1. 2018 Operating Results
Realtek reported another record year in 2018. The full-year consolidated revenues were NTD45.8 billion, a 9.9% growth from the previous year. Gross profit was NTD20.5 billion, up 14.3% from the year before. Net profit after tax was NTD4.35 billion, a 28.3% year-over-year increase. Earnings per share (EPS) was NTD8.57. According to IC Insights, 2018 global semiconductor market revenue exceeded US$500 (US$514 billion), a 16% growth over 2017. In that, memory was the largest segment by product type and grew the strongest. Excluding memory, the 2018 semiconductor market grew a modest 8%. In spite of the uncertainty in the semiconductor industry due to ever-changing international relations and trade disputes, Realtek, with all hands working closely together, delivered a 10.9% year-over-year revenue growth in US dollars in 2018, which was above the 8% growth average of non-memory companies, and above the 7.4% growth average of global fabless IC design companies. Realtek ranks 12th in 2018 among global fabless IC design companies, moving up one place compared with 2017.
Realtek always strives for innovation momentum and technology leadership. Among the top 100 domestic corporate patent applications released by the Taiwan Intellectual Property Office in 2018, Realtek ranks 8th with 195 invention patent applications. In terms of product roadmap, Realtek proffers continual updates to current product specifications, and develops products with differentiating features that add value for our customers. The ubiquitous needs of connectivity in a wide spectrum of applications match perfectly the vision of Realtek to enable a connected world. Such synergy feeds the growth momentum of Realtek IC solutions. Throughout 2018 we introduced several highly competitive products that received accolades from the market and press. For example, the Realtek multi-mic far-field speech recognition enhanced single-chip solution (ALC5520) first received the Best Choice Golden Award at Computex Taipei 2018, and then won the Innovative Product Award from the Taiwan Hsinchu Science Park Administration. Additionally, the Bluetooth 5.0 Low Energy System-on-a-Chip (RTL8762C) and the Highly Integrated, Ultra-Low-Power Wi-Fi IP Camera SOC (RTL8715A) received respectively, the IC & Component Category Award and the IoT Applications Category Award at Computex Taipei 2018.
Besides providing the most competitive products to the market, Realtek cares about social issues, contributes corporate technological expertise, and undertakes corporate social responsibility missions. Building on the collaborative work on the AirBox Project with Taipei City Government involving the industry, government, academia, and city's residents in 2016, Realtek continued to focus on air quality issues and actively pushed forward the Taipei Lungshan Temple Incense Reduction Program. The Program was a success after Realtek joined forces with the Lungshan Temple, Taiwan Lung Foundation, and Institute of Occupational Medicine and Industrial Hygiene at the National Taiwan University College of Public Health. The result was a very impressive contribution to the protection of the environment that was recognized by the Asia Responsible Enterprise Award (AREA) organization, and given the 2018 Health Promotion Award.
2. 2019 Business Plan
After two years of impressive growth, many analysts expect 2019 to be flat for the global semiconductor industry, excluding memory. The forecast appears to be predicated on both the trade dispute between China and US as well as the slowdown of hitherto high growth segments such as smartphones and crypto mining. Nonetheless, the ramping up of 5G deployment and the proliferation of artificial intelligence applications seem to be breathing new life into the semiconductor industry and demanding even more and faster connectivity. To this end, Realtek plans to introduce a series of highly competitive connectivity solutions for connecting machines, as well as connecting machines and humans. In the automotive market, an increasing number of automotive OEMs in Europe, America, Japan, Korea, and China are choosing automotive Ethernet to be the in-vehicle network backbone for their new models of cars. Shipments by Realtek are expected to pick up gradually in 2019 with the expansion of our customer base. At the same time, we are developing a new generation of 100/1000BASE-T1 dual-mode PHY and multiport automotive Ethernet switches. To meet the demands for increasing LAN (Local Area Network) speed for commercial and gaming PC needs, Realtek introduced the world's first 2.5GBASE-T Ethernet single-chip controller in 2018. In wireless LAN (WLAN), while enjoying revenue growth from the ongoing migration of 802.11n to 802.11ac, Realtek is developing a new generation of 802.11ax products to provide customers with a complete portfolio of WLAN solutions. In IoT, Realtek leads the market with the announcement of a highly-Integrated, ultra-low-power Wi-Fi IP camera SoC ideal for various portable camera market opportunities.
In Bluetooth, Realtek strives to satisfy various Bluetooth applications with different solutions, including Bluetooth transceivers, low-power Bluetooth single chip, and Bluetooth codec single chip. The latter is becoming the solution of choice for True Wireless Stereo earphones, which have been picking up market momentum since the second half of 2018. Optical networks are enjoying growth in many emerging markets, led by China. Realtek is expanding her optical network solutions in all markets with good results. In response to the market need for greater bandwidth, Realtek is developing a new generation of single-chip 10G PON gateway controllers, which may start contributing to business in 2019. In computer peripherals, Realtek, in addition to deepening its roots in the PC markets, is entering the earphone market and winning projects at several commercial and gaming earphone brands. To address the needs of mobile phone users to have USB Type-C audio earphones and converters, Realtek is rolling out a series of high-performance, low-power USB2.0 audio codec products. With respect to IP camera SoCs, Realtek is bringing into the market a new generation of highly-integrated IP camera SoCs in 2019 to meet the needs of the surveillance and security industry. In multimedia, the overall market for TVs and monitors remains flat, however new opportunities will come with the demand for higher resolution, higher refresh rate, better picture quality, and richer display connectivity. Realtek will introduce a new generation of high-end 4K smart networked LCD TV SoCs, as well as a new generation of integrated high-resolution 4K2K/QHD monitor controllers with USB Type-C interface, thereby fueling business growth.
3. Strategy for Future Development and Impact by Competitive, Regulatory, and Macro Conditions
Looking to the future, Realtek will continue to cultivate our core competency, strengthen our competitiveness, and energize our product strategy. Through our strength in high-integration and low-power design, we position ourselves to be the best partner to our customers, provide the best solutions to the market, and deliver the most user-friendly, best price-performance connectivity products to end users in tomorrow’s world of Internet of Things, Internet of Vehicles, and Artificial Intelligence. Despite the general conservative view of the semiconductor market in 2019, coupled with uncertainty in the macro economy, Realtek remains cautiously optimistic that it can capture growth opportunities in this highly challenging and competitive environment to continue reaching new heights and creating greater value for our shareholders.
Thank you for your ongoing care and support. We hope that you will continue to stay with us on this exciting journey to a better future.