Q4 2022 Navitas Semiconductor Corp Earnings Call
[music].
Thank you for holding and welcome everyone to the Navi task semiconductor fourth quarter 2022 earnings call.
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'd like to ask a question. During this time simply press star followed by the number one on your telephone keypad if.
If you'd like to withdraw your question again press the star one thank.
Thank you I will now turn the call over to Steven Oliver VP, corporate marketing and Investor Relations. Mr. Oliver. Please go ahead.
Good afternoon, everyone I'm, Stephen Oliver Vice President of corporate marketing and Investor relations. Thank.
Thank you for joining another test semiconductor's fourth quarter and full year 2022 results conference call.
Joined today by Gene Sheridan, our chairman, President CEO , and co founder and Ron Shelton, our CFO and treasurer.
A replay of this webcast will be available on our website approximately one hour. Following this conference call.
And the recorded webcast will be available for approximately 30 days following the call.
Additional information related to our business is also posted on the Investor Relations section of our website.
Our earnings release includes non-GAAP financial measures reconciliations of these non-GAAP financial measures with the most directly comparable GAAP measures are included in our fourth quarter earnings release, and also posted on our website in the Investor Relations section.
In this conference call, we will make forward looking statements about future events or about the future financial performance I'll never test, including acquisitions you can identify these statements by words like we expect or we believe or similar terms.
We wish to caution you that such forward looking statements are subject to risks and uncertainties that could cause actual events or results to differ materially from expectations expressed in our forward looking statements.
Important factors that can affect never test business, including factors that could cause actual results to differ from our forward looking statements are described in our earnings release.
Please also refer to the risk factors section in our most recent 10-K and 10-Qs.
Our estimates or other forward looking statements may change and <unk> assumes no obligation to update forward looking statements to reflect actual results changed assumptions or other events that may occur except as required by law.
And now over to Jean Sheridan CEO .
Thank you, Steve and welcome to everyone on the call today.
I am very pleased with our Q4 results, which came in above our midpoint guidance across all key metrics.
For 2022 in total I'm, especially happy with the dramatic expansion and diversification.
Both organically and through acquisitions.
<unk> entered this year with a solid position in five major growth markets with leading edge Jan <unk>.
Carbide, along with complementary silicon drivers and controllers.
Such a position gives us confidence to reiterate our expectations to double our revenues in 2023 as compared to 2022.
This month, we completed the buyout of our Celgene controller joint venture constituting our third transaction in just nine months all major steps in building our portfolio of leading edge Gan Silicon carbide Silicon based digital isolator as an analog controllers optimize for wide bandgap materials, which we believe is unequaled in our IND.
<unk>.
This pure play focus on next generation power semiconductors, without any distraction or dilution by traditional self empowered uniquely position us for growth and leadership in next generation electrified systems from EDF renewables to industrial and appliance markets to mobile consumer and data Center segment.
Yes.
In total these transactions have expanded our market opportunity by 75% from $13 billion to over $23 billion per year by 2026.
2022 was an extraordinary year for our company.
Happily expanded into these new market segments transitioning from a company in 2021 that was 100% mobile consumer focused to a more diversified set of markets, resulting in 2022 revenues with approximately 30% in appliance and industrial 12% in solar and storage, 5% and easy and 40 <unk>.
In mobile and consumer segments.
These diversified markets also comes a diversified regional footprint with 24% of our 22 sales in North America, 42% in Europe , and 44% in Asia.
Let me explain further about our joint venture controller transaction.
Elevations semiconductor was a JV created in 2021 with Halo microelectronics.
J D will started to create application specific silicon analog controllers optimized high frequency Gan and silicon carbide to enable even higher efficiency density and integration at a lower cost.
As you know <unk> is a unique capability to go towards an integrated circuits much of what were integrating again has traditionally been designed into the silicon analog controllers.
With this new capability and controllers, we can accelerate our pace of development and innovation with the optimal partitioning and integration between the silicon controllers, and again power devices to deliver more value in a more complete solution to our customers.
The initial products from this venture target mobile Chargers consumer adapters, and our plants auxiliary power supplies.
Overtime, we expect this technology will be introduced in all of our target markets, including EV solar and storage data center and more industrial applications.
We closed the elevation transaction last week with 22 employees, joining our company composed mainly of design applications products and test engineers.
The first generation products were introduced last year and already have generated dozens of customer events and appreciable ramping revenues.
These products will be rebranded as <unk>, plus we will launch a new generation family in March at the <unk> power Electronics show.
Let's turn our progress for each of our target markets.
And we've.
We've established a strong position with our silicon carbide technology and ultrafast roadside charges.
Our level III DC fast Chargers deliver up to 350 kilowatts of power were up to 20 miles per minute of charging.
And at 10, 80% charge and when the 18 minutes dramatically reducing range anxiety concerns for consumers.
Our silicon carbide differentiation resides in the technology itself in which we deliver industry, leading ink circuit efficiencies and cooler temperatures.
Furthermore level III charger architectures are moving to a higher bus voltage from 1000 volts to 500 volts, which helps to increase power density simplify designs and further improve efficiency reliability and cost a 500 volt bus requires up to 3300 volt silicon carbide device capability of Volcker.
<unk> range for now the top selling carbide based unequaled performance with limited competition.
Our silicon carbide technology has already been adopted by over a dozen roadside charge, our customers and is being integrated and over 50% of the U S say Chargers, including Electrify America and EV go Joe.
Just one of these customers, we expect shipments to approach a million units by the end of Q2.
The total roadside charge a potential for silicon carbide is estimated to be over $1 billion by 2030 growing at a 30% annual growth rate.
We believe this year's rollout of the inflation reduction Act, which includes $7 5 billion for EV charging infrastructure will accelerate this roadside charter growth rate and add significant upside to this market.
This month, the biting administration announcing goal to install a half a million EV charges in the U S. By 2030 with all EV charging funded through the bipartisan infrastructure law built in the United States.
Also by July 2020 for at least 55% of the cost of all components will need to be manufactured domestically.
Matches, well with our Texas state Silicon carbide wafer manufacturing with our supply chain partner ex that.
In addition to the royalty charges, our silicon carbide technology is in development production for EDI onboard Chargers with major customers that include general motor BYD and Mercedes AMG.
As previously announced we have created a joint design center in Germany, a rising China based <unk> player with almost 10% of worldwide sales in 2022.
This center will initially co develop next generation onboard charges <unk> utilizing a combination of our Gan silicon carbide and digital isolated to address both 400 volt in 800 volt battery system.
If the <unk> center in our existing EDI system design Center, we are developing five onboard system platform supporting 10 customer projects to utilize our Gan on silicon carbide and we're still on track for our first Gan based <unk> and production in 2025.
Let's turn to renewable energy were installed solar power capacity is expected to exceed that of natural gas in 2026, and a coal by 2027, becoming the largest in the world, reflecting a three X increase in installed capacity from 2022 2027.
In commercial string Inverters, we have over 20 customers in production or development today, including AP systems power electronics chain robot son grow BYD and X sight.
As with EV DC fast Chargers bus voltages and solar and energy storage are also rising to 500 volts driving more of this market to our strength with 3300 volt silicon carbide capability.
As recently announced Germany, <unk> has achieved 25 degrees C cooler temperatures and three X longer expected lifetime in there for six kilowatt solar string inverters. Thanks to our unique trencher assistant Planer Silicon carbide technology.
For residential solar my friend Burgers convert low voltage DC to high voltage AC power at 350 to 415 watts per individual panel here.
Here again is still on track for a significant 2020 for revenue ramp with multiple solar residential customers.
We also anticipate accelerated growth in this segment as the inflation reduction act dedicates over $50 billion to solar storage and wind starting this year.
Turning to home appliance and industrial applications, we continue to make excellent progress across Gan on Silicon carbide, and we now have over 45 customer projects either in production or development.
Gallium nitride or Gan half franchisees are shipping in high volume in the appliance market all silicon carbide is shipping in volume today with high power industrial motor control applications.
In total we anticipate 2023 appliance and industrial revenues increased nicely as a percentage of <unk> revenues.
Here again, the inflation reduction act dedicate to $9 billion to upgrade U S home appliance efficiencies, which we anticipate will create additional tailwind in this segment.
In data Center news, the European Union's high efficiency requirement for power supplies and newness titanium plus came into effect on January one.
Now ill toss dedicated data center team continues to develop for high performance system platforms to deliver titanium plus efficiency higher power density and lower system cost compared to legacy Silicon systems.
These system platforms have enabled 10 customer development projects all of which target production later this year or early 2024.
In mobile fast and ultra fast charging for smartphones and laptops design wins continue at a strong pace. Despite the market slowdown in 2022.
Last year, notwithstanding our customers develop nearly 100, new and fast charger designs from Samsung or Apple Lenovo Dell anchor anymore, plus the recent 210 watts and fast charger for Xiaomi Redknee note 12, which enables 100% charge in a lightning fast nine minutes.
In addition, our Gan technology is utilized in the new one plus 210 watt fast charger.
And now the task was just feature in the global one plus 11, five <unk> launch alongside Google Qualcomm and other major technology partners.
And this week, we announced the real knee GTE three with a 241 can pass charger.
Given our market expansion and diversification, we anticipate our mobile and consumer business to be appreciably less as a percentage of revenue in 2023 as compared to 2022.
In summary, 2022 was a year of significant expansion and diversification and technology markets and regions.
Now with leading edge Gan silicon carbide neutral Isolator and analog controller, we are uniquely positioned to displace legacy silicon power devices and multibillion dollar established markets. While also enabling the electrification of major new growth markets like solar energy storage and electric vehicles.
Now over to Ron Shelton our CFO .
Thank you Jane and thanks to everyone for joining us this afternoon.
My comments today I'll first take you through our fourth quarter and annual 2022 financial results then I'll walk you through our outlook for the first quarter and the full year of 2023.
Revenue for the fourth quarter grew to $12 3 million that represents 68% growth from the fourth quarter of 2021.
For the full year of 2022, we grew revenue to $37 9 million.
Representing year over year growth of 60%.
This is in line with our guidance.
Looking back 2022 was truly a pivotal year for <unk> as.
As we exited the year, we had most of our revenue coming from Gan based products focused on the China mobile market.
We exited the year with our end markets diversifying beyond that smartphone market.
Into home appliances solar data center industrial and easy.
Not only have we maintained our leadership position in the gas market are.
Acquisition of Genesis immediately gave us entry into the silicon carbide market with industry, leading products for which we are seeing significant demand.
Together with Gan, we exited the year as a pure play next generation power semiconductor company with a complete set of products industry, leading technology organizational scale.
And our most important asset the group of incredibly talented and committed employees to successfully address the market opportunity totaling over $23 billion by 2026.
Before adjusting expenses I'd like to refer you to the GAAP to non-GAAP reconciliations in our press release earlier today and the rest of my commentary all cost and operating expense commentary will.
We will refer to non-GAAP cost and operating expenses.
non-GAAP gross margin in the fourth quarter was 46% an increase from 38, 4% in the third quarter as we benefited from a shift in the mix of our product revenue for fiscal year 2022, non-GAAP gross margin was 48% compared to 45, 4% in the.
The prior year.
As we were adversely impacted during the year by higher wafer prices from TSMC and.
And that strategic decision early in 2022 to absorb lower margins and a targeted new market.
Margins in this new home appliances industrial market will significantly expand through 2023, as we transition to cost optimize gen four Gan products.
Total non-GAAP operating expenses were $16 9 million for the fourth quarter of 2022.
Our non-GAAP SG&A expense was $7 1 million.
The non-GAAP R&D was $9 8 million in the fourth quarter of 2022.
Fourth quarter expenses reflect the full quarter of Genesis operations and continued investment in that business a full quarter of consolidated results from our joint venture, which was subsequently acquired and closed last week.
And as we mentioned in our remarks last quarter <unk>.
Kris compensation, including a bonus paid to China employees, which was effectively an additional months of salary.
For fiscal year 2022, non-GAAP operating expenses were $56 2 million.
<unk> to $35 3 million in the prior year.
This increase reflects continued significant investments in new products technologies and markets and includes expenses rising from the completion of our Genesis and <unk> acquisitions and consolidation of our joint venture beginning in Q3 all.
All of these investments are laying the stage for significant growth in the future.
Putting all this together with non-GAAP loss from operations was $11 $9 million compared to a loss from operations of $6 $9 million in the fourth quarter of 2021.
As we continue to invest simultaneously across new markets and this phase of our company's growth.
Our weighted average basic share count for the fourth quarter was 152 4 million shares.
Turning to the balance sheet. It continues to remains strong with high levels of liquidity.
After paying off debt of $4 5 million.
Cash and cash equivalents at quarter end were $110 3 million.
Components of working capital, we continue to remain a focus and we are seeing progress on that front.
Receivable was $9 3 million compared to $10 $9 million in the prior quarter, reflecting improved days sales outstanding.
Inventory rose to $19 1 million compared to $17 million in the prior quarter and that was largely due to the transition from one generation of products to the next.
We carefully manage that transition in days in inventory were relatively flat sequentially.
Overtime, we are confident that our inventory levels will trend towards our long term target for inventory turns better than three times.
Moving on to guidance for the first quarter. We currently see revenues is relatively flat on a sequential basis.
This represents substantial year over year growth of approximately 85% over the $6 7 million. We recorded in the first quarter of 2022 and it reflects the expansion of our product lines and new market opportunities.
Our guidance assumes continued strength in demand for silicon carbide products with some limitations and supply shortened quarter due to Chinese new year.
As we look further out into 2023.
We believe with our expansion in supply availability for silicon carbide products.
Recovery in the mobile market beginning in Q2.
An anticipated expansion into new markets, but we can double revenue over 2022.
Gross margin for the first quarter is also expected to be relatively flat on a sequential basis.
Due to an increase in Gan wafer pricing from our foundry partner.
However, we continue to expect that gross margins will expand over the next few quarters.
As we transition to Gen four gan products and gain share in new higher margin market segments.
For these reasons, we expect our gross margins will continue to grow through the year and trend to the mid Forty's as we exit 2023.
In total our non-GAAP operating expenses in Q1 are expected to be approximately $18 million and this excludes stock based comp transaction expenses and amortization of intangible assets.
The sequential increase is due primarily to compensation increases and incremental audit fees.
We will continue to invest in growth, but expenses will decline as a percentage of revenue as we scale throughout the year.
With that in mind, we expect that expenses will increase at a rate of mid to high single digits on a quarterly sequential basis.
For the first quarter of 2023, we expect our weighted average basic share count to be approximately 156 million shares.
So in closing we are pleased with the results for the quarter and we are excited about the significant opportunities in front of us as the only pure play next generation power semiconductor company in the industry.
We intend to invest resources in our targeted end markets products and technologies with the intent of becoming one of the fastest growing power semiconductor companies in the world.
Operator, let's begin the Q&A session.
Certainly at this time, if you'd like to ask a question. Please press star one on your telephone keypad, if I could draw your question again press Star one.
Our first question comes from the line of Ross Seymore Deutsche Bank.
Your line is open hi, guys.
Hi, guys. Thanks for letting me ask question. Thanks for the end market color that diversification is very impressive to see just wondered if you thought by those end markets within the doubling of revenue growth and even the first quarter guidance any sort of directional color by those end markets.
Yes, Hi, Ross.
From you.
Yeah. Thank each of them are growing OE comment that that the mobile recovery, we see starting in Q2, but given that recovery is starting Q2 and flowing into the second half of the year, we see that growing less than the others overall, but each market showed strong growth year on year.
And then gene for my follow up you talked about the gross margin increasing in exiting the year at about 45% or the mid <unk> can you just talk about the puts and takes I know mix is going to be a tailwind gen four traction, but any sort of color on those metrics.
Really as Ron as Ron said, it's primarily the trend for transition silicon crop prices are stable those margins are north of 50% as we've commented before we will also benefit from increasing margins as the again enters higher margin higher power market. So those are the primary factors.
Having that incremental improvement.
Great. Thank you.
Thanks Ross.
Blake Friedman with Bank of America. Your line is open.
Hi, Thanks for taking my question just wanted to follow up on the gross margin side of the business is there any way you can quantify the headwind that's coming from the higher wafer cost that you mentioned in the opening remarks.
Yes, we had actually mentioned that Thats been commented on by many in the industry. There was a 6% additional increase one time that kicked in in January of this year.
Thats, causing some of the muted.
Margin or flat margin Q4 to Q1, but to put that in perspective for the full year, that's no more than 1% gross margin impact.
As quickly offset by our margin expansion and cost reduction coming from Gen. Four.
Got it helpful. And then just quickly following up I believe you previously previously said that Sip related sales were on track to grow at a 60% CAGR in that this year I just want to confirm you remain on track to hit that target for this year.
Yes, we haven't given a breakdown or a specific growth target for organic sick, but it's fair to say both are growing very strongly year on year contributing to that doubling.
Great. Thank you.
Thanks Blake.
Tristan <unk> with Baird. Your line is open.
Hi, This is Tyler on for Chris and Thanks for taking my question could you provide an update on the adoption rate and Scott Karnes for again that you're currently seeing and maybe provide a year end target of greater adoption rates could go.
Yes, Hi, Tyler Thanks for your question.
Yes, I think as we've described before a few factors number one.
The adoption rate is.
We don't have a specific percentage, but its certainly very strong in what we call. The ultrafast Chargers 100 Watt and hire you saw highlight a number of them.
We see that trend now moving and strong adoption moving into more mainstream in the <unk>.
60% to 100 Watt range.
And we see some adoption picking up even below that but certainly the strongest adoption is in that 100 watts and above and we think that will continue the.
The other comment I would make is we're also on track for a system cost parity with silicon Chargers that will contribute heavily to accelerating the adoption that mainstream category of sort of 30 to 100 Watt range.
Great and for my follow up what are the implications of the ramp of AI and data centers and power supplies and the potential benefit for the adoption of <unk> technology in the data center.
Yes, great Great question in fact, we didn't really give that color, but you have two fundamental challenges you've got these new standards for higher efficiency titanium plus demanding higher efficiency at the same time, the AI intensive datacenters are demanding more power.
It's putting a lot of pressure on the power spikes that have to deliver on both of those requirements that pressure of course is great for again, because silicon struggles to deliver the higher power density, but also struggles to hit the higher efficiencies of titanium plus so we think all of that is contributing to the acceleration in that market and of course, we'll be launching our first scan based data centers as well.
About reshaping into those markets later, this year and ramping significantly into 'twenty four.
Great. Thanks again thanks.
Thanks Tyler.
Kevin Cassidy with Rosenblatt Securities. Your line is open.
Hi, guys. This is a cleaner on for Kevin Cassidy. Thanks for taking my question.
In your prepared remarks, you spoke briefly on it but.
But could you get into some detailed commentary on the current silicon carbide.
Supply dynamic.
Yeah very good question, we didn't talk much about it but last quarter, we announced that we.
Signed a multi year long term agreement with X fab and the material suppliers.
For the Silicon carbide substrate and EPPY that enables a five X increase in supply from middle of last year. When we acquired the company throughout this year and ramping into next year. So that's a major.
Supply agreement as you know we're shipping all we can all we can build as much of the industry is.
And that supply we're going to start in Q1.
It is for wafer starts and the material to feed those start so we actually feel there's significant capacity expansion and therefore, the commensurate revenue growth in Q2, and all of that increase supply goes through the supply chain. So that's on track.
A great deal for us and well fueled a lot of the silicon carbide growth from Q2 and beyond.
Okay. Thank you and then kind of related follow up.
Could you just.
Yes.
Provider qualification.
Your new substrate provider.
Yes, we haven't revealed the name or disclose the name of the suppliers.
So there is not much more color to add about the substrate suppliers at this point.
Okay.
Thank you.
Quinn Bolton with Needham Your line is open.
Yeah, Hey, guys. This is <unk> on for Quinn. Thanks for letting me hop on and ask your question.
So on the Ebs silicon carbide announcements and sorry, if I missed this but when do you expect the roadside charge or an onboard charger opportunities to begin ramping.
Material part of revenue.
Yes that ramps already occurred we were shipping.
Even last year, we acquired the company in fact, we commented that EV last year and Thats, the only with a quarter and half benefit of the Genesis acquisition was at 5% of last year's revenue.
So thats almost all obesity onboard chargers as well as roadside charger and we highlighted that both of those are growing nicely and really will be accelerated by our EV design center, both the general one supporting customers globally as well as the new Gili collaborative one that we've created.
And we gave a number of comments about significant position in roadside Chargers and why that's moving up into the right.
And can you comment on the Asps for these solutions.
Yes, silicon carbon intensive power level on the application, but in general the silicon carbide devices tend to have asps sellers range from anywhere from two to $20. It can extend beyond that range depends on the parallel one oftentimes we're paralleling many of them in some systems, depending upon again the application power level.
It can be dozens of devices.
And dozens of dollars if not $100 of content per system, but it really does vary depending from the power level and applications.
Okay. Thank you and a quick clarification, you stated that mobile.
Total charges to be less of a percentage of revenue in 'twenty three relative to 'twenty. Two did you mean total revenue or gain in revenue.
Total.
Okay.
Alright, thank you.
Yes, Thank you Trevor.
Good with Gould tactical growth Youre line is open.
Hi, Yes. This is <expletive> Gould.
As a follow up to Kevin's question on the Silicon carbide supply can.
Can you give a sense of how much the insufficient supply in silicon carbide held back.
Your revenue it sounded like you could have shipped more had you had the substrate available.
Yes are you, referring Victor Q3, Q4 last year, yes, yes.
Yes, I don't think we gave specific numbers, it's always hard to judge because theres quite a bit of demand there.
There that could have been shipped but.
Certainly.
Or two per quarter.
Sort of a conservative estimate.
Okay, and then just a follow up on the on the Gan side can you also describe your supply situation I understand you are adding to supply over the course of this year.
Yes, I mean, I'm, assuming similarly to silicon carbide ramping gradually from from first quarter on.
Yeah actually in last.
We had announced that that TSMC had tripled the capacity last year. Most of that capacity was added I think by the end of last year. When you couple that tripling and we took a big share of that capacity as they are leading customer.
With the softening in the China mobile market that we saw middle of last year in the second half of last year that opened up a lot of capacity. So it's a pretty different situation. We enter the year with a pretty strong capacity situation. We're not supply limited in the case of Gan and we expect that will continue throughout the year.
Terrific. Thanks.
Thank you Nick.
Tim Peterman with Craig Hallum. Your line is open.
Okay.
Hey, guys. Thanks for taking my question.
I think I heard <unk> say in response to a question earlier that mobile.
As a as an end market was going to show growth in 'twenty three over 22, I guess that was a little surprising to me just given kind of the run rate. So you're exiting the year at can you talk about.
I guess did I hear that right and then can you talk about kind of the assumptions that are baked into your mobile outlook for the year.
Yeah, No you heard it right it will grow strongly not as fast as the other markets since it gets sort of a slow start with that Q2 recovery just starting next quarter.
But it does benefit not only from that market coming back we see inventory levels in the channel quite low we see forecasts and even backlog.
Coming back and indicating that Q2 recovery and a stronger second half of the year. We also highlighted nearly 100, new Gan Chargers developed with our customers last year, adding to the ones already released in the market that puts us at something like 250, plus Gan Chargers released to production many of them ready to launch.
As that market comes back.
And we still got another 250 in development behind that so there's a lot of positive things there that will drive that growth, but we're still cautiously optimistic and planning that growth as I said good growth year on year, but even stronger growth in the other markets.
Okay. That's really helpful. I guess as a follow up I wanted to ask on the data Center markets you talked before about I think last quarter $5 million purchase order, we thought would ship in the back half of this year is that still on track and then more broadly I know you.
I think you said you have 10 programs right now is to get nine last quarter. What are you seeing in terms of design activity.
Just in that market I know there are certain areas that you know.
The spending is slowing and then the data center, but I mean, you guys, obviously being at the leading edge may not be seeing that but I'm just curious.
How youre seeing the data center market.
That particular program, we highlighted last time has delayed into 'twenty four but with that said as you pointed out we've actually increased the customer pipeline, including that one from nine to 10, so trending up a little bit there.
We don't see any signs of slowdown I think that one program that pushed to 'twenty four is kind of unique and not a reflection of any macroeconomic trends that we can see.
So I think it looks positive, but as you say we're early in that market. We're not the best indicator of it we see all upside coming from zero and we see a lot of strong tailwind between titanium plus and the earlier comments about the AI data centers demanding more power from the power supplies.
Okay, great. Thanks, guys.
Thanks Sam.
Jon <unk> with CJS Securities. Your line is open.
Hi, This is Ross kesselman infer John a quick question.
Could you maybe specify on the traction youre seeing from policy changes such as the Iranian different funds for renewables in the titanium standards for Europe , I know you touched upon it but do you think you could add a little bit more color.
Yes, I think that titanium standard is a unique one that's already.
In place started January one specific to EU, but most of these power Spicer designed to meet global standards to meet the minimum required standard out there, which is or where the toughest standard I should say, which is that titanium one in Europe . So that one is clearly driving strong trends for us. So we have actually four different customer platform server platforms for data centers.
Development all of them meeting that titanium standard.
Looking closely what those 10 customers that I.
<unk> talked about I think inflation reduction act is a little different it's huge amounts of money as we highlighted over $50 $60 billion in our target markets. It is just rolling out this year. So I think it's early to talk exactly what the impact is going to be those are big numbers. They are bound to have an impact in each of these areas sustainability or I should say.
Renew ability.
In solar in particular.
Upgrading home.
<unk> energy efficiency and also the EV roadside charger infrastructure, but I think time will tell exactly what that impact will be as we see those dollars flow to consumers to our customers and then ultimately to our business.
Got it.
No you've mentioned previously that there has been a kind of a constraint on the silicon carbide products have you seen any indications of improvement in that area.
Yes, I would go back to the long term agreement, we signed last quarter that now starts this quarter and it translates into increased revenue capacity to support that revenue starting next quarter and Thats a five <unk> increase it's not a step function, but it's five X from middle of last year, when we acquired <unk> and ramping through.
This year and into next year, so that gives us a lot of headroom to do more if we can do it.
Got it. Thank you so much for the additional color.
You bet. Thank you.
Again, if you'd like to ask a question. Please press star one on your telephone keypad Italian <unk> with Jefferies. Your line is open.
Yes, hi, Thank you guys for taking my question.
So the one I had for Eugene I just wanted to understand this joint venture acquisition, a little bit better is that fair to assume that it's moving you guys to the parity with silicon pricing Foster forget solutions or is that kind of accelerating that parity for the higher voltage applications. Thank you.
Yes, Thanks mentality I know, it's a great question, a good observation youre exactly right or what we're doing there is not only developing leading edge analog controllers that are optimized for higher frequency again, it's on carbide, where actually co packaging them with our optimized again when you combine that with the cost reduction and performance improvement of Gen. Four.
That's also rolling out simultaneously, you'll get a really nice improvement in performance reduced size footprint.
<unk> power density, but also helping us on that Bom cost and it is a factor driving us to that system cost parity compared to silicon specifically around mobile Chargers consumer doctors.
And I also mentioned the.
Home appliance auxiliary power supplies.
Awesome. Thank you that's really helpful. And then the other one I had was about the Houston see Jean if I understood correctly, you mentioned that you guys saw a 6% increase this January January 2023 is that fair and then.
Hi.
I think historically, you've heard of maybe some potential kind of annual increases in November .
How should we think about that dynamic do you have some kind of price.
Already expected price increases or contractually contractual loan.
Alright, Yeah, Thats right, 6% in January I think you've heard that from probably many suppliers certainly not unique to us in any way, we had alluded or anticipated. It in earlier quarters. There was a prior 20% as the whole industry discussed and felt but we do see these as one time events that are unique in the supply and demand.
<unk> situation for the industry, obviously, the whole industry is shifting I think it's shifting to a more balanced place and we look forward to a more.
Healthy cost reduction environment, and that's certainly what we expect going forward. We certainly don't anticipate any further cost increases and don't have any contractual agreements that would suggest any cost increases.
Thank you very much.
Thanks Natalia.
Ross Seymore with Deutsche Bank. Your line is open.
Hi, guys. Thanks for let me sneak in a follow on here.
The end market color again is very helpful. I just wanted to walk through just a little bit of your view on the mobile market. I know you said it will start growing again in the second quarter can you just talk about where the channel inventory is and if I'm doing my math it all correct and it seems like you didn't ship very much at all in the fourth quarter itself into the mobile market was that generally correct in order to get the <unk>.
Inventory down before it starts popping back.
Yes, Q4, and Q1 were both pretty soft certainly not zero, but certainly soft compared to expectations in prior quarters. We don't report channel inventory, but we certainly see that significantly reduced and hopefully bottomed out.
And that only adds to our confidence.
With actual increased order.
Take.
We have a very strong backlog fully booked out on Q1 strong bookings into Q2.
And increased forecast from the customers so all of that taken together.
Leads to our our anticipation of that Q2 recovery.
And is there a seasonality to that business or is the channel dynamics in China reopening and the prevalence of a huge number of design wins much more important to think about that any sort of seasonal pattern.
No I think seasonality is always a factor in mobile and consumer Q1 is typically soft anyway independent of this unique situation. You've also got Chinese new year, which always has an impact both on consumption and production. So I think all of that rolls together to add to sort of a softer or modest Q1, and probably then add too.
The recoveries that we're seeing in Q2.
Perfect. Thanks, guys.
Thanks Ross.
This concludes the Q&A portion of the call and concludes the Navickas semiconductor fourth quarter 2022 earnings Conference call. We thank you for your participation you may now disconnect.
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