Executives
Scott Howarth – President & Chief Executive Officer
John Cobb – Vice President of Finance, Administration & Chief Financial Officer
Analysts
Mike Crawford – B. Riley & Co.
Edwin Mok – Needham & Co.
William Myers – Miller Asset Management
Walt Sosnowski – SRC Capital Management
Integrated Silicon Solution Inc. (ISSI) F2Q09 Earnings Call April 28, 2009 4:30 PM ET
Operator
Welcome to the ISSI fiscal second quarter 2009 quarterly earnings conference call. One note, that today's call is being recorded. At this time I would like to turn the conference over to Mr. Scott Howarth, Chief Executive Officer.
Scott Howarth
I am Scott Howarth, President and Chief Executive Officer, and with me is John Cobb our Vice president of Finance and Chief Financial Officer. Before we proceed, I have asked John to comment on the nature of this call and any forward-looking comments that may be made.
John Cobb
During the course of this conference call, we will provide financial guidance make projections, comments and other forward-looking statements regarding future market development and the future financial performance of the company, new products or other matters. We wish to caution you that such statements are just predictions or opinions and that actual events or results may differ materially due to fluctuations in the marketplace, delays in developing new products, changes in demand or supply, or adverse developments in the global economy.
We refer you to the documents ISSI files from time to time with the SEC, specifically our most recent Form 10-K filed in December 2008 and our Form 10-Q filed in February 2009. These documents contain and identify important factors that could cause our actual future results to differ materially from those contained in our financial guidance, projections, comments or other forward-looking statements.
Scott Howarth
The March quarter proved to be very challenging due to the worldwide economic slowdown. Demand in pricing was weakest in January prior to Chinese New Year then stabilized through the months of February and March. While demand remains soft, pricing moderated somewhat during the second half of the quarter and our order patterns stabilized.
We believe our revenue bottomed in the March quarter and are expecting moderate sequential revenue growth in the June quarter. We are still cautious about future growth as it is difficult to identify inventory replenishment from real demand growth. As we analyze the economic environment, it's challenging to identify the positives during such hard times but we do see several.
First, we entered this quarter with stronger backlog than we did in January. So far, our booking patterns have been better than the January quarter and in some market segments we have seen pricing improve. When we look at the elements that we control, we see many positives as we were able to reduce inventory, reduce spending, hold margins and even reduce our loss in the March quarter from the December quarter. Our employees worked hard to do everything they could to improve the company and the results show their hard work.
In addition, we had a strong quarter of design wins and continue to see a high level of customer design activity as our customers seek stable DRAM and SRAM supply. Our revenue for the March quarter was $31.3 million. This compares to $37.7 million in the December quarter and $58 million in the March 2008 quarter. The decline in revenue was a direct impact of lower demand across all of our markets in all countries caused by the economic slowdown in inventory correction in the industry.
Our gross margin in the March quarter was slightly better sequentially at 20.7% and with our original guidance range. This compares to the 20.5% gross margin in the December quarter and 22.9% in the March 2008 quarter. We are pleased that we could achieve a slightly better gross margin despite weak demand in pricing. This demonstrates the advantage of our fabless model where nearly all of our costs are variable. We believe this also shows that we can maintain our value proposition to our customers in our strategic markets.
As we announced in December, we took actions to reduce our spending and to preserve our cash. These actions included the reduction of our production plan, elimination of positions, salaried reductions for all of our employees, a reduction in the fees for our Board of Directors, and numerous other cost reduction actions. Mainly as a result of these actions, our operating expenses declined by $1.9 million in the March quarter from the December quarter. Our inventory declined by $10.4 million and we reduced our net loss compared to the December quarter despite lower revenue.
We took additional actions in the March quarter to further reduce our spending. These actions included additional reductions in our worldwide workforce, further expense reductions, and incremental salary cuts for all of our employees. We cannot control the economic environment or end market demand, but we are aggressively managing our business to preserve cash and to strengthening the company for long-term success.
We believe our results for the March quarter clearly demonstrate the positive impact of our actions. Looking ahead, while end market demand continues to be weak, we believe that the markets inventory correction is now mostly complete and that we will see sequential growth in the June quarter. We believe that our strategy is sound, we have the right products for our key markets and we remain focused on long-term revenue and profit growth.
We are optimistic about the long-term growth prospects and will work hard to develop new technologies, gain market share, and build a stronger company. ISSI is the leader in high quality memory products and our goal is to extend our products into new applications and markets that require high quality memories and long-term support. In the past three years we've been transitioning our business to be a supplier of high value memory and in doing so have improved our gross margin and delivered improved financial results despite a very difficult memory market condition.
We also have been seeking opportunities to grow strategically and have just announced the acquisition of a low powered KGD DRAM company. We will continue to pursue both strategic and organic opportunities to grow. We believe we have established an excellent foundation to continue to drive our strategy in penetration into our markets.
Now, I will turn to our key markets and products. The DRAM market experienced weak demand throughout the March quarter. As a result, our total DRAM revenue declined 14% on a sequential basis. ASPs also declined up to 20% sequentially in many of our markets. DRAM represented 48% of our total revenue in the March quarter. Our focused DRAM business represented 36% of total revenue while the commodity DRAM business represented 12%.
DRAM order rates and pricing began to stabilize toward the end of March quarter. Looking forward, while visibility remains limited and the industry is adjusting to lower demand, we believe our customers are nearing completion of their inventory reductions. We begin the June quarter with stronger backlog than in the March quarter in turns orders to date have been improved over the prior quarter. We expect that our overall DRAM revenue will increase modestly on a sequential basis in the June quarter.
While demand for our focused DRAM was weak during the March quarter, we had a very strong quarter in design wins. For example, we had five very large DRAM design wins in the networking market. We also had large design wins for industrial, consumer and automotive applications. We had innumerous key design wins in the automotive, telecom and consumer markets in both Bi16 and Bi32 configurations.
Overall, we continue to see many opportunities for us to expand our market share and resume our growth as the economic environment improves. Our strategic direction is to focus on key applications and markets that provide sustainable revenue and profit growth. Our strategy leverages our strength and targets those markets where we can add value through engineering, quality, service and long-term support.
Our broad product portfolio, customer service, long-term support and high quality products provide a competitive solution that we believe will help further our growth in our focus market segments. The key markets that we are focused on include networking, telecommunications, automotive, industrial, and specific consumer and peripheral markets.
While many of these markets are experiencing weak end market demand, we still see opportunity short and long-term as many companies are turning to ISSI for stable long-term supply while the memory industry is in such economic turmoil. Our goal is to use our strengths to further penetrate these markets and to also expand our addressable markets with new products.
For example, one of our key markets, the automotive market, requires a much broader temperature range to support high temperatures in vehicles to as high as 125 degree C and the highest quality memory with the goal of zero defects. During the ten years we have been focused in this market, we have developed extensive product and process design expertise and knowledge to meet these stringent requirements.
In particular, we have leveraged our engineering expertise to develop application specific products to serve this market opportunity. While the cost of supporting this market is higher than others, the margins and barrier to entry are also higher making a very attractive market for ISSI. We believe our past growth in revenue in this segment have clearly been evidence of our success.
While the economic slowdown has reduced the demand for automobiles worldwide, the electronic content per vehicle continues to grow and our position in this market segment continues to improve. We are actively supporting design wins for the 2010 and 2011 models and are confident this market will be very successful for ISSI in the long-term.
Our telecom and networking customers also require both high quality memory and long-term support, and as such benefit from our investment into high quality automotive memories. With over 3/4 of our employees in Asia, we benefit from this strong presence by having access to critical technical resources, closer support and service to many of our customers and excellent low cost leverage to our business model. As we experience this worldwide economic downturn, our low cost operating model is a significant benefit as we've been able to reduce costs and preserve cash.
As we look forward in this environment, we intend to increase our market share through superior execution and high quality product support. Several of our competitors are in need of cash to maintain their business, but we are fortunate to have a strong balance sheet and low cost operating model to support our many customers now and into the future. Overall, we feel that our combination of focus on strategic markets, breadth of product offering, long-term support and our low cost model will drive our continued success in our focused DRAM markets.
For commodity DRAMS, pricing for 16 meg to 64 megabit SDRAMs improved slightly during the quarter. Our commodity DRAM revenue increased from the December quarter as we made a concerted effort to reduce our inventory. As previously stated, the commodity DRAM revenue was approximately 12% of our total revenue or only $3.5 million compared to 7% in the December quarter. While we continue to support key customers, we expect commodity DRAM shipments to decline in the future as a percentage of DRAM revenue as we place greater emphasis on our focused DRAM.
Let me know discuss our SRAM business. SRAM ASPs were down 10% to 15% sequentially. Demand in most our end markets in geographies was weak during the quarter, but we did see strength in the China telecommunications market with the 3G build out that is taking place there. Our SRAM revenue declined by 21% compared to the September quarter and was approximately 39% of our total revenue.
During the March quarter, we won several major design wins in our key markets for various densities of our product. For example, we had two design wins for our 65 nanometer or high performance 72 megabit double in quad data rate sync SRAM, several large design wins for our 4 megabit asynchronous SRAM, mainly for networking automotive and industrial applications, and also large design wins for our 8 megabit Pseudo SRAM in automobile and industrial applications.
In addition, we had growth with our 18 megabit sync and 36 megabit quad data rate sync SRAM in the March quarter and had new design wins for our 36 megabit sync SRAM in the industrial markets. With our competitive and broad SRAM solutions plus long-term support, we are confident that we will see growth over the long-term in the SRAM market. We expect SRAM revenue in the December quarter to increase over the March quarter.
Our overall ASSP revenue decreased 15% from December quarter and represented 13% of total revenue in the March quarter. Market demand for EEPROM and Smartcard was weak during the quarter and ASPs for serial EEPROM and Smartcard products declined 10% to 15% sequentially. We secured several large EEPROM design wins for networking in consumer products and had several design wins for our contact with Smartcard. We currently expect ASSP revenue in the June quarter to slightly higher than the March quarter.
Let me now turn to our manufacturing operations during the quarter. Wafer supply was abundant this quarter as lead times continue to be normal. There were also no assembly or test capacity constraints in our memory business. Looking forward to the June quarter, we have seen increasing utilization in lead times at some foundries, but do not expect wafer or backend capacity to constrain our business.
We were very successful in reducing our inventory during the quarter. We limited our wafer starts and backend processing in order to bring our inventory level in alignment with our current requirements. In addition, we continue to make progress in product cost reduction and improvements to our operational efficiency and effectiveness.
We have achieved this significant reduction of our inventory without negatively impacting our gross margin, which demonstrates the effectiveness of our fabless business model. While many of our competitors struggle with high levels of inventory, negative gross margins and large cash outflows, we maintained our gross margin and our strong balance sheet.
Lastly, I would like to comment on an acquisition we announced yesterday. We just closed on our acquisition of Enable Semiconductor Corporation, a privately held Taiwanese and Korean company. Enable provides us with a full range of ultra low power, SDRAM and DDR SDRAMs with densities from 26 megabit to 128 megabit, including low voltage and [Y-bus] options all available in Known Good Die or KGD format for multi-chip package applications.
These low power SDRAMs provide longer battery life by using significantly less standby power. In addition, Enable provides us with an ultra low power Pseudo SRAMS. All of Enable's products fill a strategic need for ISSI in the ultra low power markets targeting consumer portables, such as cell phones, digital cameras, PDAs, and GPS devices.
Enable has been shipping these products for more than a year to large customers in the consumer and telecom markets, and has follow-on products currently in development. We expect Enable products to contribute about $1.5 million in revenue in the June quarter, which will include just over two months of ISSI ownership, and that will contribute significantly to ISSI's future growth.
The purchase price for the business was $3.5 million with a potential for additional contingent payments based on future operating results. We believe that this was an excellent strategic use of our cash. We expect the acquisition to be accretive to our financial results by the December 2009 quarter.
I'll make some closing remarks in a moment, but first let me ask John to discuss the numbers.
John Cobb
As Scott mentioned, our revenue for the March quarter was $31.3 million, which was 17% lower than the previous quarter and a decrease of 46% from the same period a year ago. Our SRAM, focused DRAM, and ASSP businesses all experienced end market weakness throughout the quarter due to the severe global economic slowdown.
Gross margin was 20.7% in the March quarter, which was within our original guidance range. This compares to 20.5% in the December quarter and 22.9% in the year ago quarter. We experienced greater ASP pressure during the quarter as a result of the overall market weakness. As a fabless company, nearly all of our product costs are variable.
As such, unlike our competitors who have the high fixed costs associated with their own fabs, we have greater ability to control our costs, which minimizes the margin impact of falling ASPs. Additionally, our strategy targets specific markets, which have a more stable pricing environment.
Operating expenses were $10.6 million in the March quarter. This compares to operating expense of $12.5 million in the December quarter and $12.4 million in the March 2008 quarter. As we previously announced, we reduced salaries for all employees, eliminated positions, and have taken other actions to reduce spending and preserve cash. In total, we have reduced our operating expenses by $3.2 million or 23% from the September quarter.
We took additional actions in the March quarter to further reduce our spending, which will benefit the June quarter. We incurred an operating loss of $4.1 million in the March quarter compared to an operating loss of $4.8 million in the December quarter and a $900,000 operating profit in the March quarter a year ago. We are pleased that we were able to reduce our operating loss compared to the December quarter despite lower revenue in the March quarter.
Interest and other income in the March quarter was $300,000. We had no sales of investments during the quarter. The net loss for the March quarter was $3.8 million or $0.15 per share. Net loss in the December quarter was $4.1 million or $0.16 per share. Net income was $2 million or $0.07 per share in the March 2008 quarter.
Despite the net loss for the quarter and the very difficult economic environment, we used only $800,000 for cash flow from operations. We accomplished this through tight inventory management, cash flow management, and spending constraints. As a result of the significant decrease in our inventory, we currently expect to achieve positive operating cash flow for the remainder of our fiscal year.
Moving to the balance sheet, we ended the quarter with $44 million in cash in short-term investment compared to $45.7 million at the end of December. In addition, we also have $21.1 million in long-term investment including our auction rate security, giving us a total of $65.1 million in cash and investments.
During the March quarter, we repurchased a total of 127,000 shares of our common stock for an aggregate purchase price of $200,000. We intend to continue repurchasing shares of our stock during the June quarter.
Our inventory at March 31 declined by $10.4 million to $27.7 million from December 31 a reduction of 27%. As a result, our inventory turns increased to 3.6 turns in the March quarter from 3.2 turns in the December quarter. Our accounts receivable decreased during the quarter by $1.7 million to $19.1 million, and the day sales outstanding increased to 55 days from 51 days at the end of December.
We also reduced our accounts payable by $9.8 million in the March quarter. Our balance sheet continues to be very strong. Overall, we are very pleased with our financial results given the economic environment. We controlled cash, held margins flat, reduced our loss, and significantly reduced spending and inventory while continuing to support customers and new product development.
Let me turn now to our guidance for the June quarter. All of our comments in this conference call regarding future numbers are forward-looking comments and subject to a number of risks and uncertainty. We are uncertain as to the duration or depth of the economic downturn. As such, our forward visibility is limited and it is even more difficult to provide revenue guidance.
That said we currently expect our June quarter revenue will increase from our March quarter. In total, we expect revenue for the June quarter to be in a range from $33 to $38 million, including about $1.5 million relating to Enable for the last two months of the quarter.
We expect continued ASP pressure and gross margin will likely be in the 20% to 24% range. Due to our actions to reduce spending, operating expenses should be in the range of $10.7 to $11.3 million, which includes additional new product mass costs and about $400,000 attributable to operating expenses for Enable. We expect about $500,000 from interest and other income.
So taking all this into account, we expect to incur a net loss in the range from $2.5 million to $3.5 million for the June quarter, or a net loss of $0.10 to $0.14 per share and lower than our loss reported for the March quarter.
Now, back to Scott for final comments.
Scott Howarth
Overall, business is very challenging as the worldwide economic downturn has affected all our markets and geographies. We are uncertain as to when business will recover and what level will be the new normal, but are cautiously optimistic that we have reached bottom in the March quarter. As such, we are continuing to work hard to develop products for the future, support our customers, and preserve cash. Despite the difficult economy, we continue to have confidence in our ability to grow our SRAM, focused DRAM, and ASSP revenue over the long-term.
In the months ahead, we will continue to focus on our five key objectives, which are number one, to grow our customer base in a number of design-ins, two, increase our product portfolio while maintaining long-term support in our target markets, three, to identify and extend our reach into underserved and growing markets, four, to serve our customers as strategic partners and gain market share, and five, focus on preserving cash and efficient use of our resources.
We are cautious about this economic environment, but believe that if we continue to successfully execute on our objectives, we will build a stronger business. We remain committed to achieving that goal.
We'll take your questions now.
Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from Mike Crawford – B. Riley & Co.
Mike Crawford – B. Riley & Co.
Just to reconcile your guidance, you said you expect to be operating cash flow positive in the quarter. On the income statement, I think it said $2.5 million loss. I think D&A runs a little bit ahead of CapEx, so am I right in assuming you're expecting to take a couple million more out of working capital to make up the difference?
John Cobb
Yes. As we mentioned, we brought down our inventory quite significantly, but because we also paid down our accounts payable, we didn't get as much benefit in the second quarter. But we expect that to somewhat reverse in the June quarter and so working capital will definitely contribute to cash flow.
Mike Crawford – B. Riley & Co.
Switching gears regarding products, did I hear you say that you shipped 65 manometer SRAMs?
Scott Howarth
Yes, we do have some initial shipments of our 72 megabit quad and double data rate SRAM.
Mike Crawford – B. Riley & Co.
I think I saw a press release from Cypress claiming that they were the only company having that, but that's not the case?
Scott Howarth
That is not the case. We also have 65 nanometer 72 megabit SRAM.
Mike Crawford – B. Riley & Co.
Then do you still breakout SRAM gross margins separately?
Scott Howarth
We don't report it separately but typically we'll just give some general ranges for our margins.
Mike Crawford – B. Riley & Co.
So, safe to say that those could be in the 30s?
Scott Howarth
Yes, for SRAM, our margins are typically in the 30% to 35% range.
Mike Crawford – B. Riley & Co.
It also sounds like with the Enable business that you acquired, so that's running, that's almost at $10 million a year business, is that …?
Scott Howarth
Well, this quarter we reported that we're adding $1.5 million, so it's only roughly 2/3. As we look forward, we think the company within a couple of quarters should be contributing somewhere in the $3 to $5 million a quarter range for revenue.
Mike Crawford – B. Riley & Co.
With the nature of these low power products, is that something that you expect to have maybe a higher than average DRAM margin associated with?
Scott Howarth
Well, for KGD business, which is what we call as business for Known Good Die, so we're selling devices without a package. It requires a lot more design-in activity. So, by its nature it's not a device that is just commodity can easily be swapped out. Typically, it goes into an MCP or some multi-chip combination, which means it's designed in, it has to work exactly with the other devices, whether it's a chipset or if it might go with a flash, and requires a lot more customization.
So, we believe over the long-term this will be a higher margin opportunity. And with the size of the market, since it goes into handheld's, a variety of portables, cell phone market, the volume opportunity for it is quite large as well.
Mike Crawford – B. Riley & Co.
Then final question is I know you said that you're not sure what kind of the new norm is for this business, but I guess safe to say that you wouldn't expect to be there yet in June, right? I think your business needs to get closer to $40 million a quarter in revenues, you think, to run profitably without working capital reductions?
Scott Howarth
I think there's two questions there, it sounds like. This current quarter, the June quarter, certainly is not what we consider back to normal rate. We believe there's two things that are occurring this quarter as some combination of probably small demand pickup plus some inventory replenishment. Looking forward then, we're looking at revenue probably in the mid-40s to 50 to be able to get back to a profitable level.
Operator
Your next question comes from Edwin Mok – Needham & Co.
Edwin Mok – Needham & Co.
Let me start with quarter outlook and maybe talk a little bit about the end market. You mentioned, if I am correct, you mentioned that all three groups of revenue is going to increase in the coming quarter. I'm just curious which group will be stronger versus the other group, can you rank them? In terms of sequential growth, that's what I mean.
Scott Howarth
Sequential growth, I'd probably say that the largest percentage would be in our ASSP business just because it's a smaller dollar amount, and we are seeing in some of the E-Squared a pickup that's occurring in some of the China markets as China government is supporting a LCD TV campaign, which is providing discounts for LCD TVs to a lot of the citizens of China. So we are seeing some pickup there. Percentage basis, that's the biggest, but on a dollar basis, is smaller. And then we believe DRAM and SRAM will probably be similar pickup.
Edwin Mok – Needham & Co.
And then maybe talk a little bit about you had mentioned on your call that on the last quarter your commodities revenue grew because you were reducing your inventory. Was wondering how much of that was inventory reduction versus just better pricing on the end market?
Scott Howarth
Edwin, I don't have the exact breakout on it. We haven't really cut it that close to identify it. It was really an opportunity where we did see prices improve so it gave us the opportunity to sell some inventory into that environment.
Edwin Mok – Needham & Co.
Is it fair to say though that since you have reduced inventory that revenue for that so the commodity fees may go back to below $3 million [compared] with what you did in the December quarter?
Scott Howarth
It will get it. It depends on some of the customers that are buying from us. So first we want to support some of our strategic customers who want to have a full supply from one supplier. So in that case, we'll probably say about flattish. Again, it depends a little bit on kind of how the industry is responding or prices move during this environment as well.
Edwin Mok – Needham & Co.
And then I have a question, just maybe just housekeeping question. How much was your CapEx and depreciation on the quarter?
John Cobb
Capital spending was $1.4 million and depreciation and amortization was $1.2 million, and then we also had FAS 123-R of about $900,000.
Edwin Mok – Needham & Co.
And then a question on your operating expense and your guidance seems like you are guiding up a little bit sequentially. Are you just being conservative or is that some reason that OpEx might go up sequentially?
Scott Howarth
Well, there's two reasons so to go through all the pieces, we did take additional actions, which will actually reduce spending during this quarter. We took further lay-offs throughout the company and incremental salary reductions that will definitely benefit the June quarter.
Now, on top of that, we have the expenses that are coming in now for Enable that John mentioned, it was $400,000. We also have a couple tape-outs that need to occur. We've been delaying some 72 nanometer tape-outs and we need to move forward with those. So, the culmination of Enable plus our mass costs we believe will move our expenses up slightly.
Edwin Mok – Needham & Co.
And then since you mentioned Enable, maybe just talk about revenue. Is it possible for you to provide what revenue they did last year and also is this $400,000 for two months, is that a reasonable assumption for their operating expense run rate?
Scott Howarth
So for last year, I don't have their revenue available to us. We're looking just at current revenue run rate. And for this quarter, with a partial basically 2/3 of the quarter, we think it'll be about $1.5 million and the expenses again at about a 2/3 quarter is about $400,000.
I think on expense rate, you can extrapolate that and it's going to be pretty accurate. For revenue, obviously, we have the goal to use our sales force, our channels, and our customers to expand that. So, that's what we're going to be targeting to grow the revenue with Enable over the next couple of quarters.
Edwin Mok – Needham & Co.
And is Enable gross margin accretive or is it within the 20% to 24% range?
Scott Howarth
It's in about the high teens to low 20s similar to or fairly similar to our current focused DRAM. With our overall volume purchasing and our combined platform, we think we can improve on those margins as well.
Edwin Mok – Needham & Co.
I have two more questions. So, first one is on Enable, right. They do sell Pseudo SRAM based on just a press release. I'm just curious, what's your view on the end market. I mean, my understanding is that the end market is quite price sensitive and not necessarily [calm] like the focused DRAM market that you guys are trying to go after, which is more the design-in approach. Is that fair to characterize that or do you guys plan to expand into that market? That's the first question and then I have a follow-up.
Scott Howarth
Edwin, I think you said the Pseudo SRAM, is that right?
Edwin Mok – Needham & Co.
Yes.
Scott Howarth
Yes, so you're right. The Pseudo SRAM market is quite price sensitive and it's really meant to be lower cost alternative to SRAM in many applications. For the difference we see is in a KGD format, there's more design-in activity and customization that's required to be able to put it into an MCP. So, we think that additional activity will provide some support in terms of lowering prices going forward and we won't see the same price sensitivity in this type of an application.
Edwin Mok – Needham & Co.
Then one last question, I understand like you mentioned that China region infrastructure spending has been actually quite robust in the last starting recently, right? I'm just curious, how much of your revenue comes from that end market or if you can characterize how much of your revenue will come from the telecom end market that would be helpful.
Scott Howarth
Now, are you asking specifically the China market?
Edwin Mok – Needham & Co.
Yes, I'm asking specifically the China market but any general data point would be helpful.
Scott Howarth
The china market is roughly 43% of, excuse me, mobile networking is kind of 43% of our total revenue. And then, from a sales standpoint, and then for the China region, which is a combination of Taiwan, China Hong Kong, is about 58% of our total sales. And as we reported in the past, our sales are roughly 2/3 in Asia, 1/3 in U.S. and Europe.
Operator
Your next question comes from William Myers – Miller Asset Management.
William Meyers – Miller Asset Management
Yes, I guess a similar question about the automotive market. You said you've been making progress in that and I'm wondering how much of that market is in the U.S. and how much is in China and what is your view on the China part of that market?
Scott Howarth
Good question, William. The U.S. market and Europe market are split about equal and of the two that represents probably 90% of our revenue. We originally started into this market ten years ago in U.S. and then expanded and have very strong presence in Europe, but they're split about equal right now.
The China market and Japan market, I'll talk to both of those, some of those markets are supplied by the customers that we sell to like Delphi, JCI, and some others, they are supported by those companies as well. But we do see opportunity for us to grow both in the Japan automotive market as we're starting to put greater focus on Japan, as well as China. And China we know will start doing a lot more of their own design and development activity in China, and we think this will be a great opportunity for us to grow as well.
William Meyers – Miller Asset Management
Then, I guess, one last question. Is there any particular design win that you had in the quarter that you'd like to give us a little bit more detail about?
Scott Howarth
Nothing jumps to my mind that I would say was kind of the critical design win. We really had so much activity across all of our customers. It actually, when we quantify the number of products that we have that are in design win activity, we did see an increase during the quarter, which was quite a surprise given the fact that the market is, revenue was down. We support a very large number of different design-ins throughout the quarter.
So what that is telling us through this period is our customers are really looking for stable SRAM and DRAM supply. And I've spent a lot of time, as well as others in the company, meeting with customers to make certain they understand we're here, we're stable and we'll be a long-term supplier for them. So we have seen that the design-in activity ramp up and we think that's just going to help us as we look forward.
Operator
Your next question comes from Walt Sosnowski – SRC Capital Management.
Walt Sosnowski – SRC Capital Management
Just a quick housekeeping question, I got the revenue guidance for the June quarter of $33 to $38 million but I didn't quite get the net income loss. What was that again?
John Cobb
The net income loss, the range was $2.5 to $3.5 million.
Walt Sosnowski – SRC Capital Management
Okay, and then with EPS of negative $0.10 to negative $0.14?
John Cobb
Correct.
Operator
(Operator Instructions) And gentlemen, there are no further questions at this time. I'll turn the conference back over to you for any closing or additional comments.
Scott Howarth
Okay. Thank you for participating in this call and have a good evening.
Operator
Ladies and gentlemen, that does conclude today's conference. We thank you for your participation.
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