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spk08: Welcome everyone to the MPS first quarter 2023 earnings webinar. My name is Genevieve Cunningham and I will be the moderator for this webinar. Joining me today are Michael Singh, CEO and founder of MPS, and Bernie Blagan, VP and CFO. In the course of today's conference call, we will make forward-looking statements and projections that involve risk and uncertainty. which could cause results to differ materially from management's current views and expectations. Please refer to the safe harbor statement contained in the earnings release published today. Risks, uncertainties, and other factors that could cause actual results to differ are identified in the safe harbor statements contained in the Q1 earnings release and in our SEC filings, including our form 10-K filed on February 24th, 2023. which is accessible through our website. NPS assumes no obligation to update the information provided on today's call. We will be discussing gross margin, operating expense, R&D and SG&A expense, operating income, other income, income before income taxes, net income, and earnings on both a GAAP and a non-GAAP basis. These non-GAAP financial measures are not prepared in accordance with GAAP and should not be considered as a substitute for or superior to measures of financial performance prepared in accordance with GAAP. A table that outlines the reconciliation between the non-GAAP financial measures to GAAP financial measures is included in our Q1 2023 earnings release, which we have furnished to the SEC and is currently available on our website. I'd also like to remind you that today's conference call is being webcast live over the internet and will be available for replay on our website for one year, along with the earnings release filed with the SEC earlier today. Now, I'd like to turn the call over to Bernie Blagen.
spk03: Thanks, Jen. NPS's first quarter revenue of $451.1 million came in about as expected, 19.4% higher than the first quarter of 2022, but 1.9% lower than revenue reported in the fourth quarter of 2022. Our results for the quarter were mixed with weaker quarter to quarter demand in our enterprise data and industrial markets, overshadowing improvements in consumer and automotive. Let's take a quick look at our first quarter 2023 revenue by market. First quarter 2023 consumer revenue of $63.4 million increased 19.5% from the fourth quarter of 2022. First quarter 2023 revenue was down 20.8% year over year. Consumer revenue represented 14.0% of our first quarter 2023 revenue compared with 21.2, a 21.2% contribution in the first quarter of 2022. First quarter 2023 automotive revenue of $105.3 million increased $8.0 million or 8.2% from the fourth quarter of 2022. This sequential revenue increase was primarily due to continued acceptance of our highly integrated solutions for advanced driver assistance systems, the digital cockpit, and lighting applications. First quarter 2023 revenue was up 93.1% year over year. Automotive revenue represented 23.3% of MPS's first quarter 2023 revenue compared with 14.4% in the first quarter of 2022. First quarter, 2023 communications revenue of $67.9 million rose $3.6 million or 5.6% from the fourth quarter of 2022. This quarter over quarter increase primarily reflected a modest revenue improvement in 5G infrastructure. First quarter 2023 revenue was up 22.2% year over year. Communications revenue represented 15.1% of MPS's first quarter 2023 revenue compared with 14.7% in the first quarter of 2022. In our storage and computing market, first quarter 2023 revenue of $119.8 million was essentially flat with revenue recorded in the fourth quarter of 2022 as declining storage revenue was offset by higher notebook sales. First quarter 2023 revenue was up 24.1% year over year. Storage and computing revenue represented 26.6% of MPS's first quarter 2023 revenue compared with 25.6% in the first quarter of 2022. First quarter 2023 industrial revenue of $47.5 million decreased $8.6 million or 15.3%. from the fourth quarter of 2022. This quarter over quarter decrease was due to lower security and power source revenue. First quarter 2023 industrial revenue was down 2.2% year over year. Industrial revenue represented 10.5% of our first quarter 2023 revenue compared with 12.9% in the first quarter of 2022. In enterprise data, first quarter 2023 revenue of $47.2 million decreased $21.3 million or 31.1% from the fourth quarter of 2022 due to broad-based weakness in data center spending. First quarter 2023 revenue was up 10.9% year over year. Enterprise data revenue represented 10.5% of MPS's first quarter 2023 revenue compared with 11.2% in the first quarter of 2022. I'd like to share some general business observations. During our two most recent earnings calls, we highlighted that customers were becoming more concerned with near-term business conditions and that ordering patterns might oscillate. This behavior continued through the first quarter of 2023. However, we do see order acceleration for products related to artificial intelligence, autonomous driving, and power modules. And our customer engagement in design wind momentum remains strong across all of our markets. Regarding operating expenses, we continue to invest in our operations to support long-term growth. In response to customer concerns, we are expanding and geographically diversifying both our global production operations and our R&D activities. In summary, We have strong customer engagement, design wind momentum, and are continuing to invest for the long term, even though timing of the revenue ramp from our customers remains uncertain. Moving now to a few comments on gross margin. Gap gross margin was 57.4%, 80 basis points lower than the fourth quarter of 2022, and 60 basis points lower than the first quarter of 2022. Our GAAP operating income was $124.3 million compared with $136.9 million reported in the fourth quarter of 2022. For the first quarter of 2023, non-GAAP gross margin was 57.7%, 80 basis points lower than the fourth quarter of 2022 and 60 basis points lower than the first quarter of 2022. This downward pressure on gross margin is expected to continue near term as we work through higher value inventory built up during the supply-demand imbalance following the pandemic. Our non-GAAP operating income was $164.1 million compared to $174.1 million reported in the fourth quarter of 2022. Let's review our operating expenses. Our GAAP operating expenses were $134.5 million in the first quarter of 2023, compared with $130.9 million in the fourth quarter of 2022. Our non-GAAP first quarter 2023 operating expenses were $96.0 million up from $94.8 million reported in the fourth quarter of 2022. The differences between GAAP and non-GAAP operating expenses for the quarters discussed here are primarily stock compensation expense and income or loss from an unfunded deferred compensation plan. For the first quarter of 2023, total stock compensation expense, including approximately $1.1 million charged to cost of goods sold, was $37.0 million compared to $35.3 million recorded in the fourth quarter of 2022. Switching to the bottom line. First quarter 2023 gap net income was $109.8 million or $2.26 per fully diluted share compared with $119.1 million or $2.45 per fully diluted share in the fourth quarter of 2022. First quarter 2023 non-GAAP net income was $146 million or $3 per fully diluted share compared with $154 million or $3.17 per fully diluted share in the fourth quarter of 2022. Fully diluted shares outstanding at the end of Q1 2023 were 48.7 million. Now let's look at the balance sheet. PB, Harmon Zuckerman, Cash cash equivalents and investments were $919.1 million at the end of the first quarter of 2023 compared to $739.6 million at the end of the fourth quarter of 2022 For the quarter, MPS generated operating cash flow of about $218.8 million, compared with operating cash flow of $52.2 million in the fourth quarter of 2022. First quarter 2023 capital spending totaled $8.9 million. Accounts receivable ended the first quarter of 2023 at $184.3 million, or 37 days of sales outstanding, up one day from 36 days at the end of the fourth quarter of 2022. Our internal inventories at the end of the first quarter of 2023 were $430.8 million, down from $447.3 million at the end of the fourth quarter of 2022, Days of inventory decreased to 204 days at the end of Q1 2023 compared with 212 days at the end of fourth quarter of 2022. Comparing current inventory levels with the following quarters projected revenue, you can see days of inventory decreased to 203 days at the end of the first quarter of 2023 from 212 days at the end of the fourth quarter of 2022. I would now like to turn to our outlook for the second quarter of 2023. We are forecasting Q2 revenue in the range of $430 to $450 million. We also expect the following. Gap gross margin in the range of 55.9 to 56.5%. Non-gap gross margin in the range of 56.2 to 56.8%. GAAP R&D and SG&A expenses between $132.5 million and $136.5 million. GAAP R&D and SG&A expenses to be in the range of $94.9 million to $96.9 million. This estimate excludes stock compensation expense, but includes litigation expense. Total stock-based compensation expense of $38.8 million to $40.8 million, including approximately $1.2 million that would be charged to cost of goods sold. Interest and other income is expected to range from $3.8 to $4.2 million before foreign exchange gains or losses. Fully diluted shares to be in the range of 48.6 to 49.0 million shares. In conclusion, while we remain cautious about near-term business conditions, NPS will continue to focus on business development and investing in infrastructure as necessary to support our long-term growth. We'll now open the webinar up for questions.
spk08: Thank you, Bernie. Analysts, I would now like to begin our Q&A session. As a reminder, if you would like to ask a question, please click on the participants icon on the menu bar and then click the raise hand button. Our first question is from Tory Svanberg of Stifel. Tory, your line is now open.
spk01: Yes, thank you. I was hoping you could elaborate a little bit more, Bernie, on your comment about the business conditions, because it sounds like the design momentum is still very strong, the activity is very strong, but you also sort of added there was uncertainty in certain ramps. So maybe you could elaborate a little bit on that, especially when thinking about the second half, which seems to be a period where the industry could potentially recover.
spk02: Let me answer, Tori, let me answer first. You look at all these industries, it's about servers, computing, including that's a servers and AI product. That's about 10% of the NPS revenue. And we had a hyper, we experienced, these areas really, all the entire companies experience a hyper growth, okay, in the last two or three years. And now the automotives too, okay, we're about 23% of our business, total togethers. and where it's about a 30-some percent. And AI, other than, okay, and across the boards, other than AI and automotive, and so far, still we experience still very heavy demand. Other than that, okay, all these design wing activities that happened in the last four or five years, and... they start to ramp last couple of years. And a lot of, because the reason we have all the inventory, we have expanded capacities and we grow much faster than the average. And now to answer your question directly, our customers, all these products during a ramp, they have a pause. And they don't know what's coming. And the new product, they push out. And so we just caught in the period, which is not bad to me. Because in the last two or three years, we have been in this unsustainable growth and hyper growth. It's like a 30, 40% over the year over year. And that will break the company. and i'm glad to announce and okay we're coming to uh um back to the uh normals okay me and uh and we will write this uh the uh global uh market and uncertainties and we just adapt and uh as a as as in the past okay bernie maybe you can answer more detail okay
spk03: And I think Michael has really laid out a very compelling case as far as the growth that we've experienced over the last three years and also identifying that The automotive market remains solidly intact, but particularly in enterprise data, with the exception of AI, that we are seeing lag in the ordering patterns there and general weakness in our other markets. So I think the thing to reinforce here is that the business model here remains intact. You know, we've built MPS around sustainable growth over the long haul. And right now we're looking at a quarter where the end customer demand is not picking up as well as we might have anticipated a quarter or two quarters ago. But again, the business model is intact.
spk01: Oh, that's, that's great perspective. And as my followup, you talked about gross margin coming down, you know, very, very moderately because of higher value inventory. Could you talk about how long you expect that to, to, to play out and, and even some, some, some ranges? I mean, I, I, I assume maybe you'll get to, I don't know, 55, 56 gross margin, but yeah, any color you can give on, on the, the, the, how long, you know, that lower gross margin would, would, would, would last.
spk03: Sure. And the good news here is that cycle times and pricing both in the fab and the assembly houses are coming down. And so we'll be able to participate in the lower costs after we burn down the inventory, which is currently at about 203, 204 days. So I would expect that we'll see downward pressure on margins through Q2 and Q3, and then perhaps a moderation leveling in around Q4. Great.
spk01: Thank you. Yeah. Go ahead, Michael.
spk02: Yeah, I might as well. Clearly, we see we're going to a downturn situation. We don't know if some segment would grow. NPS is because of very diverse companies, and some area would be still good. And in general, the consumers and the products and even some notebook may come back in the second year. And the point is, I'll try to make this regarding to gross margins. And as you know, in the past, when the industries start to slow down, NPS will be more aggressive in price. and to gain more consumer segment of the market because it can do six months later, when you turn the knob, we actively pursue those products. Six months later, those are fast designing cycles and you will turn the knobs in the revenues in about six months time. We care less about the short-term growth margins, but the long-term growth margins is still the same. So we emphasize, as you know, in the last... last 10 years or so, and we'll still pursue those model. And in the consumer segments, we may just focus in a short term to maintain the growth.
spk01: Makes sense to me. Thank you. Okay.
spk08: Our next question is from Quinn Bolton of Needham. Quinn, your line is now open.
spk07: Hey guys, thanks for taking my question. I guess I wanted to follow up on Tori's question. Really, Michael and Bernie, as you look into the second half of the year, that's normally a seasonally stronger period for the company. Obviously, it feels like there are lots of puts and takes, lots of uncertainty, customers delaying product ramps, but can you give us any sense how you're thinking about the second half of the year Will you see sort of a normal seasonal uptick in September? Are you thinking September could be flattish with kind of the 1Q, 2Q run rate? Any additional color would be helpful just to try to think about the second half.
spk03: Sure, I think that right now, normal seasonality still applies, but in our case, it's a little more muted because so much of our growth in the business is attached to those new product introductions being made by our customers. So if we look in enterprise data in which our major customers or the products that we're supporting have had product delays. And when you look at other aspects of our business, for example, communications, that's still what I'd refer to as lumpy. It's not necessarily trending in a seasonal pattern. So I think that your comment is very balanced and all I'm tilting is to the new product introductions being delayed, probably being a larger factor than just seasonality.
spk02: Yeah, I think we can't say really like a normal seasonality anymore. We experienced it in the past. You have some segments that grow really well. Some segments hit the bottoms. Last year, Q4 is especially like a notebook site. Now you see it's awakening up. NPS has one or others design as a reference, you know, those are reference designs and, okay, we have the powers and, okay, the power solutions. And we see, okay, second half, okay, mostly, okay, all the other rest of our business, okay, other than AI, automotive, and we don't, we have no clear views. And so that's the short term.
spk07: Understood. Wanted to follow up on that enterprise data segment. Obviously, weaker results, it sounds like some of the product or customer delays are sort of focused in that segment. Do you still think as the new server cycle ramps that you can get your share of the vCore power management market towards 20%? Is that still the right opportunity to be thinking about longer term even if some of those customer programs have pushed out by someone?
spk02: Absolutely. I confidently say that. Because we see all these projects has not really fully ranked yet. All the data centers, and clearly, you guys know better, and now it's slowed down dramatically. I don't know whether they over-expanded the last couple of years, and now slow, take a pause. We don't have clear views. What we know is from last quarter to Q1, for Q4, Q1 to now, they kind of slowed down.
spk03: And if I can add to that, again, using, I know that you're focused right now on the short term as far as the second half of the year, but in the GPU space for artificial intelligence, we have a very senior market share position. And as we look ahead to even the next generation, we're in a very good position to take advantage of the next generation of GPUs. So we're really still in early stages as far as being able to leverage up our position and expand our share.
spk02: Oh, yeah, yeah, but that's, yeah, I didn't add that part. The GPU part came in the AI side, and we have a current design wing and as well as the next design. and the future is it will release end of the year or next years. And those were NPS product were ramped to this. Early I referred to is that all these data centers, CPU powers, okay, or data center powers in the overall. And we still have maybe just, if it's not a single digit, just barely a double digit market shares. And from a transition from a VR 13 to 14, and it's not completed yet. We want a lot of design wings in VR 14. And it will turn into revenues.
spk07: Thank you for all that color, Michael and Bernie.
spk08: Our next question is from Matt Ramsey of Cohen. Matt, your line is now open.
spk00: Thank you very much. Good afternoon, everybody. Guys, I wanted to ask, I guess, a two-part question on gross margin. And this is sort of, you guys had been gone from sort of 54, 55, 56 on that steady cadence of 10 to 20 basis points a quarter, and that was amazingly steady. And then during The period of supply-demand imbalance, we jumped up to 58 or so. And now we've come back in and you guys discussed that in the short term. But as you look out over the next two, three years and you think about the strategy to be aggressive and grow and contrast that to some of the opportunities that you have for new design wins and higher content, Maybe you could level set us on the long-term gross margin. Has anything changed there? And where's the new normal? And I guess the second part of that thought, guys, is have you seen any specific price pressure in any markets as some of your competitors maybe get more supply? Thanks.
spk02: Yeah, OK, let me answer your last part first. Any high volumes, our customers have multiple suppliers. They always have a price pressure, other than the last two or three years, other than that. And they couldn't ship only the MPS. Most of our company have a struggle with shipments. MPS, we have less. So nowadays, all the higher volumes, as we expected, in the last couple of years, and I can also remember, we didn't talk that much. We introduced new technologies, which is much lower the cost. And that would be a fight. And so to answer that part of the questions, but earlier I said, okay, I care less about a gross margin lately, okay? But we're still operating within the models, okay? We're not dramatically go down. Clearly, it will go down. But in a long-term model, to answer your question of two or three years out, the business, NPS business is still pretty much intact. And we are focused on those higher values. We're transitioning from IC to solutions, to sell solutions. That still remains our focus. Our long-term business will go that way, and which generate and offers more values, and we have higher growth margins.
spk03: Brett KenCairn, And I think just to polish off the comment there is that you know as far as our model we've been operating over the last several years between 55 and approaching 60% as far as a non gap gross margin. And as we introduce these higher value products, they tend to have higher margins. And what that allows us to do is then manage the mix of business such that we stay within our model. So while we've sort of anticipated in the near term, downward pressure with a flattening here in the next three to four quarters, we'll continue to look to be opportunistic in managing gross margin to accelerate revenue growth.
spk00: Got it. Thank you for all the detail there, guys. As my follow-up, and I apologize for this being a nearer term question, but with all the different end market volatility, Bernie, if you could help us on your guidance by segment, just the revenue trends that you guys see into the June quarter, that would be great. Thanks, guys.
spk03: Sure. I think that we said earlier in the conference.
spk02: It's fair to ask a short-term question because this is a very uncertain period.
spk03: So I think to sort of make a simple point on it is that automotive continues to be doing very well. And there, it's both the market itself as well as the share gains that we're enjoying. I said earlier that communications is lumpy. And the other areas, including storage and compute, enterprise data, and consumer and industrial, are sort of flattish for the near term.
spk02: Yeah. Well, also the storage, okay, in the AI segments, in the AI segments in data center, that computing segments maybe is a frettish, okay? I mean, I think the majority of our revenues still come from servers. You see it in the ramping in the last, 18 months or so, and the AI in the total revenues is still a smaller percentage. And the other things I'm pointing out, there's a memory section. They're changing a new format, and they start to ramp now. This is the result, so we're kind of flattish, okay? I mean, it depends on how fast you ramp up to DDL5. NPSA has a, have a, have engaged with all the major memory companies that we have a design wings. And if they ramp up faster, then we will increase that portion of revenues. And it's depend on what the DDR5 ramp up. Okay. Yeah. Matt is still there. All right. Okay. I think we can. Oh, we lost. Okay.
spk08: Our next question is going to be from Rick Schaefer of Oppenheimer. Rick, your line is now open.
spk05: Oh, thanks. I appreciate all the color so far, you guys. Maybe if I could ask one on 48-volt, back on the AI question. I know I heard you say, Michael, or sorry, Bernie said it. I think you said senior market share position there. I'm curious, with your primary competitor in 48-volt apparently still struggling, are we at a point now, if we look at 2023, where You guys think you'll likely stay sort of sole source sort of on the A and H-100 this year. And I'm just curious, as part of that question, I heard you mention content there. So, you know, is there any color you can give us around what content does as we transition to sort of more powerful accelerators over time? I mean, is it similar? to what you guys have talked about with the move from VR 13 to 14 on V core power, where you're talking about going from sort of $50 a confirm or something to something like 70. And then finally, Michael, for you, I'm just really curious, who else are you seeing out there working on 48-volt power? This seems to be a pretty solid and growing market. Yeah.
spk02: Okay, let me answer my part first. That's the more fun part. From the landscape, I truly see that we see some competitions. I think our product remains the best so far. So that's why, so we have, and we do see some other competitions, okay, maybe as a generation a little later, okay, I mean, as that market segment grows, okay, and the competition welcomes, okay, I mean, the market's too big for MPS, okay? and we welcome other peoples, okay? And we welcome corporations. As a matter of fact, that's what we're doing now, okay? And the NPS is not big enough for that market. But we'll be glad to be leaders.
spk03: Yeah, and again, reinforcing Michael's point there is that it actually, when we enjoy a leadership position and we expect to continue to, competition is very important as far as driving technology improvements. As far as your other question, as far as dollar content, when we look at the CPU market, Generally, we denominate it with a dual processor. And so based on that, we're able to offer an expectation of what the average selling price will be per server. With the GPUs, the model is still sorting itself out. where you can have any number of configurations up to and including eight GPU boards. So it's a little harder to denominate what our dollar content is. And again, we're still in the early stages of watching this model ramp. So I think that we'll have enough experience in about two to three quarters to have a more accurate read on the dollar content, but it is much higher than what we're experiencing with CPUs.
spk05: Thanks for all that color, guys. And for my follow-up, I'd love to ask you about 5G, RAN. I know you guys have said in the past that you're selling to the big three, you know, RAN equipment, OEMs. I'm just curious how you would describe the ramp there in terms of content, in terms of share and everything. What I'm trying to do is get a sense of how big 5G is now versus how big it could be for you guys. And to something you mentioned earlier, Bernie, I'm just really curious here is, could the ramp in 5G sort of smooth some of that lumpiness you described in your calm segment? Thanks.
spk03: Yeah, if I was to draw a comparison of our experience with enterprise data, where we started out with low dollar content and then graduated up the value chain, including power management, We're probably about three to four years behind in the communications market where we're still focusing on the low dollar content for like point of load NEFUs. Now, where this is about to get very exciting is we are getting adoptions for later designs that include our power management for the processors. So at this stage, we're sort of moving with the market, again, as an early entrant. But yes, long term, I do think you're going to see a similar growth profile as what we expect to have with enterprise data.
spk02: Yeah. And admittedly, now, I keep saying Pierce is a small company, but we're not nobody anymore. And we engage with all these 5G makers, and it's only a handful of a company. As of speaking now, we're in the process of signing on the contract now. And so all of these, okay, and it's just a matter of time. Thanks for that, Collin. Yeah.
spk08: Our next question is from Ross Seymour of Deutsche Bank. Ross, your line is now open.
spk02: Hi guys. Can you hear me? We have a high inventory. Yes.
spk06: How about the channel inventory? We've heard a bunch of companies talk about the channel coming down and that's a headwind of revenue growth. I know you guys proactively manage that. So you put it on your own balance sheet, but what's the channel looking like?
spk02: It's also on the high side.
spk03: Yeah, about three quarters ago, we saw a increase in channel inventories and they've remained at about that same level. So there isn't any real new news as far as the sell-through characteristics.
spk06: Is that something that's weighing against your revenue right now? Or are you comfortable running at that relatively higher level?
spk02: No, we want it a little lower. And we want it lower to not gain me in that. In particularly in the first quarters and a lot of customer threatens and I get much higher volumes and okay that's why we shipped and now they have a have a break and so as as a result, and like a inventory didn't didn't decrease that much in the in the channel.
spk06: So it went down on your books, more so than in the channel.
spk03: Yeah, the way to look at another aspect to this is that the inventory in the channel, it depends on what our end customer's lead times are. And as we even commented in the prepared comments, We're seeing a very unusual demand pattern in that we have three areas where we're seeing an acceleration as far as the ordering pattern. But they're doing it with an expectation of having a very short lead time. So as Michael said earlier, That the channel is built up in the anticipation that the customers were going to realize, you know, the sales gains with the new products. But as those have been pushed out, that's left us in this position. So we're going to continue to manage the channel as we always have. But right now, as I said, it's at an elevated level.
spk06: Got it. And then one of the gross margin for you, Bernie, when you talked about the headwinds for it, we see this across the board, so I don't think it's anything particularly different from monolithic, but the one thing you didn't mention was mix. I get that you're carrying higher cost inventory and it takes a while to flush through, but as you go opportunistically, into the consumer market, is that rising as a percentage of sales, something that is also weighing against gross margins? And if so, when do you think that will kind of normalize as a percentage of sales, if not decrease?
spk02: Yeah, you can see as a normal because the consumer market hasn't happened yet. We reduced the way down the consumer down to the big percentage now. And mostly it's a high value inventory rate. Got it. Thank you.
spk08: Our next question is from William Stein of Truist. William, your line is now open.
spk04: Great. Thank you for taking my questions. Regarding something you just spoke about a moment ago, you spoke about elevated inventory and pushouts of projects. I think obsolescence risk is relatively small for monolithic, but maybe you can reassure us on that matter.
spk03: Oh, absolutely. Actually, very helpful question. If you look at our history, we've never had a significant inventory write-off. And a lot of the reasons around that is that our products have long life in the market and long shelf life. So we're actually, if you look back at 2019, we built up inventories and were able to capitalize when the market bounced back in 20 and particularly when the pandemic infusion of capital occurred. So we don't see inventory on our balance sheet as a negative. And in fact, when the markets do get more stabilized, particularly in enterprise data and in storage and computing, I think we're well positioned to take advantage of that uplift.
spk04: Great. And then I'd like to sort of ask a double question about supply and your supply base. Other analog companies have talked about how their foundries are absolutely not cutting cost and they never see it happening, but you've highlighted this trend in your business. Is it because you're on more advanced nodes and so that's just how sort of pricing in that market works? And then maybe you could also comment on the manufacturing plan, both in terms of long-term capacity and geographic diversity. Thanks, guys.
spk02: Yeah. We, you know that, okay, we advance our technology every two or three years. And it's where we're relentlessly cutting the cost and utilize the better technologies, better geometries. The FAB now, the last three years, the FAB cost is not lower, it's higher, as a matter of fact. But we utilize the geometries and also the new technology that we implement. We'll be able to lower the cost. And so the other question that you're making is diversify the manufacturing. We anticipated that, again, we announced that we have a new partnership outside of China, that's in Singapore, and we'll continue to do so. Really outside of that, there's no US manufacturing for our application or for our product. It all resides in Asia. It's Korea, Taiwan, and Southeast Asia. In all our module business, we can do it from outside, outside of China.
spk04: Thanks, guys.
spk08: If there are any follow-up questions, please click the raise hand button. As there are no further questions, I would now like to turn the webinar back over to Bernie.
spk03: I'd like to thank you all for joining us for this Q1 2023 earnings webinar. I look forward to talking to you again during our second quarter conference call, which will likely be in July. Thank you. Have a nice day.
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