Silicon Motion at Bank of America Conference: Strategic Growth Amid Uncertainties

On Tuesday, 03 June 2025, Silicon Motion Technology (NASDAQ:SIMO) presented its strategic vision at the Bank of America Global Technology Conference 2025. The company highlighted its robust growth prospects in NAND flash memory applications, despite geopolitical uncertainties. While optimistic about future market share gains, Silicon Motion acknowledged the challenges posed by the competitive landscape and ongoing legal proceedings.

Key Takeaways

• Silicon Motion anticipates sequential growth in Q2 2025, driven by new project ramps.
• The company aims for a $1 billion run rate, supported by a strong project backlog.
• Significant market share targets include 40% in client SSDs and over 50% in high-end PCIe five controllers.
• The automotive sector is expected to contribute over 10% of revenue within the next few years.
• Legal proceedings in Singapore are expected to conclude by the end of 2025.

Financial Results

• Expected sequential growth in Q2 2025, with a focus on new project ramps such as PCIe five for client SSDs.
• Targeting a $1 billion run rate, although the timeframe remains unspecified.
• The automotive sector is projected to account for over 10% of revenue in the coming years.
• Montitan enterprise SSD is anticipated to generate 5% to 10% of revenue by 2026-2027.
• The dividend payout stands at $2 per ADS, with half of the free cash flow allocated to share repurchases over the past five years.

Operational Updates

• Key projects include the ramp-up of PCIe five for client SSDs and the scaling of UFS4 controllers.
• Development of the Montitan enterprise SSD, with customer engagement involving two tier-one and four additional customers.
• Silicon Motion is increasing its workforce to drive project wins and development.
• Market share in client SSDs rose from over 25% to over 30% last year, with a target of 40% in the near future.
• The company supports eight out of the top 10 smartphone OEMs, excluding Apple and Samsung.

Future Outlook

• UFS4 adoption is expected to scale late this year and into 2026, targeting the mainstream smartphone segment.
• The automotive market is set to grow, driven by an increase in storage devices per vehicle.
• The AI server market presents new opportunities for high-performance, high-density SSDs.

Q&A Highlights

• Silicon Motion aims for a 40% market share in client SSDs and over 50% in high-end PCIe five controllers.
• The company positions itself as a leading merchant controller supplier without conflicts.
• Capital allocation remains focused on dividends, share repurchases, and strategic mergers and acquisitions.
• Despite tariffs and geopolitical risks, the company expects low single-digit growth in PCs and smartphones.
• The Singapore arbitration process is on track for resolution by the end of 2025.

For further insights, readers are encouraged to refer to the full transcript below.

Full transcript - Bank of America Global Technology Conference 2025:

Unidentified speaker: We’ll be making some forward looking statements during this presentation, so please refer to our filings with the SEC on the risks and uncertainties involved in investing in our securities.

Simon Yu, Moderator, Bank of America Global Tech Research: Okay, great. Yeah, I’m Simon Yu. I cover memory chip industry, and then I’m gonna moderate this session. Actually, have already received some investors’ questions. Thank you very much, Jason.

So number one, what’s the Silicon Motion specific long term growth catalyst?

Unidentified speaker: Sure. Look, I think, you know, it’s increasingly important in this industry to for for memory. NAND flash memory is becoming critical for a wide variety of applications, smartphones and PCs being the main opportunity right now, but certainly seeing more interest in enterprise, in automotive, industrial, commercial. All of these applications are increasing the amount of memory required and the performance requirements for that memory. As each of these end markets, as the devices in each of these end markets become more complex, the need for memory increases.

What we’re seeing is as memory makers expand and improve upon generation after generation of NAND, that creates opportunities for us to deliver additional solutions that help drive better performance, higher density, and overall expands our TAM and SAM.

Simon Yu, Moderator, Bank of America Global Tech Research: Yeah, that’s the great long term trend. How about the for second quarter, usually the loose season, but any quick quick recap or update near term second quarter, Arun?

Unidentified speaker: Yeah. You know, look, I think, you know, obviously, the world is there’s a lot of uncertainty around geopolitics, around tariffs, and it’s certainly challenging to forecast around that. However, you know, we are still confident that this will be a growth year for us. We expect to be growing in the second quarter sequentially as new projects begin to ramp, as opportunities begin to scale. We’ve got a number of new projects that are coming online this quarter, including PCIe five for client SSDs on the high end.

We’ve got certainly continuing new customers, new products increasing over the next few months that we anticipate will be that will drive significant growth for us later this year.

Simon Yu, Moderator, Bank of America Global Tech Research: Yes. The final question is any sort of the pull in demand from your customers for second quarter?

Unidentified speaker: The conversations that we’ve been having with our customers would indicate that the demand that they’re seeing in the second quarter is real demand and not pull in demand. Certainly, there is a concern around uncertainty in the back half of the year and whether that would present itself in pull in demand here in the second quarter. But from our conversations with our customers, our belief is that the demand that we’re seeing in the market today is real.

Simon Yu, Moderator, Bank of America Global Tech Research: Yes. And then looking at the second half, usually you could see June, but lots of uncertain factors there because of some China tariff or US tariff. So any rough idea, second half outlook? And then the management’s dreaming number, dollars 1,000,000,000 run

Unidentified speaker: Well, wouldn’t classify as a dream number. I think it’s something that certainly we’ve got a lot of visibility towards and confidence towards. We have a number of new projects that are ramping in the back half of the year that we expect to be additive and help drive our business there. Obviously, to your point, there are things that we can’t control. We can’t control tariffs.

We can’t control geopolitics. But what we can control is certainly our ability to win more sockets, to expand our customer base, expand our project base. And I would say that in the fifteen plus years that I’ve been with Silicon Motion on and off, we haven’t seen a backlog as strong as we have in terms of the breadth of projects, the breadth of customers, the engagements with our flash maker partners. We haven’t seen an opportunity this strong in a very long time, if ever. And so what we’re seeing is a really broad based increase in outsourcing by every flashmaker across the board.

And we are gaining significant share. On the client SSD side last year, we went from 25% plus to 30% plus. We believe we’re we can achieve 40% market share over the next few years on client SSD’s. You take a look at, you know, on the high end PCIe five controllers that we just launched late last year, we believe we’ll be able to achieve 50% plus market share in this category. And from a market historically, we haven’t played in because the flash makers typically develop those controllers themselves.

And they have now outsourced for those flash makers or have outsourced their entirety of their high end PCI five client SSD controller business to us.

Simon Yu, Moderator, Bank of America Global Tech Research: Yeah.

Unidentified speaker: So, that’s been an opportunity where, you know, we see certainly the first of many opportunities beginning to open up.

Simon Yu, Moderator, Bank of America Global Tech Research: Maybe let me double check the number you are talking about 50% market share for the client SSD.

Unidentified speaker: For the high end, for the high end segment of the market where historically we haven’t played in. So this is incremental opportunities for us to gain share here that historically flash makers have provided the solution in house with their in house controller that now are outsourcing.

Simon Yu, Moderator, Bank of America Global Tech Research: Yeah, that’s a great thing. But this 50% market share mostly based on the PCIe Gen Right. Great. Maybe we can continue this discussion because some investors are a little bit confused that the company got interest with NAND chip flash chip makers. So because memory makers, they have in house controller, silicon motion also sells your controller to the chip makers.

Would you recap how the business model works for the memory That’s

Unidentified speaker: a good question. I mean, look, certainly the challenge historically has been around how do we reliably gain share over time if the flash makers have their own solution? What we’re seeing now is certainly a shifting dynamic in the market as more as NAND evolves, as more three d NAND and three d NAND layers complexity increases, it requires new generation of controllers. We talk about the latest generation of controllers for the latest generation interface like PCIe five, like UFS four, we’re moving down to six nano process geometry, which is incredibly expensive for every single controller that we’re developing at six nano. It’s 15 to $20,000,000 in development costs for a single controller.

So you’re now at a crossroads for the flash makers where you’re seeing increasing reliance on outsourcing because the cost of development has grown, has increased. The cost of the range of portfolio solutions that you need to have to serve all the different end markets has continued to increase. And you’re starting to balance, need to balance between NAND development as well as DRAM and HBM development is creating certainly challenges for resource allocation. And so all of these things put together presents an opportunity for us to continue to gain share. We’re the only merchant supplier out there that works with every single flash maker.

And with that, we’re able to win a disproportionate share of the market in terms of gaining share. And that’s where what we’ve continued to be able to deliver on. And that’s what gives us confidence about the near term and the long term.

Simon Yu, Moderator, Bank of America Global Tech Research: Yes. How about the overall competitive landscape with other pure and controller suppliers, the Taiwan guys or U. S. Players.

Unidentified speaker: From the merchant suppliers? Yeah. Merchant controllers? Yeah. So I think, you know, in my again, when I first started here fifteen plus years ago, there were probably half a dozen, 10 different other merchant controller suppliers for NAND memory.

I think over the last fifteen years, that number has come way down where there’s really only one or two. And even with those guys, they’re a bit conflicted. There’s a bit of more of a conflict of interest. We’re really the only leading merchant controller supplier that isn’t conflicted. We don’t sell We don’t compete with our customers.

We are a pure merchant supplier for the most part, and we are able to work with every flashmaker and not compete with them in a lot of the areas that our competitors would.

Simon Yu, Moderator, Bank of America Global Tech Research: Yes. Maybe we can talk about the mobile solution. So any quick update, UFS driven top line growth versus maybe eMMC type of the demand downside? Sure.

Unidentified speaker: EMMC, as part of the smartphone market continues to contract, getting replaced by UFS two point two and three point one. And then UFS four historically has been more on the high end and now beginning to migrate into more of the mainstream segment of the market. We developed our UFS4 controller last year, and we expect that to start scaling late this year and into 2026. Our solution is a two channel controller versus all the other internal solutions out there are a four channel controller. And the advantage of a two channel controller is that it’s a lower cost solution.

And it’s from a performance standpoint, it’s pretty comparable to what they developed many years ago. And so we’re able to help drive UFS4 adoption from the high end into more mainstream, utilizing newer generation NAND that’s more cost effective, utilizing a two channel controller that’s more cost effective. So in essence, being able to improve the cost while maintaining the same performance in order to drive adoption into more mainstream handsets. We’re working with a number of customers, including flash makers and module makers that are targeting the smartphone market that we expect to see meaningful growth starting to scale next year as the baseband folks start driving, incorporating UFS4 capabilities into their mainstream baseband products.

Simon Yu, Moderator, Bank of America Global Tech Research: So currently, the UFS already mainstream Yes.

Unidentified speaker: And so you’ve got UFS two point two and three point one. That’s primarily on the mainstream to lower end segments. You’ve got eMMC that’s at the very kind of utilized in the very basic smartphone category and then UFS four in the premium and flagship category today.

Simon Yu, Moderator, Bank of America Global Tech Research: But a little bit, we can talk about more details of China or geopolitical risk, Android phones mostly manufactured by Chinese OEMs and then of course Korean company Samsung. But what’s your current business, maybe risk opportunities with the Chinese smartphone makers?

Unidentified speaker: Sure. Look, I think if you take a look at the top 10 smartphone OEMs in the world, right? Number one and two is Apple and Samsung. And we have virtually none to virtually none, no business with them. We do have a few sockets within Samsung, but it’s fairly small.

But I think overall, and certainly Apple uses their own internal solution. We support all the other eight players in

Simon Yu, Moderator, Bank of America Global Tech Research: the top 10.

Unidentified speaker: None of those other folks really sell a whole lot into The US. So we don’t see a significant risk in terms of tariffs, etc, that would impact our smartphone centric business. Most of the stuff that we’re selling to them are fairly trailing edge and so are not subject to any sort of issues that are present in the market today.

Simon Yu, Moderator, Bank of America Global Tech Research: You mentioned that previously auto industry offers also the new growth opportunities. So what’s the management strategies for the auto area? Sure.

Unidentified speaker: Automotive is an opportunity where we see significant growth longer term. It’s already more than 5% of our revenue. We believe it will scale to 10% plus of our revenue in the next couple of years. And certainly design wins today will lead to revenue in two, three years time, and that tends to be very sticky, that tends to have a lot of visibility towards that kind of long term growth trajectory. Automotive, while certainly the automotive market itself isn’t growing, the number of storage devices in a car is certainly growing very quickly.

From cameras to sensors to lidar to ADAS, infotainment, central processing, all these things require memory, typically a discrete piece of memory. And so that increases the number of memory components that are going into a car, where historically you had one for the infotainment, but now you’re getting upwards of 10 or more devices depending on the complexity of the car So it creates an interesting opportunity for us. And it’s not about just the very high end. We’ve got opportunities with Samsung for eMMC going into automotive.

We’ve got a number of engagements for UFS going into automotive, SATA PCIe four PCIe five wins that we’re working on for long term growth. So there is a number of opportunities here that we’re really excited about that I think as cars become increasingly more complex and the capabilities become higher with ADAS and autonomous vehicles, the opportunity for us will continue to grow nicely.

Simon Yu, Moderator, Bank of America Global Tech Research: Yeah. Here in San Fran, we do see a lot of autonomous driving cars. So any kind of the Silicon Motion specific solutions or controller for autonomous

Unidentified speaker: driving Yes. So we’ve talked about, we’ve named off a number of customers, including, you know, Waymo, Tesla, GM, Mercedes Benz, Toyota, Honda, again, a wide range of cars that we are already supporting with our whether it’s controllers or SSD solutions, but providing memory capabilities to a lot of these cars. And so we’re excited by all of this. I think certainly with Waymo being the leader, at least here in The US for autonomous vehicles, and everybody trying to figure out kind of how to catch up to that, I think the opportunity continues to grow very nicely for us long

Simon Yu, Moderator, Bank of America Global Tech Research: term. Yeah. So this one, for example, Waymo here in Semperon getting more popular. Lots of people are using this. But would you specify silicon motions, example, controller only for Waymo or you purchase an energy from the two makers and then you provide a solution storage?

Unidentified speaker: We haven’t commented specifically on the solution for each automaker. And certainly, each automaker, we could have one solution, we could have multiple solutions. So it does vary quite a bit, but we haven’t specifically called out what we’re providing for each customer.

Simon Yu, Moderator, Bank of America Global Tech Research: Yeah. And then the yeah. Let’s talk about the data center AI server requires some

Unidentified speaker: the BlueField three GPUs from NVIDIA, where we’re providing the boot drive for that. That’s great opportunity. It gives us certainly a foot in the door into the NVIDIA ecosystem, having a better understanding of the enterprise SSD requirements and the opportunities there. But where we see a big bigger opportunity is what we’ve been talking about historically, which is our Montitan enterprise SSD. Right.

This is a TLC QLC controller supporting densities upwards of 128 terabytes, where we are starting to we won two tier ones and four additional customers last year. And we expect those customers to continue to begin to scale throughout this year and then generate 5% to 10% of our revenue by the twenty six-twenty seven timeframe. And we’re on track for that. We anticipate that with the increasing focus on AI, delivering solutions that combine both high performance and high density at a TCO that’s very compelling and very comparable to hard disk drives creates a new opportunity, a new window of growth, a greenfield opportunity for us longer term. We have more experience around managing QLC than anybody else out there.

We’ve managed more QLC than anybody, flash makers included. And so being able to bring to bear that level of experience to this product category, I think, really sets us apart and creates a pretty meaningful moat around our capabilities.

Simon Yu, Moderator, Bank of America Global Tech Research: Yeah. Yeah. Maybe a little bit more details. For example, when we look at the AI server, so we can see first GPU, graphic processor unit, and HBM, high bandwidth memory. Okay.

So one combo. And then, yeah, we can see the CPU with a bit crazy CPU and low power DDR5. That’s the combo. And then we can see the storage called the eSSD Mhmm. Whether you are maybe a multi ton or a chip maker’s controller.

Unidentified speaker: Yes.

Simon Yu, Moderator, Bank of America Global Tech Research: But the question is, would you recap your new solution, the Bluetooth driver, how it works? And within the AI server with GPU, CPU, lots of chips are there. Yeah.

Unidentified speaker: So, you know, the BlueField DPU is attached to the Grace Blackwell configuration and helps offload some of the processing onto the DPU, the data processing unit. And that DPU connects to up to 15 enterprise SSDs. And so the opportunity that we’ve talked about here, the win that we talked about here in the last earnings call is around the boot drive for that BlueField three DPU. And we expect to start seeing revenue late this year and that scaling more meaningfully into 2026 and beyond.

Simon Yu, Moderator, Bank of America Global Tech Research: It is possible to expect multiple, more than one customers rather than one single Nvidia dominant demand?

Unidentified speaker: So we already provide boot drives. We’ve been providing boot drives, for example, for Google servers for a very long time, right, for the last many years. So there are multiple opportunities here, but certainly, obviously, I think in this day and age, being part of the NVIDIA ecosystem is very beneficial. Yeah.

Simon Yu, Moderator, Bank of America Global Tech Research: And then maybe we can continue the monetization, question. When do you expect any meaningful revenue contribution on Titan?

Unidentified speaker: Yeah, so we started seeing early revenue late last year. We’ll see continue to see modest revenue throughout this year and then scaling more meaningfully into ’26. As you said, scaling to that 5% to 10% of our total revenue as we exit ’twenty six into ’twenty seven.

Simon Yu, Moderator, Bank of America Global Tech Research: So toward the end of 2026 or sometime 2027, ’5 percent or 10% of your revenue will come from one time, correct. All right. We have five or six minutes left. Maybe let’s talk about the overall macro or industry uncertainties. So any impact on U.

S. Tariff so far? Or you don’t feel any big, big impact?

Unidentified speaker: I think certainly the uncertainty around tariffs and the geopolitics is does create some consternation amongst our customers and end customers, etcetera. We haven’t you know, you take a look at the overall expectations for PCs and smartphones this year. It remains relatively unchanged. You know, the industry is still expecting growth of low single digits for both PCs and smartphones, and we haven’t seen that really change much since the beginning of this year, even with the implementation of tariffs and kind of all the volatility around that. I think certainly the hope is that we’ll see the rest of the year play out.

But what we do focus on is what we can control. And what we can control is our ability to win new sockets, our ability to scale with new customers and existing customers on additional sockets. And that’s really what’s been important for us. And so we continue to focus on winning more share with our flash makers, ramping up new projects with our customers. Those are the things that we can control.

And that’s what gives us confidence about how we’re going to scale in the back half of the year and how we’re going to continue to scale longer term. That’s somewhat independent of the macro. Certainly, the end markets become weaker, well, that would create pressure for everybody in the industry, given that the increasing amount of wins that we have should help bolster or help buffer some of our performance.

Simon Yu, Moderator, Bank of America Global Tech Research: Yeah. Maybe just before The U. S. Tariff implementation, do you see a little bit higher than normal level channel inventories these days or it looks broadly normal?

Unidentified speaker: Inventory levels look broadly normal. I think obviously we work very closely with our customers to understand their demand, their end market demands and the amount of products that we’re shipping to them largely reflects end market demand. So we believe that inventory in the channel remains fairly stable.

Simon Yu, Moderator, Bank of America Global Tech Research: Yeah. And then maybe we can talk about Singapore. So any update or comment regarding the older litigation thing?

Unidentified speaker: You know, it’s the litigation is ongoing. The arbitration is ongoing. We expect Singapore arbitration to convene in October year and we expect a resolution decision by the end of this year. So nothing has changed. There’s no updates to that.

Obviously, legal updates are, you know, it’s a confidential process, so it’s going to be difficult for us to provide kind of the day to day updates on the process. But overall, you know, we’re still on the Singapore arbitration is still on track for October.

Simon Yu, Moderator, Bank of America Global Tech Research: So, Singapore arbitration, their review will start in October? Correct. And then they will they should make the decision by the end of this year?

Unidentified speaker: Correct.

Simon Yu, Moderator, Bank of America Global Tech Research: Okay. And then after that, still no any particular guidance. Yeah.

Unidentified speaker: Okay. We’re not commenting on it.

Simon Yu, Moderator, Bank of America Global Tech Research: Yeah. All right. We discussed mostly business and then the almost also very important topic is shareholder returns. Would you recap your balance sheet and then how you’re going to deploy continuously the shareholder return?

Unidentified speaker: Yes, I think if you our capital allocation policy has been pretty consistent over the last many years. The priority for us has been over the last ten years is the dividend. We’ve been paying a dividend for the better part of ten years. You know, we started off at $0.60 per ADS. Now we’re up to $2 per ADS, and we’ve increased that over time gradually.

The second part of our capital allocation strategy is share repurchase. You know, we have share repurchase programs periodically throughout our history. And if you take a look at, for example, over the last five years, roughly half of our free cash flow has gone to share repurchase. And the third part of it is M and A. We always look at potential to find things that are additive.

I think certainly going forward with technology becoming more complex, performance requirements increasing, there’s going to be more synergies between the controller and the interconnects. And so we’re continuing to look at how do we continue to develop solutions that are leading edge and that can take advantage of all the processing requirements, processing capabilities that are available.

Simon Yu, Moderator, Bank of America Global Tech Research: Yeah. Yeah. And then the these days, there are many talented engineers, Taiwan, US. So what’s the overall of your R and D activities with very professional engineers for AI? So the growth opportunities.

Unidentified speaker: You know, we’ve been increasing our headcount pretty meaningfully over the last year and a half, you know, partially to drive wins and development on the Montayne side, partially to develop new solutions at six nanometer for PCIe five and UFS four. So there’s a number of new projects and opportunities that we continue to engage in that we’ll continue to hire. But to your point, there’s a lot of great engineers in Taiwan and China and The US, and we’ll continue to find the best talent out there.

Simon Yu, Moderator, Bank of America Global Tech Research: Great. We covered all the details, industry trends and company specific. Again, if you guys have any questions, please feel free to contact me, Simon Wu at Bank of America Global Tech Research. And then thank you very much, Jason. This is a great session.

We actually conclude this session. Thank you, guys.

Unidentified speaker: Thank you.

Simon Yu, Moderator, Bank of America Global Tech Research: Thank you. You. Yeah. Alright. What’s that?

Yeah.

Unidentified speaker: Yeah.

Simon Yu, Moderator, Bank of America Global Tech Research: Maybe excuse me. Maybe a personal photo? Maybe

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