NAND flash device controller supplier Silicon Motion Technology saw its second-quarter revenues increase slightly on quarter driven by growth in sales of the company's SSD and eMMC solutions. However, revenues for the third quarter are set to register a slight sequential decrease due to rising prices of NAND flash chips as a result of the continued memory shortage.

Silicon Motion has reported net sales increased 4% sequentially to US$132.7 million in the second quarter of 2017. Net income on a US GAAP basis grew to US$24 million or US$0.67 per diluted ADS from US$23.5 million or US$0.65 per diluted ADS in the first quarter.

"While NAND flash supply continued to improve modestly this quarter, supply remained very tight and was prioritized in favor of enterprise applications," said Wallace Kou, president and CEO of Silicon Motion. "Separately, our eMMC NAND flash partner during the quarter was prebuilding inventory as part of their internal planning decisions. As a result, our SSD solutions and eMMC controllers grew this quarter, while our client SSD controllers declined."

Sales of Silicon Motion's embedded storage products, which comprise primarily eMMC and client SSD controllers and enterprise and industrial SSD solutions, increased approximately 5% sequentially in the second quarter to account for about 80% of the company's total sales.

Silicon Motion's SSD solution sales climbed over 50% sequentially in the second quarter, while eMMC controller sales increased almost 5% on quarter. Meanwhile, sales of the company's client SSD controllers decreased almost 10% sequentially during the quarter.

In addition, Silicon Motion disclosed it began shipping SATA3 SSD controllers to Intel's 64-layer 3D TLC NAND-based SSD, the Intel 545s, during the second quarter.

"We are now seeing material amounts of new 64L 3D NAND flash coming to market, with most still being directed towards the enterprise SSD market, which we believe will benefit our SSD solutions business," said Kou continued. "Since NAND availability remains very tight, NAND pricing continues to be high, which will temporarily affect our SSD solutions and overall gross margins."

"Our client SSD controller sales will rebound meaningfully in the fourth quarter," Kou said. "We believe our business will improve as NAND supply improvements accelerate over the next few quarters."

Silicon Motion expects to post revenues on a GAAP basis of between US$122 million and US$129 million in the third quarter, which will represent a sequential decrease of 3-8%. Gross margin and operating margin will be 44.9-46.9% and 14.9-17.1%, respectively.

For all of 2017, Silicon Motion's revenues are forecast to be between US$512 million and US$528 million which will represent an on-year decline of 5-8%. Gross margin and operating margin for 2017 will be 47.4-48.9% and 18.6-20.7%, respectively.