Monolithic Power Systems, Inc. (NASDAQ:MPWR)
Analyst Day Call
June 6, 2013 12:00 PM ET
Michael Hsing – President and CEO
Katherine Hoang – Product Marketing Manager
Bob Lucas – Marketing Director, Computing and Telecom Product Line
John Wiggenhorn – Director, Product Line
Giampaolo Marino – Director, Mobile Power Application
Jinghai Zhou – System Engineer
Jim Moyer – Chief Design Engineer
Meera Rao – CFO
Welcome to MPS and welcome to MPS’ First Analyst Day, and I really appreciate it if you guys come here because this is not that easy location to get to. We made a decision, we will stay here, and one of the concerns is not what are you really used to, fancier buildings, okay, but we did spend our effort to make this place a little better. We bought chairs. We bought tables. And okay use for next year. So, all right, okay.
Today, you’d rather -- I know most of you, almost every one of you. We met in the past. Some of – a few of you guys, I know you since the IPO in 2004, and I am* really glad you believe in MPS. Today, you’d rather hear my talk or my view of MPS, you will hear all the product line peoples, which we just -- the product line which we just started about two years ago, and we are still learning but the result is phenomenal *.
So today, you can hear what their view is in each of their product, you can ask any questions, but they represent their own views, so, you feel free but also we instructed them not to talk about the next quarter revenues and also the near-term revenues, but you can ask what are the possibilities and what are the activities and the design win activities, the product performance related to the competitors, and you can ask anything.
Then, I will introduce you one of our key engineers, and we do breakthrough technologies, and then another founder whom you never met, and he will come over here. And then Meera will talk about the financial update, all right.
First one is, I think was Katherine.
Good morning everybody. And again, welcome to MPS’ first Analyst Day. Before I begin, I’m asked to take care of a few housekeeping items, so the first is -- okay maybe it’s not on the presentation, butthe first item is the Safe Harbor statement that I would like to ask you to take a couple of minutes to read through.
Do your best.
Sorry, supposed to be in the presentation.
That’s all right. It’s okay.
Yeah, all right. That will come up some time. But anyways, whatever we are going to say is our forward-looking statement and that involves risk and uncertainty, and hopefully when it’s ready -- be shown to you.
Another thing is ringers because this is a live webcast, I’d like to ask all of you to turn off your ringers. Thank you. And if there are any questions, we would like to defer all that until the end of all the presentations, okay.
Now here it is, so, that’s our forward-looking statements. Here is a list of all the presenters. I go first. Okay. So my name is Katherine Hoang, Marketing Manager for Consumer and Storage Product Line. Today, I would be giving you an overview of these two markets, our products, and why we are winning in these markets?
The consumer market is huge that combine with the* storage market, we are addressing an estimated market SAM of about over $2 billion, and we believe we have the right product mix with the right features and benefits to really win in these two markets.
Our four key product families are mainly step-down regulators, step-up regulators, these are switching regulators, along with current-limit switches, and LDOs. I will talk about the consumer market first.
Why are we winning in the consumer market? As you all know, cost is a key factor in consumer, everything is very cost driven. Customers expect products that not only deliver performance but also cost effectiveness, and we have got both. We address four consumer segments within the consumer market and those are TV, set-top box, gaming, and portable.
We are looking at an addressable SAM of almost $2 billion, that is a huge market share, and there is a lot of room for MPS to grow. And as I said, consumer is very cost driven. So, you have to provide products that are not only cost effective, but higher performance. How do you that? Well, there are two reasons; the first is our disruptive technology. With our leading edge technology, we are able to develop products that not only deliver performance but also come in smaller die * size, which provides the cost savings to our customer.
Along with our process technology, we also have packaging technology that allows us to develop products that we call Cool Power* products, and these are in a much smaller package *that are also very cost effective. So, let me go back to just the competition first. So as you can see here, with the competition, in order to provide a device with 2 or 3 A load, they use a 5 x 4 millimeter SOIC package, that is a 20 millimeter square surface area. But, with the same load, MPS can do that in a much smaller package. We use our 3 millimeter by 3 millimeter TSOT * package. The TSOT package is already small and very cost effective, and this is equivalent to 9 millimeter square surface area. So, that is more than 50% savings in the package size, that’s huge, right.
So, now imagine, if you have huge system boards that need dozens and dozens of devices, and you can save that much on each device, then the overall board -- PC board can really be reduced, and . And customers can save on that as well, and that’s how we win in the consumer space. That’s how we are growing, okay.
Now, I’m going to talk about our storage market as well, and we have a lot of opportunities in the storage market. We see* high growth opportunities especially in a SSD market, which is our focus.
So, as you all know, many computers and devices still have HDDs, which is heavier, has* mechanical parts, higher power, not as fast, but with SSD, everything is IC * based, very light, faster speed, more reliable, comes in even smaller form factors, and I believe this market has taken off, and MPS is in a very good position to benefit from this market growth, and I will go into the reasons why we win and grow in this market.
As you can see here, SSD market is expected to grow at a 64% CAGR, and our SAM is an estimated $100 million plus, and it is * growing. In an SSD board, we can provide a complete power solution that differentiates from our competitors. So, here is an SSD board, a typical SSD board. We have power solutions that protect at the front end of the device, that’s the input power failure protection.
We have power that provides power to the SSD controller, the brain * of the SSD. We have power to power to flash. So, you are looking at very high content – dollar content in the SSD. For client SSD, we’re looking at a dollar plus of ASP content, and for a high-end client and enterprise, we’re looking at $2 plus ASP. So, that’s very exciting for MPS.
We are the key partner to one of the major, perhaps the biggest controller vendors in this market right now, and our power solutions are almost on every reference design. That’s very exciting for MPS, and how do we do that? Well, we have products that differentiate ourselves from the competition, and I’ll show you why. So, here is a solution that is discrete, and before I go into the details of this, I wanted to comment on a few things.
And as you know, in storage, it is very critical to protect your data from being lost if there is power failure at the input. Let’s say, you are doing a banking transaction or something very important, you want to be able to complete that transaction and preserve your data integrity if there is some kind of power loss. Now, we have that solution to provide an automatic power backup when there is a power loss to preserve * power and data integrity.
In some cases, customers use discrete solutions, and they implement that function by using several discrete function – discrete devices. They use a step-up regulator, a step-down regulator, current limit switch with reverse current blocking, control logic, supervisory function, all that on the front end – the front of the SSD and the back of SSD. Many components to implement, very costly, very complicated, very time consuming, and occupy a lot of space.
With MPS, we simplify this design problem for our customers, and we do that by integrating this whole system into 1 PMIC, that is in a three by four millimeter package size. Now, that is a testament to MPS’ disruptive technology and our design capabilities, our ability to integrate and solve customers’ problems, and this solution is a winning solution. A 70% smaller than the discrete solution requires less inductors and other passive components which saves customers even more. It is lower design risk because now you’re dealing with only one device versus several other devices, simplified logistics, and ultimately saves customers’ time and BOM cost.
And as you know, SSD form factor is shrinking, right, they don't have the same limitation that HDDs do. And in order to address that size reduction, we need to be able to keep up with our IC * development, making smaller and smaller ICs, and we can do that with our technology. We have the ability to integrate and fit* our device into even the smallest form factor in SSD. So, we have complete power solutions for all these form factors. So, just imagine, AV computer, AV server is replacing HDD with SSD. The opportunity for MPS, the growth opportunity is huge and we believe we’re in a very good position to grow in this market, and so far we have great traction.
Our partnership with major controller vendors is great, strong. We’re on many reference designs, and we’re already winning at most SSD customers, and we expect to win more and grow more.
So, just to recap. Why do we win? How do we win or you just heard me, we have technology to develop leading edge products; we have products to differentiate ourselves from the competition. And so to summarize, we provide products with the best in class efficiency with the highest level of integration with smaller solution size that saves customers’ significant cost. Thank you.
Now, next presenter is Bob Lucas.
So, while he is loading that, sorry for the glitch, good morning. I’m Bob Lucas. I’m the Marketing Director for the Computing and Telecom Product Line.
And before I begin, I’d just like to say, I have about 30 years experienced in the industry, and I don’t change companies much, but a couple of years ago, Michael introduced me to MPS and looking at the technology, looking at the markets that we’re trying to attack, I really feel that MPS was leveraged at that time to be successful, and MPS at that time I saw as kind of transitioning into a technical leader in the market, and for those reasons, I saw this as a no-brainer. This is really -- it was kind of very few times you find in the market where you can have an opportunity to go with the technical leader that their position to win like MPS is*.
I really think this is our time at MPS. I think you’re going to realize that after you see everybody’s presentations today that we really have a strong foothold in all of the segments that we’re trying to go after.
So, I’m going to talk to you today about cloud computing and why we feel that MPS is really leveraged, as I said earlier to kind of take advantage of this growing expanding market. So, all of us every day whether we know it or not are connected to the cloud, right? We all have smartphones now. We all have tablets. We all have notebook computers, but there are smartphones, even ATMs, medical devices, of course switching router servers. These are all connected to the cloud, and this is expanding rapidly. In fact, there’s been some in the industry that say by 2015, there will be over 15 billion connected devices. Now, you think okay, how many people are on earth, that’s amazing right, because all of us have, I mean in my family alone, we have four or five notebooks, two or three tablets, everybody has a smartphone, I'm sure you are the same.
So what's interesting about this before I go off this slide is that MPS also has products for everything that we are showing you here and even more, but it doesn't stop there, so there is a lot of users that's known, mobile broadband, mobile devices, cloud services, social business, social government, big data analytics, everything you see up here is kind of expanding to this cloud. So, how this relates billions of users, millions of apps, what's happening as they are becoming trillions of things.
So, I know, I am kind of stating the obvious, I know a lot of you know about this, but this is significant, and it's a big market potential for MPS. So, speaking of market potential, what do we see in the server market for us? Well, if you look at the number of servers, right, this has been steadily growing, right, steadily growing, but something has been happening over the years, there's more and more and more IC content per server, right? So, the number of potential power related ICs per server you can see from this chart is growing. This -- we believe this correlates to about $500 million SAM for MPS.
All right, how do we get there? It seems like a pretty big number, but when you think about it in today's generation of servers, it's really when you start multiplying things, it really doesn't come as any surprise, so let's just take the CPU which is the core power or the brains of the server, right? You have to have a controller, and MPS has their own proprietary DriverMOS*, and I will mention this in the later slides, but this is really our strength, I mean this is really what sold me on MPS when I saw this technology. Everybody we presented this to is just astounded in such a short time how we can make such devices.
So, this is a -- all of these are our power stages, we call this our Intelli-Phase *device, but you can see it requires a lot of power to deliver to the latest generation server CPU. Likewise, and even more of an opportunity is, DDR memory, every one of these core power has to have a number of DDR memory banks to go along with it, and our same solution that we saw for core is our* same solution that we can put into DDR memory, controller, and DriverMOS.
And then, there are a number of other utility power rails that go into a typical server, approximately 17, but they are more, and MPS does not just stop with these, we make a lot of different products that go into the server power line*. All right, so let’s just look at that, today’s two most common configurations, two-way server, four-way server, what does that mean? Two-way server just means there's two CPUs, four-way means there are four CPUs. Believe it or not, there was super computers out there today generated by some customers that have hundreds, literally thousands of CPUs per server.
But the most common right now is between two way and four way. So, as a typical solution, we have up to 41 MPS ICs on a two way server, this includes powering the core as I just showed you and DDR memory, and then there are a number of other peripheral powers rails that we supply power to with our point-of-load regulators, all right. In a four way, that number goes up, 65 MPS ICs or about $66 of content. So, you can see how this -- why a lot of power management companies are so interested in supplying solutions to the server.
All right, so remember we are doing computing and datacom, networking telecom. So, datacom and networking also have similar needs, it's very, very similar. They both require -- Datacom and networking both require multiple power rails, they either use Intel or Broadcom or ARM-based and others. They also have DDR memory rails, and they also have multiple point-of-load utility voltage rails. Telecom and networking apps are more likely to have even higher power demand than servers. So, this is an attractive market for us as well.
And there is a multiplier effect in the system chassis as I will show you in the next example. Projects lasts longer, so we have a longer life for our *products, we can continue to design in products more and more and more. At several datacom customers, I have seen you can deliver products for up to 10 to 11 years. All right, so that's a long life span for our products continually selling into more and more of these platforms.
All right. So let’s take an example. This is an actual board that MPS has designed into in a very popular telecom company. This is a switch board, and these are one of those three processors that I talked to you about, and you can see what I meant on a switch board is that there are multiple, multiple processors on a typical switch or router board. Now, this particular example, they are using a module, an open-frame module with MPS designed on to that module that they are putting into down solutions. This is a vertical board, everywhere you see a blue box is where you have up to 4 ICs, 4 MPS ICs on this* board.
So, if you look at that, this particular example, in one switchboard, there are 9 MPS controllers, there are 22 of our DriverMOS, and there are 10 boards per chassis. This means about 310 parts per board -- per chassis, I’m sorry, about $350 worth of content. We believe the SAM for our telecom space is about $600 million.
So, remember I said the timing is right, this is our time, why is this our time? Why are we so fortunate to have the technology in this emerging market, this growing market? As I said before, big data and cloud computing influences on the server market, there is a huge growth expected and we are seeing that, and more importantly and how this works so well with what we have done already is the changing landscape of server manufacturers, right? The top three OEMs are kind of losing ground, things are kind of changing in the way servers are being * developed today.
ODMs in Taiwan and other places are starting to directly deal with the server manufacturers, right, and they are developing servers not only for them, and they have been doing this for a long time, and they are like, hi, I can design my own server, right. The benefit for MPS is we have relationships not only with all the North American OEMs* that we are dealing with, but we have excellent relationships obviously in Asia, so they know about us already, they know our power solutions, and they are more adept* to using us.
There is also something changing, a large social media company has developed, I can say it's common knowledge, Facebook has developed an open-source architecture, and what they are trying to do is make kind of a standardized server board for data centers, right. So, why this is important for MPS is you are going to see this over and over again today. We are making smaller solutions; we are making them more efficient; we are saving an overall BOM cost.
Open source architecture is basically taking the server board and squeezing it, right, and before you had all of this power management peppered all over the board and they basically compartmentalize power into one small area. So, you can see that power density is going to play a bigger and bigger role in the future, and this plays right into our hands, okay.
Now, for the stuff that really gets me excited, why will we win? All right, again, you are going to see these bullets over and over again today, but two years ago you were going to hear this disruptive technology that we introduced, this latest process that we have really allows us to kind of leap frog a lot of our competitors. So, we have this superb performance, and we will show you how important that is, smallest solution size and significant BOM cost savings.
So process wise; we are developing and shipping product today on BCD3. Right now BCD3, we are about 20% smaller than the best in the industry, 20% smaller, but that if that was where we stood * right now, that would be great, right. But this disruptive technology allows us to introduce BCD4. BCD4 is about 20% to 50% smaller than our previous generation, and by the way, we get better performance out of it.
So what does this performance mean to us when we introduce products into the market, let’s just take our VR 12.5 Grantley solution as an example. By the way in the back of the room, we have demos for a lot of our different product lines, we have a demo for this as well comparing us against conventional solutions. So in this case, we can offer four phases, we also have 6-phase solutions out there, but we can achieve the Grantley spec in only four phases, where most of our competitors need six, all right. That in and of itself is pretty impressive, but with our latest technology, it gives us best-in-class efficiency. This correlates the performance in cost, and in the big picture it really makes a difference.
Accurate current sensing and better thermal management also improves performance in thermal costs. Now, this is not something -- this may sound like some technical jargon, but really this is important with our technology. Remember what I said, we are technology leader. Our DriverMOS have current sensing and thermal sensing built into the DriverMOS. We are the only ones in the market that can do this.
What this does is give us very, very accurate current sensing, if you are sensing current accurately, you can deliver power with less external components. Again, we can meet Grantley spec four-phase turbo with our -- even turbo mode with our four phase, that saves cost.
You will see a real life example of that in the back of the room. Transient response means we have best-in-class transient response with our control architecture. That means we can use all ceramic capacitors. What does that mean? That improves reliability of the system. If you have [pass] (ph) gaps, every engineer will tell you the weakest link in a solution is pass gaps, the old style capacitor, right. These dry out, they have a tendency to blowup. MLCCs are much safer and much smaller.
Okay. So everybody talks about efficiency. You may hear this a lot. What does efficiency mean? Well, this data, the red line is our efficiency versus a couple of the industry leaders that you might recognize their names. In a few short years, we have surpassed these guys in our efficiency. What does that mean? Why is efficiency significant?
I had one of the local Bay Area customers explain this to me very simply. Server farms today are becoming very huge. A lot of the social networking companies use huge server farms. Couple of the consumer related online services, you can imagine, have huge server farms, right. Each one of those servers has hundreds of server boards in it. If you can improve the efficiency on every one of those boards by just a little bit, 1% or 2%, that correlates directly to reduce power dissipation. So, how much do you think these guys pay in their electric bill every month? Millions and millions of dollars probably, this kind of savings can correlate to millions of dollars of savings every month. So, all of the power engineers are heavily focused on efficiency, even if you can improve it by one 1%.
All right, next is because of this technology we have, we make things smaller, but as you can see smaller isn’t the only thing, performance is another. So, if we look at our solution on your left versus a discrete solution on the right, the first thing that stands out is we are about two times smaller than our competitors.
So how does that correlate, lower height, because we are able to use all MLCC caps, the pass gap really extends the height of the board. We have less components because we have less phases and less external components because of our technology. There is less design time when you use our products. I’ve heard verbally from engineers, it’s so easy to design your products, and we really -- and we have a lot of supporting collateral to do that, and also it means less dollars. So our smaller footprints and lower height, really that important to the server market, okay, smaller necessarily better is just kind of a tag line that MPS uses. Well, when you think about the most popular server solutions in the market today, micro server, open source server board, blade servers, high-density modules, these are becoming the most prevalent server solutions today.
And this is why I was talking about on this open source server board where as you previously had a large board, all the power has been shoved into this little area right here, right. So -- and this is a consortium that everybody is adhering to. This open source architecture is going to become larger and larger; so power density is very, very important.
And finally, if we can achieve Grantley spec with four phases as opposed to six, how does that benefit the user. That benefits them -- we have calculated approximately $1.50, of course it varies solution to solution. But a $1.50 cost savings, again when you are talking about hundreds and thousands of server boards that’s significant, right? And it’s mainly because we can do it with less DriverMOS, less inductors* , and less external components, all right. So, is our strategy working?
In conclusion, I will tell you why I think our strategy is working. We do have a differentiated portfolio, and in just a few short years, we’ve introduced controllers, DriverMOS, point-of-load regulators, all single chip solutions, and we have delivered these to our server customers, our computing customers, our telecom customers, and they can see our superior performance and value, all right. If you are wanting to get yourself into a market, you don’t necessarily have to be the low cost leader to do that, you can impress them with technology and that’s what we’ve done.
We are partnering with Intel. Several years ago, Intel didn’t even know who we were. Now, we are partnering with them. Now, we are engaged with them on next-generation server boards and computing boards. We are working directly with them. We are getting their [offer] (ph) specs, and they are asking us you know what do you think, is there anything we need to change, and so this is a great relationship.
OEMs know our name; all the major server and telco customers now know who MPS are. They are actively designing in our products, and we are taking it up a notch. We are expanding our relationships with a lot of the social networking customers and their associated ODMs.
So in conclusion, MPS is focused on leveraging our technology. We feel with this combined market that our SAM is over $1 billion for this business unit. I believe very strongly in this. I believe so strongly in this, Michael always says, if I don’t do this, then I won’t be here in a few years, right, you’ll see somebody else standing up here. So, I have confidence, thanks a lot.
Hey, good morning. My name is John Wiggenhorn, and I am the Product Line Director for AC/ DC here at MPS, and I have to really share with you I am very excited about the opportunity to share what’s going on the AC/DC space. MPS is known and rightfully so for having great solutions in DC to DC, and you are going to hear today about a lot of the disruptive technology we have, but in the AC/ DC space, we also have some really good technology, I’m very excited about it, and again I am just -- I am glad to have an opportunity to talk to you about today.
So AC/ DC, there are products in your home, in your office, industrial sites, just about every product you can think of needs to convert power off the grid to get a regulated DC voltage, and I just have a list of these products here, right. They are all very familiar to everybody. The first three use external power supplies or adaptors; smartphones, tablets, notebooks. The next several are a little bit higher in power, but you will see them not only in the home but also maybe in the office or industrial places, but small appliances or that’s also like small tools, building automation, lighting, Smart Power* meters, white goods, so that includes refrigerators, ovens, and what not, And a little bit higher power, you get down to TV, server, and gaming. So there is a lot of products out there, they all need to convert AC to a regulated DC voltage.
So, what does this mean for opportunity for MPS? Well, there is a SAM out there, an IC product (inaudible)that’s over $1 billion, and the GAGR is, you know, over 7%. So what’s fueling, is this CAGR, you know it’s the need for our customers and our customers’ customers to reduce the size to save money and ultimately to save power. There is a big emphasis right now, and it has been going on to increase efficiency.
So, at MPS AC/DC, our product strategy really has three facets. Number one, there is a lot of churn in the market in the world that’s creating these market inflections, and quite frankly, they all come down to the wide spread emphasis on reducing the carbon footprint. So, I’m going to talk about those and what we are doing at MPS to be able to take advantage of that.
Second, we wanted to find easy-to-use products for our customers. Why is that important, well, especially for AC to DC, there is a lot of safety concerns and regulations and whatnot. The easier we can make our products, the faster our customers can get to market and they realize their revenue quicker and same with us. So it’s very important, it’s part of our product strategy.
And third is to reduce the total cost and solution size. So, we all know from the products that we buy, electronic products, the expectations -- you get more features for the same or less money. So, as an IC supplier, we need to have products that enable our customers to deliver that, and so that, if we are going to define a product, we have to see that the total solution cost is going to drop.
So, I’m going to talk about three market inflections and what we are doing at MPS to leverage those. So, the first one is the ever tightening of regulations, and there is really quite a few out there different countries have their own, but these are the three primary ones that we are – we got our eye on. So, number one is the energy average efficiency rating, every end equipment and every product has their own ratings, the higher the power typically the higher the efficiency standard is. And at MPS, we have a family of products, which I’m not going to talk too much about today, but it’s really a leading edge product family, it’s our synchronous rectifier product family.
And I’m proud * to say we have a significant design win with a leading gaming * manufacture that’s going to be ramping in the second half of this year. But, the emphasis on the average efficiency is saying that every product has different operating regions, and just like a printer is sitting idle * and then it has to engage the motor to print. So, there is a peak current and there is a lower power level. It’s recognizing that. You need to be efficient in all these different power levels. So, energy star is saying you got to take the average of 25, 50, 75, and 100, and that has to hit certain criteria.
And what’s exciting about our secondary size synchronous rectifier family is that it will enable anywhere from 1% to up to 5% increase in efficiency for our customers, and it’s relatively easy for customers to design them because our product replaces really just a passive diode and it makes it a smart, it drives a MOSFET, so it takes a drop of about 500 milliwatts* down to maybe 60, 70 milliwatts, and in some cases in our newer products, it is down to 30 milliwatts, so the voltage * translates to efficiency improvement.
The second is the European Union Standby Power or Lot 6*. So, Europe has led the world I think in recognizing that any piece of equipment, any electronic equipment, even though you may turn it off, you turn your TV off or your set-top box with a remote and/or any of your components in your house, even though you turned it off, it is still plugged into the wall. There is still a microprocessor that’s enabled, and for example like your set-top box or your satellite box receiver, this is constantly checking up on what’s going on from the main supply * from your cable company and it’s always churning even though you have your TV off and what not. So, what the European nation is saying is -- and then it is just sort of driving in the whole world as saying that any of these products once you turn them off, they cannot take any more than 500 milliwatts off the line. So, that’s something that is just really coming to effect this year, and it enables MPS to go into customers that have to make changes to their AC/DC supply, and we have solutions that enable that. And I will go into a little bit of detail on that.
And third is this No Load Power *, and this is less than 30 milliwatts is the highest standard right now, it’s called a five star rating. There is different levels. Definitely, everybody is driving to get that down to actually zero milliwatts, it’s close to zero milliwatts as possible. So, why is this important? Again this is directed towards adapters. So, there is over two billion smartphone adapters easily in the world. We go home, we plug in our smartphone at night, we charge it up. When we leave in the morning, we leave that adapter plugged on, and there is like a little green light there saying it’s still plugged in, and it is consuming power.
So this regulation -- this requirement is saying that it’s driving the whole world to get those – the No Load Power less*. So if you can save say -- to get to the 130 milliwatts, you are saving 100 milliwatts* and there is over 2 billion of these smartphone adapters alone, that’s like 200 megawatts of power saving. So this is a – it’s a small number, but it adds up very quickly.
So, the second market inflection point that we are – we got our – we are very focused on at MPS in AC/DC is the fact that I have already mentioned that, once you turn something off, it still has a micro controller in it,just about everything has a microcontroller. And all these devices now need to be connected either wirelessly or wired, and that gives us a great opportunity in AC/DC. So once you turn these off, they still need a power source and it needs to be a very efficient power source and as lowest cost as possible.
So, we have a family of products, you can see this as, MPS EasyPower. Actually, I’m going to talk about two families of products that are sort of on the umbrella of MPS EasyPower, and in this example, it’s just at a high level, it’s saying that MPS, we are taking power off the grid and we are supplying power to either microcontrollers or transceivers, and they are in environmental applications. So, you can see– some of the usual things, one thing that’s really taken off and continues to just explode is the security cameras, right. I mean, we all know that anywhere you go, there are security cameras. I mean we saw evidence of – many times on the news how a security camera catches something that’s happened and take somebody to justice like at the Boston Marathon. So, that is just a great opportunity for MPS.
Lighting so, lot of lights now, they are going into buildings have remote sensors or they need wireless controls. Again, those need power and we have with our EasyPower a means of supplying it.
Home appliances, you think of a washer and dryer and you just think, what that’s a big motor that’s driving that. But again, behind the curtain so to speak there is just a microcontroller that’s keeping track of all the wash cycles and all the housekeeping or your refrigerator. You can see from this example, a lot of the new ones have a display on them. All that needs an efficient power source to power those devices.
And then finally like Smart Metter, so all the meters in the world are slowly being changed over. So they can be wirelessly -- whatever connected to the power companies to see what the power usage is. So again, we have wins at MPS even in Smart Metter. So, in all these areas, we are selling product, and it’s across the world, and it’s just very exciting to see that we got traction, exploding areas. So there is a big opportunity here.
So the third market inflection that we are taking advantage of in AC/DC is a fact that LEDs are just – it’s been growing and we have all known it’s going to grow, but the evidence is starting to really – we have a huge backlog for the second half of the year which is really exciting, but this is a graph of the total LED market. And actually from one of the leading LED supplier in the world shared this with me, and it shows that in 2012, end of just five months ago, they said the revenue from LEDs was about $3 billion. And then, in 2015 in three years it’s going to nearly double. So, all those LEDs need efficient and reliable power sources. And they are all – there are new designs being done out in the world, and it’s an opportunity for MPS. So, you can see in the far left hand corner, there is an example where we have a small electronics board with one of our MPS solutions, and we have solutions in all the different lights that are shown on this slide.
And what’s also exciting, if you go to a few of the major home improvement stores, we have solutions in LED lights that are actually in – on the market today. So, I have talked about EasyPower, I emphasized our strategy is to make it easy. So, what is EasyPower. So, our criteria for EasyPower is to try to eliminate the magnetic, can we get rid of the transformer? Can we get rid of the any of the switching components that necessitates an inductor?
We want fewer external components; the fewer the external components, the easier it is to design the higher reliability. One thing I haven’t really talked much about yet is the technology, but on the AC/DC side, we have got some really great technology. We have high voltage components that can be integrated monolithically that simplify the design for our customers and quite frankly enable some of these features that I’m talking about, the low standby power and the high efficiency. We have that technology at our finger tips. So, this is really exciting. And then finally, as far as EasyPower is internal compensation, so all these power solutions, be it voltage or current for LED, they need a control loop, and traditionally the – we would just explain to our customer okay, just, this is how you would stabilize a loop depending on what type of load they are driving the regulation.
Well, with our newer products and our products going forward, we are bringing that compensation internal, and again that’s making it easier for our customers.
Okay, so I want to be, first smart, first EasyPower family that I want to talk about is our smart LDO family, and that’s for power up to about 600 milliwatts. So, we have design wins today in this family, and in the building automation that I mentioned, we have it in small appliances, small tools, and it’s – and even in white goods, and then being designed in a lot of different areas. So, we are definitely seeing traction. So what is great about this – there is a lot of things great* about this family, and I visited customers around the world in the last few months and they are all every excited about it, and the reason is it’s taken power right off the grid, you see the rectifier. There is only four components, you see there are only four capacitors in our part and it generates 12 volts. It’s very simple.
It has no transformer, has no indicator. It is a proprietary IC from MPS but the sine wave AC, , sine wave to * off the rectifier, which is, it’s rectifier, it’s up on the top here. We are only taking power off the grid just between when its 15 to 35 volts. So, in U.S., the line voltage is around 120, and in Europe it’s twice that. But we are only taking it off at this slow voltage which what it means is, is even though the AC line is there all the time, most of the time, we are disconnected from the line. And we are only taking power at very small intervals, about 10% of the time, so that’s power saving is right off the back. There is no inductors as mentioned in those and very small size. So this is getting a lot of acceptance from our customers, and we are getting some good wins right now.
So, our second family of product set still under this EasyPower umbrella is this high voltage * step down regulators or often known as Buck Regulators, and this goes up to about 5 watts. So, it’s for higher power applications and it is a switching regulator, it does have an inductor, * but there is no transformer, and it has an industry smallest package for this type of application, so it’s a TSOT23* just a 5-pin package. You will see it in an application -- in a demo in the back of the room and believe it or not in a curling iron. So, there is a micro obviously on that curling iron, and this is powering it. And you can how small it is, I personally have to put my glasses on just to see the package, so that’s – it’s just the way it is.
So then the second one is it has tight output regulation. So it’s just a very simple circuit, but it does deliver tight regulation even though it is – there is no transformer, no extra isolation. And then finally, it has a low standby power. So you can see the – the family of products we offer go from 2 to 5 watts right now, and you can see even at the higher power levels we offer less than 30 milliwatts of standby power, which I emphasize was a big selling point to our customers.
And we are – and we do have quite a bit of success on this. We have quite a bit of backlog on this and all the different areas that I was showing you on the white goods and home appliances and what not.
So, when I say our product strategy, we want to bring the size down, we want to save cost. So this gives you an idea of what I’m talking about. So, for the smart LDOs, it’s a – our typical application, again we have a demo on the back, it’s about 13 millimeter square to go from the AC line, and this is universal, right, goes from 85 volts to 265 volts or so.
And it brings down the – to a regulated DC voltage, and that’s up to about 600 milliwatts, and we have our high voltage buck or a step down regulator, it has the same universal input range 85 to 265. But it’s had a, but now it can go up to * 5 watts and it’s about 17 millimeter square. But these solutions replacing is a more traditional isolated solution that our customers are getting away from, and it’s taken up -- they are saving up to 5x the board space and you can imagine quite a bit of money.
So finally, I guess the best of last, what’s really behind everything, it’s – we are bringing guy to our customers, it is our technology. So it’s just not on the DC to DC, it’s on the AC to DC side too, and I have broken it down into three areas, right. There is a high voltage technology that enables being able to hit these requirements. There is our circuit design, which we have proprietary, we have patents on, and finally, it’s our applications.
So, for a high voltage * technology, we have a 700 volt process technology that is really, really great. It has every component that our designer that I need as going out in a marketing world, talking to our customers to meet the requirements. Two of the components is a 700 volt start up FETs*, so that’s what enables us to start up quickly. But then these FETs turn off and they don’t consume any power off the line. It’s what enables us to get these very low, no load power, and it’s all integrated.
And the next is the 700 volt Monolithic Power FETs. So here again, our solutions have the – everything I talked about today has the power FET integrated in the solution, so it’s not using an external FET. We do have controllers that can use external FETs, but we have regulators that we are proud of to have * them integrated.
Next, as far as circuit design, I can imagine we have a lot of patents, lot of proprietary circuits. But the three things that I’m – I guess I want to stress what makes me excited about and makes me confident that we – there is a really good future ahead is number one was that first thing I talked about the smart LDO family, very few components, and it’s a – we are gaining acceptance.
Second, it’s the integrated dimmable * PFC LED driver, those are a lot of words, but it’s just a one solution that is used for track dimmable LED drive, and up to about 6 watts, we have all the high voltage components integrated. And again, we have a demo on the back that shows our controller, and you can switch it between different dimmers and you can see how it adapts to whatever dimmer it is that may not seem like much, but these dimmers were designed for the incandescent and now we come within solid state LEDs, it’s actually – it’s a big accomplishment, and our customers are glad to see that we hbave solved * some of the challenges.
And third, I have already mentioned once and I probably can’t mention enough is our synchronous rectifier, our secondary side * synchronous rectifiers. I say we have a significant design win at a major gaming company. There is – we are definitely doing our rectifying, a little bit different than anybody else in the market. And it’s being noticed, and it’s not just from a few customers, but it’s it’s from many and probably more important, I’m excited about it’s from the big name customer. So, this is really great.
Now finally, you might say applications, so why is applications important, why you group this* under technology. Well, for AC to DC, historically it is a little bit harder to design, and DC and DC, you have got all the safety requirements, you have EMI requirements, you have concerns that okay, you are saying you can deliver this power in this form factor, but I’ve got to squeeze it into this curling iron or whatever.
So we have an application staff that that really helps further makes us easy for our customers, right. So the first thing is, they will do form factor, custom board design. So even though we have a data sheet, we may have an EVM* that already delivers power that what -- that says we can do what they need, maybe they need a custom transformer design, maybe there is – they need to do it on a single level layer board or what not. We will do that for the customer and help them get to market faster. On top of that, we will do all the testing for them too. We will do the EMI testing, we will do the surge lightning* testing. We will get them down the road towards UL, so they have confidence in our solution.
And finally, a lot of our application staff is in Asia, which is quite good because a lot of the design is being done in Asia, so we are very responsive. Now, I say we do all that, we don’t do that for all our customers, some of our customers are doing power for years and that’s what they do day in and day out, and we just let them do their thing. But there is a lot of other customers out there that this is a really good feature that we offer.
So finally summary, I said at the very beginning, there is a huge market potential for AC/DC and it’s easily over $1 billion SAM, and its growing. So what does that mean for AC/DC at MPS, I mean, we probably don’t know too much about AC/DC at MPS. I really believe that it’s possible that in about three years’ time, we will be 7% to 10% type range of capturing that SAM. I really believe that with our technology, with the traction that I’m seeing now that that we are – the future looks good.
And again, I have really tried to stress, but our customers don’t necessarily want to change their AC to DC supply if they don’t have to, but I’m very thankful there is a lot of reasons happening in the world that’s requiring our customers to change, and we are trying to be very sensitive and focused on where those areas are and having solutions to help them out.
So MPS innovation, so I have talked a little bit about that. But, I guess, I will take the opportunity to say I haven’t been at MPS very long. I have been in the industry for over 25 years, most of that has been on the AC/DC side. Most of my career was more on the technical side in IC design, IC design management, and then marketing and product line business roles in the last five or so years.
So, why did I come to MPS? When I talked to senior management Michael during my interview and one of the first things he said, John -- as a product line – leading a product line, we want differentiated products, and I thought that was just great to hear. I mean, I didn’t want to go someplace where we are just going to be fighting for whatever, just for price. So that was like okay, so that was like one of the first things he said and it was stressed. And then the next thing, okay that’s good, but can we back it up with technology and what not. So even before I came for the interview, I did my research looking on the web, and I thought, well this company has * some really good AC/DC products, so then during the interview process and doing homework and what not, I was very encouraged that he was, I don’t know this is a well-kept secret that there is a lot of technology here that focused in the right markets I thought it was a good opportunity for myself, MPS’ position to grow.
And then finally, maybe the biggest piece when you join new company is people. Everybody I talked to were * extremely smart and probably more importantly just very hungry to grow. So, I have not been here too much too long, but I haven’t been disappointed with what my assessment before and it’s been validated several times since.
So the innovation, it sounds like a redundant story here, but for AC/DC, we are trying to make it easy for our customers, that is the pillar what we are going to do, and what you are going to see coming out, and we have to be reducing the size and we have to reduce the solution costs, and I believe with our technology we can do that.
All right. Thank you. That concludes my topic.
All right. Well, good morning. My name is Giampaolo Marino. I’m the Director of Mobile Power Application here at MPS. So before we start this presentation, I’d like to give you a little bit of a background of what battery management is and kind of like the evolution of battery management, let’s start from 1990, let’s don’t back like into the 70’s when the first cell phone was introduced.
So, from 1990 onwards till today, so we start with the more or less [Star Talk], I’m sure, all of you know this * phone right. It’s nice and a sleek phone, you know sleek design, voice only, we can only talk. Then the phone design, they got a little better as the year progressed; slimmer, flatter, smaller, yet, very small display, voice only data, you can’t do much, right.
Then in about 2000, Palm introduced the first smartphone, you could do emails, bigger display, okay. So, all those devices basically were* using an IC that was * called linear * charger, right. They were not very power hungry, but what happened, let’s jump from 2000 to 2013. In 2013, we have tablets, we have smartphones, so what can we do on those devices, a lot of things. E-mail, web browsing, we can watch* movie, we can listen to music*, so all these mean that these devices are very power hungry.
Now, would an IC like a linear charger be able to provider that power to those devices, yes, but not very* efficiently. This is the reason why the market now is shifting to another device that is called a switching charger.
So, switching * charges today are used in a lot of different applications. Smartphones, power banks, MiFi, tablet, SLR camera, gaming, pico projector, and you just name it. And the reason why they are using a lot of those applications is because they are very efficient, and they are able to deliver the power that the microprocessor into those devices is requiring. Like I mentioned, there is a lot more -- these devices are more power hungry. So, if we have to talk about SAM, there is an addressable SAM here of about $750 million. Yet, again, this is switching charger. It’s one component with a huge SAM. So, this is something very attractive for us.
So, opportunities for * MPS, obviously we know mobile devices are growing and are continuing to drive* growth, especially in the consumer space, 7% to 10% CAGR, I mean, this is really the fastest growing space right now, mobile devices, tablet, and so forth, great opportunity for MPS. Battery capacity is increasing, right, and yet customers are demanding faster time to charge, and I’ll come back to this topic in the next few slides, and for us to understand why fastest time to charge is important.
So, how is MPS positioned to win into this space? Well, obviously Bob and John and Katherine, we have all been stressing pretty much the same thing. We have the best in class efficiency performance, we have the smallest solution size, we provide the best BOM cost saving, but what does it all means? All these means to me a very important thing for our customer, value engineering. When we sell our solution, when we go and visit our customer, and we talk to them, we bring them value engineering, and this is what customers today * want.
So, why will MPS win? Well, let me show you a few examples here, I’ll go back to best efficiency performance. What does efficiency really mean? This is basically just a comparison between MPS versus a competitor solution, and you’ll see here that today -- the chart here basically represents efficiency versus charge current. You’ll see here that we are a lot more efficient in our competition, actually we measured about 10% more efficiency than our competition right now.
So, efficiency means faster time to * charge, less heat dissipation, * and obviously less design complexity, but let me stop here for a second, faster time to charge. So, we did some experiment and we did some comparison and we were able actually to charge a battery 15 minutes faster because of our efficiency performance than our competition. So, would you rather charge your smartphone in 45 minutes rather than wait an hour, of course and this is value. This is value because it enhances the user experience, right. We don't have time to charge our smartphone. We want to try to use the less amount of time possible to be able to charge the battery. So, how can you do that? Efficiency, if you have a much more efficient device, than you can charge faster, and that is huge especially at our customer side, I mean that’s the first thing the customer asks for. So, very, very, very important topic.
So, again, MPS technology enables, I mean you know, Bob and John and Katherine, they’d been talking about the advantages of our process technology, right. And what I did here was just a comparison. A die* size comparison between our competition versus MPS, okay. These are two families of the same product. You’ll see here there is basically about 30% -- MPS is about 30% smaller, but smaller doesn’t mean that we have the better costs or we can offer better costs because we don't go to customer and say hey I have this solution, I can provide a better cost with respect to your competition. Smaller to us* means, we can integrate a lot more yet still providing a very good cost effective solution. Again smaller size, greater integration, and these is basically what we’re striving for.
So, let me give you an example of what smaller size and integration all means. So, this is basically a conventional solution, right, that is used today in the smartphone market, in power bank, and in a lot of portable applications. You basically had, basically three ICs to be able to provide power to the load – to power up a cell phone, right. We can do that into a single IC very easily. We can integrate a lot more; I’ll back go to what I was saying before, smaller size, greater level of integration.
Now, let me show you an example of that. This is a typical example of a customer board using a competitor’s solution versus the same customer board using MPS solution, 60% smaller solution, but this is not over yet. On top of that, we offer less component, less design time, less BOM costs, value engineering, value engineering for our customers, right? So, here is a BOM cost comparison of the same board just to give a very, very tangible example.
Here is MPS’ component and here is basically the amount of component the customer has to use by using competitors’ solution. So, that is about $0.50 cost saving, okay, $0.50 is not a lot, so what, but if you multiply $0.50 for millions of those products, I mean there is a substantial amount of costs that the customer saves, right? So, this is big and this is also what is enabling us to get significant traction into all the applications that I mentioned before.
So, I’ll go back to the first slide, and again SAM of * $750 million, and what is flashing here is basically some of the end applications where we’re getting a lot of traction right now, but we are hungry and we want to touch upon every single thing that is portable, every single thing that requires a switching charger. But right now like I mentioned, we’re very well positioned in tablet, *MiFi, power bank*, smartphones, and obviously MIDs.
So, MPS’ strategy and where are we today? Well, our goal at MPS is to be among the best three players in the battery management market. When I interviewed here at MPS, and I told to Michael, he told me we’re not just here to play, we’re here to win and that is what sold *me, I was not going to come here to be just a player in this market. I wanted to come here and be a winner, and I think we’re leading into that direction.
So, among the first three players in the market that means double-digit market share and that’s huge, especially given the SAM that I have given you. We have a strong foothold in Asia right now. We’re winning design in major OEMs and ODMs, and our name is getting across and everybody is getting to know us, and everybody is appreciating the value that we bring to our solution. We’re working very hard. We’re continuing to expand our switching charger portfolio.
We are adding a lot of new features to be sure that we are right there to where the market is asking us to be and where our customers are asking us to be. And finally, I want to say that this is just the first step towards further innovation of battery management. There’s going to be a lot more. So, please stay tuned, and there’s going to be a lot more interesting news coming up in this product line. Thank you.
Sorry okay. Our technologies, silicon technologies integrated more power transistors, analog components, and digital components in the same chip. And also we use in a foundry process, and would use the foundries and by the way we use the proprietary process in a foundry. So, these are the new things we talk about it, and since from * that time until now is just evolution of the change. We have a BCD2 at the time we called a BCD plus, and then the BCD3, and now going into BCD4, and we keep going.
So, more or less similar things. Now, I think we reached the inflexion * point, and a lot of products, okay, a few products were introduced to the market already, and we have some demos behind there, and I will let Jinghai, he is in-charge of the project, and let him talk about it, what is it all about. Okay.
Well, thank you, Michael.
Well, we don't have biological breaks. So, I know you we have a few of you guys had to go to airport. So, just you can go as you are free, but we keep talking, okay.
Thank you Michael. My name is Jinghai. I’m a system engineer. I’m with MPS for almost eight years, and through these eight years, I really feel this is the home of engineers. The reason I’m saying that because this place is full of innovations and technology, it is a technology-driven company, an engineer is always looking at trying new things, otherwise they get bored. So, that’s why I’m here today just bringing you a story and we have just started and we’re working on that and we’re very excited about this monolithic * power module, we call it MPM.
All right. What is this? Well, this is a very, very typical power supply. DC/DC power converter schematic. So, looks a little bit complicated, not very complicated, but believe or not, I got a PhD for that. So, that’s very complicated, right? I’ll tell you why. These devices -- power devices and there is another PhD for power devices, I obviously didn’t do that. I took the device transistor, diode, inductors, all that stuff, and you have to literally pick the inductors first, pick the capacitors because those are the passive * components, you have to select those values, types, and the size correctly, otherwise your circuit is * not going to work.
Now, even you pick all those power devices, you still have to do the loop control, control loop design, and that’s very, actually very complicated, and it’s not trivial because if you don't do the loop control correctly, output is going to go all the way to really, really high voltage, it’s oscillating, it’s going to kill your downstream devices. So, that’s very important and once you finish this schematic, it’s just halfway to the whole process. You still need to literally layout the device on the board and the starter, everything on to the board, and then once you got the power supply, you have to debug it, and that’s really the painful stage.
I still remember in the lab working day and night just trying to make the upper ripple within this pack, it’s not easy. So, that’s, if everything works, it works. If there is one little piece of device I calculate incorrectly, then you have to go all the way back and restart over. So, the message here, designing the DC/ DC converter is not easy, all right.
There are three type of power, DC/DC power converter, converters in this world, and the first one is actually very commonly used in many, many applications. It’s, we called down solution. Well, down solution is definitely not for; it’s definitely not a dummy solution, because you need some intelligence to make it work. If you are looking at this board, the down solution means the power is right here, actually is designed on to the motherboard. So, the motherboard is huge. It has the CPUs, memories, all other kind of stuff and you combine the power mingled together with your entire system, and that actually poses a great challenge for the system designer.
If you make one mistake in one component here, you are going to redo the whole thing, and you have to go back, change the layout, the entire board has to – throw it away * and do a new board, and that’s why it’s so complicated and time consuming, but believe or not, it’s widely * used nowadays today, okay. If you open up any *server board, you’ll see a board like that. So, people think about it. Why can’t we make a standardized module just to replace those little power supply on the board, so that becomes a second level of integration. You take all those components and lift this task to the expertise who knows how to design power, and make this design a fully qualified, fully tested solution, you can just do plug and play, put on the system, it works. If it doesn’t work, get another one and you can save the whole system board. That’s the open-frame module, but open-frame module is kind of big, the reason in because you still use the same technology as the down solution.
So, you have a PCB based, all those components, literally the same as those components putting on the down solution. So, it’s big, it’s not what we really want to do. And here, through the new packaging technology, people started to* think about, can we put -- can we build the power supply just like we build an IC via the chip. So, use the lead frame everything and the bonding wires, here is the multi-die chip, there is a controller and driver, the MOSFET, bottom * MOSFET all connected together and encapsulated. And this technology, we called MCM is a multichip module or multi-die packaging, it’s nice. It’s reliable, it’s compact, as you can see here, it’s very costly because you have multiple dies and you need to have different packaging technology to put them together. It’s not easy to do it. So, that’s very costly.
All right. So, here is what we are doing and we are actually very good at this and we are doing this encapsulated module based on Monolithic Power meaning there is only one chip, one silicon inside that module. We integrate everything into this little die and the package with the rest of the passive components and encapsulate it. That’s our technology, and all you need is input capacitor, output capacitor, and another component, I don't know what is it, but it’s a single component, just put in it works.
All right. That’s the idea, very easy to use, very reliable, the technology; and who’s going to use this device? Here are the opportunities all over the place, but enterprise networking, reliability, important; automotive, reliability important; server, same thing reliability. Everything is talking about reliability and the density. In the cellular tower and medical device, the POS, video * end point, broadband wireless, just name a few, but keep in mind all those devices really need a high density solution and need very reliable power. If the power fails, they fail, okay.
All right. So, how big is the market? We know all those applications, how big is the market, it is this big. So what is this? Actually this is our target and also this is our market. It’s very big, it occupies the entire slide. As you guys can still (inaudible) , three types of power supplies. The first one is the down solution, very complicated but believe or not*, it occupies the biggest market. And the other one, smaller and modulized, easy to use, a little bit more expensive than the down solution, that’s why it goes a little bit smaller market, but it is pretty decent there.
And then we talk about this little multichip package, very expensive. That’s why it only targets at the niche market right in the center of the entire big market. So, what is our position, where, what are we targeting at, all right? So, obviously we’re much easy to use, we’re much cheaper than that for sure. So, we can replace this market, and we’re much smaller and we’re much easier to use than the down solution.
That’s why -- here is my vision and I do believe the entire market, the entire DC/DC converter is our target, because our technology offers the smallest module and also it’s very cost effective. That’s why we’re not talking about only replacing this niche market, but we take them all. That’s my vision and it will happen in a few years, and we’ll see. And why can* we do that? You’re all familiar with this BCD2, 3, 4 revolutionary technology, and I just want to go a little bit deeper into this, because this BCD 4th generation, you know the four power transistors, there are certain key parameters, performance parameters, one is the gate charge, the gate capacitance, gate charge, and the other one is the Ohm *resistance of the device, and third one actually it's very important, is the real die-size.
If we can shrink the die-size means less costly and also means we have less gate capacitance and other capacitance, because the area is smaller, when the capacitance gets smaller we can switch in faster, switching faster means we can reduce lot of passive components size, inductors, and capacitors. When everything goes * smaller, we pack them together and make a smaller module, that's the whole idea behind this, and that for the RDSM, if the arm, the Ohm resistance turns* get smaller, we can put more power, more current out of this little device without having a thermal problem which the other conduction loses.
So, because of that, I am going to show you how we make this module. We got the lead frame, the lead frame is just like a traditional IC lead frame. The lead frame is made of copper, so it's very good heat conductive and you can see that on the lead frame, we are going to put a monolithic die. This is our BCD4 die, it has the driver, has the control, has the power fit everything built into it. The monolithic gave us the ability to do the temperature sensing, current sensing, and also gave us the ability to do the arm die protection. You don't have to sense this signal passed to a different die, then you make decision in sending this signal back to the power device. We all do all these right on the same device, its fast, the key is fast.
All right, so we put that die on this lead frame, and we put a lot of small, small capacitors and inductors right on to the lead frame, and we have the system, it looks like open frame, but wait a minute, we can put -- all the molding compound around it. So, now you look at this module as you can see in the back of the demo, it just looks like an IC, it’s multiple pins, * it’s an IC*, but it's a system instead build into it, right?
This is our MPM module, it's -- I have already explained all that because monolithic we will reduce the [percentage] (ph), so you can run faster because on monolithic, you get a very nice lead frame based, lead frame based so you can -- the die sitting right on the* lead frame, it can take the temperature, the thermal dissipation right through the PC board. So that the device doesn’t get too hot, otherwise, if you don’t have a good way to take the heat out, you are going to have a thermal problem, but our technology -- packaging technology can take that heat out right from the center of the device, right?
You have heard about this open compute project, and the people who had tried to squeeze the entire server board to a much smaller form factor and same CPU 1, 2 same 1, 2 here and the same memory DIMMs, but you can literally tell the board is so much smaller, it's like the half the size, how can you do that, because they squeeze all the power, optimize the power to the corner, up corner of this little open computer server * board and that really gave us the opportunity to fit in the module. The module is designed for that kind of product, and the power optimized to (inaudible) design like this board can provide very low – the lowest TOC* to total operating costs, because you save power, you save the energy, you save the coolings or the air conditioning costs, so that the total data center costs would be dramatically reduced.
Another example, our module goes up to the tower, well I never get a chance to climb that high to take a close look at what's in there, but I do know there's 7 MTM modules in every single one of those devices, and this is called the remote radio unit, it's widely used by the base stations, and you can see here very high density design and you need to make sure it can handle extreme temperature, humidity conditions, sometimes even thunderstorm. And well it's very difficult for a technician to go up there to fix it, so you’ve got to be very reliable. That's where the module really showed a value, okay. And here is the true story and we know we are getting there and very excited about this opportunity.
So what do we have now, we have a lot of modules already, we started to ship this 20 amp modules, and we started to ship this 1 amp * modules for the SSD digital storage and portable devices, and we are working on the 12 amps, 6 amps, and we are also working on second generation of this 20 amp modules which even shrinks the size from 15x15 to 15x12, that’s savings.
We actually have an even bigger roadmap to cover higher voltage range and higher current rating. We have a roadmap for 30 amps device as well, and that's all exciting development going on right now.
How much size actually we do a reduction, we do a comparison, this is a true design, it is MPS monolithic IC right here, inductors, capacitors. Here the total solution size is about 15x16 millimeter square. If we put all that system, same system will run at higher frequency which our technology enables us to do that and we package them, it’s here, is the module input cap, output cap, 4x6 that's about 90% smaller. So very ease of use, only three components, it's just like LDO. Okay. Another good example, here is a design win we have our micro server design win, and this is, you actually can see the board and the demo, and the demo section. This board have a lot of MPS content in it, the micro silver itself requires very dense design, make sure that board is high density, but this is our very dense solution already, 18x24 millimeter and this is again, this is a discrete solution, it’s a down solution like I said earlier. So you have a lot of components externally is a big inductor, by doing the module, if we replace this whole area with our MPM module 2x power density improvement, 2x not to mention reliability, and not to mention this half of the board size savings, you can use for the micro server to integrate more functionalities other stuff in to the board that’s the cost saving as well.
Remember, by doing this, from here to here we don't increase the cost, we are using almost same cost to implement this to replace that, but we saved the total BOM cost because we saved the board area which can save for the customer to use for other functions.
All right. So pretty much here is the story and to summarize we introduced this disruptive technology to the module market mainly because of our BCD4 and our packaging technology and most benefits density and overall system reliability. The target market we will be very high performance enterprise solutions and my vision for module market potential is over $1 billion. And this is end of my presentation but it's I think it’s the beginning of a new journey, new adventure for me to explore more technologies and really excited about it. Thank you everybody.
All right, okay, now we, I think we finally will live up to our name, Monolithic Power Systems. We named, I named the company and with Jim Moyer about 50 years ago. Now, I’m going to let – it’s the first time that Jim; Jim is semi-retired and I let Jim to speak to you. And he is a true in analog power veteran and almost 20 some years in national TIs and then in micro we worked together, then we came out.
So Jinghai has talked about PhDs, Jim does not believe in that kind of things. Jim is a most intuitive way can explain things. And to me, I really understand that, I'm not a circuit design person. And so when Jim see that kind of things he got excited and our board members got excited and probably Jim because it’s very easy way to communicate the message to him not me, I can 't do that. And I feel marketing guys talk better than and so today I have Jim to talk about little things, to talk about this, and also by the way, our field guys complained about, who is this in MPS is sending a few thousand shares amongst our -- 1000 shares amongst – that’s Jim.
I had no idea, I was disrupting anything by doing that. Let's see, what I would like to do is, I would like to find one of Jinghai’s earlier slides back to there. You shouldn't come to Silicon Valley without hearing at least one Bob Widlar story and so I am going to start by telling you a Bob Widlar story. And if you don't know who he is, I apologize but frankly, almost single handedly he invented the profession, the vocation, avocation of analog design. He started out at Fairchild moved to National and in the late 60s, he went to the EEE conference, presented a paper and the paper talked about the presentation, talked about all the reasons you could not build a monolithic linear power 4-inch regulator.
Now there are all these problems, that was heat on the dye causes drift, the die, size got big with the power transistor, it's not cost effective compared to monolithic solution, I mean to discrete solutions of the era. And sure enough everybody bought all of his arguments, went home shaking their head, nodding their heads, yes, Bob is right, we can't integrate all of this stuff and make a monolithic regulator, it's not going to work. And about 3 or 4 months later National introduced LM309, 3-terminal regulator, power on the die, thank you, Bob Widlar.
So, there is your Widlar story and everybody was convinced, it couldn't be done, well he was doing it all alone. Does anybody remember why we started integrating circuits in the first place? There is an interconnect problem, if you go back to the size of machines they were projecting to build back in the middle of the century, the mean time between failure of the (inaudible) joints was only about an hour. As we power up the machine, run for an hour go back with a hot iron and retouch all those -- joints, this was unacceptable. And so the guys at Fairchild, the guys at TI both came up with the idea at the same time, let’s not make discrete transistors, let's put a bunch together and do the inner connect as much as we can on the silicon and then we have eliminated a layer of interconnect.
Look at this, Jinghai just kind of glossed over this. In a conventional design and a conventional integrated circuit for years, for many, many decades we have been putting the die down on the die catch pedal and bring the bonding wires out. So this would have been a lead frame and but the thing that connected, the integrated circuit to the lead frame was bond wire.
So, we picked up a huge amount of interconnect on the die and then we have two layers of interconnect, the bond wire and the lead frame just to get to the front of circuit board. That's not what this does. This die has mounted upside down, okay, there are bonds, so there might have been pads on a conventional die, and the bonds go right through these copper lens, so we completely eliminated one layer of interconnect right away, we were doing this, you have heard the guys talk about the driver MOS. Without this we couldn't have done driver MOS. An integrated circuit designer designed silicon and packaging and power, all at the same time, it's a holistic problem. It's not a problem just to figure out how transistors work on the die, it’s not a problem of just integrating all this marvelous stuff on the die, you have to solve the whole thing.
The reason I got excited about this in the Board Meeting, Maurice put it up on the screen, new product coming out, new market we are going to go into, and I said, wait a minute guys, let’s go back to that slide, this is the part we have been waiting for, we have been waiting for this part, I myself was trying to think how to build it 10, 15 years ago. 15 years ago, we had bond wires and instead of the inductor I was going to use the inductance into the bond wire. Well, it's not practical. The inductance of bond wire is NANO entries. And in order to use that you have to switch it to gigahertz, that's just not practical. But these guys figured it out, noticed bond wires went away, so you don't get that inductions anymore, they put an inductor in with it. And the interconnect did not increase, it did not gain a layer of interconnect and that means you save reliability. They talk about putting reliable circuits upon the power pole to make the radio, to make the cell phone. Why is it reliable?
Because you have eliminated at least one layer of interconnect. You compare this to one of the little modules that we talked about in the middle of the three, remember there is one on the board, look at all those wires, I mean all those, 100 joints, that's awful. The one in the middle has added a layer of interconnect because now you have to connect the little module board down to the printed circuit board. This one, you have eliminated all that interconnect and it goes straight down. So, what did Widlar do?
Widlar took all these things, the reference, an (inaudible), a current limiter, all these things, power transistor, and put them all together. And so you come in with DC and you come out with DC, come in with 10 volts, he came out with 5 volts. What's the, what you did was you took away the job of the guy that was designing the printed circuit board to hold those components on it.
Now, anybody could design a 3 terminal regulator power supply trivial. Capacitor at the input integrated circuit LM309, thank you, capacitor at the output. You are in business. Instead of having your PhD, doing the design on your power supply, now you give it to the new guy fresh out of school, it is a trivial task. When you do this, you have done the same thing, DC comes in DC comes out. You get rid of all these ugly flying nodes in here. You don’t want to let those out on the board. There are two bad things about a power transistor and the switch modes supply, one is the input the gate node, and the other one is the output the switch node.
They are awful these things radiate, but they will interfere with signals and logic right on your own printed circuit board. If you are not careful it will conduct down your cables into the rest of the world. Now you got a radio, you have to license those. So what we have done here is that we can go fast because the node for the gates is all right here inside the die. That doesn’t radiate. The switch node is completely contained inside the package with one end at the inductor.
So now you’ve eliminated all of the noise is down here DC in, DC out. We wanted to do this part 15 years ago, we didn’t have the technology. What every integrated circuit design engineer dreams of is being able to do something that nobody else can do. That’s what Widlar did that’s what these guys have done, okay nobody else has this.
There are not that many people using the flip bump. There are some, but I think we are ahead of them and there is nobody doing this. We have got something nobody else can do and we’ve got probably a two year head start. It is exciting this is going to change the game. We are going to put it in places, and put it in places that you have never seen switches before. Instead of having a simple linear regulator with 40 % efficiency now you have a switcher with 95% efficiency and exactly the same design talent can put it in, anybody out of school can do that. They are going to go everywhere.
All right, thank you Jim. Okay, this is it. While Jim talked about Widlar, I can’t resist to tell you the story. I think you may expect Jim talking about Widlar, I think it is ‘88, when I interviewed with National. And I interviewed Widlar and his cubical was very messy and his buttons just since he is a big belly and it just open up. And he said how are you? When you see me, his hands scratches the butt, and then he said how are you? That was the Widlar, was a true, true genius this guy is. And a lot of people say that we got a Moyer and I said okay, this is a similar level kind of people and I really miss them. But we have a lot of young guys.
So now I am going to talk about a little bit, now you see that audio modules and I am really excited about it, let me clarify just a few things okay.
Jim mentioned that when we started the company, we start a company, we can do, can dream it off, this is a module, okay, (inaudible), immediately ties up DC to DC power supply and make up very easy for them and the bottom-line is we really want to do something other people couldn’t do it. That’s really the bottom line. We end up, we keep doing it.
So we named the company Monolithic Power Systems actually we couldn’t make a lot happen. so we know that our silicon technology the speed is too low and if we build it, we build modules very big and but still smaller than you see it previously. These are open frame module, but they are much costly and so one way to do it, yes we can build that kind of things, but now we kind off sell through a space chips, like somewhere industrial market which varies, you can’t generate revenue so it’s like very, very slow.
So Jim was okay with that okay I said why we just take that – we develop the technology for, whey we just take up to do something else, okay, much bigger. So let’s forget about the module we will sell silicons. So I pull a few slides from the IPO road show and that’s how MPS started. So this is the slide, I presented in the IPO road show. Why MPS can win? How can you sustain it? One of the slide shows is our technical capability.
In 2004, Jim designed this product and we designed the technology. Jim implemented that system on a single chip, basically to replace the analog/digital circuit and a plus four power transistor. And that was the chip took a 70 % of the notebook market and we made MPS. So we all thought that was the slide, okay. Since then probably the story up to 2008, 2009 and 2010 its similar in a one time we got a little complacent, but this technology sells everywhere this product sells self and in about 2008 people catch that okay, buoy we had to do something new, so we developed BCD3 and we keep moving forward.
So we can go back to this one, so this is also from 2004, so at the time of the IPO road show, I am dragging audio speakers from an auto box. The driver circuit is a auto box, teeny, tiny that was fitting to the auto box here. This was about this big. We have 2 speakers some of them you probably still remember that we compare a solution about this giant. So the story is by far similar; we were smaller, we were cheaper and we were better performers and high efficiency that’s our game.
Now, we are really changed by 2008, 2009 somebody before catch that so we have to do something so we started developing BCD3 and BCD4, by 2010 we realized Monolithic Power Systems could make it happen. It’s a really small weekend we are heading in the right direction if we are going to -- keep going to BCD3.5, we can make it happen. So, that’s really got us excited about it.
Along with that there is a lot of technology you remember in 2010, I talk about mesh connect we pull out all these components. This is not easy. You hear probably flip chip, the chip is flipped down okay in a very often Intel’s’ did it – I think the early users for that type of technology. But we are talking about power, that is an entirely different thing because you conduct current, you conduct – and that conduct power through it. These ball grid, teeny tiny ball, you have to conduct current through it, MPS has spent about two or three years to get through that. These are really down to fundamental material research because you have to conduct the current, you can melt and also you have a different thermo expansion between the chips and the inductors and also the lead frame.
And you have to be soft, so we did a lot of fundamental research and made happen and go past all these reliabilities. And the so now we are going forward is a not only IC technology, it’s also packaging we invested heavily in it. And also we also design our inductors to become very teeny, teeny tiny. There are no such inductor existing in the market, so we are not there yet but very close.
We have first few product we have a high current, low current and we catch both ends just to test it out, it was sort of a qualifications is there. And the cost still so higher, but I can predict in the next year or so, if it is not the next year, the year after, I can go every town design including TV our cost would compete with those guys, with the existing solutions that illuminated the entire power design that’s our original goal.
So now we reached (inaudible), that solution became this, we really can pull out audio -- power audio design into that this little package. So in the next couple of years I really feel strongly about it and I have been talking to all the shareholders or potential shareholders that you come here you won’t regret it. So we are going to announce this okay. So because it’s really plug-in and play, plug-in and play probably in a telecom market they use it very, very often, but not in the power semiconductor market you never heard about this. It’s truly jaw dropping work. We are there. We had a few products just behind it and we need to introduce a lot more. You will see array of -- familiar product when we introduce.
The next slide is our growth history. It’s all organic growth. We haven’t learned how to acquire company yet. It’s still cheaper to grow. So that’s a point I gave in the, the IPO road show, this was wrong okay I think this is here, 2004. This started here. There was 21 % CAGRs versus analog and we are doing really well and the reason is okay we focus on the large and the high gross market that was the theme on the IPOs road show. We have a fast growth and by 2010, we walked out of the TV business really we couldn’t see it in okay.
We learned it from that. We set-up at that time by 2009 we announced that we are going to drop the margin by 8% and to squeeze all the Taiwan semiconductor company out because 2008 -- before 2008, TSMC doesn’t have any process. TSMC at that time introduce a process comparable to MPS BCD2 and they start to develop product. They sell products that were 30% gross margins and so MPS stood -- when we thought about it hey, we at that time were close to 60% if we draw 8% we are going to squeeze out of them market, okay.
But 2010, we couldn’t have capacities and so we couldn’t ship enough, the orders over $300 million, close to $300 million in that. At the time we started really thinking hard, and we said we were glad we didn’t do it. That if we shoot up to over $300 million that big shipment we cannot return it, we are going to be a low margin company and with all the technology we started to develop, buoy, we are going to get out of this rat-race market. We altered the business and with the technology used silicon a technology and a mesh connect or we can do a lot of things and we started changing.
So we resumed our growth, it’s still based on the silicon technology now we are going beyond totally the game change. You may see some other modules out there, micro modules what they call it okay, but these are really can’t be compared with the MPS modules .So we are so small and so much higher current, and the cost you can’t even compare. Some of the company that grow $20 million based on the modules but they are four, five times bigger than MPS and they limited their voltage to be 5 volts, but we go all the way to 60 volts. So but there is a fundamental difference between our module and other module but the other module there is a business is not really, so small because way too expensive. So now the new era started and we live up to our name Monolithic Power Systems.
And last slide is an update. Most of you have seen the slide and when we at the 2010 – 2011, we said that okay, the company the revenue okay, the loss of the TV revenues okay, about $30 million, $40million and so we thinking deep in heart what we’re going to do and so we know it we can do a whole lot of better but the module time is the module still not ready yet but that’s the direction.
So, I pull up – so its time – was the time in 2011, I think 2010 -- October 2010 we started to talk, maybe 2011 we started to put this module together what is the possible growth for MPS from the bottom up. So the bottom up is that we can do 70 product per year, 36 months later produce $1.5 million per product which is a very conservative number. So by doing this 2011, 2014, we can end up about $100 million business. These are just a model.
And we keep going for another $100 million and another $100 million, but the life cycle of the products is 7, 8 years or longer. So we are doing that added together plus the existing revenue which has a lot of consumer -- high consumer of low end market of product and with dive down to less than $50 million, about $50 million, added together about 2016 is $500 million. It’s a model and I presented this model since 2011. And but now we have a real track record.
What is a model? In the existing product going down a little faster the newer product goes a little further we cannibalize it, especially these are CoolPower product. We lost some market shares in 2011, 2012 now this year we’re shipping significant amount in EasyPower, we gained a consumer market back. It’s a very good margin product, but although we now really not focus on it but we’re going to grow it. And it may not be a percentage wise but the taller amount this year could grow higher. And so we’re doing really well as the model predicted. All right, okay now next I’ll turn over to Meera to give the financial update.
Good morning. My name is Meera Rao and I’m the CFO of MPS. So you’ve been hearing a lot from all the different Product Line Managers as well as Michael and Jim and one of the common threats that you’d have heard through the whole thing is all these new markets that we growing in and the growth potential we have and this is something that’s very important to us because one of the things that’s always been part of our DNA is that we have a very strong history of growth and that we outperform the market. Since 2008 as you all know there has been a lot of fluctuation in the market, there has been a lot of cyclicality and the analog industry among many others has been under lot of pressure. So the compound annual growth rate for the analog industry for the last five years has been about 1.5% and our performance for the same period is about 9.8%, several times what the industry is able to do and even if you take the most recent year, you could see that in 2012 the spread between the market and us was about 16%.
And if you kind of take a look at this alongside if you kind of measure last year’s growth and weigh that against gross margins we are one of the few companies that actually grew last year and had a gross margin that was a north off 50% so we are in the upper right hand quadrant which is I think the most favorite place to be. What makes this achievement even more significant is that all our growth was organic, we are one of the few companies here that has grown organically. If you take a look at companies when we did a quick research these are the only companies out there that have not relied on M&As to fuel their growth and you can still see highlighted here, how well we have been doing in terms of both our gross margin as well as growing our revenue. This is all the past, but what you have heard and I’m just pulling together the new market served available market that you have heard, the different presenters present today. And just these new markets that we spoke off today kind of increases our SAM by about $4 billion.
To think about it, if we got 10% of this business or even 5%, you’re talking about anything between $200 million to $400 million of incremental revenue and this doesn’t include anything, it does not have the HDD market, this does not have the consumer market where we also started to innovate particularly markets like gaming where we are doing things. We haven’t talked about various portions of what I call a traditional gateways where we have got innovations plus we have got other markets that we are targeting that we haven’t yet talked about publicly. So you take all that from a revenue growth standpoint, the kind of gives me a lot more confidence that we’re on the right track to continue to have very strong growth. You might have also noticed the kind of markets we are talking about here. These are all markets that value technology these are not like consumer markets where it’s mostly about cost.
So, as you can imagine, this is also going to translate into higher gross margins so right now what we expect that as we go out you’re going to continue to see all the markets grow in dollars including consumer but we expect that the other three markets will be the ones that will grow more as a percentage of revenue as well and in communications we’re particularly excited about the revenue streams that we see coming in from networking and telecom. And when I’m talking about storage and computing I’m talking about SSD, HDD and Server opportunities which are high quality opportunities that will also pay us a premium for our products and industrial and automotive is another market which as you know is the stickiest of all the revenue and great gross margins.
So all in all we have a story that combines both growth and revenues as well as gross margin expansion and one of the questions we have got over and over again has been about our long term model, you know the last one we introduced was in the summer of 2010 when we were largely focused on consumers, at that time as you can see about two-thirds of our revenue was from consumer and half of that consumer revenue was all from TV. And we had a model that we had shared, while we knew our product our strategy had changed, we didn’t want to come out with a new model until we felt we were closer to delivering on what we are talking about and I’m happy to say that we now feel comfortable sharing with you our new model.
We expect to still focus on operating margin. We believe that 25% to 30% would be one of the best operating margins that’s delivered out there. All my numbers here are non-GAAP by the way. So talking about 25% to 30% of operating margin we expect revenue to grow very strongly 20% to 25% back in the days when we were very consumer focused we used to talk about 25% to 30%. So we are 20% to 25%, but we still believe we have got very strong growth just looking at the kinds of innovative things that we have done I mean the modules that we talked about are going to be something that’s going to sweep all across the board every single sector there is.
At the same time, we expect our gross margins to expand and so our gross margin range that we are projecting right now is 53 to 58 and I’d like to remind everybody that our most recent quarter we were at 53.2 %. We expect our R&D and SG&A model is going to be slightly higher than what we had when we were in a consumer market and this is also reflecting the kind of products we are developing as well as the markets are going after. But combined with the revenue growth we believe that long term we would be able to operate it about 14% to 16 % on an R&D basis and about to 13% to 15% on an SG&A. And given that we have been very effective in keeping our tax rate between 5% to 10%. We expect that our net margin would continue would be in the new model would stay at the 22% to 27%.
With all these revenue that we have generated we have always been cash flow positive and one of the questions we always get is what is our capital allocation. And when you look at our balance sheet we have a very strong balance sheet, we have no debt. We have at the end of last quarter we almost had $5 of cash per share.
What I like to share with you is what we have done historically on capital allocation. We have done two stock buyback programs one in 2008 the second one in 2010 and 2011. We also did a special dividend last year. And if you look at the combined impact of that we have returned over 40% of the cash that the company has generated to shareholders either through these buy backs or through dividend. So I know there is a lot of interest right now particularly in capital allocation and dividends and we have been asked again and again to come up with a balanced approach that takes into consideration something that includes dividends, buybacks and technology allocations and this is something that we have been analyzing, we have been considering. It’s not something that I have an update to give you right now except to tell you that we are looking at this very closely and stay tuned.
Of course the last order of business I have here is to talk about the current quarter. We have been looking at business units like just a tremendous amount of design activity. And when I look at the design wins, we have got some really, really good design wins, it’s the number of design wins, the quality of design wins. These were the design wins that Michael had been planning when he kind of rolled out the model the plan that gets us to $500 million and we are seeing some of those design wins come in. And during this quarter we’ve continued to see orders flowing in. We’re also noticing a kind of an interesting situation right now, we see some customers who are asking for orders to be pushed out because they’re seeing softness out there. At the same time we are seeing many other customers asking us to pull orders and expedite they’re increasing the orders that they’re placing out there.
So we’re seeing a market that seems to some people are seeing slowdown but some people are just seeing the need to push forward. So it’s kind of a very interesting market to us from that standpoint. And against that backdrop we’ve kind of updated our guidance for this quarter we expect to be in the $56.5 million to $58.5 million. We expect our gross margin to be 53.3% to 53.7%. Our operating expenses non-GAAP R&D and SG&A we feel it can come within the $21 million to $22 million.
And lastly, our stock comp we expect about $4.9 million to $5.4 million. Many of you have heard this before, but about two years ago as we rolled out our plan to grow to $500 million dollars. We also put into place equity plans that were closely tied in to the performance we wanted to kind of the growth measures that we have. And the GAAP rules are such that as our design activity increases as a probability of hitting these higher revenue goals become probable, we have to start accruing stock comp expenses and that’s what you’re seeing reflected in here. I know a lot of you are going to – many of you are going to ask me about Q3 but I just want to kind of head that off with a pause and tell you that one we only give an update for the current quarter. We still see orders coming in nicely for next quarter but it’s way too early for us to call and particularly given the mix signals that we’re seeing in a market we would really be a lot more comfortable waiting for next quarter to be able to give any more guidance.
And at this point, we’ve been talking for about two and a half hours and so I’d like to turn it over to you guys and have you ask us any questions if you have. All the presenters are in the room and feel free to ask any of us any questions that you have. I think Jennifer will be coming down (technical difficulty).
We just had a QBR reviews for all the product line in a sales region all the number here at the consumers site enables next year we’re going to call, sorry okay.
So we’re seeing basically is a migration. Last year we were competing for business, we were competing for the new consumer modules were the new BCD3 based CoolPower family of products. We were not competing for the older business with the BCD2 because of gross margin considerations. And our customers had delayed the rollout of their models because they had inventory of the older models. But now as they have depleted that and they’re rolling out the newer models we are seeing a traction in our revenues again.
Also remember that and you’re going to see that, we saw some of them coming in Q1, we’re seeing so the rest of them come back into Q2. Combined with that, as long as the macro conditions continue being the same Q2 and Q3 are typically the stronger periods that we have for consumer and this year in particular we also have additional revenue coming in from some consumer markets like we have now got some gaining win that we talked about.
So we got a few other things that are in there so this year is most probably going to end up flat maybe a little more. But for next year we can say with a lot of confidence looking at the design wins that we have that it’s going to grow certainly in dollars. What we have been targeting with all our product deployment and everything is to grow the other end markets even faster so as a percentage of revenue yes it could be lower next year but I do expect all of them to grow.
Thank you. And l had a second question for Jinghai. I don’t know where he is, we expect him. So with the module business you talked about 20 amp and 2 to 3 amp product sampling now or maybe they’re getting some design wins. Could you give us an indication on what thoughts or applications you’ll be seeing in the first revenue with your module for business?
Well the first design win we have is on the – I showed you on the radio the more radio unit and that’s the one that goes through that goes to the tower and it’s been a high reliability.
I just had a question on what you’re seeing from a competition catching up on BCD3 I know eventually you saw them catch up on BCD plus or BCD2. Are you seeing them catch up on BCD3? And then the second question is, is BCD5 on the drawing board and if it is can you get the same kind of benefits you got from BCD3 and BCD4?
So far I haven’t I don’t see any response from the large – either large company. And we monitor the Foundry. Foundry is really our competitors and no response. And Foundry they want to sell us wafers so we every quarter, every half year we ask them to give us about how many shows I’m not going to end up, no they are merit because they follow us in us. And second part of that the BCD5 so I’m not going to draw even a fact whereas BCD5 all the (inaudible) announced.
So you’re testing BCD5?
Okay. And will you get – do you think you’ll get the same type of benefit you got that you have on BCD4?
Wafer cost probably would be higher and the silicon cost will be higher but we don’t really care it now so like I want just get the technology ready and in two or three years later we’ll be in the price will be same as although I mean you need to set up your amounts.
Thank you. I had a question for John on the AC to DC market, you’re a new player there. There are some established players in the market that historically have used their patent portfolio and IT protection to several lot of people. So could you talk a little bit about your technology in this market I mean focus little bit on the architecture, is it different enough where you would not face some legal actions from some of these established players in the market.
Yeah, certainly. Can you hear me? Yeah, there is always that risk but I believe that first of all the Smart LDO that we talked about, we’re actually ahead of the game there and have our own patents on that and the only ones on the market with that. I believe we’re definitely focused on the next step so we’re not trying to look to see what – I’m not too concerned about what’s on the market now we’re trying to see where the market is going and have products going forward and making sure we’re patterning those accordingly. So yeah there is a lot of tough competition out there but like I said on the presentation I feel really good about our technology and the ability to make it easy for our customers.
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It is our competence knowing our history, plus we don’t have to find, rather competing in a market.
All right. I had a couple of questions, the first one, your full year growth target seems to be a little bit more fine perhaps a little bit more realistic at 20 to 25. Can you talk about this kind of the thought process behind data number?
Sure. When you look at it, in the consumer market if you go after something like TVs or notebooks or something you can get turn on a huge amount of revenue at one point, whereas we are going into a lot more diversified approach and some of these markets particularly when you go into industrial or networking, they kind of grow a lot slower. Relative to consumer market but we believe that if you had 20% to 25% growth, we would be far way and above the highest growth out there anyway. And so when you kind of consider the quality of revenue, the kind of gross margin expansion we are talking about. We think 20% to 25% is a pretty good number.
I think we all agree, it’s a pretty good number. Second question on, Mr. Bob, just on the computing side, you guys kept showing the open compute port, can you talk about some of the early success we are seeing just with that the server type of business.
Yeah, absolutely. On the server space there is a process that you have to go through when you are engaging with the server customers. We first started out with a lot of our pointed load regulators and I have to say that we have had probably unprecedented response from our point of load, our regulators that were working with all the major ODMs, in Asia and also in North America specifically at the targeted top OEMs that you have imagined. We got designer activities with all those guys. So, that process is proceeding, co-power is also proceeding on some smaller levels but there is design activity across our entire portfolio for server.
Okay. And just – are we going to see some activity before the Grantley products start to roll out?
Yeah, there is activity before Grantley.
Perfect and just last question for Katherine. On the SSDs, sounds like you guys are doing a great job in PMICs right now. Can you talk about what the competition looks like, I feel like if I’m some other company, I see you guys are doing really well there, why wouldn’t I want to also kind of do the same thing?
Yes, certainly. Well, the PMIC that we have that is right now industry first and probably the only solution out there. It is our patented architecture. So even if competition once they copy, they maybe shying away from it because it is an architecture. And as we said earlier, it is our disruptive, leading technology that allows us to do this type of integration. So with other competitors trying to do they may not have the same ability and really so far, I have not seen this type of integration to provide this type of solution to address the power, the protection, failure from the competition.
We knew. With the inductors, with the capacitors, there is a module. And we want to know. And they accept the higher price and some other companies are selling the module to SSD market. Now, we can provide much smaller service in a much lower cost.
When we are going to see that?
Now, it’s happening now.
Meera, you referenced already in your gross margin target range of over 53%, how should we think about the progression towards the margin target and timing there?
Our goal to the extent that we can do it is to continue to expand our gross margin. We don’t wanted it to be spiky or bursty, we want the kind of have it, kind of progress and you are going to see even as we go through this year and particularly as you go into next year and the year after you are going to see the gross margin grow a lot.
And the operating margin?
Operating margin, operating margin currently – operating margin is lower than the model that Vijay shared. But as our revenues increases our OpEx would also increase some but our OpEx will not increase at the same rate as our revenues and you are going to see such thing, our operating margins start approaching the 25% to 30% margin the target that we have.
Meera, follow up on the gross margin question, I’m just curious how much of that margin expansion is predicated on cost reduction and kind of continuing on with BCD3 and then ramping BCD4 and BCD5 I guess eventually and how much of its based on just improved mix?
I would say by and large, it’s based on an improved mix, we will also take advantage of every as if necessary, we will take advantage someway down the line. If a competition every comes up with a process that’s comparable to BCD3 and they start competing particularly for consumer market. We will then be able to use our BCD4 at that point to continue our composition in the consumer space. But for our we are using BCD4 to go after the high-end market opportunity and so I would say to sum it up again that is largely mixed driven. But, if we need to fight for cause, we will.
And maybe this is for Michael or maybe for Meera, but we are talking about BCD5, maybe number one, if you could get a sense of when it would start to go into production start becoming a more meaningful piece of revenue. I mean is that two years away or what’s the kind of cadence there?
And the second part of the question is, how long does that sort of continue, so should we think of every one to two years you guys kind of keep introducing like BCD6, BCD7, I mean, does that is business keeping going, this is the new pattern.
Maybe I’m going to speak to some of BCD product. BCD4, in the lower current level, I don’t see any thought only, I’m sorry, okay, we see a benefit is increase switching frequency that will reduce other components size, okay. That’s our next generation power -- EasyPower, if we defend the consumer size doesn’t end up very simple strategies. But on the BCD5, I think that’s a – I said the cost is high and also we are talking couple of years away and we at this time only see only benefit as we increase the speed – quadruple speed and that benefit is a module that’s the reason we really develop. Beyond that I don’t know. We don’t have any claim for that now.
Any of these new processes (inaudible) when you did the BCD product that they can be of 12-inch, I mean what point do you guys make that transition, is that still…
So for the BCD product, maybe 4.5 where we mentioned (technical difficult).
I think Meera, you showed a slide where your analog peers really struggled with growth last year and there are few comments that still (unclean) model like power. In an environment like that normally you would see some pricing pressure, I just wonder if you could comment on – if you are seeing pricing aggression from some of your larger competitors or some of the Taiwanese competitors in response to that store growth as they try and gain market share?
The consumer market in particular is a market where you always see pricing pressure, I mean this is a market where every quarter there are price downs. The difference between our competition and as the Taiwanese guys that they already operating on 20% to 30% gross margin right now. They don’t have a process that allows them to drive their cost lower and given that the dye size and everything stays the same. There is only so much package innovation they can do also to drive the cost. If they go for any further price downs that are even more aggressive than normal they are taking it all out of their gross margin.
The way we can compete on prices, we are taking the advantage of the dye size when we go to CoolPower plus all the packaging technology innovation that we have done and many of those things that we did for some of these higher value products and market opportunities that we have and we are combining the two together and we are able to price compete and yet keep our gross margin. So it’s like that we could kind of drop the prices a lot more than they could.
So, and then at the end of the day if we need we can move over to BCD4 at some future point if they really get the prices that low. So, we have a strategy that kind of gets to there but right now we don't see the need too because the competition isn’t there.
So, the BCD, okay, the BCD4 is not a size, it’s not a chip cost reduction anymore, it’s a total system cost reduction because we bump it up the speed and also to answer your first part of the question is, there was large semiconductors that responded to MPS and it was clearly responded in a 2008 and I don’t see it --
You know in a –
Actually just one other one, last one, one more Michael, today in the presentation, you highlighted a lot about technology and products but you didn’t spend any time on sales or distribution strategy, I was wondering if you can just give us a quick update on maybe how the sales and distribution strategy is similar and different to a few years ago.
Yeah, obviously, part of it is having our product lines and okay, and it’s a really a marketing clinching direct our sales – people how to sell and want to make and would full fill that and start from (inaudible). The sales log on the sales side and the North America, we add up four people and we replaced two guys and seven in the Europe and we increased four peoples. And these are very costly. And so I was criticized that our net earning not going up. So, I hold out for that and achieve the balance growth.
I was always on conservative side of the spending except just in the gate. I hear, our shareholder right away. So I hold on.
If I can just add one a quick comment there. One other things that we have been doing from the sale side in the last couple of years as we have hired sales people who have expertise in selling into market that we were targeting a year or two out, we’ve done this a very effectively in automotive, in storage and in servers and several other markets. So, as we have rolled out to newer markets that we want to target, we are most probably continue the strategy because we had founded to be very effective for us.
Just in terms of, if you can compare today versus 12 months ago, the switching opportunity tell us one of the timing to number of customers and maybe any changes in terms the addressable market there over the 12 months?
In terms of number of customers, we’d mostly sell through distributors and goes number of end customers. Some of the customers that they have gained recently have been large companies. So, it doesn’t dramatically increase the number of customers since we also sell to many smaller, it’s the quality of these customers and the potential we have that this kind of makes it exciting because many of these customers, the first revenues stream, the first product and the first revenue stream is what’s getting us on the approved vendor list. And once we are on their approved vendor list, we have a potential to do a lot more associated sell once we are in there.
Just in terms of, if you compare that expectation today versus 12 months ago that were slid, are we right on line with your expectations?
Yes, if you can see, my last slide, the score card, and after two years, we delivered as we planned. Going forward as our expectations, our customer content shifted and I may not go for the mega market, we’re more concentrated on the steady state of sustainable growth. That type of a customer.
Just a quick question on the revenue model, what speed does the market need to grow at for you to do 20 %to 25% growth and your revenue model in Europe, what would be the CapEx, what would be free cash flow as a percentage of sales in that, in that model?
Let me, I’ll answer first part of it. The market growth is obviously faster, much faster than the industrial growth. And there is not a single market segment, we target on multiple as you see the product line people presented and those markets will grow significantly. It really doesn’t matter, it’s a upturn or a downturn. So I get what it matters in some. So, in some, it’s downturn and then they push out the projects like but MPS stock on this almost zero, and we shall grow. And so there is no particular market. It’s all set to hit that would be great. Okay.
And if you look at the free cash flow and all use in EBITDA, it’s an easier measure to score against, the EBITDA that we generated last year was about $45 million. So, if you think about it, the only thing that we have that would take it, we change from the operating margin as a depreciation and the depreciation is about $2.5 million roughly a quarter. Sure, some of it will go up as revenue goes up to and we add more test equipment over there. But I would say you take adjust that out of the operating margin and everything else is free cash flow. So, we’ll be generating a fair amount of cash.
Thank you. I had a question for Giampaolo on the smartphone side, where is Giampaolo?
Yes, I’m here.
Over there. Could you talk a little bit about how you expect to see the business ramping, you talked about maybe 10% share over a certain period of time but obviously the smartphone market is pretty hot right now but there is a lot of chatter out there about this fast charging technology. So, how should we think about that business over the next year or two?
Like I mentioned in my slide actually one of the last slide, right now we have a very good foothold in Asia. We are winning a lot of designs at different customers. For us the focus is really to provide value to our end customers, the value engineering that I was talking about. So, in the future we’re seeing a lot more integration than just switching charger right and that is going to allow us to provide the major benefit to our end customers from safety standpoint from a fast charging standpoint, we kind want to put together a very control system where we can provide very accurate reading of the batteries and obviously accurate benefit to the cell phone. So, here again, I think the growth will come through putting together a lot more content rather than just switching charger alone.
I think the answer to the (inaudible) question is that in the smartphone segment. I can directly answer to you probably he talked about that answer twice, just smartphone effective. I answer for you now. Smartphone, we have very little design, very a few design. So, if we have some probably at the low end market, smartphone in Asia but we do have a lot of design, we haven’t patented yet.
I think we have time for one last question.
That’s all. Well, I’ll see you next year. Okay, not, not see you. I’ll see you, I mean in the next few months, I will see you next year here. Thank you.
Thank you all for coming.
I want to disappear.
Okay, one last…
Okay. We also prepared some lunch. Just staying you can take away, some of you or other have to catch up plane. You don’t have time to eat. So, we will (inaudible).
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