Q2 2021 Power Integrations Inc Earnings Call
[music].
Good day, and thank you for standing by and welcome to the power integrations second quarter earnings call. At this time, all participants lines are in a listen only mode.
After the speaker's presentation, there will be a question and answer session.
On the ask a question during the session you will need to press star 1 on the telephone keypad and please be advised that today's conference is being recorded.
And a further assistance. Please press star Zero I would now like to hand, the conference over to your speaker today, Mr. Joseph Shiffler surplus go ahead.
Thank you Mel and good.
Good afternoon, everyone and thanks for joining us with me on the call today are volleyball, and Krishnan, and president and CEO of power integrations.
And Sandeep Nair, our Chief Financial Officer.
During the call today, we will refer to financial measures not calculated according to GAAP non-GAAP measures exclude stock based compensation expenses amortization of acquisition related intangible assets.
And the tax effects of these items a reconciliation of non-GAAP measures to our GAAP results is included on our press release.
Our discussion today, including the Q&A session will include forward looking statements denoted by words like will would believe should expect outlook forecast anticipate and similar expressions that look toward future events or performance such statements.
We are subject to risks and uncertainties that may cause actual results to differ materially from those projected or implied.
Such risks and uncertainties are discussed in today's press release and in our form 10-K filed with the SEC on February 5.2021.
This call is the property of power integrations and any recording or rebroadcast is expressly prohibited without the written.
And consensus power integrations now I'll turn the call over to volume.
Thanks, Joe and good afternoon everybody.
This was another record quarter for power integrations with revenues of $180 million up 6% to 9% from a year ago.
Demonstrating the leverage and our model.
Non-GAAP.
Operating margin surpassed 30% for the quarter.
And the increase on a non-GAAP EPS by more than 2.5 times EBITDA, yes.
Yes.
For the first half of 2021 net revenues grew 63% from the prior year.
We are growing well above the growth rate of the analog.
Analog industry, thanks to broad market share gains and secular trends that will and dealer even as demand normalizes over the coming quarters.
1 such trend is energy efficiency.
And just being a key part of our story since the introduction and also a lot of eco smart technology.
Over 2 decades ago.
Energy efficiency has provided a tailwind adolescence driving Oems to redesign their products and the advanced and regulatory standards.
And consumer demand.
At times this day.
And wins have been boosted by highly impactful standards like.
2007, California regulations on external power supplies, which quickly drove linear power supplies out of that market.
Power integrations, 1 and outside share of that opportunity because of the links with Ics with an ideal replacement for genius.
And similar transition.
The non taken place in the air conditioning market due to China's mandatory standards flood room <unk> units.
And it was announced late 2019 and have been phased in over the past year.
China is updated minimum efficiency fulfillment standard essentially.
The rollout fixed frequency AC units, which accounted for nearly half of China production because of centers look at that.
And the response to the standard manufacturers have transitioned most of that production to variable speed brushless DC motors and have also converted from linear to switch.
And with power supplies to drive the electronics.
Power integrations is a market leader in Switzerland, and power supplies for air conditioners.
And our income tax position has allowed us to capture much of the volume and transitioning away from linear.
It has also created opportunities.
<unk> brought on a bridge switch and motor drive chips.
Which drive brushless DC motors, such as those used and variable speed <unk> units.
In fact, the 1.
1 of our largest VIX switch designs to date in Q2 at a major customer and the air conditioning market.
We're also gaining share and major appliances, where we are already the leader and AC to DC power supplies.
The efficiency and reliability benefits of our products.
Our share gains have accelerated as competitive capacity capacity constraints have very hard is other products.
And the power supply chips.
And other competitors have.
Have de emphasized or exited the power supply market altogether.
These gains on compounding the revenue benefit of rising dollar content in appliances, driven by tighter efficiency standards.
I had on increasing penetration of electronic features such as network connectivity and electronically controlled motors and Leds and lighting.
We also expect meaningful revenues from motor drive applications next year as bricks, which begins to ramp in earnest.
And an important secular trend in the power supply market.
Adoption of advanced Chargers for mobile devices, which continues to drive strong growth in our communications and computer categories.
Combined revenues from these categories more than doubled year over year in Q2.
Reflecting.
And on the market shares we have gained in the OEM and branded charges for smartphones tablets and notebooks as well as multipurpose charges from a wide range of aftermarket brands.
We have made it a priority priority to win share and this market today.
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Revenue stream will be stickier, and less volatile and more profitable than the commodity cellphone charger business of the past.
Charter designs have always had longer life cycles, and the mobile devices themselves, which are refreshed every year.
But while simplistic low power Chargers could easily be and redesign just to share a few pennies of the bom cost too.
Today's highly sophisticated charges are more like appliances.
Later focused on features and performance and longer design lifecycle.
Cycles and.
Chart, we expect many of the designs and a pipeline to be in production for a long time and we are pressing our advantage to lock in these designs today.
We want a wide assortment of advanced charger designs and Q2, including a 33.1.
And what inbox charges that will significantly increase our penetration and a top tier handset OEM.
Another OEM recently placed the largest single order to date for our Gan based and the switch products, which they have selected for a new 67, Mark Inbox cellphone charges.
For use with high volume floor models.
We also won 130 <unk> design for a leading supplier of gaming notebooks.
Turing for charging ports and using 3 Gan based switches.
As announced in May we have also.
And designed into anchors and exploration nano 2 charges, which comes in 30, 45 and 65 <unk>.
Notably the 65 Watt version is approximately the same size as a 30 watt charger from the first generation of nano charges.
Yes.
And with power density is enabled by our latest product interest, which for which will be produced exclusively with GAAP.
Gan enables switch for to operate at higher frequency, resulting in a significant reduction and the size of the power supply transformer.
We are payable and our switch for device.
Our new client zebra chip, which implements active client technology to recover losses associated with the higher switching frequency, enabling a truly exceptional level of efficiency.
And when combined with our many cap product which uses.
And it seems again to enable the use of a much smaller input capacitor.
We can deliver power density far superior to any solution available in the market today.
The synergy between these products demonstrates the value of a comprehensive approach to a power supply technology.
Users, including proprietary process technologies high voltage transistor technologies highly integrated controllers proprietary packaging and system level Knowhow.
And this has always been our approach and we have continued with our Gan technology.
Which we have seamlessly folded.
Folded into our product offerings in fact, again interest which works exactly like silicon based on the switch such that the customer doesn't have to know anything about again in order to realize its performance benefits.
Other Gan devices offered and the market, including some marketed as.
These are essentially discrete switches that required dozens of external components and many times, even a subject circuit board, which are incorporated into a power supply using and external controller chip searched on a third party.
Engineers must learn the idiosyncrasies of Ganz design and working power supply and even when successful they end up with a design containing 2 to 3 times as many components and multiple circuit boards.
Greatly complicates manufacturing and brings compromises on reliability times and market cost and form factor.
While the Transition's again is a secular trend that will lift many balls.
The benefit of integration are inescapable.
And we believe and approaches moving superior and again will just as it has with silicon over the past 3 decades and.
In fact based on recent design wins, we are accelerating our capacity additions for again to accommodate and substantially higher level of growth there and previously expected.
Looking ahead, we had been anticipating significantly lower revenues and the second half, reflecting the views demand for cell phone customers after aggressive handset bills mentor capitalized on the wall with sanctions.
We now believe that a significant portion of this adjustment took place in queue too as evidenced by a sharp reduction and sell through and.
As customers rapidly adjusted that charge and inventories.
The disconnection largely behind us and taking into account are continuing market share gains and new design wins, we expect and more moderate reduction in the second half revenues compared to our prior expectations.
4 Q3, we expect a 3% sequential decline and revenues plus or -5% and.
And we believe we are on track for the full year revenue growth in excess of 40% compared to a projected growth rate up about 20% for the analog semiconductor industry. According to W. Sps.
With that I'll turn it over to Sandy.
Thanks, Pablo and good afternoon as usual I will focus my remarks, primarily on the non-GAAP results, which are reconciled to cap and our press release tables.
Revenues for the June quarter, $180 million up 4% sequentially and above the midpoint of our guidance.
Consumer revenues were up about 10% sequentially, driven by broad based growth and appliances and consumer electronics.
Industrial revenues, but also up about 10% sequentially driven by a range of vertical including home and building automation lighting application and broad based industrial applications.
Computer revenues increased mid single digits, driven by share gains and notebook charges.
Which offsets broader softness likely reflecting less demand related to work from home.
Communications revenues were down mid single digits, reflecting the lower demand from cellphone customer offset partially by channel replenishment.
Revenue mix for the quarter was 35% communications, 31% consumer, 26% industrial and 8% computer.
We stayed last quarter that March would be the low watermark for gross margin and that is proving to be the case.
Non-GAAP gross margin growth to 51.4% and the June quarter, and up to 100 basis points sequentially, driven primarily by more favorable and market mix and manufacturing efficiencies.
Non-GAAP operating expenses were $37.6 million for the quarter up $1.4 million from the prior quarter, driven by annual salary increases and higher RMB investment, but slightly below our expectations, reflecting the pace of headcount additions.
Non-GAAP operating margin for the quarter was 35%.
While I expect operating margin to settle back into the high twenties over the next couple of quarters.
Crossing the 30% threshold and the June quarter, clearly demonstrates the leverage and our financial model.
This leverage can also be seen and our EPS growth.
Non-GAAP earnings were $58 million and the June quarter, or 83 cents per diluted share.
That's an increase of more than 150% from the second quarter of 2020 on a revenue growth of 69%.
Cash flow was also strong with $67 million generated from operations, while Capex was just over $8 million.
We stayed out just under $8 million and dividends and utilized $26 million per share repurchases buying back 335000 shares on roughly half a percent of half low at an average price of less than $79 per share.
Buyback activity has been ongoing since the end of the quarter and will continue to be driven by a preset price volume matrix.
Cash and investments on the balance sheet growth by $24 million from the prior quarter and stood at $515 million at quarter and.
And journal inventories held steady at 92 days, while channel inventories recovered from the unsustainably low levels reached last quarter ending June at 5.2 weeks still visible unexpected steady state level of about 6 to 7 weeks.
Looking ahead, we expect third quarter revenues to be down, 3% sequentially plus or -5%.
And the mid point of the range that would be an increase of 44% year over year.
While it is too early to project revenues for the fourth quarter. We believe we are on track for revenue growth in excess of 40% of 2021.
And we believe they are very well positioned for growth and 2022 based on the market share gains and the secular drivers that value outline and his remarks.
Our gross margin outlook for the year as improve reflecting our expectation power and market mix and the impact on manufacturing efficiencies.
I expect non-GAAP gross margin for the third quarter to be approximately 51.5%.
And around 51% for the full year.
Operating expenses will continue to rise gradually as the Ed headcount and both R&D and sales and work to bring more products to market with our industry, leading technologies, such as flux link and gain.
All the September quarter, non-GAAP, Opex should be between 35 and $39 million.
For the full year expenses should grow about 9% to 10% coming off a flat year and 2020.
Other income for Q3 should be in the range of 3 to 400000, while the non-GAAP effective tax rate should remain at approximately 8%.
And now operator, let's begin to Q&A session.
Thank you and tell you my Dear.
Ask a question you the only contact Taiwan on your telephone keypad until they can I your question past accounts.
And.
And now these Taiwan on your telephone keypad asked a question and to return on a question and key.
And have the first question comes from the line and say my Shebang power lines now open and to ask some questions.
Hi, guys. Thanks, a lot and ask a question congrats on the solid results.
And to talk about the channel first and foremost and and really what it means to your second half expectations being higher or less that and you said.
Quarter I Gal the channel looks like it got back closer to normal is that going to be a tailwind and get back to normal and your second half expectations or do you think that the self there's going to be strong enough that refilling. The channel is going to take a little bit longer.
So.
As we said on normal levels 6 to 7 weeks and here, we are at 5 and the predominant and growth and the channel came from that.
The cellphone area and we believe because of the share gains that we've had and the secular drivers.
We're going to have a better second half that you had previously anticipated.
So in terms of the channel.
He expected to be relatively flat for Q3 that as a possibility it could go a little bit higher and queue for you.
And you mentioned and and go through our normal but.
The best guess at this point.
Got it thanks for the color on that and I guess, that's my follow up nice performance on the gross margin side of things and if you talked about the 2 reasons mix and I think we can see a little bit of that mix and.
And why that would happen but.
Does the manufacturing side, a little bit more of a surprise to you that you usually pretty accurate on that it's always good to be.
Surprised to the upside more than the downside, but I just wanted to get a little bit more color on on the driver, especially on the manufacturing side, what happened there and how sustainable it is.
The volume is that going out and we've had the yields improvements that time reduction and also the mix and communication moves to opera market charges that helps on a margin also because of volume the lower and it has a favorable contribution and to the environment where the yard.
Thoughts are gone up we do value pricing and as a result of that and get competing against the street and you're doing value pricing that also helped a bit.
Yeah, and utilization and also test cost improvements, probably the biggest manufacturing cost improvements and and the test we have migrated to a new test platform, which is more cost effective and that happened over the last 12 months or so so that has helped us but.
<unk> said.
Even and communications.
Including gross margins for the reasons, you mentioned and that the aftermarket.
And the fact that everybody's going to very high and the charges.
Got it congrats again, thanks guys.
And price.
Thank you and next question they had the line of Christopher and all and some.
And your line is now open and you may ask a question.
Thanks, guys and congrats on the corner.
So.
I actually wanted to talk about the non-GAAP.
Operating margin for a second here I think your long term model is 20 plus.
And I know you guys had an outstanding quarter of.
30.
This quarter and and you said and it's Gonna go back into the high twenties.
But I was wondering if you.
Have you had any plans on updating that long term off margin target and where that might go over time.
Alonzo model continues to grow on top line low double digit for revenue growth with opex growing and about 60%.
And we always talked about this could be free to 5 year updated on an average we've hired a step function increase and the revenues that as far as our operating margin to hold up and.
On our goal has always been there to maximize on operating margin over a period of time and not and and get particular given year.
Yeah.
Would you say that 30% plus could be stretched call for you guys over clear.
And I really think if you remember I talked about 20% and again you have to look over 3 to 5 year bettered.
And we talked about the 20% and goal and already built against David but I think.
Being in the mid twenties, plus seems to be definitely and the direction, where the yacht and obviously.
And as we move forward will be announcing that the words the number that you indicated but at this point and we wanted to do as a talking terms of 3 to 5 years, but I think we have achieved the mid twenties, and hopefully can sustain that and struggling and the loss of direction from there.
Okay, Great and then.
It does seem like there are.
1 or 2 Newark and companies out there.
To go public.
And.
And maybe you can talk about that market.
How you see share shaking out.
And then ultimately pricing dynamics moving forward and as we have some.
More newer entrants into the market.
Sure and just to be clear.
All other again and companies off a discreet devices that on provider system level solution that I think that way and we have a huge advantage gain is very difficult to use as a very fast devise a lot of customer struggle with it.
And it has been to use our product again is embedded within our products. So we take care of all of the deal Syncrisis of again and medium with that sort of a customer's concern they cut in and tell the difference on a design point of view that of course, they can tell the difference in terms of performance.
And that's how easy to me.
And our customers.
Excuse me.
And as far as.
The other side of it is that the number of components required to implement our solution is far less and they need typically have anywhere from 1 half to 1 third the number of components, which is really needed to make the power supply small.
It's not just a question of using again you have to be able to do the size of the power supply for that day or the user component down. We also have to implement features like the current limit inside of a product and federal product and a lot of us lay otherwise you end up having additional losses outside and it's really and against the.
Use again, so talking about again as a device.
Is not very useful you have to look at the system and that's why I again has had the challenges for many many years now and.
And being able to breakthrough that lastly, I would say that in terms of the technology. We believe we have the most cost per day or 2 technology in the world and that and that's because our.
The structure is very different from everybody else's and is uniquely different because we wanted the most cost effective technology for our system on power supplies and and that way in Vietnam, and I think that and a fantastic position compared to any of the other competitors.
Awesome, Thanks cash.
Thank you me has the next question comes from the line of price.
Bandage from states on the on line is now opening and ask the question.
Okay. Thank you and and congratulations on a few records and I think it's revenue operating margin.
And cash flow.
What was on that.
First question is.
Communications business.
Balance sequential this quarter.
And you said that the collection and seems to be behind on.
Google bombing.
And how we should Google.
To the best we have make and model is slightly down and in Q3 I think.
The Huawei distribution has completed the best we can estimate.
And that's why we saw and significant reduction offset by channel, but the discipline.
But and Q3, we think that'll be the <unk>.
Slightly low yes.
Got it so so what tasty and revenues downs on.
Consumer.
We will.
And the consumer business should be relatively black from what we can tell even though you'd seasonally seasonally down because of AP.
Bound and Q3, but if he has so many and new design wins and that will we believe and will offset that.
So that's the reason for every day.
If given the range as we deal with gets hard to get the advice from.
What are you guys are too if you take the 3 percentage slag lagged muscle mind us that's the way to get there.
There will be a net we know directionally communication is going to be slightly down and typically air conditioning goes down and Q3, but we think because our share again and that sort of upset back and be flattish and industrial has so many moving box that it gets a little difficult to be very besides so that's why the range.
Gets difficult to say, but this is the best directional.
And so we can give at this point.
That's cool thanks for that color on.
Moving on to the product so rich rich.
It sounds like fun.
Hitting and momentum and we talked about some good design wins there.
How how should we think about the margin profile on products.
Business and similar to the other products.
But again.
Is on the market on day.
Consumer market data dissimilar to the consumer growth.
And we have.
And.
And we expect it to grow very nicely next day and there are many design wins and.
This year, we will.
Yet.
$2 million and revenue this year, but it will really start accelerating and next year the.
The revenue growth on.
Which has been delayed because of COVID-19, because and appliances when they go to a totally new platform like Bruce switch.
It takes quite a bit of design work and we were unable to physically go and help them and so it made the design process much longer trying to help them remotely.
The interest rate on all of those have been high but they are finally seeing the benefit of this revolutionary product.
Leaving is going to do extremely well going forward.
And just 1 last question and.
The phone will be.
Pharmacy chosen market has been going on.
Charlie moving out of the box, but that you talked about simple inbox design wins.
Thank you for the win.
Largest single order to date for and the switch from 67, what and books. So.
And they're still sort of on the mixed bag as far as the weather trembles between the box and inbox.
Yes, there is still true because the Chinese Oems.
Really focusing on charge time and day believe that and unique approach.
Allows them to charge and a much faster rate and maybe you can imagine tickets on on what's on the amount of power.
He used to the sidewalk cube charger.
This is substantially higher this about 30, and 40 times higher and charge right and they believe that day or the protocol allows them to do that so they are not too.
Anxious to go to a standardized protocol I guess bpd, because it and then move that advantage.
They are able to do something that other people can't do so we don't see it and transitioning and the near future and according to happen and the long term yes.
But is it going to happen quickly I think it's happening slower than even we anticipated.
As you already know.
And 1 of the major interest.
And have switched to USA PD on it.
And 1 is switching partially DSB PD, but beyond that we have not seen a significant and move to USD PD.
Which is actually good for us because it's all different designs and therefore the day. The fact that they are focusing on fast charging means that they're going to continue to put it and box because each generation has a much higher feature level leather.
A lot on higher performance.
So they use it as a marketing tool so they haven't transitioned out of the box.
Congrats getting on an outstanding Covid thinking yeah, thanks, though right.
Thank you and the next question comes from the line of tax free check up nicely and your line is now open you may ask a question.
Yeah, Thanks for taking questions and my congratulations on a good quarter as well.
Real quick can you talk a little bit about channel inventory on the consumer side, you said it built up and communications and I was wondering if that was true for a consumer and as well.
It's not.
Gone up as much and and consumer because the.
The demand on the appliance side continues to be extremely strong and as vs said imba soft earlier, the normalizations and different and markets would happen at different points of time, but the day mad on the consumer, especially on the major appliances continues to be very strong and.
That's in and out.
Waiting to see went back normalizes, because it has been way above normal levels, but also the other part which is very good and that is happening as we talked about it out and Bob is we're on teams have accelerated.
Because of people prioritizing other stuff plus.
People exiting this marketing already focusing the the gains that we would have had over a period of time and actually accelerate and that is going to be a very positive even been things globalized cause that'd be a nice offsets.
Back to share with you.
Got it got on.
And then.
Just thinking about the model going forward is if 1 were to assume.
That.
You hit normal seasonality whatever that is.
Going forward.
And what's your op Martin day above.
25, but the low 30.
Going through next year.
I think.
At this point in time, because even though I haven't done manual flat, but I'll do my stomach.
Fields if.
If you take wherever you will end up this year, which will be in the range somewhere and arrange that you are getting I think and the megawatt range I think it'll be give and take that.
And I think next day after the first victim.
Model and will be similar to the whole year gross margin. This year, because we believe we are going to grow next year, it's hard to tell how much but people very good about Greg next year.
And.
Gross margin of the.
Consumer I'm, sorry communications market.
Because we've got more aftermarket guys, they're taking a smaller volume is is that a good way to think about it and.
Exactly yeah.
And I am indications gross margin is increasing because of that.
Okay got it and then.
Alright so.
And you got to talk to your competitors and.
Trying to suss out.
And what policy is is the past and their argument that.
They have better energy efficiency because they use.
Soft switching.
In other words, they don't care.
And both of US on crossover same time.
Could you talk about that the policy vs Yours, and why you think your policy and having.
And how that relates to how your stance current et cetera.
Can you.
And Laymen's term, explaining what's going on.
Yes, absolutely.
And.
This is almost strange because the price.
Is up switching it's called cause it doesn't come on.
Water and the dosage for it even better zero will just searching which is even more efficient.
By using those times it'll products.
So I don't think anybody can even come close to our efficiency.
And all of its just if you want to build the smallest of happened and the world.
We are here today.
And.
Does and enable us.
More intermagnetics.
Yeah, So we talked about it and my prepared remarks that.
Latest products and a 4.
August and I frequently and that's why it's only a again and he doesn't have a silicon switch it all day.
Cause of the higher frequency operation and when he was a higher frequency and reduce the size of the transformer.
But you end up increasing the losses and the transformer and the switch to recover that we have another companionship called climbs it'll Richard it covers the losses and percentage of the output. So you can not only and maintain efficiency you can actually further increase efficiency using dino voltage switching.
And so on top of that we also have many cabinet nobody else has by the way that will also review the size of a capacitor by 40% so between minicab and.
Ground zero.
To reduce the size of the transformer and capacity.
Which are the biggest component and the power supply.
So in both cases, we reduce it by about 40% each 1 of them and.
And then on.
To make the power supply small even that is not sufficient because you have to have very few components. So that you can actually fit it into a small and flow chart.
That said, we really excel because we have typically 1 third the components of.
A competitor Afghan base desires.
I understand thank you and and last week from and you said, you're going to act as before can products.
And is that.
Ml Cvd's testing and what what 40 me that.
And we will add to add primarily on the.
On the front and.
And I can't go into details, but I could say that from.
From and packaging standpoint, we already have enough capacity and we are expanding as we speak but we'll have that that's easier to do because of the smaller shorter lead times, but it's on the back and after the front and.
Significantly expanding capacity in preparation for substantial growth not only and next year for the next several years.
Very good thank you so much.
Thanks.
Okay, and if anyone would like half across and you've only day pass Taiwan and the telephone key Fob again, barbies, Taiwan on the telephone coupons.
Next question and has the lineup Clough Anchormen of call and your line is now open you may ask a question.
Yes, and asking you gentlemen.
I wanted to follow up to last question on that Gus had and ask which was.
And and some of your prepared comments and indicated that channel inventory could possibly creep higher into Q4 and.
And maybe eventually get back to normal I know you had invested in late 2020 and early 2021.
On additional capacity ads on the on the.
The front and.
Which did prove fortuitous for you guys up and struggled with capacity.
But my question is does a normalization and channel inventory damp and any plans for you to further expand capacity from here and I have a follow up.
Well first of all.
Until the market and normalize those we want to keep as much and eventually.
With us because that day to confirm the real demand most effectively.
And when he gets distributed among many customers and distributors and it makes it really hard for us to take care of upsides seeing and the appliances and have you seen as significant upside that we did not anticipate simply because our share veins and suddenly accelerated for reasons that.
Sunday already mentioned, so it's really important for us to have that with US. However, as things normalize day will be able to build and Reggie as close to a normal hospital and.
Whether it happened and Q3 ice on things. So I think we on demand a still pretty high and and Q4 does the likelihood that we could go up on creep up a little bit.
But it's also possible that we won't be able to do that it all depends upon.
How much how long this and.
Normalization and they'll take and a black.
And the cellphone the normalization that has happened to a large extent and Q too, but and appliances, it's still very very hot and there's a demand is very high and so.
It is possible and take 1.2 or 3 quarters for it to normalize.
But having said that we are continuing to expand capacity across all of our technology and especially again Gal is where we see the most dramatic growth.
And in terms of capacity requirements. So we are focusing on that but we also need silicon capacity, which we are expanding as we speak and we will have more capacity available next.
And next year, you can save even though we are going to grow 40% on target of authority bus percent and.
And the only way and could've done that and we have the capacity and we put the capacity and place we have the grilled and inventory. So we had and a much medication and almost anybody and the semiconductor industry and we also have a very unique manufacturing model and we don't use.
Vertical standard foundries B U's.
File a youth fads that are owned by product companies.
And have excess capacity to give it to us and it's coming to us.
Cause we are permitted through contracts. So we are able to do this much better than.
Almost any other sort of a threat that accompany you can pick up the.
The other thing I would like to add is our internal inventories and only stairs sitting at 92 days on running model is 125 days. So we are well below the model that you were really liked her on and inspired of the growth that we have this year on the growth and the prior year feel very good because of the share gains and the secular and people grew again very nicely.
<unk>.
I appreciate that phone Cindy.
Very helpful.
There has been much discussion on today's call regarding and I think.
And.
Tentative.
Differentiation within Gan.
And so I don't want to belabor that point, but I think what is interesting is.
And 1 of the questions and I will see quite a bit intraquarter is the growth trajectory.
That you will appear has articulated.
Over the next couple of years forehand and.
And the question is.
Is that indicative of a rapidly expanding Tam. That's also greatly beneficial to you or does that constrain your growth and so as you address that question.
I was hoping you could also talk about.
Whether you are seeing new opportunities to maybe move into the server market.
Or outside of your.
Consumer offerings that could also expand your Campbell the time. Thank you.
Yeah, Let me answer the last question first that is that.
Again and will enable us to go to a much higher power levels.
On that integrated stretched.
However, we don't talk about the products in the higher power areas until we have them. So that's 1 of the reasons we don't.
And.
Go Crazy on on what this could be and the next 5 years.
Being.
If you go and public to respect and you can you have complete freedom to show what are you on for the next 5 years. So we are just very very conservative and in that regard.
As far as.
But again propelling.
Other companies Yeah again is a very very important technology. So when.
And can get popular and lift all the Bulls obviously the question is.
Benefit and the most and though I believe the 1 on benefit is the 1 who makes it easy for customers to use again and secondly, the company that had the most cost effective and reliable technology and I think we have really proven that shipped and the business by shipping very high volume for the last 4 years that we had.
A very low level technology, and a very cost effective technology. The truth is and the fact that they are now and and a mainline and the box charge and at 6 and 7 months.
This is the first large volume.
Again.
And that ring off and they are and a very high volume.
The design.
Well, yes.
Very helpful. Thank you.
Thank you again, if anyone would like to ask a question you will need to pass higher 1 on your telephone keypad.
They ask like a question and discontinued the same day.
Alright, thanks, everyone for listening.
And there'll be a replay on this call available.
Our website investors dot power Dot com.
Thanks, again and good afternoon.
Thank you, ladies and gentlemen that Complicities conference call and Thank you also think dissipating you may not and.
And.
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