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Ambarella Inc  (NASDAQ:AMBA)
Q3 2019 Earnings Conference Call
Nov. 29, 2018, 4:30 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, ladies and gentlemen, and welcome to the Ambarella Third Quarter Fiscal Year 2019 Earnings Conference Call. As a reminder, this call is being recorded.

I'd now like to introduce your host for today's conference, Mr. Louis Gerhardy, Director of Corporate Development and Investor Relations. Mr. Gerhardy, you may begin.

Unidentified Speaker --

Thank you. Sonia. Good afternoon and welcome to Ambarella's third fiscal quarter 2019 financial results conference call. Thank you for joining us today. Our speakers will be Dr. Fermi Wang, President and CEO and Casey Eichler, CFO.

The primary purpose of today's call is to provide you with information regarding our fiscal 2019 third quarter results. The discussion today and the responses to your questions will contain forward-looking statements regarding our projected financial results, financial prospects, market growth and demand for our solutions, among other things. These statements are subject to risks, uncertainties and assumptions. Should any of these risks or uncertainties materialize or should our assumptions prove to be incorrect, our actual results could differ materially from these forward-looking statements. We are under no obligation to update these statements. These risks, uncertainties and assumptions as well as other information on potential risk factors that could affect our financial results are more fully described in the documents that we filed with the SEC, including the annual report on Form 10-K that we filed on March 30, 2018, for the 2018 fiscal year and the Form 10-Q filed on June 8, 2018 and September 7, 2018 for the fiscal year ending January 31, 2019.

Access to our third quarter results press release, historical results, SEC filings and a replay of today's call can be found on the Investor Relations portion of our website.

I'll now turn the call over to Dr. Fermi Wang.

Feng-Ming Wang -- Co-Founder, President, CEO & Executive Chairman

Thank you, Louis. Good afternoon, everyone. Our Q3 fiscal year 2019 revenue of $57.3 million was down 8% from the prior quarter. Surveillance increased to 9% sequentially and automotive declined sequentially as anticipated.

Revenue from consumer and other applications was more than 40% sequentially and represent less than 15% of the total revenue. Our resource allocation remains heavily focused on computer vision opportunity in surveillance, automotive and other computer vision related applications.

In surveillance camera market, we see strong interest for single chip solutions with integrated computer vision processing to support the latest Deep Neural Network based algorithms. Ambarella's SoC solutions based on our CV4 architecture offer industry-leading CV performance with extremely low power consumption combined with advanced image processing capabilities required to operate in very low light and high contrast scenarios.

Additionally, the CV4 family addresses the need for on-chip hardware security features to avoid hacking and other forms of network attacks. Ambarella's CV22 and CV4 SoCs have either one design or are under evaluations at each of the leading top 10 professional security camera suppliers.

We now expect to make our first production volume shipment by the end of our fiscal fourth quarter this year with customer product introductions expected mid next year.

In October, Ambarella participated in the 2018 Security China Exhibition on public safety and security in Beijing. At the event, we demonstrated our new CV2 and CV22 SoCs for not only multiple neural networks as well as in multi-sensor and stereo applications.

We also demonstrated whole monitoring cameras, including solutions, addressing the fast growing battery-powered and doorbell camera segments with third-party partner demonstrations of features including intelligent person detection and face recognition.

We're seeing non-China security camera makers increasing reluctant to designing SoC for our main competitor HiSilicon, which is part of the large Chinese network company, Huawei. Huawei has been by the US government from supplying network equipment for government contract and the camera makers are therefore looking to find alternatives to HiSilicon for cameras to be sold into US and for government projects.

Together with our technical advantages, this has helped us win new designs at major customers that had previously used HiSilicon, providing opportunities to extend our market share for both our existing video SoC as well as our new CVFlow chip families outside China.

In consumer IoT markets, we are seeing cameras increasingly being offered as a part of the home automation ecosystems, including a broader set of smart products and services. In Japan during October, Sony announced it will enter the smart home business with the introduction of its manoma service.

Manoma includes security, automation and lifestyle services, and includes home gateway indoor communication cameras, security sensors and smart locks. The camera based on Ambarella's S2L SoC also integrates Amazon and Alisa audio assistant for voice control of home appliance.

In China, Xiaomi introduced its latest Mijia Smart Home Camera base on Ambarella's S3L HEVC camera SoC. The full HD cameras support 360 degrees pan-tilt and zoom operations and includes Xiaomi's AI assistant to enable voice commands to take pictures, record video message or control other Smart home products.

In Europe, Hive, a brand of UK service company, Centrica, introduced is Hive View Outdoor camera, part of a portfolio of connected products, also including connected sensors, thermostats and lighting.

Based on Ambarella's S2L SoC, the camera features night vision, safety, live streaming, person detection, smart phone notifications and two-way audio. And in U.S., home security service provider SimpliSafe further extend its product line with introduction of its Video Doorbell Pro, based on Ambarella's S2Lm SoC, the Doorbell includes wide angle full HD video, HDR imaging, motion alerts and two-way audio.

In automotive markets, we continue to experience strong interest and design inactivity for both our human vision and the computer vision solutions. In particular, our CV flow SoCs are being evaluated and designed by traditional Tier 1 and OEM customers as well as auto 2.0 companies for ADAS applications and the for vehicle operating higher levels of autonomy.

We now have our first design win at a Tier 1 forefront, ADAS cameras with the customer choosing our solution because of its ability to deliver cost effective, low power implementation with advanced AI features.

Our CV22 SoC addresses and exceeds the performance specifications of a molecular (ph) Euro New Car Assessment Programme or NCAP ADAS cameras.

While it's low power consumption allows use in the small form factors of a windshield mounted camera designs. The size and the thermal limits of these cameras typically recruit the use of a high power CPU based solutions.

Customer benchmarks also confirm that our performance is significantly higher than competing solutions from legacy SoC chip suppliers, enabling customer to offer Ambarella-based cameras with more advanced ADAS features.

In vehicles addressing autonomous Level 3 and 4, cameras need to capture full 360 degree video. Ambarella has previously demonstrated its capability in its EVA or Embedded Autonomy Vehicle, using multiple short and long range stereo cameras based on its CVFlow processors.

Our new CV2 CV4 processor offers a combination of extremely high computer vision processing performance, advanced image processing and stereo processing. CV2 is currently in design with a leading autonomous vehicle OEM to enable multiple short-range stereo cameras in the Level 4 design.

In this application, the CV2 stereo processing provides the necessary depth information for the detection and the classification of objects along the vehicle. Its ability to work in challenging light conditions enable it to be used in vision-based assistant and offer greater resolution, accuracy and lower cost than alternative technologies.

Our human vision devices also continue to see strong design activity in both drive recorders and electronic mirrors with this product still in the market and allowing customer to extend their product lines to add ADAS features.

During the quarter, ZF, a global leader in driveline and chassis technology as well as active and passive safety technology held its Vision Zero event in Michigan. The event focused on presenting ZF's innovative solution to automotive OEM customers and included electronic mirror and surround view monitoring system based on Ambarella's A9AQ SoC.

The demonstration has highlighted excellent image quality under various light conditions and LED flicker mitigation, both enabled by A9AQ's powerful image processing.

In electronic mirror applications, we now have design wins with true leading Asian Tier 1s for our CV22 SoCs, which support both human viewing as well as computer vision-based blind spot detection. Vision-based blind spot detection increases the accuracy of the detection and potentially lower cost by eliminating the need for dedicated radars on each side of the car.

The CV22 wins are secured as a result of our traditional strength in HDR low light performance and low latency, as well as our ability of our CVFlow processor to run advanced ADAS algorithms.

In China, we are continuing to new designs for car recorders as OEM manufacturers offer this as pre-installed options.

During the quarter, Chinese car OEMs BYD, Dongfeng and Chang'an, all introduced new car and SUV models with car recorders based on Ambarella's A12A camera SoCs. Features include full HD resolution, Ethernet connectivity and lane departure warning systems.

The need to run complex (inaudible) computer vision algorithm to monitor drivers, passengers and the entire cabin of vehicle also represents an excellent new opportunity for Ambarella.

During the quarter, China-based road event, introduced a combination car recorder and driver monitor cameras, based on Ambarella's quad-core S5L SoCs. Targeting commercial vehicles, the aftermarket cameras include ADAS features such as flow collision and the lane departure warning, as well as drive monitor features including distracted driver, driver fatigue and cellphone use warnings.

In summary, our traditional low power and high resolution human vision solutions continue to exhibit strong momentum in our focus markets, surveillance and automotive. Our existing presence and credibility in this market are helping seed the market for our new computer vision products.

The CV product command significantly higher average selling prices than our traditional devices. While automotive CV application also offer lifetime revenue opportunities, substantially higher than Ambarella has experienced in the past.

We're encouraged by the numerous design wins we have secured during the last quarter and remain excited about the future growth opportunities in automotive, surveillance and other computer vision applications.

We hope to see you at CES in January where we will be demonstrating our latest computer vision solutions, including new product introductions for both surveillance and automotive market.

With that I will transition to KC for the financial report.

Kevin C. Eichler -- Chief Financial Officer

Thank you, Fermi, and good afternoon, everyone. Today, I'll review the financial highlights for the third quarter of fiscal 2019 ended October 31, 2018, as well as financial outlook for Q4.

During the call, I'll discuss non-GAAP results and ask that you refer to today's press release for a detailed reconciliation of GAAP to non-GAAP results. For non-GAAP reporting, we have eliminated stock-based compensation expense, adjusted for the impact of taxes.

In line with our previous guidance, our Q3 revenue totaled $57.3 million, which represents a decrease of 8% from Q2 and 36% when compared to the same quarter of the prior year. GoPro revenue continued to be immaterial in the current quarter.

In Q3, we saw growth in both professional and consumer surveillance markets when compared to the prior quarter. The increase in surveillance was led by our consumer security although professional markets also increased. Auto revenue declined when compared to Q2 as a result of some customer promotional programs ending as we discussed last quarter and the overall tone of the auto market, which was more cautious than expected.

Consumer and other product revenue continue to substantially decline during the quarter. Non-GAAP gross margin for Q3 was $60.9 million compared to $61.4 million, excuse me, 60.9% compared to 61.4% in the preceding quarter. Gross margins, primarily reflect a shift in market mix to lower margin surveillance revenue in China and a drop in higher margin consumer revenue.

Non-GAAP operating expenses for the third quarter were $28.7 million compared to $29.9 million for the previous quarter. OpEx decreased when compared to the prior quarter, primarily due to a decrease in employee-related expenses and general cost control as a result of lower revenue.

Non-GAAP net income for Q3 was $7 million or $0.21 per share compared to non-GAAP net income of $8.5 million or $0.25 per share in Q2. The non-GAAP effective tax rate in Q3 was approximately 3.2%. The non-GAAP effective tax rate for fiscal year 2019 includes a change in the allocation of stock-based compensation across the company's tax jurisdictions to improve alignment of the non-GAAP tax rate to the GAAP tax rate.

The change has no impact on GAAP net income or tax rates. In the third quarter, the non-GAAP earnings per share were based on 32.9 million shares as compared to 34.2 million shares in the prior quarter.

Total headcount at the end of the third quarter was 747 compared to 741 at the end of the previous quarter with about 82% of our employees dedicated to engineering. Approximately 71% of our total headcount is located in Asia. We generated operating cash flow of $3.5 million and we ended Q3 with cash and marketable securities of $349 million compared to $376 million at the end of Q2.

During the quarter, the company repurchased approximately 825,000 shares at an average price of $37.31 for total consideration of approximately $30.8 million.

As of October 31, 2018, approximately $35.4 million remained available for repurchase under the $100 million repurchase program authorized through June 4, 2019. Total accounts receivable at the end of Q3 was $32.4 million or 51 days sales outstanding. This compares to accounts receivable of $29 million or 43 days at the end of the prior quarter.

Net inventory at the end of the third quarter was $23.3 million compared to $30.8 million at the end of the previous quarter. Q3 days of inventory increased to 109 days in Q3 from 100 days in Q2. As discussed last quarter, inventory was higher than normal and was reduced in the current quarter to a more appropriate level.

We had two 10% plus revenue customers in Q3. WT Microelectronics, a fulfillment partner in Taiwan, came in at 49% of revenue and Chicony, a Taiwanese ODM who manufacturers for multiple customers came in at 23%.

I will now discuss the outlook for the fourth quarter. We expect total revenue for the fourth quarter ending January 31, 2019 to be $51 million, plus or minus 3%. In the quarter, we anticipate revenue will continue to be negatively impacted by the decline in demand for consumer and other products. Macroeconomic factors are also making it somewhat more challenging to forecast.

Global tariff issues like the potential expansion of products subject to tariff, a potential increase in the US tariff to 25% at the beginning of the year and the potential for new export restrictions, are issues that we will continue to monitor during the quarter. In addition, slower than expected light vehicle production and some deleveraging in China could also be a factor.

We estimate Q4 non-GAAP gross margins to be between 59% and 60.5% compared to 60.9% in Q3. Change in revenue mix will continue to have a slightly negative impact to margins in the quarter. We expect non-GAAP OpEx in the fourth quarter to be between $29 million and $31 million with an increase from Q3, primarily coming from increased engineering headcount. The annual tax rate should be modeled at 7%. We estimate our diluted shares for Q4 to be approximately 32.8 million.

As previously discussed, the substantial weakness in our consumer electronics business, particularly sports cameras, along with the decline in consumer drones is expected to continue through the remainder of the year and into fiscal 2020. We believe our revenue from the automotive market will be relatively flat sequentially in Q4.

As a result of US ban on the purchase of surveillance cameras for government facilities from Hikvision and Dahua, we are continuing to see some near-term reduction in their orders, particularly in the high end of the product range normally associated with their export business. We are starting to see an offset increase in orders from non-China customers.

As it relates to other trade disputes, we have not currently been impacted by any tariffs that have been put in place by non-US governments, but continue to monitor the situation. Other impacts from the trade dispute remain a risk such as potential inventory builds in anticipation of an increase in the tariff rate, but at this time, we have not seen this affect our business.

In addition, we have not seen the dispute impact the development effort of new surveillance cameras based on our CV chips at our China customers. We will continue to control our OpEx in Q4 to reflect lower revenue expectations in the quarter. We continue to focus our headcount resources on CV product development for the surveillance, automotive and other CV markets thereby decreasing the need for additional headcount. We hope to see you at CES January 8 to 11. Please contact Louis to reserve the time to meet and see our demos.

Thank you for joining us today and with that, I will turn the call over to the operator for questions.

Questions and Answers:

Operator

(Operator Instructions) Our first question comes from Kevin Cassidy of Stifel. Your line is now open.

Kevin Cassidy -- Stifel. -- Analyst

Thanks for taking my question and congratulations on design wins for the CV chips. I just wonder if you could give us a little more detail on the design wins, say, first on the automotive or the ADAS win. Is that to an OEM? Is it North America-based or maybe just give a little more description and say who the company is?

Feng-Ming Wang -- Co-Founder, President, CEO & Executive Chairman

First of all, I think that the Tier 1 that we're working with has a very strong activity safety presence as well as they have very strong ADAS background -- what we have established is assembling our products, our CV22 product and helping them to import their algorithm on our platform and so that they can tap on this platform to the several OEMs and also this Tier 1 has established relationship with a number of a global auto OEMs and also with those OEMs, they're demoing the solution to them at this point.

This is a non-Chinese Tier 1 that we're talking about and we hope that we can continue to offer you more updates in the near future. But let me say one more thing, I think the reason that CV22 getting this design win is because our performance on CV and also that we are running all those algorithms in power consumption around 2 watts and more important -- and also as important that we can using our video processing technology to help to get better CV result. I think the combination of all this is the reason we won the design.

Kevin Cassidy -- Stifel. -- Analyst

Okay. Great. Thank you. And maybe a similar type of detail on the surveillance camera, you said it's going -- one design goes into production at the end of this quarter, fourth quarter. Can you give us an idea of what the ramp looks like. Does it accelerate through the year or --`

Feng-Ming Wang -- Co-Founder, President, CEO & Executive Chairman

First of all, I think that the one customer can start taking chip in this -- Q4 this year, and we believe they will -- they told us they are going to start shipping probably mid next year, and they are going to be a leading customer. This is a non-Chinese customer and we expect that the balance -- the rest of other professional severance customers are going to gradually run by first half of next year and I hope that most of them will be in production by the end of next year.

Kevin Cassidy -- Stifel. -- Analyst

Okay. Great. I'll get into the queue. Let others ask questions.

Operator

Thank you. And our next question comes from Quinn Bolton of Needham & Company. Your line is now open.

Quinn Bolton -- Needham & Co. -- Analyst

Hi, Fermi and Casey. I'll echo my congratulations on the nice traction on the automotive front. Hope to follow up on Kevin's question around sort of the timing. It sounds like the Tier 1 OEM you have for the ADAS system is more of a parts -- Tier 1 parts manufacturer that has relationships with multiple Tier 1 OEMs.

To the extent they're successful getting their system designed into the automotive OEMs, when do you think you would see revenue in the model productions? Is that still a kind of a two-plus-year window or could it happen sooner and then I've got a follow-up.

Feng-Ming Wang -- Co-Founder, President, CEO & Executive Chairman

Well, for this particular, I think we're looking at 2021, 2022 or beyond. Basically we're looking at those kind of design win opportunity with OEMs in those -- in that kind of timeframes. So I think that we are talking about at least two years out from the ADAS revenue point of view.

Quinn Bolton -- Needham & Co. -- Analyst

Okay. And the follow-up question was, I think you mentioned that it's the customer software that they ported to the CV22 processor, but just wanted to confirm that your relationships with a lot of the ADAS and Level 4 wins that you mentioned it's going to be running customer developed models on your CV flow architecture, is that right?

Feng-Ming Wang -- Co-Founder, President, CEO & Executive Chairman

The Level 4 design win we talk about is using stereo solution to do a sure obstacle detection classification and most of them will belong to us. So we are providing -- so far in this particular design.

Quinn Bolton -- Needham & Co. -- Analyst

Great. Okay. Thank you.

Operator

Thank you. And our next question comes from Ross Seymore of Deutsche Bank. Your line is now open.

Ross Seymore -- Deutsche Bank -- Analyst

Hi guys. Just wanted to follow up on the auto side as well, and maybe even from a higher level on the CV side, Fermi, as you're seeing the chronology of how CV plays out, can you just walk us through and it doesn't have to be quarterly, but maybe even on an annual basis, how you think the CV benefits will start to flow through the income statement at your company either by end segment or kind of the ASPs versus the unit side of the equation, any color you can give there would be helpful?

Feng-Ming Wang -- Co-Founder, President, CEO & Executive Chairman

Right. First of all, I think our CV revenue on the surveillance camera, now I'm pretty confident that we're going to start seeing revenue next year. I think in the fiscal year '21 or kind of the year 2020, we should see material revenue from those professional surveillance cameras.

For the consumer surveillance camera, I think that will lag behind it, maybe by 6 to 12 months because of design wins just started and we probably will give you more updates later on. But on the auto side, in fact, we talk about three new design wins. You have four design wins in three different auto markets.

We talk about one design win in ADAS, one design win Level 4 and two design wins in roles for CV and I believe those EE application has a chance to get into the revenue earlier than the other two. But still, we are looking at two to three years out, from that point of view. So from a revenue point of view that's how CV revenue work out in my opinion.

However, let me add one more thing we didn't talk about is there is a lot CV opportunity in China. While it's also applied to ADAS level 3, level 4 as well as emails, while we haven't talked about anything in terms of a design win in China, but I believe that the revenue opportunities in China is earlier somehow earlier than outside China.

Ross Seymore -- Deutsche Bank -- Analyst

So does that comment the last time as you just said, assuming sort of resolution on the tariff side, I would assume that the Chinese customers that are staying within China, don't really care about the tariffs, but the adoption of CV, and as the security get impacted in any way due to the macro and kind of governmental issues right now.

Feng-Ming Wang -- Co-Founder, President, CEO & Executive Chairman

I think our customers in China are watching this progress as much as we do. However, I don't -- we still continue to have a design win engagement and discussions, while I do believe they all worry about outcome of those situation, but I think at this point the project is still ongoing and moving forward.

Ross Seymore -- Deutsche Bank -- Analyst

And then one final quick question for Casey on the OpEx side. I know you mentioned that you're going to keep running it tightly and you came in below your guidance in the quarter and below my expectations for the guide.

How are you guys thinking about the OpEx side as we look into next fiscal year? I know you're not going to guide to the full year. But are you expecting to keep it tight or is the opportunity so large in CV that you would expect to continue to add headcount in strategic areas?

Feng-Ming Wang -- Co-Founder, President, CEO & Executive Chairman

Yeah, I think that from an OpEx standpoint, obviously we've got sales, marketing, G&A in there as well as engineering. And from the sales and marketing, G&A perspective, I think we're going to try to keep it pretty tight and be pretty -- as prudent as we can in those areas.

In R&D, we are not going to let the opportunity get away from us. So we're going to continue to invest and move resources over from our traditional products into the CV and also continue to hire.

So as we see more and more interest like we've seen this quarter, I think you're going to see us make sure that we have the right amount of resource applied to that, so that we don't let the opportunity get away from us, because as you know, you have to make the investments steady for the revenue as Fermi has been talking about two, three and four years out.

Ross Seymore -- Deutsche Bank -- Analyst

Thank you.

Operator

Thank you. And our next question comes from Adam Gonzalez of Bank of America Merrill Lynch. Your line is open.

Adam Gonzalez -- Bank of America Merrill Lynch -- Analyst

Hi, thanks for taking my question. Congrats on the first CV design win in autos. Just wondering Mobileye has become a lot more vocal recently about opening up their platform perhaps allowing customers to port their own algorithms over on to their platform, especially with the next IQ chip. Just wondering what your thoughts are and what this -- how this could impact your long term ability to gain share and penetrate the market.

Feng-Ming Wang -- Co-Founder, President, CEO & Executive Chairman

Right. First of all, I think while Mobileye is really focused on IQ5, so IQ3, IQ4, which are mainly designed for ADAS are not open up for any Tier 1 OEMs. And IQ5 is pretty much focused on in my opinion, level 3 or above autonomous car. So that is definitely something we need to continue to watch. But from ADAS market, I think that their strategy doesn't change.

Well, I really think that by opening up the platform versus a closed platform, the support structure, the software requirement are quite different. And while they ask you to apply, we will continue to watch how they ask you do it.

When we try to open up the platform, the amount of resource we throw on to try to make sure that our customer can throw on easily and making sure that they can -- they have enough visibility our hardware and software, so that they can do differentiation, that not only the average non-trivial but at certain point, you have to disclose not only just your surface structure, but the highway structure and we would like to see how Mobileye is going to do that.

Adam Gonzalez -- Bank of America Merrill Lynch -- Analyst

Got it. And then just a follow-up, if I were to look at your business over the next, say four quarters or so, I think you know prior to this quarter, you had 15% or 20% of your business still in legacy consumer application. If I were to fast forward, what percentage of revenues do you think that will be at the end of next year?

Kevin C. Eichler -- Chief Financial Officer

As yet, we are not going to guide out, but I think it'll definitely be lower. That market will continue to decline for us. We're not putting any of our investment resource in it and any of our focus on it. So I think the tail on that, it goes for several years, but it definitely will be declining over that period of time.

Adam Gonzalez -- Bank of America Merrill Lynch -- Analyst

Great, thanks.

Operator

Thank you. And our next question comes from Joe Moore of Morgan Stanley. Your line is now open.

Joe Moore -- Morgan Stanley -- Analyst

Great. Thank you. You talked about the ADAS win on the car side. Can you talk about autonomous and I guess, I know it's going to take a lot longer to implement those solutions, but what's the timeframe for potential design wins, kind of on the more autonomous side of the equation?

Feng-Ming Wang -- Co-Founder, President, CEO & Executive Chairman

So for that particular design, we talk about our CV2 chip is used only for the short range stereo. I do believe that for autonomous driving there is -- there are multiple camera being used and right now people are trying to using camera to solve different problems.

And I think that in these particular design, CV2 proved that they have unique position to solve this particular problem. So, and the revenue we're talking about is also 2022 in that timeframe, when that level cars are ready go into production.

So I think for any level 3, level 4 car, that it will take a while to get in there and we are patient and in fact, we're going to continue develop technology, not only on the lower edge surety stereo, but also on the chip side, we knew that we need to continue to evolve and producing more powerful and more dedicated chip for that kind of over market.

Joe Moore -- Morgan Stanley -- Analyst

Okay. Great. Thank you. And then in terms of the trade potential issues, there's been I guess some conversation about AI specific limitations of Chinese customers to procure AI centric product. Do you -- and I don't think there's been a lot of detail provided on that, but do you guys have a sense for whether that could be an issue down the road or just if you could fit under that umbrella.

Feng-Ming Wang -- Co-Founder, President, CEO & Executive Chairman

Right. So first of all, this is very vague, but if you look at the list, in 12 items, AI is one of them. If somebody asks you to that 12 items, basically the whole semi conducting actually, probably majority of them will be barred from selling to China. So I would like to see how that thing develop and how this is going to impact us.

But from an AI particular point of view, I want to point out that we don't see AI algorithm particularly. For example, when we sell AI (inaudible) engine, we don't do training, but we don't sell algorithm to our customer. So we really need to find out how the regulation to participate different AI functions in the end market, and that all of details will impact us whether that would be part of that limitation.

Joe Moore -- Morgan Stanley -- Analyst

Very helpful. And congratulations on the design wins.

Feng-Ming Wang -- Co-Founder, President, CEO & Executive Chairman

Thank you.

Operator

Thank you. And our next question comes from Suji Desilva of Roth Capital. Your line is now open.

Suji Desilva -- Roth Capital Partners -- Analyst

Hi, Fermi. Hi Casey. I'll echo my congratulations on the design win here. In the auto market, you have four design wins, you have a CV win right now. What's the right pace of additional wins we should be thinking about in the next 12, 24 months? Did it take a lot of effort for the first one or a lot of them are going to work on from the back, I just want the level of the expectation here.

Feng-Ming Wang -- Co-Founder, President, CEO & Executive Chairman

I think we are talking about the design wins that we are allowed to talk about. We definitely are working on more design win potentials and I definitely as soon as they're more, that we can talk about and will continue to provide you updates.

Suji Desilva -- Roth Capital Partners -- Analyst

Okay. That's fair. And just real quick follow-up there. How is the headcount scale as you add on more engagements. You're just add headcount for each of these guys or do you scale the headcount you have now across multiple efforts?

Feng-Ming Wang -- Co-Founder, President, CEO & Executive Chairman

Well, first of all, Casey just said, we're aggressively moving resource from our traditional video product line to CV product line. So when we scale customer, we probably go to continue to use our resource on the video side to support new opportunities and gradually that will be a one-way to step up.

Of course that if we don't have enough people, we're going to continue to hire to staff the new opportunities, but I think at this point, our current resources products are a little bit more will be enough to support the opportunity we are seeing right now.

Suji Desilva -- Roth Capital Partners -- Analyst

That's helpful. If I could sneak one last question. Can you just update us on the content per car for things like E-mirror versus ADAS, versus L4, just so we can get some numbers as to dollar per auto we can think about? Thanks.

Feng-Ming Wang -- Co-Founder, President, CEO & Executive Chairman

Yeah, so every OEM has their own ideas. So let me be quick. I think for E-mirror and for us, it's always a one single chip to design for all of the cover three mirrors. So it's a one powerful chip to do all the video processing plus the Blind Spot Detection. We haven't -- the ASP I will say in the CV22 range in a range of $15, $20 in that range.

And for the ADAS, because there is ASL chip and the ASP a little higher, but that's going to be also -- I think that's one of the biggest market in 2021, 2022 for us and people talking about 50 million units car will use ADAS technology at a point and it's a single-chip solution.

So for PMS and CMS for copy monitoring is also single-chip with multiple camera input, and we handle all the video processing and the CV application. I think the autonomous car for Level 3 above is probably most difficult to answer, because every OEM or Tier 1 have their own idea. So everybody is talking about 10-12 cameras.

Some entirely use wide one huge chip, some people try to use multiple smaller chip to solve the problem. But I think that's definitely much the higher highest ASP opportunity for semiconductor companies.

Suji Desilva -- Roth Capital Partners -- Analyst

Okay, very helpful. Thank you.

Operator

Thanks. And our next question comes from Charlie Anderson of Dougherty & Company. Your line is now open.

Charlie Anderson -- Analyst

Yes, thanks for taking my questions and my congrats on the CV ones as well. I wanted to focus on Level 3, Level 4 and the win there. I think you said it was an autonomous vehicle OEM, so maybe non-traditional carmakers. Someone is more of a start-up. I wonder if you could give us a little bit more detail there and maybe the region.

And then beyond that, it sounded like they're using for short range, are they adding a sensor to what's sort of the traditional rate here, multiple cameras, plus radar and lidar or are they not going to have one of their existing sensors would be used to there and then I have a follow-up?

Kevin C. Eichler -- Chief Financial Officer

Right. So for this particular design win is non-Chinese design win. I think that the usage models are very clear because we are in very congested traffic conditions. You need to know that that information among -- for the older cars are around you and Casey you'd like that to address the issue that means you have to do multiple light around the car become very expensive proposition.

So then what we demo and show our capability short range stereo either as a very challenging like condition, which show people that we can correctly identify objects as well as determine that that among older cars around the higher travelling.

So I think that really show people we have a cost effective and easy enough solution to solve the problem. So you can imagine that you have a short range stereo camera around your car. Multiple payers so then, you need to put your cases of full payer event and those full payer so they can go to one CV2 and we process all of the information including the stereo processing as well as the classification required to perform this function.

Charlie Anderson -- Analyst

Great. And then for a follow-up. It was great to hear about the potential to take some market share with HiSilicon. So I wonder if maybe you could quantify that to any degree in terms of from a total market share of the industry or unit perspective, any additional color there will be very helpful, thank you.

Feng-Ming Wang -- Co-Founder, President, CEO & Executive Chairman

Is hard for us to give you a number, but I can give you a high-level assessment. In the past outside China, although we are market leader, HiSilicon still have design wins because every customer want to use two supplier as well as that HiSilicon always try to offer a much cheaper solution than us and there are some customers that are using then as a first supplier and we are second.

But I think recently after we demo CV and after the current trade war situation, I think that we start seeing a larger design wins moving to us not only from the CV side, but also on the video product side, that used to use HiSilicon.

So I'd imagine our market share outside China will increase and also that Hikvision and Dahua, because we got bans from US government, most new opportunity available to non-Chinese surveillance camera season vendors, I think a portion of that will become ours too.

Charlie Anderson -- Analyst

Great. Thank you so much.

Operator

Thanks you. And our next question comes from Matt Ramsay of Cowen. Your line is now open.

Matthew Ramsay, -- Cowen -- Analyst

Good afternoon, guys. Thank you very much. For me, I think the team and lots of talks for a while about a number of angles of differentiation on your CV roadmap. You mentioned power envelope around two watts -- on the fact that you do stereo, the fact that your video is human readable that you're doing the analytics on.

And then some of the video stabilization and things that you've learned from the action camera market, maybe you could talk about like where your real -- do you feel like the core of the differentiation is what is -- what if any competitive response that you've seen from other folks with similar architecture. Thanks.

Feng-Ming Wang -- Co-Founder, President, CEO & Executive Chairman

Right. So in fact if among all of the advantage you're talking about, every different applications enjoy different advantage for us. For example, for ADAS Camera, this front facing ADAS smart camera, the most important features are one; because the form factor, your power consumption had to be small.

Two; with that limited power budget, you have to deliver as much CV performance possible. That really play to our strength. In the Level 3, Level 4 design we just mentioned, power is important, but the most important feature enables us to win the design is our stereo processing and our video processing capability that process video at low light and associate with the stereo processing to make us win this design.

In the email design, it's is almost like combination of all that because the power consumption is a concern. CV performance is a concern and also the video processing because, it's not only for CV processing, it also still need to continue to display the video while you do CV processing. So I think that's the market require -- all three of them.

So for different market, they have different requirements. Fortunately, we have multiple advantages that can help different customers for different markets for their requirement.

Matthew Ramsay, -- Cowen -- Analyst

No. Thanks. That's really helpful. Maybe Casey, a question for you. We talked about over the -- all the Q&A on the call here about some of the really exciting long-term CV opportunistic in the automotive space.

But you guys have a number of design wins for data recording cameras and 360 surround view and even some E-mirror projects that are not CV-based that are maybe nearer term in revenue. Could you maybe on the next six to eight quarters, while we're waiting for some of the CV stuff to hit the P&L, could you maybe talk us through how you're thinking about the automotive business over that timeframe? Thank you.

Feng-Ming Wang -- Co-Founder, President, CEO & Executive Chairman

So, Matt, this is Fermi. I think that in the next six quarters, majority of our auto revenue will come from recorders, because that becomes so big and so quickly. Both we see huge opportunity in China. We'll start seeing Japan become big and big and also we start seeing Korea having this kind of demand.

So in China, we mentioned that Chinese government is putting a regulation together for the recorders. And in Japan, we see opportunity to call data loggers. So I think that because we have been working on the recorder business for four years with OEMs and Tier 1s, this is going to continue to be dominant auto revenue for the next four to six quarters.

And we believe we're going to continue to see revenue from E-mirrors, AVMs but that will be much less than the recorders in the near term. But I do believe that for E-mirrors, particularly CV will happens, the market size can grow quite dramatically than that's what enables new opportunity to us.

But there is one thing I want to point out, we believe in the short-term, the CMS -- the TMS and CMS market is real and it can be a short term revenue for us. We are just starting here and we're putting a product together with them on CES. So please join us at CES. We'll give you a complete the roadmap display at that time.

Kevin C. Eichler -- Chief Financial Officer

The only thing I would add to that is clearly there's a lot of interest around the auto market and the surveillance market and in particular, a lot of interest in the promise in the long-term over the CV product line. That isn't to deemphasize the fact that we have a lot of products in the marketplace today and a lot of demand for that, it's going to continue.

So to your point, we will continue I think to see good activity on our traditional products in our additional product lines but clearly, the focus for all of you and the focus for us is to continue to demonstrate the promise of the CBR architecture we've talked about. So, that's just I'll add to it.

Matthew Ramsay, -- Cowen -- Analyst

Thanks very much guys.

Operator

Thank you. And our next question comes from Richard Shannon of Craig-Hallum. Your line is now open.

Richard Shannon -- Craig-Hallum -- Analyst

Hi guys, thanks for taking my questions. I'll add congratulations on top of everyone else's. Quick question on professional security, obviously you started -- you talked about for shipments of CV into that market with one customer. I think you mentioned a few others coming later this year.

How should we think about that professional security market in the context of that? Is there any substitution effect of other design wins? You've been in with these customers and do you think that market is definitely a grower next year, even with the geopolitical and tariff issues that could be lurking out there?

Feng-Ming Wang -- Co-Founder, President, CEO & Executive Chairman

Yes, so first of all let me quantify that what I have said about surveillance market is assuming that this is no more tariff or other impact because I cannot forecast it. So I'm assuming that the business will continue running under the current situation as first one.

Second one, I think that what I just said is we're going to have one customer taking volume shipment this quarter -- in Q4 this year. I expect majority, while other professional surveillance customer will go into production by the end of next year, not this year, I just want to be clear on that.

And we are seeing design wins with almost all of the top 10 customers and like I said in our script that we have design wins or under-evaluation will each one of that at this point and we are continue having design wins in the last three months and I hope that will continue. With that momentum, I am confident that we will continue to be a major player in this market.

In terms of size of the market, first of all I still think professional surveillance is a growing market, but the growth rate is definitely not as high as before. In fact Hikvision and Dahua came out to say that they expect their growth start slowing down.

However my belief is this. Although while the growth rate of the whole market might not be as high as before, but I think the CV technology will trigger a new wave of refreshing cycle because of the power, the performance and the functions that are enabled by CV really will trigger everybody quickly adopt this at the right pricing.

So I think that through all the years, I think the CV function will trigger the whole surveillance market those refresh cycle just like when the IP security camera comes in and create a huge refreshing cycle against the traditional MO (ph) cameras.

Richard Shannon -- Craig-Hallum -- Analyst

Okay. Great for all that detail. For me, one follow-up question on the automotive CV win in ADAS. I guess it wasn't clear to me based on your commentary and answers to the questions, whether this design is with an automaker itself or a Tier 1 OEM supplying that and so if it's the latter, is there a design specifically within automaker that you're predicting revenue starting in 2021 or 2022?

Feng-Ming Wang -- Co-Founder, President, CEO & Executive Chairman

We are -- the design wins are at Tier 1, but we know that they are presenting a solution to multiple OEMs. Most of the OEM is around 2021, 2022 at this point.

Richard Shannon -- Craig-Hallum -- Analyst

Okay. Do you have an expectation of timing of when that customer would have a win with an automaker then?

Feng-Ming Wang -- Co-Founder, President, CEO & Executive Chairman

I hope, it's as soon as possible.

Richard Shannon -- Craig-Hallum -- Analyst

Okay. I'll take that one in future times and that's all the questions from me. Thank you, guys.

Feng-Ming Wang -- Co-Founder, President, CEO & Executive Chairman

I'll try to offer you more updates in the near future.

Richard Shannon -- Craig-Hallum -- Analyst

Okay, sounds good. Thank you.

Operator

Thank you. And ladies and gentlemen, this does conclude our question-and-answer session. I'd now like to the call back over to Fermi Wang for any closing remarks.

Feng-Ming Wang -- Co-Founder, President, CEO & Executive Chairman

Thank you. And in summary, I think we are very happy with the progress we made with CV products in our target markets. I really like to thank all of our colleagues to make this happen. And thank you for joining us today. I'll see you next time.

Operator

Ladies and gentlemen, thank you for participating in today's conference. This concludes today's program. You may all disconnect. Everyone have a great day.

Duration: 53 minutes

Call participants:

Unidentified Speaker --

Feng-Ming Wang -- Co-Founder, President, CEO & Executive Chairman

Kevin C. Eichler -- Chief Financial Officer

Kevin Cassidy -- Stifel. -- Analyst

Quinn Bolton -- Needham & Co. -- Analyst

Ross Seymore -- Deutsche Bank -- Analyst

Adam Gonzalez -- Bank of America Merrill Lynch -- Analyst

Joe Moore -- Morgan Stanley -- Analyst

Suji Desilva -- Roth Capital Partners -- Analyst

Charlie Anderson -- Analyst

Matthew Ramsay, -- Cowen -- Analyst

Richard Shannon -- Craig-Hallum -- Analyst

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