Wallace C. Kou: Yes. I think for Client SSD, last year, our market share — global market share is around 25%, 26%. We believe this year we will grow to 30% to 32% range because total overall SSD number overall will grow another probably 10 million to 20 million for global unit shipment. For mobile, we will grow faster and stronger because we have more customers in the pipeline not only the existing NAND maker, they continue to grow compared with last year, but also we have two additional NAND maker joined the group to grow. And module maker, we see they will grow even stronger. And we also have a platform development with both Qualcomm and MediaTek. We also have direct engagement with smartphone maker to strengthening our position and technology and pacing for 2025 growth.
Gokul Hariharan: Okay, got it, thank you.
Operator: Thank you for the questions. One moment for the next questions. Our next question comes from the line of Anthony Stoss from Craig-Hallum. Please ask your question.
Anthony Stoss: Thank you. Jason, I was trying to write as fast as I could. On the tape out commentary, could you just break that out again by quarter and kind of the cost that you expect for the quarter? And then I had a follow-up for Wallace.
Jason Tsai: Yes. So we’re expecting to tape out our UFS 4 6-nanometer controller here in the first quarter, and then we’ll tape out our second PCI Gen 5 controller early in the third quarter. So that’s going to result in more elevated OPEX kind of similar to what you saw here in the fourth quarter for each of those two quarters. And then in Q2 and Q4, that should revert back down to a more normalized level because of those — because those peers don’t have the tape-out. Those tape-outs as we have said in the past, are typically north of $15 million in terms of total development and investment cost for us. So during the quarter, where they’re taping out, it’s certainly a big step up on the OPEX.
Anthony Stoss: Okay. Got it. And then Wallace, I’d love to hear a little bit more last quarterly conference call, you talked about a new Korean NAND maker coming on as a customer. I’m curious to your view on how quickly they could wrap and could they be a, let’s say, a top three customer in 2025?
Wallace C. Kou: We cannot comment individual NAND maker customers about the revenue, but we definitely look forward to stronger engagement and broaden our product line and design win. I think we would start looking forward to embrace the NAND maker who really can outsource more projects to Silicon Motion, and will add value to them. I think that 2024, 2025, they are really a good timing for us to show our technology and serve our NAND maker, select their R&D extension and looking forward to more exciting results. And we will definitely rollout this year.
Anthony Stoss: Okay. And if I could sneak in one more on your MonTitan, so you talked about having secured one design win. Can you give us any color on if it’s a data center hyper scaler, NAND maker, and then how quickly do you think you can secure additional out of those 12 that have sampled?
Wallace C. Kou: We cannot comment the customer and the type, but I think with Tier 1 customers and with that, we believe we will secure the second one in the second half of 2024. So I think we’re confident to win at least two Tier 1 customers by end of 2024.
Anthony Stoss: Very good, thank you.
Operator: Thank you for the questions. Next question comes from Craig Ellis from B. Riley Securities. Please ask your question.
Craig Ellis: Yeah, thanks for taking the question. Wallace, I wanted to start with you and follow-up on some of the outsourcing questions from the call, but also really continue the conversation that you and I have had over the last couple of years. So I think we both expected that there would be an increase in outsourcing from NAND customers. And the question is this, as you look across the increase in activity that you’ve observed over the last 12 months or so, can you characterize how extensive that is from OEMs that are maybe just doing one or two new products to much more wholesale changes, what’s happening on the continuum a little bit to a lot, and how much of that is baked into the guidance that you and Jason have given for calendar 2024? And then I had a couple of follow-ups. Thank you.
Wallace C. Kou: I think the — as you can see through the 2023 it was a difficult year for all the NAND makers because the weak demand and the oversupply, the NAND price declined sharply and nobody really make any planning. Everybody is margin negative. And we are able to gain share because I think we are treated view, recognize the extension of NAND makers on R&D. So that’s why we have been developed such relationship recognition, trust, and respect for the past 15 years. And we’re capable and handling. So NAND makers, their focus now is not focused on market share. They focus on profitability. So they are not either invest more CAPEX in the NAND capacity. They only invest the technology they want to deliver. So their focus on the development between the high end, more value, we can maximize the profitability they can get.
And the mainstream [indiscernible], they will try to also to third party like Silicon Motion, which we can help them and diversify and bring a more portfolio offered to the very end customer. So this is the idea we bring to the table, and we see more and more outside opportunity from NAND maker when they make a business decision, they tend to go to the third party like Silicon Motion.
Craig Ellis: Got it. And then the follow-up question is just a continuation. What are the things that you’re looking at that will indicate that this is not only a trough cycle reaction from NAND OEMs, but through the sweet spot of the cycle and towards the peak of the cycle, they would sustain this level of outsourcing or perhaps even grow it? And then the follow-up is for Jason. Jason is MonTitan ramps in calendar 2024, how should we think of the gross margin implications relative to corporate average?
Wallace C. Kou: We see this cycle because now NAND well-being shortage. So NAND maker the careful to value all the priority inside the company. Every NAND maker may have a different strategy, and we cannot comment for that. But we believe this cycle will continue until middle of 2025 or late 2025, when supply demand reached balance and NAND makers start to invest more about the CAPEX and to meet the higher demand.
Jason Tsai: And I also think that — I think to your question about how much of this outsourcing is temporary versus more of a structural shift. We have wins going into 2025 and further out. So I think this isn’t something where they were just using us for a short-term stop gap. This is something where we’re building much more substantial long-term relationships with them. In terms of the MonTitan revenue ramp and margin impact, that’s not going to expect it to happen until late into Q4 — late into 2024, excuse me, in Q4. So it’s too early to say what impact it will have. More meaningful ramp in 2025 and certainly, as we have better visibility around that, around timing of wins and scale of the wins, we’ll be able to provide more color. But right now, it’s a little too early to talk about the impact of both revenue and margins at this point.
Craig Ellis: Got it. And the gross margin color on calendar 2024 guide was quite helpful. Can you talk about the visibility that you have, Jason, to gross margins ultimately reattaining that more normalized 50% level?
Jason Tsai: Yes. I think we’re feeling pretty good about that just given the mix of new products, new projects, new technologies that are coming to market that we already have strong design win and pipeline for. As each day passes, we’re also seeing these new engagements bring with them healthier pricing levels at healthier margins, and we’re certainly working on our own back end and production to also improve costs as well. So I think we’re on a good track here and the guidance that we provided, we believe that it’s attainable.
Craig Ellis: Thanks Wallace, thanks Jason.
Operator: Thank you for the questions. Our next question comes from Suji Desilva from ROTH MKM. Please go ahead.
Suji Desilva: Hi Wallace, hi Jason. Congrats on the good guidance here. You talked about the module makers securing lower-cost NAND in late 2023 that they’re selling through now. Can you just talk about the behavior you’d expect as that lower cost NAND gets worked through and how they respond, would they then look to market conditions or just any thoughts there on how that might impact the financials after that gets worked through?
Wallace C. Kou: Most of our leading module makers I think they have been in the market for a long time. So they understand NAND price trend. So they procure a very large amount of NAND through last August to November. So that really is prepared for NAND price up. They understand NAND price, NAND will be in shortage and NAND price will go continually throughout the entire 2024. So they’re procuring advance and to balance their cost they will continue to buy some of NAND this year. But product mix and NAND different pricing makes them to be more competitive to compete with other module makers.
