Suji Desilva: Okay, alright, thank you Wallace. And then my other question is on the MonTitan as it ramps up. Is this the right way to think about that, that maybe some of the AI servers out there, great opportunity for attach rates and content increases of MonTitan or is that not the right framework for what might be…?
Wallace C. Kou: I cannot comment on that, but I think the current demand is in the very wide range from the hyperscalers and from AI server, from all-flash array, from conventional servers. So I think we’re definitely looking forward to — but the more important is a Tier 1 customer who have a really good volume, and we believe we can — we have secured one. We’re looking forward to see your second one by second half of 2024.
Suji Desilva: Okay, that’s very helpful Wallace. Thanks.
Operator: Thank you for the questions. [Operator Instructions]. We have a follow-up questions from Mehdi Hosseini from Susquehanna International Group. Please go ahead.
Mehdi Hosseini: Yes, great, thanks for the follow-up. Jason, I understand the 6 nanometer tape-out is going to keep your R&D in the $47 million to $48 million a quarter this year. Should we expect additional tape-outs next year, or in other words, should R&D stay at these elevated levels into 2025 or would it taper off?
Jason Tsai: I think we’ll continue to invest here. I think it’s a little too early for us to comment about what 2025 OPEX looks like at this point. But obviously, it’s important for us to continue to invest, to continue to stay ahead. We tape out a 6 nanometer because it’s what we need to do. The technology requirements for performance and power, you can only get both of those to the right levels when you go down to this lower process geometry. I think there are options for us to look at ways of reducing tape-out costs and foundry costs longer term that we’re exploring. So stay tuned as we have more to share on that we will. But certainly, our goal here is to continue to invest, but invest responsibly and try to bring the cost down as much as we can, but still maintain our technology leadership.
Mehdi Hosseini: Sure, that’s fair. Ultimately, we’re just trying to figure out if the company is still targeting mid to high 20% operating margin and OPEX is a factor here. So any thoughts on the longer-term operating margin target since…?
Jason Tsai: Yes, that hasn’t changed. I think if you take a look at our business in the past, we are typically a 48% to 50% plus gross margin company and operating margins in that 25% to 30%. There’s nothing fundamentally different about our business today that says that, that’s not an achievable target for us longer term.
Mehdi Hosseini: Okay, very helpful. Thank you.
Operator: Thank you for the questions. One moment for the next questions. We also have a follow-up question from Craig Ellis from B. Riley Securities. Please go ahead.
Craig Ellis: Thank you for taking the follow-up. Wallace, you mentioned the company has a collaboration with both MediaTek and Qualcomm. And I was hoping you could comment a little bit further on that, both on the duration of those two partnership engagements and two, the nature of them, are you a reference design partner for those solutions, and if so, to what extent, and to what extent have those been part of UFS revenues in the past, and are they expected to be in 2024 and 2025? Thank you.
Wallace C. Kou: It’s important for our new products and to qualify on leading SoC provider, like the Qualcomm MTK for the mobile platform. And then normally, we have direct engagement also through our customer, joint qualification. So they help us to resolve some issue during the preproduction qualification. So this is a joint prequalification and help us to gain confidence for our quality for firmware as well as ASIC. And we also and what we serve Qualcomm for automotive platform qualification. So they extended our product line like Ferri and MediaTek and other NXP. So this is the platform and platform engagement to help accelerate our product readiness, also help our customers to end the production sooner.
Craig Ellis: And how material are those relative to the revenue that we’ve been seeing and that you would expect to see in 2024?
Wallace C. Kou: I cannot quantize the numbers, but I tell you it’s very helpful and our company put a big effort for platform qualification and team and dedicated to help our product line.
Craig Ellis: Thanks Wallace.
Operator: Thank you for the questions. Next up, we also have a follow-up questions from Gokul Hariharan from J.P. Morgan Chase. Please go ahead.
Gokul Hariharan: Yeah hi. I had one question on AI. Thanks Wallace, you did highlight the AI adoption on the enterprise side. Could you also talk broadly on what happens when you have more adoption on edge devices, especially most of your PC and smartphone customers are launching AI-enabled PCs and smartphones this year and probably more next year. What does it do to NAND flash content and what does it do to your controller ASPs or controller specs?
Wallace C. Kou: So these are very good questions. Naturally, not only us, all the NAND maker, I think have spent probably at least half year looking forward to how the AI will impact for storage solution and what a controller maker need to do to improve our value and enhance AI application. So there’s a lot of exciting applications for AI PC. You’re looking from the Intel, AMD, the SoC, also Qualcomm and NVIDIA coming provide the solution. There are also third-party for AI SoC for PC, but not for the notebook, but for desktop and for PC workstation. So we are involving for what our company is for enterprise AI, the SSD probably because the enterprise — the server AI is more important for compute. So it’s solution is really a system role.
So the regular latency and sequential results is very critical and to supporting and obviously all the AI server requirement. But for the AI PC, that’s a different story because you cannot use HBN for the PC. You cannot use a very, very high density and limited density for DRAM. So the — swapping become very critical. So several technologies, several requirement is really neither SSD controller and a solution to provide to allow to make the Edge AI to be more meaningful and more practical. And I cannot go to detail. I’d just say, this is all the area we are looking for to add value and study. I think all NAND makers and leading control makers are looking for to provide solution and be part of the Edge AI trend.
Gokul Hariharan: Okay, thank you very much. And second, on PCIe Gen 5, could you talk a little bit about the pricing uplift you’re expecting as you go from PCI Gen 4 to PCI Gen 5, I remember I think you talked about significant premium in the last call. Could you talk a little bit about what you’re seeing in the market for the flagship products and how that is likely to shape out as we get into more mainstream PCI Gen 5 products towards next year as well?
Wallace C. Kou: I think, I cannot give you exact number, but our high-end PCI Gen 5 channel controller is about two times of PCIe Gen 4 controller today. We are very exciting to see our high-end PCIe Gen 5 controller adopted by three NAND maker. We believe there will be additional join in later this year. So this is very important for us to expand our market share for notebook, for PC OEM, as well as we see the increase in our sales revenue as well as margin. And this is a very important milestone. And the PCIe Gen 5 and the high-end controller can also be adopted by the server for boot storage. And I think there’s a trend we’re seeing and not just for notebook, but PC for workstation for gaming PC that will be our top high-end PCIe Gen 5 channel controller.
Operator: Thank you for the questions. With that, I would like to hand the call back to the management for closing remarks.
Wallace C. 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 section of our corporate website. Thank you, everyone for joining today. Goodbye for now.
Operator: That does conclude today’s conference call. Thank you for your participation. You may now disconnect your lines.
