Gary Mobley: Sorry, the operator keeps cutting out, I guess, for everybody. Thad, you mentioned that — I believe you mentioned that Q1 represents the bottom for manufacturing utilization for the year. And given that we’ve seen your inventory increase in days for four consecutive quarters, should we read into that as if you’re also saying that Q1 represents the bottom for the fiscal year for revenue?
Thad Trent: No. Look, I think Hassane answered that earlier. We’re not calling a bottom here. In terms of utilization, we think we’re going to be in this kind of mid-60% range until we normalize — the market normalizes and starts to return to the levels that we saw earlier in the year and in 2022. So utilization will kind of stay at this level. In terms of inventory, if you look at what we’ve been doing, we’ve actually been growing what we call our strategic inventory, silicon carbide and the Fab transition. If you look at the inventory, what I call our working inventory or base inventory, it was actually down $52 million sequentially. Days were up just because the COGS number was a lower number. But we’ve been managing that very effectively and kind of in a good tight range here.
I expect as we go through the year, we’ll build a little bit more of the strategic inventory in terms of dollars. But we’ll burn that off over a multiyear period that’s always been in our plan as we exit those Fabs and start to bring that production into our internal Fabs. So we’re actually — in terms of base inventory, we’re happy where we are.
Gary Mobley: That’s helpful, Thad. For you, Hassane, I know that you began to highlight your analog and mixed signal platforms at your May Analyst Day, I believe, that was maybe the first time that you’re really vocal on it. And maybe if you can give us an idea of where that ramp stands, how material can it be as we look through the balance of fiscal year ’24 or maybe even into fiscal year ’25?
Hassane El-Khoury: Yes. So look, the fact that I’m highlighting in my prepared remarks tells you how excited I am about the progress that we’ve made with a brand-new platform. So as far as technology development, technology development is actually on track, a little bit ahead of schedule as far as products are concerned. We’ve already taped out a few of our lead products. We will be sampling here in early ’24. And then obviously, there’s a design cycle before you get to revenue. So from all leading indicators of, one, the competitiveness of the platform; and two, the competitiveness of the products and the adoptions that I see from — early adoption that I see from customers, all of those are at or ahead where we thought that technology will get us.
You’ll hear more about it as we get through 2024 about what that technology platform is. But I will tell you, it is the most competitive mixed-signal analog platform that exists in the market today, and it will carry with it products that are highly synergistic with what we do on the power side of it. So very complementary drivers, controllers as Sudhir mentioned in Analyst Day. So we remain on track. I’m more bullish than I was when we did Analyst Day, given the progress, and we will continue to push forward through 2024.
Gary Mobley: Thank you.
Operator: Thank you. Our next question will come from the line of Josh Buchalter with TD Cowen.
Joshua Buchalter: Hey, guys. Thank you for taking my question, and good morning. I wanted to follow up on an earlier question. I think the conventional view is that silicon carbide is constrained and your — a lot of your peer commentary seems to be shifting to more demand focus right now. I guess to ask it simply, do you still view silicon carbide as constrained? And given we are moving towards more demand signals now, how are you managing investment levels, given all the efforts and long lead times that a lot of your vertical integration efforts take? Thank you.
Hassane El-Khoury: Yeah. From a supply, if you look at a lot of the Fabs and the capacity that the whole industry has talked about versus a trajectory of growth for electrification in general, I do believe that technology will remain constrained. Now of course, in the short term, capacity for 2024 to a first order is put in place. So it is a demand driven. But that goes back to the lumpiness of the ramp that we’ve always talked about. So I don’t see that as additional capacity or overcapacity given that it is temporary in nature and the growth is going to remain. The way we are managing it, of course, is — a lot of it is internally driven. Majority of our — substrate majority of our supply is generated internally and we modulate that as we convert to 8-inch.
We talked about taking utilization down in the last quarter’s earning — utilization — sorry, the capacity. Capital intensity will be down in 2024 and that’s because we’ve been performing better on our 6-inch and therefore, we’re able to ramp 8-inch faster than we originally expected. So we’re going to modulate this internal-external supply in order to tag on to what we see as a demand signal. So we don’t see a underloading the above and beyond what you see in the company, and we’ll manage it that way because revenue is going to recover. EVs are going to keep growing, whether it’s 20 to 30, 30 to 40, it doesn’t matter. It’s going to grow, and it’s a multi-decade growth, given that the penetration of silicon carbide and EVs is still below 25% and EVs in general, are below 25%.
A lot of upside in that business, it does not change our outlook for the mega trend, and we will continue to invest in the long term.
Thad Trent: And Josh, for the investments over the long term, we can modulate our investments very easily because we have a capital-light strategy of converting from 6-inch to 8-inch. Our Fabs are already 8-inch capable. So as we think about substrates, we can convert slowly versus having to go out and do greenfield investments of a new facility and having to bring that up. So as the market takes off, we can modulate our investments correspondingly kind of an equal basis, depending on what’s happening and move very quickly to bring on capacity if needed.
Joshua Buchalter: Got it. Thank you. There’s a lot of helpful context there. As my follow-up, I believe in the prepared remarks, you mentioned that at some point in 2024, you were going to look to refill the channel. Could you maybe provide some context of what signals you would need to see to go ahead and do that. I know you mentioned you’re not planning on a recovery, but is a recovery needed to get you to refill the channel? And I guess how much of a revenue tailwind would you expect that to be? Thank you.
Thad Trent: Yeah. In the prepared remarks, I said we’re going to start replenishing seven to nine weeks. We’re at 7.2 this quarter. We need to start filling that channel now. We’re underserving that mass market. So if you look over the last few years, we are supply constrained, so we started the long tail. And then we focused on our strategic LTSA customers and again, continue to start that long tail. So we do need to start replenishing that. I think — for the first quarter, you may see us go up in terms of weeks, go up a week plus or minus. But keep in mind, on this revenue basis, it’s likely down in terms of dollars, right? But we’re going to be thinking about it that way is we’ve got to actually start moving inventory into that channel to support that longer tail.
So you think about all those customers that broad set of customers, industrial through the catalog, we have not been servicing them well. Our distributors have been putting orders on us. They actually want to hold more inventory than what we’ve allowed them to hold. So we’ve got to start replenishing that. But we don’t see a big step function here as much as just a gradual increase over the course of several quarters.
Joshua Buchalter: Thank you, Thad.
Operator: Our next question will come from the line of Christopher Rolland with Susquehanna.
Christopher Rolland: Hey, guys. Thanks for the question. Can you guys talk about your overall levels of LTSAs. And then if you can, double clicking the SiC LTSAs, I think you’ve given industrial in the past as well. Anything there — and then the update on the SiC customer from last quarter, did they come back? And did you fill them this quarter or what are your expectations there? Thank you.
Thad Trent: Yeah. So our LTSAs for the next 12 months, the value is $4.8 billion. The breakdown of what that looks like roughly is about 80% auto, about 17% industrial and the rest kind of in that other bucket. So that gives us that view over the next 12 months of the LTSA coverage.
Hassane El-Khoury: Yeah. As far as — look, I don’t want to comment about specific customers, but it came exactly as we guided last quarter. And overall, it came higher than Q3. So — we said last time that we’ll keep ramping, we’ll keep ramping through ’24, and that’s coming in exactly as we expected. So that temporary, I would say, demand signal that impacted Q4 is behind us, and we’re moving forward with the ramp.
