Q3 2021 Power Integrations Inc Earnings Call
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 five 2021.
This call is the property of power integrations and any recording or rebroadcast is expressly prohibited without the written consent of power integrations now I will turn the call over to Bob.
Thanks, Joe and good afternoon.
We delivered another quarter of strong growth in revenues earnings and cash flows.
Revenues were up 46% year over year in Q3, and we are on track for growth of better than 40% for the year.
Based on the midpoint of our Q4 guidance.
That's well above the predicted growth rate of the analog semiconductor industry, reflecting the substantial market share gains we have achieved this year.
While share gains mainly reflect the strength of our product portfolio and the impact of secular trends such as energy efficiency and fast charging.
We have also benefited from our ability to deliver when competitors have struggled to do so.
We had a strong inventory position at the start of the supply chain prices, reflecting our decision to build when others were cutting production at the outset of the pandemic.
And we're not immune to the supply chain issues affecting our industry. We have clearly benefited from our unique manufacturing model, which of course is dedicated capacity at our foundry partners and from the geographic diversity of our backend suppliers, which has enabled us to weather the COVID-19 related shutdowns.
They have also managed our inventory carefully taking pains to ship as closely as possible to actual demand rather than allowing inventory to build up at customers and distributors.
While not perfect. These efforts have enhanced our ability to serve customers and helped us win share.
Most notably in appliances, where competitors have allocated capacity to other product categories.
Given the stickiness of appliance designs, we expect to hold onto the bulk of the gains even as supply chain conditions begin to normalize.
We have gained additional share in appliances. This year following China's imposition of tighter efficiency standards for air conditioners over the summer.
As a result revenues from air conditioning double year over year in Q3, and also grew sequentially in contrast to the seasonal declines we normally see in the September quarter.
Driven by appliances revenues from consumer category are up more than 40% year to date.
And we are excited about 2022, even with the likelihood to have offer appliance demand normalizing at some point next year.
In addition to share gains in AC to DC power supplies, we are seeing strong uptake.
Our bridge switch products, which drive brushless DC motors used in many appliances.
The efficiency of bridge drivers compounds, the energy saving benefits brushless, DC motors, and enhances reliability and cost by eliminating the heat sinks needed with competing solutions.
We have one that wide range of designs with Brexit in recent months and expect a meaningful revenue contribution in 2022.
We are also seeing increased traction in appliances with our Gan based in a switch products.
Shensi enables designers to accommodate more electronic features.
With minimal increase in power consumption.
While appliance Oems are typically cautious about adapting new technologies, the assembly entity with power integrations and the preference for reliable designs with.
With low component count make them far more willing to use our gan products than our competitors.
More broadly Gan has been a key factor in our growth this year and is a critical element of our product roadmap.
We sold Gan products to more than 100 customers in Q3, and we are on track to grow Gander related revenues by three X in 2021.
We expect strong growth for Gan products again in 2022 led by our continued success in mobile device Chargers with the use case for again is extremely compelling.
Transformation of smartphone charter market from a commodity cost driven market to a value added technology centric market continues at full speed and Dan is fueling the next phase of the transformation.
We are charging now a strategic element of the mobile ecosystem.
OEM saw directly engaged with us to understand how our technology can help them differentiate their products.
This is a dramatic change from the past when design decisions were made by chartering odm's based almost entirely on price.
This new dynamic makes charger designs for stickier and less susceptible to that kind of volatility we saw in the years past.
And because we are we have distance ourselves from competitors with our highly differentiated products, we have been able to win share across a broad spectrum of cell phone Oems, resulting in a well diversified revenue stream.
In short today's charter market bears little resemblance to the market up 10, or even five years ago, and we expect it to be a significant contributor to our growth for years to come.
This technology has disrupted the smartphone charter market, we believe a similar transition is underway in notebook computers.
OEM side, recognizing that commodity brick style power supplies are now obsolete since Gan provides ample power for notebooks in the form factor of a cell phone charger.
And just as in cell phone market.
We are seeing an increased level of engagement with Oems in the design of their power supplies.
In Q3, we won a new 100 watt design at a top tier PC OEM using our Gan based <unk> switch fall products.
As we discussed last quarter.
For employers high frequencies switching to reduce the size of the transformer and maximize power density and can be paired with our claims zero Ics to recycle switching losses and further enhance efficiency.
We also continued to win a healthy share of advanced aftermarket charges, including a new fortify what multiple to USB PD designed for Japan's number one accessory brands with our Gan based switched to the pro.
We also won at 30, what store brand charger.
For a major U S electronics retailer with a silicon based <unk> III product.
Thanks to growth in notebooks tablets and aftermarket charges. The computer category now accounts for more than 10% of revenues up from just 5% only two years ago.
Our market leadership in advanced charges has been a direct result of innovation and with a huge market opportunities still in front of US we are not slowing down.
Last month, we introduced our latest product for advanced charges, the inner switched III PD family.
First single chip solution for USB PD.
Along with primary and secondary site controllers, and a high voltage Gan on silicon switch.
<unk> is the first power conversion IC to incorporate a USB PD protocol processor.
This eliminates the need for a third party protocol chip.
Which not only significantly simplifies the design and reduces component count, but also ease as component sourcing.
Like all of our industrial products in our PPD users, our flex link isolation technology to eliminate optical feedback components and integrate a wide range of functionality that our competitors implement with external components.
As a result, our designers typically require less than half the number of components compared to competing designs, while offering superior efficiency and power density.
Finally, our industrial category continues to grow across a diverse range of applications revenues were up more than 50% year over year in Q3, driven by home and building automation metering solar power and broad based industrial applications.
We have invested significant resources over the past couple of years to enhance our ability to locate and serve small industrial customers.
These include online design and fulfillment resources, such as our new website, and our Pi expert design software as well as a consolidation of our channel to better leverage of our distribution partners.
These efforts are producing results and combined with attractive vertical market opportunities give us reason to be excited about our industrial category for our 2022 and beyond.
And now I'll turn it over to Sandy.
Thanks, Pablo and good afternoon, we had another outstanding quarter with revenues above the midpoint of our forecast non-GAAP operating margin above 30% for the second quarter in a row and non-GAAP EPS up more than 100% from a year ago.
We are tracking to the improved second half outlook that we communicated last quarter with revenues on course to be slightly only slightly lower than the first half. Despite a significant inventory ops overshoot in the cell phone market in the December and March quarters.
As we noted on our July call. The overshoot was partially resolved in the June quarter and appears on track to be largely normalized by the end of the year.
Meanwhile, we have offset much of the revenue impact with market share gains across a broad range of applications.
Q3 revenues were above the midpoint of our guidance range at $177 million up 46% year over year and down 2% sequentially.
The sequential decline was driven by communication category as expected, reflecting the continued work down of inventory following a period of elevated shipments driven in part by customers aggressive efforts to take share from Huawei.
The other revenue categories were all up sequentially consumer revenues were up high single digits and continued growth in major appliances.
And better than seasonal strength in air conditioning, which reflects share gains stemming from the new China efficiency standards.
Industrial.
<unk> revenues were up low teens sequentially on strength in solar Inverters metering home and building automation and broad based industrial applications.
Computer revenues were also up sequentially, driven mainly by growth in notebook adapters and monitors.
Revenue mix for the quarter was 34% consumer, 30% industrial 25% communication and 11% computer.
Non-GAAP gross margin was 52, 6% up 120 basis points sequentially, driven primarily by more favorable end market mix.
Non-GAAP operating expenses were $37 million.
Below our expectations, reflecting the timing of head count additions and lower than expected travel expenses.
Non-GAAP operating margin was 31, 7%.
While I expect operating margins to settle back into the high <unk> based on our near term hiring plans and other investments.
We have clearly seen a step function change in our profitability. Thanks to the leverage in our model.
Non-GAAP earnings for Q3 were $51 8 million.
Or <unk> 84 per diluted share.
That's an increase of more than 100% from a year ago on revenue growth of 46% further demonstrating our leverage.
We had another very strong quarter in terms of cash flow with $59 million generated from operations.
Capex for the quarter was $11 million.
We've been at or just under $8 million in dividends and utilized just $10 million for repurchases buying back 120000 shares in the early part of the quarter at an average price of roughly $82 per share.
That brings total repurchases for the year to 455000 shares at an average price of $79.
Cash and investments on the balance sheet rose by $34 million from the prior quarter and stood at $549 million at quarter end.
Reflecting the strength of our balance sheet. Our board has increased the quarterly dividend to <unk> 15 per share beginning with the fourth quarter.
That's an increase of 13% from the prior level of 13.
Also the board has allocated an additional $50 million to our buybacks, bringing the total allocation to $105 million.
Internal inventories rose by seven days to 99 days, while channel inventories rose to $6 seven weeks still slightly below our desired level of 7% to eight weeks.
Looking ahead, we expect revenues for the December quarter to be $170 million, plus or minus $5 million.
At the midpoint of the range of our full year revenues will reach $700 million.
And we'll be up about 43% compared to the prior year.
I expect non-GAAP gross margin for the fourth quarter to be similar to the third quarter level.
While operating expenses should rise rise to around $40 million as we bring on additional head count in a range of functional areas, particularly in sales and R&D.
Other income for Q4 should be around $300000, while the non-GAAP effective tax rate should remain at approximately 8%.
And now operator, let's begin the Q&A session.
Okay.
At this time I would like to remind everyone in order to ask a question. Please press star followed by the number one on your telephone keypad.
For a moment to compile our Q&A roster.
Your first question comes from Karl Ackerman from Cowen Your line is open.
Yes. Thank you congrats on the.
Pretty healthy results despite.
This headwind in communications.
I guess first and foremost to that point, how are you thinking about the trajectory of your communications business now that.
You suggest the inventory adjustment from these Android smartphone Oems has run its course.
Thank you Paul.
We really think that the cell phone business has grown very nicely next year.
The inventory.
Pulled out is going to happen a little bit more in Q4, but by the end of Q4.
Believe the inventory will be clean and we in fact expect Q1 to be slightly up based on.
The design wins and our <unk>.
Share gains in cell phones. So next year should be a really good strong growth year in the communication space.
Thank you thank you for that.
I guess as my follow up.
You you spoke about some risk to a moderation in appliance revenues for 2022.
But are there opportunities such as share gains that could allow you to grow irrespective of end market growth rate next year.
Yes, just to be clear, we expect all four of our end markets to grow next year is just a question of relative growth, we think communications and computer.
Those two markets will grow faster next year than the other two which is consumer and industrial in.
In consumer we expect a slowdown or normalization of the work from home demand.
But at the same time, we have so much share gains and plus on top of that we will get the full year benefit of the.
The energy efficiency drive in China.
And added to that we will also get revenue from our bridge switch product.
So the net net of all of that is that we believe based on our modeling that the consumer business will grow next year, but not as much as the communications business.
Very helpful.
I'll return back in queue.
Thanks, Paul.
Your next question comes from the line of Ross Seymore with Deutsche.
Deutsche Bank.
Line is open.
Hi, guys I wanted to echo the congratulations on a strong year in total.
I believe you had talked about that digestion period being done by the end of the year not to nitpick on it but last quarter did you think it was largely done at that point or did you think it was going to continue through the rest of the year. So was there any implied change in that or is that pretty much on schedule with what you had originally told us a quarter ago.
The last quarter, we said that substantial.
As normalization that had occurred in Q2.
But we knew that it will continue in Q3, perhaps it was a little bit more than we thought but it was more than made up for by the.
But by the consumer being a little bit stronger than we thought.
So overall it didn't make much of a difference we think to a large extent it is done because our expectation for Q4 is that the communications will be flattish and then Q1, we expect to have an uptick in communications because by that time, they would have to start ordering.
Because next year should be quite a nice here with the all of the design wins, we have.
Got it thanks for the clarification on that and then Sandeep one on the gross margin side. Obviously, it was even better than you thought I assume that was due to the mixed tradeoff that <unk> just mentioned versus your end markets. The fourth quarter guide is pretty clear and strong that it staying relatively flat.
How do we think about in aggregate pluses and minuses for 2022 with communications and computing are going to be the stronger areas. What are some of the ballpark ranges. We should think about for the pluses and minuses on gross margin for the entire year.
Yes, Ross the best if you Havent done the plan, yet, but the best Directionally as we see it as <unk> indicated the communication and computer category will grow faster, but we will have growth in computer consumer and industrial segment the.
The best I could model at this point is because of the mix and because of this year actually got a little tailwind from even though utilization because of the volume and we've been adding capacity that may turn a little bit next year, but the best guess I can give for non-GAAP next year is 51, 5% to 52% for 2022.
Got it thanks, Congrats again.
Thank you.
Yeah.
Your next question comes from Christopher Rolland from Susquehanna. Your line is open.
Thanks, guys for the question.
In your prepared remarks, you mentioned.
<unk>, we're allocating away from their customers for certain products.
So my question.
Questions are what competitors, what customers and what products, where they allocating away from.
So without naming specific competitors.
I would say that the people who compete with US first of all they are all discreet solution sell controllers into this market and MOSFET into this market.
For them. This market is on the lower end of that gross margin spectrum, we make very good gross margins in this market, but our competitors who sell controller they make gross margin somewhere in the <unk>. So if they can make us a higher gross margin than other areas, whether it's the automotive all our computing, that's where they are.
Allocate their resources.
That's the way to allocate the capacities.
So they are reluctant to put that capacity to a lower margin power business and that has really helped us out.
Customers are much.
Much more.
Anxious to changed our designs, which they were doing anyway, but it just accelerated it.
Thank you for that and I'll tie back and do it with just a question as well.
So you have.
I think at least three foundry partners.
<unk>.
They're not necessarily the big high profile ones, so I'm assuming that.
You guys have a little bit more supply than others, but maybe if you can talk to that.
And then.
In that because you guys may have supply where others don't.
Are you using those shortages to push strategic relationships.
Which do you find to be most strategic thanks.
Well the good news is we'll work with those partners for decades.
So we have a very strong relationship. We have also made investments in some of the equipment. So we have some dedicated.
Capacity, that's available to us and we are not competing with big companies.
And standard foundries like TSMC.
So that's the big advantage of the other thing is in the bad times, we don't slowdown.
And that is how we maintain capacity if you remember last year everybody cut back on wafers. We didn't we built a lot of inventory and so that's the given take we have with our partners. So they are very happy that we keep that foundry is running and we're able to that way of share and keep our COO.
Pete.
We're also investing for additional capacity because we know as we grow we need more capacity, we have been doing that all along and will continue to do that and Thats. What sandeep was alluding to we will be investing more and we are investing more as we speak.
So the utilization this year has been very high.
But with more investments that will be little bit of a headwind next year from a gross margin, but even then we think our gross margin next year should be slightly higher based on our estimate of 50 152, 52%.
So we think our model our manufacturing model gives us a humongous advantage in these that in these times.
Okay.
Yeah, Thanks, I'll get back in line for at the end of the queue.
Your next question comes from the line of Torrey Spangenberg with Stifel. Your line is open.
Yes, Thank you and congrats on the results.
First question is on the Gan content a little sooner.
Our architecture is clearly different from some of your peers out there.
At this time around you talked about <unk>.
Cooperates the controller. So can you just elaborate a little bit on there. Our understanding is that you can have as many as three parts and again device.
So just some extra color there. Please so we understand the growth profile again going forward.
Yes.
Thank you sorry, yes, it did.
Pending upon how small they want to make the adapter, we can have three or four products.
Within our switch.
<unk> Street PD PD stands for USB PD power delivery.
What we've done is we've taken the arena pro and added the.
Protocol processor into the same package in fact, it doesn't say identical package. So your component costs.
Count goes down significantly when you do that but in addition to that they can also use that many cap and then we had the fall. They can also use the client zero.
And so we can have lot more content in it.
And the net after a charge and so that increases our dollar content quite significantly and we are very different from other people because they are anomalies settle a primary side control.
And then the customer has to buy a switch from somebody else that high voltage switch.
And then they have to buy a secondary side controller and a processor. So whereas here we have a single chip solution. So all of that plus a way to reduce the size by adding a couple of more chips.
That's very helpful.
And then on the notebook market.
<unk> sounds like it's starting to really breakout for you obviously smartphone charger was very strong the last two years, but is it fair to say that notebook has been a continuing and has a pretty robust year in 2022.
In fact, we think next year is going to be a year, where notebook can grow very significantly we have number of design wins.
And our share of that market is very small is in the single digit percentage.
And so we have lot of room to grow and the DC.
Psychology, there is going through the same phase.
All phones, if you remember cellphones used to be just the cost of in market with the number of OEM supplying to an OEM and the OEM was never involved in the decision, making and the same was true has been true I would say notebooks were.
Few odm's and Taiwan provide almost all of the notebook adaptor thats why they look very much alike.
And it's all based on price, but that is changing because then I'll look at the charger made for a cell phone, which is in a similar pilot level 60, 65 watts, but dramatically smaller and theyre scratching their heads, saying, okay, well I have this beautiful thin notebooks lightweight notebook why am I ship.
This big brick with it so that is happening as we speak and so now we're getting direct engagement with the Oems and so they are able to show what our technology can do to make the total product much more attractive.
Talked about a design win last quarter.
They actually advertise.
Wait not only of the.
The notebook, but also the charger and the combined rate.
And that trend I truly believe we will continue because I don't think.
Consumers will accept a brick when they see the cell phone charger is much smaller.
And of course, the aftermarket guys also helping because they are now building multi port charges that can charge year notebooks and your cell phone.
And if you noticed.
Some of the growth we have seen in notebooks is actually aftermarket guys supplying really small charges to the notebook market.
So thats also helping us.
That's great context, just one last one for Sandeep Sandeep do you have a capex number for 2022 at this point.
Our 2022, I think you should think at about 6% of revenue.
Great. Thank you so much and congrats again.
Thanks Tarek.
Your next question comes from Gus Richard from Northland. Your line is open.
Yes.
Yeah, Thanks for taking my questions and congratulations on a great quarter.
I was wondering if you could just talk about.
The tightness you see in the MOSFET market in general.
Is that an additional tailwind for you guys or just doesn't matter anymore.
Okay.
Absolutely it is.
Again.
There is a significant shortage of all components, including high voltage MOSFET.
So as a result, they are looking at our solution, saying, Okay. This gives us half less than half the number of components.
Just by the fact that they don't have to saw so many different components makes it very attractive for them to secure our solutions.
There's no question about it.
You have far less worry about procuring those components.
Youre absolutely right the high voltage MOSFET shortages is really benefiting us.
Okay got it and then.
Basically talk about the.
Cellphone.
Tam or Sam and <unk>.
First is the computer Tam or Sam.
Just the relative sizes could get.
The opportunity Peter.
Same or smaller because of the smaller units or any color there would be helpful.
And just taking a look at it.
The size of it.
Sam.
I mean, so the communication Sam is in the order of <unk>.
$750 million for our product.
And the computer Sam is about 650, so it's comparable.
In that $2 50.
They include like standby power already include like monitor power and that kind of thing.
Comparing.
AC DC to AC to DC.
Well. It includes all of those things I think towards the notebooks tablets Chargers. It includes monitors printers and so.
And silver standby.
And there is very little.
<unk>.
Very small amount.
Yes.
And then.
Just moving on to the consumer market.
Made an interesting comment that you didn't think it would grow as fast as communications and Pcs.
Communication is probably not being as strong as Tc.
In the consumer market Youre, gaining so much share D. Do you expect to see given the strength of.
AC units in the back half of the year and inventory correction in the first half.
Why don't you think that can keep up with.
Let's say with <unk>.
Cell phones.
Well as far as inventory, we don't think there is much inventory at <unk>.
Okay.
Zuma customer.
Customers Oems because we.
Keep a very close relationship with them.
But our concern is really twofold.
One is the work from home demand.
Which is really helping everybody in this business is.
He is eventually going to normalized we all know that we don't know the magnitude we don't know when its going to happen, but we believe it's going to happen sometime next year.
Now that's more than offset for us.
The share gains we are getting from our competitors.
Who are either walking away from this market are deemphasizing this market.
In favor of other markets.
And once they get this shared we believe the share is very sticky it's going to be permanent because our products are truly better we would have gotten to shed anyway. He is just that this shortages.
Is that helping us.
At a faster rate.
<unk> transferred is happening much faster next year.
So that's where the headwind is the nomination of a work from home demand. The second one to a smaller extent is the housing situation in China. As you know there is a problem there where people are not buying homes and the way. It worked in China is that until we buy the home that are non appliances installs.
So that is a small percent the reason I say, it's a small concern is because even though we ship a reasonable amount of power.
Appliance products to China, a lot of them come out of China to other countries. So we think overall, China demand is probably around 20% of the appliance total appliance demand.
We shipped to the appliance companies in Europe in U S and Korea, and then of course in China.
Now on the positive side.
We also have one other benefit that is the India market has been very soft this year and I believe there is pent up demand for appliances in India that is likely to make it.
Growth area for US next year. So all in all we are feeling really good at and grow we are just a little bit concerned that there are some headwinds that the growth maybe slightly impacted.
But we don't know for sure but this is our best modeling right now.
Got it that makes it makes complete sense.
Doses of Covid vaccine and the recovery is going to go a long way to stimulating demand.
That's it for me thanks.
Thank you Youre welcome.
Your next question comes from David Williams of Debenture Mark Company. Your line is open.
Hey, good afternoon, and thanks for letting me ask a question here.
So just wanted to kind of maybe touch back on the comm segment, and obviously that scenario of Huawei.
Inventory builds.
Is playing a part there, but I'm just wondering if there's any potential that this could be any type of erosion of share or changing perhaps there or if theres any other dynamic within that that potentially could be impacting that as well or if it's simply is just the over inventory.
Good afternoon, David Thanks for the question.
We are very confident that we have not losing share it's quite the opposite we continue to gain share.
That's very clear this.
Normalization, we are seeing is just because.
Several of the Oems, but way too much power products thinking that they will get an unfair share.
Huawei.
There is get some share, but nowhere near what they were expecting obviously that didn't have the parts. They cant get the shares so they have to always err on the side of having more products.
Having said that.
They are all very positive about next year do you think next year is going to be a strong year.
Even with the work from home.
Demand normalization. They don't believe is going to impact that cell phone business and in the same time, we are gaining share.
We already have a good share of the smartphone market, but we still have a long way to go.
And then we also have the business with the aftermarket guys, which is doing very well and thats likely to grow as well next year. So we are feeling really good about.
Our position in this market and we believe very strongly that our share will continue to grow for the foreseeable future because our products are just the way to compelling.
Okay.
Yes.
It makes sense I appreciate the color and that's similar to what we're hearing as well, but theres been a lot of claims by maybe newer entrants that theres. Some some design wins there. So just wanted to set the tone.
So I appreciate the color.
And then maybe if you could speak to anything from a supply chain challenges that youre seeing in terms of thinking about the fourth quarter are there any areas in particular are pockets of strength or weakness or anything thats impacting your business our ability to meet the demand or anything new this developed in terms of the supply chain over the last several quarter.
Yeah.
No.
We've had supply chain challenges like all others.
Companies.
But we.
Our situation is lot better than almost anybody else for multiple reasons one is.
We have as I said, a very strong relationship with our.
Foundry partners they are truly partners theyre not.
<unk> foundries, where they sell to a number of different people, we have kind of committed capacity there and they are working with us to expand the capacity.
And.
In terms of the backend.
So geographically.
Diversified that even when we had stoppages in Malaysia and in.
In the Taiwan inside of Thailand.
We could shift some of our business to other areas.
So the impact was less I can't say there was no impact it did impact us it did impact some of our customers, but I would say the lastly, probably the best thing we did and it was not easy to do is to ship to real demand.
What we didn't want happening is that the our inventory being spread among a number of customers and distributors then we won't be able to serve our customers very well. So we backed our customers not to build inventory. So that we can take care of all customers.
By having all of the inventory in one place and I think that we did probably better than almost any other semi because a company that Idaho law and so that has really benefited us and thats why theyre able to take care of our customers and it being a much better situation by the way did really appreciate it.
Fantastic. Thank you and just one last one real quick do you think your visibility is improving or if you were to compare maybe I guess 90 days ago do you think your visibility into the channel and demand is better worse or maybe in different.
I think just the fact that we are so closely engaged with distributors and direct customers.
We are getting lot more.
Real time data from them.
One of the things that this coverage that has done is it's brought us very close to the Oems in the past the Oems who buy through distribution. They will place the order with the distributor distinguished based order with us.
But because of the supply chain issues now they are directly communicating with us on the business conditions. So if they need more products. They tell us right away. So we still have to wait for the distributor to tell us and I think this is going to work to our benefit.
Significantly overtime.
That creates a strong relationship with the Oems and that allows us to have a much more.
Sticky business and this has always been true to a large extent in appliances is even better now, but what is really amazing is in the cell phone business, where we had very little relationship with Oems now we are very closely working with Oems.
And that is that has made the cellphone business almost like an appliance business in terms of stickiness and not having the volatility.
Used to have 10 years ago, when they could switch their odm's anytime and you could lose a share almost overnight.
That's very unlikely to happen going forward. So I think the cell phone business has completely changed for us and we are really pleased that this COVID-19 has given us a chance to show that we had a better supplier and I think thats going to help us long term.
Thanks, so much.
Thanks, David.
Your next question comes from the line of.
Christopher Roland with Susquehanna Your line is open.
Hey, guys. Thanks for the follow up.
I guess for Sandeep.
So anything on your lead times and then also on backlog.
Is that still growing or is that starting to normalize now and sandeep youre really good at the macro in the big picture.
I was wondering if you have any thoughts on it.
D as of inventory building customers are over shipping to demand.
Whether that comes back to haunt the industry not necessarily you guys. Because you can you.
You can supply these guys.
But for the industry more broadly.
I think I'm talking in terms of us because I'm not in India.
History expert, but I'll talk generally we have done a very prudent job and just take a look back I think we were we talked about normalization in cell phone and we talked we're already talking to you that because of work from home there'll be normalization next year, possibly on the appliance area, even though we're going to gain an offsetting by sure.
So you see Lee look at the partners and look and see it as realistic. This industry has gone through and I think this year has benefited a lot and lot of segment from local mall and there will be a normalization and it's a matter of time when that will happen.
As far as our lead times.
For half of our products, we are in about six to eight weeks and for the rest of them, it's little more elevated but as <unk> indicated.
The approach, we took with our partners whether it be the foundry partners is going on in the past when things were tough we still built inventory because we think long term and thats why we get capacity and it's the way we operate on a long term thinking that enables us and truly is butler indicators.
What feedback you got from our customers as we've been actually one of a differentiator supplier being able to supply most of our customers where demand because the way we managed it.
Thanks Sandeep.
Again, if you would like to ask a question.
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There are no further questions I will turn the call back over to the presenters for closing remarks.
Alright, thanks, everyone for listening there will be a replay of this call available on our website, which is investors power dot com. Thanks, again and good afternoon.
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