Silicon Motion Technology Corporation

Good day and thanks for standing by. Welcome to the Silicon Motion Technology Corporation's first quarter of 2021 earnings conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. And to ask a question during the session, you'll need to press star 1 on your telephone. This conference call contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21 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 condition, and business prospects. Although such statements are based on our own information and information from other sources, we believe to be reliable. You should not place undue reliance on them. These statements involve risk and uncertainties and actual market trends and our results may differ materially from those expressed or implied in these forward-looking statements for a variety of reasons. Potential risks and uncertainties include but are not limited to continued competitive pressure in the semiconductor industry and the effect of such pressure on prices, unpredictable changes in technology and consumer demand for multimedia consumer electronics, the state of and any change in our relationship with our major customers, and changes in political, economic, legal, and social conditions in Taiwan. For additional discussion of this risk and uncertainties and other factors, please see the documents we file from time to time with the Securities and Exchange Commission. We assume no obligation to update any forward-looking statements, which apply only as of the date of this conference call. And please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. I would now like to hand the conference over to your first speaker for today, Mr. Chris Cheney, Director of Investor Relations and Strategy. Please go ahead.

Thank you, Annie. Good morning, everyone. and welcome to Silicon Motion's first quarter 2021 financial results conference call and webcast. As Annie mentioned, my name is Chris Cheney. I'm the Director of Investor Relations. Joining me today on this call are Wallace Kao, our President and CEO, and Riyadh Lai, our Chief Financial Officer. Following my comments, Wallace will provide a review of our key business developments, and then Riyadh will discuss our first quarter results and our outlook. We will then conclude with a question and answer period. Before we get started, I'd like to remind you of our state harbor policy, which was read at the start of this call. For a comprehensive overview of the risks and uncertainties involved in investing in our securities, please refer to the filings with the U.S. Securities and Exchange Commission. For more details on our financial results, please refer to our press release, which was filed on form 6K after the close of the market yesterday. This webcast will be available for replay in the investor relations section of our website for a limited time. To enhance investors' understanding of our ongoing economic performance, we will discuss non-GAAP information during this call. We use non-GAAP financial measures internally to evaluate and manage our operations. We have therefore chosen to provide this information to enable you to perform comparisons of our operating results in a manner similar to how we analyze our own operating results. The reconciliation of our 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. And with that, I'd like to turn the call over to Wallace.

Thank you, Chris. Hello, everyone, and thank you for joining us today. In the first quarter, we delivered record sales and EPS. Sales grew 27% sequentially to a record $182 million, and earnings per ADS were a record $1.11. Our strong revenue growth was driven by strong sales of both our SSD controllers and EMSC plus UFS controllers. with both products achieving record quarterly heights. The outlook of upcoming quarter and the rest of the year continues to be very strong, and as we have secured additional wafers from our foundries, we are raising our full-year outlook. Our August book remains very strong and continues to exceed our ability to supply. Looking into next year, We expect solid growth based on continuous strong demand for our products and a variable foundry supply. We are excited about our trajectory this year. Applications that use SSD and EMC plus UFS are doing well. Adoption of these solutions is growing and furthermore, we are growing our market share. Let me discuss key factors driving our growth this year. First, our SSD controllers. While the PC market is experiencing modest growth, an SSD attach rate continues to rise, which are all beneficial for growth of our SSD controllers. The primary reason our controllers are growing rapidly is market share gains. Several of our customers have been gaining market share, and we have also been gaining share with our customers. Our customers have also been up-sizing their order to us as they consolidate their procurement. We have been gaining SD controller and market share and expect to continue this trend. We have resized the client SD market and now believe our market share last year was in the 25 to 30% range. Based on our strong controlled cell growth this year, which were primarily driven by PCIe Gen3 SED and OEM programs, we believe we should pick up 5 to 10 percentage points of market share. Our market share is increasing because our PCIe Gen3 PCoEM programs, which we had discussed extensively in the past, are scaling. We will be shipping our GN3 SD controller to six of seven NAND flash makers. We are also shipping our GN3 controller to several module makers with PCoEM programs. SSD using our GN3 controller will be used by all of our global PCOENs. Additionally, we are gaining market share because our small merchant competitors and the captive controller sources of NAND flash makers are both also facing foundry supply issues. Our momentum will pick up further when our PCIe Gen 4 SSD controller starts ramping. Our Gen 4 controller will start shipping in the middle of this year, initially with a few PC OEMs using Intel Tiger Lake platform. We expect our Gen 4 OEM program to scale quickly next year when Intel's Elder Lake platform becomes widely available. Based on the size of our current Gen 4 design wing for OEM programs, when fully ramped, We believe our controller will be used in about half of all PCOEN Gen 4 CDs. Let me add that we continue to outgun the competition. Last year, our client-side controller share in the merchant market was four times bigger than our closest competitor. And we expect our market share to grow further as more of our OEM SD program enter production and scale. Now turning to our EMC plus UFS controllers, which are primarily used in smartphone and IoT devices. For smartphones this year, we are benefiting from an industry recovery. Additionally, with smartphone embedded storage technology continuing to rapidly transition from legacy EMC to UFS. Our UFS controller sales will continue to scale rapidly as we further benefit from this trend. Furthermore, we expect our share gain to increase our customer gain UFS market share. We believe our UFS NAND flash partner using our highly competitive jointly developed UFS controller with their industry-leading NAND and mobile DRAM technology will continue to outperform. We are also seeing positive customer engagement by our Chinese module makers and other customers with their UFS programs. In the legacy EMC segment, we continue to be positively surprised by both the staying power of EMC and the expansion of our market opportunities. EMC remains the ideal storage solution for applications that do not require large data storage capacity and are price sensitive and will continue to be widely used for the foreseeable future by low-cost smartphones, as well as IoT and other non-smartphone applications such as smart TV, streaming dongos, Set-A-Box, Smart Speaker, and Mainstream Chromebooks. Our EMC controller opportunity has also grown significantly larger with NAND makers exiting from the EMC market, but their priority has been changed. We are becoming the primary supplier of EMC controllers. There are no other meaningful merchant suppliers of EMC controllers. A strong audit book is a result of solid end markets and growing demand of our controllers. Demand for our controller continues to exceed our ability to supply to our customers because of a very tight foundry industry capacity. We still do not have enough foundry capacity to manufacture all the products ordered by our customers. We have, however, secured additional foundry supply and, as a result, are able to meet more of our customers' needs and increase our full-year revenue guidance. We have also secured additional foundry supply that should enable us to deliver solid growth next year. But again, demand for our product will likely continue to exceed our ability to supply. We are thankful to TSMC and our customers for their support in securing additional foundry supply. And to our many customers with unfulfilled orders, we ask for their understanding on this matter. We continue to work on our securing incremental foundry supply, without which the many ecosystems such as PC and smartphones that depend on our controller for storage solution could be negatively affected. Last quarter, we announced our $1 billion cell target by 2023 in three years. With stronger cell growth this year and solid growth next year, it is likely we could reach our goals sooner than our general expectation. Let me conclude by providing an update of the enterprise-grade PCIe Gen5 SD controller. Active engineering work continues, and we have been marketing our unique Gen5 architecture to hyperscalers in both the U.S. and China with very positive feedback. We expect to start sampling this SD controller with customers in the second half of next year. Now I will turn the call over to Ria to discuss our financial results and our outlook.