Welcome to the MediaTek 2021 first quarter investors conference call. Financial results and presentation materials for today's call are available on the investor section of the company's website at www.mediatek.com. Now, I would like to turn the call over to Ms. Jessie Wang, the Deputy Director of Investor Relations. Ms. Wang, please proceed. Good afternoon, everyone. Joining us today are Dr. Rick Tsai, MediaTek CEO, and Mr. David Ku, MediaTek CFO. Mr. Ku will report our first 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 the actual results materially different from the statement. The presentation materials supplement non-T-IFRS financial measures. Earnings distribution will may include it with financial statements based on T-IFRS. For details, please refer to the safe harbor statement in our presentation slides. All contents provided in this teleconference are for your reference only, not intended for investment advice. Neither MediaTek nor any of independent providers is responsible for any actions taken in reliance on contents provided in today's call. I would like to turn the call to our CFO, Mr. David Ku, for the first quarter financial results. Thank you, Jessie. Good afternoon, everyone. Now let's start with the 2021 first quarter financial result. The currency here is in NT dollar. Revenue for the quarter was TWD 108 billion, up 12.1% sequentially and up 77.5% year-over-year. Gross margin for the quarter was 44.9%, up 0.4 percentage points sequentially and up 1.8 percentage points year-over-year. Operating expense for the quarter was TWD 28.3 billion, compared with TWD 27.5 billion in the previous quarter and TWD 20.4 billion in the same period last year. Operating income for the quarter was TWD 20.2 billion, up 31.4% sequentially and up 248.1% year-over-year. non-T-IFRS operating income for the quarter was TWD 20.5 billion. Operating margin for the quarter was 18.7%, increased 2.8 percentage points from the previous quarter and increased 9.2 percentage point from the year ago quarter. non-T-IFRS operating margin for the quarter was 19%. Net income for the quarter was TWD 25.8 billion, up 72.3% sequentially and up 344.1% year-over-year. Non-GAAP net income for the quarter was TWD 26 billion. Net profit margin for the quarter was 23.9%, increased 8.4 percentage points for the previous quarter and increased 14.4 percentage point from the year-ago quarter. Non-T-IFRS net profit margin for the quarter was 24.1%. EPS for the quarter was NT$15.21, up from NT$9.35 in the previous quarter, and up from NT$3.64 in the same quarter last year. Non-T-IFRS EPS for the quarter was NT$16.38. A reconciliation table for our T-IFRS and the non-T-IFRS financial measure is attached in our press release for your reference. That concludes my comments. Thank you. Thank you, David. Now I'd like to turn the call to our CEO, Dr. Rick Tsai, for prepared remarks. Good afternoon, everyone. MediaTek began 2021 with a very strong first quarter. First quarter revenues grew 77.5% from last year to TWD 108 billion. Exceeding guidance, mainly driven by a better product mix, healthy market demand, as well as favorable exchange rate of TWD 28.3 to $1 versus guidance of TWD 27.9 to $1. First quarter gross margin came in at the high end of the guidance due to a better product mix. Before we start business discussion, I'd like to introduce you on how we now break down our revenues. We categorize our revenues into four product groups. The first is mobile phone, the second is IoT, computing, and ASIC. The third is smart home, finally, Power IC. We believe by updating our revenue groups, we could better present our growth strategies for MediaTek. Diverse product portfolio in their respective markets. Addressable markets for all four groups are around $17 billion this year. Among which, mobile phone accounts for $29 billion. IoT computing and ASIC at $28.5 billion, representing another sizable market opportunity in addition to mobile phone. Smart home and Power IC at $5.5 billion and $7 billion respectively. With our competitive IP portfolio and technology investments, we are confident that we could not only capture the industry uptrend, but also outperform in each of these markets. I will now discuss our business according to these four groups. First, mobile phone. Mobile phone accounted for 54% of first quarter revenue, growing very strongly at 149% year-over-year and 32% sequentially. The substantial increases were mainly driven by 5G revenue share gain as we further expand into high-end models. We are seeing healthy smartphone end market demand and continue to believe global 5G smartphone shipments would exceed 500 million units this year. Among 5G products, which we name Dimensity, our high-end 5G products adopt advanced processing technology and offer excellent AI, camera, and multimedia features. They are highly recognized by the market. Numerous high-end smartphones powered by our Dimensity 1200 from global major brands were launched in the first quarter. We expect a strong shipment and revenue ramp to continue in the second quarter and beyond. With that, we believe our revenue share in the high-end segment to continue to rise throughout the year and beyond. For high volume, mid-range, and mass markets, we expect 5G penetration to continue. MediaTek is already a leading 5G solution supplier to all major Android smartphone-based brands. Based on our strong roadmap and design-in pipeline, we believe we are able to grow this business further. Moreover, with MediaTek's continuous advances in 5G, we are making significant progress in U.S. and Europe markets with further share gains. In early second quarter, a global major Android brand launched MediaTek-powered 5G and 4G smartphones in U.S. market. Together with other models, we expect our smartphone shipments in U.S. and Europe markets to grow meaningfully in 2021. Moving forward, we continue to launch new products to further capture market opportunities next year and beyond. One is to offer millimeter wave technology in addition to our sub-6 GHz 5G solutions. The other is to expand into the flagship segment. By adopting leading advanced process nodes and high performance designs, we believe our flagship solutions will be competitive in penetrating into flagship models. With these initiatives, we are confident that our mobile phone group will grow better than industry for upcoming years. For our IoT computing and ASIC group, it consists of several fast-growing markets such as Wi-Fi, Arm-based computing, and ASIC. In the first quarter, this group accounted for 22% of revenue. It grows strongly at 50% year-over-year, thanks to growing demand in routers, broadband, and Chromebook, as well as strong Wi-Fi 6 migration. The group declined 4% sequentially due to consumer electronic seasonality. With comprehensive wireless and wired connectivity, Arm-based computing, and high-speed data transmission service IPs, MediaTek enjoys a highly competitive position in these markets. We continue to gain great traction in Chromebook and notebook PC markets via our competitive Wi-Fi 6, 5G slim modem, and Arm-based computing SoCs. We also see spec migration continues. We forecast our Wi-Fi 6 to account for 15% of our total Wi-Fi shipment this year, substantially increasing from low single-digit percentage last year. For ASIC, we have seen very robust gaming console demand since product introduction last year. Our switch IC and AI accelerated ASIC projects are also ramping smoothly into rest of the year. With more innovative connected products, we are able to increase our market shares in these product lines. We believe our IoT computing and ASIC group will be a major growth driver for the next few years. Next, Smart Home. MediaTek has a strong leadership position in this market. This group accounted for 16% of revenue in the first quarter. Smart Home grew 42% year-over-year, driven by recovery of the global TV demand from a year ago and grew 5% sequentially as we see a better mix. For coming quarters, we see healthy demand in anticipation of global sports events such as European Football Championship in June and Tokyo Olympics in July. Consumers are also more willing to upgrade TV specs, as they now spend more time in home entertainment. Now let me make a few comments on Power IC. In the first quarter, Power IC accounted for 7% of revenues. It grew 47% from last year, mainly driven by higher Power IC content from continuous consumer product upgrades as well as recovery of global market demand. It grew 3% from last quarter, reflecting continuation of the market growth. MediaTek provides comprehensive and reliable Power IC solutions. Power ICs are widely adopted by the majority of our business lines. Not only can you grow as a standalone business, but also bring synergistic benefits to our overall businesses. We expect Power IC business to exceed $1 billion this year, and to grow faster than the overall company in the next few years. Now, turn to second quarter guidance. Following a strong first quarter, we expect second quarter revenue to continue to increase for the four revenue groups, mainly led by 5G smartphone ramp. We expect our second quarter revenue to be in the range of NTD 118.8 billion to NTD 127.5 billion, up 10%-18% sequentially and up 76%-89% year-over-year, at a forecasted exchange rate of 28.2 NTD to $1. Second quarter growth margin is forecasted at 45% ± 1.5 percentage points. Quarterly operating expense ratio to be at 23% ± 2 percentage points. For 2021 full year, compared with three months ago, we are seeing a stronger growth momentum based on healthy end market demand and the strong key customer designs. Amid the industry-wide supply constraint, we expect our capacity to support a better than 40% year-over-year revenue growth target. We also raised our full-year gross margin target to 44%-46%. Now, I'd like to expound on major changes in our dividend policy. Based upon the confidence of our business outlook, underpinned by our competitive product portfolio and future cash generation ability, the board approved a regular cash dividend payout ratio to 80%-85%. That's our dividend policy this morning. In addition, the board approved a four-year special cash dividend program totaling NT$ 100 billion to enhance our balance sheet efficiently and to reward long-term shareholders. Shareholders will receive a special cash dividend of NT$ 16 per share every year from 2021-2024, on top of a regular cash dividend. For 2021, subject to shareholders' approval, total cash dividend to be paid is NT$ 37 per share, including a regular cash dividend of NT$ 21 per share and a special cash dividend of NT$ 16 per share. Despite the increases in cash dividend, we are confident that we can continue to invest aggressively in R&D and still possess the ability to pursue M&A opportunities should they arise in the future, as evidenced by our $3 billion R&D investment budget this year. We are fully committed to future R&D investments to further strengthen our global competitive position and create higher values for our shareholders. That concludes my prepared remarks. Thank you. Thank you, Rick. Now, we are ready for Q&A. May we please have the first question, operator? Yes. We are now in Q&A session. If you would like to ask questions, please press zero one on your telephone keypad. Please ask your questions after your name is announced. Please limit your questions to two at a time in order to allow more participants to join the discussion. After two questions, we will move on to the next caller. Should you have more questions, please press zero one again to come back into the Q&A queue. To cancel your questions, please press zero two. As a reminder, it is greatly appreciated that you turn off the speakerphone mode of your device to prevent possible echo effect. We thank you for your cooperation. Now, please press zero one if you would like to ask questions. Thank you. The first to ask questions, Gokul Hariharan from JP Morgan. Yeah, thank you. Good afternoon. Great results. Congratulations on that. My first question is on the flagship segment. Rick, you talked about increased progress with the TAM opportunity, Dimensity 1100, Dimensity 1200. Could we understand what share of the flagship segment, what is the TAM opportunity that you see there that MediaTek can really break into? Historically, MediaTek has not really been in that segment until very recently. Could we also get a little bit more details on what are your expectations of how much market share of this TAM can MediaTek take, especially with your millimeter wave-based flagship product coming out later this year or early next year? That's my first question. Okay. Let me answer you first the 5G smartphone TAM. I guess that's the key part of your question. As I said earlier, for the high-end smartphone TAM to be $3 billion-$5 billion this year. Absolutely will continue to grow in the future years. By 2023, we expect that to be, together with the millimeter wave TAM, to be around TWD 8 billion-TWD 9 billion in 2023. Thank you. Okay. Any thoughts on how much market share MediaTek is targeting over the next couple of years within this segment, given you're starting with very low share right now? Okay. I think for the general market share right now, we are talking about, we are pretty much at 45%+. For the high-end, as you know, right now we are just in the beginning. Far, based on the design situation, I think we feel comfortable. Should we have a pretty strong double-digit growth for the market share. For the real, I think the shipment will start on to your probably second half this year for the flagship. Right now, we're shipping the high end, but for the flagship, probably will start to ship starting from fourth quarter and first quarter next year. I think by then we will disclose probably more our target market shares. Okay. Got it. My second question is on operating margin. I think MediaTek looks like getting back to 20%+ operating margin after a long time. Could we talk a little bit about how do we see sustainability of this 20%+ operating margin over the next few years? Is that the new norm for us when we think about the next two, three years? Given in the past, we hit that number and we were not able to sustain it because of competitive factors, et cetera. Just want to understand how you think about operating margin, staying above the 20% mark over the next two, three years. Thanks. Okay. Let me address this question first by talking about gross margins. After all, that's the basis for the operating margin. If you look at our, I guess the numbers through the last four years, you can see we have been improving our gross margin rate from about mid-30s to now about mid-40s. We report 44.9% gross margin today for first quarter, and we're forecasting 44%-46% gross margin rate for the whole year 2021. This really has demonstrated our capability in improving the gross margin under continuous and severe competition without the current supply chain tightness. Our policy and our approach in our gross margin improvement is not taking opportunistic pricing. Nor do we take the advantage of the supply disruption currently now in our industry. I think what we really believe is our gross margin rate improvement is mainly driven by overall product competitiveness, our earlier investment in the technology and the product mix. Right now, also a very well diversified and synergistic business portfolio. Obviously, in this tight supply environment, with the cost increase from our various suppliers, we work closely with our customers and the suppliers. We have firmed up our prices. We have, I would say, adjusted our product mix so that we have, I think, gross margin which deserve our values for our customers. Thank you. Next, we're having Sebastian Hou from CLSA. Go ahead, please. Thank you. My first question is on the I think, Dr. Tsai, you mentioned that you're seeing stronger demand and also stronger customer design right now compared to two, three months ago. I wonder if it's possible for you to elaborate more on which business group, or which kind of the product applications are you seeing a stronger customer design now versus before. Thank you. Well, as we research, of course, the growth is now led by the 5G penetration. We are seeing a 5G penetration to be on track as we said earlier, of greater than 500 million units for the year. Our designing through our whole roadmap from the high-end to mid-end to the mass market segment, including flagship models, are now being designed with several, I guess almost all the major Android brand manufacturers, which leaves us the confidence in the demand and a good second half of the year. Thank you. To follow on that, so it seems like most of that is driven by the mobile business. Sebastian, actually, I would say it's probably more in mobile like CEO Dr. Tsai talked about earlier. As you can see, for the IoT computing and ASIC, for Q1, we see a more than 50% year-over-year growth. For smartphone, for Q1, we saw a more than 40% year-over-year growth. For PMIC, we also see a more than 40% year-over-year growth as well. It truly is, we see pretty strong growth and well, strong demand across all four major products business group. From the revenue overall contribution perspective, smartphone, of course, is actually still have a lion's share of our overall revenue. In terms of growth opportunity, it's been pretty diversified and pretty balanced. Okay. Thank you. My second question is, if I look at the growth rate for the new four business breakdown, I think the mobile grew almost 150% year-over-year last quarter, the rest of the three business is growing on average about 40%-50% year-over-year. Looking into the next 12 months, when we're moving to second half this year, how do you see such a year-over-year growth rate, whether or not the mobile will eventually saturate while the non-mobile business will be able to sustain as such a 50% year-over-year growth rate continuously? Thank you. Sebastian, I think for this year, like the CEO Dr. Tsai talked about for the full years, and meeting the competitive trend, I think we should be able to support a better than 40% year-over-year growth for the full year. If we break this down into the four business group, I think smartphones definitely have a much stronger growth, more than 40%. For other lines of business, in general, I think they'll be either higher than 40% or slightly very close to 40% growth. I think that's what we see for this year. For the coming few years, I think, like the first question that JP Morgan asked about, once we start getting to the higher end segment of the smartphone, I think the addressable market is actually very sizable. Currently we have a very low market share, and we do believe actually with our strong product portfolio and the competitiveness of our product portfolio, we should be able to continue to grow on the smartphone side. For the non-smartphone side, because it is well diversified, for the IoT, on computing, for the smartphone, for the TV, we do believe actually the end market demand is still very healthy. Whether or not it will continue to grow at 40%, probably not. We still believe actually we'll see a pretty healthy growth across all business line. Okay, that's fair. Thank you. Now we're having Randy Abrams from Credit Suisse. Go ahead, please. Okay. Yes. Thank you. Congratulations on the results and also the change in the payout policy. I wanted to ask the first one about the segments. The first part of it, just more a request, if it's possible to get the base from last year, either full year or the quarters for the quarter-over-quarter or year-over-year compares as we move to the new structure. Then just a couple of follow-ups looking forward. The smart home business, should we think of that as mapped pretty similar to the prior TV set-top box? It originally was considered a more mature product. It was viewed kind of cash cow stable. Are there some growth applications in there? Your view on that smart home piece, because we've had the pandemic, should we view that as more of a stable business midterm? Randy, first question first. I think for this quarter, we start to give out the full business group, both for quarter-over-quarter growth and also year-over-year growth. You should be able to basically reverse engineering to calculate about the last year, the baseline, for the full business group. To save you time, I think we can just give you the information after the call and send to everyone if they want to need that. That's the first one. The second one, we'll talk about what's the change. I think the major change is really we take out, we separate out the Power IC, because Power IC being a pretty sizable business right now. Like the CEO explained earlier, this year, we are kind of expecting the Power IC revenue will be over $1 billion with a very strong growth rate. Other than that, the Power IC, because the strong growth natural. In the past, we put that category underneath something we call the growth sector. Pretty much you can think about in the past we carve out or we take out the Power IC become the new group. Everything else pretty much stay the same. The smart home in the past, actually, we named it's called smart home and others, but pretty much just smart homes TV over there. In terms of change, the major change is just we take out the Power IC and separate that as an independent BU, actually in some reporting entity due to the size and also the strong growth nature. Okay. I think, Randy, you specifically asked about smart home. Yes, indeed, TV is a big chunk of that product group. We also actually have a very actually high growth and high margin monitor display IC business, which these two combine to what we call smart home business group. For the year of 2021, actually, they have, I would say also a very good growth, by over 30% year-over-year. With the leading position we have in those products, we believe we have a pretty good picture going forward. Thank you. Okay, great. My second question on the mobile market, it's more just two concerns we hear in the market. One is whether the build rate, MIIT for China showed a good rebound back to about 90 million a quarter. I guess your take looking at the overall market, both from a China and an export, how you see the demand health in the market. That's the first part. The second part, there's a bit of a concern the competitive environment has been benign, where your competitor has been quite constrained. You've had a better supply and been able to build inventory ahead of the coming quarters. There's a fear that it might be less benign if they get better availability later in the year. If you could address just view on kind of market health for China and emerging market, how that looks, and also a view on the landscape relative to your competitor. As I said earlier, I think the 5G China market, I think overall, smartphone shipments probably stay about flat. The main thing, of course, is the ratio of the 5G to 4G. Basically a 5G penetration. We believe there will be overall about 300 million 5G smartphone shipments in China this year. The first quarter number, the table two number, which came out, I think if you take into consideration of the seasonality, it is about on track for such total shipment number for 5G. We are comfortable with our 5G smartphone shipment forecast, demand forecast. We have been looking at very closely the inventory level of our major customers with inventory and channel inventory, which right all seem at a pretty low level. Actually quite a bit below what they would like to have in the more normal time. As a result, we feel confident about our forecast for 2021 5G shipment. As to the competition, for one, first, of course, we don't comment on competitors' action or strategy. Indeed, you're right to say that up to now the, whether t o use your word, benign, environment. We do not expect the competition to be benign going forward, as we always assume. We always assume the competition will compete fiercely, aggressively. That's why we kind of like the comment I just made on gross margin improvement. At the end of the day, you have to look at those fundamentals. Whether we have invested in the technology, whether we have invested in the product roadmap from flagship to high-end, to mid-end, to mass market. Whether they are competitive in aligning with our major customers, whether they have a good sales group in the end market. With all that, we have confidence that we can compete effectively and also aggressively. Fiercely. We think we have the good fundamentals to thrive in this market going forward. Thank you. Okay, great. Thanks, Rick and David. Next in line is Bruce Lu from Goldman Sachs. Go ahead, please. Hi. Thank you for taking my question. I tried to get some more color for the smartphone addressable market. Can you provide a bit more detailed breakdown in terms of the smartphone addressable market? It seems to me that your revenue share is substantially lower than your shipment share. How big is 4G versus 5G? What is the growth rate for the addressable market moving forward? Oh, yeah. Bruce, sorry. To clarify your question, just trying to understand the overall, the total shipment, basically the market demand. The question is more about the addressable market. I think Dr. Rick mentioned that the smartphone addressable market was TWD 30 billion. Your revenue for the smartphone this year is roughly around TWD 7 billion, TWD 8 billion each, right? The revenue share is substantially lower than your shipment share. I try to know what is the building block for this TWD 30 billion. How much is for 4G, how much is for 5G, or maybe a little bit between sub-6 versus millimeter wave, or mid to low to high-end. How does that break down for that TWD 30 billion? Okay. Bruce, let me just try to explain. Overall this year, we're looking for roughly 1.4 billion units shipment. Out of that, I think 500 million is 5G, the rest is in 4G. On average, I think 5G base is much higher than 4G. Out of that TWD 20, let's just say, a round number, TWD 30 billion, I would say probably it's 1/3 of that is 4G, 2/3 of that is 5G. On the 5G side, I think we also explained, if you're including millimeter wave and also the high-end, overall it accounts for roughly TWD 8 billion-TWD 9 billion. Currently, I guess, why you see our revenue share is relatively low compared to our shipment share is actually, A, we don't have a sizable high-end shipment yet. B, I think our millimeter wave will start to mass production later this year. We didn't really fully realize the revenue potential yet. We do have the technology and capability to capture that opportunity going forward. I see. Okay. Bruce, one thing is actually the TWD 29 billion is also including the Thin Modem, such as the Apple business as well. Yeah. I'm sorry, the Thin Modem was not included in the TAM, right? No, it's included. It's included in the TAM as well. I see. Okay. Thank you. The next question is that MediaTek is more for the bigger pictures. The MediaTek's revenue is highly geared to smartphone and highly geared to the China customer. The revenue share from the high-performance computing segment is much, much smaller. The revenue from non-China customer is much, much smaller. Can you give us more about what's the strategy to be more balanced, or company will try to stick with more focus for the consumer and the smartphone side? I think the company, certainly, as you can see from the past three, four years, the company has delivered a much more balanced and diversified revenue compared to before. Although, we certainly are seeing smartphone revenue to occupy now over 50% of the total revenue. On the other hand, if you look at the dollar amount of different product lines, product groups over the last three, four years, the growth rate of which is very, very good. It has been our strategy to drive our growth in a balanced and a diversified manner. Certainly, we cannot control the end market demand momentum ourselves, that's why we need a diversified portfolio. It so happens, of course, our technology and our investment in the product line, product portfolio in the 5G era, I think we hit the market really well at the very beginning, and we continued. As the market also expand, actually more aggressive than we also expected. Smartphone is getting to be at such high percentage. We also know, as you guys do, all high growth business will gradually moderate in the growth rate. That's why we continue to invest in the IoT, the Arm computing, SOCs, and all the smartphone. We try to ensure that they can all have a strong growth, sustainable growth. Also, as we said in the remarks, that we are expanding aggressively in, for instance, In the U.S. and the Europe market for our smartphones, not to mention all the other product portfolio. It's a long road. I agree. If you look at the numbers by both absolute numbers and the percentage, you should see the effort and the results that our strategy has come out with. I am pleased and comfortable that we will continue moving in that direction, that we will, as time goes on in the next three, four years, we'll be much more diversified compared to today. Thank you. For the tactics perspective, like your recent collaboration with NVIDIA, can we view that as a game changer or a step up in terms of getting to the server business? How should we look at this? The collaboration with NVIDIA is mainly for the PC, on the PC side. I think it's, in particular, probably more towards the high performance gaming type of PCs, which is really a perfect match between the two companies in providing that platform. It certainly, depending on how you look at it. I do not right now. If you look at it from the step into the PC segment, I think it's very, very significant for us. Our investment in Arm computing, the fruits of which definitely will not just in the smartphone arena. It has been for a while that we want to expand that investment into different segments such as notebook PCs. From a data center point of view, I think we have a different approach, basically, more through an ASIC type of business model. Again, I think our investment in Arm, we have really close working relationship with Arm, and we are always one of the top two going using their latest and highest performance core. We expect that to bring us also results in the data center area as time goes on. Thank you. Thank you. Right now, we're having Roland Shu from Citigroup to ask questions. Hi. Thanks. For your gross margin target this year have been raised from 43%-44% to 44%-46%. My question is, how much of this gross margin upside is contributed by the higher price and/or how much upside is contributed by our better product or better mix? Roland, I'm assuming when you say higher price, I'm assuming it's we increased the pricing. Is that what you mean? Or- Yes. Mm-hmm. I think that's a wrong impression. I think like the CEO explained, we didn't really take the opportunistic approach to adjust our pricing. I think what we did is actually we're just firming up the pricing, which means probably will slow down or no decline for the ASP. More importantly, we adjust our product portfolio. It's mainly coming out from the product portfolio and also segmentation expansion. Okay. Understood. Yeah. Also, are your full platform of the product gross margin growing at a similar magnitude as you raised it? A different product on an absolute level, I think most business group have a similar product, very close to corporate average. Of course, some of them are lower, some of them higher. In general, they are all within that range. We didn't receive anyone like the big laggers. How about a smartphone? Is smartphone gross margin higher or lower than the corporate average now? I think smartphone is very close. Given the fact that smartphone right now contribute relatively more than 50% of the revenue. Based on the math, the gross margin need to be very close to the gross margin. Yeah. Understand. Okay. Thank you. My second question is, I remember when Rick first joined as a CEO for MediaTek. At that time, I think one of the decision Rick made was just stop doing for the high-end or flagship chipset for smartphone. Now you would like to try to reenter this flagship smartphone business. I just want to ask what has been changed from this time and compared to several years ago? I think that you're talking about back about four years ago. Yes. Mm-hmm. Almost five years ago, we did have a line of a series of X series. X series. Yes. Mm-hmm. For the 4G market. Well, the numbers was there, which was not very successful and which also took up quite a bit of resources of ours. We decided at the time that we will go back to the mid-end and the mass market products. Actually, at the time, with a very robust, by that time, what we call 93 modem, 4G modem. We really believe that we must put our foot down and make a comeback. Try to also with the right product, with the right capability to convince our customers. Fast-forward to 2021 or 2020. Actually, if you look at the, what I call Dimensity 1000. When we had that product back in the end of 2019, it was designed to be a high-end, what we would call high-end product already. It had a tough fight, I would say, in the first half of 2020. Going into second half and into first quarter this year, that product has done really well with customers and also with the users in the end market. The Dimensity 1200 is a follow-through, and we're seeing tremendous design. Mainly because our R&D investment, which we really focus on getting the 5G modem, getting the leading-edge Arm CPU, leading-edge AI processor, and the multimedia, our traditional strength. We double down on all those things. We prove ourself right, I guess, in such investment. Now we are really very confident that the flagship chips we are designing and going into production soon will be a very competitive one. Thank you. Understood. Yeah, I understand. Yeah. I get your point for you have the right product and right technology now. I think another question is. Sorry for the interruption, Roland. We still got several analysts on the line, so I'm going to put you back in the conference room. Thank you. Okay. Ladies and gentlemen, next one to ask questions, Brett Simpson, Arete. Yes, thanks very much. David, just to clarify the revenue outlook, are you saying MediaTek grows sales over 40% in 2021? If that's the case, it implies your second half sales might decline half-on-half in the second half. Is that the right way to read this? I think first of all, it's better than the 40%. I think secondly, this year, our overall growth is somehow still constrained by the overall supply constraint. For the second half versus the first half, I think the seasonality will be different compared to the last few years, mainly due to the supply constraint, on the demand side, even though it's still very strong. Understand. Just on the supply constraints, can you maybe talk about to what extent is wafer pricing going up this year and next year? To what extent can you pass this on to your customers? I think with this year, it's mainly on the capacity rather than the wafer pricing. For the wafer pricing right now, it's pretty much been all been reflecting in our financial already, in our cost model. This year is really just the industry-wide supply constraint, and especially for some Kompanio for the mature technology. Okay, super. Maybe just shifting to Dr. Tsai. In your prepared remarks, you talked about the new breakdown for the business, but you didn't talk about automotive as a focus area. Can you maybe just share with us your perspective on what's the automotive strategy at MediaTek, and what areas in the car can you address? What sort of content per car does that translate to? When might automotive deliver a meaningful contribution to revenues at MediaTek? Thank you. Okay. Automotive, actually, we are shipping real products to real customers, actually, the growth of the revenue is pretty substantial. However, compared to the overall company revenue, it is still rather small. We're not reporting that specifically. We are focusing on mainly two segments. One is telematics, the other one being IVI, or some people call that smart cockpit. Basically, obviously, utilizing our strength in the modem and Wi-Fi capability, as well as our Arm-based computation capability. If you want to call that strategy, our strategy really is to make sure we have these products to be very solid with the major OEM makers. We want to build our reputation. As you know, automotive industry is a very difficult one to penetrate. The strategy simply is to have those two products really showing our ability in the automotive industry, and we want the OEMs to recognize our brands, our values. We continue to invest in that. Once we understand a little better, I think with the current focus now, everybody's almost in EV and autonomous driving. MediaTek, with our computation, with our connectivity, with our Power IC capabilities, I look forward to a much brighter future. Brett, just one more follow-up. I think for the automotive industry, revenue, we actually put that underneath IoT computing and the ASIC business group. Great. That's great. Thanks for the clarification. Appreciate it. Ladies and gentlemen, we are running out of time, we are going to take the last one to ask questions. The last one to ask questions is Sunny Lin from UBS. Hi. Thank you for taking my questions. Can you hear me? Yeah. Thank you. My first question is on your strategy to penetrate into the high-end 5G SoC. Just wonder if you are seeing any changes to the industry dynamics that now put you in a better position to tap into this market. I guess what I should say is the major change is our capability. Being able to design such chips and our trusting relationship with our key customers, so they are willing to work with us on such a flagship phone design. The overall market, I think, is still good, as we described earlier in the 10 numbers. I think these are very attractive 10 numbers. For us to continue growing in this very important mobile phone business, we just have to move into this segment. Thank you. Got it. Maybe a very quick follow-up. If you look into 2022, is there a target for the volume contribution or revenue contribution from this flagship 5G SoC? Sunny Lin, we will try to provide some guidance, probably either later this year or earlier next year. Sure, no problem. My second question is on the supply chain tightness. As the supply chain tightness appears to continue, but the overall 5G volume continues to ramp. If we think into second half of 2022, how do you continue to grow? What's the diversification efforts that you are taking to ease the supply chain tightness? Thank you very much. First of all, we are working certainly on already 2022 capacity supply with all our major foundry partners, and they are progressing, I would say, well. I don't think we can get everything we want, as everybody else does. What we believe is the capacity we're getting for 2022 will give us, I cannot say the numbers now, but will give us a pretty good growth for next year. I'm not too worried about it. To the diversification, this strategy is our long haul strategy, and it will not change just because of the capacity tightness or not. We will work within ourselves and with our customers to ensure that we can supply to satisfy mostly the customers' growth objective, be there in smartphone or in IoT computation ASIC or in smart home or power. That's our general strategy. Thank you. Got it. Thank you very much. Ladies and gentlemen, we thank you for all your questions. Right now, I'm going to pass it on to Ms. Jessie Wang for a closing comment. Ms. Wang, please proceed. Ladies and gentlemen, this concludes MediaTek 2021 first quarter conference call. We would like to thank you for your participation, and you may now disconnect. Thank you, Jesse. We thank you for your participation in today's conference. You may now disconnect. Thank you again, and goodbye.