Q2 2021 Lattice Semiconductor Corp Earnings Call

Welcome to the bunch of lattice semiconductor second quarter 2021 conference call I will now turn the call Orbitz and Mr. Shang the rent they're up Investor Relations. Please go ahead and start Michelle. Thank you operator, and good afternoon, everyone with me today.

And are Jim Anderson lattice, as president and CEO and Sherri Luther lattice. The CFO will provide a financial and business review of the second quarter of 2021, and the business outlook for the third quarter of 2021.

If you have not obtained a copy of our press of earnings press release. It can be found at our company website and the Investor Relations section of Atlanta semi dotcom.

I would like to remind everyone that during our conference call today, we may make projections or other forward looking statements regarding future events or the future financial performance of the company.

We wish to caution you that such statements are predictions based on information that is currently available and the actual results may differ materially.

We refer you to the documents of the company files with the SEC, including our 10, Ks 10, Qs and 8 Ks.

These documents contain and identify important risk factors that could cause the actual results to differ materially from those that are contained in our projections or forward looking statements.

This call includes and constitutes the company's official guidance for the third quarter of 2020.1.

And at anytime after this call we communicate any material changes to this guidance, we intend that such updates will be done using a public forum such as the press release of our publicly announced conference call.

Some financial information that we presented during the call will be provided on both the GAAP and a non-GAAP basis by disclosing certain non-GAAP information management intends to provide investors with additional information to permit further analysis of the company's performance and underlying trends.

Management uses non-GAAP measures to better assess operating performance and to establish operational goals for historical periods. We provided reconciliations of these non-GAAP financial measures to GAAP financial measures that can be found on the Investor Relations section of our website at lattice semi dot com.

Let me now turn the call over to Jim Anderson, our CEO.

Thank you Rick and thank everyone for joining us on our call today, we're excited to be at the beginning of the new growth phase for lattice fueled by and expanded product portfolio and multiple growth factors across our key end markets and start by covering a few highlights from Q2 of 2021.

We grew revenue, 25% of year over year, and 9% sequentially with double digit year over year growth and each of our key market segments. We expanded non-GAAP gross margin by 80 basis points year over year to 62, 1% as we continue to execute on our gross margin expansion strategy, we achieved record <unk>.

Non-GAAP operating profit of 29%, while non-GAAP net income increased 49% year over year. We also expanded our product leadership with the June launch of <unk> Pro and ex our new advanced General purpose FPGA.

And I will provide an overview of our business by end market.

And the communications and computing market revenue increased 7% sequentially and 15% on a year over year basis as we discussed at our recent Investor day, our key long term growth drivers and this segment, our datacenters and servers client computing and <unk> infrastructure.

And servers growth was driven by expansion of both attach rates and asps.

As we continue to drive an increase and our dollar content per server with each new server generation.

And computing is of significant greenfield opportunity for us with multiple programs ramping and multiple ways to bring new innovation to our customers.

The <unk> infrastructure growth is driven by our higher content and <unk> systems versus <unk> systems, and the continued worldwide build out of <unk> infrastructure.

Communications and computing continues to be of long term growth opportunity for the company.

Turning now to the industrial and automotive market revenue increased 15% sequentially and was up 47% on a year over year basis, our business grew across multiple applications, such as industrial automation and robotics, where lattice solutions provide significant competitive advantage and differentiation for our customers we can.

<unk> to deliver strong growth and the industrial segment and our product portfolio is well positioned to drive sustained long term growth.

Turning now to consumer revenue was flat sequentially and was up 13% year over year, the quality of the revenue stream and consumer has improved over the past 2 years as we've targeted higher value multi generational and designs that better leverage our FPGA portfolio. We believe our consumer revenue has stabilized and has the potential from <unk>.

This growth over the long term.

I'll now provide some product roadmap highlights.

And to be very pleased with our team's overall execution with the June launch of <unk> Pro and ex we've now launched 4 device families based on the lattice Nexus platform. Since the platform was introduced in late 2019.

We're excited about the surface pro and X family, which relative to the competition offers forex lower power and best in class system bandwidth and the industry, leading reliability. Each of these advantages provides meaningful differentiation and value for our customers applications and systems and our first 2 device families cross-link Nx and.

And <unk> are in production and ramping with customers and the third device family Mccann eggs is on track to generate revenue by the end of this year. We continue to be very pleased with the broad adoption of our nexus platform across our market segments.

On our soccer roadmap, we continue to invest and tools and solutions and software stacks to make it easy for our customers to adopt lattice products and get to market quickly during the quarter, we launched lattice automate our solution stack focused on factory automation and robotics applications automate is the fourth installment and our application specific solution.

Stack portfolio and another proof point of our continued roadmap execution.

And lastly, and our recent Investor day, we announced our new lattice of bond platform, which will double our addressable market and will allow us to address mid range FPGA applications and execution is going well and we remain on track for launch and the second half of next year, we've engaged with over 100 customers on the bond and are pleased with customer.

Reception of momentum.

In summary, we continued to execute well and Q2 and we're excited to be at the start of the new growth phase for lattice driven by our leadership product portfolio and multiple growth factors across our key end markets I will now turn the call over to our CFO Sherri Luther.

The thank you Jim we.

We are pleased with our strong Q2 financial results as we continue to execute to our financial model.

We drove sequential and year over year revenue growth continue to expand gross margin and delivered record profitability, while continuing to invest and our leadership product roadmap.

We drove strong cash generation increased our net cash positive position and continued to return cash to shareholders. Let me now provides the summary of our results.

Second quarter revenue was $125.9 million of 9% sequentially from the first quarter and of 25% year over year.

Revenue grew double digits year over year, and our communications and computing and industrial and automotive market segments with strong sequential growth as well.

Revenue from our consumer market segment was also up double digits year over year and was flat sequentially.

IP revenue was down both year over year and on a sequential basis.

Gross margin on a GAAP basis was that 30 basis points to 61, 3% and Q2 compared to the prior quarter and was up 110 basis points compared to the year ago quarter.

Our non-GAAP gross margin increased 40 basis points to 62, 1% and Q2 compared to the prior quarter and was up 80 basis points compared to the year ago quarter.

Both the sequential and year over year increases and gross margin continued to be driven by our margin expansion strategy as we benefit from pricing optimization and product cost reductions.

Q2, GAAP operating expenses were $53.9 million compared to $49.9 million and the prior quarter and $48.1 million and the year ago quarter.

On the non-GAAP basis, Entrees, and says were $41.5 million compared to $38.9 million and the prior quarter and $36.6 million and the year ago quarter.

Our R&D expenses increased sequentially as we continue to invest and our product portfolio S.

SG&A expenses increased slightly on a sequential basis, while declining to $14.6 percentage of revenue, which is below our target model.

Q2, GAAP earnings per basic share was <unk> 16, and 15 cents per diluted share compared to 14, and 13 cents and the prior quarter and 8 cents and the year ago quarter.

Q2, non-GAAP earnings per basic share was 26 cents and 25 cents per diluted share, which increased from 23 cents and 22 cents and the prior quarter and.

And the increased from 17 cents and the year ago quarter.

This represents 47% year over year growth for non-GAAP earnings per diluted share.

Driving cash flow generation continues to be a key focus area for the company.

We generated approximately $71 million and cash from operations and the first half of 2021 and this is up over 90% compared to the cash generated from operations and the first half of 2020.

And Q2, we repurchased approximately 525000 shares or $25 million and stock under our buyback program.

This brings our year to date total and stock repurchase to $40 million.

And finally, our cash balance increased to $188 million as we further increased our positive net cash position.

Let me now review our outlook for the third quarter.

Revenue for the third quarter of 2021 is expected to be between $124 million and $132 million.

Gross margin is expected to be 62% plus or -1% on a non-GAAP basis.

Total operating expenses for the third quarter are expected to be between $42 million and $44 million on a non-GAAP basis.

We are focused on continuing to drive revenue growth and profitability expansion through the strength and differentiation of our leadership product roadmap of.

Operator that concludes my formal comments, we can now open the call for questions.

Thank you.

Gentlemen.

At this time. Please press Star then the number 1 key on your Touchtone telephone and again that is star 1 we'll pause for just a moment to compile the Q&A roster.

Your first question is from Matt Ramsay from Cowen.

Yeah, Good afternoon, and thank you for taking my questions.

I guess Jim the.

Great to see the progress on the business so congratulations.

It's been a couple of months now since you guys announced it at the Investor meeting the Avant program and you mentioned a couple of things in your script I wanted to revisit that and see what the initial engagements and customer reception has been like and the second part of the question and as.

And as you guys think about moving into mid tier FPGA products over time any thoughts as to the sensitivity of restriction on on potentially shipping those into markets like China and I know some of your higher to your competitors have had some challenges. There you guys have been largely immune to some of those challenges and and the low.

Tiers of the market. So any initial feedback from regulators as to how much flexibility you might have and those mid tiers to go after some of those markets that your competitors cant. Thank you.

Thanks, Matt Yeah, so on and a bond the first of all we're really pleased with the progress on the bond I know you asked about customer momentum, but let me give a shout out to our engineering team for continuing to do and do a great job of executing on that program. We're really pleased with the progress on execution and we remain on track for a <unk>.

Sampling and and launching the device and the second half of next year and on then on customer momentum as well are really pleased with the progress on that as we shared at the Investor Day, we had engaged with over 100 customers on a bond.

We continue to have very strong engagement growing customer momentum.

And also if you recall from the Investor Day, I shared that actually was the customers that encouraged us to build the bond when we introduced nexus to our customers. We got great reception on Nexus, but the customers also asked US Hey can you do more can you expand the portfolio can you bring your power efficient architecture to mid range and so it was.

Really of the customer's by asked that the.

That we went ahead and started working on a bond back in 2019, and so yeah of customer momentum continues to be to be good our sales team as she is very happy right now by having all sorts of discussions with the bond with our customers on the second part of your question on export controls. So of course, you know we.

Always adhere to all U S regulations on export controls and we would of course do that for any new products, whether those are next and a share or a bond.

Now we've done extensive market research, we believe that there is a you know there's a tremendous market opportunity for of bonds. We believe it'll be a very competitive product and as we shared at Investor Day, We believe that'll open up about $3 billion of additional share.

Sam for us additional addressable market, which of roughly double our addressable market went up on launches. So yeah. Once again really pleased with progress on the bond to and just really excited to launch it next year.

Thanks for the color there Jim.

The follow up question.

And.

No secret that most companies and the semiconductor industry right now are our.

Have a lot more demand and they have supply.

And I would assume that you guys are and that position to some extent, maybe you could talk a bit about what the.

And the supply demand gap is and are you, maybe and a better position to supply more of that demand, giving your sourcing from soi based.

Platforms versus some of the.

And the bulk Cmos that theres, a lot more tight and foundry.

Yeah. Thanks Man.

So definitely I think that our our supply chain team has done a great job over the past year of navigating the tightness and the overall semiconductor supply chain that we're seeing across the industry I think of supply chain team has done a really good job of proactively figuring out how to navigate the just to mention a couple of things that we have.

And that we've done is number 1 of course, we've been working very closely with our customers to understand their needs and therefore cash and really long term multi quarter forecast, we understand exactly what they need and then turning around and working with our key strategic suppliers to make sure that supply is in place that's number 1 number 2.

Who is our we've proactively and strategically built inventory on especially high volume.

Products that will last for years and years, we started that inventory there and sort of strategic inventory building program back in Q2 of last year, we built inventory beginning in Q2 of last year. Then we built more inventory in Q3 Q4 and ended the year and are very good in 2020 and a very good inventory position and again.

From Q1 to Q2 this year, we built inventory sequentially and the most recent quarter and so we've I think we've done a good job of getting inventory there to help support our customers.

I just wanted to do a thank you to the supply chain team for the great job on executing but yeah. I think we're doing a good job of meeting our customers' demand there certainly can be localized.

The combinations of silicon and packaging and that might be a bit tight here or there, but as a whole I think we've done a really good job supporting our customers and I think our customers would say exactly the same thing and I think that that.

And that will benefit us moving forward because of the customers certainly see that they recognize that and they do take that into account as they decide on new designs for new systems, and we're certainly seeing some benefit right now in terms of additional new designs, because we've executed really well on the supply chain. So I hope that.

Answers the question Matt.

Thanks, very much Jim and.

And congrats guys I'll jump back in the queue I appreciate it.

Thanks.

Your next question is from Alexander <unk> from William Blair. Your line is open.

Thanks, everyone and I also extend the congratulations on another great quarter and for helping make us all look good.

Just on on the revenue by end market breakout maybe Jim if you. If you can just talk to us a little bit more about how and how those segments tracked versus your internal expectations going into the quarter and then maybe a little more granularly on on the IND.

Industrial side, obviously, there's been an acceleration and non robotics and automation coming out of Covid, but can you maybe hone in a little bit on and how much how much of it really is market growth versus share gains versus some of the incumbents and maybe have hasnt neglected the industrial customers in particular.

Sure. Thanks, Alex.

And so on the first part of the question on revenue by end market.

And certainly our Q2 came in.

Better than we had expected on the top line, which we're quite pleased by and in particular, we saw strength in.

Communications and computing and that was up 7% sequentially and 15% year over year, but also industrial and automotive, which was up 16% sequentially and 47 per cent year over year, So industrial and automotive and particular came in much stronger than we had expected and consumer kind of performed as we had thought.

And the corridor and the.

Those 2 segments of comms, <unk>, compute and industrial and auto and those have really been our lead strategic growth segments are certainly last year. Both of those segments grew double digits and those are really the segments and we look to in the future of driving the majority of the company's growth moving.

And forward, we have multiple growth vectors in each 1 of those markets comms <unk> compute we have gross and servers growth and client computing 5 G infrastructure, and then of course industrial and automotive of number of places as well and I think he asked and particular, what's kind of where some of the sources of strength and industrial and automotive.

And in that market, it's really around new design wins, new programs around industrial automation and industrial robotics, and then of automotive electronics as well, although automotive is still a relatively small part of that segment.

So we are seeing just.

Really solid growth in industrial automation and robotics applications and what we see there is.

You know, our industrial customers really accelerating their plans around automation and robotics and.

That has helped lead to new design wins for our products and certainly stronger demand and our products are just a great match for those types of applications. The power efficiency of the flexibility of the software is a tremendous amount of shopper content we provide.

You know, we just launched our lattice automate the software stack, which is specifically for industrial automation and robotics to help those customers get the market quickly to design and our products are really easily and so.

That's that's a tremendous area of of strength for us in terms of how much of it is and market versus share gain opportunity. There certainly is some portion of the the that is and market certainly and the industrial and automotive segment have recovered significantly since Q2 of last year, but I would say a good portion of.

Of that is also share gain new sources of revenue and.

And that's certainly a big contributor to that as well so.

Yeah, we're quite pleased with the industrial auto segment and continue to expect that to be of long term growth area for us.

Great that was extremely helpful and on the color front and just as my 1 follow up on as we sort of think about R&D spend.

And then going forward I think you guys have an internal target of about 20%.

And of the.

Revenue, it's been tracking a little bit below that for the last few quarters is that just a function of.

And of the timing of tape outs or how should we think about that and it's just a little bit surprising given all of the new product launches and the bond coming on.

And thank you Alex and the question. So so you're right our target that we did put out at our Investor day back in May of this year was 20% of as our R&D spend target during the quarter. We came in at about $18.4 per cent of revenue. So, although our target, but I will point out that and absolute dollar perspective that we did incur.

Our R&D spend.

And to your point to really increase our our investments and our product portfolio for the long term growth of the company and will continue to focus on that and if you look at on.

And our guide and the midpoint of our guide for Q3, and you see that that's up and and that's also a reflection of continuing investments that we want to make and our product portfolio and you know it.

At our Investor Day, we talked about are of volume platform and as long as I started the <unk> Nx product that we line. So we'll continue continue on.

Investing for the long term growth and Youll continue to see that and our and our financials, yeah and the 1.

1 thing I would add Alex is.

Certainly as Sherry said.

So we're continuing to invest and the product portfolio continuing to expand the portfolio get the great products to market, but we also when we look to continuing to invest we also wanted to do that and are in a controlled and disciplined way and a disciplined way that we know we're getting the ROI on that additional investment and so we'll we will.

And to invest but we'll do that at the right rate and pace and and a disciplined way.

Okay.

Makes it on the phone.

And with that I'll jump back in queue.

Your next question is from from Baird. Your line is open.

Hi can you hear me.

Yeah, we can hear you Kristen.

Okay sorry.

Just a quick and put it up on.

On the earlier question box voltages, and you've mentioned that the.

It's actually helping you and some customers know that you are managing the supply chain of well in terms of new design win and quantification.

On the the notably the extension of lead time, and Microcontrollers and and that's the type of architecture that you're really targeting going forward and coming of share gain and are you seeing.

Designs or an acceleration of design shift away from and your product because of the improved the variability or is it not really the case yet because of you see it takes time for customers. They have to redesign the part of who we quantified that and in the scheme of that.

Supply shortage on you're seeing and the consideration in terms of few of Tam expansion against the and he used.

Yeah, Thanks, Tricia and I would say, we're definitely seeing new opportunities and accelerated opportunities against the Microcontrollers and certainly no secret that there's a supply shortage on microcontrollers and also we've been quite clear that we are targeting.

Parts of the microcontroller market, where obviously competing with our traditional FPGA competitors and the FPGA market, but we're also going after portions of the microcontroller market as well and we're already and a good position to displace microcontrollers because of the nature of our products and the power efficiency the ability to.

And do parallel processing and for artificial intelligence algorithms at a much higher performance much better performance per watt and Microcontrollers and all of the software content and flexibility that we bring to we're already seen conversions of Microcontrollers to FPGA is but I would say the supply shortage and the fact that.

We've been able to support our customers very well, that's certainly something that our customers of notice they've taken that into account and we do have examples of customers accelerating their plans to switch to a lattice device and.

We're seeing that across a couple of different market segments industrial being 1 of the particular market segments that we're seeing that and you're right. It does take a little bit of time to redesign the systems, but.

We're seeing customers very motivated to do that as quickly as possible and some instances. So yeah, we're certainly benefiting from that Tristan.

Okay.

Great feedback.

And then the question for Terry.

We know your gross margin longer term target.

And the near term you know next few quarters, it's kind of the he took the.

The gross margin maybe deviation something we should expect for the next few quarters as well.

And and if you want to comment on what you think is going to be the.

The key tenet and spoke of was starting to continue the ping.

<unk> from currency.

The holders.

Alright, Thank you test and for the question. So I'll point out, though that our gross margin has improved and nearly 500 basis points from 2018 today and we're really pleased with the progress that we've made on improving our gross margin as part of our gross margin expansion strategy for our pricing optimization and product cost reductions are on acute.

Key elements of that strategy and when you look at the current quarter. The 40 basis points improvement that we've shown and and the 8 is sequentially and then the 80 basis points improvement year over year.

And again, you can see that pricing optimization strategy kicking in there and I also pointed out that we exceeded our 2019 target that we put out at our Investor day in 2019 at 6 of greater than 62%. So Q2 exceeded that target and as you as you pointed out and and invest our Investor day. This past may we.

We raised our target of 65% so the elements of that gross margin expansion strategy.

And that continued to be pricing optimization and product cost reductions and we have a number of initiatives that we continue to work on and put in place and some of our near term and some of our longer term belief.

And I expect to continue to be able to execute on that strategy to get to our long term target model of 65 per cent.

That's very useful and thank you.

Okay.

Again as a reminder, that is star 1 to ask a question.

Your next question is from Chris Rolland from Susquehanna. Your line is open.

Hey, guys. Thanks for the question.

Given the supply doesn't seem to be a share.

Huge constraint for you guys.

Would that mean, the typical seasonality is a bigger driver and the back half and traditionally you guys have been more flat.

Sequentially and in the back half there or just given your strong product ramps here would you expect to grow through that thanks.

Yeah, Chris I think you know other than the consumer segment, and we haven't seen strong seasonality patterns over the last couple of years the.

Consumer segment, we still see kind of normal consumer cycle.

Patterns, but that remains of now are relatively small part of our overall revenue.

And certainly we've provided the guidance for Q3.

On providing any guidance beyond Q3, but we do have throughout this year and number of new product ramps that continued through the second half and we certainly look forward to having.

Our strong second half just as we had we believe a really good first half as well.

Okay, great color there and thank you.

The 1 thing I noticed in your report is just the as a percent of total was up.

I know a lot of vendors have actually been shorting dusty given their supply constraints that may not be the case for you.

But any updates there on the channel our widest he was going up as a percent and.

And then.

Inventories that you have there.

How how robust do you think those are and and what do you expect these trends to continue thanks.

Yeah, Thanks, Chris Yeah, I wouldn't read too much into that sequential increase.

Our percentage of disturbed versus direct can fluctuate quarter to quarter and then I'll also note that a number of our large strategic customers actually prefer to go through distribution because it.

And makes it operationally easier for whatever reason, although we're happy to support of our large customers and either direct or through distribution mode, but we do have a number of large customers that prefer to go through distribution in terms of the disputed levels of inventory, we do have very good visibility into our level of Disney.

The distribution inventory and we finished Q2 I would certainly say on the leaner leaner side of what we've historically seen so I would call just the inventory lean and then we of course have very good visibility into what ships out of DSD and to our end customers and as well and so.

But again back to their first part of your question I wouldn't read too much into the the sequential fluctuation and percent Disney.

Great, Thanks, Jim and and nice quarter.

Thanks, Chris.

Your next question is from Hans Moseman from Rosenblatt. Your line is open.

Thanks, guys.

Congratulations.

And Jim just said.

So the question to some customer activity and the design cycle.

Are you seeing.

The design cycles accelerating or shortening.

What I would say is it's a little bit market dependent and I would say.

And that we're certainly seeing a very high level of customer activity in general in terms of and customer engagement.

New design wins design, and we're seeing a tremendous amount of activity I would say the level of customer engagement and activity is certainly the highest since I've I've been Atlantis and I think if you ask and number of our sales employees have been Atlantis for many years. They would say, it's the highest they've seen in the and there many of.

Airs at lattice and so and I think that's really a testament to the strength of the product portfolio of the Nexus platform. We've now launched in June our force family of devices based on the Nexus family. So that's you know.

All 4 device families that are in our customers' hands. The first 2 are already in production and ramping the third is which as mark and ex we expect to ramp into production at the end of this year and the fourth which we just launch we would expect to start to see revenue next year and so we're seeing a tremendous amount of activity.

Around the neck says and then of course as you can imagine.

Avant as well the new platform that we that we announced.

And our Investor Day, and me and and that'll launch and the second half of next year, there's a tremendous amount of customer activity around that too and I would say definitely great customer momentum in terms of the design cycles shortening or accelerating there are some instances we've seen of customers accelerating their design cycles.

It's more for customer specific reasons and some cases for instance in industrial customers, it's where they're having some supply issues with their existing microcontroller customer and so they're driving a faster accelerated pace to switched our device. So we are seeing instances that are kind of supply.

Constraint driven that's driving a faster transition to lattice, but again in general very good customer activity right now.

Great and just a quick follow up and just.

And just to make sure.

It's clear your lead times have not changed right.

Yeah, when you look across the general and the full set of lattice products generally our lead times have been relatively stable. There are you know particular instances of there may be like a particular silicon package combination of 1 device that we may have to do some tight supply of that may have a longer than normal lead.

Time, but as a whole and generally across our broad range of products, our lead times have been relatively stable.

Great. Thank you congratulations.

Thanks Hans.

Your next question is from the Sam Peterman from Craig Hallum Capital. Your line is open.

Hi, Jim Hi, Sherri. This is Sam on for Richard Thanks for taking my question.

I guess first I want to follow up on the.

The question was asked about your distributors and <unk>.

And inventory.

Yes.

You talk about how those channel inventories comparable levels of you saw on the first quarter and.

And he said there were lean is that kind of across segments are there certain spots that are are more lean and others.

Yeah, Thanks, Sam So and channel inventory in Q2 was sequentially down versus Q1, and if we look at where we ended in terms of channel distributor inventory at the end of Q2, and we look at say the last 3 of 3 to 4 years.

At the certainly the lower level of what we've seen over that time span.

So we see very lean levels of inventory within our distributors.

We have.

So as we said tried to maintain a very good level of inventory within lattice. So lattice inventory is at a very healthy level and we strategically built inventory to allow us to build parts and allocate.

On the inventory or allocate the parts to the right markets and make sure that we're supporting the customers.

Very well and then I think part of your question was also about are.

Are we seeing differences and inventory levels across different markets here, but no I would say at the inventory levels and the distributors is and we're not seeing any variance any significant variance across say different different market segments.

Okay. Thanks for the color that's helpful. And then 1 more quickly and just curious on the industrial auto segment of.

Obviously, the last 4 quarters have been pretty strong and that started to pick out took the last year.

The growth rates of about 8 per cent of higher quarter over quarter.

Wondering if you're having on the back half.

If we should expect kind of the the rate of change of the rate of growth there.

Slow a little bit.

Yes for Q3, if you look at our I can talk about Q3.

If you look at our guide the midpoint of our guidance for Q3, you see that it's sequentially up from Q2 to Q3.

No we would expect our 2 big gross segments of comms, and computing and industrial and auto to track that.

The midpoint into we'd expect of both of those to be sequentially up as well. So yeah, we're certainly expecting industrial auto to be sequentially up in Q3.

Okay, great. Thanks, guys.

Thanks Sam.

Okay and as a reminder, that is star 1 to ask a question.

Your next question is from Derek Soderberg from colleague of Securities. Your line is open.

Hey, everyone. Thanks for taking my questions.

Jim I'll, just kind of curious on the various end markets, what you're seeing on the progression from Q2 to Q3.

Just on packing and third quarter guidance from a revenue perspective.

And sort of provide any directional commentary on that that'd be helpful.

Yes, certainly direct so Q2 to Q3, we expect Q3 to be sequentially up.

We expect comms and computing to be sequentially up within comms and computing, we of 3 really good growth drivers within that segment, we have a datacenter servers, which we continue to expand our dollars of content per server and we're expanding that through a combination of higher asps as we bring more value to.

The teach server platform and higher attach rates as well and we had shared at our Investor day that with the new generation of servers. That's ramping we're expecting a significant increase and our dollars of content per server driven by 1 of the things. That's driving that is attach rate said that are we expect to now exceed 1 meeting where she.

Shipping more than 1 lattice device per server and client computing 5 G infrastructure also growth areas for us and comms <unk> compute and then in industrial auto and we certainly saw a very strong quarter. In Q2, we're seeing just very good strength and some of our new programs that are ramping in <unk>.

Our automation and robotics as I had mentioned earlier should we expect to see sequential growth there as well consumer we would expect to be flat to slightly up from Q2 to Q3. So hopefully that's a little bit of additional color for you Derek.

Yeah, that's great.

And then as my follow up just curious about any incremental competition on low power I think theres, some new FPGA FPGA players listing on the market.

Seeing anything incremental in terms of the competition there and are there any interesting companies out there for you guys to the buy to maybe build on your hardware and software platforms. Thanks.

Yeah, Thanks, Sharon and I think on on the competitive landscape for the part of the market that we're addressing today with our products.

I think the competitive landscape has been pretty stable, we haven't seen any dramatic changes. We believe we are absolutely leading the market in terms of our product portfolio for small FPGA is at a very power efficient and very flexible easy to use.

And we definitely think we're leading the market we are of significant advantage, especially with our nexus devices and we've shown and number of competitive comparisons. If you remember at our Investor day back in May and we probably did quite a bit of competitive comparisons and and data. There. So we think we're still and are in a very good.

Spot with respect to competitive landscape and our positioning in the market.

And I think the second part of your question was about potential M&A opportunities I would start by saying first we're never confused about what job 1 is and job 1 is to drive growth and our organic business and so that's always the top of mind and that is always priority 1 but certainly in parallel we're always scanning the landscape.

For any potential inorganic options that would be a very adjacent very complementary to our existing product portfolio that could be either from a hardware or software perspective, but they would be very additive and a way that would accelerate our organic strategy and again and be very complimentary. So that's kind of the way we approach.

Looking at inorganic options.

Perfect. Thanks for the detail.

Thanks Derek.

And I am showing no further question at this time I would like to turn the call back to on that as semiconductor the CEO, Mr. Jim Anderson, Brooklyn and comments.

Yeah. Thank you operator, and thanks again for everybody for joining us on the call. Today. So we're really excited to be at the start of the really a new growth phase for lattice and again driven by our leadership product portfolio and multiple growth vectors across our key end markets. So we look forward to updating you on our continued progress Center next earnings call.

Thanks, Operator that concludes today's call.

Ladies and gentlemen, this does conclude today's conference call. Thank you for your participation and have a great day.

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