MediaTek Inc

TWSE:2454

Earnings Call Transcript 2022-Q1

[Operator]

Welcome, everyone, to the MediaTek 2022 First Quarter Investors Conference Call. Financial results and presentations for today's call are available on the Investors section of the company website at www.mediatek.com. And now I would like to turn the call over to Ms. Jessie Wang, the Deputy Director of Investor Relations. Ms. Wang, Please go ahead.

[Jessie Wang, executive]

Good afternoon, everyone. Joining us today are Dr. Rick Tsai, MediaTek CEO and Mr. David Ku, MediaTek CFO. Mr. Ku will report our first quarter results and then Dr. Tsai will provide our prepared remarks. After that, we will open for Q&A.

As a reminder, today's presentation will provide forward looking statements based on our current expectations. The statements are subject to various risks and factors which may cause actual results to be materially different from the statements. The presentation materials supplement non-TIFRS financial measures. Earnings distribution will be made in accordance with financial statements based on TIFRS. For details, please refer to the safe harbor statement in our presentation slides.

In addition, all contents provided in this teleconference are for your reference only, not intended for investment advice. Neither MediaTek nor any of the independent providers is responsible for any actions taken in reliance on contents provided in today's call.

Now I'd like to turn the call to our CFO, Mr. David Ku, for the first quarter financial results.

[David Ku, executive]

Thank you, Jessie, and good afternoon, everyone. Now let's start with the 2022 first quarter financial results. The currency here is all in NT dollar. Revenue for the quarter was $142.7 billion, up 10.9% sequentially, and up 32.1% year-over-year. Gross margin for the quarter was 50.3%, up 0.7 percentage point sequentially, and up 5.4 percentage points year-over-year.

Operating expenses for the quarter were $35.3 billion, compared with $34.1 billion in the previous quarter and $28.3 billion in the same period last year. Operating income for the quarter was $36.5 billion, up 22.7% sequentially and up 80.5% year over year. Non-TIFRS operating income for the quarter was $37.8 billion.

Operating margin for the quarter was 25.6%, increased 2.5 percentage points from the previous quarter and increased 6.9 percentage points from the year-ago quarter. Non-TIFRS operating margin for the quarter was 26.5%. Net income for the quarter was TWD 33.4 billion, up 10.8% sequentially and up 29.6% year-over-year. Non-TIFRS net income for the quarter was $34.5 billion.

Net profit margin for the quarter was 23.4%, same as previous quarter and slightly decreased 0.5 percentage point from the year-ago quarter. Non-TIFRS net profit margin for the quarter was 24.2%. EPS for the quarter was $21.02, up from $18.99 in the previous quarter and up from $16.21 in the same quarter last year. Non-TIFRS EPS for the quarter was $21.71. A reconciliation table for our TIFRS and non-TIFRS financial measures is attached in our press release for your information.

And that concludes my comments. Thank you.

[Jessie Wang, executive]

Thank you, David. Now I would like to turn the call to our CEO, Dr. Rick Tsai for prepared remarks.

[Lih Shyng L. Tsai, executive]

Good afternoon, everyone. MediaTek delivered very solid first quarter results. Quarterly revenues exceeded guidance range at TWD 142.7 billion, growing 10.9% sequentially and 32.1% year-over-year with growth coming from all 3 major revenue groups.

Now let me share our views for market demand and then comment on our 3 revenue groups businesses. In recent months, we have seen global macro-economic challenges, including inflation and geopolitical conflicts. These challenges inevitably impact the supply and demand of our industry. However, MediaTek is expected to grow in this environment with our leading product portfolio, technology migrations and market expansions across products.

With that, let me comment more specifically on our 3 revenue groups for this year. First, mobile phone accounts for 53% of total revenue in the first quarter. It grew 28% year-over-year and 13% quarter-over-quarter, mainly driven by higher 5G shipments and our flagship entry. With some softening of demand for global smartphone shipments, we now believe 2022 global smartphone unit growth to be flattish year-over-year at approximately 1.35 billion units, compared with our prior view of low single digit percentage increase.

However, our view of 50% global 5G smartphone penetration for this year remains unchanged, which now represents approximately 660 million to 680 million units, a bit lower than our prior estimate of 700 million units. Nevertheless, it still represents approximately 30% increase from last year. For MediaTek, we expect our 5G shipments to regions outside Mainland China to double from last year driven by new 5G model launches and share gains in the global market.

Our flagship and high-end products, including Dimensity 9000, 8100 and 8000 demonstrate industry-leading performance in computing, multimedia and power consumption. Numerous smartphones using Dimensity 9000, 8100 and 8000 hit the market in the first quarter, which were highly recognized by consumers and some of the models are among the best-selling products.

There will be more Dimensity 9000 flagship models coming in the second quarter and available in more regions starting second half of this year. Furthermore, we expect more models adopting high-end Dimensity 8000 series to ship in regions including Mainland China, Europe, India and Southeastern Asia in the second quarter and beyond.

In addition, our millimeter wave SoC is on schedule to ship in the second half of 2022 and pave the way for MediaTek's further expansions in the global market. As for 4G market, we have expanded market share in the global higher-end models, which enables us to further expand market share globally and 4G revenue. Thanks to our 5G and 4G global share gains, we are quite confident in continuing to grow our mobile revenue this year.

Now let me comment on revenue group of smart edge platforms, which accounted for 39% of revenue in the first quarter. It grew 35% from last year and 7% from last quarter, mainly driven by WiFi 6 migration and mix shifting towards higher-end solutions across products such as TV and tablets.

We see similar technology migration trends in smart edge platforms revenue group, which lead to higher blended ASPs and revenue growth in spite of the recent market softening. We expect revenues from WiFi 6, 5G thin modem, 5G tablet, 10G-PON and 4K smart TV to grow strongly in 2022.

Moreover, we continue to expand market shares globally through global telecom operators, PC OEMs, automotive and ASIC customers this year.

With technology migrations and market share expansions, we expect smart edge platforms to grow strongly and contribute the largest revenue growth for us this year.

Now moving on to power IC, it accounted for 8% of total revenue in the first quarter and grew 52% from last year and 21% sequentially. Revenue grew across multiple usages in the first quarter. For this year, we expect demand for power IC solutions from 5G and WiFi 6 migrations as well as our growing businesses in fast charging, automotive and industrial related applications to keep our business robust.

Looking into the second quarter, we expect all 3 revenue groups to grow sequentially with mobile phone growing the strongest, thanks to the ramp of our flagship and high-end Dimensity 9000, 8100 and 8000 products. Robust 4G demand and growing WiFi business also support company growth.

We expect our second quarter revenue to be in the range of TWD 147 billion to TWD 157 billion up 3% to 10% sequentially, and up 17% to 25% year-over-year at a forecasted exchange rate of TWD 28.5 to USD1. Gross margin is forecasted at 49%, plus or minus 1.5 percentage points. Quarterly operating expense ratio to be at 24%, plus or minus 2 percentage points.

In summary, MediaTek is now in a very strong global market position backed by our leading and broad product portfolio, which enables us to better deal with competition and market uncertainties. Our strategies of 5G, WiFi 6, 10G-PON and 4K smart TV product migrations, geographic expansion with global customers and penetration into high-end and flagship segments lead us to ample growth opportunities. We believe we are on the right track towards our 2022 revenue growth target of 20%, gross margin target of 48% to 50% and 3-year revenue CAGR target of mid-teens percent.

Finally, let me add a comment on our cash dividend. Our Board has approved a proposal for cash dividend of TWD 73 per share, which represents a total amount of TWD 117 billion returned to shareholders. With our solid business outlook and cash dividend program, we remain committed to create value to shareholders.

This concludes my prepared comments. Thank you.

[Jessie Wang, executive]

Thank you, Rick. We are now ready for Q&A session. And we're pleased to have the first question, operator?

[Operator]

[Operator Instructions] The first to ask questions, Randy Abrams from Credit Suisse.

[Randy Abrams, analyst]

A good result and showing good resilience as well. My first question I wanted to ask on the outlook. First on the gross margin where you reported above 50%. So congratulations. For the guidance back to 49% at the midpoint, is that just to reflect conservatism to keep it back to the rents you've targeted for the year? Or do you see a little bit of sequential margin coming down?

[Lih Shyng L. Tsai, executive]

Randy, I think that actually is mainly reflective of the fact, as you know, last year, especially starting from fourth quarter, a lot of vendors started increasing their price basically that will increase the cost to us. And on average side, I think gradually those higher cost inventory was blending in into our inventory. So you're going to see cost side will slightly increase basically due to the cost increase.

[Randy Abrams, analyst]

Okay. Okay, yes, it is -- but it sounds like still confident on 48% to 50% for the year, so a little bit of the cost impact. Hey, I wanted to ask on the pricing on -- given you've factored a slower market demand for units, I think 2 sides to it. The inventory balance moved up again. Just how you're feeling on your inventory levels? And in a slower market, what's the expectation for pricing? Do you still see with the flagship and improvement on different tiers the ASPs on a blended holding up? And then how do you see like-for-like pricing over the next few quarters?

[David Ku, executive]

Randy, why don't I commenting about the inventory first and I'll have Dr. Tsai to talk about the condition. I think long story short, I guess right now due to the disturbance and also a lot of moving factors, for example, the COVID situation is still somehow impact the supply chain. So overall, I think from our customer side, we do see actually, they're trying to keep certain inventory reserve and move back to our own on and on the MediaTek side. I think if you're judging from the DoI, days of inventory, we do believe actually that normal days, okay, "normal days" may be in the range of 90 days plus-minus. But consider the current supply chain situation, including COVID disruption I talked about earlier, and also the overall -- the 5G wholesale capacity and also the cost consideration.

I think strategically, starting from fourth quarter last year, we do feel that the inventories -- now you see our data inventories around 100 days. But we do see that retail will gradually coming down starting from Q2. So we see the inventory on hand and overall is healthy. So that's -- I think that's on the inventory side. And I probably should hand to Dr. Tsai to talk about the second part of the questions.

[Lih Shyng L. Tsai, executive]

Randy, I think the pricing, especially associated with competition, has been raised. So -- a question for us. So I'd like to make a few comments on that front. I have a few points to make. Number one, in principle we do not believe a race to the bottom is a good or effective strategy. We do not believe race to a bottom is a good or effective strategy, I think that's our principal.

And then our target, the management's target, is to manage our profitability so that we can continue to invest heavily for our future growth. So the management's job is to maintain our profitability, hopefully in turn to continue to invest. We will not kind of pull back from investing for the future.

And number 3, I think the pricing strategy, well, in this market environment does not really generate much incremental demand. It is the -- I think that's usually the case. And given -- as David just mentioned, given the current semiconductor supply chain situation, we -- if anything, we will be more disciplined in product mix management and our pricing strategy to leverage our valuable capacity.

So we believe in -- I guess, however, in conclusion we believe strongly that MediaTek now is in a very different global market position. Especially compared to the past cycles against our competition, we will manage our profitability, as I said, so that we can continue investing. We will protect our company's value. Thank you.

[Operator]

Next one to ask questions is Sunny Lin from UBS.

[Sunny Lin, analyst]

Congrats on the strong results and good guidance. My first question is on your market share for 5G. If we recall, back in 4G MediaTek had a 40% market share in your addressable market when the technology became more mature in later years. Now any views on how much share you'd be able to get in 5G as your competitor supply start to normalize into second half of the year in 2023?

[David Ku, executive]

I think overall the market share, as you guys can see from a lot of property information certainly from the volume share perspective. I think we're doing pretty good both in China and also in the global market. Based on our strong market position and more importantly with our very strong product portfolio across all sectors which -- including entry level, mentioning also the -- and also right now the flagship, we do have strong confidence to maintain the current market share and maybe even to -- manage to create an increase in market share for the flagship because in the past we were in the very low market share situation.

[Sunny Lin, analyst]

Got it. And so, my second question is on -- also on the pricing side. So now, looking at 5G SoC pricing, although it's already in the third year of introduction, it's still at a meaningful premium over 4G and so that's probably been supported by the supply chain tightness. And so now as the supply gradually improves, what's your expectation on how that price premium may evolve next 2 years to 3 years?

[David Ku, executive]

Well, first of all, I probably need to clarify that the 5G [ clearly a much high ] ASP is actually mainly due to the technology migration, not due to the supply chain tightness, because you can judge from the gross margin if it is due to the supply chain tightness, mainly you're going to see the gross margins increase substantially. But in the last few year, we gradually increased our gross margin, mainly due to the product mix increase rather than the supply tightness. And also I think in the last few quarters, we're kind of talking about our pricing in general is a strategic, really and is optimistic. So we didn't really just increase price spontaneously due to the supply chain situation. So I want to clarify that. So again, because of that I think 5G ASP versus the 4G ASP is still a huge difference. I won't say premium. We're using more wafer clearly because the circuit and also the technology is just very different. So we do believe that gap between the ASP gap between 5G and 4G is probably going to stay there, unless some market has come out totally different this time. But in the near term, I guess, no one can get the features.

[Sunny Lin, analyst]

Got it. Maybe a quick follow-up. So in terms of supply, are you seeing any improvement on the foundry side for next couple of quarters and any expectation for the foundry cost increase?

[Lih Shyng L. Tsai, executive]

We believe foundry, especially leading-edge process foundry capacity, remains tight, especially our -- or actually our only major foundry source. But as they reported, they are also facing supply chain constraints. Staying on that, but it's also important to point out that despite the tightness of the leading edge process capacity, we are getting, I think I would say a right amount of supply that we can meet our customer requirements in general. As to the mature technology capacity, I think situation is probably somewhat different from the leading edge. We feel also rather to -- reasonably comfortable with the mature technology supply also.

[Operator]

And right now, we are having Laura Chen from KGI.

[Laura Chen, analyst]

Can you hear me?

[David Ku, executive]

Yes, we can hear you, Laura.

[Laura Chen, analyst]

My first question is about that we've seen that MediaTek really have a very great progress, not only in 5G, but also in the smartphone -- and now smartphone business such as networking and the connectivity. So I'm just wondering that if there is any plan for MediaTek in computing or PC business or even like a PC peripheral like interface. Can you help us to have more color on MediaTek plan in the PC or peripheral space? That's my first question.

[Lih Shyng L. Tsai, executive]

Okay. First, MediaTek is now in the PC business, mostly through the Chromebook sector. We do have, we believe, very strong technology capabilities from CPU, GPU as well as the multimedia, et cetera, to play a significant role in the computing area. Thinking about that, we are not a big player right now in that space. It is our intention to move into that space as we have greatly improved -- enhanced our computing capability over the past several years. So yes, indeed we are progressing into that space. As to the peripherals, we are still looking at it. The size of the market is quite different from the mainstream PC, so we are first looking at the sizable market first.

[Laura Chen, analyst]

So what kind of products we may expect to come out from MediaTek in the following like 1 year or 2 years, just like from those application process, or for Chromebook. I'm also wondering that if we plainly have like combo solution for like WiFi plus some interface connectivity for PC peripheral or can you give us some more color on what kind of products are we aiming for?

[David Ku, executive]

Laura, I think, first of all, I think, in addition to what else we talk about, I think for the peripheral, I think right now at least for WiFi, those for WiFi 5 and WiFi 6 and also for PMIC, already actually have quite a good exposure on the PC side already. If your questions is specifically talking about say high speed interface, right now it's actually not all focused yet.

[Laura Chen, analyst]

Okay, very clear. And actually my second question is also about the power management and IC. I think Rick already mentioned that we see a very strong 22% year-on-year growth in Q1. So I'm just wondering that could you give us more details on the application breakdown? And given we see recently some macro uncertainties, do you also see more softness in the power management and IC order flow?

[Lih Shyng L. Tsai, executive]

Well, Laura, our power IC business actually covers -- as you can imagine, covers a really wide range of applications. The base of course with the -- yes, in the area of PC, in the displays, monitor displays, and also smartphones, both are our obviously largest area. But as time goes on, I think as we reported before last time and this time also, we are also moving into automotive and industrial applications, which already comprise about 10% of power IC's revenue. And going forward, the objective is to move upward into higher compute-intensive applications so that we can have even better growth and better margin.

I think you also asked demand, demand, it is -- we are seeing also some impact. But I think due to the last 2 years, our power IC business has done a very good job in upgrading their capability and their customer mix. So we are seeing the first quarter results demonstrate the progress they have made and we believe this progress will continue throughout the year in 2022.

[Operator]

Next one to ask questions, Charlie Chan from Morgan Stanley.

[Charlie Chan, analyst]

So my first question is also about the pricing strategy. So I understand company's strategy totally makes sense, right. But even you want to keep discipline, but if your competitor does not, how would you react, right? So for example, if your competitor start to compromise, and what would be your reaction? And also, I mean now your customers could be suffering. I don't know, but if your customers come to you that we have a big pressure in terms of margin, profitability, et cetera, how are you going to communicate with your customers in this type of situation?

[David Ku, executive]

Charlie, I think for pricing we will not be able to comment about any move from our competitors because after all that's their strategy. But I think from our perspective, even though we center round about the pricing, I think people kind of try to understand how do we respond on the competition. And from our perspective, most important power in the competition is really starting from our technology and product portfolio and overall, the relative market position, like our CEO talking about earlier. This time around compared to the previous few cycle on the same I talked to, some of the analysts, some investor people kind of have a solid taste in the past for the cycle, or down-cycle to be precise.

But this time around, when you think about MediaTek, the product portfolio, the revenue -- the size of the revenue, the timing of our launch of our product, taking 5G for example, taking WiFi 6 for example, even we announced about WiFi 7 for example, I think overall we have a lot of tools in the competition.

Pricing is still in par with that. Arguably, it's not going to be a major part of that. So we want to make sure we fully leverage our advantage, which is a product and technology and product portfolio, really the only thing, focused on one single tool. I think that's probably the better way to look at this.

[Charlie Chan, analyst]

I see. Yes, so I think the product portfolio, I think that is also very important. So instead of cutting the price when -- as it just introduced kind of a lower cost, new 5G entry products so that your customers and probably the company can also both benefit from this sector adoption. Any plan for the -- like a low-end or new entry 5G SoC?

[Lih Shyng L. Tsai, executive]

That's a very good point. We do have -- as we said earlier and many times, we are -- we have a complete portfolio for 5G SoC which covers from -- all the way from flagship high end, mid end, entry, and we are going to have also, I would say, well, low -- entry level SoC, as we believe the penetration of the 5G into the smartphone will continue to increase and -- or the -- or different market, different region, different segment or product, and MediaTek is there and will be there to support all those different events. So we are working on that and the -- we will announce that in right time.

[Charlie Chan, analyst]

Okay. So Rick, did you say at the end of the year?

[Lih Shyng L. Tsai, executive]

No, I said at the right time.

[Charlie Chan, analyst]

Okay. So how to judge the right now? So one way I kind of think about this question is really 5G SoC in terms of on cost, right. For tempo, I think $100 5G SoC probably is good for $500 5G phone, right. So if the price point need to go to like $200 or even $150, so maybe there is a time you have to do this. So do you have any kind of a plan that the price points of 5G went well, that gets you like, for example, $150. What kind of chip price will be required to address the demand of the $150 5G smartphone?

[Lih Shyng L. Tsai, executive]

Charlie, you're trying to pin down smartphone price solely on the SoC chip product. I would agree it is maybe even a significant factor, but definitely not the only factor. There are many factors. If you look at the bottom of the phone or the display or the memory, all those things. So what I can say is, we are working on -- I just don't remember the stage, but I don't think -- we're not talking about very far away future, in the future. We are talking about something that we can announce not in too far future. We will be able to provide a good quality, good performance, but reasonably priced SoC to our customers. And it's really up to them to put together cost effective and be beneficial to the maybe a certain market segment and certain users. So I really cannot answer your question about [indiscernible] even though it is not in our control.

[Charlie Chan, analyst]

I see. I see. So just 1 clarification, it's another full question clarification. So you mentioned about the 20% revenue target. Last time you talked about more than 20%. Is there any tone change or just getting into too much detail?

[David Ku, executive]

Well, I think Charlie, last time, in this time around, I think we talk about the same, we said 20% plus. I think that's the -- we didn't do exchange. But we're also kind of talking about the overall uncertainties out there, we understand that too.

[Charlie Chan, analyst]

I see. Okay. Sound caveat. Understood.

[Operator]

Next one to ask questions, Gokul Hariharan from JPMorgan.

[Gokul Hariharan, analyst]

I want to first start with the smart edge area and WiFi 6, seems to be the primary growth driver in the last 12 months to 18 months. Could we talk a little bit about what you see on WiFi replacement cycles because historically if you think about past WiFi replacement cycles, we've seen about 4 years to 5 years before a new WiFi generation kind of comes online and becomes mainstream. Obviously, WiFi 6 has been a pretty quick adoption curve, but we are also -- I think industry is also talking about WiFi 7. MediaTek also has started to talk about it. So could you talk a little bit about when do you -- what do you think about WiFi replacement cycle? Is it the once in 5-year, 6-year kind of cycle or do you think that this is accelerating there -- to an extent that we get consistent product upgrade and ASP upgrade every 2, 3 years for your WiFi product portfolio?

[Lih Shyng L. Tsai, executive]

We are also watching this trend. I think, qualitatively at least we believe the cycle -- I should say, the cycle actually lasts now shorter than the previous generations of WiFi, that is from WiFi 4 to 5, 5 to 6, 6 to 7, probably the -- it's getting sooner for the -- for people -- for the users to move to the next generation WiFi. I -- we cannot say --I think you mentioned 2 to 3 years, I think that's probably too short. But if -- we are seeing the migration to WiFi 6 from WiFi 5 is definitely sooner than what we have seen from 4 to 5.

And the way we are -- as you know, we have announced our WiFi 7 capability back in early this year. We have the response, we have received from the customers and the different applications, frankly it's stronger than we expected. Of course, in many ways, it also reflects MediaTek's progress, the effort in upgrading our WiFi technology capability at a much faster rate compared to our -- a few years ago. We also move into almost all applications from higher end to notebook to our traditional routers and the consumer devices. So for -- at least for MediaTek, what I can say is, yes, the cycle moves faster from 4 to 5, 5 to 6, hopefully to 7 also.

[Gokul Hariharan, analyst]

Understood. My second question is on the 5G I think -- thanks Dr. Tsai for outlining your pricing approach, pricing strategy. But could you talk a little bit about -- I think your competitor has talked about gaining share over the next 3 years in the Android addressable market, which is essentially the market that you both compete in. If they become more aggressive, do you plan on responding on price or you're happy to cede some share to keep margins intact, given as you mentioned, there is not much incremental demand enough to drop prices? And I think previously -- I think couple of quarters back, we had indicated that 5G ASPs in 2022 will be largely flattish compared to 2021. Is that the statement that still holds given the current market environment?

[David Ku, executive]

Yes, well, Gokul, first of all, I think for the 5G pricing, I think the statement still holds, at least for 2022 based on what we see. I think that's still in line. When you're talking about -- again I think earlier there were several questions -- asking the same question, I think people still were kind of worried or concerned or kind of wondering how to respond to the competition. It just come out maybe from different format. I mean you come off on the way, say, a competitor may be more aggressive. So others may talk about now they don't have like the supply constraint situation. But overall, regardless of what's the rationale, basically you guys are all talking about competition, but we're also trying to highlight that in the last product cycle, which is the 4G, there is no competition -- there is no constraint on the supply, there is no shortage of aggressiveness, but we still managed to do a pretty good job on the 4G gaining market share, and more importantly growing the profitability.

So we know how to compete [ risk free ]. And we don't have a crystal ball to tell you here is what happens right now, but we can reassure you the portfolio we have right now is actually much, much better stronger compared to our last 4G cycle. Again, every one of you or some of you, actually many of you 2 years ago were still worried about whether or not will it be high on the 5G product portfolio if you still guys recall in the last 2 years question.

But after 2 years we're not just even behind, we're actually in the first wave of 5G, we gave a pretty good market share of all product segments. And right now, once we get into the flagship as the Holy Grail of the 5G smartphone, we actually -- even though market share wise actually we are still small, but the market perception and a lot of market feedback is all public information you can get on the Internet to share comparison to the Dimensity 9000. They are all very positive. So again, when we are facing competition, the bottom line for the technology and product portfolio, and we have certain confidence, very strong confidence, I should say.

[Gokul Hariharan, analyst]

Got it. One last question is, is any impact to your Q2 guidance due to the China lockdowns and factory and logistics issues, like is there any -- anything that you had to discount in your Q2 guidance because of that?

[Lih Shyng L. Tsai, executive]

I think the -- you all know our exposure like the smartphone and we have taken into account China market, domestic market I should say, China domestic market to the mobile phone 4G and 5G impact. So we -- on the other hand, we believe the outside of the China market will grow quite well this year in the 5G and we are -- I think our product portfolio works really well with, first of all, every major Android phone makers, every major Android phone makers and you can see it, for instance. For instance, our market expansion results in, for instance, North America that demonstrates our capability, our product portfolio's capability.

[Operator]

Right now, we have Bruce from Goldman Sachs to ask questions.

[Zheng Lu, analyst]

Okay. Yes. I think the investor concern is definitely for the China smartphone and demand given the recent lockdown and deterioration in demand. So what is the -- what is your assumption for the overall China smartphone shipment? And also, what -- we also understand that you have a very good progress outside of China. Can you share your revenue exposure from China within the smartphone business? Also, do you expect this U.S. smartphone shipment to grow in 2022? Will your 5G smartphone shipment more than 4G anytime this -- any quarter in this year? Something like that will be very helpful to release or to ease the investor concerns.

[David Ku, executive]

Bruce, why don't I start with our view about the China smartphone market. I think our view remain the same. Earlier this year when we gave out the 20% growth target, we kind of expect China will be either flattish or maybe even coming down a little. We're not talking about the China domestic smartphone market. Right now, we share the same view, but maybe the decline share is slightly larger than our earlier expectation. I think that's assumption.

And also at this time around, we also revised our assumption of our global smartphone shipment like the CEO explained earlier. Earlier our assumption will be global will be flattish to up a little bit, now actually it's flattish or down a little bit. But something we didn't change is our view about the 5G penetration rate ratio. I think this year we believe it's still going to be 50%. So if you do the math, basically the overall 5G addressable market coming down slightly.

Originally, we are looking for globally 700 million smartphone, 5G smartphones, but now we're talking about maybe [ 660, 670, 680 ]. And if you apply to our certain market share, which is in line with what we talked about earlier, actually -- the impact is actually manageable and plus very mildly, we also -- in our earlier statement we're also talking about one very important message. I think for the smart edge platform is -- also had very strong growth and we're even talking about we -- the allocation statement earlier say, 5G platform provides the strongest growth among all other sectors. I think this is actually all -- if you piece this altogether, that should give you why we still feel comfortable about our growth target right now.

[Zheng Lu, analyst]

But when you take the -- I'm sorry, please.

[David Ku, executive]

So sorry, so you're talking -- 5G, 4G, so we break down, I mean 5G right now, it's actually is -- definitely is the largest basically -- especially from the revenue contribution perspective upgrade to 4G, yes.

[Zheng Lu, analyst]

How about the shipment wise, can you surpass the 4G shipment anytime this year?

[David Ku, executive]

[indiscernible] specifically, 4G, 5G shipment [indiscernible]

[Zheng Lu, analyst]

I see. But I tried to dig in a little bit for your China overall smartphone shipment. You said that maybe the smartphone in China will decline more than low single-digit. I will say that I think the investor expectation now is a lot bigger than that, maybe that's the discrepancy between investors' expectation and the company's guidance. Do you -- can you share a little bit more color that -- how can you have this -- how can you -- so confident that the smartphone in China will only decline by mid to high single-digit?

[David Ku, executive]

First of all, of course we didn't talk about China will decline only mid to high single, that is not what we said, okay.

[Zheng Lu, analyst]

I see. I understand. Okay, then let me move on for a longer-term question. I mean can you share more color about the multi-year revenue growth outlook, especially coming from the smartphone business? 5G smartphone penetration rate only -- will reach 50% based on your company's guidance. It looks like the device penetration rate outgrows the infrastructure investment. Do you expect the 5G smartphone growth -- 5G growth rate or penetration rate will slow down meaningfully moving forward? What is the assumption when you provide the like teens revenue growth for next 2, 3 years?

[Lih Shyng L. Tsai, executive]

I think 5G growth coming to 2 years. I don't know, I cannot say for sure, or 3 years will remain as we projected. By now, it's about 50% penetration. I think we believe a 70% penetration of 5G is what we're looking at. And we just had a review, for instance, the other day, of different markets. We understand kind of the domestic market very well. But we know how they're -- what they're doing, how they're doing. We also understand the difficulty, the China domestic market is going through. However, we had a look at the Indian market. And if you look at the Indian market, 5G conversion rate is quite impressive. So we just -- we fully understand the saturation of the 5G market in China domestically. We also -- and that's why we are also -- we're working very closely, very well with the -- all Android phone makers, so that we have the largest market share, not only in China, but also in the global market outside of China.

[Zheng Lu, analyst]

Can I double check that? You just mentioned that the penetration for 5G will reach like 70% in 2 years. Based on this assumption, you can achieve teens growth in the coming 2 years. Is that the right assumption?

[Lih Shyng L. Tsai, executive]

Our growth going forward, of course, cannot be dependent on 5G only. That's why I think we have such many times, for instance, today also, smartphone occupied -- mobile occupies about 53% of our revenue, which brings 47% revenue coming from a very different segment. And our 47% revenue comes from basically not relating to mobile phone revenue. Not related. So this 47% of the revenue, we have also invested, WiFi is just a good example, will also provide our growth momentum going forward. And that's why we -- analysts we speak, we also work on many different new segments that we need to go in, so that we can generate the mid-teen CAGR for the next 3 to 5 years growth.

[Operator]

Ladies and gentlemen, as we are running short of time, so we are going to take the last one, for questions. And the last one will be Brett Simpson from Arete Research.

[Brett Simpson, analyst]

Rick, I wanted to maybe just dig in a little more on the China smartphone setup that you see in Q2 and particularly into the second half of this year? I guess we can all see there has been softness domestically with Chinese smartphone vendors. But I think also the export business has been impacted because of their quarantining policies, et cetera, and they've lost share to Apple and particularly Samsung so far. So I'm just -- given that backdrop, what makes you so confident that the year is sort of playing out as you expected, there's nothing really changing? And do you think Chinese smartphone vendors are kind of building inventory, so they're not mainly cutting back, they want to have supply, so they can react to any recovery, post lockdown. Just any perspective you can share with us, on how you see that side of the business, particularly going into the second half?

[Lih Shyng L. Tsai, executive]

All right, Brett. I guess I want to make sure I can clarify a few points. Number one, we recognize that the smartphone shipment is down, compared to what we believed a quarter ago. We have said that clearly in our opening statement. And of course, along with the 5G shipment, especially in China, but we didn't say specifically how much China domestic market demand is going down.

Number 2, but we also said 5G shipment in 2022 should be -- will be about 30% higher compared to 2021 5G smartphone shipment. So I guess, you guys have a lot of data, just like we do, you can figure out how much from China domestic market, how much from overseas market -- well, I shouldn't say overseas, market, the global market outside of China.

You also mentioned -- I think the third point, you're dividing the supply -- smartphone suppliers into 3 categories: China suppliers, Apple and Samsung. I think you also understand well, the market positioning of the iPhones. They are very much into high end to very high end. And you can also, I'm sure, calculate their penetration in different developed economies and in the developing economies. I cannot comment specifically on the other 2 categories you mentioned, but I did say -- we did say, we are expanding in our market share across the global markets, different regions, and we are working closely, and we are working well with 4 Android phone makers. We can say that very clearly, and I think I'm sure you can deduce from those statements, what we are feeling and what we are seeing.

[Brett Simpson, analyst]

Rick, that's very helpful. Maybe just a -- sort of a macro question, just to get your perspective on the squeeze that's sort of underway in consumer disposable income. I mean, I guess with rate rises and food inflation, energy prices all going up, many investors are now talking about downturn in consumer semis ahead, maybe it's 2023, I don't know. But what's your perspective? I mean, particularly given your high exposure -- MediaTek's higher exposure to consumer and all the cycles you've been through in your career, how do you assess the landscape at the moment, and the sort of cyclical risks around the business or semis more broadly?

[Lih Shyng L. Tsai, executive]

You certainly are right, that the macro environment being, I would say yes, severe. We recognize that fully. And when you run a business, you have to run on certain assumptions, and you try to read as much as you can, about what the economists forecast, about whether there will be a hard landing, soft landing, et cetera, et cetera, et cetera. And we're basing our current forecast on, I think, basically, there is no -- at least no imminent recession in 2022. I am not economist, not to mention, macroeconomist. But going forward, whether there is a risk of recession, your guess is good as mine. But you're also right, we have -- at least, I have gone through several cycles, especially in the semiconductor business. We do know how to manage the cycles, as much as painful as it can be. But in running a business, you have always absolute measure and a relative measure. In the very down cycle, if it happens, I stress, if it happens, the relative performance is critical. And I can assure you, MediaTek will be resilient performer. Despite your saying that, we have high consumer exposure, yes, we do. But the other lesson we have learned over the years, nobody can [ predict ] a major cycle, nobody. No matter which area you're in, in this industry.

So it's important. The important thing is to be -- to stay resilient, to manage the cycle. I hope that's useful?

[Brett Simpson, analyst]

Appreciate the perspective.

[Operator]

Yes, ladies and gentlemen, we thank you for all your questions. And now I will hand it over to Ms. Jessie Wang for closing comments. Ms. Wang, please proceed.

[Jessie Wang, executive]

Ladies and gentlemen, this concludes MediaTek's 2022 First Quarter Conference Call. So we'd like to thank you for your participation and you may now disconnect.

[Operator]

Yes. Thank you, Jessie. And thank you again for your participation in today's conference. You may now disconnect. We thank you, and goodbye.