Q4 2021 ON Semiconductor Corp Earnings Call
Speaker 1: Good morning, my name is Rob and I will be your conference operator today. At this time, I would like to welcome everyone to the ON SEMI 4th Quarter 2021 EARNINGS conference call.
Good morning, My name is Rob and I will be your conference operator today at this time I would like to welcome everyone to the on semi fourth quarter 2021 earnings Conference call.
Speaker 1: All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session.
All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question. During this time simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question again press Star one thank you Parag Agarwal.
Speaker 1: If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press star one. Thank you. Parag Agarwal, Vice President of Investor Relations and Corporate Development. You may begin your conference.
Vice President of Investor Relations and corporate development you May begin your conference.
Speaker 2: Thank you, Rob. Good morning and thank you for joining AllSemis' 4th Quarter 21 Quarterly Results Conference Call. I am joined today by Hassan Al Khoury, our President and CEO , and Thad Trent, our CFO .
Thank you Rob.
Good morning, and thank you for joining us I mean, its fourth contract won't be one part of it it does conference call.
I'm joined today by our friend and colleague, our President and CEO and Patrick our CFO .
Speaker 2: This call is being webcast on the investor relations section of our website at www.arnsami.com.
Scott is being webcast on the Investor Relations section of our reps.
At Www dot on semi Darko.
Speaker 2: A reply of this webcast along with our 2021 fourth quarter earnings release will be available on our website approximately one hour following this conference call and the recorded web for approximately 30 days following this conference.
A replay of this webcast along with our fourth quarter earnings.
Maybe it would have been approximately one.
One hour following this conference call and then at Gardner Denver.
It wouldn't be able to have it for approximately 30 days.
Following this conference call.
Speaker 2: Additional information related to our end markets, business segments, geographies, channels, share counts, and 2022 fiscal calendar is posted on the Investor Relations section of our website.
Additional information related to our end markets business segments geographies channels check, calling and talking to prescribe.
Posted on the Investor Relations section of forward website.
Speaker 2: Our earnings release and this presentation includes certain non-cap financial margins.
Our earnings release and this presentation includes certain non-GAAP financial measures.
Speaker 2: Reconsideration of these non-CAF financial measures to the most directly comparable measures in the CAF are included in our earnings release, which is posted separately on our website in the Investor Relations section.
The combination of nonproliferation measures with their most directly comparable measures under GAAP.
Included in our earnings I.
It just bolsters separately Arnold.
Website in the Investor Relations section.
Speaker 2: During the course of this conference call, we will make projections or other forward-looking statements regarding future events or the future financial performance of the company. The words believe, estimate, project, anticipate, intend, may, expect, will, plan, should, or similar expressions are intended to identify forward-looking statements.
During the course of this conference call in May.
Projections or other forward looking statements regarding future events.
The future financial performance of the company. The words believe estimate project anticipate intend may expect.
Large Jordan.
I'm Gonna expressions are intended to identify forward looking statements.
Speaker 2: We wish to caution that such statements are subject to risks and uncertainties that could cause actual events or results to differ materially from projections, an important factor that may play a role in the future.
We wish to caution.
Myself subject to risk and uncertainties that could cause actual events or.
Does that differ materially from projections.
Gordon factor that can affect our business.
Speaker 2: including factors that could cause actual results to differ from our forward-looking statements.
Factors that could cause actual results to differ from our forward looking statements.
Speaker 2: are described in our most recent Form 10-K s, Form 10-Q s and other filings with the security section.
Describe now where most of them from turnkey form 10, Qs and other filings with the Securities Exchange Commission.
Additional factors are describing now unemployed is for the fourth quarter.
Speaker 2: Additional factors are described in our earnings radius for the fourth quarter of 2021.
Speaker 3: Our estimates or other forward-looking statements may change, and the company assumes no obligation to update forward-looking statements to reflect actual results, change assumptions, or other events that may occur except as required by law. Now let me turn it over to Hassan. Hassan? Thank you, Parag, and thank you, everyone.
Our estimates and other forward looking statements may change and the company assumes no obligation to update forward looking statements to reflect these.
Changed assumptions doesn't mean, okay, except as required by law.
No.
No.
That's fine.
Thank you, Brian and thank you everyone for joining us today.
Speaker 3: As we wrap up 2021, I'm extremely pleased with the progress of our transformation.
As we wrap up 2021, I'm extremely pleased with the progress of our transformation journey.
Speaker 3: We have positioned on SEMI as a leader in intelligent power and sensing by focusing on enabling sustainable eco-
We have positioned on semi as a leader in intelligent power and sensing by focusing on enabling a sustainable ecosystem.
Speaker 3: We have implemented structural changes to focus our investments and resources on the megatrends of vehicle electrification, ADAS, energy infrastructure, and factory automation, and this is evident by our record financial performance.
We have implemented structural changes to focus our investments and resources on the Megatrends of vehicle electrification Adas energy infrastructure and factory automation and this is evidenced by our record financial performance.
Speaker 3: As we have shifted to focus on high of the high value markets, I don't want to be in the
As we have shifted to focus on high on the high value markets of automotive and industrial both the price to value discrepancies and improved manufacturing efficiencies. We have expanded our margins to achieve the target model ahead of our stated timeline or.
Speaker 3: close the price-to-value discrepancies, and improve manufacturing efficiencies, we have expanded our margins to achieve the target model ahead of our stated timeline.
Speaker 3: Our customers view on semi as a strategic partner, as evident by the execution of multiple long-term supply agreements, which provide better demand visibility for capacity planning and investments to support it.
Our customers view on semi as a strategic partner as evidenced by the execution of multiple long term supply agreements, which provide better demand visibility or capacity planning and investments to support it.
Speaker 3: To that end, the acquisition of G-TAT expands our leadership in Silicon Carbide and provides our customers the assurance of supply required to support this rapidly growing market.
To that end the acquisition of <unk> expands our leadership in Silicon carbide and provides our customers the assurance of supply required to support this rapidly growing market.
Additionally, we are exiting volatile and highly competitive noncore businesses and focusing on profitable growth and sustainable financial performance.
Speaker 3: Additionally, we are exiting volatile and highly competitive non-core businesses and focusing on profitable growth and sustainable financial performance.
Speaker 3: In 2021, our revenue increased 28% while our operating income and free cash flow increased approximately six times faster, demonstrating the operating leverage in our model as we continue on our transformation journey.
In 2021, our revenue increased 28%, while our operating income and free cash flow increased approximately six times faster demonstrating the operating leverage in our model as we continue on our transformation journey.
Speaker 3: We had a successful year amid the ongoing pandemic and supply chain challenges that continue to affect the March.
We had a successful year.
The ongoing pandemic and supply chain challenges that continue to affect the market.
Speaker 3: Our performance has only been possible thanks to the dedication of our worldwide teams and I'd like to take the opportunity to thank them for their hard work.
Our performance has only been possible. Thanks to the dedication of our worldwide teams and I'd like to take the opportunity to thank them for their hard work.
Speaker 3: Moving on to the first fourth quarter, our fourth quarter was yet another example of exceptional execution by our world-wide teams in a strong demand environment for market leading intelligent power and sensing products.
Moving on to the fourth quarter.
Our fourth quarter was yet another example of exceptional execution by our worldwide teams and a strong demand environment, our market, leading intelligent power incentive products.
Speaker 3: Although we met our margin targets at a schedule, we expect that with ongoing mix optimization, the manufacturing consolidation we have begun, and the continued ramp of new products, we have had room to further expand our margins over the coming years.
Although we met our margin targets ahead of schedule, we expect that with ongoing mixed optimization. The manufacturing consolidation, we have begun and the continued ramp of new products, we have headroom to further expand our margins over the coming years.
Speaker 3: We continue to see strong demand for our products, and in 2021, our design wind funnel grew over 60% year-over-year, and our new product revenue grew 28% from 2020.
We continued to see strong demand for our products and in 2021, our design win funnel grew over 60% year over year and our new product revenue grew 28% from 2020.
Speaker 3: This design went performance along with long-term supply agreements have positioned the company for sustained long-term growth.
This design win performance along with long term supply agreements have positioned the company for sustained long term growth.
The fourth quarter revenue growth was driven by additional capacity coming online from our investments earlier in the year and an accelerated focus to free up existing capacity to service our strategic markets consistent with our stated goal of exiting low margin non core products.
Speaker 3: The force quarter revenue growth was driven by additional capacity coming online from our investments earlier in the year. And an accelerated focus to free up existing capacity to service our strategic markets consistent with our stated goal of exiting low margin non-core products.
Speaker 3: We are making selective investments in our internal operations to expand capacity for strategic products. And at the same time, we are relieving bottlenecks in our internal manufacturing operation.
We are making selective investments in our internal operations to expand capacity for strategic products and at the same time, we are relieving bottlenecks in our internal manufacturing operations we.
Speaker 3: We have also been successful in securing additional capacity from our external manufacturing partner.
We have also been successful in securing additional capacity from our external manufacturing partners.
Long term, we are qualifying products into 300 millimeter east Fishkill facility to increase the efficiency of our fab network, while executing our fab lighter strategy.
Speaker 3: Long-term, we are qualifying products in the 300mm East Fischfield facility to increase the efficiency of our fab network while executing our fab lighters strategy.
Speaker 3: This will allow us to further expand both the capacity for products in our strategic markets and our gross margin over time given the cost benefit.
This will allow us to further expand both the capacity for products in our strategic markets and our gross margin over time, given the cost benefits.
Speaker 3: The current supply demand imbalance in the semiconductor industry will likely persist through 2022 and continue into 2020.
The current supply demand imbalance in the semiconductor industry will likely persist through 2022 and continue into 2020 base.
Speaker 3: Based on interactions with our customers and channel partners, we believe that the semiconductor inventory throughout the supply chain remains low. And lead times are stretched for the end of the...
Based on interactions with our customers and channel partners, we believe that the semiconductor inventory throughout the supply chain remains low and lead times are stretched for the industry.
Speaker 3: The supply constraint is further compounded by accelerating demand for electric vehicles, ADAS, energy infrastructure, and factory automation, and the increase of content in these applications.
This supply constraint is further compounded by accelerating demand for electric vehicles, <unk> energy infrastructure and factory automation and the increase of content in these applications.
Speaker 3: During the fourth quarter, we saw an increase of approximately 600 million in committed revenue for our silicon carbide products, bringing our current committed revenue to over 2.6 billion through 2024.
During the fourth quarter, we saw an increase of approximately $600 million in committed revenue for our silicon carbide products, bringing our current committed revenue to over $2 6 billion through 2024.
Speaker 3: Over 70% of this committed revenue is for electric vehicle traction applications with the integrated end-to-end supply chain and market leading efficiency of our silica carbide products as our competitive advantage.
Over 70% of this committed revenue is for electric vehicle traction applications, where the integrated end to end supply chain and market, leading efficiency of our silicon carbide products as our competitive advantage.
Speaker 3: To support the steep growth in our Silicon Carbide revenue over the next few years, we plan to more than quadruple the capacity of our substrate operations exiting 2022 and intend on making substantial investments in expanding our device and module capacity.
To support the steep growth in our silicon carbide revenue over the next few years, we plan to more than quadruple the capacity of our substrate operation exiting 2022, and intend on making substantial investments in expanding our device and module capacity.
Speaker 3: In 2022, we expect our silicon carbide revenue to more than double year over year as we continue to ramp with our existing customers and begin shipments to new customers under our LTSA.
In 2022, we expect our silicon carbide revenue to more than double year over year as we continued to ramp with our existing customers and begin shipments to new customers under our <unk>.
Speaker 3: We remain on track to exit 2023 with a silicon carbide run rate of $1 billion per year.
We remain on track to exit 2023, with a silicon carbide run rate of $1 billion per year.
Speaker 3: In addition, we continue to make progress on the 200-millimeter silicon carbide development program that we acquired from GTAT. In January , we received finished 200-millimeter thick wafers with device yields meeting our production target.
In addition, we continued to make progress on the 200 millimeter Silicon Carbide development program that we acquired from GE that in January we received finished 200 millimeter wave.
Wafers with device yields meeting our production targets.
Speaker 3: These wafers were manufactured using our full capabilities from bulls to substrate all the way through our own fab.
These wafers were manufactured using our full capabilities from balls to substrate, all the way through our own fabs.
Speaker 3: Our silicon carbide modules are powering the recently announced Mercedes EQXX Research Prototype Electric Vehicle Platform, which has a range of 620 miles on a single charge. We secured this design based on all-around superior performance of our modules across efficiency, thermal conduction, and switching.
Our silicon carbide modules are powering the recently announced Mercedes EQM Zacks Research prototype electric vehicle platform, which has a range of 620 miles on a single charge. We secured this design based on all around superior performance of our modules across efficiency thermal conduction.
And switching.
Speaker 3: This win clearly demonstrates our technical leadership and end-to-end supply chain capabilities for silicon carbide.
This win clearly demonstrates our leadership technical leadership and end to end supply chain capabilities for silicon carbide.
Our focus on power modules for alternative energy applications delivered a 42% year over year growth in our design funnel in 2021.
Speaker 3: Our focus on power modules for alternative energy applications delivered a 42% year-over-year growth in our design funnel in 2021.
Speaker 3: We have signed LTSAs with key players in the solar inverter market, including the top two market share.
We have signed <unk> with key players in the solar inverter market, including the top two market share meters.
Speaker 3: We expect our renewable energy-related revenue to grow by over 50% year-over-year in 2022 and expect the alternative energy market to be a long-term driver for our business.
We expect our renewable energy related revenue to grow by over 50% year over year, and 2022 and expect the alternative energy market to be a long term driver foreign business.
Speaker 3: as utility-scale power plant installations are expected to grow worldwide to reduce the climate impact of fossil fuel-based power plants.
As utility scale power plant installations are expected to grow worldwide to reduce the climate impact of fossil fuel based power plants.
Speaker 3: On the intelligent sensing front, our automotive imaging revenue grew by more than 20% quarter over quarter and approximately 40% year over year as we continue to see momentum in advanced safety with new design wins.
On the.
<unk> sensing front, our automotive imaging revenue grew by more by more than 20% quarter over quarter and approximately 40% year over year as we continued to see momentum in advanced safety with new design wins.
Speaker 3: With consumers' desire for additional safety features and an improved driving experience, we are seeing increased penetration of sensing in cars, including image sensors and ultrasonic sensing, at the same time, content per car is growing with each camera attached to one of our PMICs.
With consumers' desire for additional safety features and an improved driving experience. We are seeing increased penetration of sensing and cars, including image sensors and ultrasonic sensing at the same time content per car is growing with each camera attached to one of our P mix.
Okay.
Speaker 3: We're also seeing accelerating demand for our imaging products for industrial and factory automation in which revenue grew by approximately 10% quarter over quarter and 43% year over year.
We're also seeing accelerating demand for our imaging products for industrial and factory automation in which revenue grew by approximately 10% quarter over quarter and 43% year over year.
Speaker 3: Industrial customers are investing in automation at an increased pace to improve efficiency and to reduce volatility in operations due to wage inflation and labor shortages, on-shoring and social.
Industrial customers are investing in automation at an increased pace to improve efficiency and to reduce volatility in operations due to wage inflation and labor shortages.
Onshoring and social distancing mandates.
Speaker 3: We have leveraged our experience in the automotive market to offer our industrial customers rugged, high-resolution, and high-image quality sensors for the most demanding industrial applications.
We have leveraged our experience in the automotive market to offer our industrial customers are rugged high resolution and high image quality sensors for the most demanding industrial applications.
Speaker 3: All of these execution vectors delivered a robust margin performance exceeding our target gross margin of 45% significantly ahead of schedule.
All of these execution vectors delivered a robust margin performance exceeding our target gross margin of 45% significantly ahead of schedule.
Speaker 3: This accelerated gross margin expansion was driven by a strong and accelerated execution in closing price to value discrepancy, cost reduction initiatives, a focused drive on ramping new products, a deliberate intent to shift more capacity to products for a strategic market, and operational efficiencies across our manufacturing footprint, all consistent with the strategy outlined at our analyst day.
This accelerated gross margin expansion was driven by a strong and accelerated the execution and closing price to value discrepancy cost reduction initiatives, a focused drive on ramping new products, a deliberate intent to shift more capacity to products for our strategic markets and operational efficiencies.
Across our manufacturing footprint, all consistent with the strategy outlined at our analyst day.
Speaker 3: Along with making operational changes to drive the margin expansion, we are refining our execution in the channel to ensure that our partners are focused on driving growth in automotive and industrial end markets consistent with our strategy.
Along with making operational changes to drive the margin expansion.
We are refining our execution in the channel to ensure that our partners are focused on driving growth in automotive and industrial end markets.
System with our strategy.
Speaker 3: Throughout the year, our team worked extremely hard to pull in the schedule for engineering and operations efforts dedicated to margin improvements to offset some increased material costs we have incurred.
Throughout the year, our team worked extremely hard to pull in the schedule for engineering and operations effort dedicated to margin improvements to offset some increased material costs, we have incurred.
Speaker 3: We have worked to improve yields and ship more units into the automotive and industrial end markets, which deliver an improved margin profile for our business and help support more of our customers' demands.
We have worked to improve yields and ship more units into the automotive and industrial end markets, which deliver an improved margin profile for our business and help support more of our customers demand.
Speaker 3: In the fourth quarter, automotive and industrial grew 10%, quarter over quarter, to 63% of our revenue, as compared to 61% in the third quarter, both delivering record quarters of $641 million and $522 million respectively.
In the fourth quarter, automotive and industrial grew 10% quarter over quarter to 63% of our revenue as compared to 61%.
Third quarter, both delivering record quarters of $641 million and $522 million respectively.
Speaker 3: In a supply-constrained environment, this growth came from the increased units we could ship and, more importantly, from the strategic mix shift away from non-core, low-margin business that we intended to execute.
In a supply constrained environment. This growth came from the increased units, we could ship and more importantly from the strategic mix shift away from noncore low margin business that we intended to exit.
Speaker 3: In 2021, we walked away from $170 million of non-core business with an average gross margin of 20%.
In 2021, we walked away from $170 million of noncore business with an average gross margin of 20%.
Speaker 3: Now I will turn the call over to Thad to provide additional details on our financials and guidance. Thad?
Now I will turn the call over to Pat to provide additional detail on our financials and guidance.
Thanks Hassan.
Speaker 4: I'll start out with providing an overview of the results for the full year 2021, then step through the Q4 results and guidance for the first quarter of 22 and wrap.
I'll start out with providing an overview of our results for the full year 2021 and step through the Q4 results and guidance for the first quarter of 'twenty two.
And wrap up with an update to our long term model.
Speaker 4: 2021 was an exceptional year as we transformed the company to drive sustainable performance and shareholder value.
2021, with an exceptional year as we transform the company to drive sustainable performance and shareholder value we.
Speaker 4: We have pivoted to align our investments to the high-growth megatrends in automotive and industrial while implementing structural changes, capturing value for our differentiated portfolio, and optimizing our manufacturing footprint to increase efficiency and improve our cost performance.
We have pivoted to align our investments to the high growth megatrends in the automotive and industrial while implementing structural changes capturing value for our differentiated portfolio and optimizing our manufacturing footprint to increase efficiency and improve our cost structure.
Speaker 4: These initiatives are translating into financial results as we achieved our record annual and quarterly revenue, gross margin, operating margin, and cash.
These initiatives are translating into financial results as we achieved our record annual and quarterly revenue gross margin operating margin and cash flow.
Speaker 4: Our 2021 revenue was $6.74 billion, increasing 28.3% over 2020.
Our 2021 revenue was $6 7 billion, increasing 28, 3% over 2020.
Our automotive business increased 36% year over year, and our industrial revenue increased 33% as we continue to see content gains in each segment driven by automation electrification and enhanced safety.
Speaker 4: year-over-year and our industrial revenue increased 33% as we continue to see content gains in each segment driven by automation, electrification, and advanced
Our non-GAAP gross margins for the year improved 770 basis points to 44% and we exited the year exceeding our 45% long term target in Q4.
Speaker 4: Our non-GAAP gross margins for the year improved 770 basis points to 40.4% and we exited the year exceeding our 45% long-term target in Q4.
Speaker 4: Since embarking on our transformation journey a year ago, we've improved our non-gap gross margin by 1,080.
Since embarking on our transformation journey, a year ago, we've improved our non-GAAP gross margin by 1080 basis points.
Speaker 4: 2021 operating income and free cash flow increased approximately 6 times faster than revenue, with non-GAAP operating margin improving to 21.9%, while free cash flow increased to $1.3 billion, or 20% of revenue. While we have had significant
2021, operating income and free cash flow increased approximately six times faster than revenue with non-GAAP operating margin improved to 21, 9%, while free cash flow increased to $1 $3 billion or 20% of revenue.
While we have had significant achievements over the last year.
Speaker 4: We are excited about the opportunities in front of us. Our design wind funnel for intelligent power and sensing is expanding at a rapid rate, and we are securing additional capacity to support our growth from external partners and with selective internal investments for strategic products.
We are excited about the opportunities in front of us.
Our design win funnel for intelligent power and sensing is expanding at a rapid rate and we are securing additional capacity to support our growth from external partners and with selective internal investments for strategic products.
Speaker 4: From a margin perspective, we expect mixed optimization and our fab-liter strategy to drive further expansion.
From a margin perspective, we expect mix octomom optimization in our fab lighter strategy to drive further expansion.
Speaker 4: Our long-term supply agreements are providing increased visibility for revenue growth.
Our long term supply agreements are providing increased visibility for revenue growth.
Speaker 4: And we are confident that the structural changes and decisions we made last year solidified our baseline to allow for sustainable margin expansion.
And we are confident that the structural changes and decisions, we made last year and solidified our baseline to allowing for sustainable margin expansion over the long term.
Speaker 4: Consistent with our FabLighter strategy, we have taken the first steps towards rationalizing our manufacturing footprint by entering into a definitive agreement for the sale of our 6-inch fab in Belgium.
Consistent with our fab lighter strategy, we have taken the first steps towards rationalizing our manufacturing footprint by entering into a definitive agreement for the sale of our six inch fab in Belgium.
This transaction provides our employees with continued employment and growth opportunities, while allowing on semi to transition products to other manufacturing site in an orderly manner.
Speaker 4: employment and growth opportunities, while allowing OnSimi to transition product to other manufacturing sites in an orderly manner.
Speaker 4: by transitioning production to more efficient VAPs within our network.
By transitioning production to more efficient fabs within our network, we will eliminate fixed costs and lower unit cost, while ensuring a consistent supply of products to our customers.
Speaker 4: We'll eliminate six costs and lower unit cost while ensuring a consistent supply of products work.
Speaker 4: We expect to close this divestiture in the first quarter of 2022, and the savings will be realized over one to three years as we exit the Belgium site.
We expect to close this divestiture in the first quarter of 2022, and the savings will be realized over one to three years as we exit the Belgium site.
Turning to the results for the fourth quarter.
Speaker 4: Turning to the results for the fourth quarter, as I noted, Q4 was another quarter of record results.
As I noted Q4 was another quarter record results.
Speaker 4: Total revenue for the fourth quarter was $1.85 billion, and increase of 28% over the fourth quarter of 2020, and 6% quarter of the quarter.
<unk> revenue for the fourth quarter was $1 85 billion, an increase of 28% over the fourth quarter of 2020 and 6% quarter over quarter.
Speaker 4: The sequential increase in revenue was driven by unit shift increasing 5.7% sequentially and favorable mix in pricing across all end markets.
The sequential increase in revenue was driven by units shipped increasing five 7% sequentially and favorable mix and pricing across all end markets.
Speaker 4: Revenue from both intelligent power and intelligent sensing with that record levels, while revenue from our strategic and markets, the bottom-motivant industrial, increased sequentially 11% and 9% respectively.
Revenue from both intelligent power and intelligence <unk> sensing was at record levels, while revenue from our strategic end markets of automotive and industrial increased sequentially, 11% and 9% respectively.
Auto and industrial was 63% of total revenue as compared to 59% in the fourth quarter of 2020.
Speaker 4: Over revenue is compared to 59%. Fourth quarter of two.
Speaker 4: Turning to the business units, revenue for the Power Solutions Group or PSG was $953.4 million, and it creates a 33% year over year.
Turning to the business units revenue for the power solutions group or PSG was $953 4 million, an increase of 33% year over year.
Speaker 4: Revenue for the Advanced Solutions Group, or ASG, was $647.3 million, an increase of 24% year-over-year.
Revenue for the advanced solutions group or ISG was $647 3 million.
An increase of 24% year over year.
Revenue for intelligent sensing.
Speaker 4: Sensing Group, or ISG, for the fourth quarter with $245.4 million, an increase of $8.5 million.
<unk> group or ISG for the fourth quarter with $245 4 million, an increase of 18% year over year.
Speaker 4: Gapgros margins for the fourth quarter was 45.1% and non-Gapgros margins was 45.2%
GAAP gross margins for the fourth quarter was 45, 1% and non-GAAP gross margin was 45, 2% a three.
Speaker 4: 370 basis point improvement order over order.
370 basis point improvement quarter over quarter.
Speaker 4: The key contributors to our margin expansion have been favorable mixed shift to higher margin in strategic products, elimination of price-to-value discrepancies and report folio, and improved efficiencies in our manufacturing operation.
The key contributors to our margin expansion have been favorable mix shift to higher margin strategic products elimination of price to value discrepancies in our portfolio and improved efficiencies in our manufacturing operations.
Speaker 4: Over the last year, we have exited approximately $170 million of non-core revenue at an average gross margin of 20 percent and allocated this capacity to strategic products with a creative gross margin.
Over the last year, we have exited approximately $170 million of noncore revenue at an average gross margin of 20% and allocated this capacity strategic products with accretive gross margins.
Speaker 4: The factory utilization was 81% up slightly from the Q3 level of 80%. And we expect utilization remain approximately at this level in Q1.
Our factory utilization was 81% up slightly from the Q3 level of 80% and we expect utilization to remain approximately at this level in Q1.
Speaker 4: We also achieved record quarterly gap and non-gap operating margins of 26% and 28.6% respectively in the fourth quarter, again, achieving our long-term model.
We also achieved record quarterly GAAP and non-GAAP operating margins of 26% and 28, 6% respectively in the fourth quarter again, achieving our long term model.
Speaker 4: Gap earnings for share for the fourth quarter with 96 cents and non-gap EPS with a dollar nine per deluded share as compared to 35 cents in the fourth quarter of 2020 and 87 cents in Q3.
GAAP earnings per share for the fourth quarter with 96, and non non-GAAP EPS was $1 90 per diluted share as compared to 35 in the fourth quarter of 2020 and 87 in Q3.
Speaker 4: We're very proud of our teams for having achieved the highest ever quarterly EPS reported by the company.
We are very proud of our teams were having achieved the highest ever quarterly EPS reported by the company.
So now let me give you some additional numbers for your models.
Speaker 4: Gap operating expenses for the fourth quarter were $362 million as compared to $330 million on the fourth quarter of 2020. Non-Gap operating expenses were $306 million as compared to $292 million in the quarter
GAAP operating expenses for the fourth quarter were $352 million as compared to $330 million in the fourth quarter of 2020.
non-GAAP operating expenses were $306 million as compared to $292 million in the quarter a year ago.
Speaker 4: Variable compensation driven by our strong performance, partially offset by cost optimization measures, contributed to year-over-year-
Variable compensation driven by our strong performance, partially offset by cost optimization measures.
Attributed to year over year increase in operating expense.
We expect to maintain our non-GAAP operating expenses of approximately 17% of revenue consistent with our target model, we intend to offset the impact of wage inflation on operating expenses through higher efficiency and reallocation of resources to drive growth and margin expansion.
Speaker 4: We expect to maintain our non-gab operating expenses that approximately 17% of the revenue is consistent with our target model.
Speaker 4: We intend to offset the impact of wage inflation on operating expenses through higher efficiency and reallocation of resources.
Speaker 4: Our GAAP diluted share count was 445.3 million shares, and our non-GAAP diluted share count was 438.4 million.
Our GAAP diluted share count was $445 3 million shares and our non-GAAP diluted share count was $438 4 million.
Speaker 4: We've note that we have an updated reference table on the investor relation section of our website to assist you with calculating or to a limited share count and very sure
Please note that we have an updated reference table on the Investor Relations section of our website to assist you with calculating our diluted share count in various share price.
Speaker 4: Turning to the Q4 balance sheet, cash and cash equivalents was $1.3 billion after payment of $416 million for the GTAT acquisition in Q4.
Turning to the Q4 balance sheet cash and cash equivalents was $1 $3 billion after payment of $416 million for the <unk> acquisition in Q4.
Speaker 4: We had $1.97 billion undrawn on a revolver.
We had one we had $1 97 billion undrawn on our revolver.
Speaker 4: Cash from operations was $627 million, and free cash flow was $457 million, or approximately 25% of revenue.
Cash from operations was $627 million and free cash flow was $457 million or approximately 25% of revenue.
Speaker 4: Capital expenditures during the first quarter were 169.6 million, which equates to a capital intensity of 9%. For the full year 2021, the capital-
Capital expenditures during the.
The fourth quarter were $169 6 million, which equates to a capital intensity of 9%.
For the full year 2021 capital intensity was six 6% as.
Speaker 4: As we indicated previously, we are directing a significant portion of our capital expenditures towards enabling our 300-millimeter capabilities at the East Fish Skill Fab and the expansion of silicon carbide capacity.
As we indicated previously we are directing.
A significant portion of our capital expenditures towards enabling our 300 millimeter capability at the east Fishkill fab and the expansion of Silicon carbide capacity.
Speaker 4: This increases in line with the higher capital intensity and the near term has mentioned in our analyst.
This increase is in line with the higher capital intensity in the near term as mentioned in our analyst day.
Speaker 4: Accounts receivable was $809 million, resulting in CSO of 40 days.
Accounts receivable was $809 million, resulting in DSO of 40 days.
Speaker 4: Inventory increased $52 million sequentially to $1.4 billion. And days of inventory increased five days to 124 days.
Inventory increased $52 million sequentially to $1 $4 billion and days of inventory increased five days to 124 days increase.
Speaker 4: Increase in inventory was driven primarily by additional build of bridge inventory to support the fab trend
The increase in inventory was driven primarily by additional build a bridge inventory to support the fab transitions.
Speaker 4: Distribution inventory increased $50 million to 7.3 weeks from 6.8 weeks in Q3.
Distribution inventory increased befitting, a $50 million to $7 three weeks from six eight weeks in Q3.
Speaker 4: This slight increase was driven by timing of shipments late in the quarter. Weeks of inventory returned to Q3 levels within the first two.
This slight increase was driven by timing of shipments late in the quarter weeks of inventory returned to Q3 levels within the first two weeks in Q1.
Speaker 4: Total debt was $3.1 billion and our net leverage is now under one time.
Total debt was $3 1 billion and our net leverage is now under one time.
Turning to guidance guidance for the fourth quarter.
Speaker 4: The table detailing our GAAP and non-GAAP guidance is provided in the press release related to our fourth quarter results.
A table detailing our GAAP and non-GAAP guidance is provided in the press release related to our fourth quarter results.
Speaker 4: Let me now provide you key elements of our non-gap guidance for the fourth quarter.
Let me now provide you key elements of our non-GAAP guidance for the fourth quarter.
Speaker 4: Based on current market trends and booking levels, we believe demand will outpace supply for much of 2020.
Based on current market trends and booking levels, we believe demand will outpace supply for much of 2022.
Speaker 4: and we continue to work with our strategic customers to ensure long-term uninterrupted supply. We continue increasing.
Continue to work with our strategic customers to ensure long term uninterrupted supply.
We continue to increase supply through operational efficiencies selective investments in capacity for strategic products and by working with our external partners to obtain additional capacity.
Speaker 4: Selective investments in capacity for strategic products and by working with our external partners to attain additional capacity Based on
Yes.
Based on current bookings trends backlog levels.
Speaker 4: We anticipate that revenue for the first quarter will be in the range of $1.85 billion to $1.95 billion.
We anticipate that revenue for the first quarter will be in the range of $1 85 billion to $1 95 billion.
Speaker 4: We expect non-GAAP gross margins between 45.5% and 47.5%. This includes share-based compensation of $3.4 million.
We expect non-GAAP gross margins between 45, 5% and 47, 5%. This includes share based compensation of $3 4 million.
Speaker 4: We expect total non-GAAP operating expenses of $298 million to $313 million, including share-based compensation of $17.4 million.
We expect total non-GAAP operating expenses of 298 million to $313 million, including share based compensation of $17 4 million.
Speaker 4: We anticipate our non-GAAP OIE will be $21 to $25 million. And this results in non-GAAP earnings per share in the range of $0.98 to $1.10.
We anticipate our non-GAAP , Hawaii will be 21% to $25 million.
And this results in non-GAAP earnings per share in the range of <unk> 98 to $1 10.
Speaker 4: As we have guided in the past, our non-GAAP tax will increase starting in Q1 from our historical rate of 6% to approximately 17.5% as we have substantially utilized
As we have guided in the past our non-GAAP tax will increase starting in Q1.
Historical rate of 6% to approximately 17, 5% as we have substantially utilized our NOL attributes.
Speaker 4: This change accounts for approximately 14 cents of EPS at the midpoint of our guidance for the first quarter.
This change accounts for approximately <unk> 14 of EPS at the midpoint of our guidance for the first quarter.
Speaker 4: We expect total capital expenditures of $150 to $170 million in the first quarter.
We expect total capital expenditures of $150 million to $170 million in the first quarter.
Speaker 4: As we indicated, our analysts say our capital intensity in the near term will be higher as we ramp up silicon carbide production and dust in 300 million.
As we indicated at our analyst day, our capital intensity in the near term higher as we ramp up silicon carbide production invest in 300 millimeter capabilities.
Speaker 4: Our non-gap diluted share count for the first quarter is expected to be approximately 441 million shares.
Our non-GAAP diluted share count for the first quarter is expected to be approximately 441 million shares.
Speaker 4: As I wrap up, I'd like to shift gears to address our long.
As I wrap up I'd like to shift gears to address our long term model.
Speaker 4: Our Q4 non-gap gross margin of 45.2% exceeded our gross margin target ahead of our anticipated timeline through an acceleration of our expansion initiatives and structural
Our Q4 non-GAAP gross margin of 45, 2% exceeded our gross margin target ahead of our anticipated timeline for an acceleration of our expansion initiatives and structural changes.
Speaker 4: As such, we are raising our 2025 targeted gross margin to 48 to 50 percent, which will be primarily driven by favorable mix as we phase out of low-margin, non-core products and ramp new products in our strategic end market.
As such we are raising our 2025 targeted gross margin to 48% to 50%.
Which will be primarily driven by favorable mix as we phase out of low margin non core products and ramp new products in our strategic end markets.
Speaker 4: We'll also continue executing on our FabLighter strategy.
We will also continue executing on our fab lighter strategy to reduce our fixed cost structure and overall product cost across the portfolio as we exit subscale fabs over a multiyear period.
Speaker 4: cost structure and overall product cost across the portfolio as we exit subscale fabs over a multi-year period.
To provide a framework for this expansion, we expect 2022 gross margins in the range of 46, 5% to 47, 5% based on our visibility today.
Speaker 4: To provide a framework for this expansion, we expect 2022 gross margins in the range of 46.5% to 47.5% based on our visibility today.
Speaker 4: So our new long-term non-GAAP model is as follows. Gross margin of 48% to 50%, OPEX of 17%, and operating income of 31% to 32%.
So our new long term non-GAAP model is as follows gross margin of 48% to 50%.
Opex of 17% and operating income of 31% to 33% an increase of 300 to 500 basis point over our previous model of 28%.
Speaker 4: an increase of 300 to 500 basic points over our previous model of 28%.
Speaker 4: We believe our early success in our transformation initiative has positioned Onsemi to drive sustained and long-term revenue growth.
We believe our early success in our transformation initiatives is positioned on semi to drive sustained long term revenue growth and margin expansion.
Speaker 4: These results and outlook are only possible with the dedication of our worldwide team focused on execution and delivery of exceptional value for our customers.
These results and outlook are only possible with the dedication of our worldwide team focused on execution and delivery of exceptional value for our customers.
Speaker 4: With that, I'd like to start the Q and A. I'll turn the call back over to Rob to open the line for questions.
With that I'd like to start the Q&A I'll turn the call back over to Rob to open the line for questions.
Speaker 1: At this time, I would like to remind everyone, in order to ask a question, press star, then the number 1 on your telephone keypad. We'll pause for just a moment to compile the Q&A roster.
At this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad, we'll pause for just a moment to compile the Q&A roster.
Speaker 1: And your first question comes from a line of Ross Seymour from Deutsche Bank. Your line is open.
And your first question comes from the line of Ross Seymore from Deutsche Bank. Your line is open.
Speaker 5: Morning, guys. Thanks for letting me ask a question. Congratulations on the result.
Good morning, guys. Thanks for letting me ask a question congratulations on the results.
Speaker 5: I guess it's on the first question, Orfab, is on the revenue side. You talked a lot about the demand exceeding supply, a lot of good design wins and LTSAs, etc. I wanted to dive into the things you're walking away from. I think you said last year you got out of about $170 million of business. It seems like there's about $600 million more coming.
On the first question is on the revenue side, you talked a lot about the demand exceeding supply a lot of good design wins in L. TSA as etc. I wanted to dive into the things Youre walking away from I think you said last year, you got out of about $170 million of business. It seems like there's about 600 million more coming so I thought you gave a good outlook.
Speaker 5: So Thad, you gave a good outlook on the gross margin for the year. I know you're not going to guide revenue every quarter for this year, but I wondered how that incremental exiting process is going to hit and kind of at what pace we should be thinking that.
Gross margin for the year I know, you're not going to guide revenue every quarter for this year, but I wondered how that incremental exiting process is going to hit and kind of at what pace, we should be thinking that.
Yes, let me start with the second part of your question there.
Speaker 4: exit. We've exited 170 million in 2021. So as we look into 22, we think we will exit more of that in the second half of the year.
Exit.
Exited $170 million in 2021, so as we look into 'twenty. Two we think we will exit more of that in the second half of the year just based on the environment that we see today. So we think there is another piece, but as we've said this exit will take three three plus years to get out completely of that entire 10% to 15%.
Speaker 4: environment that we see today. So we think there's another piece, but as we've said, this exit will take three plus years to get out completely of that entire 10 to 15 percent that we said we'd exit.
Yeah.
We really think its backend loaded.
Got it thanks for the color on that and then the gross margin news I think is the news of the day, whether it was the quarter the guide or the long term model update so I just wanted to understand a little bit more deeply what was the surprise for you guys. Just conservative back in August that it wasn't that long ago, when you've already hit the target so what's going better than expected.
Speaker 5: You know, the gross margin news, I think, is the news of the day, whether it was the quarter, the guide or the long term model update. So I just wanted to understand a little bit more deeply. What was the surprise? Were you guys just conservative back in August ? It wasn't that long ago and you've already hit the target. So what's going better than expected? And I think some people might believe that there's some cyclical tailwinds that might not persist.
And I think some people might believe that theres, some cyclical tailwind that might.
Not persist I know you've seem to disagree with that but a breakdown of what surprised you and how much is structural will be helpful.
Speaker 5: I know you seem to disagree with that, but a breakdown of what surprised you and how much the structure will be helpful.
Speaker 3: Yeah, this is Hassan. Look, we had a plan. The plan happened faster than we thought. Obviously, our plan was tied to a lot of the operational efficiencies and the self-help that we've done.
Yes. This is hassan look.
We had a plan the plan happened faster than we thought obviously our plan was tied to a lot of the operational efficiencies of the self help that we've done.
Speaker 3: We were able to pull in a lot of it, given the demand environment. We were able to much faster shift to our strategic products, as you saw, auto and industrial, which for us drive a higher margin as part of the makeshift.
We were able to pull in a lot of it given the demand environment, we were able to much faster shift to our strategic products as you saw auto and industrial which for US drive a higher margin as part of the mix shift.
Speaker 3: have grown sequentially and for the year, and outpace the growth of the other markets that we are walking away from.
Have grown sequentially and for the year and outpaced the growth of the other markets that we are walking away from too.
Speaker 3: have that capacity to be able to allocate to our strategic markets.
Have that capacity to be able to allocate to our strategic markets.
Speaker 3: And of course, we've been on a trajectory of bridging.
And of course, we've been on a trajectory of bridging the <unk>.
Speaker 3: Price to value discrepancies. We've been able to close a lot of that mostly to offset our
Price to value discrepancies, we've been able to close a lot of that mostly to offset our.
Speaker 3: rise in costs. So all of these have been part of the plan, but the macro allowed us to accelerate.
Ryzen costs. So all of these have been part of the plan, but the macro allowed us to accelerate them because of the demand environment were able to walk away from business and move that capacity to a better mix shift aligned with our stated strategy. So thats what accelerated its not about concern.
Speaker 3: Because of the demand environment, we're able to walk away from business and move the capacity to a better mix shift aligned with our stated strategy.
Speaker 3: So that's what accelerated. It's not about conservative, it's about the unknown and the disruptions that we've been seeing in 2021, but the team pulled together, whether it's from improved yield that drove more units.
<unk>, it's about <unk>.
Unknown and disruptions that we've been seeing in 2021, but the team pulled together whether its from improved yield that drove more units.
Speaker 3: All of these are sustainable because the makeshift is not related to a market, you know, all markets are up, but we are choosing what to support aligned with our long-term supply agreements and those extend beyond, you know, the next few years, and that gives us the visibility and the sustainability of those results.
All of these are sustainable.
The mix shift is not related to a market all markets are up but we are choosing what to support aligned with our long term supply agreements and does extend beyond the next few years and that gives us the visibility and the sustainability of those results.
Thank you.
Okay.
Speaker 1: Your next question comes from a line of Chris Daly from Citi. Your line is open.
Our next question comes from the line of Chris Danley from Citi. Your line is open.
Speaker 6: Thanks, guys. Congrats on another good result. I guess on the gross margin guidance going forward, it looks kind of flattish for the time being. Can you just talk about the puts and the takes? What's going to be pushing those up? And then also, what's going to be keeping a lid on them? Is it material cost or something else?
Okay.
Hey, Thanks, guys. Congrats on another good results and guidance.
I guess on the gross margin guidance going forward it looks kind of flattish for the time being can you just talk about the puts and takes what's going to be pushing those are and then also what's going to be keeping a lid on them.
Zero cost or something else.
Speaker 4: Yeah, Chris, it's that there's a number of elements in there and you kind of hit on it. So we are expecting additional input costs going up. We have been successful in passing those on to the customer.
Yes, Kristen side, there's a number of elements in there and you kind of hit on it. So we are expecting additional input costs going up.
<unk> been successful in passing those on to the customers, but we do expect that happening.
Speaker 4: that happening. You know, and as Hassan said in the previous response, you know, we pulled down a lot of the acceleration of the gross margin initiatives. We think there's more here. You know, I think our biggest challenge is we've gotten a lot
<unk> said in the previous response.
Pulled out a lot of the acceleration of the.
Of that gross margin initiatives, we think theres more here.
I think our biggest challenge is we've gotten a lot of operational efficiencies here.
Speaker 4: And, you know, can we just get more throughput out of the, out of our manufacturing footprint, but, you know, we do see improvement, you know, if you look at the guidance that I put out for the year, you know.
And can we just get more throughput out of the out of our manufacturing footprint.
But we do see improvement if you look at the guidance put out for the year.
Improvement through the year, and obviously with our long term model of the 40 to 50, we don't think we're done.
Speaker 4: And obviously, with our long-term model of the 48 to 50, we don't think we're done.
Okay.
Speaker 6: Yep. And for my follow up, can you just be a little more specific on the impact and timing of the fish kill fab from a, I guess, a margin impact and the capacity impact as well. Yeah, so we take.
And for my follow up can you just spend a little more specific on the impact and timing of the fishkill fab from a I guess a margin impact from a capacity impact as well.
Yeah. So we take ownership in early 'twenty three.
Speaker 4: You know, at that time, we've had been running production in there. We'll continue to increase production in there. And then there is a period of time where we continue ramp up and global foundries ramps down. So during that time, there's a little bit of a headwind as we're providing some foundries or global foundries until we ramp up. So you can think about a little bit of a headwind for a couple of years there. But there is an orderly transition.
At that time, we have been running production in there and we will continue to increase production in there and then there is a period of time, where we continue to ramp up and Globalfoundries ramps down.
So during that time, there is a little bit of a headwind as we're providing some foundry services globalfoundries until we ramp up. So you can think about a little bit of a headwind for a couple of years there.
But there is an orderly transition between the two of them. So.
Speaker 4: So, that is all baked into our long-term plan as well, the long-term model.
That is all baked into our two.
Through our long term plan is well.
Our long term model.
Got it thanks Scott.
Speaker 1: Your next question comes from a line of Vivek Arya from Bank of America Securities. Your line is open.
Your next question comes from the line of Vivek Arya from Bank of America Securities. Your line is open.
Speaker 7: Thanks, Pradeep. My question, I find I'm curious, what's your visibility of inventory of semiconductor components at auto OEMs and Tier 1s?
Alright, Thanks for taking my question.
I'm curious, what's your visibility of inventory of semiconductor components at the auto Oems and tier ones.
Speaker 7: Just from an industry perspective, right, there still seems to be a delta between auto production and semiconductor industry shipments. Is that all a mix or pricing? Just conceptually, you know, what are you seeing out there and what is the right way to think about the sustainable content delta when we look at the automotive production improving this year?
Just from an industry perspective, great there still seems to be a desktop between auto production and semiconductor industry shipments is that all.
So pricing just conceptually what are you seeing out there and what is the right way to think about the sustainable content Delta.
When we look at the automotive production improving this year.
Speaker 3: Yeah, look, the delta is pretty straightforward. The delta between units shipped in automotive and semiconductor is purely based on the mix that our customers are building.
Yes look the Delta is.
It's pretty straightforward the delta between units shipped in automotive and semiconductor is purely based on the mix that our customers are building.
Speaker 3: When we've been throughout 2021 in a supply constraint, we remain in that same supply constraint through 2022 into 2023. So therefore, our customers are doing kind of what we're doing. They're moving production to their strategic and high value product line, which for semiconductor translate into more content.
We have been throughout 2021, and a supply constraint we remain in that same supply constrained in 2020 through 2022 into 2023.
So therefore, our customers are doing kind of what we're doing they're moving production to their strategic and high value product line, which for semiconductor translate into more content.
Speaker 3: You know, when you have premium vehicles being built, they historically, and even today, have much higher content, to the level of two to three times more content of semiconductors per vehicle.
Premium vehicles being built they historically and even today have much higher content to the level of two to three times more content of semiconductors per vehicle.
Speaker 3: That's what you see the discrepancy between the two. That's a healthy discrepancy because, you know, I've always talked about content being the biggest driver for us regardless of what the SAR does. 2021 is exactly that.
Thats, what do you see the discrepancy between the two that's a healthy discrepancy because I've always talked about content being the biggest driver for us regardless of what the SAR does 2021 is exactly that.
Speaker 3: Now, you can talk about what the long term implications of this, I don't see that being any different, you know, we've always guided automotive being much higher than SAR.
Now you can talk about what the long term implications of this I don't see that being any different we've always guided automotive being much higher than <unk> and thats related because electrification is happening <unk> seen those announcements from a lot of the Oems, where they are doubling down on the EV that drives much higher.
Speaker 3: And that's related because electrification is happening. You've seen those announcements from a lot of the OEMs where they are doubling down on EVs. That drives much higher content for us in the future than even it is today.
Content for us in the future than even it is today.
Speaker 3: Safety, you know, I talked about more and more sensing going into vehicles and that drives a lot of our cross selling as well Between you know, our sensing and our P mix
Safety I talked about more and more sensing going into vehicles and that drives a lot of our cross selling as well between our sensing and our P mix. So all of these are driving a higher growth of semiconductor than your unit growth was sorry.
Speaker 3: So all of these are driving a higher growth of semiconductor than your unit growth with SAR. So it's very reasonable of what the results are this year and what we're looking at for 2020.
So it is very reasonable of what the results are.
This year and what we're looking at for 2022, so I don't see that as just a short term thing because the macro trends extend beyond the next three years.
Speaker 3: So I don't see that as just a short-term thing, because the macro trends extend beyond the next three years.
Speaker 7: All right. And Hassan, for my follow up, also interested in your views on the silicon carbide opportunity. So you gave us a few numbers about the exit run rate and the long term agreements.
Got it.
For my follow up.
Also interested in your views on the Silicon carbide the opportunity. So you gave us a few numbers about the exit run rate in the long term agreements.
Speaker 7: You were signing and where I think investors are trying to get their arms around is we hear of a lot of big numbers and pipeline from some of your US competitors, some of the European competitors.
Mining and Wayne I think investors are trying to get their arms around is we have a lot of big numbers in pipeline from some of your U S competitors.
Some of the European competitors is this a case of just a rising tide. So there can be 456 successful suppliers.
Speaker 7: Is this the case of just a rising tide, so there can be four, five, six successful suppliers?
Speaker 7: you know, is there going to be, you know, some kind of, you know, differentiation between suppliers? Because everyone is reporting very, you know, large pipeline. So, I'm curious, what is ONS?
Is there going to be some kind of differentiation between our.
Surprised because everyone is reporting very large pipeline. So I'm curious what is the <unk> differentiation and does it change your long term.
Speaker 7: differentiation, and does it change your long-term capex forecast? I saw that you updated the margin forecast, but you kept the free cash flow forecast the same. Thank you.
Capex forecast because I saw that you updated the margin forecast, but you've got free cash flow forecast the same thank you.
Speaker 3: So let me just, I want to highlight some difference between what I talk about and what some of my peers talk about. I didn't, I don't talk about.
Let me just I want to highlight some of the difference between what I talk about and what someone might peers talk about I didn't I don't talk about funnel or pipeline I'm talking about committed revenue, which is the output of the funnel fully yielded committed revenue is what I label that that is more certain and more visibility then.
Speaker 3: funnel or pipeline. I'm talking about committed revenue, which is the output of the funnel fully yielded committed revenue is what I labeled it.
Speaker 3: more certain and more visibility than, you know, the game of big numbers of funnel disclosures. I don't disclose funnel or pipeline or whatever we want to label it.
The game of big numbers of funnel disclosures I don't want I don't disclose funnel or pipeline or whatever we want to label. It. So the comments on the numbers. The big numbers I gave are committed revenue under <unk> that we are building our supply chain in order to service.
Speaker 3: So the comments on the numbers, the big numbers I gave, are committed revenue under LTSAs that we are building our supply chain in order to service.
Speaker 3: Starting at, you know, we exited 2021, and said we're going to be more than doubling in 2022. That's where the committed revenue comes in. Now as far as
Starting we exited 2021 and I said, we're going to be more than doubling in 2022, if that's where the the committed revenue comes in now as far as.
Speaker 3: what that's going to look like in the industry. Look, there's a lot of demand out there, a lot of investments from our customers going into the
What that's going to look like in the industry look there's there's a lot of demand out there a lot of investments from our customers going into the silicon carbide.
Speaker 3: silicon carbide for electric vehicles. Is it going to be six players or so? I don't know. I know we're gonna be in the top based on our investment and based on the results of our technology performance on efficiency, but also more importantly, the supply assurance that we're able to give our customers. When you wanna double the revenue and your flagship customers are depending on,
Electric vehicles is it going to be six players or so I don't know I know, we're going to be in the top based on our investment and based on the results of our technology.
Technology performance on efficiency, but also more importantly, the supply assurance that we're able to give our customers. When you want to double our revenue in your flagship customers are depending on you know having supply assurance and controlling <unk>.
Speaker 3: Having supply assurance and controlling bulls all the way to wafers is a competitive advantage and not a lot can claim that. And I'm happy that we have closed the GTAT and we're performing very well. We're going to be expanding the GTAT capability throughout 2022 in order to support those committed revenue that I mentioned.
Pools, all the way to wafers as a competitive advantage and not a lot can can claim that and I'm happy that we have closed the <unk> and we're performing very well, we're going to be expanding the GTR capability throughout 2022 in order to support those committed revenue that I mentioned.
Thank you.
Speaker 1: Your next question comes from a line of Toshihari from Goldman Sachs. Your line is open.
Your next question comes from the line of <unk> Hari from Goldman Sachs. Your line is open.
Speaker 8: Hi, good morning. Thank you for taking the question, and congrats on the strong results. I had two as well. Curious how you're thinking about full year 22 revenue growth at this point. I think three months ago, you had guided us to think about 22 as a year where you guys undergrow the market, just given some of the dynamics that are ongoing from a portfolio optimization standpoint. Is that still the case? And I ask the question because you guys talked about, obviously, the strong design wind funnel, the improving supply backdrop. And if we take the midpoint of your Q1 guidance, Q1 revenue is going to be up 28%. So, curious how you're thinking about the full year.
Hi, Good morning, Thank you for taking the question and congrats on the strong results.
Two as well.
Curious how youre thinking about full year 22 revenue growth at this point I think three months ago, you had guided us to think about 'twenty. Two is a year, where you guys under grow.
The market just given some of the dynamics that are ongoing from a from a portfolio optimization standpoint is that still the case and I ask the question because you guys talked about obviously the strong design win funnel, the improving supply backdrop and if we take the midpoint of your Q1 guidance.
Q1 revenue is it going to be up 28%. So curious how you're thinking about the full year.
Yes toshi.
Speaker 4: Yeah, so she, uh, you know, we don't guide for the whole year. I'll give you a little bit of.
For the full year I will give me a little bit of a framework to work on though.
Speaker 4: One of the previous calls or answers, uh, questions was run around the, uh,
One of the previous calls or answers questions was run around the exit in the business that I said, we'd be back half loaded.
Speaker 4: that I said would be back half loaded. I think when we look at the full year, taking that into consideration, we're probably growing around market maybe slightly above.
I think when we look at the full year.
Taking that into consideration, we're probably growing around market maybe slightly above.
Got it that's helpful and then as my follow up.
Speaker 4: Got it. That's helpful. And then as my follow-up on that last point, Saad, the $500 million or so in revenue that you'll be exiting, I guess, over the next couple of years, how should we think about the gross margin profile on that part of the business? I think the $170 million that you've already exited, you talked about a 20% gross margin profile. Should we be thinking about a higher gross margin profile given the strong market backdrop? Thanks. Yeah, it is today. You know, last quarter we talked about...
On that last point side, the $500 million or so in revenue that you'll be exiting I guess over the next.
A couple of years, how should we think about the gross margin profile on that on that part of part of the business I think the 170 that you've already exited you talked about a 20% gross margin profile.
Should we be thinking about a higher gross margin profile given the given the strong market backdrop. Thanks, yes. It is.
Today.
Last quarter, we talked about the $100 million that we exited it was 15% now that's up to 170 at a combined gross margin of 20%. So if you think about that incremental 70, it's about a 25% gross margin today. So the next piece that we're going to walk away from is in that range or slightly higher but the challenges.
Speaker 5: Now, that's up to 170 at a combined.
Speaker 5: 20%. So if you think about that incremental 70, you know, it's about a 25% gross margin today. So the next piece that we're going to walk away from is, you know, in that range, the slightly higher, but the challenge is when the market comes back, that's, you know, that's the margin that's going to drop fast.
When the market comes back.
The margin in this kind of drop fast if we continue to maintain that so as we exit that will we'll see.
Speaker 4: that. So as we exit that, we'll swap that out for more creative margins. But today, yeah, it's slightly ahead of or slightly above that 25% that I just talked about.
The swap that out for more accretive margins, but today, yes, it's slightly ahead of or slightly above that 25%.
I just talked about.
Got it thank you.
Speaker 1: Your next question comes from a line of Matt Ramsey from Cowan. Your line is open.
Your next question comes from the line of Matt Ramsay from Cowen Your line is open.
Speaker 9: Hey, guys, this is Josh Buchalter on behalf of Matt. Thanks for taking my question and congrats on the results. In the prepared remarks you gave some helpful color on the unit growth. I was wondering, as we think about the margins, is there anything you can give us that helps us understand how much is being lifted by pricing versus the mixed shifts that you previously outlined? And when I asked about pricing, I mean for the overall market. Thank you.
Hey, guys. This is Josh buchalter on behalf of Matt.
Thanks for taking my question and congrats on the results.
In the prepared remarks, you gave some helpful color on the unit growth I was wondering as we think about the margins.
Is there anything you can give us to help us understand.
How much is being lifted by pricing versus the mix shifts that you previously outlined and I asked our pricing I mean for the overall market.
Speaker 4: Yeah, so in our prepared remarks, we really kind of broke it down into favorable mix pricing and manufacturing optimization in terms of
Yes, so in our prepared remarks, we really kind of broke it down into favorable mix.
Pricing and manufacturing optimization in terms of just getting more out and increasing our.
Speaker 5: reduce our manufacturing costs. That's really the Pareto if you think about the
<unk> reduce our manufacturing costs.
It's really the perino, if you think about the.
Speaker 4: of what is driving the gross margin improvement and that's what we can.
Sequence of what is driving the gross margin improvement and that's what we continue to see as we go forward. We think the favorable mix as we swap out of this low margin non core business, we focus more on auto and industrial which drives a higher gross margin.
Speaker 4: favorable mix as we swap out of this low-margin, non-core business. We focus more on auto and industrial, which drive the higher...
Speaker 4: That's the primary driver of gross margin expansion and obviously the manufacturing footprint going forward will be
That's the primary driver of gross margin expansion and obviously the manufacturing footprint going forward will be the next piece.
Speaker 9: That's helpful, thank you. And then within your silicon carbide business, the size of your design winds continue to come in very strong. I was wondering, within your broader high-voltage portfolio, are you also seeing share gains in your IGBTs, which have typically been dominated by some of your peers over in Europe and Asia? Thank you.
That's helpful. Thank you and then.
Within your Silicon carbide business that the size of your design wins continue to come in.
Very strong.
I was wondering within your broader high voltage portfolio are you also seeing share gains in your Igt's, which have typically been dominated by some of your peers over in Europe and Asia. Thank you.
Speaker 3: Yeah, this is Hassan. The answer is yes, we are seeing an uptick. Obviously, the LTSA is a long-term supply agreement that I mentioned focusing on
Yes. This is a sudden and the answer is yes, we are seeing an uptick obviously the lts as a long term supply agreement that I mentioned focusing on.
Speaker 3: silicon carbide. We do have long-term supply agreements for IGBT. Those are net increases from our baseline. Therefore, I would consider those share gains away from some of our peers that have dominated.
Silicon carbide, we do have long term supply agreements or <unk>. Those are net increases from our baseline. Therefore, I would consider those share gains away from some of our peers that have dominated.
Speaker 3: that market. So we do see the uptick in both in our LTSAs, so you can think about it as ramping as well over the next few years into those LTSAs.
That market so.
We do see the uptick in both.
And our <unk>. So you can think about it as ramping as well over the next few years into those <unk>.
Thanks, guys Congrats again.
Speaker 1: Your next question comes from a line of Harsh Kumar from Piper Stanler. Your line is open.
Your next question comes from the line of harsh Kumar from Piper Sandler Your line is open.
Speaker 10: Hey, guys. First of all, congratulations on a very stunning turnaround. Hassan, you've gotten pretty deep into the silicon carbide market, making the acquisition of GTAC. I was curious, with now, you know, the emphasis on silicon carbide on for, call it, six to nine months to a year, have there been any surprises, whether good ones or bad ones? I'd be curious about your color on it.
Hey, guys first of all congratulations on a very stunning turnaround.
<unk> gotten pretty deep into the silicon carbide market, making making the acquisition of <unk> I was curious with now you know.
The emphasis on silicon carbide on for call. It six to nine months to a year have there been any surprises whether good ones are bad ones I'd be curious about your color on it.
Speaker 3: Look, there have been surprises. I would say the surprises are on the positive side.
Look there have been surprises I would say the surprises on the positive side you know.
Speaker 3: You know, if you recall back in my first earnings, I was very bullish on the company's capabilities on silicon carbide, which I called a favorable surprise walking in the door. That remains.
If you recall back in my first.
Earnings I was very bullish on the company's capabilities on silicon carbide, which I called a favorable surprise walking in the door.
That remains and I would say the positive surprises number one our capabilities into quickly getting to the 200 millimeter with the <unk> acquisition closing, the <unk> acquisition and solidifying our baseline.
Speaker 3: And I would say the positive surprises, number one, are capabilities into quickly getting to the 200 millimeter with the GTAS acquisition, closing the GTAS acquisition, and solidifying our baseline.
Speaker 3: you know, full-on silicon carbide providers to our customer, and more importantly, a very competitive roadmap, not just of what we're providing today, but the customer's reaction to our roadmap conversations that we've had for the next, you know, five years or so. All of these have been very favorable. That gets me very bullish about our silicon carbide, and that's the reason, in all honesty, our strategy is to double down on it.
Uh huh.
Well on silicon carbide providers to our customer and more importantly, a very.
<unk> roadmap not just of what we're providing today, but the customer's reaction to our roadmap conversations that we've had for the next five years or so all of these have been very favorable that gets me very bullish about our silicon carbide and Thats. The reason in all honesty, our strategy is to double down on it.
Speaker 3: both from a technology development site and you heard me talk about the aggressive ramp that we've we're doing in 2022 in order to support that doubling every year of our silicon carbide revenue.
Both from a technology development site and you heard me talk about the aggressive ramp that we've.
We're doing in 2022 in order to support that doubling every year of our silicon carbide revenue starting with the quadrupling of the <unk>.
Speaker 3: starting with quadrupling of the GTAT capabilities exiting 2022.
<unk> capabilities exiting 2022, all of these are I would say positive developments.
Speaker 3: All of these are, I would say, positive developments.
Speaker 3: This is where our investment is coming in, and I remain very bullish on our capabilities and the outlook of our silicon carbide.
This is where our investment is coming in and I remain very bullish on our capabilities and the outlook of our silicon carbide business.
Speaker 10: Great. Thanks, Estan. And then, as you look at some of the changes you guys have made structurally to the on business, you know, getting into silicon carbide, getting into focusing on some new areas that are high growth, how should we think, not the near term or the midterm, but the longer term growth rate of the company, how should we think about that as maybe, you know, industry growth rate plus X percentage, what would that number be?
Great. Thanks, Sean and then as you look at some of the changes you guys have made structurally to the to the <unk> business.
Getting into silicon carbide by getting into focusing on some new areas at a high growth how should we think not the near term or the midterm, but the longer term growth rate of the company. How should we think about that as maybe you know industry growth rate plus X percentage, what would that number be.
Speaker 3: We're talking about, you know, you can think about it over the long term about 2x of the industry given the content gains that we're getting, but also being, you know, over the next few years, moving more and more towards the megatrends that are driving the.
No. We're talking about you know you can think about it over a long term about <unk> of the industry given the content.
Gains that we're getting but also be in over the next few years moving more and more towards the mega trends that are driving the content like Evs and Adas. All of these are going to drive our <unk> market growth over.
Speaker 3: like EVs and ADAS. All of these are going to drive our 2x market growth over the longer term as we exit some of those businesses that Thad just talked about.
The longer term as we exit some of those businesses that we just talked about but more importantly, it's not just the <unk>. There's a lot more also investment in content growth in the alternative energy business, where I talked about we are seeing a 50% growth in 'twenty two that is going to remain over a multiyear period all of those.
Speaker 3: But more importantly, it's not just the EV, there's a lot more also investment and content growth in the alternative energy business, where I talked about, you know, we are seeing 50% growth in 22, that's going to remain over a multi-year period.
Speaker 3: All of those are net revenue increases for us because they're new markets.
Those are net revenue increases for us because they're new markets. So that's going to keep fueling that growth. So you can see it both on the automotive and industrial.
Speaker 3: So that's gonna keep fueling that growth. So you can see it both on the automotive and industrial, and of course the cloud business where that investment is gonna keep going. So all of these are gonna fuel our growth because of our exposure to those megatrends.
And of course, the cloud business, where that investment is going to keep going so all of these are going to fuel our growth because of our exposure to those mega trends.
Thanks, guys congratulations again.
Speaker 1: Your next question comes from a line of Vijay Rakesh from Mizzou. Your line is open.
Your next question comes from a line of Vijay Rakesh from Mizuho. Your line is open.
Speaker 11: Yeah, I have found that a great quadrant and solid margins. Just a quick question on the silicon carbide side. I know you mentioned 2.6 billion in basically committed revenue. Just wondering how that trans, how that should, what should be the.
Yeah, Hi, Hassan, it's had a great quarter and guidance type margins.
Just a quick question on the Silicon carbide side I know you mentioned.
$2 6 billion in.
And basically committed revenue just wondering how that trends.
That should what should be the.
Speaker 11: contribution for 2022 from that. I know you said a billion a year, but is that what would be incremental to 2022? And if you can give some margin profile on that business as well.
Contribution for 2022 from that I know, you said 1 billion a year, but is that being.
It would be incremental to 2022 and.
If you can give some margin profile on that business is to us.
Speaker 12: Yeah, so where I didn't I'm not guiding the silicon carbide in 22 other than saying it's going to more than double from
Yes, so I didn't I'm not guiding the silicon carbide in 'twenty, two other than saying, it's going to more than double from 2021, as we ramp the existing customers. We have in 2021, plus layering on top of that the <unk> that start in 2022 and goes through.
Speaker 13: as we ramp the existing customers we have in 2021, plus layering on top of that the LTSAs that start in 2022 and go through 2024. So we have a multi-year visibility on our silicon carbide LTSAs that will get us to exiting 23 with the billion dollar run rate.
2024, so we have a multiyear visibility on our silicon carbide <unk> that will get us to exiting 'twenty three with the $1 billion run rate.
Speaker 14: That foundation is ramping, we have started ramping, we'll be ramping heavily in the second half of 2022, and that's for the full year, it will be more than 2x what it was in 2020.
That foundation is ramping we have started ramping will be ramping in the heavily in the second half of 'twenty two and that's for the full year it will be more than <unk>, what it was in 2021.
Speaker 15: For margin profile, obviously that margin profile as we ramp into our CapEx expansion is going to be accretive.
For margin profile, obviously that margin profile as we ramp into our capex expansion is going to be accretive.
Speaker 16: Today, obviously, there's the ramp-up cost, and I just want to make sure that you guys understand our margin profile and our margin guide is fully loaded, meaning it includes all of our start-up costs for silicon carbide, so that gives you kind of the equative nature of our silicon carbide over a long time.
Today, obviously, there is the ramp up cost.
And I just want to make sure that you guys understand our margin profile and our margin guide is fully loaded meeting and includes all of our.
Startup costs for Silicon carbide, so that gives you Canada.
Creatives nature of our silicon carbide over a long time.
Speaker 17: Yeah, just to be clear, so in the short term, the silicon carbide ramp is diluted to margins because we have to start.
Yes, just to be clear so in the short term the silicon carbide ramp is dilutive to margins because we have the startup costs, but over over the long term it is accretive to our corporate average.
Speaker 18: Got it. And just on the GTAT side, obviously, very good to see you guys are pivoting to that. It's obviously EV and silicon carbide are huge markets. And you're quadrupling the capacity there. But can you give us some color on how that translates, the quadrupling of silicon carbide capacity, how that translates to your silicon carbide wafer capacity, or how much of your revenue will be addressed internally with that quadrupling?
Got it and just on the <unk> side obviously.
Very good to see you guys have pivoting to that obviously, we are in silicon carbide is a huge market.
And quadrupling the capacity there, but can you give us some color on how that translates to quadrupling of silicon carbide capacity, how that translates to you.
Silicon carbide wafer capacity or how much of your revenue will be addressed internally with debt quadrupling. Thanks, that's it.
Speaker 19: Yeah, our intent to have a majority of our demand supported by our internal capability. Obviously, we are also partnered, we have outside sources that we are able to flex capacity during a, you know, bumps in ramp. But if you think about the quadrupling of our output from GTAD by the end of 22, you can think about it as putting that infrastructure for the supply over the next few years.
Yes, our intent to have a majority of our demand supported by our internal capability. Obviously, we are also partnering we have outside sources that we are able to flex capacity during a <unk>.
Bumps and ramp, but if you think about the quadrupling of our output from GE that by the end of 'twenty. Two you can think about it as putting that infrastructure for the supply over the next few years I.
Speaker 20: You know, I talked about more than doubling in 22. We're going to double again from that by in 23. As I mentioned in my prepared remarks this quarter and last quarter, that's what's going to be supported by the GTAT. But today, we do have still a mix. But as we ramp up the GTAT capability, and really the capacity expansion I talked about, is moving more and more of our substrate internal.
I talked about more than doubling in 'twenty, two we're going to double again from that by in 'twenty three as I mentioned in my prepared remarks, this quarter and last quarter.
That's what's going to be supported by the Jeep that but today, we do have still a mix, but our as we ramp up the <unk> capability and really the capacity expansion I talked about is moving more and more of our substrate.
Substrate internal.
Got it thank.
Speaker 21: Your next question comes from a line of Chris Caso from Raymond James. Your line is open.
Your next question comes from the line of Chris Caso from Raymond James Your line is open.
Speaker 22: Yes, thank you. Good morning. Just a question on pricing and what's been happening there, and I guess there's two elements of pricing, you know, ASP increases because of the makeshift, and then, you know, pricing on individual products. Can you speak about how much of a tailwind that's been and where you see that going as you go into 2022?
Yes. Thank you good morning, just a question on pricing.
Whats been happening there and I guess theres two elements of pricing.
ASP increases because of the mix shift and then.
Pricing on individual products.
Speak about how much of a tailwind that's been and where you see that is going as we go into 2022.
Speaker 23: Yeah, so if you look at 2022, it's going to be a majority of a mixed shift. You know, most of the price or cost increases that we're incurring, we're absorbing through yield improvement or operational efficiency.
Yes.
If you look at.
2022 is going to be majority of a mix shift you know most of the price or cost increases that we're incurring we're absorbing.
Through yield improvement of our operational efficiencies.
Speaker 24: So that's going to be minimal, but the primary driver is going to be a mixed shift based on really the new baseline that we've achieved exiting Q4. That new mixed shift is going to keep and maintain the margin profile that we have on our product. And of course, it's going to keep sustaining based on that mixed shift we're going to be shipping given the profile we know already in 2022 being fully booked.
So that that's going to be minimal, but the primary driver is going to be a mix shift based on really the new baseline that we've achieved exiting Q4 that you mix shift is going to keep and maintain the margin profile that we have on our product and of course, it's going to keep.
Sustaining based on that mix shift.
Sure.
Going to be shipping given the profile, we know already in 2020 to be in fully fully booked.
Speaker 25: So that on the gross margin, you know, the value, price to value discrepancies we've seen.
So that on the on the gross margin the value price to value discrepancies we've seen.
Speaker 26: A couple of points I'll make, in the strategic markets that is sustainable, that's the value of our products that we have in the baseline today.
A points I'll make and the strategic markets that is sustainable that's a new that's the value of our products that we have in the baseline today. The only I guess pricing actions that we will not be sustainable isn't that noncore business that <unk> talked about that will be exiting as the supply comes online from some of our peers.
Speaker 27: The only, I guess, pricing actions that will not be sustainable is in that non-core business that Sat talked about that we'll be exiting as the supply comes online from some of our peers. We're not going to chase that price down.
Not going to chase that price down.
Speaker 28: Today, it's more favorable than it has been historically still dilutive, but more favorable But we don't plan on maintaining that business will be exiting that so that price that portion of that business where price I don't see that as being sustainable It's not going to be a drag on margin because we plan on exiting and that's all part of the guide that I talked about
It's more favorable than it has been historically still dilutive, but more favorable but we don't plan on maintaining that business will be exiting that so that price that portion of that business, where price I don't see that as being sustainable is not going to be a drag on margin because we plan on exiting and Thats all part of the guide that I talked to.
Speaker 29: Everything that remains with our profile and our makeshift is what I would call sustainable.
Bob.
Everything that remains with our profile and our mix shift is what I would call sustainable profile, that's where.
Speaker 30: profile, and that's where you can expect our forward-looking mixed
Our forward looking mixed to be.
Speaker 31: Got it. Helpful. Thank you. So for a follow-up question, if you could give us some numbers around the Belgium fab sale, what's the cost and margin impact on that over time? And when does some of those benefits start layering?
Got it helpful.
Thank you for a follow up question.
If you could give us some numbers around the Belgium fab sale.
What's the cost and margin impacts of that over time.
And when does when do some of those benefits start layering in.
Speaker 32: Yeah, so we won't. This is bad. We won't see the benefit until we fully exit the fab. So as I said, it'll take one to three years. When we're totally out of that fab, you can think about about $25 million of annualized fixed costs coming off.
Yes. So we won't this is that we won't see the benefit until we fully exit the fab so as I said it.
We will take one to three years.
We're totally out of the fab you can think about about $25 million annualized fixed costs coming off the company.
In the short term, when the fire takes over that fab, we'll basically be paying the equivalent cost of what we have today, but as we exit, you'll see a benefit over that time frame.
In the short term when the buyer takes over that fab will basically paying the equivalent cost of what we have today, but as we exit youll see a benefit over that timeframe over that time period.
Got it thank you.
Your next question comes from the line of John Pitzer from Credit Suisse. Your line is open.
Your next question comes from the line of John Pitzer from Credit Suisse. Your line is open.
Yeah, good morning guys. Thanks for letting me ask questions. Congratulations on the solid results that just going back to channel inventory. You said it's back to 6 to 8 weeks after a kind of a pop on linearity at the end of the 4th quarter. Can you help us understand what's a normalized level that you guys are thinking about and how long it might get take to get back to that normalized level? Yeah, so today.
Yes. Good morning, guys. Thanks for let me ask questions. Congratulations on the solid results just going back to channel inventory you said, it's back to six to eight weeks after a kind of a pop on linearity at the end of the fourth quarter can you help us understand what's a normalized level that you guys are thinking about and how long it might take to get back to that normalized level.
Yeah. So today, we think about normalized level has kind of been in that 6% to seven week.
six to seven week range given the supply constraints. As you know, we're holding inventory on our balance sheet rather.
Range given the supply constraints as you know, we're holding inventory on our balance sheet, rather than shipping into the channel and we're making sure that.
channel. We're making sure that this inventory is going to our strategic customers. We're allocating an appropriate
Inventory is going to our strategic customers, we're allocating appropriately whether it's through the channel or whether it's direct by holding that inventory, we can control where it goes so in the short term I think we popped up to seven three from six eight I think thats kind of the normal range of what we're going to be looking at probably for the remainder of this year.
By holding that inventory, we can control where it goes. So in the short term, I think, you know, we popped up to seven.
You know, I think that's kind of the normal range of what we're going to be looking at probably for.
I think when you look further out there, we're probably looking at something around 10 weeks, plus or minus.
I think when you look further out there.
Looking something around 10 weeks.
Plus or minus I think is what we'll be doing I mean, obviously, we've got to see where this market.
I mean, obviously, we've got to see where this market, you know, kind of shakes out and when we would do that. But I think for the foreseeable future, it's six to seven.
Kind of shakes out and when we would do that but I think for the foreseeable future in six to seven weeks.
Got it. And then I also thought I heard you say that unit volume.
Got it and then that I also thought I heard you say that that unit volumes drove most of the sequential growth in the December quarter. One is that true and if it is I'm just kind of curious if you can help us walk through kind of the incremental margin leverage and what drove that delay because by my math the eggs.
drove most of the sequential growth in the December quarter. One, is that true? And if it is, I'm just kind of curious if you can help us walk through kind of the incremental margin leverage and what drove that successfully. Because by my math, the exiting of the businesses only gave you about 70 bips. It sounds like most of it was unit driven. I know that utilization was up. Can you just help me kind of square that circle?
Sitting of the businesses only gave me about 70 bps. It sounds like most of it was unit driven I know that utilization was up.
Can you just help me kind of square that circle, a little bit.
Yeah, so revenue was up 6%, units were up 5.7%. So you're right, so the top end revenue came from additional units being shipped primarily. And then obviously a mixed shift into higher margin. So when you think about the gross margin improvement sequentially, it is more favorable shift into the strategic markets.
Yeah. So we revenue was up 6% units were up five 7%. So you are right. So that the top end revenue came from additional units being shipped primarily and then and then obviously a mix shift into higher margin. So when you think about the gross margin improvement sequentially. It is more shifts into the.
The more favorable shift into the strategic markets.
We did get operational efficiencies, which is reducing our manufacturing cost as well and then as I said there is a slight pricing increase as well is that we're seeing kind of in the market as we're passing on additional cost to our customers that we've been seeing.
in our manufacturing cost as well. And then as I said, there's a slight pricing increase as well as that we're seeing kind of in the market as we're passing on additional costs.
You can think about it, the auto and industrial, where that was a recipient of the mix shift that we have from the non-core, the business that we exited, that also drives just a higher ASP also, just because of the market mix, and that's why we favor those markets from a strategy perspective.
Hey, John This is Tom.
Think about it the auto the auto and industrial where that was the recipient of the mix shift that we have from the non core.
The business that we exited that also drives adjust to higher ASP also just because of the market mix and Thats why we favor those markets from a strategy perspective.
So and then it's on a unit at a higher ASP.
That's helpful. And then if I could just sneak one in on the silicon carbide market, when you talk about longer term.
That's helpful and then if I could just sneak one in on the Silicon carbide market. When you talk about longer term this being accretive to your model I'm just kind of curious how youre thinking about kind of the global capacity for silicon carbide wafers versus kind of the incremental value add that your IP can bring to bear.
this being accretive to your model. I'm just kind of curious, how are you thinking about kind of the global capacity for silicon carbide wafers versus kind of the incremental value add that your IP can bring to bear? You know, to what extent are you gonna be sort of a prisoner to global supply and demand where we have to figure out kind of a CapEx model and to what extent are you not gonna be prisoner to that because you bring something unique to the table?
To what extent are you going to be sort of a prisoner to global supply demand, where we have to figure out kind of a capex model and to what extent are.
Are you not going to be presented to that because you bring something unique to the table.
Yeah, look, I've always said that nobody wins because you have material.
Yeah look we I've always said nobody wins, because you have a material nobody wins, because you have you have supply assurance, which makes everybody comfortable in our competitive advantages, but what you win is the efficiency of your products. That's how customers look at it nobody's gonna taken infill.
Nobody wins because you have supply assurance, which makes everybody comfortable and a competitive advantage.
But what you win is the efficiency of your products. That's how customers look at it. Nobody's gonna take an inferior product for a flagship EV that they're ramping just because you have supply.
Are you a product for our flagship <unk>, they're ramping just because you have supply, but they will select the supplier.
But they will select the supplier, which they have selected us because of our product performance, our roadmap. And they will get more comfortable and more bullish, just like I am, when we have the supply assurance to support their ramp.
They have selected us because of our product performance, our roadmap and they will get more comfortable and more bullish just like I am when we have the supply assurance to support their ramp.
That's what's going to be kind of the landscape moving forward. So having our supply and the assurance of supply and really controlling our fate with the substrate through the acquisition that we closed gives us that baseline that we are able to ramp from.
That's what's going to be kind of the landscape moving forward, so having a our supply and assurance of supply and really controlling our fate with with the substrate to the G. I.
The acquisition that we closed gives us that baseline that we are able to ramp from.
But we remain winning based on efficiency of our products and the aggressiveness of our roadmap.
But we remain winning based on efficiency of our products and the aggressiveness of our roadmap.
Thanks, guys.
Your next question comes from the line of Christopher Rowland from Susquehanna. Your line is open.
Your next question comes from the line of Christopher Rolland from Susquehanna. Your line is open.
Thanks guys. Congrats and congrats on that gross margin guide in particular.
Thanks, guys. Congrats on congrats on that gross margin guide to hop in particular.
I guess my first question for either of you guys, the LTSAs, I think I missed maybe some of the details there, but if you could describe kind of what percentage of revenue falls under LTSAs today, and then looking out to 2025, I mean, we know what you guys did with LTSAs at Cypress, but, you know, what are your plans for, you know, what percentage of revenue by call at 2025 might be under LTSA?
I guess my first question for either of you guys. The TSA as I think I missed maybe some of the details there, but if you could describe kind of what percentage of revenue falls under L. TSA is today and then looking out to 2025 I mean, we know what what you guys did with.
L TSA cypress, but.
You know what what are your plans for you know.
What percentage of revenue by call. It 2025 might be under L. T S. A.
Yeah, look, I'm not giving percent covered in LTSA. I can tell you in 2022, we're sold out.
Yes look.
Not giving a percent covered in lts say I can tell you in 2022.
We're sold out.
We are fully booked.
Anything incremental we get is going to come from efficiency that we get through the year in units that we're able to ship. So 2022, that's how you can think about it. 2023, our LTSAs that I keep referring to, extend through 2024. Our focus on LTSA is on strategic, and obviously there's always the net loss that we're talking about, the 10-15% that we're... Obviously, that's not under LTSA.
Anything incremental we get is going to come from.
Efficiency that we get through the year.
It's that we're able to ship so 2022 kind of that's how you can think about it.
2023, or <unk> that I keep referring to extend through 2024, our focus on <unk> on strategic and obviously there is always that the net loss that we're talking about the 10% to 50% that were obviously, that's not under TSA, we're going to be replacing that with an aggressive new product ramp.
So I'm not I'm not talking about percent under LTSA, but I can tell you the visibility is higher than it's ever been in the company
So I'm not I'm not talking about percent under PSA, but I can tell you the visibility is higher than it's ever been in the company and it doesn't it extent much beyond 2022.
Thanks, Asfan. And then for my second question, the exited business that you guys did, I think you said $170 million at 20% gross margin. I was wondering how much of that might be left? And then secondly, if a downturn were to occur and you guys needed to still fill your fabs, could you re-engage successfully with those accounts, or do you think that ship has sailed?
Thanks Hassan and then for my second question the exited business that you guys did.
You said $170 million at 20% gross margin was wondering.
How much of that might be left and then secondly, if a downturn were to occur and you guys needed to still fill failure Fabs could you reengage successfully with those accounts or do you think that ship has sailed.
No look I'll answer the second part is thats important pillar of the strategy. The answer is we're not going to chase after it because think about it this way if there is a market downturn.
No, look, I'll answer the second part because that's an important pillar of the strategy. The answer is we're not going to chase after it. Think about it this way. If there is a market downturn...
That business is highly dilutive. I mean, you can think about the 15% to 25% margin today. That's in a favorable pricing environment.
Does that business is highly dilutive I mean, you can think about the 15% to 25% margin today destiny favorable pricing environment.
So you can imagine in a down market, that revenue or that margin is way worse than it is now at that 20%. So the answer is we're not going to chase after it. Strategically, we are walking away from it regardless of what the market does.
You can imagine is in a <unk>.
Down market that revenue or that margin is way worse than it is now at that 20%. So the answer is we're not going to chase after it strategically.
Strategically we are walking away from it regardless of what the market does what.
What we are doing in the meantime to make sure that our is our manufacturing optimization is as we're exiting those we are resizing our manufacturing footprint in order to prevent under loading that historically has played.
What we are doing in the meantime to make sure that our is our manufacturing optimization is as we're exiting those we are sizing our manufacturing footprint in order to prevent under loading that historically has plagued the company. So thats going to give us that sustainable margin that we are delivering.
So that's going to give us that sustainable margin that we are delivering. So even in a downturn, we're not gonna get the drag from gross margin because of mix. We're gonna be in a favorable mix regardless of what the market does from a margin perspective. And we are working on our manufacturing optimization like I talked about with the Belgium fab and then ramping up the East Fishkill where we have scale fab through our fab lighter strategy in order to sustain that and prevent underwriting.
So even in a downturn, we're not going to get the drag from gross margin because of mix.
Gonna be favorable mix, regardless of what the market does from a margin perspective, and we are working on our manufacturing optimization like I talked about with the Belgian fab and then ramping of the east Fishkill, where we have scale fab through our fab light or strategy in order to sustain that and prevent under loaded.
So we're not going to run after bad business no matter what the market does. That's strategically our direction.
So we're not going to run after bad business.
No matter, what the market does that strategically our direction.
Thanks Hassan.
Yes.
Your next question comes from the line of William Steen from Truist Securities. Your line is open.
Your next question comes from the line of William <unk> from <unk> Securities. Your line is open.
Great. Thanks for taking my question. I'll add my congratulations on the great results and outlook. I'm wondering if you can dig a little bit more into the LTSA's just asked about, but specifically, do these look like sort of committed volume?
Great. Thanks for taking my question I'll add my congratulations on the great results and outlook.
I'm wondering if you can.
Dig a little bit more into the <unk> just asked about.
But specifically <unk> look like.
Sort of committed volume where specific orders are allocated as the.
specific orders are allocated as the demand becomes more clear, in other words, sort of just volume commitments, or are these more like hard purchase orders placed in sort of a blanket fashion?
The demand becomes more clear.
The words sort of just volume commitments or are these more like hard.
<unk> orders placed in sort of a blanket fashion.
So, I'll answer, if I understood the question correctly, the LTSAs are committed both volume and pricing.
So.
I'll answer if I understood. The question correctly, the <unk> are committed both volume and pricing.
That gives us the visibility, and they're committed on mixed, so it's not a blanket LTSA of some revenue number.
That gives us the visibility and they're committed on mix. So it's not a blanket PSA of some revenue number is.
Associated to a mix because that's what we're using in order to decide on where to expand our capacity Which is purely on our strategic products. What we don't want is just a blanket, you know capacity expansion in good or bad days So we're focusing our capacity expansion on where the LTSAs are and again The LTSAs goes that goes down in volume price and mix
The associated to a mix because that's what we're using in order to decide on where to expand our capacity, which is purely on our strategic products. What we don't want is just a blanket capacity expansion in good or bad days. So we're focusing our capacity expansion on where the lts as art.
And again, the <unk> go down in volume price and mix.
It's the best visibility we have and like I said it's sent over a month of your period capacity we're putting in today is really impacting 23 and 24 22 is kind of it is what it is and that's why I say it's fully committed year as far as mix and volume You know give plus some of the efficiencies that I talk about we'll get throughout
It's the best visibility, we have and like I said extend over a multiyear period.
Capacity, we're putting in today is really impacting 'twenty three and 'twenty four 'twenty two is kind of it is what it is and Thats why I say, it's fully committed a year as far as mix and volume.
Well.
Plus some of the efficiencies that I talked about will get throughout the year.
That helps. And then just a clarification on that last point as well, it sounds like lead times are beyond 52 weeks at this point. Is that correct? Have they extended further during the quarter? And maybe a similar question around backlog. Has that grown in the last 90 days? Yeah, well, it's that the lead times are very
That helps and then just a clarification on that last point as well.
It sounds like lead times are beyond 52 weeks at this point is that correct.
Extended further.
During the quarter and maybe similar question around backlog has that grown in the last 90 days.
Yeah, well, it's that the lead times are very consistent right around 45 weeks plus or minus.
Consistent with what we've seen in the past couple of quarters. So no major change on that.
quarters, so no major change on that. Backlog continues to be very strong. It's outpacing supply. This is purely a supply game right now in Germany.
Backlog continues to be very strong it's outpacing supply.
Earlier supply game right now in terms of just catching up with demand and just to clarify my comment that anything now is for 2023 is more on the capex not on really supply and demand perspective, meaning installing capex 222 will really impact your capacity expansion in 'twenty three.
And just to clarify my comment that anything now is for 2023 is more on the CAPEX, not on really supply and demand perspective, meaning installing CAPEX 222 will really impact your capacity expansion.
Thank you.
Your next question comes from the line of Harlan Sear from J.P. Morgan. Your line is open.
Your next question comes from the line of Harlan sur from Jpmorgan. Your line is open.
Yeah.
Morning. Congratulations on the solid results and execution. Good to see the sale of the Belgium fab. I know it's going to take a few years to see the benefits of this. I believe that you guys had targeted total fixed cost reductions from smaller fab exits to drive about 125, 150 million of fixed costs over the next few years. Is most of this fixed cost reduction still ahead of the team and have you been able to actually find more opportunities for fixed cost reduction?
Good morning, congratulations on the solid results and execution, let's see the sale of the Belgium Fab I know, it's going to take a few years to see the benefit.
I believe that you guys had targeted total fixed cost reductions from smaller site exits to drive.
About 120 $550 million of fixed costs over the next few years is most of this fixed cost reduction still ahead of the team and have you been able to actually find more opportunities for fixed cost reduction.
Yeah, Harlan, it's Thad. That number is still the targeted number that we're going after. As I said earlier, Belgium is roughly about $25 million of that fixed cost.
Yeah, Harlan it's that that number is still the targeted number that we're going after as I said earlier.
Belgium is roughly about $25 million of that fixed cost. So you can see we've got a lot ahead of us.
got a lot ahead of us. We're not, we're not done with the fact of that.
We're not done with the fab divestitures.
You know, we laid out that plan, that FabLighter plan at Analyst Day, and we're still executing to that plan.
We laid out that plan that fab light or plan.
And we're still executing to that plan.
Great. Thanks for that and then.
Intelligent sensing on a 4Q and 4-year basis, I mean, very strong year-over-year growth,
Intelligent sensing.
<unk> and full year basis, I mean, very strong year over year growth, but.
still quite a bit lower than your auto industrial segments combined. In fact, I think ISG growth was almost 2x lower versus PSG and your auto and industrial segments combined in Q4. Yet, we know the demand in content expansion
So quite a bit lower than your auto industrial segments combined with that I think ISG growth was almost <unk> lower versus PSG and your auto and industrial segments combined in Q4, yes, we know the demand and content expansion.
is just as strong as your power business, so you outsource a big part of ISG. What's the visibility on when capacity situation starts to improve meaningfully from your foundry partners and is this motivating the team to actually accelerate its insourcing efforts here?
Is just as strong as your power business. So you asked us a big part of ISG, what's the visibility on when capacities installation starts to improve meaningfully from your foundry partners.
This is motivating the team to actually accelerated in sourcing efforts here.
Look, we are, so you're absolutely right, it's not, this is purely a supply, supply constrained environment for dispensing given the higher percent of external manufacturing.
Look we are so youre absolutely right.
This is purely a supply and a supply constrained environment for dissenting given the higher percent of our external manufacturing.
So we remained focused on working with our outside foundry partners. We were able to get more supply in the fourth quarter, that's what drove us.
So we remain focused on working with our outside foundry partners, we were able to get.
More supply in the fourth quarter Thats, what drove kind of the results and we're working continuously in order to secure more and more supply.
And we're working continuously in order to secure more and more supply for 2022. So that's kind of where that business comes in. You're right, it's not a demand, it's more of a supply. And our focus about the mixed internal and external remains on track.
For 2022.
So that's kind of where that business comes in you're right. It's not a it's not a demand it's more of a supply and our focus about the mix internal external remains on track.
Thank you.
Our next question comes from the line of tore Svanberg from Stifel. Your line is open.
Your next question comes from a line of Tor Zvanberg from Stiefel. Your line is open.
Yes. Thank you and congratulations on the record results. Could you elaborate a little bit on the inventory in the channel? I think you said it went up to 7.3, but I think you also said in this quarter it came back down. So is that mainly because sell-through actually got better again this quarter, or did you take an opportunity to perhaps hold a little bit more inventory? Just want some clarification there, please. Yeah. The inventory in the channel went up to 7.3 weeks from 6.3.
Yes, Thank you and congratulations on the record results.
Could you elaborate a little bit on the.
Inventory in the channel I think you said it went up to seven three but I think you also said in this quarter. It came back down so is that mainly cause sells through actually got better again this quarter or did you take an opportunity to perhaps hold a little bit more inventory just wanted some clarification there. Please.
Yeah, the inventory in the channel went up to $7 three weeks from $6 eight weeks in Q3. It was purely a result of timing of shipments late in the quarter in Q4.
Sell through and the channel remains very robust. It's not necessarily that it has cranked up here in q1. It was just pure
Sell through in the channel remains very robust it's not necessary.
As cranked up here in Q1, it was just purely a timing of delivery, we've got supply and be able to get.
So, it's already returned back into that 6.8 weeks level. And as I was saying earlier, we think going forward we'll maintain kind of the.
It into the channel. So it's already it's already returned back into that $6 eight weeks level and as I was saying earlier, we think going forward, we'll maintain kind of the 66 to seven weeks.
Range for.
For the foreseeable future.
Understood. Thank you for that.
Understood. Thank you for that. And the 650 million run rate for CAPEX, how much of that is kind of going to fund, you know, regular CAPEX versus the additional investments you're having now in 300 milliliter and the silicon carbide capacity? The vast majority of it is going to silicon carbide and to CAPEX for East Michigan.
$650 million run rate for Capex, how much of that is kind of going to fund.
Our regular capex versus the additional investments, you're having 9200 millimeter and and this.
Silicon carbide capacity.
The vast majority of it is going to silicon carbide.
Capex for East Fishkill, 300 millimeter fab Buildout.
Or is the rest of it I would consider more maintenance capex.
Very helpful. Congrats again.
Your next question comes from the line of Roger Gill from Needham & Company. Your line is open.
Your next question comes from the line of Rajiv Gill from Needham <unk> Company. Your line is open.
Yes, thank you, and congrats as well. You might have touched upon this before, but if I look at the percentage of revenue coming from auto industrial, it's now 63%. So X those markets, the other markets are represented, 37% of sales.
Yes, thank you and congrats as well.
You might have touched upon this before but if I look at the percentage of revenue coming from auto industrial it's now 63%.
So ex those markets the other markets.
Represent 37% of sales.
Last year, the other markets were representing about 42%. So your non-concord markets are going down from 42% to 37%, 38%.
Last year.
The other markets, we're representing about 42%.
So your non core markets are going down from 42% to 37, 38%.
as you ramp auto industrial. When we're thinking about, you know, this 48 to 50% gross margin, you know, long-term, can you give us a sense, number one, in terms of what percentage of sales do we think auto industrial represent over time? And any sense in terms of the spread of the gross margins?
As you ramp auto industrial when we're thinking about this 48% to 50% gross margin long term.
Can you give us a sense number one in terms of what what percentage of sales do we think auto industrial represent over time.
Any sense in terms of the spread of the gross margins.
you know, between auto and industrial against, you know, the other segments.
Between auto and industrial against the other segments.
Okay.
Yes, the you know, we stated in our analyst state that we expect over the next five years auto industrial to become about 75% of our total revenue. So we're at 63%. So that gives you kind of our trajectory, because it's also tied to our margin expansion as we move forward towards that 75%.
Yes.
We stated in our analyst day that we expect over the next five years auto industrial to become about 75% of our total revenue. So we're at 63%. So that gives you kind of.
Our trajectory because it's also tied to our margin expansion as we move forward towards that 75% obviously the.
You know, obviously the mix or margin profile is more favorable from these markets.
The mix or margin profile is more favorable from these markets.
Because that's part of the trajectory that we have getting to that 48 to 50 percent is by being more and more exposed
Because that's part of the trajectory that we have getting to that 48% to 50% is by being more and more exposed to.
to the markets, but more importantly, it's the new products that we are ramping that are better margin profile. So it's a mixed shift for products, you know, new products versus the run rate products, and a mixed shift to end markets, auto and industrial, becoming 75%.
Two the markets, but more importantly, it's the new products that we are ramping that are better margin profile. So it's a mixed shift for our products new products versus the call. It the.
The run rate products, and a mix shift to cost to end markets auto and industrial becoming 75%.
at the expense of other markets that have historically have had lower margin profile. So net-net, you get the margin expansion and the growth that we talked about. Now, I just want to highlight one thing. In the other bucket, other than auto-industrial, we do have a growth segment with favorable margin, and that's our, you know, cloud and 5G power play. For that market, that market, we talk
At the expense of other markets that have historically have had lower our margin profile. So net net you get the margin expansion and the growth that we talked about.
I want to highlight one thing in the other bucket other than auto industrial we do have a growth segment with favorable margin and that's our cloud.
Cloud and <unk>.
<unk>.
A replay or downmarket that market, we talked about it.
Growing at 11% in our analyst day So we see that also as a favorable mix from both product and market that drive an expansion of margin beyond
Growing at 11% in our analyst day. So we see that also as a favorable mix from both product and market that drive an expansion of margin beyond where we are today. So these are kind of the three big components. You can think about driving the growth for the company moving forward and the remaining margin expansion does that talked about yes Raj.
Just let me expand on that a little bit as well the 37% has got some very favorable gross margin in there. It sounds like it's all of those low gross margin those we fast forward and we get 75% of our business and the auto and industrial.
5% other it's still favorable margin related.
It's not low-margin business. That's the part that we're exiting, but Hassan is right as we as we flex more into auto industrial That will be more creative You know
It's not low margin business, that's the part that were equity, but as long as right as we as we flex more into auto industrial that would be more accretive.
And obviously, the <unk> be accretive as well, but there is there is good.
as well, but there is good high gross margin in our other bucket as well.
Good high gross margin in our other bucket as well.
That's helpful. And my follow up that, you know, your your shift to a fab lighter manufacturing strategy is underway, you had mentioned in the past that you want to maintain your internal manufacturing footprint footprint around 65%.
That's helpful and then my follow up.
Youre, a shift to a fab light or manufacturing strategy.
Is underway you had mentioned in the past that you want to maintain your internal manufacturing footprint footprint around 65%.
And you will achieve that through a lighter footprint by exiting smaller subscale facilities that are moving to where expanding larger ones with your new 48% to 50% gross margin target how do we think about that component.
of the internal versus external manufacturing capacity.
The internal versus external manufacturing capacity.
Yeah, so today we, internally, we manufacture roughly 65.
Yeah. So today, we internally, we manufacture roughly 65% of our own product as we fast forward, we bring on east Fishkill 300 millimeter fab.
As we fast forward, we bring on East Fishkill, the 300mm FAB. We've said that we have the capabilities of expanding capacity by 1.3x what it is today. We have the option there as we add capacity and add capex.
We've said that we have the capabilities are expanding capacity by 1.3 actually.
Now we have the option there.
Add capacity and add capex to be worked out but as we as we look further out that model doesn't change we still believe we'll manufacture 65% of our own product in house, because we will get a cost benefit of it. It's really just exiting those subscale stopped moving it into more efficient fabs and obviously.
But as we look further out, that model doesn't change. We still believe we'll manufacture 65% of our own product in-house because we'll get a cost benefit of it.
scale fabs, moving it into more efficient fabs. And obviously, the 300 millimeter fab is a component.
300 millimeter fab as a component of that.
Great Congrats again.
Thanks Roger.
This brings us to the end of our question and answer session. I turn the call back over to Hassan El Khoury, President and CEO , for some closing remarks.
This brings us to the end of our question and answer session I turn the call back over to Hassan <unk>, President and CEO for some closing remarks.
Yes.
Thank you all for joining us today. I once again thank our worldwide teams for their hard work in accelerating our transformation and driving outstanding results over the last year. With the transformation of our business, we have built a strong engine to power our growth for many years to come.
Thank you all for joining us today I once again, thank our worldwide team for their hard work and accelerating our transformation and driving outstanding results over the last year with the transformation of our business. We have built a strong engine to power our growth for many years to come.
We have established leadership in the fastest-growing semiconductor markets, such as vehicle electrification and ADAS, and we are enabling disruption in energy infrastructure and factory automation.
We have established leadership in the fastest growing semiconductor markets, such as vehicle electrification and Adas and we are enabling disruption in energy infrastructure and factory automation.
We're driving growth while accelerating profitability and rapidly expanding margins. We expect to sustain this momentum with the ongoing transformational changes to our cost structure and the impending ramp of our EV business.
We are driving growth, while accelerating profitability and rapidly expanding margins.
<unk> sustained its momentum with the ongoing transformational changes to our cost structure and the impending ramp of our <unk> business.
Thank you.
This concludes today's conference call. Thank you for your participation. You may now disconnect.
This concludes today's conference call. Thank you for your participation you may now disconnect.
[music].
Yeah.
Yeah.
[music].
Yeah.
Yeah.
Yes.
[music].
Okay.
Okay.
Okay.
[music].