We’ve seen a little bit of sluggishness coming into the Fed buying season. And so I don’t anticipate it getting worse. If anything we might get a little bit of pickup sooner rather than later, but I think it’s a little bit early to tell.
Anthony Stoss: Very good. Best of luck guys.
Paul Pickle: Thank you.
Mark Lin: Thank you.
Operator: Thank you. And the next question comes from the line of Christopher Rolland with Susquehanna. Please proceed with your question.
Christopher Rolland: Hey, guys. Thanks for the question. I wanted to talk on AI as well, just given the attention it’s all getting. So last quarter you guys mentioned large US hyperscaler I think could place some initial orders for some CDRs and TIAs for AOCs, lot of TLAs there, sorry, but would love an update there on any purchasing and then you talked about sampling some 1.6T products, were those, was that linear direct drive analog PAM4 CDRs and just maybe talk about your 800 and 1.6 opportunities as you see it.
Paul Pickle: Yeah, I think — so last quarter we talked about initial orders, but we actually saw some shipments for that large US based hyperscaler. So that is 400 gig application, those — and I’ll be a little bit cautious in terms of their ramp first half is going to be a bit sluggish, but we expect it to pick up as it goes through the end of the year, December was final qualification hardware and then it sets the forecast the forecast gets set according to that. So, right now things are moving rather nicely for that — that’s let’s say roughly a $30 million annualized upside once it gets to full production and we would expect that that sales cycle to span three to five years or so. So things are moving rather nicely there.
In terms of looking at, we will see occasionally 4 — we do see 4 x 100s. We do see occasionally 8 x 100s, but really the next node in AI that we’re talking about is 200-gig single lambda devices. That’s where you start to see 1.6 terabit in any appreciable volume. We’re looking at those speeds at both mid-reach 10-K type applications as well as short reach. But right now, it’s just a really frothy opportunity environment for me to put a number on when those things start to translate to volume, I think it’s a little bit early, but we’re seeing really some nice numbers coming out of the POCs and some demonstrations. So, given the environment, I think it’s going to be, I would expect this to be pretty quickly picked up, but I see that more of a second half calendar year ’24 phenomenon rather than something in the short term, but we’re going to see steady uptick of the 400-gig modules, certainly in the first half of the year and then it will strengthen in the second half and then that’s when we’ll start to see some really nice plans around 800-gig.
Christopher Rolland: Excellent. Good progress there. I wanted to look at your segments also another way here. If I’m reading kind of the tea leaves right here, on the signal Integrity side, you’d expect that to fall and then Protection and Sensing maybe up and the other two IoT related down, is that kind of how we think about it?
Paul Pickle: Yeah, I think if we look at APS, we saw some strong pulls, a little bit of digestion into that ramp for that smartphone — North American smartphone manufacturer. I think we’ll see a little bit of pullback, but largely due to some seasonality. That’s really strong pulls up until the launch and then a little bit of pullback, so that’s Protection. Protection should have a baseline component that’s going to steadily improve from here. So, we’ve seen some nice stability in the base numbers, especially as it relates to the proximity detection and so we’ll see that slowly strengthen. I kind of look at a 13-week booking average by product line and it’s just been steadily improving, not really snapping back but just steady improvement as those inventories come off and our channel partners kind of anticipate some of those production runs.
So SIP is a little bit of digestion, signal integrity is a little bit of digestion on a really strong data center number. We could probably see some surprises to the upside but right now, we’re anticipating our revenue being a little bit softer on that channel inventory digestion for the initial launch. They usually like to validate the hardware and the numbers that you’re seeing and then they kind of resume an additional schedule. So, Protection and SIP both kind of moving a little bit sideways at this point, but slightly down.
Christopher Rolland: Thanks so much, Paul. Appreciate it.
Operator: And the next question comes from the line of Rick Schafer with Oppenheimer and Company. Please proceed with your question.
Rick Schafer: Thanks, Paul. Thanks, Mark. I guess my first question if I could just maybe a high-level, and Paul, I was just hoping that you could share a little more about your strategic kind of vision for Semtech and what the Company you think it’s going to look like you expect it to look like say in three years from now. I mean what role do modules in particular play long term and the growth opportunities there. I mean, do they justify the risk the associated margin pressure or do you see a path to maybe improving those margins demonstrably sort of more to kind of classic corporate average?
Paul Pickle: So that’s — it’s a — that’s a good question and you’re putting me on the spot. So, I certainly appreciate that. So, what do we look like three years from now? There’s no doubt that our core competencies really does kind of come from components and I do think that it makes sense to move into module products as long as you can pick up additional stacking margins. So, to have — to produce a module that essentially has component content that you produce does make sense. I’ve participated in businesses before where a lot of times you have to produce a reference design and in some cases just makes sense to go out and sell that reference design and commercialize it, manufacture and sell it. You know, this gets a little bit more complicated and that’s generally speaking from a Semiconductor standpoint, it gives a little bit more complicated when you start talking about IoT because of the diversity of use cases, you end up having to pull a lot — a broad range of technologies through in order to produce an entire solution.
If I had to be a module maker in and of itself today, the business model would be very different and I think my investor base would be very, very different. So does it justify in and of itself, the margin pressure, I think the answer to that is no. But if we can pull together a bit more of a comprehensive IoT strategy in which it becomes an enabling component on higher margin sales then, yes, I think it’s quite possible that, that can happen. It doesn’t necessarily mean that we have to own it for the entirety of that three-year, five-year play but cellular backhaul is always going to be a part of an IoT strategy and I do think that we have a rather large IoT opportunity in front of us that we need to kind of re-imagine that strategy and how we’re going to capture that in the marketplace.
