Q3 2022 Alpha and Omega Semiconductor Ltd Earnings Call

Hello, and welcome to today's Alpha and Omega semiconductor fiscal third quarter 2022 earnings call. My name is David and I'll be your moderator for today's call.

All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end if.

If you would like to ask a question. Please press star followed by one on your telephone keypad.

I would now like to pass the call over to Gary will check Gary. Please go ahead, good afternoon, everyone and welcome to Alpha and Omega Semiconductor's Conference call.

Fiscal 2022 third quarter financial results.

<unk> Investor Relations representative for <unk>.

With me today are Dr. Mike Chang, our CEO , Steven Chang, our president and define our CFO . This call is being recorded and broadcast live over the web replay will be available for seven days following the call via the link in the Investor Relations section of our website.

Our call will proceed as follows Mike will begin with strategic highlights then Steven will provide business updates and a detailed segment report after that <unk> will review the financial results and provide guidance for the June quarter. Finally, we will have a question and answer session.

The earnings release was distributed over the wire services today May five 2022 after the close of the market. The release is also posted on the company's website.

The earnings release and this presentation includes certain non-GAAP financial measures, we use non-GAAP measures because we believe they provide useful information about our operating performance that should be considered by investors in conjunction with the GAAP measures that we provide a reconciliation of these non-GAAP measures to comparable GAAP measures is included in the earnings release.

We remind you that during this conference call, we will make certain forward looking statements, including discussions of the business outlook and financial projections.

Forward looking statements are based on management's current expectations and involve risks and uncertainties that could cause our actual results to differ materially from such expectations for a more detailed description of these risks and uncertainties. Please refer to our recent and subsequent filings with the SEC, we assume no obligation to update the information provided in today's call.

Now I will turn the call over to our CEO , Dr. Mike Chang to provide strategic highlights Mike.

Thank you Gary I would like to welcome everyone to <unk>.

Today's call.

Is it going to be speaking.

All of you again.

Q3 was another great quarter, and what is the again, we succeed outperforming our guidance.

Revenue, what the record $203 million.

But that 20% growth.

Over a year and it was the first time in our history.

The $200 million threshold.

This was achieved by obtaining additional wafer capacity from <unk>.

Find great partners and continuing to optimize product mix.

We thought it in non-GAAP gross margin of 36.

7%.

Our record non-GAAP operating profit margin of 19, 9%.

non-GAAP EPS was $1 three.

<unk>.

74% growth year over year.

I am extremely proud of these results and continue to be amazed at our team effort.

So executed quarter after quarter.

All right.

Challenging times.

Ever.

I am very sad that today.

<unk> situation in China.

<unk> already Lockdowns in Shanghai.

No are you.

And the testing ability or.

Shanghai quickly and those got it.

A portion of our final packaging and testing requirements prior to sugar.

After the initial lockdowns imposed in late March our Shanghai.

And the testing facilities.

Operator.

Because our dedicated employee.

Extraordinary sacrifices.

As it is inside of that.

Operator.

However.

Keenly operations required testing and the net.

Results.

In early April .

Few of our employees.

Paul Paul Knight.

<unk>.

And our operation were forced to shut down by the Shanghai government.

Therefore, our ability to complete the assembly of all product and ship to customers or severely limit.

Fortunately.

At the end of April the Shanghai government cloud spot AOS as a.

Thank you.

And the clear to us to restart operations.

We are quickly getting them.

<unk> study again.

However, the pace at which we can resume.

<unk> operations view.

Remains China U.

Got it.

In fact, our labor workforce.

Certain raw materials and the resolving.

Our next.

At this time.

<unk> of the Lockdowns.

It is still unknown.

Update the markdown.

Paul Seavey is Rick.

We expect some time before all of the support.

What I can issue.

Our 48 result.

Their return to normal.

As a result, we are.

Our revenue in the June quarter will be impacted.

Under this.

Estimates.

It's three weeks of Libya operate operations during April and ongoing basis.

And the supply chain challenges.

We expect.

Tom will impact June quarter revenue by approximately 20% to $25 million.

However, we still anticipate a June quarter revenue around $190 million.

This represented a 7% growth year over year.

Excluding these kind of lockdown impact.

We estimate our growth would have been 20% year over year.

Good quarter.

As our operating ramp back to full capacity.

And the surrounding surprise tends to normalize.

To anticipate to recover.

The quality of the lost revenue.

Second half.

For the year.

Our wafer production was not impacted by the lockdown.

As a result, we.

Actually viewed as stock.

Yep.

Right.

Inventory.

Given the global wafer shortage over the past years, we expect.

We stood up a wafer.

We'll help 40 utilized our packaging assembly lines.

<unk> returned to normal.

Yes, I will provide more details on our guidance.

A portion of this call.

Please understand.

Margin is currently more difficult to forecast.

As our allocation mix.

The line is still moving along well.

Right.

<unk> design.

Amit coffee note.

We have been strategically tablets might all packaging and testing operations.

We have begun to accelerate.

The pace of these initiatives.

Our JV in tongue, Kim already handled a good portion of our backend requirement.

We also have again deposit to outsourcing none of this debt.

Who are the contract manufacturers.

Although that will take some time.

Almost all I think it goes without saying.

We are very thankful to have.

Oregon production facility.

Which is not a approach to this client.

Great.

The impact of the same kind of locked down.

Our premium product with the benefit of our capacity.

Notification okay.

We believe this.

<unk> only temporary.

And that makes us even stronger in the long run.

The global Cat is actually the.

Everything is just getting started and all power product.

At the forefront of that trend.

We are building, a very redundant and diversified global.

We remain well on track.

Our goal of achieving $1 billion annual revenue.

Yes.

Before I turn the call over to Steven.

I want to say.

Our Hearts go out to everyone in Shanghai that have been affected by this situation and we create quite quick.

<unk>.

I also want to give a very special thanks to our employees.

Sacrifice and dedication during this very challenging time.

Their dedication to AOS.

As reade.

All inspiring.

At a mid need realize once again.

How special.

Truly is.

And I'm very grateful to have their support.

Thank you and I will now turn the call over to Steven.

Update on our business and a detailed segment report.

Steven.

Thank you, Mike and good afternoon, everyone I will start with an update on our business and then provide color on our segment results.

The March quarter, we once again set new records for revenue and profitability driven by strong demand across all our business segments, particularly among our tier one customers.

The favorable supply and demand environment has given us more ability to optimize our shipment allocations to higher margin and strategic accounts. Moreover, we can quickly adjust to changes in customer orders by strategically distributing parts to other parts of the business.

Looking forward in addition to the challenges of the ongoing lockdown situation in Shanghai.

Of our business segments.

Unless otherwise noted the following figures refer to the March quarter of 2022.

Starting with competing revenue was up 28% year over year up 2% sequentially and represented 44% of our total revenue.

These results were somewhat stronger than our prior expectations as the March quarter is typically are seasonally weakest quarter following strong holiday shipments.

The main driver of this outperformance continued strength and notebooks, particularly from OEM customers that have a higher concentration of their business serving commercial laptop applications. We believe this was driven by returned to office trends and companies refreshing employee worked laptops.

Deliberately targeted a higher mix of commercial projects during the past years since our power and power MOSFET up higher performance specifications and higher prices that better suit commercial markets.

This benefited us as the consumer market is beginning to see weakening demand.

Finally in computing. We also saw continued strong demand for our products and high end gaming desktop P C applications.

Looking ahead, we do see early signs that the P. C market is beginning to soften however.

However, overall demand for our products remain much higher than that what our capacity can fulfill.

In the June quarter, we expect the computing segment to be lowered due to temporary operational limitations in lockdown in Shanghai.

We are optimistic that we can recover a portion of loss.

And the second half of the year once Shanghai returns to normal and as we ran for our seasonally strong September quarter ahead of holiday sales.

Turning to the consumer segment revenue grew 24% year over year and 14% sequentially.

And represented 22% of total revenue.

The year over year growth was driven by share gains and gaming with a tier one Oems.

The sequential results were largely in line with our prior is items.

Is the timing of some game systems near the end of the quarter were delayed, but we could anticipate to catch up ended June quarter.

Looking ahead home appliances are slowly which is one of the larger revenue contributors to our consumer segments. We expect the June quarter to decrease high single digits sequentially, but due to overall capacity constraints, we are able to shift production to other segments to offset revenue impacts.

Next let's discuss the communication the segments, which was up 6% year over year end up 14% sequentially and represented 14% of total revenues.

Mr <unk> slightly better than expected due to the stronger demand for our battery protection products from the leading use smartphone maker and hurricanes with Chinese Oems.

Looking forward, we expect June quarter shipments remained flat at these levels sequentially.

Finally, let's talk about the power supply and industrial segments, which accounted for 19% of total revenue. This.

This segment up and 16% year over year, and down 3% sequentially, which was slightly better than our expectations.

In the March quarter, we strategically reduced allocations to our AC D C power supply and could charter business following strong consecutive quarters of shipments.

<unk> anticipated China smartphone mucus.

Outperformance was due to strong demand from our power tool customers. This is an emerging application for us with great synergy given our product strength and low and medium voltage products targeting battery management and brushless D C Motors.

Looking forward to the June quarter, we expect to maintain about the same level of allocations for our power supply and industrial segments, and therefore anticipate revenues to remain about flat.

To wrap up the Shanghai Lockdown has temporarily stalled our momentum and really stress tested our entire organization.

However, the situation and also brought until my aspects about our business that we didn't appreciate enough before.

The extreme Brazilian and dedication of our employees and the level of support from our business partners and customers.

We are immensely grateful for this and are even more driven to keep working hard towards our goals of $1 billion in revenue.

With that I will now turn the call over to Eastbourne for a discussion of our fiscal third quarter financial results and our outlook for the next quarter.

Thank you Steven good afternoon, everyone and thank you for joining us.

Once again March quarter was a record quarter for us from the top line to the bottom line.

Revenue was $203.2 million up 5.1% sequentially.

Up 21% year over year.

In terms of product mix.

<unk> revenue was $146 million.

Four 1% over last quarter.

14.6% year over year.

<unk> revenue was $64 million up.

Nine 6% from the prior quarter.

39.1% from a year ago.

Which puts our power I see revenue over $200 million annual Ryan right.

This reflects our strategic actions to drive <unk> business to enhance our product mix.

Assembly service revenue was $2 $2 million as compared to 3.2 million and last quarter and last year.

non-GAAP gross margin was $36, 70% flat quarter over quarter.

And up from 31.9% a year ago.

non-GAAP gross margin excluded $1.3 million, so sure based compensation charges.

As compared to $1.7 million for the power quarter.

Point $4 million last year.

In addition.

non-GAAP gross margin excluded point $8 million of amortization of purchased IP, the same amount as the last quarter and a year ago.

non-GAAP operating expenses were $34 million compared to $33.5 million for the prior quarter and $39 million last year.

non-GAAP income tax expense was $2.3 million compared to a $1.3 billion for last quarter and $1 million a year ago.

The quarter over quarter increase of tax expense was primarily due to higher profit.

As well as increased.

Stock based compensation for employees from the higher price of our stock in the March quarter.

Disarm.

non-GAAP EPS was one dollar and 34 cents per share.

As compared to one dollar and 24 last quarter and 77 cents.

A year ago.

Moving onto cash flow.

Skype operating cash flow was $61.8 million, which included six $4 million net customers deposits.

By comparison.

Operating cash flow in the prior quarter was $58 million, which included $11.2 million customer deposits.

Operating cash flow a year ago was $33.3 million, which included 20 million.

Customer deposits.

EBITDA was 48 $4 million compared to $46.7 million last quarter, and $36 $2 million a year ago.

Let's move on to the balance sheet wait.

Completed the March quarter, with cash balance of $323 $1 million compared to $269.3 million at the end of last quarter.

The cash balance a year ago, it was $192 $1 million, which included $33.8 million at the JV company.

During the March quarter drew.

Drew down of $45 million equivalent alone at our Oregon Fab.

And repaid $2.3 million on our existing term loans.

Therefore at a quarter and.

Our bank borrowing balance was $65 $2 million compared to $22.7 million a quarter ago.

In terms of trade receivables and inventory.

Days sales outstanding for the quarter were 28 days flat quarter over quarter.

Given the uncertainty of the global supply chain.

We increased our inventory balanced by $14.5 million, primarily in raw materials.

Average space and inventory, where 94 days reduced by 11 days versus last quarter.

Primarily due to the impact of the consolidation of the JV company.

Finally.

Property plant and equipment that was.

$245.8 million, an increase of $49 million quarter over quarter.

Our capital expenditures for the March quarter were $43.4 million.

You expect a similar level of Capex for the June quarter.

Our Oregon Fab expansion project is on track.

Kringle expansion was over 80% down at the at a quarter and.

And a small portion of the equivalent past bin.

Moved in.

What do you expect the clean room construction can be completed.

Mark Juruti of the equipment can be moved in during the June quarter.

And we anticipate additional capacity to come online in the December quarter.

Now I would like to discuss the June quarter guidance.

We expect revenue to be approximately $190 million plus or minus $10 million.

Primarily reflecting the production lost at our Shanghai factory due to the impact of the Shanghai Covid Lockdown.

Our Shanghai factory other resumed partial production at the end of April .

This guidance is based on the assumptions about our Shanghai factory remained COVID-19 free.

Continued to gradually ramped up <unk>.

Production you May I return to normal production in June .

Scott gross margin to be.

$31, 90% plus or minus 2%.

We anticipate a non-GAAP gross margin to be 33% plus or minus 2%.

Flagging the estimated impact of lost production and incrementally expenses needed to cope with the Shanghai Covid shutdown and.

The.

Production recovery.

non-GAAP gross margin guidance exclusive point $8 million amortization of acquired IP and $1.3 million of estimates share based conversation charges.

GAAP operating expenses to be in the range of $44.3 million plus or minus $1 million.

non-GAAP operating expenses be expected to be in the range of $36 million plus or minus $1 million.

non-GAAP operating expenses exclude eight $1 million.

Estimated share based conversation charges and $2 million of estimated legal expenses relating to the government investigation.

Interest expense to be approximately $8 million and.

Income tax expense to be in the range of $1.3 million to $1.5 million.

With that we will open the call for questions opt.

Operator, Fitch started Q&A session.

Thank you.

If you would like to ask a question. Please press star followed by one on your telephone keypad.

If for any reason you would like to remove that question. Please press star funded by too.

Again to ask a question the the staff led by one.

As a reminder, if you are using a speakerphone teaching them to pick up your handset before asking you a question.

Oh first question today comes from David Williams from Benchmark. David. Please go ahead to your line is now open.

Hey, good afternoon, and congrats on the spectacular results.

Thank you. Thank you. Thank you.

Yeah, and we certainly.

See and understand the Lockdowns in China, I noticed a very challenging situation for you and your employees.

I wanted to see maybe if we could spend a minute and talk about the appliance market. You said you were seeing some slow down there.

You see that maybe from a geographic perspective is it more broad based and you get a sense that maybe it's a demand side issue or is it simply more kidding issues, where others are being affected with component shortages as well.

Hours, whereas this is Stephen wishing you a little more of us on the demand side. It is.

The the ongoing trend towards the variables speed motors is still ongoing the overall trend is moving.

But in terms of the shipment growth appears to be slowing down a little bit.

I don't think it's necessarily geographically concentrated.

Okay.

Thank you.

Then maybe if we kind of think about the omni opex side.

It looks like in junior expecting about a $2 million sequential increase there is there any component of that or maybe to what magnitude is the they locked down from China contributing maybe just some of that step up and spending.

David Yeah. This is fun.

The guidance in our all packs.

Yes.

Primarily we are anticipating.

Some additional investment that you know R&D and the sales marketing areas in that one.

Increase icons and the increase.

Hiring activities there.

To support our business growth soda.

We'll go with two.

Achieve $1 billion.

Revenue and beyond so.

We are investing.

Some some expenses also.

For that.

Related to.

Those recoveries of others by and large in the <unk>.

The investment.

Andy under sales marketing.

Yeah.

Okay, great. Thanks, and made one more time, the gross margin side obviously.

Obviously, some impact their understandable how quickly do you think that can recover can we see it returned back to the pre locked down levels and maybe what pace can you can teach it to maybe see some expansion here I'm home and makes shifts.

Wow.

For the September quarter, an ongoing.

We have to wait until next quarter's guidance.

Right now.

The situation.

Over there is quite.

Quite a bit challenging.

Have to wait.

Quarter towards to escape more.

More.

Accurate estimate.

Okay, and and that's fair, but I guess you get a sense that you can recover the margin profile as you move forward and more normalised. Notwithstanding further shut down do you think that's because it seems like those changes for the margins how to at least have been very structural in nature and it seems like those would rebound once you get there do you do you think that's the case or.

This new level for moral yet.

At this point I guess.

Expanding our businesses still.

In tact.

We have the confidence that we can continue to grow isn't it then.

Business is still there in Minnesota, there's just a temporary thing right now.

Impacted by the Shanghai production lost.

Great. Thanks to my son, and I appreciate the teller and the best of luck.

Thank you.

Thank you David.

The next question today comes from Craig Alex from B value Securities Craig's. Please go ahead and just now open.

Yeah. Thanks for taking my question and congratulations on annualized revenues sent over $800 million in the quarter guys nice accomplishment.

I wanted to follow up on the.

China.

Packaging facility issue in Shanghai, So clearly we haven't shipped in revenue from the fiscal fourth quarter. How did in fiscal twenty-three. The question is this do you think based on your interaction with customers that that you can recapture 65%, 75% how much of the 22 and a half million dollars at the midpoint gets recapture.

And then what's your sense based on the product program to carry involved in and when that happens would it be 75% in the first half of the fiscal year and the balance in the second half or how does this dynamic to play out based on how your salespeople and and other folks are interacting with customers.

Oh, okay.

I mean, we would expect that a portion of the.

Production loss of wisdom to catch up.

Howard overall.

Overall wafer production was not impacted.

Oregon.

Foundries and joint ventures continued to produce wafers. So right now we're actually accumulate in some way for inventory.

<unk>.

In the in.

And the time of April .

So I mean, what.

What are they expected on how it back and it can.

Catch up some things.

Go back to normal.

And then.

Luna.

In terms of percentage and it's hard to say no no I mean, it depends on the productions dynamics.

In the second half of the year button.

But what are you expecting a good portion of it and we can.

Hour.

Okay. So.

Like it's at least half and maybe more than that but you can recover timing.

TB the one of the things you mentioned that in response to what was happening in Shanghai coupon is that the company is looking at moving some of the work too.

Chung King and looking at moving some of the work too.

Two external backend partners, so that might imply a product recall prequalification.

Patient, but the question is this for the changes that are being made what's the incremental cost.

Packaging, whether it's moved to John King are externalized Tim.

And to what extent to stab him a 33% gross margin guidance.

And that question David asked earlier.

Sent to that linger in the back half of the year.

I mean this is.

Right now it is.

The.

The production planning and then.

Customer coordination, although things kind of us do ongoing and I'm in right now is kind of a fluid.

This point, the 33% on estimate afforded troon quarters gross margin non-GAAP gross margin.

Primarily based on the loss of production.

Shanghai facility, and some incremental expenses and we have to.

Deal with the Shanghai is locked Thompson.

Logistic challenges and transportation those things.

I would expect that.

Good portion of it and that we can.

Return back to normal and the setup.

Sign up half over a year yeah.

My my.

Current estimate.

We'll have to wait until next quarter to Caitlin more clear guidance.

Yup, that's totally understandable, it's been affluent issue over the last two plus years now right.

Moving on to some product related questions I wanted.

Stephen to ask you a few things one.

Given the.

The real.

Heightened focus on the mix of the P. C market for investors can you just give us some sense of what you think your enterprise mixed with the versus consumer mix and compute and then relating to compute.

I think it's generally well understood that there are some very significant gaming card product repressions coming some of which faced.

Based on a lot of information that's out there could be significantly higher power can you just talk about how you are looking at content.

And the gaming card business as you move into the back half of the year and remove into what is typically a period of product refresh activity for our customers.

Sure so you're asking about the graphics card, specifically or not not competing does that right. There is a two part question. The first since just computing mix on the key side between consumer and enterprise and then the second one was the gaming gaming hard question.

Sure let me address both so on the P C side and in general.

Us over the past.

A few years has been gravitating more towards addressing commercial commercial applications with Mtc and this is kind of the nature of our product mix as we develop more higher performance MOSFET as well as high performance power Ice's, we naturally.

Gravitate towards the higher performance pockets and those tend to be used in in commercial platforms at a R.

Both are notebook as little as R. P C customers.

In general content Kennedy significantly higher.

It depends what you're comparing against consumer also can vary from.

From home books.

Up to even higher performance consumer laptops, but in general I was sitting at the bomb content for commercial type.

Funds are generally 30% to 50% higher bomb content potentially.

It depends how many ports there are dependent.

What kind of Prosser processor and you have that.

Needs to be powered.

And that determines the phone contact between a P C.

Okay and then.

Gaming content Yep.

Yeah on the gaming card, yes, we're in the process of designing and getting a design into the next next platform at our at our Big breakfast hard customer we are expecting content to increase on there are more phases.

The state is increasing in general so that basically means you know more drive on losses, and I will have to use their <unk>.

We still are are in that design and in mode right now so.

Early to to comment on the the portion of the business that we will be getting but right. Now we are expecting at least the bomb content to be increasing the next platform.

Great to hear and then lastly E pawn turning it back to you.

There was mentioned made it.

$45 million tab equipment loads associated with the expansion that's been well known that the question has just given how high the cash balances Y financed the equivalent to that loan rather than just cash on hand.

Sure Yeah.

Yes, we do have a good cash balance right now and then.

Right now then.

This <unk>.

Firms loan like in five years and that loaned and.

Become available to us.

Right.

Attractive, especially compared to inflation.

None.

Yes, I would.

To strengthen Mellon.

Sheet and then yeah we.

We do need some cash to support our continue continued growth and then capex expansion. So yeah.

Yeah, that's how.

We.

Decided to drawdown.

$45 million.

Equivalent though.

So let's have a mid single digits right or is that more low single digit pain.

Run the low single digits.

Yep, that's attractive okay. Thanks, that's really appreciate the help.

Okay. Thank you expected.

Thank you Craig.

The next question today comes from Jeremy Kwan from Stifel. Jeremy. Please go ahead and the line is now open.

Yes. Thank you I'll, let me add my congratulations on the 200 million quite a milestone.

Just wanted to follow up a little bit on the the early signs of softness that you're seeing.

I understand.

Nearly coming from consumer and you'll be both the consumer portion of P. C an awful.

A line segment.

But can you elaborate a little bit more in terms of what sign that.

Leaving.

No other kind of.

Order cancellations changes in backlog customer behavior.

Give us a little bit better mmm.

Sure.

Come out of the overall backlog in terms of the P C customers.

We are seeing drop in demand for for the consumer portion.

We're not 100% commercial there'll be still serve.

Consumer segment of the market is just how we you know we are much heavier in the commercial side. So.

So we do see some some impact there.

They're from from demand softening there well that just means we just serve the payments to commercial area more so.

So that it is coinciding with what we're hearing kind of in market reports also adapt well.

The chromebooks already started to drop even though past couple quarters.

How has seen in the in the standard consumer laptop to me and also I was trying to talk a little bit about just yet.

Continuing that trend.

Okay got it.

The backlog.

Currently.

Backlogged.

Right now.

We have.

Still.

Still very strong.

Steady strong and then much higher than where we can ship you know I guess into this reflected in our customer base.

Changes in the in the past.

Two years.

R.

Having a lot of more tier.

Tier one whole year customers and ODM customers. So then we are.

Forming.

Strategic partnerships with those tier one customers.

Those those customer deposits.

On.

The indicated.

The mix changes.

Customer base of so.

While he's down to the the associate themselves.

Downtime.

Coming up and then.

Deposits and that would have on them another way too too.

Mitigated.

Downside risk.

Great. Thank you for that and.

And maybe just going back to the Shanghai facility on challenges. There can you remind me again what percentage of your revenues is handled by the facility and I understand that you know.

More standard equipment locating some team.

And then Shanghai handles multiple proprietary packaging and testing.

To get a sense of what that is right now and.

And what the utilization rate.

Privacy lockdown.

Sure then I'm in Shanghai, and tobacco, but yeah and.

<unk> with a good portion of our overall I can.

Capacity and that I mean, I would say.

More around that.

Half of the overall or somebody to us.

Over there.

In the past that yes, some packages that.

Or 40 utilized in Assam, we still have.

Some additional capacity so that's why we said.

With more wafersense terminated on hand, and in the second half of the year.

We are expecting to catch up and.

Good portion of it.

Production with lost in April .

Partially in May so.

Mmm.

Overall situation.

I guess my question was.

If it is fully utilised prior to that on lockdown.

Have you been able to kind of add incremental capacity to to do to catch up.

Yeah, No I mean.

Before the lockdown.

<unk>.

For nearly fully utilize them and some were not.

And then.

Yeah and also during the downtime we.

Re arranged it.

Two more to the sub contractors and.

Hi, there.

Production capacity soon.

There are some huh redirecting.

Suffering.

Yes, we are doing the operation planning management.

Got it and then.

Maybe if we could.

Turned to the I guess I'm, a chunk team side of things.

Give us a sense of what maybe the potential lockdown <unk> does your designation as an essential business.

Hi, Shanghai government, helping you get something from learning from chain.

Right now <unk> is not lockdown.

And China, just in the city by city right now so Shanghai.

Done.

Situation not.

<unk> trying to.

Okay, and I guess the last question for now.

The in the inventory side you know.

It sounds like some nights off the planet Preassembled wafers, but then.

Most of your increase the.

The raw material is that considered raw materials for you or.

Paint them away for us is that considered kind of moral working process. That's wondering.

We're kind of broke up there and and what kind of the main drivers.

Substrate cost I don't think like that.

What kind of thing just stay on the call back from them.

Stationary pressure sample.

Okay sure sure.

The.

The increase in Yemen.

Inventory.

Primarily in raw materials.

And my comments.

Many referring to our.

Quarter in March quarter and.

The increase compared to.

December quarter and.

During the March quarter, we inter.

Intentionally increase some raw materials.

Inventory, yes, and his foundation after.

And though did.

Global supply chains challenges.

The wafer.

The stock pile up and you know.

Mike was referring to was it for.

Going to the.

April .

Timeframe.

Wonder why now Shanghai Assembly House.

Was shut down the button on our Oregon Fab was continue.

Continuing to produce.

So did the other foundries in Holland CQ JV, so I mean.

That's why.

And the month of April we.

We have some.

The additional wafers piled up on.

Nothing to where we say we expect in the.

Second half of the year, we can catch up on some of the production lasted.

At Shanghai Factually in April and partially in May.

Got it that's that's very helpful. Thank you and sorry, if I could just ask one more question on the <unk> side of things can you can you give us an update in terms of their capacity expansion plan.

Are they still tracking too.

Had they been able to receive and install equipment and get things wrapped up how much incremental capacity.

Download the course of this year. Thank you.

Yeah, I assume known.

C J.

J V. They've raised the $80 million in in January .

And then they already placed an order for for the.

Capacity expansion so.

That lead time for the equivalent to the.

Is quite a bit long nowadays so we do not expect an additional capacity come out lie this year.

Got it so instead of the growth that you're expecting or you know the menu or the year I'm, sorry, but I guess I'm looking at the calendar.

Dependent upon <unk>.

You're seeing all the income up again.

Incremental gain would come.

Come from Ah, Yes in Oregon.

Capacity expansion underground pop as well as.

Foundry supply.

We have been working with the <unk>.

<unk> partners.

Since the last year, so we should be able to assist.

Additional.

Capacity supply.

During the course of this year remaining of the calendar year.

Got it great. Thank you very much.

Alright, thank you.

Thank you Jeremy.

The next question today is a follow up question from David Williams US benchmark. Please go ahead. Your line is now open.

Hey, Thanks again, just wanted to maybe touch on this quarter and the revenue outside was that driven more by volume or pricing or maybe even more so from mixed shift to St color round of what drove the outside will be helpful.

Sure.

Primarily in the March quarter, we received additional.

Wafer supplies from our.

Foundries.

As well as the JV, So that's where where we we can produce them more shutdowns Moore.

Okay, great any thoughts on maybe what are the unit volume growth with would've been perhaps.

Sequentially.

I mean mixing definitely changed.

In the.

During the quarter unit if you.

Talk about.

The total units and it may not be higher than.

December a quarter, but the.

Mix definitely.

Favre often higher aspie.

Type of products for example policy products continue to have a strong growth in the in the March quarter.

So now that I'm in.

The product.

Product mix and you know some some products and the minimum ISP at a penny.

Penny or a couple of <unk>.

The summer.

Over all her and then I mean, that's the.

Kind of a pretty wide spectrum.

In terms of.

Sounding prize of our products, so and I'm in the product mix it during the quarter.

Impact on other revenue mix.

Right a bit.

Okay, and maybe just the last one for me real quick.

Commentary around the designment activity or any tracking you're saying, how how predominant been in anything in particular, they're interesting slowing down and where appropriate pace.

Assignments I think that's still study now we continue to to lock in our business both for this year as well as for next year.

We've been focusing not only on our core market P C.

Smartphone and home appliances will be talking I know, we talked about the loss, but we're also working out and building at some of our newer newer markets. We talk about powerful system as an as an emerging area and.

You know as as we continue to diversify the breath of our products and applications. We're also getting closer to doing.

To our customers of the Cuban customers. So it's in good shape.

Thanks again I appreciate it.

Thank you David.

They may have additional questions facing at this time, so I'd like to pass a conference back over to the management team for closing remarks.

This concludes our earnings calls today. Thank you for your interest in the US and we look forward to talking with you again next quarter. Thank you.

This can I get your today's conference call. Thank you for your participation you may now disconnect your lines.

[music] [noise].