Maxim Integrated Products, Inc.

Ladies and gentlemen, thank you for standing by and welcome to the Maxim Integrated Third Quarter of Fiscal 2020 Conference Call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you'll need to press star one on your telephone. As a reminder, today's program is being recorded. I would now like to introduce your host for today's program, Kathy Todd, Vice President, Investor Relations. Please go ahead, Kathy.

Thank you, Jonathan. Welcome everyone to Maximum Integrated's Fiscal Third Quarter 2020 Earnings Conference Call. Joining me on the call today are Chief Executive Officer Tunch Deluja and Chief Financial Officer Brian White. As part of our usual process, we have posted a supplemental financial presentation to our external investor relations website. The information in this presentation accompanies the financial disclosures in our earnings press release and on this conference call. During today's call, we will be making some forward-looking statements. In light of the Private Securities Litigation Reform Act, I'd like to remind you that these statements must be considered in conjunction with the cautionary warnings that appear in our SEC filings. Investors are cautioned that all forward-looking statements in this call involve risks and uncertainty, including the impact of the coronavirus pandemic, and that future events may differ materially from the statements made. For additional information, please refer to the company's Securities and Exchange Commission filings, which are posted on our website. Now, I'll turn the call over to Tinch.

Thank you, Kathy. Good afternoon to all our participants. We hope that you're safeguarding your health during the current global crisis. We appreciate you joining us today and your interest in Maxim Integrated. Let me first summarize last quarter's results. The March quarter progressed largely as we had expected, apart from the last two weeks of the quarter. Given the growing concerns about COVID-19, we took precautionary measures to protect employees and work with social distancing mandates of governments. These measures impacted our manufacturing test operations in the Philippines. However, due to solid execution by the global Maxim team, our March quarter financial results were within the range of our guidance. We have a flexible supply chain that is geographically diverse, and the global pandemic has a varying impact depending on location. Our supply chain footprint in wafer fabs, both internal and at our foundry partners, is currently operational without disruptions. In assembly, we have flexibility in our supplier network to work through staffing-related capacity constraints. Our Thailand test operations are currently able to continue at full capacity. However, our Philippine test operations are impacted by social distancing measures. In the June quarter, we expect our test operations in the Philippines will run at approximately 70 percent of normal run rate. Additionally, we are expediting product shipments for our medical customers to fight the pandemic, and this has been factored into our test planning. Our internal and external manufacturing teams are doing great work in optimizing Maxim's operations during the crisis. Let me turn to our fiscal Q3 and Q4 market overview. Please note that our June quarter commentary by end market includes the effect of our Philippine test constraint on revenue shipments. I will start with automotive. In the March quarter, our automotive business was up 5 percent sequentially with growth across all of our automotive applications. including infotainment, auto body electronics, VMS, and driver assistance systems. Due to the impact of COVID-19, we expect the June quarter automotive demand will soften. Our automotive customers have been significantly impacted by shelter in place mandates around the world, and many customers have temporarily stopped producing cars. We continue to believe in the content growth opportunities in this market and continue to invest in power management, ADAS, and BMS for electric vehicles in anticipation of the return of growth from these content-rich applications. Due to COVID-19 OEM factory closures resulting in lower demand and given our test constraints, we anticipate our automotive business will be strongly down with a greater than 20 percent decline sequentially. We expect declines in all of our automotive markets with the lowest impact in our BMS business due to the resumption of demand at Chinese OEMs. Let me next turn to the industrial market. In the March quarter, industrial was flat from the prior quarter. We saw modest broad-based declines, which were offset by an uptick in automatic test equipment. Days of inventory in the channel remained similar to the prior quarter and were well below our target of 60 days. The COVID-19-related test operations disruption caused a sharp decline in shipments to distributors during the last two weeks of the quarter. As a result, we were not able to replenish channel inventory at the rate previously forecasted. Brian will provide more detail on our distribution business right after this. In the June quarter, we expect industrial to be up sequentially, primarily driven by expedited medical products to help our customers meet a surge in demand. Industrial is expected to be up from the same quarter last year. Once again, we have the impact of our test constraints weighing on our guidance. Otherwise, stronger growth could be achieved. Let me next discuss communications and data center. In the March quarter, comms and data center was up 3 percent sequentially. We experienced strong growth in demand for 25G optical products for base stations and 100G optical products for data center applications. The ramp in optical products was partially offset by weakness in notebook computers and peripherals. Our laser driver products are being rapidly deployed at hyperscale data centers and 5G base station uplinks. Our products enable these links to move more data while staying within limited power budgets. Our optical business should benefit in future quarters as employees around the world adjust to remote work. We are starting to ramp shipments of new design wins in server power for a leading hyperscale data center customer. We expect this ramp to be a tailwind for the business in future quarters. In the June quarter, we anticipate comms and data center revenue to be up from the prior quarter, primarily driven by increased demand for server power and optical products for hyperscale data centers. Coms and data center is expected to be strongly up from the same quarter last year. We expect power and optical for data center and 4 and 5G base station applications to contribute to strong year-on-year growth. Finally, let me turn to consumer. In the March quarter, consumer was down 5% sequentially. with an uptick in smartphone-related shipments, more than offset by seasonal declines in other consumer electronics. In the June quarter, we expect the consumer market to be very soft due to the COVID-19 epidemic impact on consumer spending and lower smartphone content. Consumer is expected to be strongly down greater than 20% sequentially. I would like to recognize Maxim's hardworking employees at our wafer fab and test manufacturing sites, our supply chain partners, and our global employees who are remaining productive as they work from their homes. I'm very proud of the resilience of this company as shown by our ability to navigate these unprecedented times. We remain highly profitable due to our well-diversified business model and outstanding product portfolio. We're maintaining our focus on long-lived, high-performance, analog and mixed signal products, which will deliver value to our customers and drive sustainable growth for Maximum in the long term. Now, I'll turn the call over to Brian.