Q2 2021 Tower Semiconductor Ltd Earnings Call
Good day.
EBITDA.
And.
Thank you.
[music].
Ladies and gentlemen, and thank you for standing by and welcome to the tower semiconductor second quarter 'twenty 'twenty..1 result conference call. All participants are currently in a listen only mode. Following management's prepared statements instructions will be given for the question and answer session for operator assistance during the conference. Please press Star zero.
As a reminder, this conference is being recorded August <unk> 2021.
Joining us today are Mr. Russell, how longer it tower CEO and Mr. Oren Shirazi CFO I would now like to turn the conference over to MS. <unk> Levi Senior Vice President of Investor Relations and corporate Communications and as Levy. Please go ahead.
Thank you and welcome to Donald semiconductor and financial results conference call and for the second quarter of 2021.
Before we begin I would like to remind you that some statements made during this call and may be forward looking and are subject to uncertainties and risk factors that could cause actual results could be different from those go on to the expected. These uncertainties and risk factors are fully disclosed in our form 20-F and form F..3 and 6K filed with the Securities and Exchange Commission and when its findings.
His line is if you want these authority and they are also available on our website Teradata assumes no obligation to update any such forward looking statements.
Please note that the second quarter of 2021 results have been prepared in accordance with U S. GAAP.
Financial tables, and data and todays earning release and and the earnings call and also include certain adjusted financial information that may be considered non-GAAP financial measures under regulation G and related like Ulta and Glioma and has established with the Securities and Exchange Commission. The financial have diverse and include a full explanation of these measures and the reconciliation of these non-GAAP measures.
And the GAAP financial measures.
And I like Mexico, and the Cosmo and I'll see you owe me suraj and a longer and myself. Please go ahead.
Thank you know eat a pleasure.
And we're quite excited to share with you our second quarter results and business activities.
Our revenue for the second quarter of the year was $362 million.
A record for tower, representing 17% year over year, total and 26% organic growth.
And the order of revenue dollars.
The year over year organic growth was mainly driven by RF Soi and.
And at over 40% year over year organic increase.
Power IC at 35% year over year organic increase.
And each sensors, 30% year over year organic increase and power discrete at 23%.
To note all business segments demonstrated growth and the second quarter.
And we guide the third quarter of the year to increase toward mid range of $385 million.
Representing year over year, 24% total growth and.
And a 38% organic growth.
And breaking a $1.5 billion.
Annualized revenue run rate.
This should be driven by a further and large year over year increase and RF Soi and image sensors.
With all business segments expected to demonstrate growth.
Our customer demand and serve markets are strong and hence.
Hence, we expect continued top and bottom line growth and the fourth quarter.
As tools become qualified for production.
And enabling further increases and high value flows.
To support continued growth based on our customer demand, we continue to execute the previously announced capacity expansion plans.
As well, our adding 200 millimeter and new capacity, which will be addressed with more details by for us.
Towards specific large 300 millimeter growth, we signed an agreement with S T microelectronics and.
And this partnership we will join forces for and accelerated fab ramp up a key factor to speedily reach a high utilization level and therefore, a competitive wafer cost.
The Grant day 300 millimeter manufacturing facility.
Which tower will referred to as Fab 10 is currently being facilities.
Total install its own equipment and 1 third of the total space, which should triple our current 300 millimeter foundry capacity.
The fab is expected to be ready for equipment installation later this year and start prototype production and the second half of 2022.
Our strong execution and advanced 65 nanometer 300 millimeter based analog RF power.
Power platforms displays and other technologies will be significantly enhanced by this activity and a cut off day.
The United States Senate passed the innovation and competition Act of 2021 and appropriated for $52 billion towards U S semiconductor growth.
The Bill is now before the house of Representatives, providing its passage our target is to receive funding towards further growth initiatives and the United States.
Potentially at our beautiful 130 acre campus.
And our San Antonio, Texas facility or possibly elsewhere.
Of course, this and during the past quarters have been strongly involved and activities related to this act.
And I have attended 3 industry leader panels on the subjects of growing and are securing the U S. Microelectronics supply chain, where I have focused as well on the need for advanced analog semiconductor integrated circuit manufacturing.
1 such panel was a CEO roundtable hosted by Senator Cornyn and Congressman Mccall, both sponsors of the chips act and their respective legislative bodies and visionary activity.
And I attended a special session at the select USA conference hosted by U S Secretary of Commerce for Mondo.
I spoke of 4 imperatives that we believe are essential for foreign entities to qualify to receive incentives from the United States for the United States onshore semiconductor manufacturing growth.
Firstly, there needs to be U S onshore R&D, especially in a foundry model, enabling innovative entrepreneurialism is to successfully moved from concept and feasibility and.
Transition and to value add business second.
Secondly, all companies need to show a history of strong IP security, both external and internal to the company.
All recipients should have a strong history of supporting U S government initiatives.
And lastly, there should be a legislative focus on differentiated analog technology, which addresses 80% to 85% of all system electronics by volume.
We continue to work with the Congress and the United States. The Department of Commerce. Other U S government agencies as well as other partners.
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Moving to our specific businesses during.
During the second quarter, our RF mobile business was 25% of our revenues and.
And is expected to show strong growth throughout the year.
Estimates remain that 5 G handsets will double year over year 2021 over 2020 to about 550 million handsets out of a total of about $1.3 billion.
This shift combined with the high content increase of 5 G and our strong position and this market fuels our continued growth.
And importantly in addition to revenue growth the shift to more advanced and higher value <unk> technology is helping increase the average selling prices and this segment.
This trend is expected to continue for at least the next several quarters.
Demand is strong and both 200 millimeter and 300 millimeter and.
And the partnership announced with S. T will help meet the requirements of our strong 300 millimeter design win pipeline.
The RF infrastructure business, serving telecom and Datacom and markets with our industry, leading silicon germanium technology.
Entail a high run rate due to data center strength and was about 12% of our corporate revenues for.
For Datacom, where forecast remained quite strong rebuild both high speed optical transceivers.
And high speed.
Hard disk drive pre ops for storage.
Our power IC business was about 15% of our total revenues with strength and automotive industrial and consumer segments. The.
And the business is benefiting from a strong market cycle as well as our significant presence and automotive battery management, which is outgrowing the market and provide for long term growth with a worldwide trend of vehicle electrification.
Our power discrete business has more than recovered representing about 16% of our revenues.
Like power Ics and growth is broad based led by automotive applications.
We expect this business to level off over the next few quarters, while we focus our capex expansion on other higher margin segments.
Our imaging business represented 15% of our revenues.
With main growing markets being the medical and dental X Ray and industrial sensors and.
In addition, we continue to grow and the cinematography and broadcasting market segment being among our highest margin imaging applications.
For the medical market, we see a recovery of the dental segment to levels that are higher than the pre COVID-19 levels.
With the present high growth trajectory.
The main long term growth drivers stem.
Predominantly from the transition from.
Traditional amorphous silicon based flat panel technology to Cmos.
Our customers, who are either X ray detectors suppliers or X ray equipment suppliers, who design with us their own sensors are gaining more market share and we are sole supplier in most cases are growing our share accordingly and.
And the industrial market, we see a steep growth and all of its segments machine vision for factory automation for traffic control as well as automatic data collection on.
On the display side, we continued substantial partnership developments for back plane silicon for micro OLED.
Mainly for the VR display.
Which is a fast growing market and on silicon wafer based micro OLED technology for large displays Tvs laptops tablets and smartphones.
Referring to utilization.
Starting to this quarter, starting this quarter, sorry, we will refer to the number of photo layers processed during the quarter per wafer size.
Given the fact that we continue to increase the capacity of our manufacturing facilities with.
Changing mix of flows pure utilization numbers do not represent the company's operational performance on a time comparative basis.
For the second quarter foundry layers, all numbers, given and 8 inch equivalents for 150 millimeter 451000 layers were processed as compared to 353000, and Q2.2020 up 28% year over year.
411000 layers were processed and the previous quarter Q1.2021.
For 200 millimeter.
And 5.921 million layers for process as compared to $5 million 115000, and Q2.2020 up 16% year over year.
$5 million 772000 layers for processed in Q1.2021.
For 300 millimeter 1 billion and 404000 layers for processed as compared to 903000, and Q2.2020 up 55% year over year.
$1 billion 375000 layers for processed in the previous quarter.
Yes.
Yeah.
Okay.
And excuse me 1 second.
Yeah.
Moving now to corporate sustainability.
And we're about to issue our first formal environmental social governance or ESG report.
However, the core of the ESG has long been embedded and the DNA of the company.
And for tower ESG is much more and then papers listing activities and targets and just our focus and being a good even excellent company for our community and our world.
And it is how we serve our employees customers partners and stakeholders.
Various elements of our corporate responsibility sustainability and ESG efforts will be described and the Shreveport and are well aligned to our value vectors with a mindset of excellence at each of the described areas.
We are continuously evaluating our activities in order to improve and ensure that our commitment and actions toward a company that better society and betters. Our lives around us are achieved valued and sustainable.
With that I'd like to turn the call to our CFO, Mr. Oren Shirazi for it.
Hi, everyone.
Where it is today, our second quarter 2021 results achieving record revenues of $362 million.
Reflecting a remarkable 17% year over year.
Revenue increase.
And resulting in significant increases in gross profit operating profit and net profit.
We are providing a revenue guidance of 385 for medium to long for the first quarter of 2021, representing an additional wrinkle live and your quarter.
I've discussed several times over the last few quarters.
We continue to see significant customer demand and demand for it goes for.
Since we announced in February 2021, and 1 other than $50 million for capacity expansion plan to increase our capacity and our 8 inch and 12 inch fabs.
We now announced and additional capacity investments of 1 hundreds maybe on the law, but with us and $250 million of total capex purchases, which are expected to be paid over the coming for us.
For equipment that begin to provide incremental capacity during the third quarter of 2021 and continuing into 2022 assets.
As mentioned by Russell for enhanced 12 inch capacity on top of our existing wasn't for S. T microelectronics and offs entered into a partnership to accelerate the ramp up of DAU growth at 12 inch from Italy, We expect minimal capex payments for these projects in 2021 and will give details on future schedule and cost.
During the next quarter.
I will now move to our second quarter fee and they'll highlights and then discuss our balance sheet and cash flow financial statement.
Revenue for the second quarter of 2021 was 362 million.
52 million dollar and higher yields and the yield reflecting a 17% year over year revenue interest.
Looking at organic revenue, which is defined as total revenue excluding revenue from Novo non Japan previously Panasonic semiconductor and.
And revenue for Maxim and our San Antonio Fab revenue and the second quarter of 2021 reflect.
26% yield and.
Revenue increase.
The loss and operating profit for the second quarter of 2021.
Well $74 million and $34 million, respectively. These gross both 8 and $16 million higher or 28% higher over yield.
Year over to you and.
And these operating profit is $12 million higher or 54% higher yield volume net.
Net profit for the second quarter of 2021 was $31 million or 29.
Earnings per share.
And 28 diluted earnings per share.
Net brokerage is $12 million higher or 62% higher year over year.
Looking at the balance sheet, we demonstrated again, a strong and stable financial position a.
A few points to note all shareholders' equity reached a record of $1.52 billion as of June 32021 day.
Deferred revenue and customer advances balances under current liabilities and long term liabilities and the balance sheet have increased by $9.6 million and $6.6 million respectively.
Compared to December 31, 2020, reflecting enhanced receipts from customers and that's up to gauge more capacity reservations to them to address their excess demand.
Also offset by some scheduled for repayment.
Current assets ratio defined as current assets divided by short term liabilities is strong at the value of $3.7 X.
And with regards to our cash and cash equivalents in the second quarter of 2021 and.
Cash flow generated from operations was $93 million.
The investments and fixed assets net mainly for money and fixed joining equipment.
And 56 million total.
We paid 20 million for all of this during the second quarter of 2021.
And invested $17 million and short term bank deposits and marketable securities.
Our GAAP table consists of $108.2 million outstanding all the Nashville.
And an additional $2.3 million on Aesop related Joe resulted resulting in fully.
Fully diluted share count of 1 other than $10.5 for media.
Going forward to the second half of the year following the swing honest and $85 million record live and your guidance for the sales growth over 2021.
During this quarter, we expect to see increased margins a step.
Steps towards the fourth quarter incremental revenue impact over the margins, which we forecast should exceed the 50% incremental model.
And now I would like to turn the call back to the operator.
Thank you ladies and gentlemen at this time, we'll begin the question and answer session. If you have a question. Please press star 1 if you wish to cancel your request. Please press star 2 and feel like.
Using speaker equipment time, and if the handset before pressing the numbers questions will be pulled in the order. They are received please standby while we poll for your questions.
Yeah.
Yeah.
The first question is from Mark <unk> of Jefferies. Please go ahead.
Hi, Mark.
Yeah.
The next question is.
From Pasadena Gill of Needham and company. Please go ahead.
Yes, Thank you and congratulations on the great momentum across all the major business lines and that's great to hear thank you.
Absolutely. So oren just a question on the on the gross margins as we progress throughout the year you had mentioned in your prepared remarks and in Q4 that you would expect.
The model to exceed the 50% gross profit fall through and Q4 as some of those incremental cost.
Related to capacity has been absorbed.
Wondering how we think about that.
Upside to the 50% gross profit for.
All through.
Without giving any numbers, but just are we seeing a higher margin process flows in Q4 that would give you the confidence to say that we're going to be above the 50% GP.
GP profit flow through.
Yeah.
And all.
Given answer there.
[laughter].
We have.
Seen very very strong increases in demand.
And.
And for a variety of the increases in demand.
And in order to.
Be able to cover it.
We have worked with customers for increases and the Asp's.
And that provide higher margins in order to have a quicker return on the investment itself.
So a good portion of what's going on and Q4 as a result of Q3 starts.
That are and I wonder pose that have a higher selling price than previous quarters, and its driven off of customers that are working towards increasing demand versus previous run rates for the most part and.
And yes, as I mentioned during the script itself as we move more and more into some of the for example, 5 G driven activities as we move into higher gigabit per second data center as we move towards more.
Large stitched dye wafers all of that our higher margin flows to begin with so it's a combination of a richer mix and where we talked about the increase of another $100 million and 200 millimeter investment that.
And that really is for the main part to increase capacity for a richer mix for higher margin mixes and so.
Q4 is a combination of both it's as higher margin mixes are growing and in instances, where we are and have increased capacity.
And that those are coming in at this point or will be coming in off of purchase orders that had an increase and ESP.
Okay got it that's super helpful.
Some of the drivers for the margins.
And with respect to the FTE, Mike from a partnership that you announced.
Weeks ago.
Very very interesting announcement.
Wondering kind of the rationale for both parties.
Particularly SD micro.
Who.
I actually began construction of this facility and 2018 and Italy.
And as kind of bearing the bulk of the <unk>.
Construction.
But it is allowing.
You guys to leverage your expertise and.
300 millimeter and 200 millimeter to really kind of maximize the.
The foundry and I'm curious kind of what was SD micro's thinking in terms of partnering.
With you and and the value that you will bring to the table.
And maybe if you could just remind us in terms of how much expected capacity, you're kind of targeting and.
For 2024, and beyond and so we get kind of a sense of the potential scale and this partnership. Thank you.
Oh.
The fundamental drives was really stated by.
S T and the press release itself and.
And that was to drive.
A faster ramp to high Utilizations.
And a faster ramp of something.
Capacity.
Which obviously then reduces the fixed cost per substrate. So the deal is has a very strong.
We believe and they believe win win for both companies.
The specifics of the financial model has not been released.
And I'm not sure that all the details will ever go out and to the public that's part of the confidentiality that Este and ourselves have.
But the model itself is a very good model for both companies for many many reasons and.
And I believe there is the major driver again.
From their side was what was stated and the PR and that has a faster ramp to high Utilizations, which is the key towards good margins and a manufacturing facility.
Thank you.
The next question is from Marc <unk> from Jefferies. Please go ahead.
And Mark.
Okay.
Okay.
Hello can you hear me, yes, yes.
And now we can you can okay, great alright.
And I don't know what happened there.
Thanks for taking my question Russell on a go out and tell you I think you mentioned second half of 'twenty 2 prototype I just want to make sure I heard that right. When do you think.
<unk>.
Started shipping production revenues.
Our target would be to start shipping production revenues and the first half of 'twenty 3.
Gotcha.
And when you talk you talked about.
I think several capacity.
Expansion plans I don't think I heard silicon Germanium mentioned there are you what what is the is that included and the capacity additions can you talk about what youre doing with silicon germanium capacity expansion standpoint.
It is definitely included in it.
And the infrastructure activities that we're doing we had mentioned are very strong.
We have.
Growing demand consistently and data center.
And yes, so the silicon germanium and Silicon Photonics are both parts of our expansion plan.
Thank you.
Gotcha, and and you mentioned.
About the no 2 investing 200 millimeter differentiated platforms.
So.
<unk> platforms are certainly 1 of our differentiated platforms.
Got you that makes sense. Thanks.
Thanks for that clarification and then on the.
And the chips Act and your your view to kind of target San Antonio there.
Do you have a sense of when you would expect to get visibility on this and.
And what extent would you do would it would you expect this to be direct funding or for.
Our sales tax credits.
Expectation doesn't necessarily.
Tie into what will happen.
Our expectation is direct upfront funding.
And that's where we'd like to be I think.
City.
County governments.
Through a lot and have offered a lot and areas of tax abatements.
And that I think is a very good thing for ongoing margins and a reduction of ongoing running costs.
But.
The big issue of any Greenfield activity is the upfront investment.
And the amount of years that it takes to.
Now too.
Bring that upfront investment into a net.
Profit positive business and.
And upfront grants are what really enables that.
So the for US the important thing is to whatever.
Works out or whatever might be worked out with us.
And then to make sure that it really pencil as well.
For the company and for our shareholders and that's what our target is to have a deal we would love to increase capacity and the United States.
And again I think for San Antonio facility is a very beautiful campus too.
And to targeted with him.
But certainly it has to be something that pencils.
And.
So that would be part of the discussions that we would have at a point that whatever committee would be ultimately used to determine and grant awards would be granting these awards.
And so it's very helpful. That's all I had for now. Thank you. Thank you very much good question second.
And the next question is from Richard Shannon of Craig Hallum and please go ahead.
Hey, Richard.
Good morning, Russell or I guess, good afternoon, and evening to you and and so on.
And then follow up on the gross margin question here and talked about soon and your investment and differentiated flows and at the same time, you talked about some of your power discrete and maybe leveling off here.
It jumped to that 1 the second but how do we think about the longer term gross margin model.
The company is you make all these investments obviously expecting to get a run rate and utilization on those and.
And it'd be interesting to hear that answer and context to your past history and gross margins were used.
But 3 or 4 years ago got into the mid twenty's level here and you're at the low twenty's today, and what I'm curious to the degree to which you're thinking and approach those prior high levels.
Yeah, So our average of the.
And I believe.
Relative to that a little bit and are in the for further remarks. So for Q3, we will see probably.
For.
The gross margin increase and all the margins will increase however, not to the for 50% incremental model and for them for <unk>.
Q4, we expect it to be.
To exceed the 50% incremental module swaps relative explained previously because of some are.
Very good and selling price increase trend.
And improved mix.
For the next day yields if you ask going forward I think you should go from the baseline of the queue for the betterment of the on the margins and then from that point in time.
Assume the incremental model.
The above 50%.
If you want to be conservative or not slightly above but better than the 50%.
If the trend and the market, which you know better than me will continue OSB.
Continual wed like now because now it's a very good trend for us.
Okay.
And just to follow up on this and so I don't have details on what kind of total dollar capacity youre expecting here I'm not sure how far to take that Incrementals and 50% gross margins and get to a you know.
Whole poor level down the road here and again I'll ask if its you know if we can get to near prior levels here as you as you fill up this new capacity is that is that possible or or can we approach that just any comments relative to your history would be great.
And what is your question and the maximum revenue capacity whatsoever.
Margin, no and where we can go with gross and gross margins over time, giving all the given all these investments here again relative to your history here, where you've gotten up to the 25, even close to 26% level for years ago and now we're at the 20 level and obviously, we've got some investments that will increase depreciation you're but overtime as you fill that up can we get back up closer or to that level.
Yeah, well it depends what I was looking to fuel Joe Youre looking into but.
For the next day area. So definitely we can achieve and at 25 or even higher slightly higher okay. Okay.
That's helpful.
And kind of a multipart question here and then on the power market here first of all you said I think Russ you said discrete you're expecting the level off here over the next few quarters slowed to understand why there and if you could make some broader comments also on your power IC space, where I think you've been gaining some share would be great to know you know what voltage levels youre seeing the benefits and.
And what degree of that is happening and Evs that'd be great. Thanks for asking.
Yes so.
Our power discrete market has been a little bit different than others and that's for power discrete we don't.
Offer a foundry offering flow.
For the power discrete and we have customer flows that we bring into the company and.
And we do in many instances co developments on additional flows or incremental flows our capabilities.
The power.
Power discrete business itself is not the highest margin business and the company.
But it's a very stable business for us by virtue of the relationships, we have with those customers.
The fact that it's very dependent upon each of these customers.
We have reached levels of revenue that we think is very adequate and the company and the company is.
Not presently taking the capital expenditure to put into those flows as theres others, such as was the follow up question.
Previously such as our silicon germanium, such as some some imaging capabilities.
Certainly saiful capabilities that.
Both have a higher margin impact for us and secondly.
We own the flow so we have much more freedom and the market as to who we work with.
So that's that's the issue there it's not that we don't have customers that would not wish or do not wish to grow with us and that area.
At this point not our preferred area that we wish to grow our capacity and the company.
Okay that makes total sense I will jump out of line. Thank you Russell. Thank you.
The next question is from Patrick Ho of Stifel. Please go ahead.
Thank you very much and I and congrats on the nice quarter Russell, maybe first off in terms of Ah I think you guys were very presence in terms of the capacity expansion plans to meet the market demand environments. I know you have a lot of customers today and obviously some of the capacity expansion is dedicated to.
Are you getting more share with the existing customers, but can you qualitatively maybe discuss how potential new customers can be brought onboard as you expanded capacity given the current demand and market.
Certainly we are actually in some instances, taking new customers on board.
But those customers are coming in under a different types of arrangements.
Where potentially they'd be paying for a certain capacity itself as it's all pure incremental capacity.
And when a customer would give money towards capacity the model as 1 of 2.1 model is that whatever the prepayment is would be amortized over time against wafers tips.
And typically a nominally with a.
And time date.
So that capacity is more or less are committed or money is forfeited. The other is that the money is just given with no amortization, which.
And as more or less a guarantee for the company that does a return on that incremental capacity.
And.
And has 1 impact and that is it really does increase the specific margin dollars for that customer on top of whatever the selling prices on the wafer.
So those are our 2 models for.
And for the most part at this point, we're working to support our present customers that all have increasing demands and we think that that is very important that those people, who really have made commitments to us and are.
Relying on us that we're doing all that we can to enable their growth within the market.
And I think 1 thing that.
It's very very indicative that we have a good.
Truly taxonomy as customers as the percentages of organic growth that we're seeing that I believe really are much higher than the market growth itself.
And hence that shows that the customers that we're working with.
And our good growth customers that themselves are increasing market share and hence, we're increasing market share and the respective and segments.
That answers your question.
No. It does thank you very much and maybe as a quick follow up I know 200 millimeter tools are different from 300 millimeter tools, but we're hearing more from the equipment industry that they're facing supply constraints and again I know 200 millimeter they were probably a little more or they're probably more options out there.
Procure those type of tools, but have you seen any.
Constraints on your and trying to get deliveries of some tools or is everything still kind of on track on your end.
For the most part all of the appeals that have already gone out for equipment is on time on deliveries.
What we're seeing now is just that the lead time on deliveries is extending for new P. O S.
And that's particularly the case for 300 millimeter.
But for 200 millimeter as well, but we've not seen a gating of.
Any of our suppliers.
Refusing to take a purchase order.
Great. Thank you very much very welcome.
And next question is from Lisa Thompson of Zacks investment Research. Please go ahead.
Good morning.
Good morning, Lisa.
Afternoon for me I guess, good morning, Yeah, I guess.
Okay.
Hum.
And about 66 million and there's something like a very hard time for Ya.
Yeah.
Hi can you hear me any better now.
Yes.
I'll just yeah alright.
This quarter is that about 56 million Capex and said it was going to be like 45 to 49.
So do you have any different thinking on Q3, Q4 and Q1 from what you had previously said.
We have a little bit different thinking because of the what we said in the press release that we have and announced an additional 100 and mainly on so extra Lisa. This is why I said in my script that I expect now you'll know we announced in January and February 150 <unk>.
And we announced today at least another 100. So the total is 250 and as I said in my prepared remarks will be paid in the coming 5 quarters. So if you assume it linearly.
Another 50 million until the baseline.
Since we are just announced the new $100 million recently, you may assume obviously that it will be below 50 million extra flow in Q3, So I would assume a little less than 50 for Q3 like something like $40 million.
And then $50 million.
A quarter and maybe sometimes 62 GAAP, Jeff for the full $250 million and.
And this is on top of the baseline that we had without those Capex plan, which is like you mentioned 45 for meal.
Wanted to know Q3, and kill somebody would it be about 45 million base plus additional 40 from the tools and the 250.
And pretty similar for the upcoming quarters, so between 85 store and 95.
Total right.
Great that really helps thanks, a lot and that's my only question. Thank you.
Very well.
And next question is from David Duffy of Steelhead Securities. Please go ahead.
Yeah. Thanks for taking my question.
Just out of curiosity.
For the Panasonic business goes.
And that capacity fungible to other customers.
And.
And just kind of curious if it's if it's unique to them or.
And let's say.
Theoretically Panasonic didn't exist could that capacity be transferred to other customers easily.
Yeah. So.
Understanding the question I just wanted to clarify so I don't offend anybody.
And <unk> bought the Panasonic semiconductor right. So it's now the group is called.
New photon Japan technology.
So I just don't want to offend anybody there.
I think.
For a good extent for capacity is fungible to.
And to the extent that there are some specific flows that are used that are non fungible, that's the case as well.
So there there are some slows that.
Uh huh.
It really is pretty much dedicated to and markets that are served with certain products had previously been Panasonic semiconductor and our new photon Japan.
Or serving new photon and as a whole, but a good amount of that capacity is fungible.
Okay, and then as far as.
See you.
You mentioned the utilization rates and you just gave us layer counts that were processed and different wafer sizes, yes right.
Did you give it.
I guess, there is still a utilization rate number available right. Because you gave us the total layer counts up at 100 and 203 hundred millimeter.
We can calculate the utilization rates. So could you help us understand you know you gave us the number of process. What's the total number available. So we can back into the utilization rate no thats exactly why and using the process layers. The exact amount of photo layers is not necessarily a relevant number as theirs.
Other constraints and bottlenecks that are not necessarily photo related.
And we're adding photo as time goes on so that's not a.
And area that we'll be presenting at all anymore.
I'll just be presenting photo layers used and on a comparative basis its a good operational metrics.
And so then how do you know how and how do we tie that into utilization rates and efficiency of using your equipment. Since that's basically 1 of the most important metrics of our foundry business is the utilization of your equipment.
So is there another metric that we can look at because when you just give us the foundry and the number of layers process, it's not necessarily food and utilization rate driven and so well.
Is there any other metrics, you'll be giving us to understand about how efficient you are using your equipment.
You can certainly assume that presently we are fully utilized.
That's every layer that we can ship are shifting.
Before then.
Before thank you for tools are rising.
Okay and then.
Or and what we expect for operating expenses and the Q3 and Q4.
<unk> been adding people and capacity at various locations.
What should we kind of expect on a dollar basis for operating expenses in Q3 and Q4.
Oh operating expenses should remain flat and the.
Future quarters, because youre right that we already and good people, but they are in Cogs, it's mainly the conditions and they operate those engineers to support deferred production. So that's in there because that's within the 50% incremental model.
Opex R&D and SG&A, we are keeping to them and flip.
So we should see some nice leverage in the back out for the calendar year.
Some nice leverage.
Some strong let phone and leverage from operating expenses being flat and the back half.
And percentage is yes.
Okay. Thank you that's it for me.
Yes, so just to follow up on your question.
And the.
Our prepared script.
And I had mentioned.
Q3 guidance and then I said that we expect top and bottom line continued growth and the fourth quarter.
And as more tools become qualified for production, enabling further increases and high value flows.
So you know what.
I think somewhat intrinsic to the statement.
And if were depending on new tools to be qualified what we're running right now is running at full utilization.
Excellent. Thank you.
Well thank you.
And next question is from Richard Shannon of Craig Hallum and please go ahead.
Oh, Hey, guys. Just a couple of quick follow ups for me just to be clear I'm pretty sure. The answer is no, but just wanted to confirm muscle and the new $100 million. Capex addition, here that doesn't include any equipment that would be installed with for you in yesterday and micro facility is that correct.
You are correct. It does not include.
Okay, and that's what I thought.
Quick question on another topic your silicon germanium or are you seeing much if any benefit from 400 gig a day.
<unk> ER or I guess devices and they go into 400 gig datacom modules, yet or is that still a pretty small piece of business.
It's a growing piece I wouldn't say, it's certainly not the biggest portion of the site, but it is a growing piece.
And.
Uh huh.
Yeah.
And we press released.
Uh huh.
Our revenue customer and Fi.
For Silicon Photonics.
And <unk> does 4.
400 gig right.
Yes, yes.
Yes.
Are you seeing a 100 gig.
And for 100 gig or are those still growing at a decent rate or is that starting to plateau.
So and and in the prepared remarks, I had mentioned that.
What's really up and moving right now.
Is the.
The datacom and not the telecom telecom is where we do predominantly the 100 gig right. So telecom is not the 100 gig is not increasing usually and volume at this point.
And the Datacom is and those are typically 25 gig chip.
Yeah.
Okay.
That is all from me Russell. Thank you you're very very welcome. Thank you.
Okay.
There are no further questions at this time, Mr Al long ago, and you'd like to make your concluding statement.
Certainly thank you very much.
And <unk>.
And for your interest and for the good questions.
For your reference posted on our website on the quarterly release page on the Investor Relations section is our second quarter 2021 financial results slide deck and <unk>.
Please access at Esper and desire and interest.
To summarize for call and where we're at we really were excited are excited with second quarter record revenue results.
And particularly the activities that have led to our third quarter guidance of substantial continued growth and breaking a $1.5 billion annualized run rate.
We believe that the 385 million Q3 guidance, which represents a.
38%.
Year over year organic growth.
It's really extremely strong evidence that we're serving the right customers and the right markets.
And that type of a growth I think is.
Quite substantial.
We are.
Really executing well on our expansion plans.
And most everything is in place and arent target.
And hence as stated in the script.
We are looking for and expect fourth quarter growth and both top and bottom lines.
And we're very excited with the partnership with S. T at the aircraft they factory.
And.
And over the next years.
Expect and believe that we'll see very important and significant movement and 300 millimeter growth and 300 millimeter capabilities as we qualify our tools and installed more tools and that facility.
And other activities happening and the company are still exciting.
And look forward to.
A meeting with you again for the third quarter release.
And possibly other interactions and the interim so thank you very much for your interest and.
Best wishes for health and happiness. Thank you.
Thank you. This concludes the tower semiconductor second quarter, 2020.1 results conference call. Thank you for your for your participation you May go ahead and disconnect.
Okay.
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