Q4 2024 Tower Semiconductor Ltd Earnings Call
Speaker Change: Good day and thank you for standing by. Welcome to the Tower Semiconductor Fourth Quarter and Fiscal Year 2024 Earnings Conference Call. At this time all participants are in listen-only mode.
Speaker Change: To withdraw a question, please press star 11 again. Please be advised that today's conference has been recorded.
Speaker Change: I would now like to hand the conference over to our speaker today, Noit Levy, SVP, Investor Relations. Please go ahead.
Speaker Change: Thank you, and welcome to Tower Financial Results Conference Call for the fourth quarter and fiscal year of 2024.
Speaker Change: Before we begin, I would like to remind you that some statements made during this call may be forward-looking and are subject to uncertainties and risk factors that could cause actual results to be different from those currently expected.
Speaker Change: These uncertainties and risk factors are fully disclosed in our Forms 20-F and 6-K, filed with the Securities and Exchange Commission, as well as filings with the Israeli Securities Authority. They are also available on our website. Tower assumes no obligation to update any such forward-looking statements.
Speaker Change: Please note that the fourth quarter and fiscal year of 2024 financial results have been prepared in accordance with U.S. Gaps.
Speaker Change: The financial tables and data in today's earnings release and in this earnings call also include certain adjusted financial information that may be considered non-GAAP financial measures under Regulation G and related reporting requirements as established with the Securities and Exchange Commission.
Speaker Change: The financial table includes a full explanation of these measures and the reconciliation of these non-GEP measures to the GEP financial measures.
Speaker Change: We have a supporting slide deck that complements today's conference call. The presentation is accessible on our company's website and is also integrated into today's webcast for your convenience.
Speaker Change: Now, I'd like to turn the call to our CEO, Mr. Russell Ellwanger. Russell, please go ahead. Hello, everyone. Thank you for joining our call today.
Speaker Change: During today's call, we'll provide our financial highlights for the fourth quarter and the fiscal year of 2024, reviewing strategic developments of the year.
Speaker Change: and outlining our vision for the future, including steps we are taking to ensure sustained growth, now having entered into 2025. Please find the 2024 financial details in the supporting slide deck.
Speaker Change: At the onset, and looking back at 2024, I take this opportunity to express gratitude to our employees for their dedication and hard work, to our customers and supplier partners for their collaboration, and to our shareholders for their continued trust and support.
Speaker Change: Together, we have built a strong company, enabling us to capitalize on the great opportunities that lie before us.
Speaker Change: We concluded 2024 with an annual revenue of $1.44 billion, a net profit of $208 million, and a fourth quarter revenue of $387 million.
Speaker Change: representing an in-year Q1 to Q4 revenue growth of 18% and fourth quarter to fourth quarter year-over-year growth of 10%.
Speaker Change: We guide the first quarter of 2025 to be a midpoint of $385 million, plus-minus 5%,
Speaker Change: which midpoint represents about 10% first quarter year-over-year growth. We target year-over-year growth for 25 with sequential quarter-over-quarter revenue increases within the year.
Speaker Change: with an acceleration in the second half of the year as our capacity and investment continue to progress through customer qualifications with the ensuing production shipments.
Speaker Change: We will now present the 2024 revenue breakdown for a major technology platform and the expected trend for 2025.
Speaker Change: Later in the call, we will provide summaries of the technical advancements achieved in 2024, which continue at this time, in order to not just maintain, but to grow these specific market shares.
Speaker Change: The revenue breakdown by technology and by end market application is shown in slides 5 and 6 respectively.
Speaker Change: RF infrastructure revenue was about $241 million, or 17% of our corporate revenue in 2024.
Speaker Change: In 2025, we target strong growth in the RF infrastructure revenue, quite significant as this is on top of a near doubling in 2024 over 2023.
Speaker Change: with a more than tripling of SIFO revenues in 2024 to $105 million for that year.
Thank you.
Speaker Change: Our mobile revenue was approximately 418 million dollars, 29% of our corporate revenue in 2024.
Speaker Change: After achieving strong growth in the segment in 2024 over 2023, we anticipate some decrease in RF mobile in 2025, mainly as a result in the present Android market as forecasted by our customers.
Speaker Change: However, within this context, we target growth in our more advanced 300mm platforms, signifying market share wins for us and our customers, promising continued growth as the market recovers.
Speaker Change: Power Management and Discrete Revenue was about $426 million, or 36% of our corporate revenue in 2024, broken down evenly between IC and Discrete Revenue.
Speaker Change: Based on the current customer forecast, we target growth for the power management business unit in 2025, with the highest growth for advanced 300mm platforms.
Speaker Change: Due to the impact of having discontinued FAB1 lower-margin, legacy 150mm activities, discrete business is expected to decrease in 2025-2024.
Speaker Change: Sensor display revenue was about 221 million dollars or 15% of our corporate revenue in 2024.
based on the current customer forecast.
Speaker Change: We target 2025 moderate growth for this business unit. Mixed signal and CMOS revenue was about $105 million, or 7% of corporate revenue in 2024, targeted with moderate growth in 2025.
Now we'll provide additional color for our major business platforms.
RF Infrastructure.
Speaker Change: RF infrastructure was our fastest-growing segment in 2024, riding on the mega trend of scale up and scale out of cloud computing and AI clusters.
Speaker Change: driving strong demand for electronic and optical components that require advanced silicon germanium and silicon photonics technology. To that effect, our silicon germanium platform has seen rapid growth throughout 2024 and is forecasted to continue so in 2025.
Speaker Change: We take pride in being the founder of choice to leaders in this industry, building components such as CDRs, drivers, and TIAs for optical transceivers and pluggable, and re-timers for active cables.
Speaker Change: While we have recently received a reduced forecast for active copper-cable silicon-germanium components, we have at the same time received upside orders for silicon-germanium optical transceiver components, and as such, we see continued growth in silicon-germanium without interruption.
to support all customer growth in 2025 and beyond.
Speaker Change: We are bringing up our high-demand silicon-germanium platform in both our San Antonio and Big Dalhemmick factories while adding incremental tooling to Newport Beach factory as part of our announced 350 million investment in capacity.
Speaker Change: In addition, we have released 300mm sodium germanium PDKs in our Wozo Japan factory.
Speaker Change: and have a lead customer already in product design. 300 millimeter tools will add additional silicon germanium capacity.
Speaker Change: at larger wafer form factors. Our silicon photonics platform continues to gain strong market share at 400G to 800G and is now in volume production at 1.6T.
Speaker Change: We are working closely with our partners, including six out of top ten leading optical transceiver module makers in the world, of which the top two, namely In-A-Light and Coherent, Press-Released or Multi-Generation Codevelopment Partnerships.
Speaker Change: We highly value these customer partnerships, yielding continuous, world-leading, best-in-class technological advancement.
Speaker Change: To support the strong group, we are bringing up our SIFO platform in our San Antonio factory and have also released a full PDK for a 300mm Lozo factory.
Speaker Change: 300mm enables our SIFO customers to more easily address the future potential needs of CPO architecture that combine advanced SIFO technology with 2.5D integration of optical and electrical components.
Speaker Change: The added capacities mentioned for CIGI and SIFO are in various stages of customer qualification with expected shipments and result in high value incremental revenues in Q3 and Q4 of this year.
Speaker Change: Finally, we continue to work with our customers to bring to market next generation 400 gigabit per lane technology targeting the upcoming 3.2T standard.
Speaker Change: To note, we have already demonstrated with Elite customer bandwidths consistent with the 400 gigabit per lane speed requirements needed for the 3.2 standard.
Speaker Change: We see further application of our leading CIGI and SIFO technologies outside of the optical transceiver markets.
Speaker Change: For example, we announced our partnership with Renaissance in the emerging SATCOM market where phased-array ICs for terrestrial disk antennas, built using Sci-G technology, promise strong growth with the proliferation of satellite-based Internet services.
Speaker Change: In our RF mobile market, despite some headwinds with weaker customer forecasts in 25-24, particularly for Android-based devices,
in addition to existing markets.
Speaker Change: We continue to invest in new technologies, such as the triple-play process announced with Broadcom for Wi-Fi 7.
Speaker Change: which offers industry-leading integration of a power amplifier, low noise amplifier, and switch onto the same die.
Speaker Change: in the single die form factor to support high-end Wi-Fi functionality, hence a much smaller footprint than previously possible.
Thank you.
Speaker Change: Looking at our power management business, during 2024, we executed the transfer of our flagship Advanced 65 nm BCD platform to Albuquerque to take advantage of the large capacity available to us as part of the previously announced agreement with Intel.
Speaker Change: In the fourth quarter, we delivered successful prototypes to elite customers, and based on this success, have received our first production PO, a major milestone achieved ahead of plan. We have extreme customer interest in these flows, well beyond what could be supplied in Mozu, Japan.
Speaker Change: Additionally, in Q4, we announced the release of our next generation 300mm power management platform, which promises as much as 60% lower conduction losses for prior platforms, critical for power management ICs.
Speaker Change: used within lithium-ion battery operator products such as smartphones, tablets, wearables, a large and growing market presently at about six billion dollars.
Speaker Change: Turning to sensors and displays, there are several trends shaping this market.
Speaker Change: that have given and continue to give impetus to our priorities and investments among which industrial sensors are transitioning to 300mm platforms enabling denser logic, smaller form factors, and higher resolution pixels.
Speaker Change: We demonstrated 100 megapixel and 300 megapixel high-speed global shutter stack sensors with 2.47 micron charged domain pixels.
Speaker Change: Medical and Dental Sensors. Some 200mm CMOS products are shifting to lower cost IGSO platforms.
Speaker Change: While high-performance applications, mammography and extradental x-ray drive demand for 200 and 300 millimeter stitch CMOS.
Speaker Change: Hence our development activities in medical and dental are focused on next generation CD detectors.
Speaker Change: 200 millimeter extra oral x-ray and 300 millimeter x-ray including having released a 300 millimeter more cost-effective layer reduced lean flow PDK enabling our customers to battle on price as well as with performance.
Speaker Change: OLED on silicon is a significant large incremental business growth opportunity.
Speaker Change: for CMOS backplane for high-resolution micro OLED displays known as OLED on silicon for AR, VR, and XR applications. Our expertise
Speaker Change: and long performance history and large format imagers position us as a leader.
Speaker Change: First OLED-on-silicon prototypes are targeted to ship second half of this year, featuring unique ultra-low-leakage transistors combined with high-K capacitors.
Looking at Utilization.
We are strategically repurposing certain capacities across multiple fabs.
to further enhance our PSYCHE and PSYFO capabilities.
Speaker Change: While this may result in lower overall utilization rate in the near term, there's a crucial step towards aligning our production with the evolving needs of our customers.
Speaker Change: By focusing on these advanced process technologies, we are positioning the company for sustainable, long-term growth.
ensuring we meet increasing demands.
Speaker Change: This initiative optimizes our production portfolio and underscores our commitment to
Speaker Change: to innovation and fast execution to maintain market leadership in a rapidly evolving industry.
Please see the complete disclaimer at https://sites.google.com or at https://sites.google.com.au
Speaker Change: FAB 2 and FAB 9, where we are driving CyG and CyFo capability capacity activities, operate under approximately 55% utilization.
www.mercierfilms.ca
Speaker Change: FAB 3 was at 70% utilization, FAB 5 at 60%, and FAB 7, 300mm, at 90% foundry utilization.
with the highest process layers to date.
Non-CAPEX projects are ongoing in Fab 7 to maximize shipments.
Speaker Change: from FabMix Changes and with the agreement with NTCJ utilizing some of their capacity.
Speaker Change: To summarize, in 2024, we've shown our commitment to innovation, excellence, and growth. We've made significant progress and built a strong foundation for the future.
Speaker Change: Looking ahead, our investments and focused efforts are already delivering positive results.
positioning us to target year-over-year growth
Speaker Change: We are actively engaged in seizing new opportunities to grow our CERB markets and provide continued leadership.
Speaker Change: Thank you for your continued trust and support. We look forward to sharing with you our achievements throughout what will be an exceptional year ahead.
Speaker Change: With that, I'll turn the call to our CFO, Oren Shirazi.
Oren Shirazi: Hello everyone. Earlier today we released our financial results for the fourth quarter and for the full year and also released our balance sheet.
Oren Shirazi: For the fourth quarter of 2024, we reported revenue of $387 million, a 10% increase over the same quarter of the previous year.
Oren Shirazi: Thereby, achieving the target we provided one year ago, demonstrating quarter-over-quarter revenue growth for each quarter in 2024 against the previous 2024 quarter.
Oren Shirazi: This resulted in an 18% revenue increase from Q1'24 to Q4'24. For Q1'25, we got $358 million revenue, plus-minus 5%, which represents 10% year-over-year revenue increase.
Oren Shirazi: Gross profit for the fourth quarter of 2024 was $87 million, higher as compared to $84 million in the fourth quarter of the prior year.
Oren Shirazi: Despite being impacted by the headwinds resulting from added fixed costs and depreciation that the company took on for the first time following the commencement of operations in the Agrate 12-inch FEB facility that the company and STMicro share in Italy.
Oren Shirazi: Operating profit for the fourth quarter of 2004 was $46 million compared to $45 million in the fourth quarter of the prior year.
Oren Shirazi: Net profit for the fourth quarter of 2024 was $55 million or 49 cents basic and diluted earnings per share.
Oren Shirazi: Net profit for the fourth quarter of the pre-review was $54 million or 49 cents basic and 48 cents diluted earnings per share
For the full year 2024, revenue was $1.44 billion.
Oren Shirazi: Gross profit was $339 million, operating profit was $191 million and net profit was $208 million or $1.87 basic.
and $1.85 diluted earnings per share.
Oren Shirazi: Tax expenses recorded in our P&L for full year 24 and for the fourth quarter of 24 were at a low, all in.
tax rate of 5% and 4% respectively.
Oren Shirazi: Much lower than our long-term financial model, mainly due to tax benefits recorded during 2004 following a statute of limitations expiration and other tax-related benefits which impacted
Oren Shirazi: However, please note that for the long-term model planning needs, one should continue to assume 15% will be our all-in effective tax rate as previously communicated.
Oren Shirazi: For the full year 2023, revenue was $1.42 billion, gross profit was $354 million, and operating profit was $547 million.
Oren Shirazi: This high operating profit included $314 million net from the Intel merger contract termination.
Oren Shirazi: and $33 million of net restructuring income from the reorganization and restructure of our Japan operations.
Oren Shirazi: Net profit for the full year 2023 was $518 million or $4.70 basic and $4.66.
Oren Shirazi: sent diluted annex per shares, and included $290 million net income from Intel due to the merger contract termination, and $11 million net of restructuring income.
Oren Shirazi: Moving to the balance sheet and future CAPEX and cash plans. As of the end of December 2024, our balance sheet assets totaled $3.1 billion, as compared to $2.9 billion at the end of 2023.
Oren Shirazi: primarily comprised of $1.3 billion in fixed assets net of depreciation, predominantly comprised of FEB equipment and $1.8 billion of current assets.
Oren Shirazi: The current assets ratio, reflecting the multi-payload by which current assets are larger than the short-term liabilities, is very strong at about 6x.
Oren Shirazi: Additionally, shareholders' equity reached a record of $2.64 billion at the end of December 2024.
Oren Shirazi: A strong financial position enables us to plan the following investments in strategic opportunities that support our corporate vision.
Oren Shirazi: One, we have committed to invest up to $300 million to acquire equipment and other CAPEX that Tauer will own in Intel's new Mexico-FEB facility, enabling us to ramp up FEB capacity and capabilities for our customers.
Oren Shirazi: About 15% of this amount has already been paid, and the remaining 85% of these CAPEX amounts are forecasted to be paid in installments during the upcoming two years.
Oren Shirazi: Two, in addition, $500 million of total cash has been allocated to make investments in equipment the tower is to own in the 12-inch fab in Agrate, Italy, following the previously announced STMicro partnership.
Oren Shirazi: To date, we have already invested 80% of this amount, placed purchased orders for all the equipment and other CAPEX required, and the remaining amounts are expected to be paid in the upcoming year.
Oren Shirazi: In addition, we are executing a $350 million investment plan to expand SAIFO and SAIGI capacity and capabilities.
Oren Shirazi: for the qualification and ramp-up of those technologies in our 8-inch and 12-inch facilities in Israel, Texas, and Japan to serve our growing customer demand.
Oren Shirazi: Payments towards this CapEx investment plan are expected to be made in installments during the upcoming two years.
Oren Shirazi: Lastly, I want to note that all above investments, including the SIFO and PSYCHIC CAPEX investments are included in the business strategy and financial model previously presented by the company.
Oren Shirazi: and our required steps to achieve it. In this model, we outlined a revenue target of $2.66 billion per annum that could be achieved by fully loading our existing facilities, including the above-mentioned SIFO and SIGE CapEx investments.
Oren Shirazi: and our newly built and to be built capacity at the Agrate and New Mexico facilities. Which revenue level could result in 560 million dollars of annual operating profit and 500 million dollars of annual net profit?
Oren Shirazi: Now, I'd like to turn the call back to the operator.
Operator?
Speaker Change: Thank you. Dear participants, as a reminder, if you wish to ask a question, please press star 11 on your telephone keypad and wait for a name to be announced. To withdraw a question, please press star 11 again. Please stand by while we compile the Q&A Role Studies. We'll take a few moments.
And now we're going to take our first question.
Speaker Change: And it comes to line of Cody Akri from the Benchmark Company, LLC. Your line is open. Please ask your question.
Cody Akri: Thank you guys for taking my questions, and congrats on the progress.
Excuse me
Speaker Change: Maybe if we could start, Russell, with your thoughts about the mobile market, your comments there. If you can maybe help to size your expectation for contraction, and then just, you mentioned Android. You didn't specifically talk about your Apple customers.
Speaker Change: and just comments recently from Skyworks that they'd lost about a quarter of their dollar content. I wonder if that had any impact or if that was factored into your thinking as well.
No, specifically...
for what we believe that we're supplying.
into Apple, we don't see any reduction. As far as...
Speaker Change: We have customers that are serving multiple markets within Asia and their forecasts are down. It's not wildly down and as stated we have
within a 300 millimeter portion of it.
Speaker Change: We do see growth this year for high-end activities. What we see is some of the 200 mm having been reduced.
If you're asking for...
you know, to what degree it would be reduced.
Speaker Change: I don't like giving yearly guidance, but it's not overly substantial.
somewhere probably in the upper teens.
RF mobile business.
Thank you very much.
Speaker Change: All right, thank you for that, Russell. And then maybe, Oren, if you could talk about the incremental margin, just the the contraction that you saw this quarter, if you can maybe help to frame how much of that was the Egrate ramp and then what is that impact for the rest of the year?
Speaker Change: Thank you. For the rest of the year we don't expect any additional headwinds because like we explained previously
Speaker Change: From this new baseline that we presented in Q4-24, we expect the incremental model to work according to the past with the 50% incremental.
Speaker Change: Margin, because all the headwinds were already included in this report. If you ask how much, so you see that if you compare Q4-24 to Q3-24, you see an increase of $16 million in the revenue.
Speaker Change: which by the 50% incremental model should have resulted in an additional $8 million gross margin. However, there is a minus 6, so the difference between plus 8 and minus 6, most of that is attributed to Agrate headwinds.
Thank you.
All right, thank you very much.
Thank you.
Now we're going to take our next question.
Speaker Change: And the question comes to the line of Mahwish Mahbub from SIG. Your line is open. Please ask your question.
This is Bastian filling in for Mehdi Hosseini.
Twitter at noventa.com.
Speaker Change: Could you elaborate on which segment do you expect to be above or below seasonality? And my follow-up is, you started the production ramp on the 1.6TB at several lead customers.
Speaker Change: Could you give us an update on the timing of revenue and when should we expect material contribution to revenue? Is it still on track for material contribution in the second half of 2025?
Thank you.
Thank you. Thank you.
Speaker Change: It's already a reasonable amount of revenue in the fourth quarter. I don't have, at this point,
Speaker Change: A strong visibility in the specific POs that will be receiving second, third quarter for second half shipments, so I can't really predict what the mix will be. I have a much greater granularity on overall forecast.
Speaker Change: As far as your first question on what segments are stronger seasonally than the Q4 to Q1 seasonality?
certainly
Speaker Change: If we were to look at it, you would have the Psyche.
The CIFO
Speaker Change: Yeah, I would say also the mixed signal and the power, as far as the entireties of them, they're staying about at the same.
Speaker Change: CIS is actually a little bit stronger where we're seeing the the biggest seasonality is within the mobile.
Thank you. Thank you.
You've done a very helpful thing.
Thank you.
Thank you.
Now we're going to take our next question.
Speaker Change: And the question comes to the line of Richard Shannon from Craig Hallam Capital Group, LLC. Your line is open, please ask a question.
Hey, Richard.
Russell, hi, how are you?
That's a good thing.
Speaker Change: Excellent, thank you. Thanks for letting me ask a couple questions here, maybe on kind of RF infrastructure, I guess probably a multi-part question here.
I want to try to...
Speaker Change: very strong. And then, maybe as a follow on to that, specifically you talked about silicon photonics in the context of share gains when you get to 400 and 800 gig, maybe if you could provide more specificity on that please.
Speaker Change: I don't think I said share gains in 400 and 800 gig. In general, there's certainly...
Thank you. Bye.
a share gain in that.
Speaker Change: SIFO really didn't exist very strong at all at 100 gig.
Speaker Change: So, if you were to look at 400 and 800, that's where SIFO first came into the play.
and it was...
Speaker Change: put in there, although there's some back feed at 100 gig as well.
I suppose...
Speaker Change: A corollary there is that FIFO has equal benefits for 100 gig as it does at 400 and 800.
Speaker Change: the fact that not until 400 and 800 did SIFO really come into the market, that's why you would say that
Speaker Change: If you were to say share of optical transceivers, obviously it only started to grow at that level.
large learning model software would be driving
Speaker Change: a step back in data center speeds, which I don't believe, but if it did, probably SIFO, now that it's proven, would have big growth in 100 gig as well. So I don't...
But if I understood your question...
specifically.
Speaker Change: CIFO really only started to gain market at $400, but as well it came into and backfilled into $100.
Speaker Change: But the biggest use of it is 400 and 800 and then going into 1.62
Speaker Change: but it's not intrinsic that it has no benefit at 100, it has the same benefits that 100.
I don't know if that answered your question, Richard, but...
Speaker Change: You know, a follow-up on that. I clearly made some incorrect notes when I heard that, so let me follow up on that one. Let me touch on RFMobile here. They obviously delineated the dynamic here between the iOS and Android ecosystem. Maybe you can also delineate it in terms of wafer size here. It sounds like we're going to see a fairly strong shift, particularly with the Agrate capacity coming online this year. How do we see your exit rate of this RFSOI capacity towards 300 when you exit this year?
this year.
when I exit 2025?
Yes, please.
Thank you.
If we look at the RFSOI,
There was probably...
Speaker Change: Two-fifths of it was 200 and 20-24, three-fifths of it plus-minus was 300 millimeter.
And if we were to look at our...
Forecast for...
2025. It's probably more on the order of
four-fifths and one-fifth
Speaker Change: Okay, that is helpful to think about that. Last question for Oren. Oren, if you can help us out, think about your depreciation load here. Obviously had to step up in the fourth quarter. I expect we'll see some more here going throughout the year. How do we think about depreciation number for the year? Just to clarify, what I just gave you
was revenue breakdown. It wasn't wafer units, right?
Okay.
Cody Akri: All right, thanks for that clarification. Oren, depreciation, how do we think about that for the year as well as the exit rate, particularly as we add in from both Agrate and New Mexico?
Hmm
Cody Akri: We are just qualifying the factory, we, like I mentioned, we only...
So far, invested 15% of the $300 million, so obviously...
Cody Akri: Part of the 15% will have been arrived and installed, and qualified, and will start depreciation. So it will not be at all this year. Agrate, it's already baked into Q4, the depreciation number. And so you can see.
Cody Akri: So it's but it's already in the numbers. So whatever q4 on rate will continue this 65 million
Speaker Change: run really continue okay fair enough that is all for me I'll jump on the line guys thank you
Thank you. Now we're going to take our next question.
Speaker Change: And the question comes from Lisa Thompson from Zacks Investment Research. Your line is open. Please ask your question.
Hi, good morning.
Lisa Thompson: My question is about your expectations for revenue growth this year. You said to expect it sequentially. Do you expect it to do similar or better than the 18% from Q1 to Q4?
Lisa Thompson: We didn't guide for the exact revenue from Q1 to Q4. We said three things. We said that we target the year to be higher than 2024, and we target sequential revenue growth, and we target that H2 will be strong.
Lisa Thompson: So, stronger, but we cannot talk about specific numbers for Q4.
Okay.
Lisa Thompson: And in the second half, you said revenues would be helped by added capacity. Can you just list maybe in order of what capacity is coming online that's going to be the biggest contribution to revenues?
Lisa Thompson: I think it's mainly the CyG and CyFo capacity, also Agrata capacity.
Lisa Thompson: But mostly it's the SidePoints IGF on the $350 million plan. Not that everything will be qualified and installed this year, but that's...
Main driver
Okay, great. Thank you. That's my only question.
Thank you. Now we're going to take our next question.
Speaker Change: And the next question comes to the line of Matt Bryson from Wedbush. Your line is open, please ask your question.
Matt Bryson: Yeah, I have a couple questions if that's okay. First one is, I think, heading into Q4,
You said you thought you'd be able to get to...
Matt Bryson: Roughly $150 million run rate on your silicon photonics business, and previously, I think you targeted doubling that business in total in 2025. Did you hit that target, and I guess is that assumption still valid for the silicon photonics business?
Yes, we
Matt Bryson: at least hit the $150 million annualized run rate on Q4. So that was definitely the case. What we said that we targeted wasn't a doubling against the Q4 run rate.
We had targeted a doubling of the 2024 revenue.
Matt Bryson: Right, so it's not that we've targeted at any given point a $300 million dollar SIFO 2025.
Thank you.
But yes, I
Matt Bryson: That was statements that we made and that's still within our targets, absolutely. But yes, we did achieve or exceed the 150 run rate.
Thank you.
That's great to hear. And then just...
Matt Bryson: conjecture that, you know, as there's a shift to optics, that there may be less demand for
Matt Bryson: active copper cables. Is there anything fundamental going on like that? Or do you think it's just inventories or something with your specific customers? I guess longer term, how do we think about that business?
I think in the very short term,
It was stated in the MACOM financial release.
Matt Bryson: that NVIDIA's change from a 2x36 to 1x72 had an impact on the ACC, although I believe that
Matt Bryson: There's many other needs and drives of ACC for the architecture, so I don't think that active copper cable.
Matt Bryson: an active optical cable, for that matter, is going to reduce in the long-term. I think it'll grow. But there was reductions in forecasts, at least, and this is, I'm not speaking out of turn, it was in the NACOM release, related to that change of architecture.
Matt Bryson: Awesome. And my last one, Russell, is just you talked to a couple of different places where you're seeing...
Matt Bryson: some shift from 200 millimeter to 300 millimeter wafers. I mean, how do we think about that?
Matt Bryson: impacting your model? Is there, I'm assuming you get some step up in ASP, but there's some required step up in investment, or is that production already there? And so the net's just an improvement in ASP.
Speaker Change: Thank you for watching. Please subscribe to my channel. See you in the next video.
Um.
I think it's...
Speaker Change: within the model that Oren has spoken with you about in the meetings that you've had with other of our finance, certainly the 300mm has a higher selling price, but it also has a higher substrate price.
Speaker Change: So, you know, the margin impact is very similar, the revenue impact is a bit higher. But the big thing is that at 300 millimeter at this point, we are having greater integration of more advanced components such as the LNAs.
Speaker Change: which in and of itself then can drive higher incremental margin, but those are only within the models that we've given. When we give the 2.7 billion model, we did forecast within the next years that the bulk of everything we're doing with RFSOI specifically would be at 300 millimeter.
Speaker Change: Awesome. And I guess the last one for me is just on the RF side of things. You talked about your expectations related to the downtick in Android.
Speaker Change: contribution just want to clarify when you were saying kind of teams down or I think with high teams down is that the entire RF piece or just the Android piece and then also
Speaker Change: When you're looking at that business, is that more inventory right sizing? Is it more customer based? Is it something that's changed structurally in that business? Just trying to figure out how to model it.
It's really an excellent question.
The
Speaker Change: We really do serve leading customers into the Android market, specifically into Asia.
Thank you.
When there's a good year.
Fortunately, within that year, customers build greater inventory.
Speaker Change: because they never want to be short, and the minute that they're short to...
You know a lead
Speaker Change: phone maker, they open the door to be losing market share.
Speaker Change: So, and then you have the knee-jerk reaction, that if demand goes down for this or that reason...
Speaker Change: The impact in the short term is a big correction with our customer.
Speaker Change: So, I believe that there's weakness within Android in Asia, specifically in China.
Speaker Change: leading makers are selling, I think it's that it is down, but the inventory of our customers is more than is needed for the short term.
Speaker Change: internally is that it will recover within this year, but that I honestly cannot forecast. I can only state where we're sitting now with customers and that's, you know, a very honest answer where we sit, so the...
Speaker Change: What we're doing within mobile itself is down about, you know, upper teens this year by our forecast.
Speaker Change: I speak specifically with with our lead customers on a very regular basis and that's their present forecast they don't want to
Speaker Change: give us numbers that they cannot meet, but the general belief and consensus is that numbers can be substantially better.
Awesome, I really appreciate the call.
Thank you very much. Very good questions. Thank you.
Thank you.
Now we're going to take our next question.
Speaker Change: And the question comes to Lion of Cody Akri from Benchmark company LLC. Your line is open, please ask your question.
Speaker Change: Yeah, thanks guys for taking my follow-ups, um Maybe Russell if I can just get a quick clarification there on mobile and then I'll get another one
Speaker Change: I'm sorry, I missed what you said, Cody. It broke up a little bit. Just a quick clarification on your statements on mobile into the high teens. Is that just your Android piece or your Android plus your iOS piece?
Speaker Change: That's everything. I don't have it broken down right in front of me but that's everything that we serve.
Speaker Change: Okay, and then any help with your comments about first half to second half acceleration? Any way to help weight the year?
More highly weighted in the second half? Just joking, Cody.
it. Yeah.
Yeah, the q1
Reasonable quarter, year over year, you know, certainly.
Speaker Change: meeting slightly above expectations, whatever. But in Q2, we said, you know, quarter over quarter growth. But then we expect...
Very notable, measurable growth in the 3rd and 4th quarters.
Oren Shirazi: As Oren stated, we don't really want to give a long-term guidance at this point.
as far as revenue increase.
Oren Shirazi: When we went into 2024, you were in that, you know, the
Oren Shirazi: this same call a year ago, and I was asked if I expected year-over-year growth, and I said I would be highly disappointed if we didn't. And last year was a very tough year, and that was off of a Q1 that was not so robust.
Oren Shirazi: and we did have the year-over-year growth. If you were to ask me about year-over-year growth this year, I certainly expect year-over-year growth and market year-over-year growth.
Speaker Change: You know, if it's not, you know, really a reasonable amount of number that's adding to the revenue this year, we'd be more than disappointed.
Speaker Change: So the second half should be very strong, you know, how strong, you know, it's not going to be...
Speaker Change: And something that I think we'll all be proud of to be able to report.
Speaker Change: Very good. Very helpful. And then maybe for Oren, if you could just talk about your OPEX expectations, especially as we go into the first half of spending, but any comments on the full year would be helpful as well.
Speaker Change: I don't know. I would expect the baseline of OPEX as was released in Q4 to stay flat. During the year it's fixed cost.
Speaker Change: and Agrata is already baked in the numbers, so we don't expect increase.
Any seasonal increases?
Speaker Change: No, no, it's fixed cost so they are pretty much linear over the year.
So no pay raises.
That's all I'm hearing.
Speaker Change: Ah, true employees, if there will be, there should be offset by cost efficiencies, right?
Okay, excellent. Thank you.
Speaker Change: Thank you and now we're going to take our last question for today.
Just give us a moment.
Speaker Change: And the question comes to land of Richard Shannon from Craig Cullum Capital Group, LLC. Your line is open, please ask your question.
Speaker Change: Thank you for joining us. We will be back shortly. Thank you.
Speaker Change: Great, thanks for taking my follow-up here. It's in the power bucket here. Russell, if I took good notes here, and clearly I haven't in other parts of the call here, but I think you said you were targeting growth in the power management business. Does this include both the power IC and discreets that you've previously talked about separately, or is it just in the...
Speaker Change: Power AC bucket, I'm not sure what the terminology means here.
Speaker Change: No, I said that the discrete business would be down year over year and the power IC itself will be up year over year, that's our target.
Okay, and then wait...
Power discrete would be down.
Okay, and if we put those together?
collectively.
Should be up.
Should be up, okay.
Speaker Change: Fair enough. That's all for me. Thank you. Thank you very much.
Thank you.
Thank you.
Speaker Change: That are enough of the questions for today. I would now like to hand the conference over to your speaker Russell Ellwanger, CEO, for any closing remarks.
Thank you.
Thank you.
Speaker Change: Thank you for your interest. Thank you for the good questions. Enjoyed them.
Speaker Change: It really is a very exciting time and we're, I think,
performing very well to market needs.
and market changes.
Speaker Change: So much has happened, so much news just recently impacting data center, impacting
potential data center architectures.
In general,
Speaker Change: where we're at and what we're doing within the infrastructure space.
Speaker Change: is leading edge with very key customers. We expect that he'll maintain being...
a very strong market for us with really
Speaker Change: Multiple generation activities going on with the leaders to maintain leadership there.
We backfill that with very strong power management activities.
that will continue to grow.
Very strong demand.
Speaker Change: now being qualified and further generation developments in a very high capacity factory in Albuquerque, New Mexico.
And then we have other.
Speaker Change: based technologies that continue to provide good margin revenues such as the CIS.
Speaker Change: Not necessarily huge growth engines, but also not necessarily something that's...
requiring a lot of resources.
backplane for OLED on silicon.
Speaker Change: We expect that to be a very big growth engine for us in coming years, and prototyping this year, as I had stated.
Speaker Change: We have strong customers, extremely good technologies within RFMobile, specifically RFSOI, and we look forward to that continuing to grow.
Speaker Change: Very excited about the activities in Agrate, the customer qualifications, continuous qualifications there, and hitting high-level utilizations in that factory within this year.
Speaker Change: So, all in all, I think we're in very, very good position.
Speaker Change: We also see within that Q1 greater than Q1-24, Q2 greater than Q2-24, Q3 greater than Q3, and Q4 greater than Q4.
Speaker Change: So, within that, if that helps your modeling, that's something very real, and that shows that it is market increases where we think, again, the greater than for Q3 and Q4 should be substantially greater than.
Speaker Change: So, with that, I'd like to end the call and say, truly, we're very excited about where we're at, where we're going, opportunities in front of us.
Speaker Change: and to continue to share the excitement and achievements with you throughout this year. Thank you very much.
Thank you.
Thank you. Thank you. Thank you.
Speaker Change: This concludes today's conference call. Thank you for participating. You may now all disconnect. Have a nice day.
Speaker Change: This video was made in Cooperation with the U.S. Embassy in the Philippines. No part of this recording may be reproduced without the permission of U.S. Embassy in the Philippines.