Silicon Image Margins to Shrink Q3 From Shift to Lower-Priced Smartphones
Silicon Image’s product gross margins will shrink in Q3 from a “mix shift” to lower-priced smartphones because its Mobile High-Definition Link (MHL) interface technology has a smaller presence in that market segment, CEO Camillo Martino said on an earnings call.
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While Silicon Image continues to ship “record volumes” of MHL-enabled ICs, the shift toward lower-priced smartphones has “moderated” the company’s planned second-half revenue growth, Martino said. Silicon Image has made “progress” in landing MHL design wins in mid-priced smartphones through a reference design built around MediaTek’s MT6589 quad-core processor and the company’s Media Data Tunneling technology, Martino said. But penetration in that segment is “unlikely to be at the same level” as Silicon Image forecast earlier this year, Martino said.
Silicon Image’s Q3 product gross margins are expected to fall into the 47-48 percent range from 52 percent in the previous quarter as a result of the shift to lower-priced smartphones, the company said. Silicon Image projected Q3 revenue of $78 million-$81 million, up from $73.7 million the previous quarter when MHL accounted for 70 percent of total sales. Silicon Image’s overall Q3 gross margin, which includes licensing, is expected to decrease to 57-58 percent from 58.2 percent in Q2. MHL is installed in 25 percent of smartphones, up from 17 percent a year earlier, and is expected to be in 30 percent of TVs by year-end, including Sony’s Bravia sets, the company has said. The number of MHL-equipped products increased to 275 million units in Q2, up from 220 million in the previous quarter.
Silicon Image developed an MHL chip “specifically targeted” at mid-range smartphones, but “was over-aggressive in our ability to turn that product into a revenue-generating opportunity,” Martino said. The MHL 3.0 standard was expected to be complete by mid-year (CED May 2 p1) but won’t be available by year-end, and won’t be a “licensing story” for Silicon Image until 2014, Martino said.
Other disclosures: (1) The much-delayed HDMI 2.0 spec will be available “within the year,” said Martino, concurring with what Steve Venuti, president of HDMI Licensing, told us late last week (CED July 29 p6). Silicon Image earlier this year forecast a mid-year release for HDMI 2.0 (CED March 8 p1) after an earlier delay from late 2012.
(2) A tier one supplier is expected to ship product by fall built around Silicon Image’s third-generation 60 GHz WirelessHD technology, Martino said. Silicon Image earlier this year said it had two “material” design wins for the 60 GHz technology, but Martino declined to identify the products that will use it.
Silicon Image swung to a $4.2 million Q2 profit from a $943,000 loss a year ago as revenue jumped to $73.7 million from $63.8 million. Product sales improved to $63.6 million from $51.4 million, while licensing revenue declined to $9.9 million from $12.3 million.