Q4 2020 Power Integrations Inc Earnings Call
Yes.
Ladies and gentlemen, thank you for standing by and welcome to the power integrations fourth quarter earnings call. At this time, all participants are in a listen only mode.
After the speaker's presentation, there will be a question and answer session to ask a question. During the session you will need to press star one on your telephone.
If you require any further assistance. Please press star zero I would now like to hand, the conference over to your Speaker today, Joe Shiffler director of Investor Relations. Thank you. Please go ahead.
Thank you Mike Good afternoon, everyone. Thanks for joining us with me on the call today are bothered by other Krishnan, President and CEO of power integrations.
Sandeep Nayyar, our Chief Financial Officer.
During this call we will refer to financial measures not calculated according to GAAP non-GAAP measures exclude stock based compensation expenses amortization of acquisition related intangible assets and the tax effects of these items a reconciliation of non-GAAP measures to our GAAP results is included in our press release.
Our discussion today, including the Q&A session will include forward looking statements denoted by words like will would believe should expect outlook forecast anticipate and similar expressions that look toward future events or performance such statements are subject to risks and uncertainties that may cause actual results to differ materially from those projected or implied such.
Such risks and uncertainties are discussed in today's press release and in our form 10-K filed with the SEC on February seven 2020, and our most recent quarterly report on form 10-Q filed with the SEC on October 29 2020.
This call is the property of power integrations and any recording or rebroadcast is expressly expressly prohibited without the written consent for power integrations now I'll turn the call over to Bob.
Thank you Joe and good afternoon, everyone for.
Quarter revenue was comfortably exceeded our expectations, increasing 32% year over year to $151 million.
The growth was broad based with all four end markets up double digits from prior quarter.
Non-GAAP operating margin expanded from 25% non-GAAP earnings was <unk> 60, but thank you for sure and we generated $46 million in cash from operations.
Reflecting our strong cash flow and healthy balance sheet. Our board of directors has increased the quarterly dividend for 13 cents per share.
This marks our third dividend hikes in the past four quarters with a total increase of 37% over that time.
For the full year, while revenues for the analog semiconductor industry grew just 3% our revenues grew 16% with growth in all for end market categories.
Consumer category, our largest end market entering this year grew about 10% in 2020 and finished strong.
Nearly 20% year over year in the fourth quarter.
Appliances were the main growth driver, reflecting robust demand as well as continued share gains at a broad range of customers in Europe, China, Korea, Japan, and the U S.
The impact of share gains continues to be magnified by rising dollar content in household appliances, driven by features such as network connectivity into the line.
<unk> and other electronic intelligence as well as tightening energy efficiency standards.
Although in a switch products, which are gaining significant traction in appliances drive dollar content, even higher by providing a greater level of integration than earlier products.
Also seeing strong interest in other Gan products and our bridge switch motor driver chips at many appliance customers, which points to continued growth in dollar content going forward.
In the industrial category demand for high power products was constrained in 2020 by pandemic driven delays in infrastructure projects.
The lower revenues and high power, what are offset by growth in home and building automation.
We operated tools.
And broad based industrial applications.
Resulting in a lower.
Low single digit growth for the overall category.
Going forward, we expect other industrial business to benefit from a broad range of secular trends such as renewable energy high voltage DC power transmission electrification of transportation and tools.
Art homes and buildings and fixed USB charging receptacles.
The communications category provided the largest incremental revenue contribution in 2020 growing more than 30% for the year.
The smaller computer category grew even faster up nearly 50%.
The common denominator across these categories.
The rapid adoption of advanced charges for smartphones tablets and notebooks.
What was the past couple of years power integrations as demonstrated a commanding lead in terms of technology and product design for advanced charges and that advantage is now translating into rapid growth in market share and revenue.
Adoption of advanced charges accelerated last year and shows no sign of slowing as the five day, though not continuous.
Even in spite of the phones require high end power charges due to the larger batteries. Many Oems are pushing power levels, even higher so offer much faster charging as a way to differentiate their products.
While thanks to new technologies like USB, PD and the move to in excess of the model at certain Oems, we are seeing an unprecedented way up they love it.
Ovation in charter designs at Oems and aftermarket suppliers.
This includes an increasing number of charges designed to power two or more devices and a robust pipeline of designs with our Gan products that includes our Gan based Ethernet switch products as well as our new mini E cap Ics, Minicab, Ics, which use Gan technology.
To reduce the size of a charger by enabling smaller input capacitors.
We won several designs with mini cab in Q4.
Including a 65 watt design utilizing minicab, along with Gan based switch and energy saving capital Ics.
While not necessarily typical such high value designs. They exemplify the sea change that has occurred in the charter market over the past several years.
Not long ago charges for commodities and cost was the only variable that matrix.
Good day Oems are thinking strategically about charges either as a value added feature a revenue generating accessory and waiver third party aftermarket brands has emerged as well.
We have seen this change coming for quite some time and we were ready for it. Thanks to the R&D investments, we have made in technologies like Gan and for evolutionary products like switch.
Our investment in again, which began almost a decade ago.
The Great example, although the long term thinking that has been a cornerstone of our success.
Our approach to managing for the challenges of the pandemic. He is another.
While some other industry reduced head count or cut salaries in the early stages for the pandemic, we continue to invest in other people, giving normal salary increases and expanding other workforce by 4% last year with the largest increase coming in R&D.
Yeah.
In fact, we hired a number of highly capable people, let's go by industry peers in the early stages of the pandemic.
We also invested in capacity and infrastructure spending more than $70 million in capital last year, including nearly $50 million on construction of new facilities for our European operations and updates for the San Jose headquarters.
We also built inventory as demand softened in the early stages for the pandemic rising to 178 days at the end of the June quarter.
Building inventory is something that you can afford knowing that our products have long shelf lives and are fungible across applications and customers.
It brings stability to our foundry relationships, helping to preserve our capacity and enables us to satisfy customers when demand surges as we are seeing today.
While lead times are extended for some other newer products and the distributor inventories are below normal way of being able to keep customer production line is running despite an unprecedented surge in bookings in the recent months.
Finally, before I turn it over to Sandeep I'd like to acknowledge Roger for tracking who is leading power integrations for personal reasons. After six years as our VP of operations.
Taking over for Roger is Sunny Gupta, who has previously who was previously in charge of operations Center for US and also in Brazil before the acquisition by the NSS.
He has more than 25 years of experience in operations and quality engineering in the semiconductor industry and he is the ideal person to lead our operations team going forward, we think Roger for his contributions to our success and his help in ensuring a smooth transition as sunny take solar.
And now I'll turn it over to Sandeep.
Thanks, Pablo and good afternoon, as usual ebb and focus my remarks, primarily on the non-GAAP results, which are reconciled to GAAP in our press release tables.
Fourth quarter revenues were $151 million up 24% sequentially with all for market categories growing double digits as Bob noted.
Communications was up mid <unk>, driven by the ongoing strength in fast charging for smartphones.
Computer revenues were up more than 20% driven by continued growth in tablets as well as monitors and server standby power supplies.
Consumer revenues were also up more than 20%, reflecting the strong demand in the appliance market.
While the industrial revenue grew low double digits sequentially, driven by home and building automation as well as broad based industrial applications.
Revenue mix for the quarter was 34% communications, 31% consumer.
6% industrial and 9% computer.
Mix was a slight headwind with respect to gross margin, which fell by 20 basis points to 51% on a non-GAAP basis.
Non-GAAP operating expenses were $37 $9 million up $2 million from the prior quarter and modestly above our expectations for <unk>.
I'm really reflecting the timing of R&D projects.
Non-GAAP operating margin for the quarter was 25%.
For the full year non-GAAP expenses were only up slightly setting aside the impact of last year's litigation settlement, which was recorded as a negative expense.
Other income for the quarter was about $600000 down from the prior quarter due to the lower interest rate environment.
The non-GAAP effective tax rate for the quarter was 5%, resulting in non-GAAP earnings of <unk> 60 per diluted share.
Cash and investments on the balance sheet increased by $5 million from the prior quarter ending the year at $449 million.
Cash flow from operations for the fourth quarter was $46 million, while capital expenditures were $35 million.
The higher Capex reflects the need to pull forward some capacity additions, especially in assembly and test as a result of the ongoing surge in demand.
That brought our total capex for the year to just over $70 million.
Including roughly $15 million for building construction.
For 2021, I expect our base Capex to return to the normal run rate of 5% to 6% of revenue plus an additional $12 million to $15 million for the completion of our construction projects.
The other notable use of cash in the fourth quarter was $7 million for dividends.
As volume noted the dividend would go up by <unk> <unk> per share in the first quarter, which is an increase of 18%.
Internal inventories fell slightly in terms of dollars and were down 33 days from the prior quarter to 122 days.
Channel inventories also fell during the quarter as sell through once again exceeded sell in.
We ended the quarter at $3 two weeks, a level, which we consider to be unsustainably low and we expect some level of replenishment alka in the March quarter.
Looking ahead, we expect first quarter revenues to be flat compared to the fourth quarter, plus or minus 5% with continued strength in cell phone offsetting seasonal declines in computer and industrial categories.
We do believe that the current strength in cell phones reflect some level of overbuilding by Oems looking to capture the Huawei handset business and that a slowdown is likely to materialize at some point, perhaps as early as the June quarter.
Nevertheless, we believe that when the dust has settled on the <unk> situation odd.
Our OEM customers will have increased their share of the handset market magnifying the share gains we are achieving through our success in advanced charges.
For the March quarter, we expect communication to increase as a percentage of the mix.
With industrial revenue as being seasonally low resulting in a lower gross margin.
Specifically I expect non-GAAP gross margin in Q1 to be approximately 49%.
However, I expect the March quarter to be the low watermark for the year as mix should improve in a more favorable direction beginning in Q2.
The stronger Japanese yen versus the dollar will be a headwind in the second half of the year, though I expect this impact to be largely offset by cost reduction initiatives.
As a result, I expect our full year gross margin to be around the 50% Mark.
Q1, operating expenses should decline modestly compared to the fourth quarter to about $35 million on a non-GAAP basis.
After a very modest expense growth in 2020.
I do expect a rebound in 2021 with travel and events resuming at some point during the year.
And with a full year impact from the hiring that we deferred to late 2020 and early 2021.
Other income should remain around $600000 in Q1 and stay at a similar level going forward.
The non-GAAP effective tax rate for Q1, and the full year should be around 7%.
Barring any potential changes in tax law under the new administration.
Finally.
I expect the diluted share count to rise by roughly 200000 shares.
Quarter throughout the year.
And now operator, let's begin the Q&A session.
At this time I'd like to remind everyone in order to ask a question press star one on your telephone to withdraw your question press the pound or hash key please standby what we compile the Q&A roster.
Your first question comes from Karl Ackerman from Cowen.
Yes. Good afternoon, gentlemen, appreciate you taking my question.
Sandeep for my first question, it's on the industrial business.
Given how important that is to the mix.
And the gross margin Leverages as we go throughout the year.
Could you talk about the visibility for the high power area of the business for next few quarters.
So as we had talked about earlier that because of the pandemic things had kind of slowed down a bit and I think that seems to be the theme. We still are very well positioned but I think the projects resuming because of the pandemic may not be at the same pace it will be at a slower.
We still expect our industrial segment of growth and in fact for the year, we expect all off for segments to grow in the coming year.
Let me also add in the longer term.
The high power business has a very bright future because when you look around the world.
There are a lot of investments being made in renewables and electrification for.
For example, China, just recently announced a zero carbon plan and they are planning to invest something like 16 trillion dollars to.
Get the country to zero carbon by 2016.
And with the New administration in the U S. We believe renewables and energy efficiency will become central state and that will also help of course Europe has always been the leader in pushing our renewables and electrification.
And so all of those in the long term.
Very good drivers in the short term, we have a challenge because of the pandemic, which continues to impact our ability to not only designing the products, even where we are designed in.
Infrastructure price had delayed due to the pandemic.
Yes, I appreciate that.
For my follow up we've heard several suppliers across the supply chain, having raised prices.
Particularly given the shortage of cross boundary.
I know comms mix plays a role, but it's your margin outlook also a function of higher prices of wafers or other input costs.
If so could you talk about your strategy regarding the tradeoff between pricing and volume commitments from your customers. Thank you.
We have not increased our prices because we have long term customers. However, our price us having firm. This year, we haven't had the normal yearly decline.
The same extent.
So that will definitely help but in terms of our cost. It has gone up slightly because when you try to push the capacity to the limit there is always some extra cost but at the moment, we are not pricing as passing it on to their customers.
But as I said, we we do save on not decreasing the price as much as we normally do.
Your next question comes from tore Svanberg from Stifel.
Yes, Thank you and congratulations on the strong results below you talked about more and more of these charges no supporting multiple devices.
We are seeing with USB PD that you can now have as many as two three for interfaces to charge devices.
How does that really impact the dynamics for for for the business because I assume.
And in a device like that you would have quite a bit more content.
Thanks, Yes.
The advantage of multiple ports for us is that.
Typically each forward will require one of our Reno switch products. So if you have two ports.
To switch products.
And that's actually the most efficient way.
To build a multi port design. So that is the benefit Dell at ASP essentially doubles, if it's too important triples. If there is three parts. So thats a huge benefit the other benefit is when you go to multiple cores and you want to keep the size of reasonable you end up having to increase the efficiency significantly.
That means you have to use our gan based products.
And typically multiport charges.
For the higher power. So by definition, they will have to use Gan and Gan has a much higher ASP than our silicon based switches. So that also helps the last one is.
Our many cap product, which reduces the size of the input capacitor that also becomes very important in multiple designs again for size and usually in addition to all of this by the way. Many people also use it again.
To reduce the capacitor size, but in addition, today's.
Typically also have a cap zero because once you get to something like 65 warrants at higher.
Then.
The input.
Current becomes an issue. So you have to use cash zero to meet the NOLA consumption and so we get to sell something like that for different chips and three of them could began in a two part design. So that's a huge ASP increase for us.
That's great.
Great context there.
I'm starting to see some adapters that 200 watts.
That's just a marketing.
Approached by some some charger manufacturers, but my understanding is P. D is limited 100 watts. So is.
Is that perhaps a proprietary standard and is that something that you would be shipping into.
The 201 charter is actually two port charged that each each one of US 100 watts, which is.
Within the USB PD standard.
However, as some other Oems, especially in China do not use USB PD they use their own.
Protocol.
We don't care, which one what did they do whether they use USB PD or not because we are.
Toggles do any protocol.
So it is true it is true that our.
Some Oems are working on 201 two.
<unk> designs.
And the phones that connect to them can handle the 100 watts.
Input to reduce the charge time quite dramatically.
Very good line one last question for Sandeep Sandeep inventory days at 125.
Do you think you'll be able to get those up a little bit this quarter or I think so tight that that's going to be pretty tough.
So I think with the weeks in the channel being so low.
And the.
The demand still being data if you remember I talked to you about the Q for Q1, Q2 dynamic before which is exactly playing out as I thought you saw fuel for turning a little high. So I think it will take a little longer to do but we are we have got absolutely capacity than we are.
Making sure that'd be meet all the demands of our customers. So I think it'll take a little while but ex within our model and as you know going up 10 to 20 wouldn't be a problem in data based on so if we can we would like to keep it that way. So that we can meet any more upside demands.
Very good thank you and congrats again.
Thanks Laurie.
Your next question comes from Ross Seymore from Deutsche Bank.
Hi, guys congrats on a really strong year.
Even stronger close to the year and the beginning to this one so the supply side of the equation doesn't seem to be impacting you guys. At all I know you are very strategic about how much supply you hold but the channels lean now your inventories on your books are a little bit leaner is there any supply constraint issues that you see limiting the revenue growth within the next year.
Quarter two quarters.
From everything we know we believe we can meet the demand the actual demand of the customers.
They are obviously talking very closely with us because they wanted to make sure they get the parts.
We're actually very surprised we are able to meet that demand and then they say demand I have to be very careful not necessarily everything they want to build inventory, but what the actual demand is.
How much inventory they can build the safety stock inventory will depend upon the demand going forward and how quickly we expand our capacity.
But our goal is to make sure that we don't hurt to any customer and we've been able to do that for multiple reasons. One is we built a lot of inventory. If you remember that's 178 days.
At the end of June that's really really helping us there.
The second benefit of that is we kept our foundries running even during the downturn. So we were able to preserve the capacity.
So if there is a net area when we are expanding capacity that's in the back and these are the testers.
Assembly.
<unk> and <unk>.
Those take a much shorter lead times, so we can expand that as the.
The demand increases and we are doing it as we speak. So we think we will have more than enough capacity on the backend.
By the end of this quarter.
But our goal right now is to keep as much of the inventory with us so that we can serve all the customers.
Soon as we allow our customers to build inventory our inventory is spread around the world that does not allow us to serve our customers as well. So our goal is not to do that we will only allow them to build inventory. Once we have satisfied all of the underlying real demand and so we have been able to do that.
In Q3 and Q4, so our customers are very happy and we will continue to do that until.
Our our ability to ship.
Is significantly higher than the day Matt.
Thanks for the detailed answer there and then just on the handset side of things the wireless side can.
Can you talk a little bit about how seasonality shifts is.
Seasonality is even a useful framework, but how it shifts now then we're talking out of the box kind of retail Ala Carte Chargers, whether they'd be multipart or otherwise.
Well.
There is only one OEM.
Gone out of the box in a broad sense.
There are two other Oems, who have gone out of the box only on the high end of the phones and in fact, one of the one of them which is in China.
The event out of the box and they said that if you want the charges they'll claw that in free in other words, you can buy a phone without a charter at the same price as the one with the charter.
So guess, what the customer is not going to do.
So I think in the short term the impact is relatively small and loan but in the long term.
Clear.
It is going to be a net.
Negative for us and the reason I say that even though if everybody shifts.
Out of the box the number of units will go down, but we have exposure to the entire product line and even the low end, we will have the ability to use it fast charger and we believe most people end up buying.
Fastest charges so in some sense the attachment rate for fast charger will be lot higher.
Relative to the slower or charges that are cheaper.
So that's one aspect for the second aspect is.
The out of the box is really.
Promoting or are the aftermarket guys are taking advantage of it and the aftermarket volume is growing very rapidly.
It's just amazing how fast that's happening and so that means that the Oems are saying, hey, wait a minute I want to have as attractive a charger as the aftermarket so that they can capture.
The gross margin on these accessories.
So there is now a strong incentive for Oems to build attractive.
Charges that compete directly with aftermarket charges in terms of size in terms of power in terms of multiple ports and which means that all of the ASP.
It is going to be much higher in these out of the box charges because now they are competing with aftermarket charges.
So overall, we think our content will go up our.
Profit will go up and so we actually think this is good for us long term.
Also means that the higher power charges will become a larger portion of the business I mean cellphone charger charges, Sam if you will.
So russ what other indicators that trend for the future in the short term.
The dynamic that I talked about the Q for Q1 Q2 with the Huawei situation when indefinitely play and that's why we talked about the impact of seasonality and the changes can happen because of that dynamic, but what <unk> indicated is the long term for the other box is actually a very good thing for us for the move to the power level.
Bottom line.
Thanks for the one clarification just on that topic that you just mentioned what is it that you're monitoring that gives you the the pause to kind of caution people about that.
For people going for multiple share et cetera et cetera.
Different versus seasonal buying patterns, just the sheer magnitude that these customers are buying just it's a little bit of color without obviously customer names about what's leading you to give that incrementally cautious commentary on an otherwise awesome report and guide.
Well, we know exactly the total number of cell phones at each and every major OEM is well known.
You know the information available in the open market.
So it's easy for us to look at how much share Huawei is losing.
Yeah.
We know that total number is going to multiple people. So it's easy to figure out.
How much of that.
You will likely go to different people now we don't know exactly how much share gains each one of the Oems we serve will take but the total so using that we are able to.
Make sure. We are shipping we are we are not over shipping too much obviously, it's very hard for us to figure out how much each one of them need, but we do know that the overall what the demand is going to be so we can manage that reasonably well.
Got it thanks, Congrats again.
Okay. Thank.
Thank you.
Your next question comes from David Williams from Loop capital.
Yes, congrats on the quarter and thanks for taking the question.
Thanks, David.
I wanted to see if maybe you could touch a little bit on the importance of the Gan products within your portfolio and how much business do you think that you've been able to capture because because of the Gan and then maybe if you could.
Just kind of the magnitude of the ASP differential.
Differential between a silicon based and the Gan based.
It is very clear to US is Dan is on a extremely fast growth rate growth.
Great.
<unk> right now.
In 2020.
Roughly I mean, we actually doubled slightly more than doubled the revenue, whereas for 2019.
And this year.
It's a it'll be more than double it could be as much as triple the revenue.
For Brian again products I should say.
The large portion of our Gan designs are again revenue I would say maybe 50% of it is from.
Aftermarket.
Chargers.
But what we're finding is increasingly the Oems for the reasons I mentioned earlier.
Beginning to use Gan to differentiate their products in terms of size efficiency rate and so on and multiport.
To compete with the.
Aftermarket guys. So that they can they can get the business day with lucrative accessory business.
So I believe this year, we will get significant will make significant inroads into OEM business, where they are building them you know high end charges for accessories.
But beyond that we have our.
Customers in 20 different applications outside of cell phones that we're shipping into.
Now we are shipping into about 100 as of Q4, we shipped 200 different customers our Gan products.
But even beyond all of this data I believe other technologies and an engineer that Gan is here and it will replace silicon about certain power level.
Or again is very cost effective it's proven to be very reliable in the field.
Haven't had a single failure related again in the field, so far even though we have shipped a lot again.
And we think that about roughly about 30 watts GAAP.
<unk> is more.
Attractive than silicon.
For all of our products. So almost all of our new products now will use again and they are using Gan as we speak.
So we are building a significant capacity because we think again will offer let's say a differential advantage over our competitors and thats already being being proven.
The cell phone market, but also in the consumer market like TV and appliances and also industrial market and of course computer market, where we are winning number of designs and notebooks with our Gan technology.
Great. Thanks for the color that's very helpful. And then and then lastly, if I can just kind of thinking about the <unk>.
Automotive segment, I know thats, a long tailed design cycle, but have you seen maybe any acceleration in qualifying for us in the automotive just kind of given the constraints that we're seeing within the market today.
Are you at all or any any difference there.
Actually those short term issues won't make any difference because the design cycles for so long in automotive.
We are working with multiple Oems and we will know probably in next year.
Where we are in terms of design and design wins and it'll be something like 2020 for before we actually see revenue from the deep.
Traction part of it that is driving the motor because driving the motor it takes much longer time to qualify that if you had a power supply within the car. So before that we are able to start seeing revenues coming from our power supply chips. For example, we have released.
Automotive was up illustrates we have enhanced the automotive was enough power <unk> diodes, and our links which product all of those will get designed in lot faster because they go into parts of the car that are not safety related and therefore, they have shorter design cycles. So we expect to start seeing some revenue.
A little bit of revenue this year gradually increasing but the big increase will come when we are in the drivetrain.
Great. Thanks, So much guys certainly appreciate it and best of luck on the quarter.
Thank you very much.
Your next question comes from Gus Richard from Northland Capital markets.
Yes, thanks for taking the question and let me offer my congratulations for a strong quarter and year.
Just on the Gan products, what percentage of revenue are they now and sort of what is the growth rate of that product Mark product family.
Well last year.
It was we had said that in the in 2019 and it'll be a mid single digit millions in 2020 it was <unk>.
Just over $10 million.
And this year.
As I said, we expect it to be.
More than double probably as much as triple the revenue, which will be somewhere in the 20% to $30 million worth of revenue and then you can calculate what ratio it is for that.
Total revenue.
Got it.
And then just in terms of the supply of FTE wafers for the for the product are you well.
Situated for for.
Hum.
For the for the base wafers.
Absolutely we have no constraints at all.
On the base papers.
Okay. Okay, you need your your vendors don't need to add any capacity.
No.
Got it and then.
In terms of seasonality for the year I know Ross asked about cell phones.
Talk about your overall thoughts on how the year will play out do you expect.
Seasonality seems a little bit off these days can you give us a little bit of color on how you think it will play out for the full year on top line.
Well there are a lot of dynamics happening first of all <unk> is driving.
Power levels up which is good for us the fast charging is taking off which is good for average liquidity even more power.
So that discharge and we are gaining share we are gaining share from other competitors and our Oems are gaining share from Huawei. So there is a lot of multiplying factors.
So the best we can estimate.
We can only estimate short term in Q1, we believe our cellphone revenue will grow continue to grow.
And.
After that it really depends upon.
How this huawei situation resolves itself and so we will know in Q2.
It will continue to grow at maybe the move it up a softness and then it's.
A question of.
How much.
<unk> is going to start with absorbing this cash charges.
So for the whole year, the cellphone revenue should do extremely well in 2021.
Yeah.
Trying to get into India.
I was trying to get at the other pieces of your revenue you expect industrial consumer PC to behave.
As one would expect.
In a normal seasonal year or will they have similar types of impacts ex cell phones.
It will be a different seasonality because of the pent up demand in for example in the consumer goods, which is appliances.
Appliances.
Turning to grow because I think the appliance companies pulled back too far in Q2.
And the demand is very high because people are staying home and data.
They want more convenience at home so they are buying more appliances.
And adding adding to that because most people.
Don't want to go to the store to buy an appliance.
Most of that pie as companies are now selling online, which means they have to have inventory to be able to.
Customers on line is directly from business to consumer type of sale.
And so what we're seeing is that a significant demand from all major.
So for consumer companies.
Appliances.
So that this starts the.
Yeah.
Seasonality.
We won't be surprised if the demand continues through Q2.
Second half is always more challenging too.
To predict.
We have to believe.
The total bookings we are seeing right now is higher than the underlying long term demand in the short term that is obviously an increase demand. So like the fortunate Brad. We also believe the second half could have some kind of an adjustment once we are.
Over this day.
Demand bubble, if you will.
Having said that we are very very confident that we are gaining share.
Like we always do during downturns and as a result, we are very confident that we will.
Grow well above the market.
Here, but I cannot tell you the exact seasonality in the second half.
No that was very helpful balloon. Thank you so much congratulations again on the good quarter.
Thanks Curt.
As a reminder to ask a question press star one.
Next question comes from Christopher Rolland from Susquehanna International.
Hey, guys, it's David Haberle on behalf of Chris Rolland. Thanks for taking my question and congrats on the terrific quarter here.
Yes, Thanks, David I, just haven't you guys haven't seen the supply constraints that other guys, but has there been any kind of knock on effect, where you have a customer who can't ultimately build the device because they can't find other components is there any way to gauge that or pretty pretty much. What youre seeing is good to go on the customer side that Youre meeting real demand at this point.
No youre absolutely right.
Many times so they can procure other components and Thats why we monitor that very carefully we don't want to ship whatever their customer asked for because then all it's going to do is sit in their inventory because they can't get other components and then we've lost our ability to serve other customers so but surprised.
Lee.
Customers have been extremely cooperative telling them. Okay. We will definitely make sure youll get the parts you need but please don't build inventory and so what we are doing is we are managing it on a daily basis on a weekly basis, which is a lot of hard work, but I believe that's the only way to manage it so that all customers are.
Taken care off and I think they understand that and we have been very successful in making sure.
That this upswing.
Serge has been served well for our customers in fact, many customers have told us that.
They have had more challenges with other IC companies then with US. They say we are the best supplier, but it takes a lot of work to do that and that will continue to do that at least through Q1.
Got it and then for for my follow up I think that's a very prudent approach by the way for.
For my follow up do you guys have visibility into when do you think you'll allow customers to start building inventory and replenishing the channel it seems like a nice tailwind at some point for you.
You have any visibility as to when demand might slow down a little bit and you might be able to replenish that channel.
Yes, that's a good question to the best we can estimate we think we may be able to replenish the channel a little bit in Q1, it really depends upon what happens to demand after the.
Lunar new year.
So we have to wait and see.
There is always a concern that.
You know after the new year, there could be some push outs and so on.
But.
And all of that into account when we are projecting the guidance that we are we are we are saying, which is a 150 plus or minus 5%.
So.
If the demand continues then it would be difficult to.
Build inventory either at power in our channel or at our customers now.
Now what we don't know is whether our customers have inventory of finished goods that they might have overbuilt and that's our concern in the second half.
They might have built too many appliances too many cell phones in anticipation of gaining more share.
And which may or may not happen.
And again I want to emphasize that yes, there might be a soft and that's from the second half.
But on a relative basis I believe we will do over perform the analog side because of the market.
This year.
Again.
Great. Thank you very much for the color there.
Youre welcome.
That was our last question at this time I will turn the call back over to the presenters.
Okay. Thanks, everyone for listening there will be a replay of this call available on our Investor website, which is investors power dot com. Thanks, again for listening and good afternoon.
Okay.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
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