 2024 financial results conference call and webcast. Joining me today is Wallace Kou, our President and CEO; and Jason Tsai, our CFO. Wallace will first provide a review of our key business developments, and then Jason will discuss our first quarter results and outlook. Following our prepared remarks, we will conclude with a Q&A session. Before we get started, I would like to remind you of our Safe Harbor policy, which was read at the start of this call. For a comprehensive overview of the risks involved in investing in our securities, please refer to our filings with the US Securities and Exchange Commission. For more details on our financial results, please refer to our press release, which was filed on Form 6-K after the close of the market yesterday.

This webcast will be available for replay in the Investor Relations section of our website for a limited time. To enhance investors’ understanding of our ongoing economic performance, we will discuss non-GAAP information during this call. We use non-GAAP financial measures internally to evaluate and manage our operations. We have, therefore chosen to provide this information to enable you to perform comparisons of our operating results in a manner consistent with how we analyze our own operating results. The reconciliation of the GAAP to non-GAAP financial data can be found in our earnings release issued yesterday. We ask that you review it in conjunction with this call. With that, I will turn the call over to Wallace.

Wallace Kou: Thank you, Tom. Hello, everyone, and thank you for joining us today. I’m pleased that we delivered revenue at the high end of our range of our first quarter, but the market of PC and smartphone began to rebound. Additionally, we delivered another quarter of gross margin expansion through the successful introduction of a new product and the mix shift toward higher end PCIe and UFS products. We continue to invest in the next-generation technologies that we expect will drive long-term sustainable top and bottom-line growth of our company. We are also benefiting from the increased controller outsourcing by our NAND flash maker customer, a trend that should continue as the controller capacity increase and the design cost continue to rise.

Flash makers remain focused on profitability, while managing their investment to serve the increasingly diverse end market memory requirements. Despite the macro uncertainties, we are excited by the progress we are making securing strong design win momentum and share gain across all our end markets as we launch several new products including exciting new win with NVIDIA’s BlueField-3 DPU platform, that I will discuss in greater detail in a moment, as well as new solutions for the PC, smartphone, enterprise and automotive markets. I would like to spend a moment discussing the current business environment. The current global economy picture is increasingly difficult to navigate and they change day-to-day due to ongoing tariff and geopolitical challenges.

Regarding current climate, we believe the impact to our business should be limited given that the US only accounts for 10% of the global smartphone market, about 25% of the PC market. For smartphones, the US market is dominated by Apple and Samsung accounting for nearly 85% market where we have historically had little to no share. Our overall exposure to US consumer electronic sales is significantly lower than many other semiconductor companies in the PC and smartphone bootcamp. While the escalating tariff environment creates uncertainty in demand in the near term, we are going to remain focused on what we can control, delivering market-leading products win, superior performance, expanding our market share with the flash makers that are increasingly resource constrained, supporting multiple memory technology and diversifying our business through the expansion into new and growing market including enterprise and AI storage, automotive, industrial and more.

I would now like to discuss the broader NAND flash environment. The NAND industry experienced improvements throughout the first quarter as inventory level in consumer markets including smartphone and PC appear to have bottomed out and enterprise storage demand remains strong. NAND flash maker have begun to raise prices recently given scale back flash production and reduced inventory levels. We will continue to focus our resources on our flash maker partners as they will be the customer with the greatest asset to NAND in 2025 if prices continue to rise. Our business with module makers remain steady as they are starting to build inventory ahead of increasing NAND prices and restocking low channel inventory for aftermarket SSD. One area where we are benefiting from both increasing NAND costs and the potentially negative pricing impact of tariffs is a rapidly growing interest in QLC NAND.

QLC allows server and device makers the ability to significantly increasing memory density in a cost-effective manner given OEM’s opportunity to deliver higher density storage solutions at a more reasonable price. As we have discussed during the past few investor calls, we believe we are the best position to benefit from the increased adoption of QLC given that we have more experience managing QLCs than any other controller maker. We are experiencing significant inbound interest for developing QLC products across the enterprise market like iTunes [ph] and the consumer market for both SSD and smartphones. And we expect to deliver multiple new products in the coming months that will capitalize on this interest and help us deliver long-term sustainable revenue and earning growth for many years to come.

Now let me share some update for each of our business segments, beginning with client SSD controllers. While there has been much discussion around the 2025 outlook for PC given the current geopolitical uncertainties, as of today we believe the market is still expecting PC to grow in the low to mid single digit range. We have seen some motivation by customers to purchase ahead of the NAND price increases and any potential economic effect of tariff and potential supply disruption, but we believe inventory level remain healthy based on our current customer forecast and continued share gain in the mid-range and high-end PC market. We are increasingly confident in our client SSD business for this year and our pipeline of new program for next year to deliver long-term growth.

We are seeing stronger than expected demand for our new PCIe 5 8-channel controller. As we have mentioned previously, this controller is the first 6 nanometer PCIe 5 chip in the world and we have design wins at four of six NAND flash makers and nearly all module makers, given its superior performance and lower power requirement. Introduced in December quarter, this controller already accounts for over 5% of client SSD business, and we expect they will continue to grow rapidly over the next several quarters as PC OEM, NAND flash maker and module maker customers ramp up their high-end PCIe 5 project to full scale. In addition to the success we are experiencing with our 8-channel controller, we have already secured four flash maker wins with our upcoming PCIe 5 4-channel DRAM-less controller, targeting the mainstream market.

This 4-channel controller was tape-out in Q3 last year and expected to begin shipments later this year. We are also actively engaged with virtually every module maker for this new controller, and we anticipate that they will help us continue to drive share growth in the client SSD in 2026 and beyond. In the first quarter, we began to see demand for our new PCIe 5 8-channel controller increase as our flash maker partner secured additional PC OEM wins, and our module maker customer saw significant demand from the consumer aftermarket. Additionally, there is a new market developing for the controller as the white box server market, build a lower-cost hardware platform for AI inference that can leverage more mainstream components. Given the early strength in our 8-channel PCIe 5 controllers in addition to the multiple wins with our upcoming 4-channel DRAM-less controller, and our strong competitive position in the mid-range PC market, we believe we are increasingly well-positioned for unit and revenue growth in client SSD over the next several years, barring significant headwind from the broader economic environment.

Now I would like to move on to our eMMC and UFS business. Like the PC market, the smartphone market showed signs of a bottoming and recovery in the March quarter. This was driven in part by increased smartphone subsidy in China post the Chinese New Year holiday and from the increased inventory restocking ahead of any disruption from geopolitical actions. While it is difficult to know how tariffs will impact smartphone sales in 2025, we have had a promising start of the year. During the March quarter, we experienced strong booking momentum from both flash maker and module maker customers for UFS 3.1 and UFS 2.2 controller as well as for our eMMC controllers. As we mentioned during our last conference call, the market is shifting away from eMMC and UMCP solution in the smartphone market, which have historically been dominated by flash makers.

With the introduction of less expensive mobile DRAM solution, module makers are gaining share using our controller and selling UFS eMMC solution to smartphone OEMs. It is also leading to the adoption of 30-party controller — third-party controller solution by the flash maker to compete in value line market to reduce development cost. With our new high-end eMMC 5.1 controller and our broad-based eMMC product portfolio, we are well-positioned with both flash makers and module makers to serve the automotive, IoT, smart TV, set-top box and other markets that account for more than 800 million units a year. Overall, we are delighted by the long-term opportunity we are seeing in the eMMC and UFS to further grow our share in the embedded smartphone memory market, as well as make a significant inroad into automotive, IoT and other high-volume markets.

I will now provide an update to our MonTitan business. MonTitan is one of the most exciting opportunity for Silicon Motion given the large addressable multibillion-dollar market for enterprise class controllers. As we have discussed, this is a new opportunity for our company, and we continue to expand our product portfolio, customer engagement and technology as we enter the market for the data center, enterprise storage and AI solutions. Interest in MonTitan is driven in part by emerging demand for QLC NAND solutions. With AI, given its ability to deliver high density at lower cost, we have more experience with any others and support more QLC NAND than anyone else in the industry. MonTitan also offer greater flexibility than competing solution given our wide range of firmware capability with which we can meet the unique needs of different customers’ applications and use cases.

Our flexibility is opening opportunity across multiple fronts in the enterprise and AI storage solution business. Many of our early customers are focused on delivering solution for storage system architectures, but we are now expanding our addressable market for MonTitan. We have been working with the NVIDIA team for over a year to qualify our new MonTitan server boot storage solution for use with the BlueField-3 data processing unit, or DPU architecture. And we have been designed into the platform. BlueField-3 is a network accelerating solution that help deliver peak AI workload effectively, end-to-end security and high-performance cloud networking use NVMe over fibers. Our boot storage solution will be used to power BlueField-3 DPU beginning later this year, adding a significant new revenue and unit growth opportunity for Silicon Motion.

Additionally, each BlueField-3 DPU will be paired with multiple high-density enterprise class QLC SSD through PCIe switches. Currently, Solidigm is the only company shipping a high-density 122-terabyte QLC enterprise SSD in the market. And we expect to be the second providing a 128-terabyte QLC MonTitan SSD turnkey solution to our customers later this year. We are thrilled to be growing part of NVIDIA storage ecosystem, providing enterprise boot storage and high-density 128-terabyte MonTitan enterprise data storage solution for AI. These solutions deliver ASP that are significantly above our current corporate average with accretive gross margins. As our MonTitan product portfolio evolves, we look forward to engaging with new customers to expand our addressable market in other areas as we are currently doing with BlueField.

To that end, we are currently focused on delivering a more complete family of MonTitan products, including controller for SATA and PCIe server boost drive, higher density and performance 8-channel and 16-channel controller for AI storage application. With MonTitan supporting the upcoming 2 terabit monolithic die QLC NAND, we will be able to deliver high-density, high-performance 128 terabyte SSD with a best-in-class brand reach of 3.5 million IOPS, putting us in a great position to rapidly expand our market share in the large and growing market for AI storage solution. And finally, we are also engaged with multiple partners with next-generation PCIe 6-controller targeting the NVIDIA Rubin GPU platform that is expected to begin ramping in 2027.

We are confident that MonTitan will begin to ramp in the second half of this year and more meaningfully in 2026 as multiple customers enter production. Finally, I would like to provide highlights on our automotive and other business. Our automotive market position continued to improve as we add new products to our growing portfolio, we continue to support automotive across all our product category, including SATA, PCIe SSD, eMMC, UFS and our ferrite embedded solutions across a wide variety of use cases. We are the first company to receive ASPICE Level 3 certification in PCIe 4-controller, and we are on track to deliver a PCIe 5-controller for automotive later this year. Vehicle capacity continued to increase along with the need for faster, more dense storage solution given the increase in processing capability, ADAS, sensors, cameras and other advanced systems.

We continue to expand our presence in the automotive market and are increasing our market share with existing and new customers alike, including Samsung, which we have added recently. We are currently shipping to many of the biggest names in the business, including Mercedes, Tesla, GM, BYD, Xiaomi, Toyota, Honda and many others and are well on our way to achieving our large target of 10% revenue contribution from automotive by 2026 to ’27. Additionally, we recently introduced our 2708 microSD Express controller and have already secured a major design win with a leading South Korea flash manufacturer, supporting one of the most anticipated next-generation handset gaming platform announced this year, the Nintendo Switch 2, by delivering PCIe SSD-like level performance in microSD form factor.

The SM2708 is designed to meet high-density, high-speed needed for modern portable gaming and other demanding applications. In conclusion, the start of 2025 has been challenging given the geopolitical headwinds driven by the tariff crisis. Silicon Motion is well-positioned to expand its position across the market in 2025 as we continue to gain share with the flash makers. These partnership and partners increasingly look to outsource controller given their need for operation expense discipline, while managing significant investment in other technology, including DRAM and HBM memory. Our position is also improving through the introduction of new products, including our PCIe 5 client SSD controller, which is experiencing strong demand. In addition to our new UFS and eMMC product as we progress through the year, we will also benefit from the introduction of our UFS 4.1 controller in the smartphone market as well as ramp of MonTitan for storage system solution and the boot storage in BlueField-3 DPU in the second half of the year.

Additionally, we are well-positioned for continued share growth in each of our other markets, including automotive. Longer term, as our MonTitan automotive business continue to scale for the next several years and our broad portfolio of solutions for IoT, industrial, commercial and smart devices applications continue to gain share, I’m confident that our strategy to diversify beyond the maturing PC and smartphone market will be successful and continue to believe that we could generate more than 20% of our business in 2027 from these new opportunities. I look forward to sharing more about our successes with these products and new markets throughout this year. Now let me turn the call over to Jason to go over our financial results and outlook.

Jason Tsai: Thank you, Wallace, and good morning to everyone joining us today. I will discuss additional details of our first quarter results and then provide our outlook. Please note that my comments today will focus primarily on our non-GAAP results unless otherwise specifically noted. A reconciliation of our GAAP to non-GAAP data is included with the earnings release issued yesterday. In the March quarter, sales decreased 12.9% sequentially to $166.5 million, coming at the high-end of our guided range despite the weak end-user demand for PC and smartphones at the start of the quarter. Gross margins increased again in the quarter to 47.1% as we continue to benefit from improved product mix as we shift customers to newer products.

Operating expenses increased sequentially to $63.6 million as we continue to invest in new enterprise storage products and given the timing of new product tape-outs. Operating margin increased sequentially to — excuse me, operating margin decreased sequentially to 8.9%, but was within our guided range. We had a one-time tax benefit due to the reversal of a risk accrual — of a tax accrual that we had in the previous year, which resulted in a tax benefit of $2.5 million in the quarter. Earnings per ADS was $0.60. Total stock compensation, which excluded — which we exclude from non-GAAP results, was $4.8 million in 1Q ’25. We had $31 million — $331.7 million in cash, cash equivalents and restricted cash at the end of the first quarter compared to $334.3 million at the end of the fourth quarter of 2024.

Cash declined slightly in the first quarter, primarily from the combination of dividend payment of $17 million and $24.3 million in stock repurchases. In the first quarter, we repurchased $24.3 million of the $50 million six-month repurchase program the Board authorized on February 6 with an average price of $56.96 per share. First quarter is challenging given the geopolitical impact of the US election and its effect on global trade. While market uncertainty remains high, our team executed well and delivered revenue at the high-end and operating margin within the upper half of the guidance range while investing heavily in advanced geometry products and our emerging MonTitan platform for enterprise and AI markets. We continue to build upon our strong foundation for long-term growth.

Now I will discuss our second quarter outlook. Revenue is expected to increase 5% to 10% to $175 million to $183 million, driven by the success of our PCIe Gen5 as well as continuing strong demand for our UFS 3.1 and 2.2 controllers. Gross margin is expected to expand to the range of 47% to 48% as we continue to transition customers to newer platforms. Operating margin is expected to be in the range of 8.9% to 10.9% as we benefit from higher revenue and gross margins. Our effective tax rate is expected to be approximately 16% to 17%. Stock-based compensation and dispute-related expenses are expected to be in the range of $3.1 million to $4.1 million. For the full year, PC and smartphone growth targets remain in the low to mid single digit range with an above average second half weighting.

We believe that our business will reflect the broader industry with significant growth expected in the second half, barring an overly negative impact from tariffs impacting end-user demand. As such, we are not changing our annual outlook currently and target revenue growth that is in line with our achieving a run rate of approximately $1 billion as we exit the year. Additionally, we expect to continue to improve our gross margins as we transition customer new products and enter the enterprise market in the second half of the year. We remain confident that we can drive gross margins towards the higher end of our historical range of 48% to 50% by the end of this year. We’ll continue to invest in advanced geometry products that will allow us to grow our market share across our businesses long-term and help us diversify our product portfolio into new markets.

Despite these higher investments, we are confident that we can return to our historical operating margin range of 25%-plus in the midterm as investments we have made over the past 18 months begin to scale and deliver stronger revenue growth, better gross profitability and improve our operating profitability. Overall tax rate for this year is expected to be approximately 15%. Stock-based compensation and dispute-related expenses for this year is expected to be in the range of $27 million to $29 million. As we enter the second quarter, we are experiencing increased design win activity and improved outlook from our customers. We see strong demand for our new PCIe Gen5 products, including 8-channel that’s currently shipping as well as for our UFS 3.1 and our new UFS 2.2 and eMMC 5.1 controllers in the smartphone and automotive markets.

For our upcoming 4-channel PCIe 5 controller and our UFS 4.1 controllers, our teams have been actively securing new wins and growing our backlog meaningfully as these advanced platforms expand into mainstream PC and smartphone markets next year. Lastly, the momentum behind our one-time family of enterprise controllers continues to grow as enterprises and CSPs around the world continue to invest in next-generation data centers that require high performance, low-cost QLC storage solutions in our — that we are uniquely positioned to provide. While we are seeing a small degree of pull-ins ahead of NAND price increases, we do not expect this to impact our ability to grow sequentially throughout the year. Our teams continue to execute well, are growing our product portfolio, winning new projects and customers and expanding our addressable markets, positioning Silicon Motion for sustainable long-term revenue and profitability growth.

This concludes our prepared remarks. We will now open the call to questions. Operator, please go ahead with the first question.

Operator: Thank you. [Operator Instructions] We will now take our first question from the line of Craig Ellis from B. Riley Securities. Please go ahead, Craig.

Craig Ellis: Yeah. Thanks for taking the question. I wanted to start with an inquiry on the enterprise SSD MonTitan program. So, first of all, Wallace, congratulations on breaking into NVIDIA. That seems like a very significant intermediate and long-term development. The question is more longer term with that business line. It sounds like the business is strongly on track with the six customer wins you talked about last quarter to begin ramping up later this year. The question is, as we look out to 2026, if we’ve got six customers engaged now, where would you expect the business to exit ’26 in terms of customer engagements? And how many of those might be in production? Not looking for specific guidance, but just color on the degree to which the pipeline is building out, especially as you get blue chip customers into the mix.

Wallace Kou: Okay. Craig, thank you for the question. Let me answer your question. First of all, our previous six major customer engagement, they are not related to current NVIDIA BlueField DPU platform engagement. So, this is six customers we are on track. They’re going to ramp from second half of 2025 gradually and 2026 will reach the more meaningful revenue growth. I think ’27, you will see much more significant. We are on track to achieve 5% to 10% from ’26, ’27 our total revenue, doesn’t change. But NVIDIA BlueField DPU design win gave us a better picture into the BlueField module for boot storage. In addition, because the BlueField module with the PCIe switches, which connect to many up to 30 PCIe enterprise SSD solution.

So, each of the storage server going to comply to maximum to 30 SSD. So, this is a portion will be — majority portion will be 128 terabyte high density. So, gave a new opportunity. So, we need to leverage the opportunity with the NVIDIA ecosystem provider such as VAST DDN, such as Dell, NetApp and also their end customer, right? And so, this gave them more opportunity to win in and qualify this ecosystem and not only grow our boost storage on NVIDIA platform, but also grow with NVIDIA ecosystem for storage. So, this is — we work with many of our module maker and partner to deliver the high density 128 terabyte QLC SSD by end of this year. This gave additional momentum to grow our revenue in MonTitan family.

Craig Ellis: That’s really helpful, Wallace. Thank you. For my follow-up question, I wanted to turn one to Jason. So, Jason, it’s clear the trailing 18 months as the company has invested in 6-nanometer tape-outs. On the other side of that, the company has done extremely well, getting new design wins with NAND makers and module makers across the full range of products that the company offers. The question is this, where are we in the journey of upgrading the portfolio to 6-nanometer from a mass set cost standpoint? How much of that is now behind us looking through the current 2Q? How much of that is ahead? And beyond 6-nanometer, can you talk about when we would see the next node transition for the company as we think about operating expense intensity over the next couple of years? Thank you.

Wallace Kou: So, in the near term — let me answer you. In the near term, we’re going to have two more 6-nanometer tape-out in the next three quarters and one 5-nanometer tape-out, which will be a cost reduction for mobile controller. And next year, in probably around middle of next year, we’re going to have a 4-nanometer tape-out for PCIe Gen6 enterprise SSD because we have a customer waiting urgently, and we do not want to miss the schedule and deliver the results. Frankly speaking, we are really in the full design pipeline, and we have many, many customers, and then we don’t have enough R&D resources to support many, many new designs. And we are very confident in our growth momentum in client SSD, mobile controller as well as enterprise SSD.

Jason Tsai: I would also point out, Craig, that we do not anticipate moving beyond 6-nanometer for the foreseeable future for client applications, client PCs or clients — or smartphone applications. The 4-nanometer product that Wallace is pointing towards is for PCIe 6 for the enterprise. So, I think — and historically, with the exception of very rare cases, we really don’t retape-out an old controller into a new process geometry. We look at new designs supporting whether new generation of flash or new generation interfaces for new tape-outs. And so, to Wallace’s point, we’ve got two 6-nanometer tape-outs coming up here throughout this year, which is pretty flat compared to last year. But we’re also looking at utilizing other foundry partners as well potentially to see if we can certainly get better pricing longer term.

Craig Ellis: That’s really helpful color guys. Thank you.

Operator: Thank you. We will now take our next question from the line of Suji Desilva from Roth Capital. Please ask your question, Suji.

Suji Desilva: Hi, Wallace. Hi, Jason. So, maybe following up on Craig’s question about the NVIDIA product here. I appreciate the MonTitan guidance of 5% to 10% of revenues. How should we think about sizing the NVIDIA partnership with the ecosystem in terms of addressable market? Any framework or metrics there would be helpful.

Jason Tsai: Yeah. So, look, I think, obviously, the opportunity for BlueField, we’re very excited about. I think there are a number of factors regarding that kind of affect the TAM. We expect the BlueField-3 product to begin ramping late this year, and we see a meaningful ramp in ’26 and beyond. With every successive win at MonTitan, it makes more — it gives us more confidence around achieving our goals for 5% to 10% of revenue in ’26. And the TAM really depends on several factors, the growth in the enterprise storage market, the global demand, tariff impacts, et cetera. We do anticipate this to be a meaningful part of our MonTitan business longer term.

Wallace Kou: So, let me add a comment is we’re very happy to see NVIDIA start to focus on storage. During the GTC 2025, they mentioned the storage next. So, they really put a new spec and performance requirement to build the storage, especially there’s compute storage and data storage. The BlueField DP3, the third generation is really for data storage, but much bigger density storage system. We’re very happy to see the momentum and for the design win. And I think we cannot comment the total unit, but we’re going to start to ramp from second half of this year, and there’s a minimum quarterly revenue, and we do see the momentum moving to many, many storage systems integrator. And in addition, I think many, many hyperscaler CSP, they are also looking for high density QLC SSD.

In the past, many, many CSP and service provider, they only need an 8 or 16 terabyte. Now they really changed their mind and moving — and we — I think as you can see from last financial release, several players announced the major design win in the CSP. So that gave you the indication about the trend. So, I think we’re exciting for our technology MonTitan, not just for NVIDIA BlueField-3 DPU design. And also, they’re going to go many, many and for AI cloud service and storage — server storage requirement.

Suji Desilva: Okay. That’s very helpful color, Wallace. Thank you. And then maybe switching over to the notebook market. Understanding the mix here, where is your traction in the premium notebooks? And what’s your outlook for the 8 versus 4-channel product here as the year progresses?

Wallace Kou: Okay. If you take a look for the PC OEM this year, they’re going to ramp up the 8-channel PCIe 5 from July timeframe. I think all the PC OEM top five will align at the same time. And we’re going to see 5% of the second half, 5% of total PC shipment. And the 4-channel DRAM-less controller designed for 2027, mean 2026 production. So, I think we have a design win from four of six NAND makers and nearly all module makers for both 8-channel and the 4-channel DRAM controller. That’s why we believe our 8-channel will have a minimum 30% market share through with the PC OEM. And for 4-channel, we’re going to have a minimum 50% market share when PCIe 5 move to mainstream in full scale production. That’s why we believe we’re going to continue to gain market share in client SSD, and we’re going to grow from 30%, 33% today and moving towards 40% in the next few years.

Suji Desilva: Okay. Very helpful, Wallace. Thanks guys.

Operator: Thank you. Our next question comes from the line of Gokul Hariharan from J.P. Morgan. Please go ahead, Gokul.

Gokul Hariharan: Yeah. Hi. Thanks, Wallace and Jason. So, first of all, on this BlueField-3 DPU engagement, can you talk a little bit about how this business engagement and product sale will work? So, you are already qualified by NVIDIA. And then customers such as DDN or Wadata or Dell will basically embed your controller into their storage solutions. Is that typically how that’s going to work? And secondly, how many vendors have been qualified? I think you mentioned only Solidigm has been qualified so far. You’re kind of the second vendor. How long do you think you can kind of keep this kind of only two kind of vendor status in this? And maybe lastly, I think how do you size this market compared to the regular kind of enterprise and data center controller market in the enterprise that you’ve been targeting with the original MonTitan target market?

Wallace Kou: So, let me expand maybe basically about business model and certain thing we cannot share with you. I think we start to engage with NVIDIA about a year ago. So, in the beginning, we don’t fully understand what’s really the purpose for the application after three months query and everything. And I think — and we understand this for NVIDIA BlueField-3 DPU platform. And in the past, the BlueField-3 used for really is a pass-through transfer the data between GPU to GPU and CPU to GPU. I think this is selling for networking and really designed for the storage system. And I think the design win give us a great opportunity to fully understand NVIDIA, their plan for the storage application and give opportunity to approach it beyond through the ecosystem and go to the end system integrator one by one.

And I think NVIDIA did not own the system storage product, but selling the BlueField-3 module to their system integrator and storage enabler. So, this is a business model. And so, we need to be qualified by NVIDIA. I think there’s only two suppliers to support the boot storage. We are one of them, and it’s in the final stage qualification because they’re going to ramp in the second half of this year. So, nearing the final stage. And we are in the process to qualify our high density QLC SSD through the ecosystem. So, this is in process. We believe by end of the year, the customer will move into mass production. So, this is just in the beginning range about the storage system growing momentum for AI storage. And we see there is more beyond this.

And when — this is a mature variable, we can share more data with our investors.

Jason Tsai: And I would also point out, Gokul, that on the BlueField, when we talk about the opportunity there, and Solidigm isn’t in the BlueField opportunity — isn’t in the boot drive opportunity there. Solidigm is on the high density 122 terabyte side that our high density QLC data storage opportunity is. So, it’s different than the boot drive opportunity that we’re talking here specifically with NVIDIA on the BlueField-3.

Gokul Hariharan: Got it. So, for the boot drive opportunity, according to what you know, you are currently the only one qualified. Is that fair? Or are you only…?

Wallace Kou: There’s only two supplier. We are one of the two supplier.

Gokul Hariharan: Understood. Understood. Yeah. That’s very clear. Second question, maybe for you, Jason, and also for Wallace. How should we think about — I think you’re still maintaining the exit rate of $1 billion by Q4 of this year, which is a pretty meaningful step-up from what your Q2 guidance is roughly a 30% or 40% kind of step-up from the Q2 guidance. And historically, we have never seen that kind of seasonality, at least in the last five or six years. Maybe in 2019, we saw that. I think beyond that, we’ve never seen that kind of step-up in revenues into Q4. So, I just wanted to understand like, are there some specific kind of project wins, customer ramps that you’re really kind of penciling in, which gives you the confidence to kind of still stick to that guidance, especially given the macro environment has changed?

Wallace Kou: I think we will see Q4 momentum building the $1 billion run rate, we did not count on the enterprise business of BlueField design revenue. It’s really based on last year, our major design win from mobile phone, mobile controller as well as PC, PCIe Gen5. So, because this design win pipeline will create enough momentum for us to bring to $1 billion run rate in Q4.

Jason Tsai: And I would also point out that we do have a number of new programs that are scaling, right? The 8-channel PCIe 5, we expect the PC OEM channel to scale more meaningfully in the back half of the year as PC OEMs start ramping for the holiday season, ramping for enterprise replacement cycle, ramping for the Windows 10 replacement cycle. All those things are kicking-in in the back half of the year. And that’s still the current expectation. Obviously, the geopolitical is uncertain, but the numbers that we’ve seen, the forecast that we’ve seen today are still indicating a very back half-centric growth profile for PCs and for smartphones for this year as well. So, we’ve got the new PCIe 8-channel ramping. We’ve got beginning late ramp of UFS 4.1. We’ve got, to Wallace’s point, some of the MonTitan boot drives as well as the high density 128 terabyte SSD controllers ramping.

So, we do have a number of new programs that would be supplementing the expected market strength that we’re seeing.

Gokul Hariharan: Got it. Yeah. That’s very clear. Thank you.

Operator: Thank you. We will now take our next question from the line of Matt Bryson from Wedbush. Please go ahead, Matt.

Matthew Bryson: Thanks for taking my question. I guess, first off, when I look at what was happening with some of your customers and peers in Q1, it seems like February and March picked up relatively significantly and that momentum is carrying into Q2. Obviously, you came in ahead of your guidance range, but didn’t quite see the same magnitude of momentum. And if I look at Q2 seasonality or Q2 guidance, it looks relatively seasonal. I guess, my question is — first question is why are we seeing a bit more of a guide that’s reflective of the pickup that seems to be happening across the industry?

Wallace Kou: Because the tariff is really created many uncertainty. I think we can — based on where we are, although I believe we have almost no impact on tariff at the moment. We try to be cautious, but our design win pipeline is rock solid and we’re gaining market share continually. And it’s really — as we said, we have enough design win pipeline and ramping in the second half of this year. That will bring the $2 billion run rate in Q4 timeframe, and we are very confident to achieve it. And we have many, many new projects ramping, including Toyota global model for ADAS and IVI. So, this is many new design wins and really bring a very broad range of product mix. And I think the NVIDIA and 128 terabyte enterprise MonTitan, that will bring more momentum in 2026 and beyond.

But ’25 Q4, I think the full year, current pipeline and design win is sufficient to carry our sales revenue growth. But we don’t want to have a more aggressive guidance, because I think so far we try to be cautious and make sure we meet all the investor expectation.

Matthew Bryson: Great. So, it sounds like you’re just trying to embed some conservatism in your current outlook. And I guess, the second question is kind of following up on Gokul’s last question. In terms of how we should think about the ramp in Q3, Q4. It sounds like it’s very project based. I tend to think about new PC designs, them starting to get built in June, July, new handset designs, particularly Chinese handset designs being more of a late Q3, Q4 timeframe type opportunity. And it sounds like a lot of the enterprise designs come in, in Q4. Is that kind of how we should think about those new programs layering into your revenue stream to get to that $250 million goal by Q4?

Jason Tsai: Yeah. That’s right, Matt. And just again, a little bit more commentary around Q1, Q2. Just given the broader economic environment and the potential impacts of the changing tariff policies, we believe it’s prudent to err on the side of caution, right? While we’re seeing — as we said, some mild customer pull-ins, the amount is not material enough to change our near term outlook. And we’re experiencing increased interest in all the new products that we talked about, right, PCIe 5, US+4, et cetera. And our guide for the June quarter is pretty consistent with our peers and in line with really more importantly, with our customer forecast. And so those are kind of the key foundation of kind of what we see in the market today in the first half of this year. And then certainly, to your point, we do have some program specific, market specific things affecting growth in Q3, Q4 that are going to be pretty meaningful.

Matthew Bryson: Thanks.

Operator: Thank you. [Operator Instructions] We will now take our next question from the line of Nick Doyle from Needham. Please go ahead, Nick.

Nick Doyle: Hi. Thanks for taking my questions. Asking about the Switch 2 opportunity, can you help size that at all what your market share attach rate is there? And maybe what kind of ASPs are those looking like? Thanks.

Wallace Kou: This is designed for the microSD Express C7.0, they use for content card for the Nintendo. So, I can only say we’re about 80% of the share.

Nick Doyle: Okay. Helpful. The importance of the boot storage application, could you just talk more about that? Like what exactly are you providing there? And does that help you get closer to providing the data storage part? Thanks.

Wallace Kou: I think what I can say is because through the collaboration with NVIDIA team, we definitely understand the full field module and the ecosystem. And through the ecosystem, we work with the star ecosystem together, and that’s why we get an opportunity to get our product qualified in advance. And through that, I think because we see we — because many companies announced their 128 terabyte QLC SSD. But no one can deliver the real product except Solidigm. And we believe we could be the second player to provide the turnkey solution to the market to fill the demand for storage system. So, this is a great opportunity, but we have to execute very well, deliver the result. So, we’re very excited about the new opportunity and engage with NVIDIA.

I think it go beyond just the BlueField DPU, believe me. But we cannot say too much, but we do want to work because the storage system is much bigger for AI cloud and AI server. And this is the opportunity we show QLC in demand when we do see, as I said, all the cloud storage provider and changing their direction and set higher density enterprise SSD drive. So, this is a great opportunity for Silicon Motion to shine to grow.

Nick Doyle: Thank you.

Operator: Thank you. I’m showing no further questions. I’ll now turn the conference back to Mr. Wallace Kou for his closing comments.

End of Q&A:

Wallace Kou: Thank you everyone for joining us today and for your continued interest in Silicon Motion. We will be attending several investor conferences over the next few months. The schedule of this event will be posted on the Investor Relations section of our corporate website, and look forward to speaking with you at this event. Thank you everyone for joining today.

Operator: This concludes today’s conference call. Thank you for participating. You may now disconnect.