MediaTek Inc. (OTCPK:MDTKF) Q4 2021 Earnings Conference Call January 27, 2022 2:00 AM ET
Company Participants
Jessie Wang – Deputy Director, Investor Relations
Rick Tsai – Chief Executive Officer
David Ku – Chief Financial Officer
Conference Call Participants
Randy Abrams – Credit Suisse
Gokul Hariharan – JPMorgan
Roland Shu – Citigroup
Brett Simpson – Arete Research
Bruce Lu – Goldman Sachs
Charlie Chan – Morgan Stanley
Frank Lee – HSBC
Operator
Welcome everyone to the MediaTek 2021 Fourth Quarter Investors Conference Call. Financial results and presentations for today’s call are available for download on the Investors section of company’s website at www.mediatek.com. And now, I would like to turn the call over to Ms. Jessie Wang, the Deputy Director of Investor Relations. Ms. Wang, please go ahead.
Jessie Wang
Good afternoon, everyone. Joining us today are Dr. Rick Tsai, MediaTek CEO and Mr. David Ku, MediaTek CFO. Mr. Ku will report our third quarter results and then Dr. Tsai will provide our prepared remarks. After that, we will open for Q&A.
As a reminder, today’s presentation will provide forward-looking statements based on our current expectations. The statements are subject to various risks and factors, which may cause actual results materially different from the statements. The presentation material supplements non-TIFRS financial measures. Earnings distribution will be made in accordance with financial statements based on TIFRS. For details, please refer to the Safe Harbor statement in our presentation slide. In addition, all contents provided in this teleconference are for your reference only, not intended for investment advice. Neither MediaTek, nor any of the independent providers, is responsible for any actions taken in reliance on content provided in today’s call.
Now, I would like to turn the call to our CFO, Mr. David Ku for fourth quarter financial results.
David Ku
Thank you, Jesse. Good afternoon, everyone. Now, let’s start with the 2021 fourth quarter financial results. The currency here is in NT dollar. Revenue for the quarter was $128.7 billion, down 1.8% sequentially and up 33.5% year-over-year. Annual revenue totaled around $493.4 billion, up 53.2% year-over-year. Gross margin for the quarter was 49.6%, up 2.9 percentage points sequentially and up 5.1 percentage points, year-over-year. Gross margin for the year was 46.9%, up 3 percentage points from the previous year.
Operating expense for the quarter was $34.1 billion compared with $31.9 billion in the previous quarter and $27.5 billion in the same period last year. Full year 2021 operating expense was $123.6 billion compared with $98.3 billion in 2020. Operating income for the quarter was $29.7 billion, up 1.5% sequentially and up 93.3% year-over-year. Non-TIFRS operating income for the quarter was $30.9 billion. 2021 full year operating income was $108 billion, up 150% year-over-year.
Non-TIFRS operating income for the year was $110.4 billion. Operating margin for the quarter was 23.1%, increased 0.08% from the previous quarter and increased 7.2 percentage points from the year ago quarter. Non-TIFRS operating margin for the quarter was 24%. Operating margin for the year was 21.9%, up 8.5 percentage points from 2020. Non-TIFRS operating margin for the year was 22.4%.
Net income for the quarter was $30.1 billion, up 6.3% sequentially and up 101.6% year-over-year. Non-TIFRS net income for the quarter was $31.2 billion. Net income for the year was $111.9 billion, up 170% year-over-year. Non-TIFRS net income for the year was $113.9 billion. Net profit margin for the quarter was 23.4%, increased 1.8 percentage points from the previous quarter and increased 7.9 percentage points from the year ago quarter. Non-TIFRS net profit margin for the quarter was 24.2%. Net profit margin for the year was 22.7%, up 9.8 percentage points year-over-year. Non-TIFRS net profit margin for the year was 23.1%.
EPS for the quarter was $18.99, up from $17.92 in the previous quarter and up from $9.35 in the same quarter last year. Non-TIFRS EPS for the quarter was $19.63. 2021 full year EPS was $70.56 compared with $26.01 in 2020. Non-TIFRS EPS for the year was $71.81. In addition, a reconciliation table for our TIFRS and non-TIFRS financial measures is attached in our press release for your information. That concludes my comments. Thank you.
Jessie Wang
Thank you, David. And now I would like to turn the call to our CEO, Dr. Rick Tsai for his prepared remarks.
Rick Tsai
Good afternoon, everyone. 2021 was a great year for MediaTek following a successful year of 2020. We again set several financial records in 2021. We achieved record revenue of NT$493 billion or $17.6 billion. We more than doubled our earnings per share to NT$0.705. In addition, both gross margin and operating margin increased for four consecutive years. Gross margin increased more than 11 percentage points from 35.6% in 2017 to 46.9% in 2021.
Operating margin increased more than 17 percentage points from 4.1% in 2017 to 21.9% in 2021. These results reflect our successful implementation of strategies to have early readiness in 5G and Wi-Fi services to capture the entire product cycle as well as industry leading low-power computing technology supported by disciplined operation. Meanwhile, thanks to our enhanced competitiveness in technologies. We are better able to expand our addressable markets and provide more values to our customers.
With strong business fundamentals, we are confident in sustaining a strong cash flow going forward. We therefore in last April raised our cash dividend payout ratio to 80% to 85% on a regular basis and launched 4-year special cash dividend program of NT$16 per share per year. Based on our 2021 EPS of NT$0.705, we expect our cash dividend payment in 2022 to be in the range of NT$72 to NT$76 subject to Board of Directors approval.
On the business side, our revenue growth delivered strong annual growth rates in 2021. Altogether more than 2 billion electronic devices sold in 2021 were enabled by MediaTek solutions ranging from smartphones, smart TVs, to routers, broadband, notebooks, tablets, and a large variety of devices. This computing play a critical role or these billions of smart edge devices are complementary to the fast growing cloud computing and play a critical role in enriching everyone’s cloud experiences. Motivated by the convergence of smart edge devices, we recently made some changes in business organizations to consolidate our resources and invest heavily on the fast growing computing, connectivity and smart edge platform businesses. We will also align revenue disclosure with these changes starting from 2022 with three groups, mobile phones, smart edge platform and Power IC.
Along with this trend our continuous expansion in addressable market, we foresee our total addressable market to grow to $140 billion in 2024 from $80 billion in 2021. For MediaTek, with such a growth prospect as well as strong and matching technologies, we believe we will enjoy revenue CAGR of mid-teen percent for the next 3 years, with all revenue groups growing robustly. MediaTek with all the key technologies and capabilities for the smart edge devices, we offer high performance, low power CPU, GPU and APU. Our comprehensive and synergistic portfolio of short, long-range wireless wireline technologies that is 5G modem, Wi-Fi 6, Wi-Fi 7, Bluetooth 10G PON are industry leading. In addition, the high quality camera, video, audio IPs, using our superior edge AI techniques provides highly differentiated value to our key customers. All these technologies, IPs and capabilities are integrated into various products serving multiple and complementary platforms in a most efficient manner.
Power IC being broad-based in nature provides not only value to MediaTek products, but also steadily growing revenue. Still, we continue to invest aggressively in technology technologies for the future growth beyond 3 years. We are extending our core capabilities into higher power computing, high performance, low power graphics, IPs, 5G modems with low latency, massive distribution applications. Next-generation Wi-Fis, security IPs, all of which will be integrated into event system architectures for different platforms and ecosystem. Underneath them all are the leading edge process as well as 3G chipless technologies in collaboration with our foundry partners.
Lastly, but importantly, we collaborate closely with our key customers, ecosystem partners at the early IP product development stage. In order to optimize the system performance and greatly enhance the user experiences, MediaTek strives to be a reliable and trustworthy partner to our customers as we become more relevant in the industry. The business momentum that we have built in the last couple of years, our broad-based product offering and the continuous technology migration within our competitive portfolio will make 2020 a resilient year for MediaTek. Despite the potential uncertainties in the end market, we expect in 2022 our revenue growth to exceed 20% with a gross margin target of 48% to 50%. Thanks to better product mix and strong technology migration.
With that, let me comment on 2022 growth drivers for each revenue group. For mobile phone as the largest smartphone SOC maker, we aim to sustain our leading position in 2022. Our main growth drivers this year will be continuous 5G migration in more regions, expansion into flagship segment. We expect global 5G smartphone penetration rate to grow from high 30% to exceed 50% this year, which represents approximately 700 million units. Overall, 5G penetration rate in China stays high at 80%, where we aim to sustain our leading position we expect 5G unit growth to mainly come from other regions. We expect our 5G shipments to regions outside of China to double in 2022. Due to our strong 5G design in pipelines, with global customers, with extensive market positions in North America, Europe, India and other emerging regions. In addition to our strong sub-6 gigahertz portfolio, our millimeter wave SoC has also been certified by a global major operator with mass production starting in the second half of 2022 for global markets.
We are also very excited about our expansion into flagship, the technical capability and user experience of our first flagship SoC, Dimensity 9000 is highly recognized by the market. Major benchmark data shows that Dimensity 9000 has a powerful CPU with the best power performance. All major China brands have adopted Dimensity 9000 and the first model is scheduled to launch in March. We are also working closely with key customers to market the Dimensity 9000, the leading 5G SOC brand.
With our strong technology investments, we will continue delivering future generations of flagship products. For smart edge platforms, we are still at the early stage of technology migration in Wi-Fi 6, 6E, 5G, Bluetooth 5.0 and we expect multiple year growth opportunities ahead of us. In addition to technology upgrade on existing platforms, which contributes most of the growth for this group this year, I’d like to point out that our ability in expanding into new platforms and capturing emerging opportunities through leveraging our leading technologies will begin to payoff this year.
First, with our early readiness of 5G modem on Wi-Fi 6E, we have been able to penetrate the notebook market successfully. Our partnership with Intel and AMD help us build a strong designing pipeline, with all major global OEMs. A small notebook model start mass production this year we expect revenues from this platform to grow meaningfully. Furthermore, we are seeing other revenue generating opportunities starting to bear fruit. One example is customer premises equipment or CPE for global operators, where we ship multiple products, including the main chip, 5G modem and Wi-Fi 6. Another example is AR gaming device, where we provide the critical multimedia SoC. These developments will provide future growth in this area in years to come.
For Power IC, the structurally higher demand driven by accelerated technology migration continues into 2022. We offer Power IC solution in diverse industries, including computing, communication, consumer automotive and industrial. Product sales through MediaTek group platforms, such as smartphones and smart edge devices will continue to grow robustly this year and to account for about 30% of our Power IC revenue. Non-group associated businesses, including fast charging adapter, type C, and memory-related Power IC products will grow even faster. Among which automotive and industrial applications are showing the highest growth rate and we account for more than 10% of our revenue this year.
For the first quarter of 2022, we expect revenues coming from higher 5G adoption and flagship Dimensity 9000 shipment to offset lower seasonal demand for certain consumer products. We also expect mix shift towards higher value-added products across all revenue groups and bring benefits to gross margin. We therefore forecast our first quarter revenues to be in the range of NT$131.2 billion to NT$141.5 billion, up 2% to 10% sequentially and up 21% to 31% year-over-year at a forecasted exchange rate of NT$27.7 to $1. Gross margin is forecasted at 49% plus or minus 1.5 percentage points. Quarterly operating expense ratio to be at 25%, plus or minus 2 percentage points.
To summarize, we are making very good progress toward 2022. Based upon our 20% plus revenue growth target this year, $20 billion revenue is around the corner and this will be the beginning of new chapter for MediaTek. With our business realignment to invest heavily in computing, connectivity and smart edge platforms, we believe we are on the right track to capture future growth opportunities, along with healthy smartphone growth. We are confident to achieve our 3-year mid-teens revenue CAGR target and to create shareholder value.
This concludes my prepared comments. I wish everyone stay safe and have a happy Chinese New Year. Thank you.
Jessie Wang
Thank you. Operator, we are now ready for Q&A session. Can we please have the first question? Thank you.
Question-and-Answer Session
Operator
Yes, thank you, Jessie. [Operator Instructions] The first one to ask questions Randy Abrams from Credit Suisse. Please go ahead.
Randy Abrams
Hi. Yes, thank you and congratulations on the result and also looks like a good outlook. First question I wanted to ask on the business segments, a two-part question. I think first just the motivation to combine it looks like you are combining the compute IoT networking with what used to be the smart home more mature product, which originally had much different growth rates. So, wanted to understand the motivation to combine? And then the second part if you could give the fourth quarter by segment either the revenue or the growth and also a rough view on the splits for 2022 of growth by segment?
Rick Tsai
Okay, Randy, I take the first part and David will do the second part. The consolidation of our two business groups actually multiple objectives. First and the most important is to create scale. While these two businesses comprise about $6 billion revenue last year within which there are many synergies, where they were kind of artificially separated before like – I mean, like TVs we have strong smart and AI-enhanced display capability where they will be utilized easily to our smart vision product lines and also to our OTG businesses and all the Wi-Fi products that we have be – almost being utilized in TVs and all the other products. So, the strong synergy among different product lines and the – and with the consolidation, all the R&D resources will be combined. Also, we will be more productive in our R&D resource utilization and although those R&D resources will be asked to deliver the new business opportunities and that’s mainly why, Randy.
Randy Abrams
Thanks. Great, thank you.
David Ku
Okay. Randy, for your second question is maybe I talk about the growth rate last year for the three business groups and also talking about the revenue breakdown roughly, I think for last year basically, overall all business groups grow more than 30% probably with the strongest from the mobile phone sector. But I think the key point is all groups grow more than 30%, that’s point number one. Point number two in terms of revenue breakdown, for fourth quarter last year, for the three business groups. I think mobile phone accounted for roughly 52% and the Power IC accounted for roughly 7% and the rest go to the smart edge platform. And for this year, given the fact like the CEO talked about earlier, I think this year, we are looking for another strong growth year, and more importantly, all three groups, all have pretty robust growth rate. So, I would say the revenue, percentage on revenue contribution to be pretty much in line with what we have enforced with last year. I don’t see there is any big movement or change over there.
Randy Abrams
Okay. And to clarify then, all three groups probably pretty similar near that 20% average?
David Ku
Yes, I think probability they are also very similar as well.
Randy Abrams
Okay. And actually the second question I wanted to ask on the – more at the profitability side, margins have seen a good expansion, I feel like it’s two things, it’s mixed, improving competitiveness. But also you have had the industry tight supply environment, which has been a good seller’s market. I am curious to your view, factoring, you will have the vector of competitiveness, but also if supply environment starts to shift, how you are looking at the base of margin if this is the new level, where we should start looking at 50 plus or just be mindful, it’s a good environment and could come down. So, curious to your view on gross margin? And then for OpEx, there has been a lot of talks about hiring and getting more aggressive after keeping headcount pretty stable the last few years after buying MStar. So if you have a view on OpEx and hiring for this year?
Rick Tsai
Okay. Randy, we expect the – as we said in our opening remarks, we are looking at a 48% to 50% gross margin target. And we are also looking at the resilient year 2022 despite the – what we believe there were more uncertain in the macro environment, China, U.S., etcetera. So, in that sense, supply and demand imbalance, which we have seen and all the industry has seen last year and a large part of 2020, I think will be a bit more moderate in 2022. But because of our technology migration capability and our mix improvement, we still believe we can improve our margin to what we now forecast. Whether we are going to do better, we will – I mean, I think this year, the supply demand being more moderate, we will have to work with our customers and also with our suppliers to optimize our margin going forward. The second question?
Randy Abrams
[Indiscernible]
Rick Tsai
Okay. Thank you.
Randy Abrams
Okay. And then just quick on the OpEx outlook and then I will catch up…
David Ku
Yes, OpEx. Yes, I think, Randy, I think for the OpEx ratio, I think like the guidance we give always around 25% plus minus 2%, I think for this year compared to last year, I think our strategy is still invest heavily and aggressively for the growth for the next 3 years plus. So, the goal is actually probably trying to maintain probably slightly down this – I think last year, the OpEx ratio is around 25% to 26%, this year I think it goes actually – keeps you on 20% albeit similar level. But overall, I guess, given the fact if we can continue to grow the top line and also improve the profitability and then actually the gross margin, I think overall, we should be still looking for another year of operating margin improving.
Randy Abrams
Great, thanks a lot. Okay, thanks and good result.
Rick Tsai
Thank you.
Operator
Next one to ask questions, Gokul Hariharan from JPMorgan.
Gokul Hariharan
Thanks for taking my questions. Congrats on the good results. I just want to focus on the longer term guidance, the mid-teens long-term growth and expansion of the addressable market opportunity, could we talk a little bit about as you see the addressable market grow from $80 billion to $140 billion, what is the main driver? Are we addressing new markets in the next 3 years or is it just the addressable market growing at that rate? And also, when we think about mid-teens growth for overall MediaTek in the next 3 years, which are the segments which are growing faster? If you think about mobile, smart edge and Power IC, which are the segments which are growing faster, significantly faster than the mid-teens? And – yes, that’s my first question.
Rick Tsai
Okay. We expect all three groups of course to grow pretty robustly. For the coming 3-year, I think the – a lot of the growth will come from the technology upgrade and the product much better, product mix we have already put in place now in 2022. However, we see mobile growth rate compared to smart edge platforms growth rate, smart edge platform growth rate will be higher compared to mobile phone. Power IC also, it’s always very steady and very good. So for the ‘21 to ‘24, we will see RSM moving from $80 billion to $140 billion. We are not counting any – very new market, addressable market, which by the way with our heavy investment in our R&D will come in after 3 years. I must point out. Thank you.
Gokul Hariharan
Understood. That’s very helpful. Thanks, Mr. Tsai. Second question on 5G and mobile, usually what happens when we reach 60%, 70% penetration in 5G, we start to see prices start to come down a little bit. How do you see this evolve at least in 4G that happened, 3G also it happened?. Do you see that happening in 5G as well? I think previously you had guided that ASPs for 5G should still be going up this year. But as we look forward, do we see that prices start to come down for 5G beyond this year or do you think that 5G blended ASPs can actually stay around these levels?
Rick Tsai
I think at least for this year for 2022 like we explained earlier we still see flattish to slightly up on the blended 5G. More importantly, if you look at our business actually, the mix between 4G and 5G continue to improve. So on the blended ASP, which including an old smartphone sector is actually the heavily accretive, but even you only look at the 5G, we believe it’s still pretty flattish to slightly up, mainly due to that we talked about earlier, the business expansion, which including the smartphone segment expansion and also the global expansion. I think one thing I am trying to highlight is actually when we say the global expansion, maybe people still have the impression talking about the emerging market, but in reality like we talked about last time, even for U.S. market last year alone, I think we shipped more than 30 million units of smartphones. And this year, I think the number should be continuing to grow. From the market share perspective in the U.S. enjoy market share last year, we believe our market share is north of 35% and this year will continue to increase. So, the global expansion and also segmentation expansion really helped at least for this year. For next year, I guess, again, maybe a little bit too mature, too early to talk about that, but overall we do believe as long as we can continue to enjoy this technology migration and also expansion of our addressable market, we should be able to cope with sort of mix change nicely.
Gokul Hariharan
Thank you. Thanks very much. And I will go back into the queue.
Operator
Next one, we have Roland Shu from Citigroup.
Roland Shu
Hi, Happy New Year and congratulations upon the very good results. First question is, David, you mentioned about the mix between 4G and 5G SOC continued to increase. So, may we have the 4G and the 5G SOC revenue breakdown in last year? And also in this year, will you still continue to grow 4G SOC revenue in 2022? And also for the gross margin point of view, how about the 4G and the 5G SOC margins compared to corporate average now?
David Ku
Roland, first of all, for 4G/5G breakdown in revenue, we didn’t really disclose that externally. But I can share with you the 4G – 5G revenues more than 50% of overall smartphone already is continuing to grow strongly this year, given the fact like we talked about earlier, the penetration rate will increase from last year 30% to this year, globally more than 50%. And we enjoy the global expansion, again, not just in China, global expansion, I think that’s – that much we can disclose. In terms of gross margin, I think right now it’s pretty much for all product line and also all our business segments. They are pretty much in line with the corporate average, okay. I won’t – they are some difference, I won’t say it’s the big difference, some of it higher, some of it lower, but I would say it’s actually all within the guidance range.
Roland Shu
Okay. How about for the 4G – 4G revenue this year, are you going to continue growing the 4G revenue this year?
David Ku
No, I think for the absolutely revenue, our view is probably were flattish maybe even down – if the volume likes to come down for the good reason, because the most – a lot of 4G will be converting to 5G.
Roland Shu
Understood. Okay. Second question is do you comment about – for your inventory, so your inventory actually just been going high amount of your product lines, what product carries the highest inventory level and what product is with the lowest inventory level? Are you expecting for any like the inventory correction anytime soon?
David Ku
I think, first of all, before commenting about the detail for the inventory, I’d like to talk about the market inventory or the customer inventory. I think in general, what we see both on the channel side and also on the customer side, I think the inventory level, even though it compares to last year to try and increase I guess mainly due to a lot of customers still trying to strategically use inventory or slightly higher into level to manage the uncertainty for the supply chain. But overall on the absolute level, we do see both from the channel side and also from the customer side, the inventory level is healthy and manageable. Then coming back to the MediaTek side, I think our inventory again compared to last quarter Q4 versus Q3 is actually increased, I think mainly due to what we need to call with the current market situation. And to make the long story short, we do believe that around 100 days of inventory isn’t normal and also probably it’s the better way to manage given the overall situation. What do I mean by the overall situation if I just detail it ours actually we need to consider how as the longer lead time for the events note and also the overall foundry and OSAT capacity and pricing consideration, it also was – of course we need to take into consideration about the market competition situation and also the last – the customer requirement. But overall I guess we do believe it’s manageable and also it’s healthy industry for the preparation for the future revenue growth.
Roland Shu
Okay. Thanks, David.
Operator
Now, the line is open to Brett Simpson from Arete Research.
Brett Simpson
Yes, thanks very much. I wanted to ask on pricing generally, but on mobile, on the smartphone business, we understand you have made material price increases in 4G and also price uplift in 5G. Can you maybe just help us understand is this fully reflected in Q1 guidance or do we see some of the price increases coming in Q2? And more broadly and this goes for the broad portfolio you offer. With pricing going up, reacting to the foundry cost increases, how do you think the consumer, how do you think price rises, impacts consumer demand this year or do you think it’s relatively inelastic? Thanks.
David Ku
Brett, I think for the pricing, let me emphasize, I am assuming you are talking about two elements. One is actually our cost which is the foundry’s pricing and other parts actually is our pricing. I think all happenings, also start happening in the fourth quarter last year already. And first quarter this year, the guidance do including the new pricing on the MediaTek side, which by the way happened – last starting from last quarter and also the new pricing or new cost elements for MediaTek recently started from fourth quarter last year. So, yes, it’s including the guidance already – including the guidance already. And the second question will be will the new pricing have any impact on overall market demand? I guess actually, it’s for any price increase, certainly will have some impact, but overall, if we net it out, we still see what actually is the overall impact or the demand maybe the better way to talk about that impact, the demand still looks solid and healthy. That’s what we see for the moment even after the pricing.
Brett Simpson
And maybe just as a second question for Rick, you talked about a sort of slight shift in how you are addressing the smart edge and you mentioned computing is one of the key growth drivers. Can you maybe talk a bit more broadly about the strategy here? Are you going to address Windows 11 with your platforms? And I guess on the GPU side, you use a lot of molly today and molly doesn’t support DirectX and things like Ray Tracing which you are going to need if you move into the computing market more broadly. What’s – how do you address or how do you think about graphics? Because I guess when you look at the players in computing today, the Nvidias, the AMDs the Intels, they have significant resources in graphics, which are very different architectures to what we see in smartphones. So just like to know your strategy here in GPUs? Thanks.
Rick Tsai
Okay. Understand the question. It is indeed the computing is indeed – well, addressable market, fairly large one for MediaTek, where we have, I would say, quite small exposure. We have built quite strong capabilities in computing, GPU, APU, we also understand those are mostly based on the mobile, flagship mobile applications. We have some way to go both from a technology point of view and from the ecosystem point of view, we understand that. That’s why I said earlier in one of my response that the some arose a large addressable market is not now in our 3-year forecast or addressable markets, really, maybe a small portion. But so you can tell our horizon is beyond 3 years, it’s more like 4 years and beyond. And we certainly – that’s also a big reason why we are investing resources in R&D and therefore developing those future addressable markets. They are not easy we understand, certainly, GPU being very challenging, very challenging technology for that kind of market. We are, I cannot really disclose our strategy, but we are looking at the not just the certain IP as you just mentioned, we must – well, we don’t exclude any possibilities within the industry. But the important thing is we, I think I believe with the revenue we have with the revenue growth, but we have going forward with the margin that we have been improving, we have well, pretty good capability from financial point of view for sure and our capability to recruit now much better, high caliber people to move forward. Thank you.
Brett Simpson
And maybe just a follow-up to that, Rick, I guess there is a lot of hype around Metaverse. You will be seeing a lot of new products being introduced at some point this year. When would you expect MediaTek to have a platform to address this market?
Rick Tsai
We aren’t there. Actually, this is a major part of our, again, our addressable market. We have been working with some of our key customers with certain VR or AR specific applications. We have built I think one of – not one, but some of our MediaTek’s really core competencies, low power technology capability, and low latency capability, which was very good performance from computing point of view, not to mention the audio connectivity modems or WiFi, Bluetooth. So, we have all the elements. I am sure you understand. And of course, the Metaverse is – I don’t know whether it’s young or nice, fairly young. We know it’s going to be big. We are working with or shall we say key system companies to work with them in making our technology into the devices for those applications. There is no doubt in my mind that MediaTek will be a major player in the Metaverse universe, shall we say. There is no doubt in my mind. It’s just – but I am not so sure that will happen in 1 year or 2 years. It will take a little while. And we – that’s fine with us, because we have I think we have, as I said, a very strong already fundamentals that will give us the competing capability and advantages. Thank you.
Brett Simpson
That’s great. Thank you.
Operator
Next one to ask questions [Indiscernible] UBS.
Unidentified Analyst
Hi, good afternoon. Thank you for taking my questions. So, my first question is on the supply chain tightness. Want to get your thoughts on how long the foundry supply constraint may sustain? Would you anticipate further margin impact from the foundry cost increase for next couple of quarters?
David Ku
I think for the supply chain situation, just like the CEO talked about earlier compared to last year, I think it actually certainly eased up a little bit, but it doesn’t mean actually there is ample supplies out there. I think probably the best way to think about that it’s actually still tight, but manageable. And given our overall operating and also given especially given the size we have, I think relatively speaking is actually we got ample support for what we move for this year. In terms of pricings, I think I am talking about the supply chain pricing, I have been no bore given the market uncertainty and also given the overall demand situation. I guess, our view is that probably it’s actually not a good time from the supply chain perspective to think about increase in price, that’s our view.
Unidentified Analyst
Got it. Thank you. That’s very helpful. Second question, on the SEM market size that you mentioned, so, for $80 billion going into $140 billion, would you be able to provide the breakdown by key markets?
David Ku
Yes, certainly, I think for the $80 billion in 2021, roughly $40 billion, yes and as much as $10 billion in Power IC and the rest go to mobile phones. And by 2024, our view is actually on the smart edge we will grow from $40 billion to roughly $80 billion. Power IC will grow from $10 billion to $14 billion to $15 billion, mobile phone will grow to $50 billion. I think that’s how we view.
Unidentified Analyst
Got it. So, a few years ago, you mentioned that you were planning for auto motors. Is that still ongoing? Is that part of the smart edge for your business?
Rick Tsai
Yes, it is. We – actually, we have built a pretty good and competitive products in the infotainment applications market and of course, the modem, 5G modem modules. We have one, I will say critical win with the OEM. We have not made a big noise out of it, because the revenue so far is not – it’s not huge. So and the automotive business is a very time consuming go-to-market kind of business. MediaTek certainly is in this very important segment. And as we move on, we will, I mean there are some – like some new, but very significant EV startups that we will work with to develop products for them in future.
Unidentified Analyst
Got it. Thank you. That’s all I have. Happy Chinese New Year.
Rick Tsai
Thank you. You too.
Operator
Next we have Bruce from Goldman Sachs. Sir, the line is open to you now.
Bruce Lu
Thank you for taking my question. Congrats the great results and thanks for the detailed update for the cash flow and market. Well, I am trying to ask a question about the profitability and sustainability. We understand the foundry raised the wafer price and you guys did a very good job in terms of tackle the cost which it delivered the good margins in the first quarter. So, what’s your customers’ feedback and how does that look for the margin profile throughout the year? I mean, I do remember that rigorous tension in the first quarter is a new chapter of your profitability then do we expect the margin will continue to trend throughout the year?
David Ku
Yes. Bruce, I think during the opening remarks by our CEO, Dr. Rick Tsai, I think we talked about from a year-over-year perspective. I think we do basically addressed all, I think as you recall earlier last year, the guidance for the full year we gave out was 44% to 46%. And we end up actually probably slightly on the higher end, actually it fits the high end of our guidance. And this year, I think overall guidance is 48% to 50%. And of course, as you can assume we are working towards the mid to high and if not existing is a little bit I think that’s the goal. But given the fact actually, there is still a lot of uncertainty. And also, now we only talked about like not even end of January yet. So, we probably won’t be able to provide more detail. But overall, I think if I am looking at the fourth quarter gross margins, and also if I am looking at the guidance given for the first quarter, which is 49% plus/minus 1.5%. To answer your question directly, I think both from the profitability and also from sustainability perspective, we do have certain level of confidence, I think mainly due to again two factors that continue migration for technologies and also the expansion not just on the flagship side, but also on the global expansion. I think that two factors together do give us confidence to continue to improve the profitability, as we indicated earlier.
Bruce Lu
Okay. Thank you. So, the next question is more for your M&A strategy. I mean, I saw a very different phenomena between MediaTek versus global peers like Qualcomm or Nvidia who are usually trying to acquire a big company trying to – take for a second the company acquired EdTech and sell it out to Sigmastar, Airoha, all these companies, when you try – when you invest them, you sell them and makes very good money out of it, but you don’t really include them into your product portfolio to enlarge your product offering. So, why is that, there is a big difference between MediaTek strategy versus the global other fabless companies?
David Ku
I think what you are talking about probably is only the partial picture, really the full picture. For example, for the most of the sort of the target or company, we acquire, actually, we keep this in housing growth nicely, just to name a few, for example, for MStar. Now, it’s actually one of the foundations, or key pillar for the smart edge business and also for ReachTech. Right now, it’s actually last year, we talked about revenue growth. By the time we are calling the revenue sub-$500 million, but now we grow the revenue last year to be more than $1 billion. And more importantly, we also talked about – for Power IC, more than 10% revenue come from automotive and also from industrial. Another example is actually braving, that’s actually maybe too old or people forget about that and we will require really and right now, more into the stimulus revenues actually is coming off on really – basically, I think it’s the IMB or the connectivity. So, we do actually have a pretty solid M&A track record. So, what are you talking about is the audience from solid – from the revenue side actually is much smaller, but we actually probably get into a question, the short answer is MediaTek, essentially, is also considered about M&A in the past, and also going forward, I think that will be one of our first choice.
Bruce Lu
Well, I do understand the rating in ReachTech, but that was like more than 5 years. So, what I am trying to say is that for the last 3 years, 4 years, the industry is in serious consolidation. But a lot of people yes, we just don’t see that coming from MediaTek. Is there any particular reason behind that or…?
David Ku
Bruce, sometime it may take two parties and make a deal. And actually, so it’s not like we want to do a deal, the deal will happen. I think the only thing I can say is actually we see this as a one possible option. And we have done that so many times. And whether or not it’s the right time, right taking come out, it’s actually sometimes out of our control is out of our control.
Rick Tsai
But it is definitely in our picture. This – if you look at MediaTek, during the last 4 years or 5 years, we actually we would have, we just had to basically turnaround our business first and invest in technology. Without which, I mean there is really no good place to make any major M&A, successful M&A. And I think MediaTek is now in a much, much stronger foundation that we can be more aggressive. However, David said that well, too, it takes two to make a deal and but we are going to – we are looking at all options.
David Ku
If I may, maybe I can add one thing and it seems down the line. It’s actually it’s another issue is actually on the Taiwan accounting system. Have been doing M&A. Most of the U.S. companies can reporting for GAAP and people focus on non-GAAP. So, what – when you look at our financial announcement, we actually disclosed what we call non- TIFRS. Unfortunately, I think most of industry analysts [indiscernible] probably only focus on the GAAP. I think that actually is another issue somehow limited Taiwanese company to grow by a sizable company. Because once you grow by a sizable company, you will incur sizable depreciation. So, we need to focus on non-GAAP. I think it’s a good time for me to also bring – that’s why we start to disclose the non-GAAP, which is non-IFRS number 3 years ago, but when I do the research report to be honest not many people report that. So, maybe that’s a good point Bruce. Maybe you can help them.
Bruce Lu
I mean, well, definitely, you guys did a good – big acquisition. I will definitely start to learn more about non-GAAP and report to the investors as well as analysts maybe need to be educated a bit more. I don’t disagree. But the reason I asked this question is that MediaTek is highly, highly consumer centric business in nature with higher exposure in China. So, if you want to get a faster track to enter into the enterprise businesses, not only a non-China business, might be a fast track from a lot of investment perspective, and we are just trying to see if the management is aggressive in terms of doing that because that’s the underlying rationale for me to ask the questions.
David Ku
Bruce, I will probably just make a final closing and then we move on to next question. Well, first of all, like our CEO, M&A is our strategy. For the second point when you talk about MediaTek with a lot of revenue coming from China, I would say, there is again, volume pressure, when you compare the revenue contribution from China between MediaTek, Qualcomm, Intel, I think we are on the same level. So, that’s just one clarification there.
Bruce Lu
Okay. Thank you.
Operator
Ladies and gentlemen, with the interest of time, we are going to take the last two callers for questions. And the first one is Charlie Chan from Morgan Stanley.
Charlie Chan
Thanks. Hi, Rick, David and Jessie. Happy Chinese New Year. So, my first question is easier is about the Windows opportunity. You said in your 140 P and K [ph] opportunity and for the OA or the PCC people market, what is the TAM that you are looking at? And the starting point of revenue contribution? That’s my first question on WOA. Thank you.
Rick Tsai
I answered the question earlier, it is not. Yes, it is not. We – I mean, it doesn’t mean that we are not presuming that. It’s just going to be 4 years and beyond. We need some time.
Charlie Chan
Okay. Any reason that it takes longer time, because, I mean in terms of hardware design, you already have a big success in the Chromebook processor, whereas your major competitor, Qualcomm seems to overcome the ecosystem issue. So, I am just a little bit surprised why it takes much longer for MediaTek.
Rick Tsai
Well, Chromebook, yes, we have been doing well. And we certainly will continue to invest in that segment for sure. That segment actually has a very high synergy with our current investment in the flagship chips. I guess what I am talking about is video, much larger addressable market, including Chromebook, which takes higher power computing capability ecosystem synergy. If you look at our competitor, the time, the years they have taken to be where they are, of course, I don’t know really well, how much their revenue is. It is a market that we have recognized to be very large, but also with different kinds of barriers. And we must address those barriers very, very robust manner. I think again, we are in a good position that we don’t have to rush, that’s quite important. Well, I want to do the right thing. We want to set the right strategy and execute them well. Thank you.
Charlie Chan
Sure. Thanks Rick. So, I think sometimes it’s a good strategy to bide your time, patient, about no matter Wi-Fi 7, which for in-market should be 2 years later. And even your 6G vision white paper, I think there is a grey paper, the paper, you mentioned that the timeline should be 2030. So, what would the company want to kind of take a lead of those kind of very leading edge kind of from thinking about future technology? And do you think that MediaTek can really kind of lead the world, especially MediaTek was very successful in China or emerging market features. And now, 6G seem to be kind of the leaders of the world. So, can you define kind of rationale behind why you want to do this so early? Thank you.
Rick Tsai
I am just trying to make sure I am answering the question – your questions. First, I think Wi-Fi 7 or 6G, I am very proud that we are – we have made tremendous progress. If you think – if you look at where we were 4 years ago with Wi-Fi 6, our market position vis-à-vis our major, large U.S. competitors, now we were behind. Now we are kind of shoulder-to-shoulder. The key is, we have done a tremendous job with 5G modem and it’s we have invested in high caliber people so that we have blueprint. These other things that which are very difficult, very challenging, but on the other hand MediaTek does have handle, computing market is I mean, it’s an existing market for a long, long, long time. However, it’s not a big interesting market for MediaTek, but it’s yet. So, the pace from our end, it’s not whether we want to invest or not, we do, we do and we are putting resources. Well, I just don’t want to putting undue expectations, I want to make sure that for the next 3 years we can keep our forecast of mid-teens percent growth, based on what we know what we are doing, why we work on the 3-year to 5-year horizon. We can also deliver a good growth target for that. So, it’s not that we are not being aggressive. It’s we are, but I don’t want to put any undue expectations.
David Ku
Rick, I may. Actually Charlie, I think once you wanted to clear things by listening your question, I think maybe there is some miscommunication. I think from an investment perspective on WOA, I think while Rick is talking about we have actually been aggressive. Okay, so for investment, we are being aggressive, just about expectation management and also about the meetings scrolls, we didn’t really expect a huge number. I think that’s clarification of that. That doesn’t mean we won’t invest on [indiscernible]. Actually, we talked about we want to invest right now for 3 years latest market, I think during the opening remark by Rick.
Charlie Chan
Okay. Thank you. Yes. So, look forward to seeing you in person, maybe after pandemic come down, and we can have some discussion regarding your long-term vision. Thank you.
Rick Tsai
Sure.
Operator
Next one to ask questions, Frank Lee from HSBC.
Frank Lee
Okay. Thank you. I just wanted to have a, I guess, a follow-up question on the long-term growth of mid teens. I think the last year or 2 years it seem the tightness and something that they are leading to price increases. As you look forward as part of your long-term growth. Is there any assumption of ASP improvements going forward as part of this long-term growth target?
Rick Tsai
Well, I think the answer is probably yes and no. Yes, means actually, to the product mix. And also, again, to the hiring, we do expect the growth of ASP will continue to improve, but no price actually is currently within reflecting sort of the price, simple price adjustment for that mid-teen growth.
Frank Lee
Okay. So basically, you are saying if the ASP increases, is really a function of content growth going forward?
Rick Tsai
In terms of technology and concepts, yes.
Frank Lee
Okay. And then just and sort of like a positive because I know you gave a good breakdown of your $80 billion target in 2021, getting to $140 billion. And the different areas are growing. The smart edge looks like it’s growing the strongest from $40 billion to $80 billion, but others also growing. Is it safe to assume? If we could, I know it’s difficult, but is there waiting? Just give us an idea of from a content growth perspective, the percentage increases, should we expect the biggest to come from smart edge or is it more about the TAM growth?
David Ku
It’s actually from all three business segments. For example, from mobile phone, like we talked about from 4G to 5G and also into the flagship that’s actually warming by the product growth. For the smart edge, which including 6, Wi-Fi 6, Wi-Fi 6E, Wi-Fi 7, that’s actually is a nice example of constant growth. Another example is actually, for example, for the wireline communication, the GPON, the 10G PON, so I think really just on the whole segment for [indiscernible] for example we get into the industrial, get into [indiscernible]. So, it’s actually happening in all presets. And if I want to add anymore, it’s actually on the smart edge platform due to the variety of products over there, we also have elements of evolving growth as well.
Frank Lee
Okay. Thank you. And then I guess my last question is on the auto, I know you guys addressed this a bit as well, but I guess as far as because it seems to be a major growth area for a lot of people in the industry, is any more specific feature as far as like from a product point of view, within autos, that you are targeting more to break through? I mean, you talked about infotainment, but is there any other areas within autos that you think would be the biggest opportunity for MediaTek in the next couple of years?
Rick Tsai
I think with automotive we also will look at our competencies. Our competence lying in computing in connectivity and the new products that we will be developing certainly probably will be with our major competences and then maybe expand some that we suddenly have all the Power IC capability whether we will go to a very high voltage Power IC, that remains to be seen.
Frank Lee
Okay, great. Thank you.
Rick Tsai
Thank you.
Operator
Thank you, ladies and gentlemen, for all your questions. Now, I will hand it over to Miss Jessie Wang for closing comment. Miss Wong, please proceed.
Jessie Wang
Ladies and gentlemen, this concludes MediaTek’s 2021 fourth quarter conference call. I would like to thank you for your participation. And you may now disconnect. Thank you.
Operator
Thank you, Jessie. And ladies and gentlemen, we thank you for your participation in today’s conference.