慧榮科技 (SIMO) 2018 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the Silicon Motion Technology Corporation First Quarter 2018 Earnings Conference Call. (Operator Instructions)

女士們、先生們，感謝大家的支持，歡迎大家參加慧榮科技公司 2018 年第一季獲利電話會議。 （操作員說明）

Before we start the conference, I would like to read out the safe harbor statement for you. This conference call contains forward-looking statements within the meaning of Section 27A of 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.

在會議開始之前，我想為大家宣讀安全港聲明。本次電話會議包含 1933 年證券法第 27A 條和經修訂的 1934 年證券交易法第 21E 條含義內的前瞻性陳述。此類前瞻性陳述包括但不限於有關半導體產業趨勢以及我們未來營運績效、財務狀況和業務前景的陳述。儘管此類聲明基於我們自己的資訊以及我們認為可靠的其他來源的信息，但您不應過度依賴它們。

These statements involve risk, uncertainties, and actual market trends and our results may defer 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 pressure on prices; unpredictable changes in the 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.

這些陳述涉及風險、不確定性和實際市場趨勢，我們的結果可能因各種原因與這些前瞻性陳述中明示或暗示的結果有重大差異。潛在的風險和不確定因素包括但不限於：半導體產業持續的競爭壓力以及這種壓力對價格的影響；多媒體消費性電子產品的技術和消費者需求發生不可預測的變化；我們與主要客戶的關係的狀況和任何變化；以及台灣政治、經濟、法律和社會狀況的變化。

For additional discussion of these risks and uncertainties and other factors, please see the documents we file from time to time with the Securities and Exchange Commission.

有關這些風險和不確定性以及其他因素的更多討論，請參閱我們不時向美國證券交易委員會提交的文件。

We assume no obligation to update any forward-looking statements, which apply only as of the date of this conference call.

我們不承擔更新任何前瞻性陳述的義務，這些陳述僅適用於本次電話會議之日。

Now I would like to hand the conference over to your host for the day, Mr. Jason. Over to you, sir.

現在我想把會議交給今天的東道主傑森先生。交給你了，先生。

Thank you, and good morning, everyone, and welcome to Silicon Motion's First Quarter 2018 Financial Results Conference Call and Webcast. My name is Jason Tsai, and with me here is Wallace Kou, our President and CEO; and Riyadh Lai, our Chief Financial Officer.

謝謝大家，大家早安，歡迎參加慧榮科技 2018 年第一季財務業績電話會議和網路廣播。我的名字是 Jason Tsai，和我在一起的是我們的總裁兼執行長 Wallace Kou；以及我們的財務長 Riyadh Lai。

The agenda for today is as follows. Wallace will start with a review of our key business developments. Riyadh will then discuss our first quarter financial results and provide our outlook. We will then conclude with Q&A.

今天的議程如下。華萊士將首先回顧我們的主要業務發展。然後，利雅德將討論我們第一季的財務表現並提供我們的前景。然後我們將以問答結束。

Before we get started, I'd 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 U.S. SEC.

在我們開始之前，我想提醒您我們的安全港政策，該政策已在本次電話會議開始時閱讀。有關投資我們的證券所涉及風險的全面概述，請參閱我們向美國證券交易委員會提交的文件。

For more details on our financial results, please refer to our press release, which was filed on Form 6-K after the market -- after the close of market yesterday. This webcast will be available for replay on our website, www.siliconmotion.com, for a limited time.

有關我們財務業績的更多詳細信息，請參閱我們的新聞稿，該新聞稿是在昨天收盤後以 6-K 表格形式在盤後提交的。該網路廣播將在我們的網站 www.siliconmotion.com 上限時重播。

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 similar to 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.

為了增強投資者對我們當前經濟表現的了解，我們將在本次電話會議上討論非公認會計準則資訊。我們在內部使用非公認會計準則財務指標來評估和管理我們的營運。因此，我們選擇提供此信息，以便您能夠以類似於我們分析我們自己的經營業績的方式對我們的經營業績進行比較。公認會計原則與非公認會計原則財務數據的調節可以在我們昨天發布的收益報告中找到。我們要求您結合本次電話會議進行審查。

With that, I will turn the call over to Wallace.

這樣，我就把電話轉給華萊士。

Thank you, Jason. Hello, everyone, and thank you for joining us today. Let me first update you on our business, and then Riyadh will review our financials and provide our outlook later on the call.

謝謝你，傑森。大家好，感謝您今天加入我們。首先讓我向您介紹我們的業務最新情況，然後利雅德將審查我們的財務狀況並在稍後的電話會議中提供我們的前景。

We are pleased to report first quarter revenue of $130.3 million, which is up 2% year-over-year and down 4% sequentially, and is the highest first quarter revenue in our corporate history. We saw solid sequential sales growth from both our client SSD controllers and eMMC controllers. This trend was, however, offset by similarly soft SSD solutions sales.

我們很高興地報告第一季營收為 1.303 億美元，年增 2%，環比下降 4%，是我們公司歷史上最高的第一季收入。我們看到我們的客戶端 SSD 控制器和 eMMC 控制器的銷售額都實現了穩健的連續成長。然而，這一趨勢被同樣疲軟的 SSD 解決方案銷售所抵消。

For the first quarter, we delivered earning per ADS of $0.71, which is also up year-over-year and also the first quarter record high.

第一季度，我們實現每 ADS 獲利 0.71 美元，年成長，也創第一季歷史新高。

Our business started this year with much more favorable market condition than last year. Unlike last year, our business no longer is negatively affected by lack of the NAND supply and rising NAND prices. Currently, NAND supply is rapidly a variable and NAND prices continue to soften. In Q1, increasing output of 64- and 72-layer 3D NAND had led to modest NAND price reductions. We believe NAND supply will continue to grow as the year progresses and price will decline further, both favorable trends to us.

今年我們的業務開始時，市場條件比去年好得多。與去年不同，我們的業務不再受到 NAND 供應不足和 NAND 價格上漲的負面影響。目前，NAND供應迅速變化，NAND價格持續走軟。第一季度，64 層和 72 層 3D NAND 產量的增加導致 NAND 價格小幅下降。我們相信隨著時間的推移，NAND 供應將繼續增長，價格將進一步下降，這對我們來說都是有利的趨勢。

Lower NAND prices will further strengthen demand for client SSD and demand for our controllers. Currently, interest by NAND flash vendor in building client SSD is much higher than the same time last year. Our SSD controller projects with our 3 NAND flash partners are over 80% higher today than 12 months ago.

較低的 NAND 價格將進一步增強對客戶端 SSD 的需求以及對我們控制器的需求。目前，NAND快閃記憶體供應商對建置客戶端SSD的興趣遠高於去年同期。今天，我們與 3 個 NAND 快閃記憶體合作夥伴合作的 SSD 控制器專案比 12 個月前成長了 80% 以上。

PC OEMs are also communicating to us their plan to increase adoption of SSD this year versus a little or no increase in SSD adoption last year.

PC OEM 也向我們傳達了他們今年增加 SSD 採用率的計劃，而去年 SSD 採用率幾乎沒有增加。

NAND industry supply will increase much more strongly this year than last year, especially from 64- and 72-layer 3D NAND capacity coming online. 64-layer 3D manufacturing yield are already matured and the flash vendor are keen to further ramp output.

今年 NAND 產業供應量的成長將比去年更加強勁，尤其是 64 層和 72 層 3D NAND 產能的上線。 64 層 3D 製造良率已經成熟，快閃記憶體供應商渴望進一步提高產量。

Intel and Micron have already been sampling SSD using their QLC 64-layer 3D NAND, and we believe QLC-based device sales will gradually increase in the second half of this year. Additionally, most flash makers have already begun to sample with customers their 96-layer NAND and are expecting commercialized production in the second half of this year.

英特爾和美光已經開始使用其 QLC 64 層 3D NAND 提供 SSD 樣品，我們相信基於 QLC 的設備銷售量將在今年下半年逐漸增加。此外，大多數快閃記憶體製造商已經開始向客戶提供96層NAND樣品，並預計在今年下半年實現商業化生產。

All of these technologies, such as higher-layer count from 64- to 96-layer 3D and higher-density QLC not only increased industry capacity and the output, but also leading to significant and rapid reduction in NAND costs per bid. And seeing the NAND industry is highly competitive, reduction in price per bit quickly follow cost reductions.

所有這些技術，例如從 64 層到 96 層的更高層數 3D 和更高密度的 QLC，不僅增加了行業產能和產量，而且還導致每次投標的 NAND 成本顯著而快速地降低。鑑於 NAND 行業競爭激烈，每比特價格隨著成本的降低而迅速降低。

We believe our NAND flash partners are currently taking advantage of their increasing supply of low-cost NAND to build more client SSD and price their devices attractively to OEM and other customers.

我們相信，我們的 NAND 快閃記憶體合作夥伴目前正在利用其不斷增加的低成本 NAND 供應來製造更多客戶端 SSD，並為其設備定價對 OEM 和其他客戶具有吸引力。

Based on today's NAND flash prices, we expect our SSD controller sale to grow by at least 20% for the full year, and we expect full year SSD controller revenue to exceed what we achieved to 2016.

根據今天的 NAND 快閃記憶體價格，我們預計全年 SSD 控制器銷售額將成長至少 20%，我們預計全年 SSD 控制器收入將超過 2016 年的業績。

As previously mentioned, we currently have growing portfolio of SSD controller projects as our 3 NAND flash partners over 80% more than at the same time last year. The majority of these SSD controller projects are for PCIe, NVMe and interface that is designed specifically for faster NAND flash and SSD. The majority of SSD controllers that we are currently shipping on the other hand are using the legacy SATA 3 interface, originally designed for slower hard disk drive, but still extensively used in client devices, data centers and enterprise applications.

如前所述，作為我們的 3 個 NAND 快閃記憶體合作夥伴，我們目前擁有不斷成長的 SSD 控制器專案組合，比去年同期增加了 80% 以上。這些 SSD 控制器專案大多數是針對 PCIe、NVMe 和專為更快的 NAND 快閃記憶體和 SSD 設計的介面。另一方面，我們目前發貨的大多數 SSD 控制器都使用傳統 SATA 3 接口，最初是為速度較慢的硬碟設計的，但仍廣泛用於客戶端設備、資料中心和企業應用程式。

Our flash partner are working with their OEM customer to transition SSD technology from SATA 3 to higher-performance NVMe and expect that majority of client SSD sales will be based on NVMe next year. We believe we will benefit from this transition to NVMe and it could, as a result, further increase our SSD controller market share.

我們的快閃記憶體合作夥伴正在與他們的 OEM 客戶合作，將 SSD 技術從 SATA 3 過渡到更高效能的 NVMe，並預計明年大部分客戶 SSD 銷售將基於 NVMe。我們相信，我們將從 NVMe 的過渡中受益，從而進一步增加我們的 SSD 控制器市場份額。

We are also excited to be working with 2 flash makers on their more cost-competitive 4 b/cell QLC-based PCIE, NVMe client SSD, which are expected to start shipping in the second half of this year and gradually ramp. Our controller project will help bringing to market the world's first client SSD to be using QLC NAND flash.

我們也很高興能與兩家快閃記憶體製造商合作，開發更具成本競爭力的基於 4 b/cell QLC 的 PCIE、NVMe 用戶端 SSD，預計將於今年下半年開始出貨並逐步量產。我們的控制器專案將有助於將全球首款使用 QLC NAND 快閃記憶體的客戶端 SSD 推向市場。

We believe our success has been a function of our best-in-class technology and cost-effective solution, but also our unique value proposition to customers.

我們相信，我們的成功不僅取決於我們一流的技術和具有成本效益的解決方案，還取決於我們對客戶的獨特價值主張。

Our turnkey solution and customizable platform cover a broad range of market from SATA to PCIe NVMe from single-chip VGA SSD to low-cost DRAM-less SSD to premium high-performance SSD, and offer customers option to select from wide range of flash from MLC to TLC and QLC; from legacy player NAND to current 64- and 72-layer 3D NAND and upcoming 96-layer 3D NAND.

我們的交鑰匙解決方案和可自訂平台涵蓋從 SATA 到 PCIe NVMe 的廣泛市場，從單晶片 VGA SSD 到低成本 DRAM-less SSD，再到優質高效能 SSD，並為客戶提供多種快閃記憶體選擇： MLC到TLC 和QLC；從傳統 NAND 到目前的 64 層和 72 層 3D NAND 以及即將推出的 96 層 3D NAND。

We provide our flash partner with hardware plus firmware turnkey solution for their SSD targeting retail and other fast-turnaround markets. These turnkey solution are also widely used by our module maker customers. We also provide our flash partner with highly customizable hardware plus firmware platform for developing SSD that they can tailor their own firmware for their OEM customer and application-specific need. Additionally, we then provide our customer with a match on the ground local engineering support in the U.S., China, Taiwan and elsewhere.

我們為快閃記憶體合作夥伴提供硬體加韌體交鑰匙解決方案，用於針對零售和其他快速週轉市場的 SSD。這些交鑰匙解決方案也被我們的模組製造商客戶廣泛使用。我們還為快閃記憶體合作夥伴提供用於開發 SSD 的高度可自訂的硬體和韌體平台，他們可以根據 OEM 客戶和特定應用的需求自訂自己的韌體。此外，我們也會在美國、中國、台灣和其他地方為客戶提供相符的本地工程支援。

Now let me turn to our open-channel NVMe SSD controller for hyper-scale data centers. Our first hyper-scale customer began sampling and [testing] our controller late last year, and the feedback continue to be positive. We anticipate this controller entering production midyear. Separately, early in April, our second hyper-scale customer began sampling our open-channel SSD controllers.

現在讓我談談我們用於超大規模資料中心的開放通道 NVMe SSD 控制器。我們的第一個超大規模客戶在去年年底開始採樣和[測試]我們的控制器，反饋仍然積極。我們預計該控制器將於年中投入生產。另外，四月初，我們的第二個超大規模客戶開始對我們的開放通道 SSD 控制器進行取樣。

Open-channel SSD technology continue to evolve and progress rapidly. Microsoft has been leading the standardization of open-channel SSD technology with Project Denali, as of which we recently began a joint development partner separately. Alibaba and Chinese hyperscalers are developing a different open-channel SSD standardization and we are also involved in this as well.

開放通道SSD技術不斷發展並快速進步。微軟一直透過 Denali 專案引領開放通道 SSD 技術的標準化，為此我們最近開始單獨建立共同開發合作夥伴。阿里巴巴和中國的超大規模企業正在開發不同的開放通道 SSD 標準化，我們也參與其中。

We believe, over the next few years, open-channel SSD technology will be broadly adopted by most of leading hyperscalers for their data centers, and we are well positioned to grow as a leading controller supplier to this market.

我們相信，在未來幾年中，開放通道 SSD 技術將被大多數領先的超大規模企業的資料中心廣泛採用，並且我們已做好充分準備，成長為該市場的領先控制器供應商。

Let me now turn to our eMMC controllers. In the first quarter, revenue rebounded sequentially as SK Hynix began replenishing their depleting eMMC controller inventory. Longer term, the market for eMMC-embedded memory, which is primarily used in Android smartphone is an ex-growth market.

現在讓我談談我們的 eMMC 控制器。第一季度，隨著 SK 海力士開始補充其耗盡的 eMMC 控制器庫存，營收季減。從長遠來看，主要用於Android智慧型手機的eMMC嵌入式記憶體市場是一個過時的市場。

Our strategy is to actually manage this product line to deliver stable revenue stream and reduce the significance to our overall business as we rapidly grow our SSD controller and SSD solution sales.

我們的策略是實際管理該產品線，以提供穩定的收入流，並隨著我們快速成長 SSD 控制器和 SSD 解決方案銷售，降低對我們整體業務的重要性。

While our relationship with SK Hynix remain strong today and we continue to very effectively support SK Hynix with our very competitive low-cost, high-performance eMMC controller, we are also working very closely with Micron as their UFS controller partner. We believe our UFS controller sale should scale next year as UFS adoption increases, and this should offset the expected gradual decline of older eMMC technology. This combination of continuous sale of old eMMC controller at SK Hynix, plus our newer UFS controller sale growth at Micron should enable us to deliver a stable revenue and cash flow stream.

雖然我們與SK 海力士的關係至今仍然牢固，我們繼續透過極具競爭力的低成本、高性能eMMC 控制器非常有效地支援SK 海力士，但我們也與美光作為他們的UFS 控制器合作夥伴密切合作。我們相信，隨著 UFS 採用率的增加，明年我們的 UFS 控制器銷售量將會擴大，這應該會抵消舊 eMMC 技術預期的逐漸衰退。 SK Hynix 持續銷售舊的 eMMC 控制器，加上美光新的 UFS 控制器銷售成長，這相結合應該使我們能夠提供穩定的收入和現金流。

Now turning to our Shannon data center SSD and Ferri industrial SD solutions. Revenue declined seasonally as expected this quarter, and will recover sequentially in the second quarter as the new project scales. Unlike first half 2017 when NAND supply was short, sales of our SSD solution in this year will not be facing any NAND supply constraints. We expect our Shannon SSD sale to grow in the second quarter as new Alibaba projects scale with their growth in data center space. Separately, we are also expecting our Ferri SSD sale to rebound in the same quarter as our product is diversified further into automotive infotainment systems, data networking (inaudible) storage and other applications.

現在轉向我們的 Shannon 資料中心 SSD 和 Ferri 工業 SD 解決方案。正如預期的那樣，本季營收出現季節性下降，並將隨著新項目規模的擴大而在第二季逐步恢復。與2017年上半年NAND供應短缺不同，今年我們的SSD解決方案的銷售不會面臨任何NAND供應限制。我們預計，隨著阿里巴巴新項目隨著資料中心空間的成長而擴大，我們的香農 SSD 銷售額將在第二季度成長。另外，隨著我們的產品進一步多元化到汽車資訊娛樂系統、數據網路（聽不清楚）儲存和其他應用，我們也預計我們的 Ferri SSD 銷售額將在同一季度反彈。

Let me conclude by saying that we are off to a good start in 2018. The first quarter was largely as expected, with more NAND supply coming to market and NAND flash prices declining modestly. We expect these trends to continue throughout 2018, which will benefit our business, especially our client SSD controller sales.

最後我想說的是，我們在 2018 年有了一個良好的開端。我們預計這些趨勢將持續到 2018 年，這將有利於我們的業務，尤其是我們的客戶 SSD 控制器銷售。

I will now turn the call over to Riyadh to discuss our financial performance and outlook.

我現在將把電話轉給利雅得，討論我們的財務表現和前景。

Thank you, Wallace, and hello, everyone. I will summarize our financial results and then provide our outlook.

謝謝你，華萊士，大家好。我將總結我們的財務業績，然後提供我們的展望。

Before I begin, I would like to reiterate that our 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.

在開始之前，我想重申，除非另有特別說明，否則我們今天的評論將主要關注我們的非公認會計準則績效。我們的 GAAP 與非 GAAP 數據的調整包含在昨天發布的收益報告中。

Our Q1 revenue decreased 4% sequentially, in line with guidance. For Q2 2018, we expect revenue to increase 3% to 8% sequentially with growth led by our SSD solution sales. For full year 2018, we expect revenue to increase 5% to 10% with bias towards the upper half of this range, led by accelerating demand for our SSD controller, strong growth from our SSD solutions and stable eMMC controller sales, partially offset by declining memory card and flash drive controller sales.

我們第一季的營收季減 4%，符合指引。對於 2018 年第二季度，我們預計營收將環比成長 3% 至 8%，成長由我們的 SSD 解決方案銷售帶動。對於2018 年全年，我們預計收入將增長5% 至10%，偏向該範圍的上半部分，這主要是由於對我們的SSD 控制器的需求加速、我們的SSD 解決方案的強勁增長以及穩定的eMMC 控制器銷售，但部分被銷售額下降所抵消記憶卡和快閃磁碟機控制器的銷售。

I will now walk you through the performance of our key products before taking you through key elements of our P&L and the rest of our financials.

現在，我將向您介紹我們主要產品的表現，然後再向您介紹我們損益表的關鍵要素以及我們其他的財務狀況。

In Q1, sales of our SSD controllers grew 10% sequentially, which is follow-on growth from our SSD controller rebound that began in Q4 2017. In Q2, we expect our SSD controller sales to grow further as new programs begin to ramp. For full year 2018, we believe our SSD controller sales will likely grow at least 20%, upward bias from our previous expectation.

第一季度，我們的SSD 控制器的銷售額環比增長了10%，這是我們的SSD 控制器自2017 年第四季度開始反彈以來的後續增長。增加，我們的SSD 控制器的銷售額將進一步成長。對於 2018 年全年，我們相信我們的 SSD 控制器銷量可能會成長至少 20%，高於我們先前預期的。

While we saw some modest NAND price reductions in Q1 and believe price reductions could accelerate in Q2, we remain unsure to what extent we could benefit from this for the rest of the year. We are noting that bias is on the upside, and we will likely enjoy sequential SSD controller sales growth for the rest of the year. We also reiterate that if NAND SSD prices were to fall meaningfully, our SSD controller sales growth will likely be stronger than currently anticipated.

雖然我們看到第一季 NAND 價格略有下降，並相信第二季價格可能會加速下降，但我們仍然不確定今年剩餘時間我們能在多大程度上受益。我們注意到，偏見是向上的，我們可能會在今年剩餘時間內享受 SSD 控制器銷售的連續成長。我們也重申，如果 NAND SSD 價格大幅下跌，我們的 SSD 控制器銷售成長可能會強於目前預期。

In Q1, sales of our eMMC controllers grew 15% sequentially, as SK Hynix continued to rebuild their depleted eMMC inventory. In Q2, we expect our eMMC controller sales to be stable. For full year 2018, we believe our eMMC controller sales should be flattish, in line with 2018 smartphone industry forecasts.

第一季度，隨著 SK 海力士繼續重建其耗盡的 eMMC 庫存，我們的 eMMC 控制器的銷售額環比增長了 15%。在第二季度，我們預計 eMMC 控制器的銷售將保持穩定。對於 2018 年全年，我們認為我們的 eMMC 控制器銷售應該持平，這與 2018 年智慧型手機產業的預測一致。

In Q1, sales of our SSD solutions declined over 25% sequentially because of seasonally weak Shannon and Ferri SSD solution sales. In Q2, we expect our SSD solution sales to rebound sharply sequentially as new programs ramp.

第一季度，由於 Shannon 和 Ferri SSD 解決方案銷售季節性疲軟，我們的 SSD 解決方案銷售額環比下降了 25% 以上。在第二季度，我們預計隨著新項目的增加，我們的 SSD 解決方案銷售額將大幅反彈。

For full year 2018, based on our current portfolio of Shannon and Ferri customers and projects, we believe our SSD solutions should be able to grow at least 20% with strong growth from both our Shannon and Ferri products.

2018 年全年，根據我們目前的 Shannon 和 Ferri 客戶和專案組合，我們相信我們的 SSD 解決方案應該能夠在 Shannon 和 Ferri 產品的強勁增長的情況下增長至少 20%。

Our Q1 gross margin increased sequentially from 46.6% to 48%, largely due to growing mix of sales from higher gross margin controllers and declining lower gross margin SSD solutions. We expect our Q2 gross margin to be in the 46.5% to 48.5% range, as we expect lower gross margin SSD solutions to grow faster than higher gross margin controllers.

我們第一季的毛利率從 46.6% 連續成長至 48%，這主要是由於毛利率較高的控制器的銷售成長和毛利率較低的 SSD 解決方案的下降所致。我們預計第二季毛利率將在 46.5% 至 48.5% 範圍內，因為我們預計毛利率較低的 SSD 解決方案的成長速度將快於毛利率較高的控制器。

For full year 2018, we continue to expect gross margin to be in the 47% to 49% range.

對於 2018 年全年，我們繼續預期毛利率將在 47% 至 49% 範圍內。

Our Q1 operating margin decreased to 22.1% from 24.1% in the previous quarter because of lower revenue and higher operating expenses, slightly offset by better gross margins. We expect our Q2 operating margin to increase to 22.5% to 24.5%. Operating expenses in Q2 should be similar to Q1.

由於收入減少和營運費用增加，我們第一季的營運利潤率從上一季的 24.1% 下降至 22.1%，但毛利率的提高略有抵銷。我們預計第二季營業利潤率將增至 22.5% 至 24.5%。第二季的營運費用應與第一季類似。

For the full year, we expect operating margin to be in the 23% to 25% range. Total headcount at end of Q1 increased to 1,262, which was 12 more than at end of Q4.

我們預計全年營業利潤率將在 23% 至 25% 範圍內。第一季末總員工人數增至 1,262 人，較第四季末增加 12 人。

Our effective tax rate in Q1 was 14.6%, lower than 16.6% in the previous quarter. We expect our effective tax rate for full year 2018 should be roughly 15%.

我們第一季的有效稅率為 14.6%，低於上一季的 16.6%。我們預計 2018 年全年的有效稅率應約為 15%。

Our Q1 EPS was $0.71, lower than the previous quarter's $0.79, but higher than $0.70 a year ago.

我們第一季的每股收益為 0.71 美元，低於上一季的 0.79 美元，但高於一年前的 0.70 美元。

In Q1, stock-based compensation in our operating expense, which we exclude from our non-GAAP results was $3.1 million, lower than $8.1 million in the previous quarter, due to seasonal timing of RSU awards and consistent with timing of past years.

第一季度，由於RSU 獎勵的季節性時間表以及與過去幾年的時間表一致，我們營運費用中基於股票的薪酬（我們將其排除在非GAAP 業績之外）為310 萬美元，低於上一季的810 萬美元。

For Q2, we expect stock-based compensation of $0.6 million to $0.7 million and $14.8 million to $16.8 million for the full year 2018. We had $346 million of cash, cash equivalent and short-term investments at the end of the first quarter, $20 million less than in the previous quarter, but $42 million more than a year ago.

對於第二季度，我們預計2018 年全年的股票薪酬為60 萬至70 萬美元，1,480 萬至1,680 萬美元。美元比上一季減少 100 萬美元，但比去年同期增加 4,200 萬美元。

In Q2, we paid $10.8 million of dividends to shareholders, the second $0.30 per ADS quarterly installment of our annual $1.20 per ADS dividend that was announced in April of last year.

在第二季度，我們向股東支付了 1,080 萬美元的股息，這是去年 4 月宣布的每 ADS 年度股息 1.20 美元的第二筆每 ADS 季度分期付款 0.30 美元。

This concludes our prepared remarks. We will now open the call to your questions.

我們準備好的演講到此結束。我們現在將開始電話詢問您的問題。

(Operator Instructions) We have the first question from the line of Gokul Hariharan from JPMorgan.

（操作員說明）我們收到來自摩根大通的 Gokul Hariharan 的第一個問題。

First of all, I had a question on enterprise controller side. I think Wallace had mentioned in his prepared remarks that you are starting to see some more traction, especially among Microsoft as well as Alibaba-led consortium. And you also mentioned it will -- your first product will get into production. Could you talk a little bit about a couple of things? Any thoughts on when you expect this to contribute to revenues? What is the kind of competition you are facing in the open-channel space, given that many of the established controller companies don't seem to be very supportive of open-channel? And lastly, is this going to be restricted to 1 or 2 hyperscalers or is it a consortium, which could be adopted across multiple hyperscalers just like what happened in the server space with open compute? That's my first question.

首先，我有一個關於企業控制器方面的問題。我認為華萊士在他準備好的演講中提到，你開始看到更多的吸引力，特別是在微軟和阿里巴巴領導的財團中。您也提到，您的第一個產品將投入生產。您能談談一些事情嗎？您預計這何時會為收入帶來任何想法？鑑於許多成熟的控制公司似乎不太支援開放管道，您在開放通路領域面臨什麼樣的競爭？最後，這是否僅限於 1 或 2 個超大規模企業，還是一個可以跨多個超大規模企業採用的聯盟，就像開放運算的伺服器空間中發生的情況一樣？這是我的第一個問題。

So let me answer your first question. We expect our first open-channel controller production in middle of this year, but volume would be very limited. We believe our open-channel controller enter meaningful production is really 2019 next year. We just become member of the Project Denali open compute project host by Microsoft and we are joining as a discussion member. We believe from the industry, Microsoft would like to define a standard interface for their open-channel SSD controller end product because enterprise SSD is not equivalent to data center SSD. We believe majority carmaker would like to see what tailor-made SSD solution to meet their specific need. So we believe this trend will become broader and broader and more attractive to favor data center makers. Although initially, NAND maker hesitate to participate because they will reduce value for NAND maker SSD solution. But we believe eventually, NAND maker -- currently, at least 2 to 3 decided to participate to support this event. Because China will have their own standardization of open-channel, it will be very favorable to Silicon Motion to participate in both organization and to adopt our intellectual property from controller to firmware knowledge for NAND to our Shannon, the driver layer FTL that gave a tremendous opportunity to serve the growing market. We believe the market will become meaningful maybe from late 2019 and 2020, and we should see really significant sale revenue grow from 2020.

那麼讓我來回答你的第一個問題。我們預計我們的第一個開放通道控制器將在今年年中生產，但產量將非常有限。我們相信我們的開放式通道控制器真正進入有意義的生產是在明年 2019 年。我們剛剛成為 Microsoft 主辦的 Project Denali 開放式運算專案的成員，並且我們將以討論成員身分加入。我們認為，業界認為，微軟希望為其開放通道SSD控制器終端產品定義一個標準接口，因為企業級SSD並不等於資料中心SSD。我們相信大多數汽車製造商都希望看到什麼樣的客製化SSD解決方案來滿足他們的特定需求。因此，我們相信這一趨勢將變得越來越廣泛，並且對資料中心製造商更具吸引力。儘管最初，NAND 製造商猶豫是否要參與，因為這會降低 NAND 製造商 SSD 解決方案的價值。但我們相信最終，NAND 製造商——目前，至少有 2 到 3 家決定參與支持這項活動。因為中國將有自己的開放通道標準化，所以對慧榮參與這兩個組織並將我們的知識產權從NAND控制器到韌體知識採用到我們的Shannon（驅動層FTL）將非常有利，該驅動層FTL為我們帶來了巨大的影響。我們相信，也許從 2019 年底到 2020 年，這個市場將變得有意義，並且從 2020 年開始，我們應該會看到銷售收入真正顯著成長。

Okay. That's very helpful. Could you also share a little bit on the client SSD controller side? What are the recent updates that you're seeing from your customers, given you mentioned that you have seen 80% increase in terms of the number of projects that are -- that you're working with your NAND flash partners?

好的。這非常有幫助。您能否分享一些有關客戶端 SSD 控制器的資訊？鑑於您提到您與 NAND 快閃記憶體合作夥伴合作的專案數量增加了 80%，您從客戶那裡看到的最新更新是什麼？

We have a pretty broad [evolving] things in 2017 last year. Majority are design projects are focused on 3D NAND and from 64-layer TLC to 96-layer TLC as well as QLC. We will be the first controller maker to support 64-layer QLC SSD, and we do see very broad range of the product line. And through the pipeline, we have quite strong confidence in our real sale revenue and

去年，我們在 2017 年經歷了相當廣泛的[不斷發展]的事情。大多數設計項目都集中在3D NAND以及從64層TLC到96層TLC以及QLC。我們將成為第一家支援 64 層 QLC SSD 的控制器製造商，並且我們確實看到了非常廣泛的產品線。透過管道，我們對我們的實際銷售收入和

(technical difficulty)

（技術難度）

and really exceed 80% compared to last year. And we're going to grow at least 20% our sale revenue compared with last year.

與去年相比，確實超過了80%。與去年相比，我們的銷售收入將成長至少 20%。

The next question comes from the line of Rajvindra Gill from Needham & Company.

下一個問題來自 Needham & Company 的 Rajvindra Gill。

Wallace, you mentioned that NAND pricing is declining moderately and you expect it to kind of decline further as you flash makers take advantage of the mature yields. Wondering if you could -- now that you're about a quarter into the year, give us a sense of what the attach rates for client SSDs, kind of the rough ballpark are going to be this year in the desktop notebook market versus kind of where they were last year?

Wallace，您提到 NAND 價格正在溫和下降，並且您預計隨著快閃記憶體製造商利用成熟的產量，價格會進一步下降。想知道您是否可以——現在已經進入今年的四分之一了，請讓我們了解一下客戶端 SSD 的附加率，今年台式筆記本市場的大致情況與去年他們在哪裡？

We see really the first half of the notebook really is -- has softened and we really do not see the strong growth. However, adoption rate of SSD momentum is very strong compared with last year because the price declined sharply especially for OEM. The NAND price decline for the channel is slowly gradually, but NAND price decline to OEM, I've seen is sharper. And we see it's about 1/3 to the PC market, about 1/3 to [PaaS] compared to this year.

我們確實看到筆記型電腦的上半年確實已經疲軟，我們確實沒有看到強勁的成長。然而，與去年相比，SSD的採用率非常強勁，因為價格大幅下降，尤其是對OEM而言。通路方面的NAND價格下降是緩慢的，但我看到OEM方面的NAND價格下降幅度更大。與今年相比，我們看到 PC 市場的份額約為 1/3，[PaaS] 的份額約為 1/3。

Okay. Got it. Okay. So the NAND pricing to the OEMs is much sharper versus the NAND pricing to the module makers? I just want to understand that.

好的。知道了。好的。那麼 OEM 廠商的 NAND 定價比模組製造商的 NAND 定價高很多？我只是想了解這一點。

That's correct.

這是正確的。

Okay. All right. That's interesting. Okay. And then your kind of shift to PCIe, NVMe, the real trends in the industry, which demonstrates your innovation and technology. Can you talk about that transition from SATA 3 to PCIe and NVMe? Is this broad based across the industry? What's driving the move to faster interfaces? And how are you then positioned competitively in PCIe and NVMe as these are more advanced interfaces, controllers?

好的。好的。那很有意思。好的。然後你們轉向PCIe、NVMe，這是行業的真正趨勢，這反映了你們的創新和技術。您能談談從 SATA 3 到 PCIe 和 NVMe 的轉變嗎？這在整個行業中具有廣泛的基礎嗎？是什麼推動了向更快介面的轉變？那麼，由於 PCIe 和 NVMe 是更先進的介面、控制器，您如何在這些領域保持競爭優勢？

I think our second-generation PCIe and NVMe controller that launched last year are doing very well. In fact, most of our new client SSD win with these new controller is our unique turnkey solution and customizable platform, which help our customer quickly bring to market high performance. From the market per se because Intel and Samsung driving PCIe into the market very aggressively, so we do see PC OEM in commercial product line, 70% are already adopted the PCIe, but the consumer line is still below 50%. But in the channel, I think channel is still slow. Majority of the channel -- probably 70% are still in the start-up, but we do see the transition due to 3D NAND, higher-density 3D NAND, faster 3D NAND coming and costs going down. That's why it would trigger the demand for PCIe SSD to replace the SATA as well as replace majority of the HDD. And we do believe, in 2020, the PCIe BGA SSD will become even more attractive to replace HDD as well as replace HDD in desktop. So that's why we see the PCIe momentum will become stronger and to replace SATA next year in 2020.

我認為我們去年推出的第二代 PCIe 和 NVMe 控制器表現非常好。事實上，我們的新客戶 SSD 贏得這些新控制器的大部分原因是我們獨特的交鑰匙解決方案和可自訂平台，幫助我們的客戶快速將高效能推向市場。從市場本身來看，由於英特爾和三星非常積極地推動PCIe進入市場，所以我們確實看到PC OEM在商業產品線中，70%已經採用了PCIe，但消費性產品線仍然低於50%。但在通路方面，我認為頻道仍然很慢。大多數通路——可能 70% 仍處於初創階段，但我們確實看到了由於 3D NAND、更高密度 3D NAND、更快的 3D NAND 的到來和成本下降而發生的轉變。這就是為什麼它將觸發 PCIe SSD 取代 SATA 並取代大部分 HDD 的需求。我們相信，到 2020 年，PCIe BGA SSD 將變得更具吸引力，取代 HDD 並取代桌上型電腦中的 HDD。因此，我們認為 PCIe 的勢頭將變得更強，並在明年 2020 年取代 SATA。

And last question on that, Riyadh. The ASPs, I think, in the past you said, are twice as high versus the SATA controllers SSDs. Does that still remain the case?

最後一個問題，利雅德。我認為，您過去說過，ASP 是 SATA 控制器 SSD 的兩倍。情況仍然如此嗎？

Well, our -- Raji, our ASPs in general for our client SSD products on average is roughly about $5. Obviously, for newer products, we are going to be rolling out our newer products at higher price points. But as they become mainstream, our ASPs will converge towards the $5 average.

好吧，我們的——Raji，我們的客戶端 SSD 產品的 ASP 平均約為 5 美元。顯然，對於新產品，我們將以更高的價格推出新產品。但隨著它們成為主流，我們的平均售價將趨向於 5 美元。

But next year or -- later this year or next year, you are going to see an ASP bump as they transition to the this PCIe SSDs.

但明年或今年晚些時候或明年，當他們轉向 PCIe SSD 時，您將看到 ASP 的提升。

If there are any ASP bumps, they are going to be temporary. Our business model is not about pricing our products increasingly higher, but rather to provide a same sort of affordability to our customers, so that they can be competitive in their markets. And the more competitive they are, the better we benefit as their controller partner.

如果平均售價有任何波動，那也只是暫時的。我們的商業模式並不是讓我們的產品定價越來越高，而是為我們的客戶提供相同的負擔能力，以便他們在市場上具有競爭力。他們的競爭力越強，我們作為他們的控制夥伴受益就越大。

The next question comes from the line of Mehdi Hosseini from SIG.

下一個問題來自 SIG 的 Mehdi Hosseini。

I have one follow-up question for Wallace and one for Riyadh, and thank you for all the details. It seems to me that the long-term -- longer-term growth opportunities are very attractive. So for Wallace, I want to better understand as how the cloud guys and their procurement becomes very different and distinguishable compared to the enterprise. When I look at NVMe market is dominated mostly by Samsung and Intel, those 2 effectively account for 75% of the NVMe market, either -- it doesn't matter client or enterprise. But I think that market share is up for grabs when we look into the cloud and -- especially with the open-channel, it creates opportunity. And I want to get a better sense from you or maybe some more detail. I think you kind of alluded to this early on, but help us understand the market competitiveness or competitive landscape with open-channel? And how that becomes very different than enterprise? And I have a follow-up.

我有一個後續問題要問華萊士，還有一個問題要問利雅得，感謝您提供所有詳細資訊。在我看來，長期成長機會非常有吸引力。因此，對於華萊士來說，我想更好地理解雲端運算人員及其採購與企業相比如何變得非常不同和有區別。當我看到 NVMe 市場主要由三星和英特爾主導時，這兩家公司實際上佔據了 NVMe 市場的 75%，無論是客戶還是企業。但我認為，當我們研究雲端時，市場佔有率是有待爭取的——尤其是在開放通路的情況下，它創造了機會。我想從你那裡得到更好的了解或更多細節。我想您很早就提到了這一點，但是可以幫助我們了解開放通路的市場競爭力或競爭格局嗎？這與企業有何不同？我有一個後續行動。

Okay. Let me try to explain a little bit about the business model of open-channel. The way Microsoft want to define industrial standard for open-channel is they would like to change this model. They are able to procure the NAND from different vendor. They can also procure the controller from different vendor and to consign to manufacture partner to make SSD. So the SSD sale will be more NAND independent, because the [effort to] FTL move to the driver layer and the host maker able to control. So this is the fundamental business model change. Now looking for Silicon Motion, how we play into open-channel. We are a controller maker. We understand NAND very well. We understand the FTL flash management, the [GABI] collection, the ECC, everything very well. And we also know the driver layer very well through our Shannon system. Their solution have already developed to driver layer FTL serve the China and major customer. That's why we are able to integrate all different technologies together seamlessly, maintain a good performance and no latency and to tailor for customer need. That's why we are able to launch 2 different products very quickly for China customer this year. And looking at the landscape, NAND maker, they hesitate to jump into the total solution due to each of carmaker might be needing your customization, need a very, very tedious support for many different special functions because different cars have a different purpose, have different application. They are more [object] oriented. There are different than enterprise SSD. So we believe they give us not only opportunity to serve the carmaker directly, also gives more opportunity to serve NAND maker, which they did not have such a solution. And so I cannot mention who they are, but it really is very exciting for Silicon Motion to open the door to [end] open-channel for car industry for call makers.

好的。讓我試著解釋一下開放通路的商業模式。微軟想要定義開放通路的產業標準的方式是他們想要改變這種模式。他們能夠從不同的供應商採購 NAND。他們還可以從不同供應商採購控制器並委託給製造合作夥伴來製造SSD。因此SSD的銷售將更加獨立於NAND，因為FTL的[努力]轉移到驅動程式層並且主機製造商能夠控制。所以這是根本的商業模式變革。現在正在尋找慧榮科技，我們如何進入開放通路。我們是控制器製造商。我們非常了解 NAND。我們非常了解 FTL 快閃記憶體管理、[GABI] 系列、ECC，一切都非常了解。透過我們的香農系統，我們也非常了解驅動層。他們的解決方案已經發展到驅動層FTL服務中國和主要客戶。這就是為什麼我們能夠將所有不同的技術無縫整合在一起，保持良好的性能和無延遲，並根據客戶需求進行客製化。這就是為什麼我們今年能夠很快為中國客戶推出兩種不同的產品。看看NAND製造商的情況，他們猶豫是否要跳入整體解決方案，因為每個汽車製造商可能都需要您的定制，需要對許多不同的特殊功能非常非常繁瑣的支持，因為不同的汽車有不同的用途，有不同的功能。它們更加面向[物件]。與企業級 SSD 有所不同。所以我們相信他們不僅給了我們直接服務汽車製造商的機會，也給了我們更多服務NAND製造商的機會，而他們沒有這樣的解決方案。所以我不能提及他們是誰，但對於慧榮來說，為呼叫製造商打開汽車行業開放管道的大門確實非常令人興奮。

Great. Crystal clear. Now let me turn to Riyadh. You have been making investment to help you with these longer-term opportunities. When I look at the revenue and operating profit to employee, it peaked in 2016 and it has been declining as you reinvest in the company. When should we see a turnaround in this? Is this more of 2020 when cloud opportunities happen and the scale comes in? Is that when we should see a rebound in like a dollar operating profit per employee? And is that when the leverage is going to come back into the model?

偉大的。晶瑩剔透。現在讓我來談談利雅德。您一直在進行投資來幫助您抓住這些長期機會。當我查看員工的收入和營業利潤時，它在 2016 年達到頂峰，並且隨著對公司的再投資而不斷下降。我們什麼時候應該看到這種情況的轉變？這是否是 2020 年雲端機會出現、規模擴大的時代？那是不是我們應該看到每位員工營業利潤反彈一美元的情況？那是槓桿將重新回到模型中的時候嗎？

That's a very good question, Mehdi. We actively track our revenue per headcount. And our revenue and headcount had been improving quite nicely until last year. Last year, unfortunately, our revenue did not grow, but at the same time we were -- we are committed to continuing to invest ahead of curve in order to make sure that we are properly positioned for our longer-term growth opportunity. For example, the open-channel data center SSDs, right? So we continue to have to add engineering resources in order to make sure that we are -- we remain ahead. But at the same time, we have to -- we suffered through last year where revenue declined a little bit, so resulting in our overall dollar per headcount coming down less than optimally. Now as we get ourselves back on the revenue growth curve and a lot of the headcount investments have already been put in place, we're not expecting the heavy sort of headcount increases that we've had in the past. And at the same time, when our revenue starts to scale again, we should get ourselves back on the trend where our revenue per headcount becomes more optimal.

這是一個非常好的問題，邁赫迪。我們積極追蹤人均收入。直到去年，我們的收入和員工人數一直在大幅改善。不幸的是，去年我們的收入沒有成長，但同時，我們致力於繼續提前投資，以確保我們為長期成長機會做好準備。例如，開放通道資料中心SSD，對嗎？因此，我們必須繼續增加工程資源，以確保我們保持領先地位。但同時，我們必須——去年我們的收入略有下降，因此導致我們的人均總收入下降得不太理想。現在，當我們回到收入成長曲線上並且許多人員投資已經到位時，我們預計不會像過去那樣大幅增加人員數量。同時，當我們的收入再次開始擴大時，我們應該回到人均收入變得更優化的趨勢。

But is the leverage in the model -- and I know we're talking about the longer term and there are some uncertainties, but -- would help for investors to understand -- or to have a grasp of when would the leverage come in a given all the investments that you have already made. Is that more like second half of '19 when open-channel scales? Or should we just wait and see how your new products are going to evolve and turn into high volume manufacturing?

但是模型中的槓桿——我知道我們正在談論長期，存在一些不確定性，但是——將有助於投資者理解——或者掌握槓桿何時會出現考慮到您已經進行的所有投資。這是否更像 19 年下半年開放通路規模化的情況？或者我們應該等待，看看您的新產品將如何發展並進入大批量生產？

Well, the first trigger for us would be in the near term when the NAND prices fall more dramatically. Because the faster NAND flash prices fall, the more our client SSD controllers are going to be able to scale, right? And so when that scales, we're going to have must faster revenue growth and the metric -- dollar per headcount will start looking much better. And longer term, obviously, when our data center SSD controller starts contributing, we'll also have the benefit of that. So the near term -- the uncertainty that we're facing is when will NAND prices come down and how fast will prices come down, so that we can start having stronger client SSD growth. And that will be the largest determinant of our dollar per headcount. But longer term, one of the targets that we have in managing our business is trying to get ourselves to roughly 30% operating margin profile.

嗯，對我們來說，第一個觸發點是在短期內，當 NAND 價格大幅下跌時。因為 NAND 快閃記憶體價格下降得越快，我們的客戶端 SSD 控制器的擴充能力就越大，對嗎？因此，當規模擴大時，我們的收入成長必須更快，而人均美元的指標將開始變得更好。顯然，從長遠來看，當我們的資料中心 SSD 控制器開始做出貢獻時，我們也將受益匪淺。因此，短期內我們面臨的不確定性是 NAND 價格何時會下降以及價格下降的速度有多快，以便我們可以開始實現更強勁的客戶端 SSD 成長。這將是我們人均收入的最大決定因素。但從長遠來看，我們管理業務的目標之一是努力使營業利潤率達到約 30%。

The next question comes from the line of Sujeeva Desilva from Roth Capital.

下一個問題來自 Roth Capital 的 Sujeeva Desilva。

So my question is on the SSD solutions business here. Can you talk about whether you are able to improve the gross margins on this business on a secular basis? Or whether they are kind of fixed around NAND prices, where they have to pass the NAND pricing moves through to the customer?

我的問題是關於 SSD 解決方案業務。您能談談您是否能夠長期提高這項業務的毛利率嗎？或者他們是否圍繞 NAND 價格進行固定，他們必須將 NAND 定價傳遞給客戶？

We believe last year, we did suffer the NAND shortage and our procurement for NAND is not really that great. So I think the gross margin is going to suffer continually through the second quarter. However, I believe, around the third quarter, we should see better margin improvement for our SSD solution and we should be able to benefit with the new NAND price decline and that will also benefit our SSD solution for our third quarter.

我們相信去年我們確實遇到了 NAND 短缺的問題，而且我們對 NAND 的採購量並不是那麼大。因此，我認為第二季的毛利率將持續下降。然而，我相信，在第三季度左右，我們應該會看到我們的SSD 解決方案的利潤率得到更好的改善，並且我們應該能夠受益於新的NAND 價格下降，這也將有利於我們第三季度的SSD 解決方案。

Let me also add more to what Wallace said, just so that you have the right expectation. You should not expect our SSD solution's gross margin to be comparable to our controller gross margin. By definition, most of the components in our SSD solution are NAND that needs to be procured. And in a typical SSD, NAND could be 80%, 90% of the bill of material. So by definition, these products are going to be below corporate average in terms of gross profitability.

讓我對華萊士所說的內容再補充一點，好讓大家有正確的期望。您不應期望我們的 SSD 解決方案的毛利率與我們的控制器毛利率相當。根據定義，我們的 SSD 解決方案中的大部分元件都是需要採購的 NAND。在典型的 SSD 中，NAND 可能佔物料清單的 80%、90%。因此，根據定義，這些產品的毛利率將低於企業平均值。

Okay. And then the other question on the SSD solutions is, where the revenue size for '18 will come in will be kind of a record year for you guys and what the long-term growth rate for that business can be? An estimate there?

好的。關於 SSD 解決方案的另一個問題是，18 年的營收規模對你們來說將是創紀錄的一年，以及該業務的長期成長率是多少？那裡有估價？

I think we -- I think the major growth for our SSD solution for Shannon is really the open-channel SSD for next year. If we execute very well, we should be able to see very strong growth in 2019. It's all the execution and customers, their, really, commitment. So far, we see the momentum is very strong, and we're preparing to launching the solution aggressively next year. This year will be a small volume production.

我認為我們的 Shannon SSD 解決方案的主要成長實際上是明年的開放通道 SSD。如果我們執行得很好，我們應該能夠在 2019 年看到非常強勁的成長。到目前為止，我們看到勢頭非常強勁，我們準備在明年積極推出該解決方案。今年將進行小批量生產。

In addition, we also have our Ferri SSDs, which continue to do very well. And in this part of our business, we have a very diversified set of customers, who's going into also very diversified set of end applications. And a lot of these projects are long-tailed, and so it's a matter of accumulating more and more customers, going into more and more applications. And we -- so we expect our SSD -- our Ferri SSD solutions to also continue to grow longer term and potentially even at a comparable growth rate to our Shannon products.

此外，我們還有 Ferri SSD，它們的表現仍然非常出色。在我們的這部分業務中，我們擁有非常多元化的客戶群，他們的最終應用也非常多元化。其中許多項目都是長尾的，因此需要累積越來越多的客戶，進入越來越多的應用程式。我們 - 因此我們預計我們的 SSD - 我們的 Ferri SSD 解決方案也將繼續長期成長，甚至可能以與我們的 Shannon 產品相當的成長率。

The next question comes from the line of Mike Crawford from B. Riley FBR.

下一個問題來自 B. Riley FBR 的 Mike Crawford。

Just to be clear on semantics. When you say that you're working on 80% more client SSD controller projects than at this time last year, is that a function of unit volume or potential revenue impact or how are your measuring that 80%?

只是為了清楚語意。當您說您正在進行的客戶端 SSD 控制器專案比去年同期多 80% 時，這是單位數量或潛在收入影響的函數，還是您如何衡量這 80%？

Project numbers. Number of projects.

項目編號。項目數量。

Given that some projects have the potential to be perhaps mainstream products and others may be niche products. Is -- can you take a stab at potential unit volume and revenue with that?

鑑於某些項目有可能成為主流產品，而另一些項目可能是利基產品。您能否嘗試一下潛在的單位銷售和收入？

We cannot talk about detail. But from the number of projects are really involved is 80% more than compared with last year. And due to the new NAND, the trend, we benefit leading in our technology to support 96-layer TLC as well as QLC. That's why we get tremendous work from our NAND partner in helping them accelerate launch into the market for late 2018 and 2019.

我們不能談論細節。但從真正參與的項目數量來看，比去年增加了80%。由於新的 NAND 這一趨勢，我們受益於技術領先，支援 96 層 TLC 和 QLC。這就是為什麼我們的 NAND 合作夥伴付出了大量的努力，幫助他們在 2018 年底和 2019 年加速進入市場。

Let me also add further. These projects relate to the different types of NAND that are coming out, the current 64-layer flash, the upcoming 96-layer flash. We have QLC, TLC. We also have various other different types of NVMe projects that Wallace had previously mentioned. So it's accumulation of all these projects that are -- at our NAND partners leading to 80% more projects this year than at the same time last year.

讓我也進一步補充一下。這些項目涉及即將推出的不同類型的 NAND、目前的 64 層快閃記憶體、即將推出的 96 層快閃記憶體。我們有QLC、TLC。我們還有華萊士之前提到的各種其他不同類型的 NVMe 計畫。因此，我們 NAND 合作夥伴的所有這些項目的累積導致今年的項目比去年同期增加了 80%。

Okay. And then Riyadh, in recent quarters, past 4 or 5, there has been some pretty big swings in working capital from quarter-to-quarter, I think more so than what we've seen in the prior years leading up into this. Is that your assessment as well? And how should we think about working capital expansion and contraction going forward?

好的。然後，利雅得，最近幾個季度，過去的四五個季度，營運資金出現了一些相當大的波動，我認為比我們在這之前幾年看到的波動更大。你的評價也是這樣嗎？我們該如何看待未來營運資本的擴張與收縮？

Mike, there has always been certain amount of lumpiness relating to our working capital, especially when you look at it on a turnover perspective. If you -- and then it's -- and a lot of it deals with when we are building inventory for upcoming growth or when we are drawing down inventory or where timing of accounts payable, we could have a lot of sales, for example, that are happening at the end of the quarter. And that would make the presentation of number look less than optimal. But generally, our payable cycles and receivable cycles are fairly short. And certainly, for this quarter, there is nothing out of the ordinary other than timing matters.

麥克，我們的營運資金一直存在一定程度的波動，特別是當你從營業額的角度來看時。如果你 - 那麼它是 - 當我們為即將到來的成長建立庫存時，或者當我們減少庫存或應付帳款的時間安排時，我們可能會有很多銷售，例如，發生在季度末。這會使數字的呈現看起來不太理想。但一般來說，我們的應付週期和應收週期都相當短。當然，對於本季來說，除了時機問題之外沒有什麼不尋常的。

Next question comes from the line of Mike Burton from Longbow Research.

下一個問題來自 Longbow Research 的 Mike Burton。

With the open-channel controllers on track to launch midyear, I know you mentioned that -- obviously, a lower gross margin profile. But I'm just wondering how we should think about it versus SSD solutions on the operating margin side? And then also, on the revenue side, is there any cannibalization of your SSD solutions by this open market controller? Or any color on the percent of bill of materials that this controller would be?

隨著開放渠道控制器預計在年中推出，我知道您提到過——顯然，毛利率較低。但我只是想知道我們應該如何考慮它與 SSD 解決方案在營運利潤方面的關係？然後，在收入方面，這個開放市場控制器是否會蠶食你們的 SSD 解決方案？或是該控制器的物料清單百分比有任何顏色嗎？

Mike, let me start by just correcting perhaps the wrong understanding of our open-channel. Our open-channel controller, open -- these are controllers for our open-channel SSDs using data center. These are not below corporate average gross margin products. Our controller SSD projects are going to be above corporate average gross margin. Our controllers as a whole are above corporate average. And certainly, our SSDs, whether for client SSDs or controllers for client SSDs or controllers for our data center open-channel, they're all above corporate average.

麥克，首先讓我糾正對我們開放管道的可能錯誤理解。我們的開放通道控制器，開放—這些是使用資料中心的開放通道 SSD 的控制器。這些產品的毛利率均不低於企業平均值。我們的控制器 SSD 專案的毛利率將高於企業平均值。我們的控制人員整體水準高於公司平均。當然，我們的 SSD，無論是客戶端 SSD 還是客戶端 SSD 控制器，還是我們資料中心開放通道的控制器，它們都高於企業平均。

I'm sorry. I meant that the SSD solutions are below on gross margin. I was wondering how that compares versus the open-channel controller on the operating margin side? And then also, the open-channel controllers as a percent of the bill of materials, and if there is any cannibalization of the SSD solutions?

對不起。我的意思是 SSD 解決方案的毛利率低於此水準。我想知道在營業利潤方面與開放通路控制器相比如何？另外，開放通道控制器佔物料清單的百分比，以及 SSD 解決方案是否有任何蠶食？

For SSD solutions, Shannon products or Ferri products, these products as a whole are below corporate average in terms of gross margin. And all of these products -- the bill of materials primarily is NAND flash that we need to be procure.

對於SSD解決方案、Shannon產品或Ferri產品，這些產品整體毛利率低於企業平均。所有這些產品——物料清單主要是我們需要採購的 NAND 快閃記憶體。

I think -- to answer your question, Mike, open-channel-based SSD solution, the margin will be slightly better than standard NVMe SSD solution. So we are going to charge service fee and software fee and tailor certain software for the customer. So open-channel-based SSD solution, I think, gross margin will be slightly better than standard PCIe NVMe SSD solution.

我認為，回答你的問題，麥克，基於開放通道的 SSD 解決方案的利潤將略高於標準 NVMe SSD 解決方案。所以我們會收取服務費和軟體費，並為客戶量身訂做某些軟體。因此，基於開放通道的SSD解決方案，我認為，毛利率會略優於標準PCIe NVMe SSD解決方案。

Okay. Also you mentioned your partnership with Micron on mobile UFS controllers as an offset to some declines in the future at Hynix. I just want to clarify if that was supposed to begin this year or is that more of a comment about next year?

好的。您還提到您與美光在行動 UFS 控制器方面的合作，以抵消 Hynix 未來的一些下滑。我只是想澄清一下，這是否應該從今年開始，還是更多是對明年的評論？

It will begin this year.

將於今年開始。

Okay. And then last, just other 10% customers in addition to Hynix?

好的。最後，除了 Hynix 之外還有其他 10% 的客戶嗎？

At the end of 2017, we -- for full year 2017, we only have 2 10% customers. The first is Hynix and the second is Intel, just these 2 customers.

2017 年底，2017 年全年，我們只有 2 10% 的客戶。第一個是海力士，第二個是英特爾，就這兩個客戶。

There are no further questions at this time. I would like to hand the conference back to the speakers. Please go ahead.

目前沒有其他問題。我想將會議交還給發言人。請繼續。

I would like to thank all of you for joining us today and your continuing interest in Silicon Motion. We will be attending several conferences in Asia and U.S. in the second quarter. Detail of this event will be available on our website. Thank you, and goodbye for now.

我要感謝大家今天加入我們以及您對慧榮的持續關注。第二季我們將參加在亞洲和美國舉行的多個會議。本次活動的詳細資訊將在我們的網站上公佈。謝謝你，現在再見了。

Ladies and gentlemen, that does conclude our conference for today. Thank you all for your participation. You may all disconnect your lines now. Thank you.

女士們、先生們，今天的會議到此結束。感謝大家的參與。你們現在可以斷開線路了。謝謝。