慧榮科技 (SIMO) 2005 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Third 2005 Silicon Motion Technology Corporation's Earnings Conference Call. My name is Raika (ph), and I will be your coordinator for today.

女士們、先生們，大家好，歡迎參加慧榮科技公司 2005 年第三次獲利電話會議。我叫 Raika（ph），我將擔任你們今天的協調員。

[Operator Instructions].

[操作員說明]。

I would now like to turn the presentation over to your host for today's call, Mr. Richard Wei, Chief Financial Officer. Please proceed, sir.

現在我想將演講交給今天電話會議的東道主，財務長理查德·魏先生。請繼續，先生。

Thank you and hello, everyone. This is Richard Wei and I am the CFO at Silicon Motion. We're happy that you could join us on our conference call today. You all should have received a copy of the press release, which was issued last night. If you have not received a copy, please go to our website. Additionally, we also put a PowerPoint file on our website. And that contains some of the material that we discuss today. So, you may want to download that at some time. If you will bear with me for a moment, I need to go over our Safe Harbor policies.

謝謝大家，大家好。我是理查德‧魏，我是慧榮科技的財務長。我們很高興您今天能夠參加我們的電話會議。你們都應該會收到昨晚發布的新聞稿副本。如果您沒有收到副本，請造訪我們的網站。此外，我們還在網站上放置了 PowerPoint 檔案。其中包含我們今天討論的一些材料。因此，您可能想在某個時候下載它。如果您能耐心聽一下，我需要回顧一下我們的安全港政策。

Certain statements made during the course of our discussion today may constitute forward-looking statements that are based on management's current expectations and beliefs and are subject to a number of risks and uncertainties that could cause actual results to differ materially - including risks that maybe beyond the Company's control. For these risks, please refer to the Company's filings with the SEC.

我們今天討論過程中所做的某些陳述可能構成前瞻性陳述，這些陳述基於管理層當前的預期和信念，並受到許多風險和不確定性的影響，這些風險和不確定性可能導致實際結果出現重大差異，包括可能超出預期的風險和不確定性。對於這些風險，請參閱公司向 SEC 提交的文件。

Now, let me just quickly go over the Q3 numbers, and then I'll turn it over to Wallace for his remarks on Q3 as well as Q4. Our sales in Q3 was 747 million NT, and that was up 20% from the same quarter last year and up 35% from Q2. In terms of the product composition, 87% of our sales came from the mobile storage products, which include flash card controllers as well as USB 2.0 controllers; and 13% of our sales came from the multimedia SoC, which include the multimedia display processors as well as the portable audio SoCs.

現在，讓我快速瀏覽一下第三季的數據，然後我將把它交給華萊士，讓他對第三季和第四季進行評論。第三季銷售額為7.47億新台幣，比去年同期成長20%，比第二季成長35%。從產品組成來看，我們87%的銷售額來自於行動儲存產品，其中包括快閃卡控制器以及USB 2.0控制器；我們的銷售額中有 13% 來自多媒體 SoC，其中包括多媒體顯示處理器以及可攜式音訊 SoC。

In terms of units, in Q3 we shipped a total of about 24 million units in the mobile storage product area. And that was up from about 10 million units in the third quarter of last year. That was an increase of about 147%. It was also an increase of about 75% (ph) from 14 million units in the second quarter. And so both the year over year (inaudible) comparison are fairly impressive. On the multimedia SoC side, we shipped a total of about 400,000 units and that was up from 337,000 units in the second quarter. In terms of margins, our Q3 gross margin was 52.3%, and that was up from 44.2% in the third quarter of '04, as it was up from 46.9% in the second quarter.

從出貨量來看，第三季我們在行動儲存產品領域的出貨量總計約2,400萬台。這比去年第三季的約 1,000 萬台有所增加。增幅約 147%。與第二季的 1,400 萬台相比，成長了約 75%（ph）。因此，同比（聽不清楚）的比較都相當令人印象深刻。在多媒體SoC方面，我們總共出貨了約40萬顆，高於第二季的33.7萬顆。就利潤率而言，我們第三季的毛利率為52.3%，高於04年第三季的44.2%，也高於第二季的46.9%。

Operating margin in Q3 was 27.8% and that was up from 26.7% in the third quarter of last year and up from 20.2% in the second quarter of this year. Our net income in Q3 was 215 million NT, and that was up 85% from second quarter and up 82% from a year ago period. Now let me just run over some balance sheet numbers quickly. Our cash and cash equivalents as was for short-term investment, which really should be considered cash, because it really was deposited in fixed income bond funds. The two items added together was about $80 million US. And total assets was 115.

第三季的營業利益率為 27.8%，高於去年第三季的 26.7%，也高於今年第二季的 20.2%。第三季淨利為新台幣2.15億元，較第二季成長85%，較去年同期成長82%。現在讓我快速瀏覽一下一些資產負債表數字。我們的現金和現金等價物用於短期投資，這確實應該被視為現金，因為它確實存放在固定收益債券基金中。兩項合計價值約 8000 萬美元。總資產115。

This actually represents a fairly large increase from the balance sheet number at the end of Q2 and it reflected primarily the IPO proceeds of about $41 million US. And the Company has no debt. In terms of financial ratios, A/R days - average A/R days increased from 45 in Q2 to 47, whereas inventory days -- average inventory days came down from 87 down to 56. And inventory days due to an imbalance decline from 63 to 59. Our current ration was a healthy 6.3 and ROE has shown steady improvements from 26% in Q1 to 29% in Q2 and now 35% in Q3. The ROA was 19% in Q1, followed by 24% in Q2 and it was 30% in Q3. And so, we've seen fairly healthy improvements in both the ROE as well as the ROA.

這實際上比第二季末的資產負債表數字有相當大的成長，主要反映了約 4,100 萬美元的 IPO 收益。且公司無負債。從財務比率來看，應收天數－平均應收天數從第二季的45天增加到47天，庫存天數－平均庫存天數從87天下降到56天。天數下降到 59。第一季的 ROA 為 19%，第二季為 24%，第三季為 30%。因此，我們看到 ROE 和 ROA 都有相當健康的改善。

Now, I'll turn over to Mr. Wallace Kou, our CEO, for his review of the Q3 business as well as our Q4 outlook.

現在，我將請我們的執行長郭先生回顧第三季的業務以及我們第四季的展望。

Thank you, Richard. Thank you to all of you who join our call today. As you see, we had an extremely successful third quarter and were able to successfully navigate our number challenge -- over the second quarter. So, in Q3, we saw extremely strong demand for mobile storage products -- flash, memory controllers, slashing (ph) for our SD and MMC controllers. (Inaudible-highly accented) trends in the market, we ship a product mix (inaudible-highly accented) and actually put (ph) our sales from these products.

謝謝你，理查。感謝今天參加我們電話會議的所有人。正如您所看到的，我們的第三季度非常成功，並且能夠在第二季度成功應對我們的數位挑戰。因此，在第三季度，我們看到對行動儲存產品——快閃記憶體、記憶體控制器、SD 和 MMC 控制器的削減 (ph) 的需求極為強勁。 （聽不清楚-高度重音）市場趨勢，我們推出了產品組合（聽不清楚-高度重音）並實際將（ph）我們的銷售額來自這些產品。

So, in Q3, we shipped a record 24 million flash memory card controllers and UBS 2.0 flash disk controllers, which was 143% increase from the previous year. We found this to be quite remarkable, given that we are facing (inaudible-highly accented) strength for (ph) our supplies on (inaudible-highly accented) especially LGA package. Much of this due to fire that unfortunately occurred in (inaudible-highly accented) factory in May, which create a long BGA (ph) and LGA (ph) (inaudible-highly accented) lead time. The result of this, we decided to ship the majority of our testing (ph) and assembly work to SPIL (ph) at the end of Q2, which also caused some more delays. Despite a challenging manufacturing side, we still managed to post a solid quarter with across the board improvement revenue and earnings and margins.

因此，在第三季度，我們的快閃卡控制器和UBS 2.0隨身碟控制器的出貨量達到了創紀錄的2400萬個，比前一年增長了143%。我們發現這是相當了不起的，因為我們面臨著（聽不清楚 - 高度重音）我們的供應（聽不清楚 - 高度重音）的強度，尤其是 LGA 封裝。這很大程度上是由於 5 月（聽不清楚 - 重音）工廠不幸發生的火災，導致 BGA (ph) 和 LGA (ph)（聽不清楚 - 重音）交貨時間較長。結果，我們決定在第二季末將大部分測試 (ph) 和組裝工作運送到 SPIL (ph)，這也導致了更多的延誤。儘管製造方面面臨挑戰，但我們仍然成功實現了穩健的季度業績，收入、利潤和利潤率全面改善。

For the fourth quarter Q3, we had totally (inaudible-highly accented) customer, we exceeded 1 million units per month in shipment. That's also another record. Even more importantly, we shipped over 10 million unit of - flash memory controllers in September and 2.2 million USB 2.0 flash disk controllers in September. That also lead to believe we might have fully emerged from some of these recent operational difficulties. So, our R&D expense increased by 80% year over year, but we believe adding to R&D capability will only increase our competitive edge over the long term.

在第四季第三季度，我們擁有完全（聽不清楚的高口音）客戶，我們每個月的出貨量超過 100 萬台。這也是另一項記錄。更重要的是，我們9月快閃記憶體控制器的出貨量超過1000萬個，USB 2.0快閃記憶體控制器的出貨量超過220萬個。這也讓人相信我們可能已經完全擺脫了最近的一些營運困難。因此，我們的研發費用年增了80%，但我們相信，從長遠來看，增強研發能力只會增加我們的競爭優勢。

Now, looking forward to the Q4, we definitely want to focus for our customer support and also improving our (inaudible-highly accented) support from customer manufacturer side. So, we believe we'll see a continued strong growth, especially for NAND (ph) memory controller card products. Primarily, because indications are the MCM flash memory controllers is driven by the mobile phone, which should happen in Q4.

現在，展望第四季度，我們肯定希望專注於我們的客戶支持，並改善我們來自客戶製造商的（聽不清楚-高度口音）支援。因此，我們相信我們將看到持續強勁的成長，尤其是 NAND (ph) 記憶體控制卡產品。主要是因為有跡象表明MCM快閃記憶體控制器是由手機驅動的，這應該會在第四季度發生。

We are also thinking to some new opportunity for this product in China, in particularly, start to grow in Q4. We aim to launch a number of new exciting high performing products, also going to help us to growing Q4 revenue. Now, as in the technology-wise, we're moving to migrate most of our product to 0.16 micron from 0.18 micron process technology. So, we believe we can see the upgrade in our current product line with integrated voltage regulator (inaudible-highly accented) reset the MP3 portion, we're also going to integrate audio codec DC-to-DC converter (inaudible-highly accented) compare (ph) with competitor.

我們也在考慮該產品在中國的一些新機會，特別是在第四季開始成長。我們的目標是推出一系列令人興奮的高性能新產品，這也將幫助我們增加第四季的收入。現在，在技術方面，我們正在將大部分產品從 0.18 微米製程技術遷移到 0.16 微米。因此，我們相信我們可以看到我們目前產品線的升級，整合式電壓調節器（聽不清楚-重音）重置了MP3 部分，我們還將整合式音訊編解碼器DC-DC 轉換器（聽不清楚-重音）與競爭對手進行比較（ph）。

Although, I think challenging for the industry (inaudible-highly accented) such as continuing competitive pricing pressure and (inaudible-highly accented) have driven tremendous flash demand, so we're going to see the flash shortage. But we believe that we focus on five flowing areas, we're convenient (ph) to grow for this in very strong position -- market segment. First, I think we'll continue to grow in the flash memory card controller. We're going to expand more new opportunity designs for major OEM (ph) customers. Second, we believe we're going to move to 0.16 micron in USB 2.0 flash disk controller product line. We're going to expand quickly in the China market, as well as top PC makers.

儘管如此，我認為該行業面臨的挑戰（聽不清楚-高度重音），例如持續的競爭性定價壓力和（聽不清楚-高度重音）已經推動了巨大的閃存需求，因此我們將看到閃存短缺。但我們相信，我們專注於五個流動領域，我們很方便（ph）在非常有利的地位——細分市場——上實現成長。首先，我認為我們將在閃存卡控制器方面繼續成長。我們將為主要 OEM (ph) 客戶擴展更多新的機會設計。其次，我們相信 USB 2.0 隨身碟控制器產品線將轉向 0.16 微米。我們將在中國市場以及頂級個人電腦製造商中快速擴張。

The third one, we're going to launch several new product lines such as CompactFlash controller, the Combo card controller, as well as XT picture controller and MS Pro adaptor controller will also help to improve our additional product line. Fourth, after we are focused developing new products and our strategy for the MP3 with a flash-less MP3 play that using a card reader function result (ph) building flash memory. And also, additional, we built a micro hard drive MP3 player. So, we're now have a limitless supply for flash. We can't outgrow our revenue.

第三，我們將推出幾個新的產品線，例如CompactFlash控制器、Combo卡控制器，以及XT圖片控制器和MS Pro適配器控制器，也將有助於完善我們的額外產品線。第四，在我們專注於開發新產品之後，我們對MP3的策略是採用讀卡機功能（ph）建立快閃記憶體的無快閃MP3播放。此外，我們還建立了一個微硬碟 MP3 播放器。所以，我們現在的快閃記憶體供應是無限的。我們的成長不能超過我們的收入。

Lastly, we are continue to expand our - and leverage our joint product development with our major partner like Lexar Media and Samsung System LSI division. Focus on flash controller areas as well as mobile media segment. So, in conclusion, we believe we are well positioned to grow in the coming year with a strong demand for flash memory cards, USB flash disk controllers and the multimedia SoC areas.

最後，我們將繼續擴大我們的業務，並利用我們與 Lexar Media 和 Samsung System LSI 部門等主要合作夥伴的聯合產品開發。專注於快閃記憶體控制器領域以及行動媒體領域。因此，總而言之，我們相信，隨著快閃卡、USB 隨身碟控制器和多媒體 SoC 領域的強勁需求，我們將在未來一年實現成長。

So, we believe our tremendous product line with strong pattern portfolio, increase the prior and growing list of solid customers will also (ph) enhance our position as the leading supplier for mobile storage controllers in the coming quarter and next year. So, this is gives us tremendous -- (inaudible-highly accented) and with growing opportunities with mobile phones as well as the new kind of digital camera.

因此，我們相信，我們龐大的產品線和強大的模式組合，增加了先前和不斷增長的穩定客戶名單，也將在下一季和明年增強我們作為行動儲存控制器領先供應商的地位。因此，這給我們帶來了巨大的——（聽不清楚——口音很重）以及行動電話和新型數位相機不斷增長的機會。

That brings me to the end of my prepared comments. I thank you, again, for joining us today. And hope you continue to support Silicon Motion. Now we welcome your questions.

我準備好的評論到此結束。我再次感謝您今天加入我們。並希望您繼續支持慧榮科技。現在我們歡迎您提出問題。

[Operator Instructions].

[操作員說明]。

And you first question comes from the line of Quinn Bolton for Needham and Company.

你的第一個問題來自李約瑟公司的奎因·博爾頓（Quinn Bolton）。

Hey, guys, nice quarter. I was wondering if you could give us a little bit more detail, kind of, on some of the unit splits between, say, the USB 2.0 controllers and the MMC/SD cards? Both of those product lines look like they were up. And then it's sort of as similar split between the graphics display controllers versus the MP3 player SoCs. And then I've got a couple of follow-ups.

嘿，夥計們，美好的季度。我想知道您能否為我們提供更多關於 USB 2.0 控制器和 MMC/SD 卡之間的一些單元劃分的細節？這兩條產品線看起來都已經崛起了。圖形顯示控制器與 MP3 播放器 SoC 之間的劃分也類似。然後我有一些後續行動。

Yes, sure. For the mobile storage segments, it was 30 over 24 million. Out of that, USB was about 4.4 and the rest would be the -- the rest would be 20 and that's about -- that's SD/MMC primarily. And then on the multimedia side, the total is 407,000. And out of that, about 150,000 is the display processor and the rest is MP3.

是的，當然。對於行動儲存領域，這一數字為 30 超過 2400 萬。其中，USB 約為 4.4，其餘的將是 - 其餘的將是 20，主要是 SD/MMC。然後在多媒體方面，總數為 407,000。其中，大約 150,000 個是顯示處理器，其餘的是 MP3。

Okay, great. And then on the pricing front, it looks like on the SD/MMC - MMC/SD cards as well as USB blended ASPs were down about 15%, which seems a little bit more aggressive pricing than what we had modeled in. I was wondering if you could talk about some of the price dynamics in the market? I mean, obviously, your units, I think, were much strong than expected. Are you seeing any kind of price pressure? Or is the pricing more a function of mid-shift to single channel away from dual channel products? And then, you know, do you see any stabilization with the introduction of new card controllers in the fourth quarter?

好的，太好了。然後在定價方面，SD/MMC - MMC/SD 卡以及 USB 混合 ASP 下降了約 15%，這似乎比我們建模的定價更激進一些。我的意思是，顯然，我認為你們的單位比預期的要強大得多。您是否看到任何價格壓力？或者定價更多是從雙通道產品轉向單通道的中間過程？然後，您知道，第四季新卡控制器的推出是否會帶來穩定？

The facilities (ph) for the -- NAND flash memory card controller has declined, due to in the Q3 we shipped the (inaudible-highly accented) percent the increase by comparison to Q2. So, the average ASP for flash memory controller -- the ASP dropped about 5% to 8%. But due to -- because one of the major (inaudible-highly accented) supplier, they have some process (ph) migration issue . So, instead of shipping the wafer, they're shipping the (inaudible-highly accented) cell package. That's why -- but because we are not able to de-lever (ph) LGA patching time. So, we increase that (inaudible-highly accented) shipment. So, you combine the average about the pricing. That's why ASP declined to about 15% (ph).

NAND 快閃記憶體卡控制器的裝置（ph）有所下降，因為與第二季相比，我們在第三季的出貨量（聽不清楚-高度重音）增加了百分比。因此，快閃記憶體控制器的平均 ASP 下降了約 5% 至 8%。但由於－因為主要（聽不清楚-重音）供應商之一，他們有一些流程（ph）遷移問題。因此，他們不是運送晶圓，而是運送（聽不清楚-高度重音）電池包。這就是原因 - 但因為我們無法取消 LGA 修補時間。因此，我們增加了（聽不清楚－口音很重）的出貨量。因此，您可以結合定價的平均值。這就是 ASP 下降至約 15% (ph) 的原因。

Okay, and then, kind of just in there, can you give us a rough sense of the flash card controllers -- and I guess USB, what percent are single channel versus dual channel of your shipments? And then similarly, what percent are shipped in (inaudible-highly accented) form versus packaged form?

好的，然後，您能給我們大致了解一下閃存卡控制器嗎？同樣，以（聽不清楚的重音）形式與包裝形式運輸的百分比是多少？

In flash memory controller in Q3, almost 95% are single channel.

第三季的快閃記憶體控制器中，幾乎95%都是單通道。

Okay.

好的。

In USB -- in USB flash disk controller, about -- I would say about 65% is single channel, 35% about dual channel.

在USB中——在USB隨身碟控制器中——我想說大約65%是單通道，35%是雙通道。

Sorry, that's six-five?

抱歉，現在是六點五？

65, that's correct.

65，沒錯。

Okay. And then, how about packaged versus (inaudible)?

好的。然後，打包與（聽不清楚）怎麼樣？

For the total -- within total mobile storage, the (inaudible) was about 66% of that group.

在行動儲存總量中，（聽不清楚）約佔該組的 66%。

Okay, so we've got most of those transition to single channel and (inaudible) sort of behind the Company. Obviously, there's a little bit more than could -- that could switch over, but the mix shift or pricing impact for mix shift probably starts to stabilize over the next couple of quarters. Is that a fair statement?

好的，我們已經將大部分過渡到單一管道，並且（聽不清楚）是在公司後面。顯然，可能會發生一些轉變，但混合轉變或混合轉變的定價影響可能會在接下來的幾季開始穩定下來。這是一個公平的說法嗎？

See, we also just announced a high end product (inaudible) controller. That's a dual channel. This is our own product with a dual channel with a 0.3 micron. That's why that really (ph) did not come to a very high margin to us. So, we're going to transition from the old 0.3 micron to 0.1 micron dual channel. It's in the Q4 side, that's going to help us for the ASP and also gross margins.

看，我們還剛發布了一款高階產品（聽不清楚）控制器。那是雙通道。這是我們自己的產品，雙通道，0.3微米。這就是為什麼我們的利潤率並沒有很高。因此，我們將從舊的 0.3 微米雙通道過渡到 0.1 微米雙通道。在第四季度，這將有助於我們提高平均售價和毛利率。

Okay, good. And then last question and I'll yield the floor. You guys had a great gross margin, much stronger than expected. Is this really the benefit from the transition to 0.18, is most of your product now in 0.18? And what's the timing on the 0.16 micron transition? When do you expect to see the benefit from 0.16?

好的。然後是最後一個問題，我將發言。你們的毛利率很高，比預期的高很多。這真的是過渡到 0.18 的好處嗎？ 0.16 微米轉變的時間是？您預計什麼時候可以看到 0.16 帶來的好處？

We start to -- we start moving 0.16 micron with the USB flash disk controller, because that market's very, very price competitive, price sensitive. So, starting from maybe December moving to January next year, we are transitioning to 0.16 micron. For flash memory card controller, we are prepared maybe to start next year Q2. It all depends on market situation and how much market we can sustain.

我們開始將 USB 隨身碟控制器轉向 0.16 微米，因為該市場的價格競爭非常非常激烈，而且價格敏感。因此，從 12 月開始到明年 1 月，我們正在向 0.16 微米過渡。對於閃存卡控制器，我們準備可能從明年第二季開始。這一切都取決於市場狀況以及我們能維持多少市場。

Okay, and just the question on the gross margin - was that really from the transition from 0.18 or are there other things going on, on the gross margin side?

好的，只是關於毛利率的問題 - 這真的是從 0.18 開始的過渡嗎？

Well, it's mostly a transition to 0.18, but we're actually not quite finished with the transition, 0.18 was about 90% of total shipments in Q3.

嗯，這主要是向 0.18 的過渡，但實際上我們還沒有完全完成過渡，0.18 約佔第三季總出貨量的 90%。

Okay, great. Thanks, guys.

好的，太好了。多謝你們。

And your next question comes from the line of Daniel Amir of WE Hembrecht.

您的下一個問題來自 WE Hembrecht 的 Daniel Amir。

WR Hembrecht, actually. Thanks for taking the call. Congratulations on a good quarter. A few questions here. First on the gross margin side, which as related to your guidance here for Q4, I mean, what gives you the confidence that you can have, you know, similar operating margins in Q4 as you did in Q3, which are clearly, you know very high. And it's probably, I mean -- assumption that this is not kind of your long term model anyway -- margins like this. So, what type of -- can you give a bit of clarity there?

事實上，WR亨布雷希特。感謝您接聽電話。恭喜您度過了一個美好的季度。這裡有幾個問題。首先是毛利率方面，這與您對第四季度的指導相關，我的意思是，是什麼讓您有信心在第四季度擁有與第三季度相似的營業利潤率，這顯然是，您知道的很高。我的意思是，假設這不是你的長期模型，可能就是這樣的利潤率。那麼，您能說清楚什麼類型嗎？

I think, actually, our long term target, actually, about 30% gross margin. Why we have confidence in Q4, is because we launched several new product lines. Some new products are also flash related product, but because it's very, very unique such as Combo card controller as well as MS Pro adaptor controller. That will have a very high gross margin. We have such a very unique high end product line, we can take premiums when we launch a product first. That's why we believe in Q4 we will -- intend to do the same or even a little better gross margin compared to Q3.

我認為，實際上，我們的長期目標實際上是 30% 左右的毛利率。為什麼我們對第四季有信心，是因為我們推出了幾條新產品線。一些新產品也是快閃記憶體相關產品，但因為它非常非常獨特，例如Combo卡控制器以及MS Pro適配器控制器。那將會有非常高的毛利率。我們擁有非常獨特的高端產品線，當我們首先推出產品時，我們可以收取溢價。這就是為什麼我們相信第四季的毛利率將與第三季相同，甚至更高。

But how much does the gross margin benefiting still from transfer to the 0.18 or, you know, you're beginning to transfer 0.16 in the USB controller. And how much is it related to the new product introduction?

但是，從轉移到 0.18 或者，您知道，您開始在 USB 控制器中轉移 0.16，毛利率仍然會受益多少。又與新品推出有多大關係？

That's a bit hard to quantify. I think -- I would attribute more of that to the 0.18 transition.

這有點難以量化。我想——我會把這更多地歸因於 0.18 的轉變。

The new product (inaudible-highly accented) commission (ph) fell 5% to 10%, but we still have a 10% product we are in the process of transition from 2.35. To 0.18 micron in Q4.

新產品（聽不清楚-重音）佣金（ph）下降了 5% 至 10%，但我們仍然有 10% 的產品，我們正處於從 2.35 過渡的過程中。第四季達到 0.18 微米。

Okay. Now, with regarding to your revenue guidance, can you clarify, you know, what is your assumption here on the revenue guidance? I mean, the thought process that maybe it would be stronger than this? I mean, is it related to, you know, what's happening on the testing and packaging side? Is that the major reason or are you holding back here?

好的。現在，關於您的收入指導，您能否澄清一下，您對收入指導的假設是什麼？我的意思是，思考過程或許會比這更強？我的意思是，這與測試和包裝方面發生的事情有關嗎？這是主要原因還是你在這裡猶豫不決？

I think we do see the strong demand in the NAND flash controller side, but however, because flash supplies today is in severe shortage, especially in high density portion. We also try to be conservative in the packing side, as you can see. So, each flash memory card is only two have a manufacture. One is CoB (inaudible-highly accented) they have a flash memory manufacturer shipping (inaudible-highly accented) cell package, most of the customer would like to use LGA package (ph) for controller. So, we believe before end of this November the LGA (inaudible-highly accented) shortage cannot be relieved. So, we are trying to take conservative road regarding the revenue growth in Q4.

我認為我們確實看到了 NAND 快閃記憶體控制器的強勁需求，但是，由於當今快閃記憶體供應嚴重短缺，尤其是在高密度部分。正如您所看到的，我們在包裝方面也盡量保守。所以，每張閃存卡只有兩家有製造商。一種是CoB（聽不清楚-重音），他們有快閃記憶體製造商運輸（聽不清楚-重音）單元封裝，大多數客戶希望使用LGA封裝（ph）作為控制器。因此，我們認為在今年 11 月底之前，LGA（聽不清楚的高音）短缺問題無法緩解。因此，我們正在嘗試對第四季度的收入成長採取保守的道路。

Okay. Now, a bit about -- just can you clarify a bit on the MP3 player side? I didn't exactly get what you're doing there? And kind of what you're seeing in the market dynamics. You're integrating, clearly, the chip. But at the same time, you said you were supply constrained and units will be flat. So, can you clarify what's happening there?

好的。現在，您能澄清一下 MP3 播放器方面的情況嗎？我不太明白你在那裡做什麼？這就是你在市場動態中看到的情況。顯然，你正在整合晶片。但同時，您表示供應有限，單位數量將持平。那麼，你能澄清一下那裡發生了什麼事嗎？

Because we believe we saw the trend develop. When this started, we're supposed to see the much better momentum for the revenue growth and number of shipments. But however, do to the high density flash shortage, a lot of our customers cannot get enough of flash memory.

因為我們相信我們看到了趨勢的發展。當這一切開始時，我們應該會看到收入成長和出貨量的更好動能。但是，由於高密度快閃記憶體短缺，我們的許多客戶無法獲得足夠的快閃記憶體。

So, the strategy changed a little bit, because our controller not only can drive the flash memory, but also can read the different flash memory card, as a card reader function. So, I think there's a new trend for MP3 player. It's called Flashless. So, they don't need the flash memory built in. They can read it even without (ph) flash memory card, which have a MP3 song, they can still play MP3.

所以，策略改變了一點，因為我們的控制器不僅可以驅動閃存，還可以讀取不同的閃存卡，作為讀卡器功能。所以，我認為MP3播放器出現了新的趨勢。它被稱為無閃光。所以，他們不需要內建快閃記憶體。

Now, is there any new design wins that you can speak of there?

現在，您有什麼新的設計成果可以談談嗎？

We have some new design wins, but I just really have to wait for customer to announce. There are some with the micro hard drive. Some also with the flash memory.

我們贏得了一些新的設計，但我真的必須等待客戶宣布。有一些帶有微硬碟。有的還帶有快閃記憶體。

Okay, so for now I guess we should expect that it will be somewhere around 300,000 units next quarter as well?

好的，那麼現在我想我們應該預期下個季度的銷售也將達到 30 萬台左右？

I think we will grow a little bit compared to Q3.

我認為與第三季相比我們會有所成長。

Okay. Now, can you comment a bit about the USB flash drive environment now? It seems like, you know, it seems like more pricing pressure in that segments than there are in the MMC or SD card controller segment. And also, a bit, you know, how -- what type of demand are looking there? Is demand stronger than expected? Weaker than expected or are there specific channels which are stronger or weaker?

好的。現在，您能評論一下 USB 隨身碟環境嗎？您知道，該細分市場的定價壓力似乎比 MMC 或 SD 卡控制器細分市場更大。而且，你知道，那裡正在尋找什麼類型的需求？需求是否強於預期？弱於預期或是否有特定管道更強或更弱？

Since our current major OEM customer in the USB flash disk, I think the demand is very stable and will continue to grow. But in order to expend our market share, that's why we're moving to 0.16 micron technology to strengthen (ph) the (inaudible-highly accented). But at the same time, because customer is looking for total down cost. That's why we integrate external multi regulator and the panel reset. That's going to save another $0.20 additionally.

由於我們目前主要的OEM客戶在USB隨身碟，我認為需求是非常穩定的並且會持續成長。但為了擴大我們的市場份額，這就是為什麼我們轉向 0.16 微米技術來加強（ph）（聽不清楚-高度重音）。但同時，因為客戶正在尋求降低總成本。這就是我們整合外部多穩壓器和麵板重置的原因。這將另外節省 0.20 美元。

So, I think when we move to 0.16 micron with integrated power reset and multi regulator, that gave us another arm to compete -- especially in China market because that's the price very sensitive. So, we have two major charges to grow. One is continue to grow China market with our low end SM321 (ph) enhanced version. And we continue growing major top line PC makers. We cannot announce who they are, but I think in the next 3 months, our customers will announce themselves. So, with a top line (ph) PC makers a bundle business (ph) with the USB (ph), they'll also help it grow the revenue.

因此，我認為當我們轉向具有整合式電源重置和多穩壓器的 0.16 微米時，這為我們提供了另一支競爭手段——尤其是在中國市場，因為價格非常敏感。因此，我們有兩項主要的成長任務。一是透過我們的低端 SM321 (ph) 增強版繼續發展中國市場。我們繼續發展主要的頂級個人電腦製造商。我們無法公佈他們是誰，但我認為在接下來的 3 個月內，我們的客戶將會公佈他們自己。因此，隨著頂級 PC 製造商將 USB 業務與 USB 業務捆綁在一起，他們也將幫助其增加收入。

Now, what is the ASB - what's the ASB for controller right now? On the USB side?

現在，什麼是 ASB？在USB端？

For (inaudible-highly accented) it's about $0.80 for low end; with the packaging, it's about $1.25.

對於（聽不清-重口音）低端的價格約為 0.80 美元；加上包裝，售價約 1.25 美元。

And on the card side?

那麼在卡片方面呢？

You mean USB?

你是說USB嗎？

Yes.

是的。

USB is single channel is about $0.70 with the package. The dual channel is about $1.10.

USB 為單通道，含包裝價格約為 0.70 美元。雙通道的價格約為 1.10 美元。

Okay, thanks a lot.

好的，非常感謝。

And your next question comes from the line of Ben Lynch of Deutsche Bank.

你的下一個問題來自德意志銀行的本林奇。

Yes, well done on the quarter. I'm just trying to see if there are anymore questions left. I'll try and come up with some. Maybe, Wallace, you could talk through some of the upside/downside risks for the Q4 guidance. You know, whether you think you are being conservative or just, you know, touch you base case and there's equal downside and equal upside, or are you just sort of being conservative?

是的，本季做得很好。我只是想看看是否還有問題。我會嘗試想出一些。華萊士，也許您可以談談第四季度指導的一些上行/下行風險。你知道，無論你認為你是保守的，還是只是，你知道，觸及你的基本情況，有相同的下行和相同的上行，或者你只是有點保守？

And also, you mentioned one thing which is impacting the near term prospects, anyway. Package shortages, and that they could not be received until, I guess, end of November, you said. Is that effectively too late to matter for Q4? Or if that situation was a little bit better, a little bit earlier?

而且，您也提到了一件影響近期前景的事。你說，包裹短缺，而且我猜要到 11 月底才能收到。這對第四季來說是否已經太晚了？或者如果情況好一點、早一點呢？

Well, I think that LGA packaging portion that absolutely impacted just a little bit. But however, with Q4 guidance, we take conservative role. As you can see, in China soft on Q4, but the demanding to manufacture SD/MMC cards is very, very strong. But in China, they are only able to do SMT technology. They are now able to do COB (ph). That's why they are waiting for LGA packaging very, very urgently. So, we believe if we have enough supply, we can fill demand China portion very, very quickly. But if we cannot get enough supply, but I think we still will meet our Q4 guidance.

嗯，我認為 LGA 封裝部分絕對會產生一點影響。但是，根據第四季的指引，我們採取保守態度。正如您所看到的，中國第四季度表現疲軟，但製造 SD/MMC 卡的需求非常非常強烈。但在中國，他們只能做SMT技術。他們現在能夠進行 COB (ph)。這就是為什麼他們非常非常迫切地等待 LGA 封裝。因此，我們相信，如果我們有足夠的供應，我們可以非常非常快地滿足中國部分的需求。但如果我們無法獲得足夠的供應，但我認為我們仍然會達到第四季度的指導。

Okay, great. And could you -- what's your read on the -- you mentioned for Q4 one driver is going to be cards for cell phones. Do you have any estimate as to what, you know, proportion of the flash card consumption in Q4 is going to be for cell phones?

好的，太好了。您提到第四季度的一個驅動因素將是手機卡，您對此有何看法？您是否估計第四季度手機閃存卡消費的比例是多少？

I think that I -- I don't have particular number in Q4. But I think I've talked to both Samsung and Nokia just this week before I come back from Japan. It seems that in next year this will be about 840 million units for cell phone. But (ph) 20% to 25% cell phone going to have a removable flash memory card.

我認為我沒有第四季的具體數字。但我想就在我從日本回來之前的本週，我已經與三星和諾基亞進行了交談。預計明年手機銷售量將達8.4億部左右。但 (ph) 20% 到 25% 的手機將配備可移動閃存卡。

So, that's a number people shooting for. We believe we are now able to monitor our customer -- how many shipment goes to digital camera or goes to retail, go to mobile phone bundle. So, as you can see, we only calculate from the type of the flash memory card. For example, mini SB and T-Flash, ISMMC and (inaudible-highly accented) they're all using mobile phone. (Inaudible) card use digital camera. So, we believe that next year is a really market driver in the mobile phone.

所以，這就是人們的目標。我們相信我們現在能夠監控我們的客戶——有多少貨物流向數位相機或流向零售、流向手機捆綁。因此，如您所見，我們僅根據閃存卡的類型進行計算。例如，mini SB 和 T-Flash、ISMMC 和（聽不清楚-重音）他們都在使用手機。 （聽不清楚）卡片使用數位相機。因此，我們相信明年是手機市場的真正動力。

Okay. Now, you've been in discussions with Samsung and Nokia about this opportunity for quite some time now. So you're probably quite well informed. When we talk about that slot of 20% to 25%, is that slot penetration, or by definition, all of those phones will have this bundle card as well, or --?

好的。現在，您已經與三星和諾基亞就這個機會進行了相當長的討論。所以你可能非常了解情況。當我們談論 20% 到 25% 的插槽時，是指插槽滲透率，還是根據定義，所有這些手機也將配備此捆綁卡，或者——？

I think it's about (inaudible-highly accented) all the total number of phone in the world.

我認為這大約是（聽不清楚－重音）世界上所有電話的總數。

And they'll all have bundle cards? It's not just that they'll be a slot?

他們都會有捆綁卡嗎？不只是他們會成為一個槽點？

That's correct.

這是正確的。

Great. Do you have a -- because you've been very active in this, is this going to be -- it's OEM business that's potentially more predictable than, you know, just flash cards that are sold into the channel. And do you feel that you have a good chance at getting a good portion of this OEM business?

偉大的。你是否有——因為你在這方面一直非常活躍，這會是嗎——它的 OEM 業務可能比你知道的銷售到渠道中的閃存卡更具可預測性。您認為您有很好的機會獲得這個 OEM 業務的很大一部分嗎？

We believe so, yes. I think, as you can see, today's I think (inaudible-highly accented) called T-Flash (inaudible-highly accented) micro SD card, is in severe shortage right now, because nobody can produce enough volume to meet the demand. So, not only Motorola announced (inaudible-highly accented) in China their new generation mobile phone, 95% using the micro SD flash memory card. So we -- our customer, they are positioned very well in the bundle -- our regional bundle. Direct bundle or retail bundle for this mobile phone. So, we believe we will have a good shot in that position.

我們相信是的。我認為，正如您所看到的，今天的我認為（聽不清-重音）稱為T-Flash（聽不清楚-重音）微型SD卡目前嚴重短缺，因為沒有人能夠生產足夠的數量來滿足需求。所以，不僅摩托羅拉在中國宣布（聽不清楚－重音）他們的新一代手機，95%都使用了micro SD隨身碟。因此，我們——我們的客戶，他們在捆綁包——我們的區域捆綁包中處於非常有利的位置。此手機的直接捆綁或零售捆綁。因此，我們相信我們在這個位置上會有很好的機會。

Great. I think this was sort of touched a little bit earlier on, but through your discussions with customers, you know, what is your read on, particularly USB inventory levels at the moment? Even flash cards. There does seem to be quite a bit of rebates going on. And Lexar last night, although they're a smaller customer for you , had quite a big increase in their inventory levels.

偉大的。我認為這在早些時候就已經被觸及了，但是透過您與客戶的討論，您知道，您的解讀是什麼，特別是目前的 USB 庫存水平？甚至閃存卡。看來確實有不少回扣。昨晚雷克沙雖然對你來說是一個較小的客戶，但他們的庫存水準卻有相當大的增加。

I'm sorry, Ben, what was the question?

對不起，本，問題是什麼？

Just, you know, your read on customer and channel inventory levels? One of your larger top five customers, Lexar, had another, you know, growth in their -- large growth in their inventory levels last night.

只是，您知道您對客戶和通路庫存水準的了解嗎？你知道的，你的前五名較大客戶之一，Lexar，昨晚的庫存水準又出現了大幅成長。

I think inventory levels, so far where we read, is, I think is quite healthy. It's not like last year. But this year, I think because the really, we don't see that if any of our customer have a huge inventory. (inaudible-highly accented) it's really difficult to get a high density flash memory. That's the major challenge right now.

我認為，到目前為止，我們所讀到的庫存水準是相當健康的。這不像去年。但今年，我認為因為實際上，我們沒有看到我們的客戶是否有大量庫存。 （聽不清楚-重音）獲得高密度快閃記憶體確實很難。這是目前的主要挑戰。

Okay, and maybe, then, the last question I have. This is the first time I've really heard you talk about it. This PC OEM business for USBs. You know, is this -- what size opportunity do you believe this is?

好吧，也許我還有最後一個問題。這是我第一次真正聽到你談論這件事。這家針對 USB 的 PC OEM 業務。你知道，你認為這是多大的機會？

We can only say we will probably two out of the top five PC makers OEM business. The next 3 months we'll be in mass production, but we have to wait for our OEM customers announcement and we cannot say something at this moment.

我們只能說我們可能會為前五名的PC廠商提供OEM業務。未來 3 個月我們將投入批量生產，但我們必須等待 OEM 客戶的公告，目前我們無法透露任何資訊。

Okay. And what's led you to get this? Just, you know, is this business you didn't have before? Or this is the first time --

好的。是什麼讓你得到這個？只是，你知道，這是你以前沒有做過的生意嗎？或者這是第一次——

Well, we never focus on PC makers, because there's no USB never was our top priority. It was the flash memory card controller. But because our customer volume now, some are able to penetrate into our top tier PC makers.

嗯，我們從不關注 PC 製造商，因為沒有 USB 從來都不是我們的首要任務。這是閃存卡控制器。但由於我們現在的客戶量很大，有些人能夠滲透到我們的頂級個人電腦製造商。

Great. Okay, thank you very much.

偉大的。好的，非常感謝。

[Operator Instructions].

[操作員說明]。

And your next question is a follow-up from the line of Quinn Bolton of Needham & Company.

你的下一個問題是來自 Needham & Company 的 Quinn Bolton 的後續問題。

Hey, guys. I just wanted to ask, sort of, what Q1 might look like? I know last year you saw a pretty significant falloff. I think some of that was inventory driven. I know you're not giving guidance on the call for Q1 today, but can you walk us through some of the dynamics? It sounds like supply is packaged -- LGA packaged devices in the fourth quarter may be constrained. And so, does that potentially set you up for a better than seasonal - or certainly better than last year, you know, trend Q4 to Q1? Any thoughts you can provide would be helpful.

大家好。我只是想問，Q1 可能會是什麼樣子？我知道去年你看到了相當顯著的下滑。我認為其中一些是庫存驅動的。我知道您今天不會就第一季的電話會議提供指導，但您能否向我們介紹一些動態？聽起來供應是封裝的——第四季度 LGA 封裝裝置可能會受到限制。那麼，這是否有可能讓你的第四季到第一季的趨勢比季節性更好——或者肯定比去年更好？您可以提供的任何想法都會有所幫助。

I think today's Silicon Motion is quite different than a year ago Silicon Motion. First, we have a much broader customer base. So, we said earlier, we have five customers they have shipped about a million unit STMs flash memory cards per month right now. So, about a year ago we probably have one or two.

我認為今天的慧榮與一年前的慧榮有很大不同。首先，我們擁有更廣泛的客戶群。因此，我們之前說過，我們有 5 個客戶，他們現在每月發貨約 100 萬張 STM 閃存卡。所以，大約一年前我們可能有一兩個。

Now, with a diversified customer base and we in the Q4 we're going to launch six new product lines that are going to help us sustain our revenue growth. Although Q1, I mean, we're seeing now (ph) a period of downsizing (ph), but with our new product lines and with - are (ph) going to help us to sustain the revenue streams into next year.

現在，憑藉多元化的客戶群，我們將在第四季度推出六條新產品線，這將有助於我們維持營收成長。雖然第一季度，我的意思是，我們現在看到了一個縮減規模的時期，但隨著我們的新產品線和 - 將幫助我們將收入流維持到明年。

So, I mean, if you were to put a range on it -- I mean, I think last year you were down by almost a third. Would you see more traditional seasonality? I mean, and I don't know what you would call traditional seasonality. Would traditional be down 10% to 20%?

所以，我的意思是，如果你要設定一個範圍——我的意思是，我認為去年你下降了近三分之一。您會看到更多傳統的季節性嗎？我的意思是，我不知道你所說的傳統季節性是什麼。傳統的會下降10%到20%嗎？

I think we cannot predict a Q1 number, but absolutely, it will not be the same as last year.

我認為我們無法預測第一季的數字，但絕對不會與去年相同。

Okay. And then just a follow-up on the foundry side for the 0.16. Can you talk about which foundry partner you're using? Is that UMC (ph)? Is it SMIC (ph)? Just a little bit more on the foundry relationship.

好的。然後是代工廠方面的 0.16 的後續行動。您能談談您正在使用哪家代工合作夥伴嗎？是UMC（ph）嗎？是中芯國際（ph）嗎？關於代工廠關係的更多資訊。

I think we'll use both. So, as you know (inaudible-highly accented) is the new (inaudible-highly accented) you don't need to redo the (inaudible-highly accented) again. So, that would take advantages for the integrator analog circuitry. With (inaudible-highly accented) that's where we can get another 15% (inaudible-highly accented).

我想我們都會使用兩者。因此，如您所知（聽不清楚-高度重音）是新的（聽不清楚-高度重音），您不需要再次重做（聽不清楚-高度重音）。因此，這將有利於積分器模擬電路。透過（聽不清楚-重音），我們可以得到另外 15%（聽不清楚-重音）。

Great. Okay, thanks.

偉大的。好的謝謝。

And at this time, you have no further questions.

此時，您沒有其他問題了。

Well, I guess, you know, we'll probably end the conference call right now. Thank you very much for your participation. And if you have any questions, please send us an e-mail or give us a call. You could also go to our website and download both the press release as well as the PowerPoint file. And we appreciate your interest and look forward to talking to you again next quarter. Thank you.

好吧，我想，你知道，我們可能現在就結束電話會議。非常感謝您的參與。如果您有任何疑問，請給我們發送電子郵件或致電我們。您也可以造訪我們的網站並下載新聞稿和 PowerPoint 檔案。我們感謝您的關注，並期待下季再次與您交談。謝謝。

Ladies and gentlemen, thank you for your participating in today's conference. This does conclude the presentation. You may now disconnect. Have a great day.

女士們、先生們，感謝你們參加今天的會議。簡報到此結束。您現在可以斷開連線。祝你有美好的一天。