Alpha and Omega Semiconductor Limited Q3 2023 Earnings Call

Ladies and gentlemen, Hello, and welcome to the Alpha and they make US semiconductor fiscal Q3 2023 earnings call.

My name is Maxine and I'll be coordinating today's call. If you would like to ask a question. During the presentation you make these type of passing stuff led by one on your telephone keypad.

I will now hand, you over to eat yet sigh of the Blue shirt group to begin Eugene. Please go ahead when you're ready.

Good afternoon, everyone and welcome to outlet.

Semiconductor conference call to discuss fiscal 2023rd quarter financial results.

Today our students.

Yes.

This call is being recorded and broadcast live over the web.

Replay will be available for seven days following the call can be found in the.

Section of our website.

Today's call will proceed as follows.

Beginning with <unk>.

By strategic highlights and a detailed segment report.

After that <unk> will review the financials.

And provide guidance for the June quarter.

I know you will have the Q&A session.

The earnings release was distributed over the wire maybe for Tony.

The market of course.

We believe it is also posted on the company's website.

Our earnings release and this presentation include non-GAAP financial measures.

These non-GAAP measures because we believe they provide useful information about our operating performance that should be considered by investors.

Jackson with the GAAP measures.

A reconciliation of these non-GAAP measures.

Comparable GAAP measures is included in the earnings.

We remind you that during this conference call, we will make certain forward looking statements including discussions.

And financial projections.

These forward looking statements are based on management's current expectations.

Risks and uncertainties that could cause our actual results to differ materially.

For a more detailed description of these risks and uncertainties. Please refer to our recent and subsequent filings with SEC.

We assume no obligation to update the information provided in today's call.

With that I will.

I'll now turn the call over to our CEO Steven Chang.

Steven.

Thank you Tia and good afternoon, everyone.

I will begin today with a high level overview of our results and then jump into segment detail.

Our fiscal Q3 results were near the high end of our revenue and gross margin guidance revenue was $132 $6 million non-GAAP gross margin was 25, 1% and non-GAAP EPS was negative 21 sites.

As we indicated last quarter our performance this quarter reflects our effort to bring customer inventory levels back into balance as quickly as possible in response to the sharp industry wide inventory correction, particularly in PC and smartphones.

As for the broader market environment and consumer demand continues to be weak. However, we are optimistic that the worst is behind us given the intensity of the inventory correction, coupled with our proactive measures.

Looking into the rest of the year, we expect it to recover a good portion of the revenue decline and the upcoming June quarter with further improvement expected in our seasonally strongest September quarter.

In terms of our operations our near term focus is continuing to work with our customers through the inventory correction and preparing for peak season.

We're looking forward to the upcoming fall flagship phone launches and the holidays, all of which are big opportunities for us given our leading share with the leading Oems in each of these end markets.

As I look to the long term as the newly appointed CEO of Eos and positioning the company towards growth beyond our near term 1 billion dollar revenue targets over the years <unk> has grown to be a major global power semiconductor supplier to tier one players across Pcs graphics.

Gaming smartphones appliances and power tools to name a few.

However, we are just scratching the surface of potential opportunities in front of us in the coming decade. The electrification of everything trend is set to accelerate and it will shape our lives in profound ways.

Growing concerns over climate change and the need to reduce dependence on fossil fuels will continue to drive the transition towards electric vehicles and clean energy.

Advancements in generative AI withdrawn exponentially higher demand for high performance computing data centers and spur advancements in robotics.

Rapid progress and battery technology will likely usher in a growing array of higher voltage portable electronics similar to recent developments in power tools.

Moreover, continued advancements in Iot and high performance computing will pave the way for widespread adoption of new cutting edge products, such as smart devices for the home and work.

All of these new use cases will drive more demand for power management solutions and significantly expand the market opportunity from the $50 billion Tam today.

Semiconductor has had become an essential part of our daily lives and our homes in our workplaces and in our communities.

AOS is comprehensive range of products, which covers a wide voltage spectrum positions us at the epicenter of this monumental trend that is set to transform every facet of our buys and the industries that we know to date.

I'm determined to drive AOS towards even greater success and capitalize on this exciting future and have my sights set on AOS, becoming a multibillion dollar business by the end of this decade.

We plan to take our products deeper into our existing core markets like Pcs and smartphones with more integrated solutions and drive higher Bom content.

We will leverage our core technology, IP and strength in advanced computing battery motor and power supply.

To invest or indeed in new adjacent markets like data centers for AI automotive and energy generation.

Our supply chain strategy is another key piece of that puzzle that is critical to us, reaching new heights over the coming decade as.

As we look towards our future we remain committed to optimizing our supply chain strategy.

I understand that diversification is key to maintaining reliability of supply and Thats why we are exploring additional foundry partnerships in new geographical locations to expand our production capabilities.

Further we will continue to balance between internal manufacturing and third party foundries to ensure a more robust supply chain that delivers top notch products to our customers.

Our success in attaining a record number of tier one customers is no coincidence.

It is a direct result of our unwavering focus on providing products that are both compelling and reliable.

By unparalleled customer service and engineering support.

We strive to solve our customers' power problems with a user friendly system approach by providing a total solution.

As CEO I will continue to make sure. This commitment to excellence remains one of our core values and constantly strive to exceed our customers expectations with every product and service that we deliver.

Lastly, our talented and dedicated employees are who make this possible.

We build upon our strong foundation and momentum I will continue to foster a work environment and culture in which our employees can fully unleash their talents with respect and care.

With that let me now cover our segment results and provide some guidance by segment for the next quarter.

Starting with computing.

March quarter revenue was down 57, 7% year over year, and 44% sequentially and represented 28, 7% of total revenue. These.

These results were driven by lower shipments across all computing applications magnified by March quarter, being our seasonally weakest quarter.

However, we believe inventory at some of our customers Hasnt been depleting and we are seeing a resumption of orders for the June quarter.

Our current visibility sees encouraging demand recovery in some applications.

For the June quarter, we expect total computing segment revenue to be up about 40% sequentially.

Turning to the consumer segment March quarter revenue was up slightly year over year and decreased five 5% sequentially and represented 33, 6% of total revenue.

These results were in line with our expectations driven by strong gaming volumes, which grew 68, 2% year over year and decreased 11, 3% sequentially.

In addition, we saw a 30% sequential recovery from both home appliances and E mobility, which includes E bikes and E. Scooters. Another application of the AOS is addressing with our medium voltage solutions for motor and battery management.

Looking ahead, we anticipate our consumer segment revenue to be flattish or slightly dropped sequentially.

Next let's discuss the communications segment revenue in the March quarter experienced a considerable decline of 33, 7% year over year, and 45, 4% sequentially, making up only 14, 5% of total revenue.

Drop in revenue was primarily attributable to weak consumer demand and the ongoing inventory correction in smartphones across all regions. The.

The correction seems to be taking longer than we initially expected, which will cause this segment to remain weak and we currently expect single digit percentage decline in the June quarter. Despite these.

These challenges we remain optimistic about a rebound in the second half of the year in our seasonally strongest quarters for the fall launches and ahead of holiday sales.

Now, let's talk about our last segments power supply and industrial which accounted for 20% of total revenue.

March quarter revenue decreased 29, 6% year over year, and 35, 7% sequentially.

The performance by application in this segment was mixed PC power supply a quick Chargers for smartphones were weak consistent with the declining trend in PC and smartphone sales.

But power towards exhibited positive signs of recovery.

65% sequentially.

For the June quarter, we anticipate this segment will rebound with about 50% sequential growth, primarily driven by increased demand by our tier one U S smartphone customer and China's high and quick charter demand.

Additionally, we anticipate continued strength in the power tool category.

In closing as we stated last quarter, our business is affected by the economic environment and industry cycles.

Given our strong fundamentals, leading technology more diversified product portfolio tier one customer base in all our business segments.

Banding manufacturing capability and supply chain and robust balance sheet. We are in the best position, we have ever been to continue our growth momentum. Once this downturn is past us.

Moreover, the encouraging data from our backlog and constructive conversations with our customers. These us to believe that the March quarter was the bottom and that the worst is now behind us.

As such we are optimistic about the future and look towards executing on the opportunities ahead of us.

With that I will now turn the call over to <unk> 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.

Revenue for the quarter was $132 6 million.

Tom.

99, 8% sequentially and 34, 8% year over year.

Reflecting the current industry wide inventory correction.

In terms of product mix.

MOSFET revenue was $81 million.

<unk> 41, 2% sequentially.

<unk> 42, 2% over last year.

Power IC revenue was 47 4 million down five 1% from the prior quarter.

92, 1% from a year ago.

Assembly service revenue was $6 million as compared to $1 2 million last quarter and $2 3 million for the same quarter last year.

License and engineering service revenue was $3 6 million for the quarter.

In February 2023, we entered into a license and engineering service agreement with a leading power semiconductor automotive supplier related to our silicon carbide technology.

The total amount of $45 million.

These contracts.

Further validates the technical leadership of our Silicon carbide technology.

In the agreement. Besides the license we will also provide product development and engineering services over the next 24 months.

The revenue related to this agreement is recognized over the contract period.

non-GAAP gross margin was 25, 1% compared to 29, 5% in the prior quarter and 36, 7% a year ago.

The quarter over quarter decrease in non-GAAP gross margin was mainly driven by a less favorable mix and lower manufacturing efficiency.

non-GAAP operating expenses were $36 2 million compared to $32 8 million for the prior quarter and $34 million last year.

So quarter over quarter increase was primarily due to last quarters reversal true up in variable compensation accruals.

non-GAAP tax expense was $2 5 million versus $1 5 million last quarter and $2 2 million in the prior year.

Quarter over quarter increase was due to the withholding tax on the $18 million payment received under the Silicon Carbide license agreement mentioned previously.

non-GAAP quarterly EPS was negative 21.

Third to 67 last quarter and $1 34.

A year ago.

Moving onto cash flow.

Operating cash flow was $11 6 million, which included 18 million first tranche payments received from our licensing deal.

$8 9 million repayments of customer deposits.

By comparison.

Operating cash flow in the prior quarter was <unk> 3 million, which included $12 $2 million net repayments of customer deposits.

Operating cash flow a year ago was $61 8 million, which included $6 $4 million net customer deposits.

We expect to refunds around a total of $30 million customer deposits in calendar year 2023.

Consolidated Ebitdas was $6 5 million.

Compared to $31 8 million last quarter, and $48 4 million last year.

During the quarter.

We repurchased.

<unk> hundred 7000 shares of our stock.

$2 7 million through our existing share repurchase program that was previously approved by the board.

We also purchased 217000 shares of employee restricted stock units vested during the quarter.

By paying $5 5 million withholding tax on behalf of employees.

Now, let me turn to our balance sheet.

We completed the March quarter with cash balance of $265 9 million.

Compared to $287 8 million at the end of last quarter.

The cash balance a year ago was $323 1 million.

Net trade receivables were reduced to $19 4 million.

Compared to $53 2 million at the end of the prior quarter.

Days sales outstanding were 30 days for both this and the prior quarter.

Net inventory was $179 8 million at quarter end compared to $163 8 million at the end of the prior quarter.

Mm $143 5 million last year.

Average days in inventory were 152 days compared to 109 days in the prior quarter.

We expect average days in inventory to improve along with our revenue recovery.

Capex for the quarter was $22 7 million.

We expect Capex for the June quarter to range from $15 million to $20 million.

Our Oregon Fab expansion is complete and started ramping in March 2023.

Now I would like to discuss June quarter guidance.

We expect revenue to be approximately $160 million plus or minus $5 million.

GAAP gross margin to be 24% plus or minus 1%.

We anticipate the non-GAAP gross margin to be 25, 8% plus or minus 1%.

GAAP operating expenses to be in the range of $45 5 million plus or minus $1 million.

non-GAAP operating expenses, you expect it to be in the range of $36 5 million plus or minus $1 million.

Interest expense to be approximately $1 2 million.

And income tax expense to be in the range of $1 3 million to $1 5 million.

With that we will now open the call for questions.

Operator, please start the Q&A session.

Thank you ladies and gentlemen.

If you would like to ask a question. Please press star followed by one on just kind of think Adler.

So just wanted your mind please press <unk>.

By team.

Thanks Ross your question. Please ensure that your line is underway.

Our first question today comes from David Williams from Benchmark. Please go ahead, David Your line is now open.

Hey, good afternoon. Thanks for letting me ask a question and Steven Congrats to you on the disposition and.

Just finding the bottom so it's good to see.

Thanks, David I appreciate it.

Yes, so first I wanted to ask even on the gross margin.

Obviously, you had some pressure last quarter and understandably with the mix and the utilization, but just kind of curious how we should be thinking about margin as you get back up to more normalized revenue levels.

Typical run rate can we see this return to where we were previously in the mid 30 range or is there anything structural that's going to keep you maybe maybe a little bit below the 30 longer term.

Now for US our current model is still to move and move towards that mid.

Mid 30% range right now and that the market has flipped from a sellers market to a buyers market. So we do have to.

To be competitive in order to to protect our business and also to grow share. So in the time being before the market recovers.

We'll be shy of that target, but that doesn't change nothing structurally changes our model for for when we get out of this the market situation. We're in now.

Okay. That's fair so is it.

Should we think about this is you're competing on price and so youre, giving margin to get the business or are you able to maintain kind of your pricing just from a competitive and maybe a performance competitive stance.

Certainly we will compete on performance, it's more of that in the last few years during the supply shortage and we didn't touch price and or in some cases, we have increased prices.

In that environment, which is very very unusual.

Our market.

Our products continue to compete on our performance, but we also need to price accordingly in the market.

Okay, great. Thanks for the color and then Stephen just maybe your strategy and maybe I missed this in your opening opening.

Remarks, but how do you think about the IC business and just the opportunity there I know you've been a proponent of that and just kind of curious how maybe what your strategy is and as you go forward.

Sure.

<unk> is a key part of our business. It's been in one area that we've been broadening our product portfolio in order to address the higher margin content at the same time, we recognize that in some of our applications specialty in Pcs theres already been a move towards more integration, meaning using ics to replace small sets in certain sockets.

So for us, it's a necessary part of.

Being a part of that bond content going forward and with that we are seeing bom content increase and some of our applications.

So we continue to invest more in our Ics in order to bring out more power IC products.

These products tend to be more application specific so as we come out with more products now they will be tackling.

Sockets that we weren't able to address before.

Okay Fantastic and just one more if I might.

Just on the the licensing and engineering agreement that sounds very interesting around your silicon carbide. Just wondering if you could give us any more color around that and then maybe what what segment or end market do you expect that product will be shipping into this automotive or.

Or what market that might be serving.

Sure certainly we are definitely excited about.

Clothing that licensing deal, it's great validation of our technology that another of our peers.

<unk> is that our technology can compete in.

The global space. So for US this is actually going to help us fund our ability to to grow. This business. This business does take a lot of investment in terms of.

The R&D as well as to secure the supply chain.

It's going to help us to enter into markets that we haven't been into before such as automotive or industrial power supplies.

So Bruce.

We're excited about the new address new extension or a new of our of our product portfolio.

Thank you best of luck on the quarter guys.

Thank you.

Thank you. The next question comes from Craig Ellis from B Riley <unk> Securities. Please go ahead. Your line is now open.

Yes, thanks for taking the questions and I'll Echo the congratulations Stephen.

Great look forward to working with you I wanted to follow up on the last question. This may be more for <unk> can you just talk about how much revenue associated with the new.

Silicon carbide deal Retroact in fiscal <unk> and how much revenue is <unk>.

Tim.

For fiscal <unk>.

Sure.

We recognized $3 6 million.

Revenue.

From this licensing deal.

Agreement is for 24 months period.

The revenue recognition is going to be.

Spread out.

Over this contract period so.

Yes, we already baked in some estimated.

Revenue.

June quarter guidance.

And should it be about $5 million to $6 million a quarter. Upon if we just do the high level math that $45 million over a couple of years, so $2 million a month or is there something related to either technology development milestones or other that would cause revenue to be lumpier.

It's in that ballpark number but it is more.

Depends on the.

Engineering service hours.

Our team spend relative to two.

Overall total expected engineering hours, so it's more like.

So with the.

Progression of this.

Engineering service.

Yep.

And then just a clarification on that before I flip it to Steven.

So with.

That being the revenue impact $3 6 million in the quarter something greater than that.

And closer to $5 million to $6 million in the fiscal fourth quarter.

How do we think about the gross margin impact.

This contribution does it come in near our corporate average level or does it come in either materially lower or higher.

For the.

Licensing engineering service portion of the revenue on that day.

Okay.

Carries higher.

Gross margin for us.

Okay and that was baked into the gross margin color for the fiscal fourth quarter I would take it okay.

So Steven so nice to see that some of the businesses are rebounding strongly with the color that PC is up 40%.

Quarter on quarter, and industrial up 50% so to your point.

Point in the prepared remarks that there are some places where inventory is better can you just elaborate in more detail later in Pcs are you seeing good inventories that across the board or just in some products like chromebooks are gaming Pcs, which we've heard are stronger.

And then industrial can you characterize that and then.

Can you characterize maybe how bad things are in the communications market given it seems like were.

Seeing lower expectations now that maybe three months ago that would be helpful as well.

Sure Yes.

Yes.

I'd say, that's a necessary pattern to its tied to a certain types of <unk>, we know that overall you're going to end.

Demand is still a bit soft in terms of because both consumers and corporate buyers are delaying their refresh cycles.

That said that's not that.

At the component level. This is what we saw the sharper inventory correction, which led to our March quarter.

Our results and going into the June quarter, we are starting to see some signs of that inventory correction abating and certain sockets I can't really see is a clear pattern out of that asset that we are getting starting to get.

They aren't getting orders again part of this is also.

Dependent upon which customer you're engaging with because based on their inventory policy. During the shortage time, some hoarded it a lot more and ordered a lot more components during that time, whereas others. We're hand to mouth. So they don't really doesn't really have as much of an inventory correction problem. So it's more of a kind of a customer by customer.

In terms of their inventory levels.

And some are are exiting more out of that whereas others are still it still takes longer to actually get through that.

Got it and then could you just provide some commentary on communications, how do you feel about inventory levels in that end market.

Sure so the smartphone market embracing it with.

Starting with the correction even at the end of last year.

And we still see the first.

Sorry, I should say.

The March and June quarter is still relatively soft when it comes to the two two battery protection in general also those two quarters are usually the lower quarter because of just when our customers go through there.

Their phone launches so we're still preparing and anticipating that the second half will be stronger, but that will be seen.

As our customers release their fall refreshes.

And that leads me to my last question before I hop back in the queue. I think you commented in your prepared remarks you saw.

I'll leave it was.

Potential for growth.

In the fiscal first quarter, which is typically a seasonally strong quarter for the company can you just elaborate on that in more detail do you do you expect that.

Across the business for select segments, just any indications that you are getting about how the fiscal first quarter can play out for the company would be quite helpful.

Stephen Thanks.

Sure. So overall, we are ours are definitely looking at the second half to see whether it would be a rebound what.

What degree it can recover.

Right now it is still a bit murky in terms of the visibility of the end demand, but that said we are expecting the component level inventory correction to continue to improve.

Into the September quarter.

I don't think the demand will be back to what it was originally.

And typically that September quarter is the peak season.

But the end demand I think isn't quite there yet I think it's still being more of the impact of the relief from.

Inventory control abating.

Got it thank you.

Thank you as a reminder, if you'd like to ask a question. Please press <unk>.

Thank you Pat now.

Our next question comes from Jeremy Clean from Stifel. Please go ahead. Your line is now open.

Yes, Thank you and let me also add my congrats on the.

Pardon me.

This year for personal here and also on calling the bottom here.

I guess first question Andy.

And.

The inventory correction appearing to be and.

In terms of the demand that youre seeing can you give us how much of the.

The how much of this is currently the inventory replenishment that you're seeing in the June quarter and how much.

Indeed, the underlying sell through your work.

Any any kind of color that would be very.

Helpful.

Sure I would say most of the impact is still coming from the inventory.

Correction and getting back to more normal.

That's probably the bigger contributor of that we're hoping for bigger stronger September end demand, but thats I would say still remains to be seen.

But the inventory correction inventory levels are improving and so on that front and we're seeing that in the backlog and the orders that are being placed.

Great and then.

Maybe a follow up on the licensing agreement can you just maybe walk us a little bit.

Through more how that came about.

Is this a customer that you've been working with maybe on the product side incentive partner up.

Doing a license and then also any other details can be found in the chairman's exclusive.

Are you still working on your own products.

Any more detailed Oh and also on the manufacturing.

Any any detail from that would be great.

Sure. So this partner.

They are basically behind in their their silicon carbide technology, it really didn't have anything going.

And we.

Basically we're looking for a jumpstart to that.

<unk> approached us and we came to an agreement for that to for them to license our products and technology for that it is an exclusive license, but at the same time it doesn't prevent us from continuing our own.

Like we have been doing if anything as I mentioned before this is this deal is helping to fund can help us to speed up our own silicon carbide initiatives.

Order or to expand the product portfolio.

The marketing sales needed to promote the products as well as secure the supply chain.

And are there once this customer develops their own product is there an ongoing potential royalty or any kind of ongoing revenue stream from that.

And also when can we expect for products from that partnership and offer from your own internal.

Development.

Yes, so we already have for these products.

From our for our Silicon carbide, even before this licensing agreement.

And there will be.

That's part of the contract and the contract period.

We will have benefits there are.

Through.

Through supplying these products to them for the period.

The agreement.

So and again, we will still at the same time, continuing to grow and our own silicon carbide business.

Great.

Turning to the car management and agreement integration that you're talking about longer term can you give us an update again this coming from the digital control.

Alright.

<unk> been working on.

Can you give us maybe an update there in terms of your.

Progress in penetrating.

The graphics cards. Thank you.

Sure So our biggest.

Most immediate impact is still going be in the client computing area.

And because we know we're not we're addressing not only the MOSFET and the track of off the IC side. We're also.

Also developing controllers in that space, which is helping us to expand the bom content there quite significantly.

Somewhere from what used to be $2 because of approaching $4 to $5.

Cause of the integration that we're seeing the additional sockets that we can address.

Because of our power management IC.

Technologies that haven't been deployed there so in the near term I think that's kind of the biggest impact for us.

Okay.

Typically increasing the bom content in the client computing.

We will move onwards from there to other areas, but I think most most immediately that's what's going to move the needle for us.

Yeah.

Great.

And I guess.

Maybe in terms of going.

Going back to the pricing question. It sounds like the environment has kind of shifted back over to more balanced and maybe a more normalized environment.

Can you give us maybe an update in terms of the competitive landscape I remember you mentioned a couple of quarters ago.

<unk> seen some increased competition.

Hi.

Capacity has eased up in other areas.

Regions can you just give us an update there and tender.

Expectations for pricing.

In fiscal 'twenty four versus.

The.

Fiscal 'twenty three thank you.

Sure I think during the <unk>.

And then the correction territory for inventory correction.

But the pricing is gonna be it's going to be tougher in terms of because our competitors as we can.

And before they do have access to supply, whereas during the shortest time they didn't.

So it's been getting getting back to kind of normal competitive.

Type a type of a market again, but cycles come and go as well too so.

We exited out of inventory correction.

Approach more of a normal pricing situation or environment.

Regarding the relationship between that.

Us and our customers.

Great.

One final question maybe for you.

Fine.

The cash flow looked pretty nice I guess relative to you.

The operating results I noticed the.

Rents receivable was down quite a bit.

Dsos were roughly flat, but where do you see.

Accounts receivables going as is.

And then where do you see kind of cash flow is going over the next couple of quarters. Thank you.

Sure Yes.

I mean in terms of.

Days sales outstanding than.

It has been.

30 days or so.

We don't see any collection issues receivable balance down that was money because of the shipment.

Revenue.

Was kind of exceptionally low for the March quarter.

The timing of the.

Collections, and then shipment so going forward I would expect.

So our revenue recovers.

I would.

Expected.

Our cash flow.

<unk>.

Continuing to improve.

Sorry.

A follow up on that.

The Oregon Fab expansion, mostly complete.

Can you provide us with your outlook.

I'll look for Capex can you give us maybe a <unk>.

Longer time horizon, like where do you see your manufacturing needs. I know you mentioned I think it was looking at other geographical locations.

Is there is there a capex outlook associated with that and also.

What kind of.

Activity can you are you.

Are you looking would you be able to get from potentially the chips Act.

Government subsidies and things of that nature. Thank you.

Okay.

Yes in the hour.

Oregon Fab expansion is complete and so from the cash flow perspective.

It will still happen.

A little bit lingering payments so.

That's why.

Youll see in the June quarter, we guided $15 million to $20 million.

Level Capex from there.

We expect our capex.

Gradually too.

Come down a little bit.

Ben.

Same time, yes, we are working with the other foundries to develop on the hour.

The capacity.

Right now we don't have.

Concrete plan for that.

Our internal funnel.

Foundry internal fab expansion so.

In terms of.

Chips Act in that yes.

We are at.

We'll be working with.

The state government and the federal government with all with.

Consultants and so the.

Right now this.

We still have a lot of work to do in terms of.

Getting some potential funding from that.

Chipset.

And one final question in terms of the.

Your utilization rate and time is an update there.

And I would imagine utilizations look at lower end.

Okay.

This is kind of the lowest level you kind of anticipate over the next you know.

A couple of quarters.

Yeah, you are today nation right now it is relatively low.

Then.

Especially for the backend.

The Oregon Fab.

We're ramping up our expansion so actually.

That expansion.

Pasty actually is what we need right now so.

Our Oregon Fab.

Nation is relatively better.

Yes.

In fact on that we can improve on that.

Factory Euthanize.

<unk> was our revenue was started.

Thank you very much.

Thank you.

Thank you our final question today comes.

David Williams from benchmark. Please go ahead. Your line is now open.

Yeah.

Hey, John Thanks for letting me jump back on.

Just wanted to ask quickly on.

The JV and the disposition there.

A healthy equity stake in anything I guess changed or indifferent there.

We should be thinking about or maybe timing.

Yeah.

Right now they are.

In the process of raising additional funds from our side so.

Sure.

We'll see.

Right now the market is.

It's tough right now so.

Sure.

Other than that.

We don't have on other inflammation.

Okay and on the Oregon Fab can you remind us of what that magnitude of the capacity expansion was in terms of maybe annual revenue.

It's a relatively.

The expanded about.

Additional.

15% also yeah.

15% in terms of wafers or.

Yes wafer.

Wafer wafer okay 15th.

Yes.

Wafer.

Okay. Thanks, very much I appreciate it.

Well, that's all for me.

Thank you as a final reminder to ask a question. Please press star followed by one on just kind of think he pad now.

Yeah.

We have a follow up question from Jeremy Kwan from Stifel. Nicolaus. Please go ahead. Your line is now open.

Yes, just a quick follow up on the JV. It looks like the equity method investment that went up by a couple million dollars. It has been going down previously does it is there.

And then I think the.

The minority interest the loss kind of went up a bit there on the income statement side can you help us understand what's going on there.

Is there is the JV kind of.

Running a little bit lower than before and.

Yes.

Has there been kind of an increased investment in that.

Yes.

Sure Yes.

In the March quarter, we recorded an hour portion of.

Jv's December quarters December of 2022 quarters.

Results. So we always have a one quarter lag there so.

In the.

December quarter last year.

We incurred a loss so compared to the September 2022 quarter, which where they they had.

Small income so.

We recorded a 42% of their December quarters loss.

Our March quarter's financials.

Got it and then.

On the balance sheet side that going up a little bit.

Yeah.

What was the driver there.

Oh, that's mainly.

Because of the exchange rate changes.

Translation.

Because of their yeah theyre.

Financials is on that.

<unk>.

RMB.

U S dollar.

Great. Thank you for that clarification.

Thank you.

Yeah.

Thank you as another reminder, if you'd like to ask a question. Please press star followed by one on the testing keep background.

Okay.

We have made out of the question. So has that changed the management team for any closing remarks.

Sure.

So this concludes our earnings call today. Thank you for your interest in AOS and <unk>.

Looking forward to talking to you again next quarter. Thank you.

Thank you.

Ladies and gentlemen that concludes today's call. Thank you for joining you may now disconnect your lines.

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