Q3 2021 Alpha and Omega Semiconductor Ltd Earnings Call
And <unk>.
Total revenue.
Mike.
Good day.
And then.
Absolutely.
The strength.
[music].
Good day, and thank you for standing by and welcome to the Alpha and Omega semiconductor reported financial results for the fiscal third quarter of 2021 conference call.
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 you know thinking I would now like to hand, the conference over to your speaker today, Mr. Gatti the warhead.
Managing director of the Blue shirt Group Asia.
Good afternoon, everyone and welcome to help and I needed Semiconductor's conference call to discuss fiscal 2021 third quarter and financial results under the word jagged Investor Relations representative for AOS.
With me today are Dr. Mike Chang our CEO.
Steven Chang pregnant and he found me on and our CFO.
And it's being reported and broadcast live over the web replay will be available for assembly. Following the call and you get the length and the Investor Relations section of our website.
Call will proceed as follows Mike will begin with strategic highlights.
And Stephen will provide business updates and a detailed segment reported after that and the bond will review the financial results and provide guidance for the June quarter.
Finally, we will have the question and answer session for.
The earnings release was distributed over why your services today May <unk> 2021, after the closing and market. The releases also posted on the company's website. Our earnings release and this presentation includes certain non-GAAP financial measures, we use non-GAAP measures because we believe they provide useful information and other operating performance at <unk>.
To be considered by investors in conjunction with the GAAP measures that we provide a reconciliation of these non-GAAP measures to comparable GAAP measures is included in the earnings release.
Mind, you that during this conference call, we will make certain forward looking statements, including discussions of the business outlook and financial projections and forward looking statements are based on management's current expectations and involve risks and uncertainties that could cause our actual results to differ materially from such expectations for a more detailed description of these.
Risks and uncertainties. Please refer to our recent and subsequent filings with the SEC.
We assume no obligation to update the information provided in today's call.
Now I will turn the call over to our CEO and Mike to provide strategic highlights Mike.
Thank you Gary.
I'd like to welcome everyone to today's call.
And I am excited to be speaking with all of you again per day and.
Reported another strong quarter.
And the March quarter, we ex.
Theater, and such strong year over year performance.
Each of our market second line.
We sold for.
Robust.
Shipments across most of our product categories.
These include resort ahead of.
Patients.
Revenue of $169 million.
Practice started year over year.
And the sequential growth.
We benefited.
From strong and market demand, which enabled us to optimize our product mix.
And the meantime, we continue to take a disciplined approach to our spending.
All of this resulted in non-GAAP gross margin of 31, 9% and non-GAAP EPS of <unk> 77.
Which is.
<unk> increased to five seven times year over year.
Brian will go into more details.
Our financial performance data.
I remain encouraged by.
And by our teams solid execution.
The operational controls and efficiency continue to positively impact our bottom line, resulting in significant profit.
Visibility improvement.
As I discussed on crude as a cost.
Our mission is to be a trusted technology partner and global supplier all paid for.
For the 40 of power semiconductors.
There is some issue continues to drive our strategic focus and the work we do at <unk>.
Yes.
Our focus to our and the average.
Moving broader and deeper product innovation.
Our strong engineering team and the technical expertise enable us to develop.
A broader variety of our <unk> Creek and.
Power IC technology platforms.
And this allows us to expand our product offerings and.
Did you ever complete power solutions for more targeted applications.
As a solution provider.
<unk> deepened our relationships with customers become their trusted strategic partners.
As a result, our newer products are driving growth for.
Primarily by increasing.
I'm content.
Core applications.
On the menu revenue fronts.
We continue to ramp up.
Our capacity.
Our joint venture Fab and <unk> According to plan.
For semiconductor capacity remains tight globally.
And market demand outlook continues to.
To be solid across the board.
With our expanded capacity added.
And at a JV that we are thankful to be able to address it.
Additional customer demand from the Chongqing joint venture.
The JV fab is for feeding its purpose.
And providing us with practical capacity management.
Which is critical to supporting our growth.
I am very.
Please.
We used the progress.
And we are on track.
Two our approach and the phase one target run rate and.
And the September quarter day.
And we'll update you on our progress.
Jim you crap laser disc.
This call.
While we have made a tremendous progress as a company.
Over the last several years.
We are energized by the opportunities in front for us.
We believe that our forecast.
Innovation and unwavering commitment to develop.
Strategic partnerships with tier one OEM customers will enable us to continue to capitalize on our core growth opportunities.
As well as progressive penetrate other.
<unk>.
Importantly, we are confident and we will stop cash.
And our target of $600 million annual revenue.
For calendar year 2000.
And one.
Now I would turn the call over to Steven for it.
Update on our business and a detailed a second and report.
Steven.
Thank you, Mike and good afternoon, everyone I will start with an update on our business and then provide detailed segment highlights for the March quarter.
As Mike discussed earlier, the industry wide supply remains tight while demand continues to be strong across all our core market segments and the miss of worldwide shortage, we continue to optimize our operations product mix and capacity allocation to support our key customers and maximize revenue.
We are working diligently with our strategic customers to meet their procurement needs in particular, we have been ramping production at the JV fab and function.
Supply and fund the JV fab has enabled us to address growing demand.
Our business momentum in recent quarters reflects our broad product portfolio go to market strategy and expanding production capacity more and more our products offer a comprehensive solution to our customers leveraging our expertise and power.
This expands beyond commodity parts into multi market optimized solutions, enabling our customer products to become more reliable and efficient.
We are celebrating growth by winning new customer engagements with an expanding pipeline of new products and increasing Bom content with our application specific solutions. For example, we are designing and more and more power IC products into notebook applications.
We are also expanding our compact module solutions to address additional homework clients applications like washing machines and room air conditioners.
Now, let me drill down into each other business segments.
Let's start with computing revenue was up 48, 6% year over year and up eight 6% sequentially as anticipated. This segment represented 41, 5% of our total revenue.
And demand for our products remains strong even going into the March quarter as our major customers, we're still facing shortages.
While we were on allocation, we actively managed our capacity to support customer demand and resumed sequential growth and the quarter.
During the quarter, we were able to improve product mix by selling more higher ASP products for both MOSFET and power Ics.
We allocated more resources to support the computing segment, especially the notebook application.
The graphic card business was strong in the March quarter and is expected to remain strong driven by crypto currency mining.
Looking ahead, we expect overall computing revenue to grow by mid single digits and the June quarter, we expect solid demand at our ODM customers for both notebooks and motherboards offset by a temporary drop and graphic card business and two production delays.
Moving on the consumer segment, which was 21, 2% of total revenue and our March quarter.
79, 1% year over year and up one 3% sequentially.
TV business was down seasonally offset by the strength and home appliances.
We shipped high volumes of module solutions to important home appliance customers in Korea and China.
And resume growth and the March quarter, and we expect momentum to continue in the coming quarters.
We continue to grow our gaming business with both our MOSFET and power IC products in multiple sockets looking.
And looking to the June quarter, we expect the consumer segment to be flat with continued strength and home appliances and gaming offset by a decline in our television business.
Next let's move to the communications segment, which was 16, 2% of total revenue for the quarter.
42, 2% year over year and up one 8% sequentially.
This segment played out better than expected as Farnborough phone business performed better than normal seasonality.
Demand for some phone models extended into the March quarter, particularly and the China markets.
We expect our communications segment to decrease for low double digits and the smartphone low season for the June quarter.
We are well positioned to resume battery protection growth and the September quarter with design and secured at our key global customers.
Finally, let's discuss the power supply and industrial segment, which accounted for 19, 2% of our total revenue.
This segment was up 75% year over year and up 12, 5% sequentially.
For solid growth was due to several factors first quick charters were strong due to demand for our travel adapters used for tablets as well as quick charging solutions for smartphones.
Second the demand for AC DC power supplies for laptop adapters was robust with incremental design activity with major power customers in Taiwan.
Third demand from our powerful customers remained strong with a low voltage motor drive solutions, we have been growing this overall segment due to support for about JV fab.
We expect this segment to grow by high single digits and the June quarter, driven largely by robust target business for both U S and China markets.
I am excited by the momentum, we're seeing and our business with nine months of fiscal 2021 now under our belts we are ex.
<unk> well and on track with our roadmap we've laid out for the investment community in terms of our key growth drivers across the various business segments.
With that I will now turn the call over to Yvonne for a discussion of our fiscal third quarter financial results and our outlook for the next quarter.
Sure.
Thank you Steven good afternoon, everyone and thank you for joining us.
Revenue for the March quarter was $169 2 million up six 5% from the prior quarter and up 58, 4% from the same quarter last year.
In terms of product mix.
<unk> revenue was $122 6 million up three 5% sequentially and up 41% year over year.
Power IC revenue was $43 4 million up 16, 1% from the prior quarter and up.
Up 139, 5% from a year ago.
A summary service revenue was $3 $2 million as compared to $2 $9 million and last quarter, and $1 2 million and others for the same quarter last year.
Non-GAAP gross margin for the March quarter was 31, 9%.
And from 31, four percentage and the prior quarter and up from 27, 5% and the same quarter last year.
The quarter over quarter increase and non-GAAP gross margin was mainly driven by the better product mix, partially offset by the lower utilization and some of our factories due to the lunar new year holiday and a one week shutdown at our Oregon Fab nudity and.
March for annual maintenance.
Non-GAAP gross margin ex coded $8 million of amortization of purchased IP for both the March quarter and the prior quarter.
In addition.
Non-GAAP gross margin excluded <unk> $4 million of share based compensation charges for the March quarter and for the prior quarter as well as the same quarter last year, respectively.
Non-GAAP operating expenses for the March quarter were $39 million.
Compared to 31 $5 million for the prior quarter and $25 8 million for the same quarter last year.
The quarter over quarter decrease was primarily due to the higher variable compensation and of course the last quarter.
Non-GAAP operating expenses for the quarter excluded $3 $4 million of share based compensation charges and.
And $6 million of legal expenses related to the government investigation.
And this compares to two.
And $2 $8 million of share based compensation charges and.
$8 million for legal expenses related to the investigation for the prior quarter as well as $2 $5 million of share based compensation charges.
For $1 million for legal expenses relative to the diversification and $6 million of.
And the impairment charge related to an investment and the startup company for the same quarter last year.
Income tax expense for the quarter was $1 million compared to $7 million for the prior quarter and a $1 million income tax benefit for the same quarter last year.
Non-GAAP EPS attributable to AOS for the quarter was <unk> 77 per share as compared to 65.
For the prior quarter and 11% for the same quarter last year.
AOS continued to generate positive operating cash flow.
AOS on a stand alone basis generated $33 $3 million, so for operating cash flow in the March quarter, as compared to $35 7 million and the prior quarter and $49 $5 million and the same quarter last year.
And the March quarter.
<unk> $20 million customer deposits for securing supply.
The JV company generated a positive operating cash flow of $5 3 million and the march quarter compared to $4 million into prior quarter and $15 $2 million. So free cash flow use the Friday JV company in the same quarter last year.
Consolidated Ebitdas for the March quarter was $36 $2 million.
<unk> to $31 6 million for the prior quarter and $8 8 million for the same quarter last year.
Ebitdas attributable to AOS for the quarter was $36 million.
Compared to $25 3 million for the prior quarter and $6 5 million for the same quarter last year.
EBITDA for the JV company was for $5 million and the March quarter as compared to $6 million for the prior quarter and negative $1 1 million for the same quarter last year.
Now, let's look at the balance sheet.
We completed the March quarter, with cash balance of $192 $1 million, including $158 3 million at AOS and $33 $8 million other JV company.
This compares to $181 million at the end of last quarter, which included $142 3 million at AOS and $38 7 million other JV company.
Our cash.
Cash balance a year ago was $110 $2 million, including $99 5 million at AOS and $10 7 million at the JV company.
The bank borrowing balance at the end of March was $167 2 million, including $26 4 million at AOS and.
And $148 million other JV company.
During the quarter AOS, and the JV company, repaid $2 $1 million and for $4 million of existing loans respectively.
Net trade receivables were $33.7 million and at the end of the March quarter as compared to $24 9 million at the end of the prior quarter and.
And $17 5 million for the same quarter last year.
Days sales outstanding for the March quarter was 22 days compared to 21 days in the prior quarter.
Net inventory was $145 1 billion at quarter, and slightly up from $144 $3 million and last quarter and up from $127 $4 million and the part year.
Average days and inventory were 112 days for the quarter compared to 115 days and the prior quarter.
Net property plant and equipment was $432 $6 million.
Up from $438 million for last quarter and up from $412 $3 million for last year.
Capital expenditures were $15 8 million for the quarter, including $10 1 million at AOS and $5 $7 million at the JV company.
The JV company and continue to ramp.
12 inch fab during the March quarter.
It's on track to achieve the phase I and targeted run rate in the September quarter. This year.
The JV company is in the process of additional financing to further expand its capacity.
We will provide more details when available.
With that now I would like to discuss the guidance for the June quarter.
We expect revenue to be approximately 100, and the $70 million plus or minus $3 million.
GAAP gross margin to be 31, 7% plus or minus one per site.
We anticipate and non-GAAP gross margin to be 32, 5% plus or minus 1%.
Non-GAAP gross margin excludes <unk>.
8 million amortization of acquired IP and $6 million of estimated share based compensation charges.
GAAP operating expenses to be and a range of $36 $2 million plus or minus $1 million.
Non-GAAP operating expenses are expected to be and a range of $31 million plus or minus $1 million.
Non-GAAP operating expenses exclude $4 $7 million of.
Estimated share based compensation charges and $5 million.
Estimated legal expenses relating to the government investigation.
Income tax expense to be approximately $9 million to $1 1 million.
Loss attributable to non controlling interest to be approximately $2 million.
As part of our normal practice, we're not obligated to update this information.
With that we.
And we'll open the call for questions.
Operator, please start the Q&A session.
Thank you.
Ladies and gentlemen, if you would like to ask a question and you need for spine and then number one on your telephone keypad. Once again, you may price by one to ask a question.
And while we compiled and lasting.
And your first question comes from the line of Greg Kenny can be violence can and do you see your line is open.
For taking the question and to the entire team congratulations on just very robust execution and our breakthrough performance, Mike you and I have known each other for at least 10 years now and you've always had and then where you bring vision for where you wanted to take the company and this is certainly a very.
Significant milestone so good for you catch up.
The first one.
Youre welcome.
And maybe the first question should be to you with JV Fab phase two two for is still ahead of us as the best for AOS sales still ahead and if so can you just comment on some of the things that you see when you look out over the next couple of years for the company.
You talked about specifically on this joint venture.
Not necessarily just the joint venture, but that as well as some other things that's happening with it.
Things like the tier one OEM wins that you talked about the increased diversification that you are getting across different end markets and and the strong revenue and earnings growth that you see and the business. It was more of a general question on the company's evolution over the next two to three years losses.
Thank you very much and actually not the company you have a very one core.
Commission that belief and.
And no matter, what we always want to growth.
So we.
And look hard all these years.
And once we grow.
Are you for structurally stronger all cash.
<unk> you would get bathroom.
That would be stronger and our relationship with the customer would be deeper.
And they award recognizes value and Thats, except for which we of course it before today.
Union Cross over.
Critical mass or thresholds.
And what that up and you read about the adequate.
So and in line now we start to.
Okay enough mass right. So the drop through still stand and maybe were accelerated because of our capability and now also because of our infrastructure and everything.
And what it's done.
And so we are actively looking for a billion dollars and more.
No that helps and certainly large companies with their product programs for companies that can scale with them and I think one of the things that you are saying is you now have the ability to do that and to be a trusted partner to tier ones. So thanks for that.
Let me take that line of thinking a little bit and to the near term and flip it over to you. Stephen So we had stellar fulfillment and execution and the quarter $170 million and revenues with growth across I believe three of core end markets.
As we look at the end market profile, we would typically expect to see revenues increased sequentially from <unk> to <unk>, just given seasonal dynamics and things like smartphones and gaming cards and notebooks.
Question is do you have that kind of flexibility.
And the business or as we look at calendar <unk> fiscal for Q <unk>.
Revenues are we really fully optimized in terms of our output relative to and demand.
Sure.
During this time and auto.
And.
For sure.
And able to.
Net growth.
And we will not be having a lot of accounts and perhaps the ops.
And our growth.
And we had to.
This presentation.
And business support and how to grow.
Sure.
And she was on our key customers.
And also.
Mike.
And our revenue as well.
After a careful.
Is it liberated.
And if there.
And while we've been making.
And two to grow our business.
So.
So and the short term, we definitely saw and then.
Computing that we've taken the chance to improve and the asps by selling higher value sockets.
MOSFET and power Ics and what we're getting into some more.
Applications to in terms of and higher power sockets.
And the including of getting into the graphics of course, the power space for Cpus is too big of about two.
We also continue to.
And to deepen our home appliance and business and is an area that we've been we entered into the market years ago and have been consistently grow and that and that business.
And I think during this time the shortage.
Trying to improve.
R R <unk>.
Our ability to serve some of these tier one customers and smartphones.
Going to be big and they are going to be coming back. So if youre talking about kind of looking for further out we are preparing for a.
For novel Peek in the September quarter, because we are well positioned.
Key smartphone makers there so I think seasonality is a little bit different this year, but.
I think and some ways is still attainable and see it so I think and smartphone.
And as an example of that.
That's really helpful. And then clarifying the gaming card production delay issue because that related to AOS and components or is that related to components away from AOS and <unk>, but it impacts your shipment and intensity and of the application.
And that's a little bit of both I think right now and things are so tight and especially with power IC products.
And more things that you have people here or do you have I guess allocation for so and but we believe that with the short term thing and I am.
And behind US, it's just a temporary thing and they should and this.
This should be resolved quickly.
Yeah. That's helpful. And then a couple for you if I could place for.
First question is nice to see that the guidance for our gross margin increased but.
And I thought that three months ago, when the company initially guided to gross margin and indicated that.
Lunar new year, one week shutdown and and.
Oregon Fab shutdowns would negatively impact gross margin by about 190 basis points. So so is it possible that the gross margin improvement would actually be greater than what I think is a 60.
Basis point increase and you get the full.
And the full month benefit from that higher level of utilization versus relate the absence of a week and each of your two internal problems.
Sure.
What would be offsets be.
Preclude that.
Okay.
We are pleased with our margin improvement.
March quarter, it was primarily driven by better product mix.
Yes.
Originally.
Estimated and.
Sure.
Some.
<unk> reductions and the.
And the operators in China for lunar new year actually as it turned out and better than expected.
And also the Oregon, and Fabs and <unk>.
You mentioned this.
Most of them.
That got pushed in the towards the end of the March quarter. So.
Impact on the March quarter was the relatively smaller.
So and overall net and we.
We think and I mean this.
<unk>.
Product mix and then we can.
Continuing to net.
Improve some there and then.
One factor is that.
The current tight and demand supply environmental for Hawaiian.
Provided and.
Some opportunities for us to optimize the mix.
Another contributing factor is the.
Is the growth outlook.
From <unk> and <unk> products.
For example, you saw our power IC products that growth quite a bit and.
100, and almost 140 basis.
And the year over year growth in this zone.
Those.
Newer products generally carry a higher margin for us so.
So and fundamentally and we expect to gradually improve our.
Margin with new products.
Got it and.
And then and the prepared remarks, there was mentioned about 20 million and advance payment I believe related to capacity can you talk a little bit more about what that relates to and when the.
Fulfillment would be executed for that payment.
Sure.
And the March quarter, we received $20 million and customer.
<unk>.
For security.
Supply for.
And.
Next few years and I mean.
Each year, we have for some.
Numbers and the.
<unk> guarantee and.
The.
Quarter before and the <unk>.
Some of the quarter, we also received.
$10 million.
And they could.
Back then.
And.
And those.
Those.
Deposits.
I think and the indicators.
And our relationship with our customers.
Getting.
Deeper and deeper sold and.
And they recognize AOS.
And our products and the patio and.
And our supply.
We we.
But happy to see that.
That's helpful. And then lastly, before I hop into queue nice to see.
JV fab at the time of motoring along around the mid single digits for another quarter.
At these revenue levels, just at a reasonable level or are there. Some gibson takes either way coming and the next couple of quarters that would chip fab epic either materially up or down.
I would expect.
And stay around this level.
For a couple of quarters.
Relatively.
And then.
June quarter's net revenue guidance slightly.
Slightly higher than that.
March quarter so.
And that would be similar production level for the JV company, so and the overall and the yen it is.
Marching toward the target run rate.
Net.
September quarter.
Got it thanks, everybody and I'll get back into cash.
Alright, thank you.
Thank you Greg.
Your next question comes from the line of EBIT Williams from Loop capital. Your line is open.
Hey, good afternoon and congrats on.
The incredible quarter here, it's great to see the progress.
Thank you David and thank you.
So I wanted to maybe I think a little bit about the.
From the solution standpoint, and maybe the modules that you've talked about obviously, you've been growing the IC business.
Do you think that overtime and when it becomes more as a solution provider and maybe modules and less like a discrete maybe silicon provider.
I think from our perspective and definitely moving into modules and Ics is something that we have been doing and is part of our strategy going forward and for argue a total solution is actually it's a total set price when youre talking about individual sockets, and yes, youre talking about Ics and modules, but we want to be is the solution provider to our customers. So.
Usually when theyre looking when a customer is designing aboard and multiple sockets and they need to work together in order to for the application.
To perform at its best so as best we can provide a total solution to help the customer and.
And say Hey, these parts brought together and two.
And they know how to do to performance at <unk>.
And then it without leaving too much on the table and basically.
Can you get the best performance by having the parts operate and and.
Got it.
So for US I think we will be continuing to grow.
And we'll do our products certainly.
But it's not going to be moving away from.
And from suites, or anything and and also just wanted to dig a point that our IC products and our module products.
A lot of them have discrete solution and I'll, just speak silicon devices inside and that's what powers that flow.
Power devices and of course, coupled with IC it can really bring out the performance.
Sure.
And.
And thinking about that is there do you think that this is kind of and organic approach longer term or do you think there's an opportunity maybe for an acquisition or something that might come in too.
Perhaps us supplement that.
And in general, we always are and the lookout for M&A opportunities, especially if there's something that complements what we're trying to do that can help us to really you know it's two to move forward in one area or maybe compensate for it.
Yeah.
But and I think we definitely have an organic plan workflow is not strictly a restricted to that.
Okay great.
And then maybe on the bookings side, obviously, a strong quarter and a good guide can you talk maybe a little bit about the velocity of bookings through the quarter and how that's maybe trended into April.
Sure.
Backlog has been strong and steady throughout the quarter.
Not so much flow.
<unk> and there is.
Reflecting the strong and and market demand and our company specific.
Business growth and then and now.
Our design ins and wings so.
We will monitor the market changes and dynamics.
Closely and so we will adjust our plans.
Accordingly.
Okay, that's fair.
And maybe and in terms of the JV, you've talked about it reaching a run rate.
In the September quarter, and that the planning phase of that for the second phase there of the JV when do you think.
And maybe a realistic times could you have capacity if we continue to see the strength that we're seeing and the market now when could you reasonably have the phase III.
And a.
A ramp phase.
We suddenly we understand and the current market demand and supply situation.
Sure.
Our JV company also understand and attend.
And as I said in my prepared remarks.
The JV company is and the process of additional financing.
No.
And to further expand and their phase II.
So I don't want to jump that guarantee or interest.
We will provide more details when available.
Okay, Great and then just one more for me if I can on.
On the on the margin improvement is there and what you're really good size, maybe what the prioritization.
The higher margin products versus maybe what the volume benefit would have been in the quarter.
In the March quarter reported.
Much million entirety, the margin improvement came from and.
Better product mix.
And this tight supply demand environment and.
B, we have opportunities to optimize and <unk>.
Mix, so and also.
And reflected in some and newer products, and which and carrying which are carrying at a higher margin for us.
And yet it's primarily.
And the prompted product mix.
Great. Thanks, so much.
Thank you.
Thank you.
Next question comes from the line of Jami wines and Stifel Nicolaus. Your line is open.
And then thinking and let me add my congratulations on a strong execution and growth.
And if and I wanted to follow up on the capacity question because.
And my understanding is that.
Combined with the JV and the Oregon Fab.
The quarterly revenue that it can support and telecommuting to support and <unk>.
One was $150 million or so on and put our revenue.
And well above that and <unk>.
Can you give us an idea of where the utilization stand both in Oregon, and Alpha and the JV and.
And how that.
And he kind of pharma and the earlier question is how quickly can add additional capacity to expand your headroom.
Sure.
Overall net.
Last year or a year.
And then David I guided that.
The combined capacity, probably can support us to $115 million revenue.
Per quarter level.
During the last a year or two and so.
<unk>.
And our product mix improved the credit bid.
And so.
And when we rolled out and all.
And newer products and.
And what products and carry generally.
<unk>.
Higher asps higher.
And our margin and and.
And also at the same time.
No.
The new products and generally.
And.
Half the shrinking die size and so Norwich.
Which is equivalent to giving us.
Additional capacity so.
That's the Delta right now.
$170 million.
Quarterly revenue versus $150 million.
Quarterly revenue and net.
And pretty much and that contributed to our.
Newer products.
So.
Right now our Oregon Fab is at full capacity and the JV 12 inch fab is trumping up and then finally.
Two of them.
To their target run rate so.
And we still have and may still have.
Some room to go.
So overall, yes.
Happy with.
Jv's progress.
Maybe if I can.
Push a little further on that can you give us an idea how much room you have left to go and how much of a growing and they need to keep.
And keep growing.
Because for one and I understand.
And the equipment market and there is very long lead time.
It takes time and install liquid and get things up and running and so.
It appeared and where you might be a little bit capacity limit and at some point and and can you give us an idea and what that that could be but and then it might be.
Okay sure.
As I said and.
And JV fab and Ste.
And then ramp up.
And on a little bit.
I will say it and then probably $5 million per quarter contribution to our revenue range.
And yet we recognize and then.
Semi.
Equipment and our lead time is getting longer.
And.
Are there.
And J.
JV.
Also.
Doing their part of the work too.
And you expand their capacity.
And then.
We don't have to.
Due to the whole face of phase III all together.
Beyond the phase one.
And over there and actually.
The current phase one clean room still has some space.
They kind of squeeze in some.
Shipment to <unk>.
And some bottleneck areas and so so that they can produce a more wafer.
Fundamentally yes, let us know where they are in the process of additional financing for the full face Alpha phase II expansion, Yes, then.
Or provide more information later on.
Great. Thank you that's very helpful and.
A question on the $20 million deposits.
And I guess two questions there one is.
And this included in the operating cash flow for.
And for AOS.
Yes, yes.
Okay and and as this.
And we see this for securing capacity at the Oregon fab or at the other JV.
As soon as the supply from AOS.
And did not spell out and wherever weighted manufacturing.
Got it okay and.
Is this.
<unk>.
Something thats recognized it sounds like it's going to be.
<unk> recognized over the next couple of years securing capacity for the next couple of years and is it kind of.
Potential revenue.
Incremental.
And as.
And guarantee them for a certain dollar amount of.
Incremental supply for the next multiple years.
So is it something that day.
And converted into revenue and at some point or is it kind.
And kind of a deposit that you hold for now.
And later deposits and day yet.
And the return later.
And later got it.
And then when that happens is when.
And you will be counted as like a.
How does that how do you record that on the cash flow statement.
While the Albion radar.
The reduction for the operating cash flow at a time when we return to.
Deposits.
Got it okay. Thank you and.
And Ah.
Question for Mike on the price.
And I can see that.
<unk> for substantially as a percentage of sales I think 15% ish last year and 25% or more this year.
Two questions first part is.
Is this fab externally and if so what kind of.
Wafer.
And so are you seeing are there any shortages.
And I think that can impact humor and theirs.
From that level, and then longer term when you mentioned that $1 billion target eventually where it could pricing.
And I want to hit that kind of revenue.
Great.
And Steve and maybe interest.
This first and then Monday, Mike and definitely.
And to the overall picture.
And power Ics and just.
Any any any product everything doesn't need the source and.
Some of our products and a monolithic similar products are on a multi year multi chip.
And especially when it's taking advantage of or so.
And so.
So to some degree and turnovers to some degree will also depend on outside.
And in general and nothing Ics for any kind of foundry business is tight these days, whether it's the MOSFET or whether it's somebody and IC. So yes, I think that we are facing some constraints there and just like any other business.
And how I see definitely is something that we are investing to grow and and.
It will become.
<unk> will start to become a bigger portion going forward.
And especially when you look out to non plant for.
For $1 billion and beyond and at the same time I also expect the discrete business to grow as well too.
Fundamentally does free is still one of the underpinning a lot of the power IC strength.
So and the bigger picture, we still expect.
The suites to it to be a big a majority of the business still but at the same time power IC is going to grow for.
Percentage of business lines as well.
Absolute dollars.
Great.
Youre right.
And Joe Steven speak and Thats, what I would like to say anyway. So it isn't complete yet.
Yes, no that was very thorough thank you Steven.
And one last question and the.
And the communication segment it looks.
It looks like Youre doing very well there and I.
I think the prepared remark you talked about Chinese Oems doing quite well can you talk about the dynamics, you've seen and I understand there is.
There's market dynamics going on with Huawei and non Huawei.
Huawei Chinese Oems going after net market share.
Can you talk about what youre seeing in terms of the.
And how that settles out and if there is there is a chance for.
A pause.
People take stock and where their market share gains actually were.
Sure I mean, I don't want to speculate and in terms of like work with and open out at the end, but in general Yes, certainly other Chinese vendors, they're all jockeying for market share and.
Yes.
Starting from last year.
And so part of it also.
We have.
More increased ability to serve that market before it actually these Chinese customers phone makers they work force.
One of our first for the customers for PCM.
And Thats.
Battery protection products and before we engage with the tier ones.
And we have to perform and allocation for a bit but now because of the function and functional gave us increased ability to supply. So we actually have been working on average.
Winning some of this business and supporting some of this business for going forward and I believe that we will.
And we'll have a strong business from all of that the other global markets U S Korea as well as China.
Great. Thank you and second one last question.
Hello.
You're thinking that your peers have talked about first half and second half will be first half kind of being strong and the second half can you do you have any kind of early read on that given your backlog levels and your visibility and your expectations from there and.
For this one and I mean.
And then right now.
The March quarter was definitely above normal seasonality.
And the June quarters, and that we guided already so right now our backlog.
Is a sales strong and.
Healthy and the sold.
We are closely monitored.
And.
Market and Nymex.
And our channel inventory actually.
Below our targeted range right now.
Can you quantify that firstly.
The channel volume.
And finally inventory, we normally target and total three months and channel inventory right now and isn't below the low end.
Target.
Great. Thank you very much.
Okay. Thank you.
Once again, ladies and gentlemen, if you would like to ask a question and the branch firewall on your telephone keypad.
I think we have a follow up question from the line of Craig Alistair and design and Securities. Your line is open.
And thanks for taking the follow up just two quick ones. The first just either for.
Stephen are aethon, guys, if I rebound the clock six months.
And when we were talking about some wiggle room on fab capacity one other things that we were talking about is the potential for and and.
Incremental tool here, there to yield some debottlenecking benefits and and give some incremental.
Incremental supply again and the today's discussion it sounds like.
<unk> 150 to 170 years, and really do product. So did I misinterpret, what the company was conveying six months ago or is the debottlenecking benefit just a small minority of the overall.
Gain that we're seeing from $1 50 to $1 70, with the majority being the new product.
Yes, and Youre right.
Okay and then the second question is really.
A bigger picture question.
Just on how we look at how the net.
Joint venture Fab is being optimized from phase one through phase for my understanding was and has been for the last few years that we were going to optimize phases, one through three for volume and and scaling and we're certainly doing that.
But we really and what kind of optimized for gross margin until phase for but with your strong fulfillment and execution.
And industry dynamics and.
And some other things that we're getting very good gross margin. So is that possible going forward that we can actually optimize for both through phase two through for where we're optimizing for both strong gross margin and getting the volume ramp that Mike talked about as being so important for the longer term avalere.
And of the company.
Sure I mean, yes, and then I mean it can.
<unk> helped both both and.
But.
And for US and the first thing is sent to us.
The expanded capacity provide.
Volume support to us so.
And I mean, yeah, I would expect that.
And the phase two and three.
Margin and free.
And probably can also benefit to some extent.
That's great. Thanks, guys. Thank you.
Thank you.
Thank you.
Thank you and we have follow up questions on your line of Jeremy Kwan from Stifel. Nicolaus. Your line is open.
Yes. Thank you.
Quick question on the pricing I think.
Last quarter, and you mentioned and adjusting our patrons and reflect cost increases and being very selective about it and can you.
Moving upbeat about where you're seeing things now in terms of and your own input cost.
And youre doing that mitigate that and kind of.
Taking that that you're.
Benefiting from.
Yes, so I think and then.
And this current line et cetera, and maybe you are seeing cost increases just like anybody else.
We are putting and implementing what we said last time in terms of and <unk>.
And can price up.
Some of our customers.
And in order to absorbed and share it and ensure that payment pass along and that cost.
And again, we're being selective about that.
We need to support our customers.
And the business, but they also understand the nature of this industry wide situation too.
And so there's some belt VR and AR and implementing now.
Great. Thank you.
Thank you and then.
And I think audio question and southeast momentum I would like to turn the call back to the management for their continued Mike.
Sure. This concludes our earnings call for today. Thank you for your interest and AOS and we look forward to talking to you again next quarter. Thank you.
Thank you so much.
<unk> and gentlemen, this concludes today's conference call. Thank you all for joining you may now disconnect.
Yeah.