Good day, and thank you for standing by. Welcome to the Silicon Motion Fourth Quarter 2021 Earnings Conference Call. This conference call contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 as amended.

Such forward-looking statements include, without limitation, statements regarding trends in the semiconductor industry and our future results of operations, financial condition and business prospects.

Although such statements are based on our own information and information from other sources we believe to be reliable, you should not place undue reliance on them.

These statements involve risks and uncertainties and actual market trends and our results may differ materially from those expressed or implied in these forward-looking statements for a variety of reasons.

Potential risks and uncertainties include, but are not limited to, continued competitive pressure in the semiconductor industry and the effect of such pressure on prices, unpredictable changes in technology and consumer demand for multimedia consumer electronics, the state of and any change in our relationship with our major customers and changes in political, economic, legal and social conditions in Taiwan.

For additional discussion of these risks and uncertainties and other factors, please see the documents we file from time-to-time with the Securities and Exchange Commission. We assume no obligations to update any forward-looking statements, which apply only as of the date of this conference call.

Please be advised that today's conference is being recorded. . I'd now like to hand the conference over to your first speaker today, Mr. Chris Chaney, Director of Investor Relations and Strategy. Please go ahead, sir..

Thank you, Amber. Good morning, everyone, and welcome to Silicon Motion's Fourth Quarter 2021 Financial Results Conference Call and Webcast. As Amber mentioned, my name is Chris Chaney, I'm the Director of Investor Relations here at Silicon Motion.

Joining me today on this call are Wallace Kou, our President and CEO; and Riyadh Lai, our Chief Financial Officer. Following my comments, Wallace will provide a review of our key business developments, and then Riyadh will discuss our fourth quarter and full year results and our outlook for the upcoming year.

We'll then conclude with a question-and-answer period. Before we get started, I'd like to remind you of our safe harbor policy, which Amber read at the start of this call. For a comprehensive overview of the risks involved in investing in our securities, please refer to our filings with the U.S. Securities and Exchange Commission.

For more details on our financial results, please review our -- refer to our press release, which was filed on Form 6-K after the close of the market yesterday. This webcast will be available for replay in the Investor Relations section of our website for a limited time.

To enhance investors' understanding of our ongoing economic performance, we will discuss non-GAAP information during this call. We use non-GAAP financial measures internally to evaluate and manage our operations.

We have, therefore, chosen to provide this information to enable you to perform comparisons of our operating results in a manner similar to how we analyze our own operating results. The reconciliation of GAAP to non-GAAP financial data can be found in our earnings release issued yesterday. We ask that you review it in conjunction with this call.

And now with that, I'd like to turn the call over to Wallace..

Thank you, Chris. Hello, everyone, and welcome to our earnings call. Silicon Motion just wrapped up a stable year, and we believe we are now gearing up for another great year. Our fourth quarter sales were up 84% year-over-year, and the full year sales grew 71%.

Our fourth quarter earnings per ADS were up over 120% year-over-year, and full year earnings grew over 90%. Our 2021 business activities were extremely strong, and we are seeing much of this momentum continuing into 2022.

Last year, demand for our SSD controllers using OEM program for PC and other client devices as well as our eMMC and UFS embedded storage controllers used in smartphones, automotive, IoT and smart devices was tremendous. And demand from OEMs continue to be very strong. Last year, we delivered corporate record sales.

Despite our very strong sales, we could not meet the full demand of customers who are building SSD and other storage devices for OEM in many categories of applications. We are now able to meet their full demand because our business was supply-constrained, constrained by limited availability of foundry wafer supply necessary for fabricating RICs.

Today, supply continued to be very tight and we don't expect this situation to change this year. As previously discussed, our audit book was significantly backlogged last year. And today, this backlog remain significant. Early last year, we originally communicated a 20% to 30% sales growth guidance for full year 2021.

This revenue guidance was based on both meaningful incremental foundry wafer supply allocated to us as well as existing product mix and pricing arrangements. From that starting point, our operations team was able to meaningfully upsize sale growth to 71% for full year 2021 by optimizing our product mix, customer allocation and pricing.

Now turning to this year. For full year 2022, we have again received meaningful incremental wafer supply from our primary foundry partner. Based on this incremental wafer supply, we will be able to grow full year sales 20% to 30%. We believe, however, that there are opportunity for us to grow even faster than this baseline range.

And our operations team has already begun implementing strategic initiatives with the aim of delivering upside to baseline. Upside opportunity include better product optimization, additional wafer supply and pricing. I look forward to sharing with you more on this in the following quarters as we can successfully execute.

Sales of both our SSD controller and eMMC+UFS controller were extremely strong. Now let me talk about each one of these 2 key product lines. Full year sale of SSD controller grew 75% to 80%, significantly faster than the market.

In 2021, we likely gained close to 10 percentage points of market share, with full year client SSD controller market share today, that is roughly in the 35% to 40% range. our SSD controller growth was driven by extensive adoption of SSD by PC OEM using our controllers.

Sale is almost every one of our key customers involving OEM program, whether NAND flash makers or module makers, grew strongly. And we expect the significance of our sales to OEM to continue to increase.

The portion of our SSD controller using OEM program grew to account for well over half of our SSD controller sales in the second half of 2021, significantly higher than 1/3 the year before.

To address our controller for channel market, we anticipate the significance of OEM program to grow further and account for close to 2/3 of our overall SSD controller sales this year. Last year, we saw the continued ramp-up in sales of our PCIe Gen3 SSD controller, which have been widely adopted by PC OEMs.

And in the second half of this year, we launched the first generation of our PCIe Gen4 series of SSD controller, also to OEM. The rollout of Gen4 with OEM lagged our initial launch for our Gen4 into the channel market by well over a year because of extensive verification and testing by both our direct customers and the PC OEMs.

We are now initiating the launch of our second-generation PCIe Gen4 controller and expect Gen4 to account for a majority of SSD controller sales this year, which coincide with accelerating broad-based adoption of PCIe Gen4 SSD by PC OEMs. We believe that we will continue to gain market share this year.

Based on the design win and sale projection, we expect our controller to be in half of all of PCIe Gen4 socket at PC OEM by the end of this year or early next year when our Gen4 program are scaled.

Additionally, our NAND flash customers continue to work with game console OEMs for the adoption of our SSD controller in their next major device upgrade cycle next year. It is likely that PCIe Gen4 will last a few years since Intel, AMD both continue to bring new upgrade variant of CPU with PCIe Gen4 to the market.

Similarly, we are preparing for the launch of our third-generation PCIe Gen4 controller next year before transitioning to PCIe Gen5 in the following year. Before moving to our eMMC+UFS controller, let me provide an update on our enterprise SSD controllers.

As many of you know, we have been investing actively for several years in enterprise-class SSD controller R&D. We have been investing in our understanding of the large, complex and fragmented market and the technology necessary for bringing differentiated and compelling solution to customers.

The design cycle in the enterprise market are also much longer than the client and mobile OEM markets. Our current product before the upcoming launch of our flagship enterprise-class PCIe Gen5 controller are finally completing final customer testing and qualification. And moving to production sales this year.

We are currently rolling out our enterprise-class SATA SSD controller for the large-volume, long-tail, well-established enterprise market; and separately, our turnkey PCIe Gen4 SSD controller with robust firmware that is performance-tuned for certain enterprise data center applications.

And additionally, we are on track to begin sampling our flagship SM8366 PCIe Gen5 SSD controller in the second half of this year.

We believe our Gen5 is uniquely positioned with both very competitive operation performance and robust architecture and is also compellingly differentiated with future design desired by hyperscale and enterprise customers, such as a highly customization firmware, performance shaping capability and optimize data placement technologies.

We believe we are well positioned to repeat the success we have achieving client SSD controller in the enterprise SSD controller area as well. Now let me turn to our eMMC+UFS controllers. Last year, sale of both eMMC controller and UFS controller roughly doubled, with growth coming primarily from market share gain.

Sales of UFS controller grew strongly as our U.S. NAND flash customers continue to expand aggressively to build its market position with smartphone OEMs. Our UFS controller sales also benefited from growing sales to other customers.

We are seeing renewed growth in sales of our plastic eMMC controllers from the proliferation of new applications, such as automotive with ADAS, telematics and entertainment systems that use eMMC; but also from the opportunity clearly as many of the NAND flash makers began to exit from this order load capacity storage technology.

We have benefited from the supplying controller to module makers stepping into the market. Additionally, a few NAND flash makers who are facing foundry wafer supply issues are also outsourcing eMMC controller from us.

This is an attractive market for us because we are the only meaningful merchant supplier of eMMC controllers, and the eMMC market is relatively big with annual market sales volume of approximately 1.5 billion units. Now I will turn the call over to Riyadh to discuss our financial results and our outlook..

timing of our wafer supply and China channel market inventory cleanup. We received meaningful incremental wafer supply this year, but the timing of the availability of supply is not linear and will impact us in Q1. Wafer supply for certain key nodes in Q1 will be less than in Q4, which means we will have fewer high-demand parts to sell.

As I had said a few minutes ago, we are currently operating at very low inventory levels with just a couple of weeks of finished goods of controllers. Furthermore, for parts with better supply availability, module makers offering in China's channel market have reduced procurement to clean up their inventory before the long Chinese New Year holiday.

We believe this action is temporary as module makers are trying to reduce their inventory holding risk before the long holiday. Positively, we are seeing recovery of the channel market, both in terms of sentiment as well as business activity as module makers are now more willing to build products than a quarter ago.

Our module maker customers targeting the channel market are now actively discussing with us about controllers to support their upcoming NAND flash procurement. Fortunately, our new OEM programs are not affected as these programs -- these new programs are only beginning and will pick up and accelerate over the next few quarters.

We are already 1/3 of the way through the first quarter and see good improvement in sales next quarter. We expect sequential growth through the rest of the year with growth coming from the scheduled ramp of new OEM programs, which will be supported by the timing of incremental wafer supply already allocated to us.

Let me now turn to our gross margin guidance. For the full year, we are expecting gross margin in the 49% to 51% range. We believe we can continue to manage our products around our 50% target gross margin. First quarter gross margin should be in the 49.5% to 51.5% range. Turning to our operating margin guidance.

For the full year, we are expecting operating margin in the 29% to 31% range. We are delighted that we are now delivering towards our 30% target operating margin. First quarter operating margin should be in the range of 27.5% to 29.5%, lower than in the fourth quarter because of higher tape-out expenses. And for our other key modeling assumptions.

For the full year, we expect stock-based compensation to be in the $22 million to $24 million range. First quarter stock-based compensation should be in the $5 million to $6 million range. We expect our effective tax rate for 2022 to be approximately 20%.

For the full year, we expect approximately $45 million of CapEx, of which $18 million will be for routine CapEx and $27 million for our Hsinchu and Taipei office building construction. First quarter CapEx should be approximately $14 million, of which $6 million will be for routine CapEx and $8 million for our office building.

This concludes our prepared remarks. We will now open the call to your questions..

Our first question comes from the line of Craig Ellis from B. Riley Securities..

Team, congratulations on the very strong performance in calendar '21. Wallace, I wanted to start off with maybe a bigger picture, longer-term question. So as I look back at 2021, you had strong share gain and growth in really all of your markets, and it looks like that demand strength and that order strength is persistent in 2022.

And then it sounds like SSD solutions has a new product ramp that could augment your product mix and growth in 2023.

So the question is this, as you look at the business and the share gain potential across SSD controllers, eMMC and UFS, put in context when you last saw this type of growth for the company and your confidence today in the ability to execute against that growth the way that you did last year..

Great. I think you asked very good questions. If you look at the big picture, if we can secure enough wafer supply, we believe the growth momentum will continue for the next 5 -- 3 to 5 years. And we do see we have a lot of a headroom to grow, particularly in client SSD, eMMC and UFS controller.

For clients SSD, we believe by 2023, we should have at least 1 major client SSD project for all NAND makers, and we have confidence to achieve that. And we believe our eMMC controller will continue to grow with benefiting from the NAND maker. They are outsourcing.

Some NAND maker are also into us, and we grow with incremental all the new applications for IoT device and smart devices, including low-end smartphone. UFS, we also gained market share with additional customers. We believe the momentum will continue to grow when UFS becomes more popular in the smartphone market.

So I think if we can keep execution for all our major project program and we can recruit talent in R&D in time and we get a sufficient wafer, the growth momentum will continue for the next 3 to 5 years..

what is the momentum that you have operationally on things that benefited gross margin last year? And what are some of the potential pressures on gross margin as you look through the year? And what levers do you have to offset those?.

Craig, we are continuing to look at our business and look for ways to improve that, similar to what we were doing with our business a year ago. We are -- there are certain initiatives relating to the product mix, pricing, wafers and other costs that we are looking into which we plan to execute. And so while the growth -- the baseline remains the same.

The baseline is what we had communicated.

There are potentially opportunities where we can deliver better results in terms of top line and also better results in gross margin relating to the upselling of a richer mix of products that we did last year; optimization of our product mix; allocation to customers, which, again, we also did quite nicely last year; and also better pricing discipline which we will continue to press ahead this year.

And furthermore, on the cost of sales side, we also continue to look very carefully about our manufacturing processes. Where there are opportunities to tune our yields to reflect better costing, we'll certainly be pressing on that.

So this is in terms of both the fabrication of the products as well as the back end and other elements of our manufacturing processes. There are opportunities that we're continuing to look into in order to improve our profitability..

That's helpful. And if I could just sneak in one more before hopping back in the queue. Congratulations on the strong start on the share buyback program. And I appreciate all the visibility into how you execute the program as you go through the first half of the year.

And at the risk of putting the cart a little bit before the horse, can you just talk about the executive teams and the Board's view on what could happen after the first half of the year? Is share buyback something the company would entertain in the back half given the level of operating cash flow and the degree to which free cash flow is well above CapEx needs for the new building that's underway and the dividend program that's been nicely enhanced of late?.

Craig, that's a great question. We have a business that's highly cash generative. If you were to look at our fourth quarter, our cash balance at the start of the quarter and end of the quarter is a little changed despite $50 million of share repurchase, over $17 million of dividends paid to shareholders plus CapEx and other elements.

So we clearly have the cash flow to continue to do a lot of attractive initiatives to boost our shareholder value. But let us first complete our current shareholder program -- share buyback program, and we can certainly look into other initiatives or continuation of this type of initiative later this year..

Our next question comes from the line of Raji Gill from Needham & Company..

And my congratulations on the stellar results on the '21.

Wallace and Riyadh, when you look to calendar '22, and you were very clear about saying that the 20% to 30% outlook is a baseline target and it will be based on -- and the upside to be driven by certain variables, incremental wafer supply, product optimization, et cetera, I'm wondering how you're thinking about the timing of that.

You mentioned in Q1 that the sequential decline in revenue is driven because of the timing of capacity not happening.

So my question is, how confident are you that you will get the incremental capacity at the timing that if you need? And what reassurance is TSMC providing you that gives you that confidence, not only to -- to provide a 20% to 30% outlook but essentially say there could be upside to that if we get more supply throughout the year?.

So I think you raised a very good question. So how confident we are regarding from baseline guidance to move to the upside? I think the primary rely on the additional wafer supply from TSMC as well as how we can pull in the wafer allocation to us from second half to first half.

We -- I think, as we mentioned, we are in severe shortage in certain technology nodes, including 55-nanometer and all advanced technology nodes, 16-nanometer and 12-nanometer. However, I think we are comfortable in 28-nanometer wafer supply. We are just.

So if we cannot get any additional wafer supply from TSMC, it all depends on how we can fully utilize 28-nanometer with a better product mix and with the pricing with the customer. But so far, we believe we could be benefiting from some of potential wafer supply with our primary foundry supplier.

And we are discussing almost every week, and we see there's a positive momentum. In addition, our primary customer also helping us to get wafer supply from TSMC. I think that momentum and direction will be very helpful and positive..

Okay. Great. That's helpful to understand. And the -- starting on Q1, the channel inventory cleanup in China, which is leading to a decline in Q1 2022. You mentioned that these module makers are starting to build more inventory or indications that they will do that post the holiday season to support the NAND flash procurement.

I'm wondering if you could kind of elaborate a little bit further on how the module makers are thinking about their products this year. The OEM programs are very strong, and that's -- and it's great to hear that that's represent 2/3 of the controller sales.

But trying to get a bit of understanding of the module makers as we progress throughout this year..

Okay. Let me try to clarify regarding the situation, the Q1 we faced. I think module makers, they're all opportunity takers. And because of the Chinese New Year is coming, so most of them, our customers, try to reduce inventory to reduce the risk.

Because of the NAND pricing, there's still a lot of uncertainty, although the Xian Fab Samsung lockdown impact of Samsung's production output. But I think all the module makers, they are expecting NAND price decline continually. So they hesitate to really capture very large volume of NAND, so they don't need a more controller inventory.

However, lately, we do see all the module customers from China, they are actually discussed by the new procurement program, which we see from the backlog from our Q2 and Q3. And these are really very, very actively across all our major customers in China and in Taiwan. So we see this as a very good momentum. And we check with the channel.

It looks like the channel inventory now also very low in China, and the activity has become very -- is very actively. So this is a very positive move, and we see the backlog moving up very strong even with mature technologies, particularly in the legacy node.

And this is helpful for us to increase our confidence China market will recover strongly from late Q1 to late Q2..

Our next question comes from the line of Karl Ackerman from Cowen and Company..

Two questions, if I may. Riyadh, I was hoping you could help me bridge the outlook for March and the full year guide by discussing whether customers have signed or cemented volume orders for these PCIe 4 controllers. That gives you the confidence in a big snapback in the revenue beyond the March quarter.

And as you address that question, is there a way to quantify the impact in March from a moderation or pushout of client SSDs given these supply chain disruptions impacting PC assembly?.

Karl, for your question relating to PCIe Gen4 purchase orders from our customer, I'll defer that question to Wallace who provide better insight into this..

I think our PCIe Gen4 program is that we have multiple PCIe Gen4 program with PC OEM from 5 different NAND makers and 4 different module makers simultaneously. So the ramp-up is based on their own internal program process. So there's a very intensive qualification and testing, also NAND procurement. The -- we do not see the schedule.

For some of OEM, they are on track. For some, they are a little pushed out due to the delay from both our internal resource issue and then they make their own decision. So I cannot comment on the detail. But the backlog is very, very strong. We did not see any impact from the backlog.

Frankly speaking, all the major new PCIe Gen4 are 12-nanometer technology node. And we just don't have enough wafer to support the demand to fill. If we have sufficient, I think we will revise guide immediately. For -- in addition is our UFS controller is 3.1 that uses TSMC 16-nanometer. We also have a severe shortage.

Even TSMC increased in amount compared with the 2021, but they're not enough to meet our customer demand in 2022. So we'll continue to work with our customers, with TSMC together to gain additional wafer supply. But so -- but that's our baseline guidance, 20% to 30% growth based on current wafer allocated to us..

That's very helpful. I appreciate that. For my follow-up, I did want to touch on your PCIe 5 enterprise controllers. You indicated that you are moving into production this year.

But could you also discuss the design engagements you have on enterprise controllers broadly, both for PCIe 5 as well as PCIe 4 products that you have available today? And I guess as you address that question, is the growth of enterprise controllers a big driver, a small driver? What sort of driver to your full year outlook?.

I think probably I did not speak clearly. We are going to sampling our PCIe Gen5 enterprise controller in the second half of this year. It will be production in second half of next year 2023.

So the PCIe Gen5 flagship enterprise controller, we believe that will be uniquely positioned for very high-end, high-performance driver for enterprise customers, especially a hyperscale customer and a design for high-end enterprise server as well as data center providers. And we believe this product will win quite a lot of major design.

We are in -- frequently discuss with the potential major customers. Currently, this year, we are ramping our SATA enterprise controller with a high volume, and our PCIe Gen4 controller, who is not a leading controller, but we also win some incremental customers. And we're going to ramp up in the second half of this year..

Our next question comes from the line of Suji Desilva from ROTH Capital..

Wallace, congrats on a strong year there. Looking ahead to calendar '22, it sounds like you're kind of setting it up the same way at the beginning of calendar '21, the guide and then the potential for upside with wafer allocation.

How does the beginning of '22 feels different perhaps from the setup in '21, where you did upside the numbers just in terms of supply chain and capacity? Just be curious another differences..

I think that as we mentioned from the early 2021, we start to what TSMC for 2022 wafer supply. And we understand 2022 wafer supply, in particular, technology node that are more severe than 2021.

So we -- I think TSMC recognized the importance of our position as a technology provider for major customer in certain market sector, so we do get an incremental wafer, especially in 16- and 12-nanometer technology node.

We -- this year, the difference -- major difference is we have much broader OEM-based customers and much stronger market-leading position from both clients with the -- and eMMC and UFS controller because we have a multiple UFS controller will go production this year.

Now we do face the -- even the wafer allocation we got, we can only grow as our guidance, 20% to 30%. However, this opportunity, which is we set a model like last year, our major customer will also helping us to asking additional wafer supply from TSMC.

So if there's any customer cancellation or any opportunity, I think we might be able to get an incremental wafer in the second half of this year. So I think that we just keep a focus on what we are doing and try to maximize the wafer we're using for product mix. As I mentioned, 28-nanometer, we are a little comfortable.

We could do a better wafer allocation in 20-nanometer to gain incremental sales revenue even without the additional allocation in advanced technology nodes..

It's helpful. Thank you for that contrast versus 12 months ago. And then I think your next growth opportunity is really this high-end enterprise SSD controller or just enterprise SSD controllers in general.

Can you talk about how, if any way, the competitive landscape there is different from the SSD controller business where you've been so strong and gained 10% share this year? I want to understand the competitive dynamics, how many subtle differences that we should note..

Yes. As you know well, we spent investment for enterprise controller for almost 4 years right now. We do gain tremendous lessons. We also gain technology and experience from previous 2 generations. Now I think that we found the, architecture-wise, our second-generation enterprise SSD controller steers behind the leading -- the leader in the market.

However, the PCIe Gen5 enterprise controller is our third generation.

We really learn enough lessons how to really -- to create a really enterprise-type controller architecture to meet the customer demand and expectations, particularly in latency and also the rewrite combination performance and all the key features and custom adds we all deliver into the silicon.

And in addition, we also spent great effort to do the modeling for the computer architecture in SSD and also do the performance-tuning algorithms with dedicated firmware teams. Now we believe our firmware technology and enterprise SSD will be similar or same level with the leader in the market today.

And that's why we have a pretty good confidence when we launch PCIe Gen5 SSD controller, we should have a pretty decent position in the market..

Your next question comes from the line of Anthony Stoss from Craig-Hallum..

I also wanted to follow up a little bit on the enterprise controller side, Wallace. Ahead of shipping to samples in the second half of this calendar year, you are exuding a ton of confidence entering that market just like you did with the PC OEM side.

Is it just based on conversations since you haven't sampled solutions yet? And then also maybe 2 quickies for Riyadh, just updating kind of the order book size. And then also -- and maybe for you, Wallace as well.

The Q1 limitation that you're getting now from TSM, when did you learn of this change? Is it something that you've known for a while? Or is it more recent?.

I think you have probably 2 or 3 different questions. Let's just try the enterprise side. The enterprise, I think we do start to -- as we said, we do start to have a volume shipment for SATA enterprise controller this year. and our PCIe Gen4 controller is incremental sales.

Although we understand that's not the leading controller today, but we are able to secure a few customers to sell the PCIe Gen4 as a vehicle to introduce our PCIe Gen5 enterprise controller, which we'll be sampling in the second half of this year and production in second half of next year.

Regarding the wafer allocation and discussion with the primary foundry maker, I cannot discuss details. But I think the TSMC, they definitely look based on the market need and also to avoid the short side and long side and balance the supply, right? So automotive is probably most critical sector.

There's several other market sectors to avoid breakdown. So they look based on the market, surveying the feedback based on end customers' need and to do the allocation. I think we do have a very, very strong design win, specially PCIe Gen4. We believe our program will occupy probably 50% of all PCIe Gen4 from PC OEM. So that's significant.

And definitely TSMC would have to consider because our shortage may cause a certain problem for the major supply chain for the node shipment. In addition, I think same thing for smartphone, all the UFS for major smartphone customers, and so this is very, very important for the foundry maker. I believe there are some discussions going on.

We cannot comment on the detail. Hopefully, we can get an incremental wafer supply on the second half of this year..

Tony, I'll now try to address your other question, your third question relating to our -- the sizing of our order book. Our order book has continued to grow. Wallace had briefly touched upon that in his comments a little while ago. So our order books continue to grow. And one way to look at this is to look at our order book versus our actual sales.

This ratio last year versus today has remained just as broad -- the ratio remains similar to what it was a year ago. So we -- our order book -- the strength of our order book has remained quite strong and quite sizable.

But bear in mind, when we look at our -- when we talk about our order book, we're also talking about our adjusted order book where we're discounting the orders from our module makers that are more opportunistic with more limited visibility and focusing more on the higher quality stuff.

But even with the higher quality visibility, it still remains very significant to what we're able to deliver this year comparable to what it was a year ago..

Our next question comes from Donnie Teng from Nomura..

CEO and CFO, congrats on a very strong 2021 results. Two questions. So first one is, I'm interested in the game console business opportunity for this year, if I heard correctly.

So one, could you kindly elaborate more on this opportunity? Is this for OEM or aftermarket? And also, are you replacing the existing suppliers? Or it's like you are the additional suppliers to this game console opportunity?.

So as I mentioned, this year is no -- the new generation, it will be 2023 launch. This year is a refresh. So we are not in the refresh cycle. Game console customers want to -- player want to maintain the same solution continually. I think we will go through 2 NAND makers to win the game console socket next year.

I cannot comment whether we replace existing player or additional controller maker..

Got it.

Is it an OEM business or aftermarket business?.

OEM. OEM business..

And my second question is regarding to the UFS. So I think so far, we have a very powerful 2754-UFS 3.1 controller, right? I'm just curious, do we have any new generation or new upgrade for this IC maybe beyond second half this year with our leading U.S.

customer? And also, considering UFS has been also replacing eMMC controller quickly this year, right? So just curious, regarding to your full year sales growth guidance, 20% to 30%, how would you think about the growth momentum between SSD controllers and the UFS controllers?.

Okay. Let me just -- I probably cannot probably to give you the whole product road map. But I should tell you, our UFS is going to have 2 more new product coming for this -- for the second half of this year. One is the also 3.1, the other is 4.0. The 3.1 is really is to support the new generation of NAND.

Because a new generation of NAND, the DDR go to 2400 or DDR over 3000. So you don't need that many channels for NAND. So in order to be more cost-effective and also high performance, especially in , we have a new architecture design for this new controller. And cost will be cheaper than. Performance could be even better.

And because -- more suitable for the 176 layer or beyond, especially above 200-layer TLC as well as QLC NAND. And for UFS 4.0 is redesigned for a very high end, and we want to be ahead of even some NAND makers so we can provide the value-add to the NAND maker customers.

Regarding the UFS sale revenue, I cannot comment for that because I just cannot -- I can just tell you the demand is much more than I can support. So even our customers try very hard to consign additional wafer. Still not enough to support the demand..

Don, let me also add, this year, our growth is not only quite strong, but it's also very balanced. We have very strong growth from our client SSD controllers. We also have very strong growth from our eMMC+UFS controls.

And when you look into that one layer below, growth is not coming just because of 1 of the 2 legs of UFS + eMMC, but rather growth is coming from both legs of eMMC. So strong growth from our eMMC controllers as well as strong growth from our UFS controllers, and we believe this will carry over into next year..

Thank you. There are no further questions. I'll now turn the call back to CEO for closing remarks..

Thank you, everyone, for joining us today and for your continuing interest in Silicon Motion. We will be attending several virtual investor conferences over the next few months. The schedule of these events will be posted on the Investor Relationship section of our corporate website. Thank you, everyone, for joining tonight. Goodbye for now..

Thank you. That does conclude our conference for today. Thank you for participating. You may all disconnect..