Q1 2025 Tower Semiconductor Ltd Earnings Call
Good day and thank you for standing by welcome to the tower semiconductor first quarter 'twenty five earnings conference call.
At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question. During the session you will need to press star one on your telephone you will then have an automated message advising Johan does raise to withdraw your question. Please press star one on one again, please be advised that today.
Speaker Change: This conference is being recorded I would now like to turn the conference over to your first speaker today, Ms. Lovett Senior Vice President of Investor Relations and Human resources. Please go ahead.
Ms. Lovett: Thank you and welcome to <unk> financial results Conference call.
Okay.
Speaker Change: <unk>.
Speaker Change: Before we begin.
Speaker Change: I would like to remind you that some statements made during this.
Speaker Change: Cool.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: Excellent.
Speaker Change: Doug.
Speaker Change: These uncertainties and risks.
Speaker Change: Close enough.
Speaker Change: Okay.
Speaker Change: The Securities and Exchange Commission.
Speaker Change: Yeah.
Speaker Change: Alrighty.
They are also available on our website.
Speaker Change: Hello assumes no obligation to update any such forward looking statements.
Speaker Change: Please note that the first quarter.
Speaker Change: Our financial results have been presented.
Dan.
Speaker Change: Yeah.
Speaker Change: Financial tables.
Speaker Change: The earnings release and in this earnings call.
Speaker Change: Certain adjustments.
Speaker Change: So that may be considered non-GAAP financial measures.
<unk>.
Speaker Change: As established with the Securities and Exchange Commission.
Speaker Change: The financial.
Speaker Change: Got it.
Speaker Change: These measures.
Speaker Change: These non-GAAP measures financial measures.
Speaker Change: We have a supporting slide deck that complements the conference call presentation is accessible on our company's website and is also integrated into <unk>.
Speaker Change: Got it.
Speaker Change: Now I'd like to turn the call.
Speaker Change: Right.
Speaker Change: Go ahead.
Hello, everyone.
Speaker Change: Thank you for joining our call today.
Speaker Change: It is a pleasure to have the opportunity.
Speaker Change: To update on our activities and progress.
Speaker Change: We opened 2025 with a quarterly revenue of $358 million with a net profit of $40 million.
Speaker Change: We guide the second quarter of 2025 to a midpoint of $372 million plus or minus 5%.
Speaker Change: Our firm our target for year over year growth.
Speaker Change: With sequential revenue increases throughout 2025, and with strong acceleration in the second half.
Speaker Change: Multifamily capacity investments complete customer qualifications and ramp into production.
The overall market experienced uncertainty due to tariffs and related policy shifts.
Speaker Change: However tower offers a clear advantage to our customers.
Speaker Change: Through our global footprint and proactive cross qualification of all major process flows across our sites.
Speaker Change: Our global manufacturing flexibility.
Speaker Change: Bind with the strength of our wide technical offerings give us an immediate opportunity to grow wherever demand emerges or constraints occur.
We will now present first quarter 2025 revenue breakdown, whilst adding some flavor for the year.
Speaker Change: Please reference slide number four.
Speaker Change: Looking at our first quarter revenue breakdown, we see two significant year over year shifts.
Speaker Change: Firstly RF infrastructure has grown from 14% of our total revenue in Q1, 25% to 22%.
Speaker Change: At this at a higher corporate revenue level.
Speaker Change: Secondly, power grew from 10% to 18% of our corporate revenue.
Speaker Change: Very important shift, resulting from a share gain in our new served market, which we will refer to shortly.
Speaker Change: In our RF infrastructure business, we continue to see growth driven by data center and AI expansions.
Speaker Change: <unk> by our Silicon Photonics, and Silicon germanium technologies for optical fiber communications.
The first quarter of 2025 continued record revenue levels for these two technologies.
Speaker Change: As we look towards the second quarter, we see further strong sequential increases.
With continued growth forecasted in the third and again in the fourth quarter of the year.
Speaker Change: Silicon Photonics continues to displace traditional email solutions at 800 gigabit per second and is anticipated to increase further at 1.6 Terabits per second for which we are presently in a production ramp.
Speaker Change: The market shift to silicon photonics combined with the expected 800 G and one six T optical transceiver five year CAGR of 49% based on like counting reports provides ample opportunity for tower revenue and blended margin growth in the years to come please reference slide.
Speaker Change: Number five.
Speaker Change: In addition to being a driver within the strong market dynamics, we continue to invest in next generations of technology to maintain our very high market share in silicon photonics.
Speaker Change: For example, this past quarter, we announced a new technology that enabled in a light to reduce the number of external lasers.
Speaker Change: Used per 800 G module by a factor of two.
Speaker Change: And hence substantially reducing the transceiver cost.
Speaker Change: We also announced with open light the achievement of a 400 gigabit per lane modulator performance, enabling next generation of 3.2 T products to our knowledge.
Speaker Change: This is the first demonstration of a 400 gigabit per second modulator integrated on an eight inch silicon wafer. Please reference slide number six.
Speaker Change: Along with Silicon Photonics.
Speaker Change: Thinking germanium is growing strongly with continued adoption for <unk> and drivers in optical modules, which are benefiting from the same strong market dynamics.
Speaker Change: Longer term, we see adoption of silicon germanium and satellite terrestrial receivers as well as low noise amplifiers for the most advanced handsets, providing additional growth factors for this high margin segment of our business.
Speaker Change: In 2020 for the handset market demonstrated about 7% growth with towers, RF soi year over year growth being at about 30%.
Speaker Change: This year the handset market is currently forecast to see flat to minimal growth, creating a situation where RF soi customers are now burning off some inventories however, our handset markets our overall growth.
Speaker Change: More than compensated by a new served market for tower, namely envelope tracker.
Speaker Change: <unk> by our highly differentiated custom developed power management 300 millimeter BCD platform.
Speaker Change: We expect this to continue to grow and provide a strong revenue stream for multiple years.
Finally in power management, we are seeing a strong rebound in both our high voltage 200 millimeter platforms as well as continued strong growth in our 300 millimeter BCD platforms.
Speaker Change: Our higher voltage 200 millimeter power business, serving automotive industrial and consumer applications are in the midst of a strong ramp.
Speaker Change: And 300 millimeter BCD, where primarily benefiting from the strong ramp of new business, serving the handset market, namely envelope tracker as previously mentioned.
Speaker Change: And then below trackers used in advanced handsets to improve battery life by interacting closely with the baseband.
Speaker Change: <unk> adjusted the operating point of the power amplifier minimizing wasted energy.
Speaker Change: Our current lineup is in support of a major new handset with our newly introduced custom base band that is coupled with our direct customers envelope tracker.
Speaker Change: 300 millimeter business is expected to grow strongly as we continue to qualify additional products and ramp a large capacity, we have available and the Albuquerque facility.
Speaker Change: We are seeing a market rebound in our machine vision sensor business.
Speaker Change: And 200 millimeter and 300 millimeter.
Customers have consumed their inventories and are placing orders not just for existing skus, but also for new sockets.
Speaker Change: Straightening refreshed vibrance in this market this.
Speaker Change: This includes not only the traditional machine vision market using our global shutter pixel technology, but also <unk> centers direct time of flight based on our spat pixel technology for robotics and autofocus applications.
Speaker Change: The impact of this rebound is expected to be seen in the revenue of the second half of this year.
Speaker Change: Utilization in the first quarter fab two we continue to build the additional siding capacity operated at approximately 55% utilization.
Speaker Change: Sat through is at 80% utilization.
Speaker Change: <unk>, 5% to 65%.
Speaker Change: Growing with the increased high voltage power management demand and fab seven 300 millimeter was fully utilized with the highest process layers to date with additional activities, allowing us to be well above our 85% utilization model.
Speaker Change: Fab nine was at 70% utilization.
Speaker Change: To note as previously stated fab two and fab nine are in the midst of repurposing towards silicon germanium and silicon photonics.
Speaker Change: With available capacity awaiting full customer qualification.
Speaker Change: In summary, we are pleased with progress across all areas.
Speaker Change: We reaffirm quarter over quarter revenue growth for the year.
Speaker Change: Silicon Photonics and <unk> demand remains strong in fact very strong.
Speaker Change: With tier one customer alignment on next generation co development and 203 hundred millimeter.
Speaker Change: Our 200 millimeter high voltage power is experiencing high demand with continued strong interest in 300 millimeter 65 nanometer and finer line BCD program.
Speaker Change: The industrial imaging market is rebounding on top of a stable medical and camera imaging business.
Speaker Change: And we remain confident in the realization of high volume display activities.
Speaker Change: With that I'd like to turn the call to our CFO Mr. Oren Shirazi Oren. Please thank you Ross.
Oren Shirazi: Hello, everyone earlier today, we released our financial results for the first quarter of 2025.
Oren Shirazi: For the first quarter of 2025, we reported revenue of $358 million, representing a $31 million.
Oren Shirazi: Four 9% year over year revenue increase compared to the same quarter in 2024.
Oren Shirazi: Gross profit and operating profit for the first quarter of 2025 $73 million and $33 million respectively.
Oren Shirazi: Similar to the same quarter in 2024.
Oren Shirazi: <unk> gross profit and operating profit benefit this from the year over year revenue increase.
Oren Shirazi: This benefit was offset by the aggressive fixed costs, which as previously communicated commenced operations during the fourth quarter of 2024.
Oren Shirazi: Net profit for the first quarter of 2025, plus $40 million, reflecting 36 cents basic earnings per share and 35 diluted earnings those yields.
Oren Shirazi: Net profit for the first quarter of 2024 were $45 million 40 basic and diluted.
Sure.
Oren Shirazi: And included a nonrecurring income tax benefit.
Oren Shirazi: Moving to our balance sheet and future Capex and cash plans.
Oren Shirazi: Our balance sheet remains very strong evidenced by the following indicators and financial ratios.
Oren Shirazi: At the end of 'twenty of March 2025 assets totaled $3 1 billion.
Oren Shirazi: Primarily comprised of $1 $3 billion in fixed assets.
Oren Shirazi: Dominantly comprised of machinery and $1 7 billion of current assets.
Oren Shirazi: Current assets ratio is very strong at about seven X, while shareholders' equity reached a record of $2 7 billion at the end of March 2025.
Speaker Change: An additional indication of our financial strength has been awarded to US last week by standard <unk> Poor's Israel recent annual rating review, which reaffirmed our rating is IL Dudley stable and don't seem to stable outlook for the company.
Speaker Change: Our strong financial position allows us to invest in strategic opportunities that support our corporate vision as follows.
Speaker Change: One we've committed to pay up to $300 million to acquire equipment and capex in the 12 inch New Mexico Fib.
Speaker Change: 10% of which has been paid and the remaining 85% is focused there to be paid as we ramp up qualifications by end of 2026.
Speaker Change: As part of the SD micro partnership.
Speaker Change: $500 million in cash are allocated for this Italy 12 inch fab equipment, we've already invested 80% of such amount and the balance is expected by the end of 2025.
Speaker Change: And.
Speaker Change: Sorry for all of the high margin safely inside your business, we announced we will invest $350 million to expand our capacity.
Speaker Change: Capacity in our eight inch Fabs in Israel and takes us.
Speaker Change: And in our 12 inch wafer fab in Japan.
Speaker Change: 25% of such amount has been paid to date. The remaining 75% is expected to be paid by the end of 2026.
Speaker Change: All of these investments, including the Sighful <unk> Capex full.
Speaker Change: <unk> fully reflected in our previously presented strategic and financial model.
Speaker Change: Under this model we target.
Speaker Change: $2 $7 billion I don't know to revenue.
Speaker Change: At full loading of our existing fabs, including aggressive and new Mexico.
Speaker Change: $560 million in annual operating profit and $500 million.
Net profit.
That concludes my prepared remarks, now I'd like to turn the call back to the operator, so we can take your questions.
Speaker Change: Thank you.
Speaker Change: To ask a question you will need to press star one on your telephone we feel name to be announced to withdraw. Your question. Please press star one on one again.
Speaker Change: Please standby, while we compile the Q&A lifestyle.
Speaker Change: Yes.
Speaker Change: Thank you we will now go to the first question.
Speaker Change: And your first question comes from the line of Cody Acree from the Benchmark Company. Please go ahead.
Cody Acree: Yes, thanks, guys for taking my questions and congrats on the progress.
Cody Acree: Russell Congrats on the new envelope tracking business, maybe if I can.
Cody Acree: Just start there can you just maybe help us size that business.
Cody Acree: Revenue wise today, and then your expectations for the year and maybe as you look into the next few quarters.
Cody Acree: Okay.
Cody Acree: I am not sure I really should.
Cody Acree: Being that.
Speaker Change: It's very specific to a certain customer and I think not difficult to find out who that customer is.
Speaker Change: It has reached very high volumes and we will continue with even higher volumes I mean, we're talking thousands of wafers per month.
Speaker Change: But I don't think it would be proper for you to give more color than that especially with your own reporting I think you had specifically know exactly who we're talking about.
Speaker Change: And this is.
Speaker Change: We're going to be accounted for in your RF mobile business is that correct.
Speaker Change: No.
Speaker Change: The envelope trackers, and the power management and power management Okay.
Speaker Change: I talked a lot about the increase from the 12% to 18%.
Speaker Change: In the 300 millimeter right Okay awesome.
Speaker Change: Can you maybe help us with the size of your cycle business this quarter and your expectations for the rest of the year.
Speaker Change: Certainly I think this is just in line with what we talked about when we entered the year and there is no difference right now and what we're seeing in the growth.
Speaker Change: We finished the previous year with <unk>.
Speaker Change: <unk> hundred.
Speaker Change: About $105 million and we said that we would see a doubling of that within.
Speaker Change: 2025 and that's.
Speaker Change: Everything pretty much on track for that to occur.
Speaker Change: Okay great.
Speaker Change: And then lastly can you maybe just absolutely two more questions out can you just talk about the tone of business that you might be.
Speaker Change: Getting from customers in your conversations.
Speaker Change: Both are officially in and artificially I guess as Youre, just talking to them and getting their read on the impact of the current tariff landscape.
Speaker Change: Okay.
Speaker Change: There are certainly discussion about tariffs and the potential impact we have not seen any yet and our customers arent really seeing an impact.
Speaker Change: There is.
Potentially some fear.
Speaker Change: Not.
Speaker Change: As far as our manufacturing, which as stated we do have the ability through.
Speaker Change: Through cross qualifications to manufacture and many different global locations, depending on customer needs or desires.
Speaker Change: There is some.
Potential fear that if you look at.
Speaker Change: At the very end market for example, some of the power management going into power tools that are being produced in China.
Speaker Change: That potentially could have a softening in the end market of the China products being sold into the U S.
Speaker Change: None of that has been realized yet, but there is some concern there.
Speaker Change: However.
Speaker Change: We have not seen.
Speaker Change: Any pullback in orders, nor a discussion of pullback in orders.
Speaker Change: Due to any concerns on tariffs.
Speaker Change: And some of that again is because of our ability to support our customers in manufacturing and shipping from various global locations.
Speaker Change: Great. Thank you for the help there and then just lastly, any any thoughts or comments around.
Speaker Change: The Indian project that was in the media.
The last couple of weeks about the.
Speaker Change: Possible tabling of that project.
Cody Acree: A very good question Cody, let me just think for a second so that I answer it properly.
Speaker Change: Ethically correct.
Speaker Change: So I did read the article.
Speaker Change: It came as a surprise because we stopped the project and at our request we withdrew from the project some five six months ago.
Speaker Change: I will say without breaking.
Speaker Change: Any type of confidentiality agreements that we had that the article itself with 100% baseless.
Speaker Change: Really no truth and anything that had said.
Speaker Change: It was tower that withdrew from it for the reasons, we withdrew our very good reasons, but again out of confidentiality. It would not be proper for me to go into those reasons.
Speaker Change: However.
Speaker Change: We never press released anything about the India project.
Speaker Change: There was released by others not by us even during the time that we are engaged.
Speaker Change: But why we didn't press release anything is we never had any formal agreement to go forward. We are working on an opportunity as one should always look at and develop.
Speaker Change: Every opportunity that's.
Speaker Change: Good for your customers good for your shareholders. Good for your business and it could have been a very good thing but.
Speaker Change: But ultimately for reasons that we thought were very good we withdrew from the project.
Speaker Change: Unlike anything that was in the article it was tower that was true.
Speaker Change: Thanks for all the help and congrats on all the progress.
Speaker Change: Thank you very good questions Guardian, Thank you always for your interest and good questions.
Speaker Change: Thank you.
Speaker Change: Thank you as a reminder, if you would like to ask a question. Please press star one on one on your telephone keypad.
Speaker Change: We will now go to our next question.
Speaker Change: One moment please.
Speaker Change: Your next question comes from the line of Richard Shannon from Craig Hallum. Please go ahead.
Russell Oren: Well, Hi, Russell Oren, Thanks for taking my questions.
Russell Oren: Maybe I'll start with first one on silicon photonics.
Speaker Change: And prepared to ask you about the competitive dynamics here and I think you made a brief remark to that I guess I'd love to get your sense of.
Speaker Change: Given a few other founders started talking a little bit about silicon photonics, transceivers, whether youre seeing anything specifically and then maybe as a.
Speaker Change: A follow on in the general topics Silicon Photonics, how do you see the $1 six generation shaping up from a revenue point of view versus the 800 gig generation maturity, obviously doing very well.
Speaker Change: So I didn't honestly followed the first part of your question, maybe you could restate up I'll answer the second part.
Speaker Change: Yeah.
Speaker Change: The $1 60, we are in a ramp right now.
Speaker Change: Additional customers.
Speaker Change: Saying that they will be ramping strongly in the second half.
Speaker Change: So we are.
Speaker Change: It's very real we're supplying it and again a good fashion and these are eight by 200 channels.
Speaker Change: So.
Speaker Change: Moving along very well and <unk>.
Speaker Change: I wanted to if you could really just restate. The first part of the question, but I didn't pick up with the question.
Speaker Change: So it was just based on competitive dynamics in Silicon Photonics, we've seen a couple of other foundries talk about either on earnings calls or in other events about.
Speaker Change: Getting into the transceiver part of the market here and so just wanted to get your sense of whether youre seeing any of that going into that.
Speaker Change: We would estimate our market share somewhere about 80%.
Speaker Change: Now anytime that you have.
Speaker Change: A very strong market share.
Speaker Change: You have to work very hard to protect it.
Speaker Change: And the best way to do that is.
Speaker Change: Shipping wafers that performed well on time.
Speaker Change: And having customer aligned roadmaps.
Speaker Change: There are next generation needs.
Speaker Change: Our ready and available before they need them. So.
Speaker Change: So that's where we're engaged right now.
Speaker Change: It's a very big growing market as I stated.
Speaker Change: If you look at the analyst report it slipped to have a 49% CAGR.
Speaker Change: And having customer line broke down.
Speaker Change: I am sorry, our next generation.
We're ready and available before.
Speaker Change: It's forecast to have a 49 are you there hello.
Speaker Change: Hi, I'm here, yes, Sir okay.
Speaker Change: A 49% CAGR, so it's a very big growth market.
Speaker Change: Our point will be to maintain very strong share as that market is growing.
Speaker Change: But it is a very big market.
Speaker Change: Also.
Speaker Change: A very high value product high value products drive very high margins.
Speaker Change: So hopefully that answers your question, but.
Speaker Change: At present, we.
Speaker Change: We're serving four of the top five producers.
Speaker Change: As far as optical integrators.
Speaker Change: And.
Speaker Change: I think in a sole position with four of the top five.
Speaker Change: Yes.
Okay excellent I appreciate that feedback.
Speaker Change: My next question Russell is regarding.
Speaker Change: Kenny utilization it sounds like your cross fertilizing.
Speaker Change: The seas across multiple fabs.
Speaker Change: Which you described already here today, which makes total sense here.
Speaker Change: But wanted to get a sense of when we start to see this.
Speaker Change: Complete and starting to see greater capacity available here and I guess my question is specifically oriented towards silicon germanium and silicon Photonics wanted to know whether is that utilization pretty much 100% and when does that spigot open up here.
Speaker Change: It sounds like you have great demand or love to get a sense of when we start to see acceleration.
Speaker Change: Yes.
Speaker Change: Restate, what I said during the prepared remarks for.
Speaker Change: For the <unk> in FIFO.
Speaker Change: The combined infrastructure business.
Speaker Change: We see.
Speaker Change: Continued growth.
Speaker Change: Revenue presently and we see that growing in Q2 growing and additionally, in Q3 and growing Additionally in Q4.
Speaker Change: So if you were talking about capacity opening up and Thats, the only way that that could happen. When there is big demand obviously were running as many as we can presently.
Speaker Change: The cross qualification as well as even within Newport Beach additional capacity capability being added so that's happening real time and Youll see it.
Speaker Change: We anticipate that Youll see it in Q2, and then incrementally higher Q3, and again incrementally higher than Q4.
Speaker Change: <unk>.
Speaker Change: Okay last question I'll jump out of line here just wanted to ask kind of big picture longer term thinking out a couple of years or if you want to pick a different timeframe here and looking at some of the Big picture are the biggest drivers of your top line here, obviously RF infrastructure with the two segments. We talked about today is going to be one I would imagine fit in there.
Speaker Change: Sure.
Cody Acree: RF Soi of the new capacity and then your last earnings call. You specifically mentioned in your closing remarks about OLED on silicon back planes here I Wonder if you can kind of rank order, which ones. You think are going to be the biggest dollar contributors over a two year timeframe or whatever you'd like to pick Russell.
Cody Acree: An incremental dollar growth and especially the margin impact of it the biggest contributor will be RF infrastructure.
Cody Acree: Power on absolute dollars should continue to be a big growth driver.
Cody Acree: RF mobile as stated.
Cody Acree: <unk> pulled back a bit within the first quarter as compared to where we were at during 2024, but we expect that as well too.
Cody Acree: Snapback and have very strong growth and 26% and 27%.
Cody Acree: So I think that those will be the biggest the display we're confident.
Cody Acree: Display realizing big revenue growth.
Cody Acree: There is activities happening customer forecasts that are happening, but it has not been accomplished yet so I.
Cody Acree: Don't want to overstate that.
Cody Acree: The.
Cody Acree: The biggest.
Cody Acree: Confidence in the future and so what's happening presently the activities are there the revenue not yet.
Cody Acree: So upon.
Cody Acree: Starting to get into a few thousand wafer per month of back plane shipment, that's when I'll be much more confident on the growth driver of display.
Cody Acree: But.
Cody Acree: To get to the few thousand wafer a months I'm confident in that presently on display itself and again, what we do with the OLED is the back plane the silicon pipeline.
Speaker Change: Okay I appreciate that perspective, I'll jump out of line. Thanks Russell Thanks, Greg Thank you Richard and very good questions.
Cody Acree: Thank you.
Speaker Change: Your next question comes from the line of Matt <unk> from Wedbush. Please go ahead.
Matt <unk>: Thanks for taking my questions.
Speaker Change: Just with the RF mobile business.
Matt <unk>: Okay.
Matt <unk>: Bob.
The lowest point of close to the lowest point.
But it tends to hit.
Matt <unk>: Can you.
Matt <unk>: All of us whether or not.
Matt <unk>: This might be a bottom.
Speaker Change: How far customers are in terms of reducing their inventories.
Matt <unk>: And I guess is it all inventory reduction or I think there has been a bit of effort.
Matt <unk>: In China ramp up domestic production.
Matt <unk>: Side is that affecting the business at all.
Matt <unk>:
Matt <unk>: Yes.
Matt <unk>: So.
Matt <unk>: The forecast, we see the mobile business growing throughout the year, the RF mobile RF Soi specifically in the front end module. So it should be growing throughout the year against the Q1, So I would at least from forecast I would say that yes. This Q1 was the lowest point.
Matt <unk>: Now on the base business itself.
Matt <unk>: You are correct there has been a drive in China.
Matt <unk>: And.
Matt <unk>: Possibly.
Matt <unk>: Something that.
Matt <unk>: Came as a little bit of a surprise that may be a negative impact of trying to get.
Matt <unk>: The Chinese regulatory approval was needing to show them.
Matt <unk>: Our customers in a different numbers from our customers.
Matt <unk>: And potentially that drove.
Matt <unk>: Some further drive for some of our.
Matt <unk>: Our very big Chinese customer too.
Matt <unk>: Get more market share into China.
Matt <unk>: So that is part of what we're seeing as well we have one customer.
Matt <unk>: Where they are sourcing more of their volume percentage inside of the country itself.
Matt <unk>: Awesome.
Really appreciate the color that was.
Matt <unk>: That was all.
Matt <unk>: Uh huh.
Matt <unk>: Thank you very much.
Matt <unk>: Thank you.
Matt <unk>: Your next question.
Speaker Change: It comes from the line of Lisa Thompson from Zacks Investment Research. Please go ahead.
Speaker Change: Good morning.
Speaker Change: I'd, just like to ask a little bit more about.
Speaker Change: Your sales and how it relates to tariffs I know.
Speaker Change: At year end, you said, 42% of revenues go to the U S but.
Speaker Change: I believe that just means thats, where you send the bill do you actually have what percent of product or so do you have coming from outside the U S to the U S.
Speaker Change: We like we said in the financials you are right the 42% of our revenues about.
Speaker Change: Yes.
Speaker Change: For U S customers.
Speaker Change: Usually the.
Speaker Change: The shipping of the goods is not done to U S is done to where the customers ask us to send to Sandeep for continued work, which usually is I mean, it's not usually there is a lot of.
Speaker Change: Regions in the world. According to the customer request can be Philippines, Thailand.
Speaker Change: In order to package them in.
Speaker Change: Test them and put them into a final product. According to the customary I'll request doesn't matter the cooperated in the U S for this okay.
Speaker Change: So the 40% is just to you bill right, it's not where it is.
Speaker Change: The headquarter of the parent company that we built.
Speaker Change: Yes, it's not the place that we should ship the product.
Speaker Change: Okay.
Speaker Change: We ship, what we are doing too.
Next to packaging houses into the next station in the change in the supply chain right.
Speaker Change: Correct.
Speaker Change: So that would mean, possibly that very little of that revenue actually goes physically to the U S and it would be.
Speaker Change: <unk> captured by tariffs right.
Speaker Change: Great.
Speaker Change: Yes.
Speaker Change: Yes, a very small part of that.
Speaker Change: Physically enter okay.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: Alright, thats good to know and just one small question do you do you expect operating expenses to stay above the $40 million.
Speaker Change: Level from the rest of the year.
Speaker Change: Uh huh.
Speaker Change: We expect it to remain about flat at this current level of 40 million a quarter right.
Speaker Change: Okay, great. Thank you so much that's all my questions.
Yeah.
Speaker Change: Thank you.
Speaker Change: Our next question is a follow up from Cody Acree from the benchmark company. Please go ahead.
Cody Acree: Hey, guys. Thanks, So let me back in line here.
Speaker Change: A couple of quick questions.
Speaker Change: The volume that Youre seeing from a graph that started in.
Speaker Change: Ernest.
Speaker Change: So yes.
Speaker Change: Yes in Q4, it actually started in earnest.
Speaker Change: Got it.
Speaker Change: Any thoughts on that ramp Russell throughout the year.
Speaker Change: Yeah.
Speaker Change: Q2.
It will be a reasonable number Q3 Q4, we expect will be higher by forecast.
Speaker Change: <unk>.
Speaker Change: Something that had mentioned previously that we.
Speaker Change: We see.
Speaker Change: The.
Speaker Change: Q1 revenue is below.
Speaker Change: The.
Speaker Change: Bulk of our RF Soi at this point is 300 millimeter not 200 millimeter.
Speaker Change: <unk>.
Speaker Change: By design.
Speaker Change: Tried to move all of the 300 millimeter.
Speaker Change: The <unk> factory.
Speaker Change: For multiple reasons, not the least of which is allowing then more capacity.
<unk> <unk> seven.
For the <unk> and Silicon photonics growth for new 300 millimeter platforms.
Speaker Change: Okay. Thanks, that's very helpful.
Speaker Change: You mentioned.
Speaker Change: The envelope tracking power management business, and you mentioned, new Mexico in the same breath youre not ramping that in new Mexico, yet is that right or is that is that the plan.
Speaker Change: Are you ramping wafers in new Mexico already.
Speaker Change:
Speaker Change: That specific project is being worked in new Mexico. It is not yet wrapped in new Mexico.
Speaker Change: Right now that is coming out of the what was the factory in Japan.
Speaker Change: Okay, great. Thank you and then lastly could you just.
Speaker Change: Sorry, I'm, sorry, I'm slow on this update but can you believe.
Speaker Change: However, your conversation or your explanation about what's happened in China.
Speaker Change: In the RF mobile business you mentioned.
Speaker Change: Customer.
Speaker Change: The qualification process.
Speaker Change: Some regulatory approval.
Speaker Change: Movement with a customer we discussed that yet.
Speaker Change: Yeah.
Speaker Change: During the diligence and working to get Chinese approval for the Intel acquisition.
Speaker Change: We were very careful about not opening up anything.
Speaker Change: About <unk>.
Speaker Change: Customers that were not Chinese based.
Speaker Change: We had very little choice, but to be open about revenues and activities of Chinese customers with the Chinese government.
Speaker Change: We think potentially.
Speaker Change: Potentially as a result of that.
Speaker Change: That at least one customer.
Speaker Change: Got a lot of pressure to start sourcing in China.
Speaker Change: And that happened in some of.
Speaker Change: Their market share is now going internally into China.
Speaker Change: Presently it is not the most advanced platforms capability doesn't sit there to do that.
Speaker Change: But volumes of older platforms are now being manufactured in China and not with us.
Speaker Change: Okay, but that does not change your expectations of Europe mobile business is still dropping in Q1 and should improve through the year.
Speaker Change: Correct.
Speaker Change: Okay, Alright, thank you guys.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: Our next question is also a follow up from Richard Shannon from Craig Hallum. Please go ahead.
Speaker Change: Okay.
Speaker Change: I'm going to follow on <unk> last question here on mobile.
Speaker Change: And specifically I think it was.
Speaker Change: In response to my question here about.
Speaker Change: Improvements kind of longer term I think you've talked about a snapback in 'twenty, six and $27 and RF Soi and mobile.
Speaker Change: Yes.
Speaker Change: Wanted to get some sense of the dynamics here, you're expecting a much better market or what I would guess is some share gains here, but maybe you can kind of clarify how and where you expect this to occur.
Speaker Change: Okay.
Speaker Change: We have brought on multiple newer customers.
Speaker Change: Some.
Speaker Change: Relatively new entries into the market.
Speaker Change: That have grown remarkably fast.
Speaker Change: One specifically I don't believe that we press released with we intend to.
Speaker Change: But it's.
Speaker Change: A customer that was very strong.
Speaker Change: Antennas.
Speaker Change: Then went into.
Speaker Change: Making their own.
Speaker Change: Antenna switches.
Speaker Change: And they've been very successful they've grown very strong.
Speaker Change: Have multiple other customers that as well are gaining share very quickly.
Speaker Change: So that's a lot of what we're talking about within the growth of.
Speaker Change: The remaining quarters of 2025.
Speaker Change: These customers because.
Speaker Change: Of their big share gains.
Speaker Change: During a time that the market was being built.
Speaker Change: At a reasonable rate to 7% improvement and they got share gains in it.
Speaker Change: They certainly thought as many products as they could.
Speaker Change: As you are initially wrapping and gaining share.
Speaker Change: One thing that you cannot do is under supply to customers demand.
Speaker Change: So the.
Speaker Change: Handset integrators that we're buying from them.
Speaker Change: They themselves.
Speaker Change: Built relatively.
Speaker Change: Relatively big inventory, so they wouldn't let them down.
Speaker Change: When the market then started to pull back with the forecasted no to very low single digit growth in 2025.
Speaker Change: We're stuck with inventory that's burning off now.
Speaker Change: So for the existing Skus.
Speaker Change: That we had shipped last year, they have inventory that's being burned off but.
Speaker Change: There is continual new designs for more advanced models. So that's what we're really counting on for the growth.
Speaker Change: And this year.
Speaker Change: As far as getting into 2026 and beyond.
Speaker Change: There is.
Speaker Change: More established very large customers.
Speaker Change: We have re engaged with our newly engaged with that their ramps are planned to start in the fourth quarter of 'twenty five and go throughout 2026 or to begin in the first quarter of 2026.
Speaker Change: So if you look at 26, we see it as a very big growth year for our RF mobile business, mainly front end module surfing handset.
Speaker Change: Hopefully that gives the color you're asking for.
Speaker Change: That was very helpful. Thanks, Thanks for that Russell.
Speaker Change: My next question as it related to.
Speaker Change: New Mexico Fab with Intel here, and I guess, maybe I had a little bit of confusion that Cody asked on as well here, but maybe I'll ask in a slightly different way here is when do we expect to qualify equipment to you're starting to see depreciation and then also go to production in this last part of the question Russell I ask because last call you talked about a large.
<unk> got.
Speaker Change: And power management.
Speaker Change: I think it's very early this year that we're not talking about ramping until next year. It seems like very early to award appeal for so I just want to make sure I understand that while capital.
Speaker Change: As far as the first part of your question.
Speaker Change: We would start.
Speaker Change: Seeing production shipments within this year, which is what we've had stated in the third and fourth quarter of this year.
Speaker Change: Upon hitting a certain level of production shipments is when you begin depreciation of tools.
Speaker Change: So that's when we would start seeing depreciation.
Speaker Change: You'd have to refresh me, though on the second part of the question.
Speaker Change: Talked about a big PL for power management.
Speaker Change: Yes in the last earnings call in fact, I can pull it up here.
Speaker Change: Find it real quickly.
Speaker Change: Okay.
Speaker Change: I think it was in your prepared remarks actually gives you give me a second I can located here, yes. So last quarter, you said <unk>.
Speaker Change: Deliver successful prototypes lead customers and based on the excess received our first production Po.
Speaker Change: Related.
Speaker Change: Five nanometer.
Speaker Change: Yes that was in fab 11, Ax I didn't say that it was a big volume.
Speaker Change: But we did receive our first production.
Speaker Change: Before we start recognizing revenue.
Speaker Change: We have certain milestones on the volume that we ship.
Speaker Change: And those volumes, we would believe will hit Q3 Q4.
Speaker Change: Yes.
Speaker Change: Okay. That's helpful to give some perspective, there and then my last quick question Russell is related to Silicon photonics.
Speaker Change: You have mentioned.
Speaker Change: Additional platforms that do laser attach with the Silicon Photonics you are delivering today wondering when we might see that into production and then also how do we when the general timeframe when do we expect to intersect with the CPO market.
Speaker Change:
Speaker Change: It's a very good question the latter part of the bigger question is when will the CPO market actually.
Speaker Change: Be realized.
Speaker Change: Minutes thought to be probably at least four years out.
Speaker Change: So I am not sure of the exact timing of when CPO will be there.
Speaker Change: What we're doing with CPO or very good active programs.
Speaker Change: To ensure that our customers that are really as I stated the big players on the optical integrator side.
Speaker Change: That they know they can stay with us for multiple generations and that we're well prepared and theyre well prepared at the time that it would be if it does get adopted.
Speaker Change: That will be their supplier.
Speaker Change: So and we have many forms of how we are pursuing that.
Speaker Change: Uh huh.
Speaker Change: If that answers the CPO question and what was the other part of your question I'm sorry.
Speaker Change: Laser attach.
Yes.
Speaker Change: Exactly that's some.
Speaker Change: Where we do the integrated laser.
Speaker Change: That's with the <unk> platform.
Speaker Change: When will that.
Speaker Change: Start seeing volume shipments by forecast.
Speaker Change: Have multiple customers that are saying into 2020.
Speaker Change: We'll see if that occurs but that is what's being stated on it.
Speaker Change: Okay. That's helpful perspective, that's all from me I will jump out of line. Thanks Ross.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: That does conclude our Q&A session I would now like to turn the call to Mr. Russell Ellwanger. Please go ahead.
Speaker Change: Yes.
Speaker Change: Thank you.
Speaker Change: This past month Dr Pressler.
Speaker Change: The VP of RF technologies, Dr. Racanelli tower's President and I attended the optical fiber conference OFC in San Francisco.
Speaker Change: We have developed quite a strong reputation in the optical transceiver field.
Speaker Change: And candidly it was almost embarrassing we were greeted as rock stars.
Speaker Change: During the conference.
Speaker Change: Met with over 60 customers with discussions in real time activities and multiple areas for example programs for further platform efficiencies.
Speaker Change: Multiple form factors for next generation 400, G modulators and co package optics.
Speaker Change: As an executive management, we continuously meet with our lead customers and new customers, both groupings, either already creating or with the potential to create a large industry impact.
Speaker Change: And my most recent multi week customer visits I was thrilled with the extreme capability character and passion of our existing customers as well as newer customers spanning not just data center, but also our mobile front end module power management and imaging offerings.
Speaker Change: It really is the most exciting time for tower.
Speaker Change: There is an interesting quote from former U S. President Bill Clinton He stated.
Speaker Change: Old age is when our memories outweigh our dreams.
Speaker Change: Self.
Speaker Change: Not being a spring chicken.
Speaker Change: Ponder these words I, specifically pondered what defines vibrant inspired us.
Speaker Change: My thought is that it is not just a high weighting of dreams, and maybe better wording than dreams is high and noble aspiration.
Speaker Change: But as or even more importantly that these aspirations are tied to consequent actions.
Speaker Change: At tower, we have many high and challenging aspiration.
Speaker Change: But most importantly are the real time consequential action, we are taking to achieve them.
Speaker Change: Extremely extremely capable people with boundless passion.
Speaker Change: In an environment that promotes that inspires.
Speaker Change: Both the capability and passion is unstoppable.
Speaker Change: Especially when this environment is based upon customers with equal capability and passion.
Speaker Change: That are dedicated to partner towards mutual success.
Speaker Change: We thank you for your interest in the company, we look forward to updating you over the next quarters as we continue our progress towards achieving our multi year aspiration.
Speaker Change: In the short term, we will be attending the following conferences.
Speaker Change: And look forward to seeing you face to face as possible for your schedule.
Speaker Change: On may 18th we will participate in the ultra timer annual Israeli conference in Tel Aviv.
Speaker Change: On may 28th we will participate at the Craig Hallum 20, <unk> annual institutional Investor Conference in Minnesota.
Speaker Change: On may 29th we will participate at the TD Cowen <unk> annual Technology Media and Telecom Conference in New York again. Thank you for your interest. Thank you for your support.
Speaker Change: And best wishes to you.
Speaker Change: Thank you. This concludes today's conference call. Thank you for participating you may now disconnect.
Speaker Change: Okay.
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