Listening to SIMO's conference call.
OEM demand continues to improve. They are shipping to more customers than ever before, are expanding their footprint with module makers, and are working with all the NAND makers.
Controller technology is advancing with NAND complexity.
Inventory in both PC and smartphone market are normalizing.
SSD controller business - they expect stronger PC demand in the coming months. The are shipping PCIe gen4 to a Korean NAND maker, and they are selling PC SSDs to all but one major NAND maker.
PCIe gen5 will be used in high end PCs in 2025, and will eventually become standard. They've already got late 2024 design wins for this product. Their gen5 controller will have an ASP about double the gen4 SSDs. Gen5 SSDs will be mainstream in 2026.
The new enterprise controller will begin production in late 2024, and then generate more meaningful revenue in 2025 and beyond.
UFS controllers - they are gaining market share. UFS 4.0 is not expected to be mainstream until 2025. They are working on a UFS 4.0 solution using 6nm processes. They hope to have production volumes of UFS 4.0 in 2025. They are selling eMMC and UFS chips outside of the smartphone space.
Financial comments (from IR dude, CFO is not on the call)
most of these comments are in the press release.
Gross margins will improve gradually over the next few quarters. Most NAND makers are selling products below cost for the past few quarters. SIMO's pricing is reflective of the weakness of the NAND makers. SIMO's COGS remains high, and this may come down over the next few quarters. They think they will gradually return to historical gross margins over time, but no timeline was provided.
Operating expenses will be elevated until Q3 2024. This is due to high R&D expenses for three new major products, which are 1- gen 5 SSD controller, 2- UFS 4.0 controllers, and 3- something else.
Q&A.
By 2025 80% of value SSDs will utilize QLC NAND. And QLC will enter the datacenter sometime in 2026/7.
We believe SIMO customers will gain market share in 2024. SIMO is gaining market share in the transition of PC SSDs to gen4 and gen5.
Q: What's the expected speed of the gross margin recovery, and when will you get back to 48%-50% gross margins? A: it depends on a combination of NAND industry health, and new product launches. We are not providing specific guidance for next year.
Q: Will Micron make their own UFS 4.0 controller? A: They've been working on it for four years, and it's not yet known how Micron will move forward. SIMO is engaging other NAND makers for UFS 4.0 as well. |
