Q2 2024 Tower Semiconductor Ltd Earnings Call
Ladies and gentlemen, thank you for standing by welcome to the tower semiconductor second quarter 2024 financial results Conference call. All participants are currently in a listen only mode. Following management's prepared statements instructions will be given for the question and answer session for operator.
Assistance during the conference. Please press Star Zero as a reminder, this conference is being recorded July 24th 2020 for joining US today are Mr. Russell Ellwanger tower, CEO and Mr. Oren Shirazi CFO I would now like to turn the conference over to MS. <unk> Levi Senior Vice President.
Investor Relations and corporate Communications Ms. Levi. Please go ahead.
Thank you and welcome to <unk> financial results conference call for the second quarter of 'twenty 'twenty four for the fall.
We begin I would like to remind you that statements made during this call may be forward looking and are subject to uncertainties and risk factors that could cause actual results. So with your friends from Doug Harned you expected. This.
Uncertainties and risk factors are fully disclosed in our form 20-F, and 6K filed with the Securities and Exchange Commission filing with the Israeli Securities Authority.
So available on our website.
Assumes no obligation to update any such forward looking statements.
Please know that the second quarter of 2020 full financial results have been prepared in accordance with U S. GAAP.
Financial tables in today's earnings release. The earnings call also include certain adjusted financial information that may be considered non-GAAP financial measures.
<unk> and related reporting requirements and established with the Securities and Exchange Commission and the financial statements include a full explanation of these measures and the reconciliation of these non-GAAP measures.
So the GAAP financial measures, we have a supporting slide deck that complements today's conference. Glenn. This presentation is accessible on our own company's website and is also integrated into today's webcast for your convenience now I'd like to trying to cross two hours here, let me start off and how long ago I felt please go ahead.
Secondly.
Welcome everyone. Thank you for joining our second quarter 2024 earnings conference call.
It was a quarter in which we delivered strong financial performance.
And in which we receive substantial increases in customer forecast short to midterm affirming.
Affirming the value of our strategic focus.
Revenue for the second quarter reached $351 million.
With a net profit of approximately $53 million, resulting in net margin of about 15%.
At the beginning of 2024.
Publicly stated a target of sequential quarterly revenue growth throughout the year.
For which we remain committed.
This was achieved in the second quarter of 24 with a $24 million increase in revenue compared to the first quarter.
And we are on track for this target in the third quarter with a revenue guidance of $370 million plus or minus 5%.
Moving into the second half of the year, we remain focused on driving innovation.
Further enhancing our market leadership and delivering sustainable growth.
I will now present, a brief overview of our primary growth drivers.
For the second quarter RF infrastructure revenue increased 50% year over year and represented 14% of the total quarterly revenue.
We anticipate continued infrastructure revenue growth in the foreseeable future as customer forecasts for the next 18 months have increased dramatically.
Silicon Photonics is experiencing an even stronger ramp than prior expectation.
Speaker Change: And we are seeing extremely robust and climbing to Mount for our society based technologies.
So I think the Madden girl is predominantly from TIAA and drivers for optical transceivers.
I believe we hold the number one market position.
The expected expansion of AI applications is strongly linked to the robust growth of the silicon germanium technology.
S AI applications in various sectors demand higher performance inefficiency.
Our technology stands out due to its ability to operate at higher frequencies and lower power, making it ideal for AI hardware.
In addition to the G. I N drivers new products are ramping aggressively.
For example, active copper cables. Please see slide five are experiencing an increased adoption for shorter reach data center interconnects.
Driven by the need for lower signal loss at the high speeds required by AI.
We also expect continued high increase in Silicon Photonics revenue.
This business is targeted to grow from $30 million revenue in 2023.
To about $80 million in the present year and from that point.
Most recent customer forecasts would result in more than doubling this revenue in 2025.
Speaker Change: This is driven by the very high demand for 400, G and 800 gig transceivers.
Exponential increase in data traffic from AI cloud computing streaming services and Iot alongside.
The expansion of data centers five G deployment.
Having greater need for high performance computing.
Speaker Change: The cypher based transceivers offer higher efficiency, lower cost and leverage advancements, making them essential for network infrastructure upgrades and the growing computational demands of AI applications.
Looking forward prototyping of one six terabyte products continues with several customers having demonstrated 200 gigabit per second per lane transceivers.
Were already very active in 3.2 terabyte R&D programs.
<unk> collaboration with specific market, leading customers targeting 400 G per lane solutions.
During the second quarter, we delivered initial samples to our market leading customer.
Boeing breakthrough performance with an advanced architecture, and incorporating new materials.
Beyond AI in Datacom, we continued to make good progress on FIFO engagements with automotive leaders and frequency modulators continuous wave based lidar. Please see slide six.
And with existing and emerging leaders in quantum computing optical switching and other sensing applications.
There is a growing ecosystem of silicon photonics based differentiator products, where I believe we occupy the number one foundry market position.
Based on the strong demand, we're seeing from our cycle customers.
Additionally, qualifying our saiful platforms at our San Antonio 200 millimeter facility.
And we have made significant strides in bringing to market. A 300 millimeter version of our cycle flows with process design kits available.
And are happy to report that high performance successful silicon was delivered to lead customers, including some very novel and breaks through solutions for certain advanced applications.
The 300 millimeter added sighful capacity.
In addition to providing capability for these novel applications combined with the San Antonio Sighful capacity.
Should ensure that we can meet short and long term customer demand for this market.
Which we are very bullish.
For Q2, RF mobile revenue predominantly RF soi increased approximately 60% year over year and represented 31% of the total revenue during the quarter.
We are currently fully utilizing our 300 millimeter RF soi capacity and what was the Japan.
And continue to transition through to millimeter RF I thought RF soi customers towards prostate, Italy per plan to support this increased demand.
During the second quarter, we shipped prototypes and across day for our most advanced RF Soi technology.
G. P S 65, RSV, which not only exhibit industry, leading our RMC off a higher efficiency power handling.
But also enable strong scaling for optimum for sectors.
For Q2, our power IC business revenue increased 60% from Q1.
Representing 14% of total revenue during the quarter.
We anticipate continued growth through the remainder of the year.
Within this market.
We're seeing strong demand for a 300 millimeter technology.
To meet this demand.
We continue to qualify new capacity in the new Mexico, Fabs and are happy to report good progress at initial customer prototypes already taped out with expected qualification and subsequent ramp in 2025.
Our fab utilization rates for the second quarter one.
One.
As previously announced will be operation consolidated into fab two was about 75%.
FAP two eight inch was about 67%.
Three eight inch at about 55% and expect it to show substantial higher utilization in Q3.
Due to the great demand, we are flying from that factory for Silicon germanium and Silicon Photonics.
About five eight inch is at about 45%.
To wrap with recovery with empower.
712 inch was at about 85% fully loaded fab nine eight inch was about 60%.
Today, we released our updated corporate sustainability.
Environmental social and governance ESG report.
This report highlights our commitment to environmental stewardship ethical practices in social responsibility.
Doing our part towards a sustainable society and world.
When we report our achievements with a focus on short mid and long term measurable milestones and targets.
Magnify our role as world citizens.
We invite you to explore the Shreveport and we welcome any comments as you join us on our journey towards a more sustainable and equitable future.
With that I'll turn are tied to our CFO.
Mr Oren Shirazi warranties.
Hello, everyone earlier today, we released our second quarter 2024 financial results, which I wasn't sure.
First by analyzing the P&L highlights followed by a cash and balance sheet fruitful.
For the second quarter of 2024 were both a revenue of $351 million up $24 million over the prior quarter, which resulted in $14 million higher gross brokerage and $21 million.
I think appropriate although the same goodness.
Gross profit for Q2 was $87 million $14 million higher as compared to the Gulf brokerage, the broiler quota, which totaled $73 million.
Operating profit was 51st we don't do it all in including included.
$6 million restructuring income.
Due to grant received in relation to the operation reorganization in Japan, previously announced and completed last year.
Speaker Change: Operating profit.
He is $21 million higher than prior quarter operating profit.
That's perfect were $53 million, reflecting 48.
Diluted earnings per share and.
And included $2 five millions of our off net impact from Japan to the organization known as before.
Net proceeds in the fourth quarter was $45 million or 47 basic and diluted earnings still shield.
Moving to balance sheet, and future Capex and cash flow that towards the end of Q2 'twenty for our balance sheet assets totaled $2 96 billion.
Compared to $2 $5 billion for the same period last year, primarily.
Primarily comprised of $1 2 billion fixed up it's mostly machinery and equipment and $1 7 billion of outflows.
Current assets ratio is lifting the multi peril, which got us a louder than short term liabilities was very strong at five nine.
As compared to $4 80.
For the same period last year.
Shareholders' equity reached a total of $2 5 billion at the end of Q2 24 compared to $2 billion out of the end of the same period.
Last year and compared to $2 $4 billion as of December 2023.
Yeah.
Our strong financial position and enable us.
Speaker Change: To plan the following investments for strategic opportunities that are aligned to our vision.
One approximately $500 million of total aggregate cash was allocated to make investments in equipment and other capex items like wild for the 12 inch factory in Italy. Following the previously announced SD micro partnership.
Today, we have already placed purchase orders to all the equipment and other capex items required for us to all stick Opex data plan.
Of which we have paid $380 million to.
To date and the remaining one other than $20 million are expected to be paid in the coming six quarters, namely until the end of 2025.
Two in addition, as previously announced we have committed to invest up to $300 million to acquire the equipment and other capex items that we will own and Intel's fab in new Mexico, enabling us to ramp up capacity and capabilities for our customers.
Which amounts.
To be paid during 2024 25 and until 2006.
Furthermore, we expect our maintenance capex baseline level to remain at about $200 million to $240 million on them.
And lastly, we are investing in more capability and capacity tools.
Other assets.
And our technology offering, especially to increase outside U anti full capacity in our eight inch and 12 inch wafer fabs.
And to enhance our global technological offerings to enable flexibility that will support our customers from our various sites and change our product mix to a richer mix from a margins perspective.
Wish to note that all the above investments are aligned our business strategy and contained within our financial model previously presented by the company in November.
Speaker Change: In the model, we outlined our revenue target of $2 66 billion.
Telling them that could be achieved by loading our existing facilities and capacity Idiograph and new Mexico facilities.
Which could result in $560 million of annual operating profit and $500 million of.
Annual net profits.
Yes.
Yeah.
Now I'd like to turn the call back to the operator.
Alright, Thank you Les.
Ladies and gentlemen at this time, we will begin the question and answer session. If you have a question. Please press star one if you wish to cancel your request. Please press star two.
Using speaker equipment Congo lift the handset before pressing the numbers the questions will be pulled in the order. They are received please standby while we poll for your questions.
The first question is from Cody Acree of benchmark. Please go ahead.
Hey, guys. Thanks for taking my questions and congrats on the progress.
Russell, maybe if you could take a step back to your AI exposure.
Thanks for all the details in FIFO.
Could you maybe give.
He is an aggregate number of <unk>.
Silicon germanium side, though and then maybe a shot it active copper cables as far as our total exposure.
Yeah.
A little bit difficult for me to do that in all honesty I.
I don't have that type of granularity.
We assume that probably.
Somewhat about 50% of what we're shipping right now is really being driven by AI demand, but it's hard to say I mean, the customers that we ship to the integrators that we ship to.
Basically supply everything within data center. So for me to specifically say, how much is AI, driven and not a I driven.
Really it's it's it's not something I can give on a granular basis.
Certainly we know that.
AI is driving big demand for increased speed and that's the acceleration of having gone to 800 G. This year to such a big extent isn't a high a I drive.
And a lot of what were serving as 800 G. So I assume at least 50% of what we're shipping but.
Excuse the expression, but that's somewhat profitable logical.
Sure.
For the maybe.
If you can talk about optical versus copper cable activity.
In video, obviously has a big push with respect Comex platform Ethernet are you seeing any.
<unk>.
Immediate push to copper on your optical activity.
Speaker Change:
It's not necessarily for me to say how much for shipping to true.
Certainly and video is a very big buyer and as stated in the fact that we have the number one position within optical transceivers.
What certainly assume that Nvidia would be a big customer for us.
But to say how much is for Nvidia.
Not saying certainly Nvidia is used.
Speaker Change: Using active copper cable.
Speaker Change: That's why I think fairly well known so well.
We'd made me assume that we're shipping into that.
And also I guess yourself three utilization I think you said that was one question.
Alright.
Hum.
Speaker Change: Okay.
Okay.
For sure.
63% to 65%.
This show a substantial part or will show substantial higher utilization in Q3.
So in Q3, we would expect it's fully utilized.
Okay.
We can be anything there on that.
Not constrained on FIFO inside J, I mean, there there might be more photo layers that.
Could be shift outside of bottlenecks for those two flows but those two flows are full.
And I guess the transition to the 300 millimeter.
So how is that progressing.
I stated that we released the PDK.
And ships samples that are very high performing.
As well as a very very unique application that we're doing there.
With us.
A different material than would typically be being done with cycle, but I don't want to get into at this point, but yeah. So it's going very well in 300 millimeter. The activities there are the walls and factoring in the past.
And as stated were qualifying and have had very good progress there as well additional capacity in San Antonio.
Great. Thank you guys. Thank.
Thank you Cody and good questions.
The next question is from Richard Shannon of Craig Hallum. Please go ahead.
Well, Hi, Russell and Oren, Thanks for taking my question.
I think I'll start off with one in the RF infrastructure business here are you talking about some very strong.
Results in forward forecast here and kind of the baseline Tia and driver business, maybe it's just wanted to get a sense of the degree to which this is market growth versus potentially a tower semi share gains can you do you have a good sense of the drivers there.
Yeah.
In the area of Silicon Photonics, it's all share gain because it didn't exist in the past.
So that's.
That's not being facetious, it's just the case right.
With our new served market of which we're gaining quite a bit of share in shipping a lot of.
Billions of dollars of revenue and continually increasing that to multiple customers. So there it's that if.
If you will I mean, it's a new market and hence a share gainer and something that didn't exist before.
Which is always a very nice thing to have right.
The best way to have a very strong market share growth by entering markets that didn't exist.
Speaker Change: In the area of Silicon germanium.
All right.
Yeah.
Is it share gain or not.
I am not sure.
<unk> two.
We believe for a good number of years to have the number one position in optical transceivers.
So when you're you're number one is a little bit hard to have a lot of share gain on the major thing is to be with strong customers that when the market is strong and has a big demand you're growing with them and you've maintained your customers.
So I think.
What's happening there isn't necessarily share gain it's demand increase.
And again <unk>.
Additional products there.
Needed now that weren't really driven before.
Active copper cable active optical cable has been talked about for a long time and you know many people a sample for a long time.
But given the.
Increase.
Again AI driven.
In data center speeds, the 800 G. The 160.
The need for <unk>.
Drivers and in many cases as well re timers in the cable it's very real and.
I would have to consider that to be share gain because there was a market that we weren't really serving before.
As far as the Ti A's and the drivers.
Sydney within the applicable itself I honestly don't know if we're getting any share gain there or just some.
Market is getting much stronger.
Continually we have new customers and those customers nominally we'll always try and some share gains providing that they're gaining from someone that we're not serving but for the most part on the core products that we do for Opticals. We we've already serves the biggest customers within it it's a little bit difficult to.
Increase in sharing that for the T. I a N. The drivers that are within the applicable itself.
But the fact of.
The demand for applicable having increased.
Good thing, if you're sitting at 60% to 65% market share.
And that market grows as long as you sustain that market share you have there and good growth.
Hopefully Richard that answers your question.
It does I appreciate all the perspective. Thanks Russell My second question on Silicon Photonics are great to see the the opportunity is for sure. Some really nice growth here I guess, maybe the question I'd like to frame here is thinking about the big picture long term here what is the Tam look like in a few years and to what degree are applications outside of the day.
Comm transceivers, adding into that you're supposed to get talked about automotive today and in the past, but that some CW, but curious how how much of that Tam for selling the time excuse just outside of Datacom.
If you're looking at long term Tam I think it's quite substantial if you'd be looking at 'twenty five 'twenty six 'twenty seven I don't think it is very substantial.
If you know for automotive the activities that we're doing for the Lidar I'm very very advanced activity, but I don't think.
You'd see going into the automotive market, a very big ramp at least not starting before 2027 and continuing that in 2008 and beyond.
Speaker Change: And where there's other applications that are not conventionally, while we would be considering.
You know our CFO chip sitting within the applicable for example on some of those are.
Now an active sighful capability that is looking at in the optical switch so that is sitting within the data center, but it's part of a.
Speaker Change: Sam served market that we don't have right now.
We don't do deep Submicron switches.
On the digital side, but.
There was a lot of activity right now and.
We'll see ultimately how successful it is an optical switches and that's again, that's an increase in our Sam.
Within data center, but it's an increase in sand.
You've talked as well about other applications such as silicon photonics for.
Ah trial amateurs versus you know big optical cable drafters specifically.
Specific lead customer there isn't elo and.
As stated that's you know that's a new served market totally.
Did not exist before it all.
That we expect will get very large but so.
All of that as you know part of that.
Big time.
How much is the Tam.
Outside of data center within data Center, I would say that problems in the data center will remain the biggest portion of it but the data center is growing incredibly especially.
Speaker Change: I don't want to overstate it but.
The drive for AI and the speeds needed by AI.
They reduce latency neither by AI.
Besides E that we're doing the cycle that we're doing.
That Tam is certainly growing.
And the growth of that I think will always be much bigger than the outside of data center on proportion, but it's not that the outside of data centers insignificant.
Okay, great. Thanks for that detail here, maybe a quick question for Oren.
Our gross margin fall through is pretty strong here in the second quarter can you give us a good sense of why is there some sort of mix shift or other dynamics and to what degree is that a sustainable.
Yeah.
It's also what Russell said about the cycle.
Speaker Change: The faithful model genes are very good the way above the average.
Mental model I'll say, a 50% incremental gross profit so.
This is why you'll see that you'll collect 30% to 60% this quarter came up to be 60% incremental gross profit, although the revenue because we had some very nice FIFO and generally speaking richer mix than previously not anything special.
I mean, a very special about called anything one time.
Got it.
Okay.
One last question I am sorry.
Sorry.
Yes that is sustainably special.
I can't I believe special Okay great.
Speaker Change: One last question I will jump out of line for you Russell just looking at your power IC business here you had a nice pick up here in the second quarter from what I would assume is a naturally low level in the first quarter and obviously if you look back a couple of years you had.
Some very nice revenue levels, obviously, driven by some inventory build that pretty much everyone. In the power IC space had seen you know in the Seventy's atheist, even in the 90 million plus range per quarter.
Are we are we through the inventory burn here currently who are still affected by that and then as we look out maybe one to two years with your Crystal ball do you see the ability to get back up to those levels anytime in the mall.
Now I'll I'll call it near future I'll, let you define what you think what you see is that timeframe, but love to hear your thoughts there. Thank you.
Speaker Change: For the total power revenue, yes, I think that we will get.
Speaker Change: Beyond previous year's numbers.
For the 200 millimeter presently.
We still see that there's inventory being built off.
Our burned off although.
We are starting to get much more orders there.
We had stated last quarter, we had expected that Q1 would have been slow.
And certainly with the numbers this quarter I think we said, it's a you know a 60% increase in the power revenue, but the big growth that we see with empower he's coming into our more advanced platforms in 300 millimeter. Although the 200 millimeter, we continue to do it fast and so on as well and we see that.
You know coming back strongly but I don't know that the 200 millimeter within 25 wells at the same levels that we had had in previous years, but the 300 millimeter will more than make up for it.
Okay perfect that is all from me guys. Thank you.
Thank you.
The next question is from Matty Matty Hussaini of S. E. Please go ahead.
Thanks for taking my question a couple of follow ups.
For me it was doing well.
Did I understand all the dynamics.
So can you just help me with how are.
The share gain or trying to there.
Well the inventory correction.
When do you think overall in the market would pick up in them.
We expect the Mercury recovery.
So we feel good.
Inventory refresh so just to summarize the question how should I think about it.
Sure It does.
Market dynamics into the country.
We expect to your customers.
Inventory refresh itself.
Yes.
I had stated last quarter that maybe.
Above and beyond what the market was saying we were seeing very strong demand for RF Soi.
We continue to see that in particular for the advanced platforms in 300 millimeter.
So I don't think we're being impacted more have we been impacted for the past few quarters on inventory correction.
Overall.
Speaker Change: 2024 are supposed to be a growth year for mobile.
So I.
I think from overall analysts they would believe that.
From a market itself the inventory is in pretty good shape.
But as stated.
And.
Some of that is really a market share gains with newer customers.
Speaker Change:
We have seen very strong and robust demand for for RF Soi in particular from a state of the advanced platforms in 300 millimeter, which was the big drive for bringing up and qualifying that at the <unk> factory.
And <unk>.
My plan.
Be shipping a reasonable amount of product in the fourth quarter.
On RF Soi from the royalty factoring in addition to what we haven't had in the base of 300 millimeter and in Japan.
O I.
The RF soi being a very strong business for us if I look at.
24 versus 23, you know overall year should be.
A pretty reasonable growth on the RF soi.
And if I look at.
25, I would see growth as well so I I don't see that we're being hit by inventory correction.
Correction understood.
So just quickly your exposure to smartphones on both.
Hum.
I'll take a simple book profitable I apologize your.
Voices very muscle for me I'm, having a little bit difficult time hearing you.
But.
I assume that yours you honest.
Arthur.
And both Android O S.
I think that would be a good assumption.
Yes.
Great and as a follow up for you Oh man.
Two follow ups here.
Increase.
Mix of physical Photonics, which I assume is a higher than corporate average gross margin.
So the upfront costs and margin dilution.
I agree with you guys.
Five and then.
Hum.
The gross margin that you reported for Q2 that was on a GAAP basis.
Correct.
Q2, gross margin was closer to 25%.
Yeah, Yeah. It is 25% under golf there what do you mean, our pro forma.
Okay.
Understood.
The two 3 million, but adjusted.
Just I just want to make sure I get that right.
Oh this is the amortization of the amortization.
Amortization of our employee stock option plan.
Yeah, Yeah, yeah, yeah, so you'll of course yeah.
Okay.
No.
Increased mix. So that's why you have offset the dilution that comes from the ramp up to 300 millimeter fab.
Okay.
Yeah.
Oh, a question referring to Q2.
Well looking at 225.
You.
It starts production.
The new site.
Great.
Could higher margin contribution from.
The infrastructure, especially specifically silicon photonics helped offset the dilution from the ramp up of news out there.
Yeah definitely the increased margin from the <unk>.
Sighful should be and then just go with the draw that Larry described to stifle growth next year.
In his prepared remarks should be.
The higher impact than it did.
These you'll call it dilution from the.
I've got to effectively a headwind.
So it should be much higher.
Yes.
Got it thank you sorry for the mic.
Thank you good questions.
The next question is from Lisa Thompson of Zacks investment Research. Please go ahead.
Hey, Lisa.
Hi, there either.
Ask you I thought last quarter, you said that silicon photonics contributed about 5% of revenues, yes, yes, that's right, yes, and so what would have been this quarter.
Well, what I stated last quarter I believe is that we would see it.
Remaining somewhere about 5%.
Throughout the year, but against increased revenue quarter over quarter, so that the cypher revenue would be increasing quarter over quarter.
We haven't put out a specific number for Q4, so I really don't want to say right now what the percentage would be for the year I said that it would be.
You know that we expect over $80 million of FIFO revenue in 2024, that's over $80 million, but you know how much is over 80.
One can try to figure out for themselves.
But I would expect that.
It will certainly not be below 5% and could be a little bit above.
Okay.
Correct.
Mostly.
I believe it's mostly going into like.
Plausible optical transceivers right.
I believe almost all of it right now is applicable optical transceivers.
Okay, and do you have a feel for what speeds.
Take down is 400 800.
I think someone's even going into 100, but the bulk of it is 408 hundred at the specific breakdown between four and eight.
I could probably find out but I I don't know off the top of my head.
Okay, and you did say something interesting about having a 1.2 terabyte I sit at one country converting several several discharging. Please go ahead.
Right. So it's not just one customer working on that.
No.
Okay, and then how far off do you think you get to a 1.6.
As far as the calendar year from here.
Yeah.
Speaker Change: Maybe I'm a bit aggressive here, but I think that will be shipping in the fourth quarter.
Of 25.
Yeah, and that would be one customer with more than one.
At least one.
Okay.
Great Alright.
Are you shipping a very high volume in the fourth quarter, but I do see rising in the fourth quarter.
Samples samples.
Certainly samples, but I think something that will actually go into into data center.
I believe I could be wrong, but I think it's possible.
Right.
And then given that.
But just.
The way the market is.
It shifts to higher speeds is it possible that your growth accelerates.
Does it go higher.
Our high speed products.
The growth in absolute dollar is absolutely in percentages no right.
I mean, yeah, when you're at 80, and you're going we said more than double next year, which we're pretty confident in.
I continue with those type of rates from 30 to 80 to more than doubling those are you know.
It's a very very high rate, but as far as absolute dollars I, absolutely think that it will continue to accelerate.
And do you think there'll be beating down on margin that's.
Crime progresses.
Hum like where it is.
Uh huh.
I don't think the customer partners, we have we'd ever beat us down on margin you certainly.
You know partner with somebody that the higher the volume is.
The more that you both benefit from economies of scale and prices come down.
But.
People pay for value.
Speaker Change: And.
It cost to produce value so well.
Some pricing come down overtime with lead customers.
It must and it should.
Mobile margins remain very strong yes.
Okay, great. Thank you that's all my questions good questions Lisa Thank you.
Okay.
The next question is a follow up question from Richard Shannon of Craig Hallum.
Please go ahead.
Hi, Thanks for letting me ask a couple more here in my first one Russell is is.
Looking at your capacity, especially at 300 millimeter capacity I'm wondering if there's any tightness and when those get relieved I mean any comments you can make on that.
By product area I think in this call if you've talked about power and RF Soi and even silicon Photonics, Ontario millimeter or any comments you can help us understand where there's tightness and when it gets really it would be great to hear thanks.
So presently there's tightness at 300 millimeter RF Soi.
And I stated that we're fully utilized and that.
It's being relieved real time.
<unk> stated that.
We target to have.
Production revenue in the fourth quarter from the <unk> factory.
And you know that's not single digits. So it's you know we're looking at.
A fair amount of relief there.
So that would start to be relieved in the fourth quarter and you know first second of next year.
What we had said previously and it was a good question that was asked about the the market headwinds by taking on once you start shipping revenue you know taking the depreciation of a new incremental toolset, but that we expected a reasonable ramp from the fourth to the first of the second quarter of next year to be able to absorb that so.
Within that type of a statement without getting specific numbers.
We expect shipping quite a bit of.
RF Soi on a monthly basis by the second quarter of next year out of the Italy factory.
As far as the 300 millimeter for power.
That is.
Speaker Change: The relief with capacity there is in the.
Albuquerque activity, where we have the capacity corridor from Intel.
And I stated that we're in very advanced stages with customer prototypes going now we have.
Very advanced activities, there and we believe that will start shipping their qualified parts.
And probably the first half of 2025, and that's quite a substantial amount of capacity that we can be growing at that factory. So that's the relief on power management.
But it's more than just a relief on the power management, it's really growing an entire new market for us because we did not have them.
65 nanometer platform.
Speaker Change: For any reasonable capacity in the past and now we do that was one of the.
The big bonuses that we got out of the entire experience with Intel.
Definitive agreement was what we started early on on an arm's length agreement to develop capacity within one of their factories to meet very large customer demand to bands and end customer demands.
So the the Albuquerque capacity corridor is really are.
Roadmap for increased capacity with the talent management and potentially other flows as well.
We have some.
Pretty interesting activities on but have not.
You have publicly announced we have you know.
Actual activities without.
Speaker Change: And customer commitments on it but it will be most likely more there and then just power management within that factory.
Did that answer your question I hope.
Speaker Change: Yes, yes. It did Russell. Thank you very much that's all the questions.
Thank you.
Okay.
Thank you.
There are no further questions at this time, Mr. Al Linker would you like to make your concluding statement.
With pleasure. Thank you.
So thank you for listening. Thank you for really a very good questions from everybody.
To summarize we are tracking well.
Speaker Change: And remain committed to our stated target of sequential revenue growth throughout 2024.
As evidenced by our second quarter performance and third quarter guidance.
In addition to the recovery of mobile and growth in our advanced power platforms, we're experiencing a robust rapidly expanding demand from both existing and new customers within the optical space.
Our strong position in optical transceivers.
<unk> with multiple years of first year customer partnership and developing both passive and active silicon photonics platforms have uniquely prepared us to be the leading foundry of choice for data transfer within the exploding AI market.
We remain focused on innovation.
And hence enhancing our market leadership.
In order to continue to deliver sustainable growth.
On August 27, and 28, we will be participating in the Jefferies semiconductor hardware and communications technology summit in Chicago.
On September 4th we will participate in the benchmarks 11th annual Tech Media Telecom one on one conference in New York.
And in addition on September 11th we will participate in the Jefferies Israel Tech Trek in Tel Aviv.
Thank you very very much.
We look forward to see you at any or all of these events or otherwise.
Thank you again.
Speaker Change: Thank you. This concludes tower semiconductor conference call. Thank you for your participation you May go ahead and disconnect.
Okay.
Right.
Thank you.
Speaker Change: Yes.
Okay.
Okay.