AOSL - Earnings call transcript Q3 2021 | Alpha and Omega Semiconductor Limited

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Operator

Good day and thank you for standing by. Welcome to the Alpha and Omega Semiconductor Reports Financial Results for the Fiscal Third Quarter of 2021 Conference Call. [Operator Instructions] Thank you. I would now like to hand the conference over to your speaker today, Mr. Gary Dvorchak, Managing Director, of the Blueshirt Group Asia.

Gary Dvorchak

everyone. afternoon, Good Alpha fiscal to Semiconductor’s call conference And third and quarter discuss XXXX financial to welcome Omega results. I'm Gary AOS. for Dvorchak, Investor Relations representative With me Dr. today are Yifan our our Chang, CEO; Chang, President; Mike Stephen CFO. and our Liang, being recorded live web. This call and is over broadcast the available Relations A Investor following the in of our website. seven call replay for days the via will link be section the The call will proceed as follows. Mike will begin with strategic highlights. business updates report. segment and detailed provide a will Stephen Then, results and that, provide for After the Yifan quarter. review the financial will June guidance

earnings will release after the distributed close is have services the May we of release The today, session. Finally, wire was question-and-answer The company's website. on over X, the also XXXX, posted market.

that operating include non-GAAP by considered and in call, from earnings These and forward-looking measures and expectations. believe reconciliation release. should and conjunction useful based discussions outlook we could investors risks projections. Our We GAAP measures GAAP non-GAAP with these A financial to our measures. is provide provide. financial in certain forward-looking actual comparable measures this that that make measures performance management's because to our current and of results on of cause the this uncertainties We Including we during we remind statements materially use the statements, presentation certain involve be will they release the about non-GAAP included business earnings you differ expectations conference are such information

and to in uncertainties, more provided to We refer the recent obligation risks a subsequent of call. the please update these today's filings SEC. no For assume detailed description and our with information

provide strategic over to call CEO, highlights. will to turn Mike, I the Now Mike? our

Mike Chang

we today today's you We strong reflect million like am of year-over-year in disciplined segment. to to our time Thank sequential speaking our We ahead spending. to optimize of to to to quarter. market March solid benefited of product another I growth. each performance expectations. end you, call. the most strong a from us again $XXX across report with product results quarter, In leading market categories, the enabled excited all In robust Gary. our take strong welcome our everyone approach saw mean year-over-year experienced be to shipments mix. of would to of and Revenue and which continued we I demand,

All impact I this times solid and seven year-over-year. margin non-GAAP resulted EPS execution. $X.XX, our our improvement. in into on resulting continue remain of controls which go significant efficiency our by line more gross will non-GAAP encouraged positively bottom team’s and by in performance The of to latter. details Yifan financial of increased XX.X% operational profitability

As and I discussed broad strategic technology and be This mission mission partner portfolio on power a trusted AOS. do work we global the drive at our calls, a of focus semiconductors. to is continues to supplier of our previous

driving, R&D effort deeper and innovation. Our is focused product broader

and Our us us targeted Power broader develop product a solutions our variety strong offerings of expand allows the This to power and and engineering team applications. discreet technology to platforms. technical IC deliver more expertise, for power complete enable

relationships our their to with have customers trusted solution a As deepened strategic provider, partners. we become

driving our increasing our content newer growth core are applications. BOM a result, As the products primarily in by

to capacity we front joint semiconductor our fab manufacturing to globally. ramp plan. tight at Chongqing in up remains our continue venture the capacity according On The

expanded fab its is demand on and with approaching to The September are customer the additional Yifan continues fulfilling able to progress thankful are market capacity in update JV the the we JV X management, fab on this will be the am our started later the capacity outlook call. Chongqing to to be quarter. growth. our our to we demand which track us the end rate target on As supporting I is Phase with flexible purpose you pleased the critical run across providing progress fab JV joint and of at very Board. from With venture. address

the have We we commitment enable that innovation on as front we by years, made developing progressively OEM markets. of in to While Tier continue customers to tremendous growth progress opportunities, on opportunities believe partnerships a last our the focus over core us. other as to and well X with energized our are penetrate company unwavering us strategic will several capitalize as

for calendar that we of surpass will million annual we confident are target year Importantly, $XXX our XXXX. revenue

tend business a will I for Stephen report. call over detailed to and to our updates Now on segment Steven?

Stephen Chang

business segment Thank start our with update for you, detailed and afternoon, March an on And the provided I highlights will Mike. then everyone. good quarter.

supply earlier, to and the our tight to demand shortage, In our maximize worldwide operations, mix core industry-wide product midst allocation a customers key of market strong As Mike all segments. capacity to continue while and be revenue. continues discussed support we remains across our optimize

Chongqing. been in working growing fab are from at fab their particular, ramping enabled to strategic have us We JD diligently JV to with In address the our has we customers procurement the Supplies production demand. needs. meet

and go-to-market Our customer solution production product to optimized our a become reflects strategy into parts solutions, our customers, in to business leveraging power. products portfolio, in capacity. products recent More comprehensive enabling expanding momentum efficient. more offer and This commodity multi-socket and broad beyond our reliable quarters expands our expertise more, our

with solutions. new are BOM by increasing new an We customer engagements and accelerating of pipeline products our expanding winning with content growth application-specific

we products applications. For Power IC are more into more example, and in notebook designing

appliance our solutions room contact module We applications conditioners. also air washing are home to like and machines additional address expanding

Now let each of down me into segments. drill business the

going our for and as shortages. remain total was Revenue even strong major the March Let's XX.X% quarter revenue. segment demand our of sequentially into our start X.X% End as up still were with products year-over-year This facing anticipated. represented Computing. customers XX.X% up

actively our demand While and in we support quarter. were the on customer sequential allocation, we capacity resumed managed growth to

more resources were was business especially application. the quarter, strong to allocated graphics able We to by for and support mix segment, is mining. strong and remain notebook more The March the improve driven by the Power ASP product in products Computing During we card to ICs. quarter selling cryptocurrency expected MOSFETs both the higher

revenue in overall to by grow quarter. the expect Computing Looking ahead, digits mid-single June we

We our at both card graphic customers ODM due in and a production by expect business drop temporary for delays. offset solid to notebooks motherboards, demand

China. appliances. momentum the quarters. to of growth XX.X% the we total sequentially. the which Consumer high quarter the We customers to home was year-over-year revenue in X.X% down the important in solutions on, volumes and shipped March coming resumed is segment, business quarter Korea of was by in TV up March expect and Moving appliance in up home seasonally Gaming XX.X% offset strength in continue and module

grow both MOSFET our IC Power with products gaming in multiple continue our and business sockets. to We

gaming, the offset June to our consumers flat a Looking strength with appliances be the segment quarter, business. TV we home in decline in by to expect continued and

segment let’s up to XX.X% This Next, X.X% extended up some quarter, sequentially. normal quarter, than smartphone year-over-year Demand which March out into the China than expected, Communications was move the the particularly seasonality. of segment, and better models business as phone the better in XX.X% revenue played for market. total performed in

low our in communication June the smartphone quarter. season segment the We for to low decrease double-digits expect

global to resume customers. with quarter growth battery We key secured are September our at designs well-positioned in the protection

solid This XX.X% Finally, of revenue. factors. let’s for growth Industrial due Supply year-over-year discuss XX.X% which the Power several and was was accounted up segment sequentially. total and up to Segment, The XX.X%

due for were as adaptors strong, chargers First, solutions for as well tablets demand quick-charger to for used travel smartphones. quick

activity demand supplies for was the design laptop Taiwan. power AC-DC power with robust, in for customers adaptors Second, major incremental with

low motor Third, with demand drive solutions. strong from our our power voltage tool customers remained

segment overall to growing due JV this been We have from support fab. our

quarter largely for seeing Yifan? nine we've We am the Yifan excited next to of U.S. charger grow growth track expect our single-digits now a With that, on business by markets. third and terms our business community months driven fiscal to are in we I XXXX robust of by turn our across momentum business. investment China over now of quarter and quick with June this and outlook drivers quarter. well in under are belt, segment the discussion the executing our by we key results call our for the are With the the for for in both high fiscal roadmap segments. out financial various will laid I

Yifan Liang

everyone prior year. joining the up $XXX.X Revenue Thank million, from us. March was quarter for afternoon quarter and for and the up you, last thank same you Good XX.X% X.X% quarter Stephen. the from

year DMOS mix, product was ago. $XX.X up from of up and X.X% up XX.X% from was XXX.X% terms $XXX.X quarter and sequentially a IC Power revenue XX.X% the prior In million, million, revenue year-over-year. up

our last was for compared in service the and driven non-GAAP to due offset and New amortization last mainly quarter fab at excluded product of lower $X.X same by Non-GAAP $X.X quarter. the same quarter purchased March factories the revenue of partially the as shutdown Oregon of Non-GAAP the end gross million XX.X% both last gross for the March up and from Lunar year. million quarter margin quarter near better The for for was XX.X%, our and Year one-week by mix from the maintenance. annual margin gross increase holiday quarter the margin $X.X the in up to at $X.X utilization some million March of IP prior quarter-over-quarter Assembly the year. XX.X% in prior quarter million was

the by $X.X as quarter, to on AOS operating a operating in flow. positive same to quarter quarter quarter JV was year, million quarter. stand-alone March share-based AOS million for EBITDAS the Non-GAAP the AOS excluded used charges well $XX.X was related quarter $X.X cash to Consolidated charges, In year. quarter million quarter $X.X was March in In share-based for JV and charges to the last last $X.X $XX.X per quarter to million related same quarter the prior prior legal for government higher to received last continued customer deposits a year. respectively. as the as year. quarter prior quarter charge the last to and quarter and the in quarter prior benefit compensation flow were same and $XX.X March addition, for and the March to the compared $X cash to for as Company for in generated to million and for EBITDAS $X investigation in million Company for year. investment flow for year. the for of prior accruals of and for expenses as quarter $XX was million quarter related impairment operating quarter the million well the the quarter cash quarter, for excluded cash supply. million Company the for million, $X.X $X.XX operating quarter million the JV March to and to compared March The flow year. for million of non-GAAP of last million the quarter legal million company for attributable quarter quarter positive the for $X.XX million $X prior year. in generated of last for $XX.X $X.X $X.X same $XX.X and million as the gross same of for $X.XX to Non-GAAP last quarter start-up income same for was This same EPS million the for basis share AOS million $X.X $XX.X $XX.X and the quarter variable compensation quarter, $X.X The March of the million prior to the related last to of share-based compared compared was million of due the the last compared prior $XX.X million the last million million, expenses compares to expenses investigation. compensation the year. quarter compared securing same $X.X the expenses same for in compared the margin share-based $X.X attributable quarter tax as an million, prior compared million $XX.X legal the of for as $XX.X quarter tax $XX.X quarter the Non-GAAP of the operating Income million in generate expense million prior last compensation quarter primarily the the for and to we $X.X the $X.X decrease quarter-over-quarter the EBITDAS million year. charges $X.X compensation expenses the and negative quarter, investigation, million $X.X same million

$XXX.X completed million at of We the the including cash the look let’s included million end which balance $XXX.X million, sheet. Now million at at at with the balance at Company. $XXX.X $XX.X last quarter, This quarter the and Company. compares million at AOS $XX.X March AOS JV $XXX to JV of million and

at at $XXX.X and ago of million AOS the including Our $XX.X million, Company. and was cash bank The at March million million balance was the $XX.X JV Company. million million, at end borrowing $XX.X year $XXX.X at the including JV a AOS $XXX.X balance

the XXX the in year. days the JV million Days XX $XXX.X respectively. year. quarter fab to Company loans, Company in JV from repaid continued quarter, $XX.X track XXX million last quarter-end, from existing During $X.X the prior million Property, and sales and for is million Net quarter outstanding the the further the rate days quarter. of inventory $XXX.X $XXX.X of the Average $XXX.X end March September days last process million up The prior and the $XX.X million, Plant on at to including the million end and quarter. receivables days, as achieve Capital March million the quarter, the prior was this ramp last at run at million million compared in for quarter XX million in expand to $XXX.X in and quarter Company was million during The in Equipment up for $XX.X days quarter, Net were its the It’s million year. JV slightly quarter prior million were to $XXX.X quarter, the at capacity. were at AOS same financing I from of $X.X XX-inch compared from the inventory was AOS expenditures quarter. the the target last the quarter Company. and for its additional up to to $XX.X Net $X.X JV year. and of up compared $XX.X trade Phase March

With discuss for now We the when I will would guidance that, details June like provide quarter. more available. the to

margin exclude share-based Non-GAAP operating share-based to of minus expected plus million $X.X We minus X%. Non-GAAP margin excludes approximately XX.X% million. and charges operating or GAAP acquired of are non-GAAP to and range $X in be $XXX We minus the $X.X expenses million. $X.X charges. $X or be or million be operating to range estimated $XX plus gross IP margin the $X to million. $XX.X million GAAP compensation Non-GAAP expenses or compensation estimated of plus of X%. expense million. minus to amortization be approximately estimated anticipate plus Loss government plus million of expect: million $X.X of the gross relating approximately minus interests to Revenue be legal XX.X% million, $X.X expenses gross non-controlling or expenses to in attributable million $X.X million tax $X.X investigation. to to Income to be million. be

the we open this our the With of update for not part call Q&A session. to normal Operator, will information. obligated As practice, that, please start we questions. are

Operator

B. Your first line the [Operator comes Ellis Riley Craig Instructions] you. Thank question from from of Securities.

is line Your open.

Craig Ellis

I you to… for the to question you to and for unwavering least take just breakthrough so and for XX company, for you've known a have entire very now, on and had the Mike, vision good an team execution years performance. milestone, taking wanted other robust at very a and certainly where Thanks this congratulations and the is I’ve you. significant had each always

Mike Chang

you. Thank

Craig Ellis

can things You’re welcome. comment Phase And is still us best And years that with company? the of for see if for out question be the for so, the first to couple you JV when you next ahead. should of of X some maybe the on still is AOSL you ahead over fab look the just you

Mike Chang

joint venture. about specifically talked this You on

Craig Ellis

like the the strong and diversification but earnings increased the Not you to more of you that’s that on the It different well that getting venture, wins over markets as end the with revenue X about, that the question Tier necessarily see as talked in OEM across you’re general a the just and things business. that growth the next was years. joint three of two things happening evolution company’s some

Mike Chang

has of company the Actually no and to much. the very very want core what grow. we one always matter you thank Well, belief a combination

We So we grow, pretty infrastructure these work be hard all will years. our stronger. we once

be better. would Our quality

the stronger. would value. And Our they relationship that’s will our the would we’re be what deeper, be product And doing. recognize with customer because

good is it’s threshold mass critical for or that, course, not Of certain okay. – over today. before Across

You adequate. the read out

to why been not mass, I’ve enough always get So right.

our it stand, you drop the the because I of bids also don’t you still question. So maybe will – because your know is right accelerate what now infrastructure everything. our that’s

more. we actively for So billion looking dollars and are

Craig Ellis

companies be that that big to programs is X. helps. have of the can with And to companies want and scale that them. ability do No, partner with product saying a things certainly, And large think to you’re Tier the I that trusted one

that. So for thanks

that the Let thinking of over near-term and Steven. take into line to bit a it you, me little flip

had stellar in we three across, growth execution So of believe four with I revenues end fulfillment the quarter $XXX markets. million in

is, look of in XQ notebooks. we to the look at revenues have things business? we really as see profile, increased we sequentially you XQ at to The dynamics in question fully demand? fiscal do and and of relative would cards output and are we smartphones As to like XQ our gaming see revenues given calendar from the that flexibility some just end kind in optimized Or XQ terms market typically expect

Stephen Chang

Sure.

of year this our able services. end growing being to time, we’re new this During

kind the in-house key how growth. we’ve But We’re perhaps to revenue mindful support shouldn’t to of decisions well. even as to how business grow, and lot and some to have also to maximizing make a what our side the that, be customers while with ALS house had support that of at our about support

been we’ve So making span a careful has a grow been that to that as business. our if deliberate decisions and

more the we’re both ICs, the and value selling definitely we that Power and computing short-term, sockets advanced in of well course, into including to into some state too. of getting higher higher the we’ve MOSFET the the ASPs is CPU chance by in big still the getting improve pockets in power terms applications as graphics, taken saw power or to of So for for

area entered our turning great some and time smartphone of to to continue an growing been think Tier consistently years that also improve I these been business. into was and X And And customers. have and of back. business, going shortage we’ve – to this we appliance is still going ability market a to is our and this We deepen serve big be home that it’s be during few to the ago time

you’re kind little the normal makers for looking So referring are because about in we key talking the a if September out, a of there. well-positioned – quarter, further the are we peak with smartphone

bit So in this it’s long think still seasonality too. I as think different some year, a same but little is I ways the

a is of that. So smartphone I think an example

Craig Ellis

it That’s really impacts production your to clarifying away that Is components AOSL And gaming intensity the application? related delay into then the AOSL, helpful. is shipment card but or from issue. that related components

Stephen Chang

a of bit both. That's little

Power you care of, now think to there's and or when take are for. have tight I more products, things so things I allegation guess right especially that have, IC with

behind is and believe this be this short-term is thing, should we while a us and that quickly. So thing it resolved temporary a

Craig Ellis

And helpful. I That's for you Yifan, could couple place. a then Yes. if

XXX that Fab when one-week nice shutdown company New Year, Oregon shutdown would I margin margin, to The by for to the Lunar about see the increase. points. basis negatively guidance ago the and our that gross impact thought it gross first gross margin guided question is initially three that indicated months But

benefit you full it is increase of that from really utilization the I gross as greater margin two internal So think Fabs? than possible a that improvement your XX would each basis of point in actually level month is the a week the higher versus get absence be of what

Yifan Liang

Sure.

Craig Ellis

that would be would what not, preclude if the offsets And that?

Yifan Liang

Okay.

for than margin Oregon it pleased estimated it we it end reductions primarily mix. got Actually, expected the are the improvement. quarter. and pushed I Year. In on driven Fabs of mean also Yes, turned the March was by with New China the of the mentioned, March product in We out our the better towards better quarter, mostly originally, annual some operators Lunar

was March the on the So impact smaller. relatively quarter

us I mean, and this can in to we overall mean, that we we some continue supply one and where current mix environmental I provided So and is demand and product net, now, some factor think mix. tight and there to optimize then opportunities then for are then the improve then, the

factor new from – our is products. contributing growth Another – the the just of

products year-over-year XXX bit For and quite XXX% growth. you Power IC grew – our example, saw a almost

those So higher newer are products, carried margin for us. genuinely

with So new expect to then products. fundamentally we gradually our margin improve

Craig Ellis

mention little that be Got to payment, it. the then the $XX talk was Can related a bit prepared payment? executed there when more relates capacity. in about you advance to I that And million would a for what believe remarks, of fulfillment and

Yifan Liang

million we Sure. years. supply I then mean, the In deeper for And received March before deposits, those guarantee getting we quarter back our for indicator quarter I we next received think with also quarter that December numbers deposits we $XX the have in customers million, in few and are each some and the customer the in deeper. security and $XX relationship our think an year I

[indiscernible] they products supply. AOS’ recognizing our So and

we that. were see happy to So

Craig Ellis

materially That’s revenue along queue. At single hop at these before in to digits or Nice there gives that would down? that some time, coming around helpful. or are another shift mid either the I quarter. then levels, JV for the reasonable in way And the and lastly, fab of see either next motoring takes Fab appetite a level the quarters the is couple up

Mike Chang

couple stay this this would of a quarters slightly level I revenue I the quarters, quarter. I mean, expect, than two and higher for guidance relatively March around mean,

So be JV production level for similar that the the would company.

their it the marching run is quarter. toward in rate September target overall, So

Craig Ellis

queue. Got in it. get I’ll Thanks everybody. back the

Mike Chang

All right. Thank you.

Yifan Liang

you, Thank Greg.

Operator

Loop Capital. from comes line David question the next of Your from Williams

open. is Your line

David Williams

congrats the Hey, to see progress. great It’s quarter incredible the good here. afternoon, on and

Mike Chang

you. Thank

David Williams

solution modules – a standpoint Discrete that the talked to and about, you a provider? less time you’ve like growing little been maybe the Silicon think a I more and modules as provider think from maybe wanted So that AOS the maybe becomes over do business. maybe obviously, about solution IC you’ve bit But the

Mike Chang

that total have forward. from perspective, something total strategy moving for and And of definitely we our as and is part think to IC solutions going doing I been of modules view our our a talking want the and set, it’s to you’re about talking But about our customers. sockets, provider right. then modules. to When individual actually, be is yes, is you’re ICs we solution

looking is a when board, application they perform have customer multiple for best. So designing at in the – then work need a they’re its sockets usually, when to together they to order

provide So got can perform without together it’s the much if solution best these you we table. customer work having to when too best basically, hey, and total can best we say, on operate parts a help and to the performance to they And get know at the it. how and the leaving parts by

continuing us, it that’s want away products, moving for the think really or module we’ll Discrete be products, discretes And our of it’s certainly. what to bigger but point silicon IC of solution the from portfolio device, powers can device Discrete grow not that our – being And anything. them course, the at inside. be they going So performance. I have coupled of IC, But just to also and our to have lot a with products the

David Williams

And Sure. in that or is that, you kind think you approach opportunity – do thinking supplement something this maybe an come Or organic might that longer-term. do of acquisition is an an for to that. there’s perhaps Thank you. about think there

Mike Chang

we’re an what maybe are we think can restricted lookout or to that. to not for move compensate one in in In general, area on organic strictly definitely forward help to we compliments trying especially, do, M&A that plan weak. that to the really we have it, an something I But are it’s for but if us that area always opportunities, there’s

David Williams

and you talk to of maybe how the then velocity into guide. Can the booking And quarter bookings about it little side, that may strong the quarter trained be great. a bit on April? good Okay, obviously, maybe a and through

Mike Chang

has It’s steady not our Sure. and demand, reflecting throughout quarter, strong company-specific growth, the fluctuation design wins. our so and the Backlog strong and there. been end business market much

so closely changes we our market monitor adjust the that we very dynamics accordingly. will and So plans and

David Williams

second run When it maybe fair. That’s in JV. talked Okay. the of of the have reaching seeing September the do it, in now? maybe the capacity rate see JV, continue in the the think could And two, we’re terms in the could and that phase you’ve the there of quarter in planning about phase have the you at market strength phase ramp if realistic to When you pace? you we times, least reasonably

Mike Chang

demand will understand the situation. certainly, current supply We market and

also it. company understands JV Our

As I said, my of JV to financing prepared the in in the in expand remarks, is X. further additional Phase company their process

don't want jump So, I gun the here. to

we when so, will provide available. And details more

David Williams

Okay, if me, versus improvement, the there more for I the quarter? great. prioritization you maybe on then margin would benefit just volume of the And the size, maybe margin one have can what been is way any really, higher what the products the in

Mike Chang

better In this tight in the March supply quarter, product from environment. came pretty demand much entirely that improvement the mix margin

products our at higher caring optimize then newer also for us. margin reflected some mix. which to opportunities and – have And a are We

So yes, it's primarily from the mix. product

David Williams

so much. Thanks Great.

Mike Chang

you. Thank

Operator

Thank you.

comes next Stifel, from from of Your the Kwan Nicolaus. question Jeremy line

open. is line Your

Jeremy Kwan

my the could it Oregon I the follow-on of, earlier are question give And $XXX with support, to idea in some quarterly that million understanding of – so let the the us to how kind your revenue. with that stands well expand strong and can you. how is wanted me and of add execution total company with quickly JV? capacity could And the add an also the utilization you or questions, thank Oregon in Yes, additional above support that. capacity you and Can where headroom? Obviously, yes, revenue fab, JV because combined congratulations on the with to X on that, and follow-up and my the quarterly Phase both fit you your results.

Mike Chang

per and on or maybe Sure. us year, had Overall, yes, year level. guided I revenue to $XXX probably that a last million combined and capacity quarter then half support can ago, year, a

that, or During some the year or product our mix a quite last bit. a improved two

size, when products, the same an newer And shrinking products at ASP, we equivalent Carries the higher half then So, capacity. giving by time rolled out our which new to margin. additional and us is like generally. generally higher carriers also newer products at the

million right products. that's and quarterly delta million versus revenue pretty now, quarterly that our $XXX So, the $XXX to newer revenue contributed much

at So, fab XX their our this and close is JV right Oregon full now capacity fab target the rate. is to run is into up fairly ramping and

room they go. So, have some still to

overall, with happy JV’s So was yes, but progress. I

Jeremy Kwan

how can long keep very And give a a Can – don’t of and you much to left us install things I it further growing? of you how I you to of takes there's market kind if room get is an runway time Because lead that. go? have need Maybe running. on little equipment, to equipment push up idea understand times, much the

a there bit limited might an might some period you be? is you be What point? us what at could of limit can idea be? And capacity that where a give So that little

Mike Chang

the equipment The of Okay, bit. don't their we JV Phase million doing JV do little sure. have to time dollars the said, still contribution can would lead to face We fab ramp I expand up our recognize as I semi is to part getting X whole work the longer. revenue yes, is per altogether. say of few their range. capacity. quarter also And a Then probably

the actually there some over X, cleanroom has current still space. Phase the Phase Beyond X

equipment on. more some where will areas, of produce wafer. expansion. additional in the Yes, squeeze they in of later are can then phase for provide Fundamentally that information can that's so full up yes bottleneck we process some more X to they financing Phase So lift they the

Jeremy Kwan

I flow That's One $XX including two there. on a the you. this is helpful. the is, And guess, for questions very Thank cash deposit, million Great. AOS? operating question

Mike Chang

Yes. Yes.

Jeremy Kwan

or for Okay. this is fab And received is capacity at the at JV? securing – this the Oregon

Mike Chang

They're are manufacturing wherever spelled AOS. from supply the them. not out in the It's we

Jeremy Kwan

it. Got

sounds that's it's like the years. recognized? securing next recognized going capacity this it against for next years. potential couple Okay. over is to It's the And It something couple be of kind is revenue? of of And

Mike Chang

Incremental dollar isn't guaranteed amount years. them for a for multiple of incremental next certain supply

Jeremy Kwan

some or it kind of and a now is into that converted revenue that hold it return So, something is gets for at deposit you point, later?

Mike Chang

return yes soon. deposits, then this Yes, is later we'll

Jeremy Kwan

Return later. Got it.

Mike Chang

Yes.

Jeremy Kwan

like statement? – then as record how happens, counted is that a the cashflow will be it that – do it And on you when

Mike Chang

time that at of operating be Well, when flow deposit. we reduction that return would cash

Jeremy Kwan

Got it.

percent those nice you. Okay. a question Thank the And it's Mike to see Power as increase IC, for sales. very substantially that, on of a

more XX%-ish or Two think last questions. year, XX% I year. this

your First mentioned run is, there level? shortages, once what you things wafer rate? of you longer billion can requirements impact Are of bad could revenue if Power target Where externally? be so, that from is kind that needs then And IC this any eventually. And term, kind $X you that seeing? hit part are that

Stephen Chang

any then you does is I’ll the this first be need can I Mike, just Power definitely like everything give maybe ICs address think and picture. overall sourced. product, to can Stephen, This

And our monolithic. products some are of

especially Some of our multi-chip, when taking our it's products are advantage of silicon.

tight so outside. foundry think will to is business of but on it's it's in And I kind we And to for general, also it's MOSFET depend some these whether whether internal, some days, degree, or degree ICs an any a IC.

and are to look a out become time, proportionally facing the investing billion still forward, I the any going yes, something fundamentally too. lot some grow like will expect plan business strained. portion you when Discrete a of beyond. definitely of it that think in we Power the underpinning well the to I same constraints the we And But $X to one there, grow just for are especially at Power IC So bigger is also and is as start IC business. other Discrete to

percentage the as as both we of the IC business business-wise picture, absolute So, is be Discrete to expect bigger Power the bigger well in time, dollars. of a this same grow going still. But total majority still at to

Jeremy Kwan

Stephen. Great. you, Thank

Okay. Go ahead.

Stephen Chang

[Indiscernible]

Jeremy Kwan

thorough. segment, you're it doing One Yes, communication very looks that was question Stephen. there. like well on the you, last Thank very

gains about market actually about Can out – in about where quite that were? you talk talk how well. Huawei see, Can market you think the as OEMs of there's you're going Chinese non-Huawei that chance after share remarks, doing you pause understand I of with you talk prepared – stock I dynamics Chinese and their the the your if terms a there's dynamics going take a settles market for share. seeing and what OEMs people in on

Stephen Chang

the of products general, Sure. all PCM increased but market supply. makers, us and also like, that allocation terms well, first protection share market is other end. Chinese bit, But customers to attorneys, in a phone we for in they're on ability to were want them I we one first this, engage of out on talking serve to of our they these actually to speculate starting at before mean, customers I – part last But gave for win And ones. battery that who's early before have vendors, our we assumptions – now increasability yes, don't tier for the as certainly from of with to year. the because going more had put

So been of supporting of business winning working some this and had this actually we on business. and some

have So we going from all believe U.S., well the strong China. as markets, as will global business forward, Korea, that a I

Jeremy Kwan

you. Thank Great.

And sorry, question. last one

semiconductor backlog about you giving visibility, than Can half half – any your being kind any levels the versus of stronger have second on read maybe half. that early Some expectations that, your end? kind you second do first of peers first your talked your half of from and

Mike Chang

right I definitely quarter the Well, we seasonality, that the normal now June this mean, March and quarters one, was already. guided above

our right is still now and backlog strong healthy. So

So are we monitored at market dynamics. closely

Our target right range our actually now. is channel below inventory

Jeremy Kwan

Can you quantify that The channel please? us, inventory specifically… for

Mike Chang

and now normally two to of then, the target. three inventory below inventory months the Channel isn't right end channel target low we

Jeremy Kwan

Great. Thank you much. very

Mike Chang

you. Okay. Thank

Operator

from I the [Operator question Instructions] a Securities. we follow-up think from have Riley B. Craig of line Ellis

open. is line Your

Craig Ellis

Thanks for taking the follow-up.

ones. quick two Just

deep talking if one fab the I the months, is talking about rebound around Yifan. like here XXX in that we and six about benefits potential Guys, work really there sounds first it new or for I some or incremental variance is give discussion, XXX some to to think some the capacity, were when either going the for incremental we were tool bottlenecking The the Stephen supply. clock product. yield of things And an today's is

what overall we're being majority ago, to just So company new is I from the was the of or conveying XXX XXX the minority de-bottlenecking the with a six gain that seeing months benefit, the did small misinterpret product?

Stephen Chang

Yes.

You are right.

Craig Ellis

Okay. until one question just that. has we Phase going optimized for margin things that strong and doing And we're to we were phases three some optimize the then the volume your X for certainly venture optimize that gross weren't been few and My and on from second through very question Phase other fulfillment good is we're And going for really dynamics really margin. with gross last the to how getting but execution, how through look X, joint But scaling. we good industry is was, understanding a X. picture Phase years at being fab one bigger

that is gross Mike X we both about through through talked So forward for going the the ramp actually possible for being optimizing getting can optimize it Phase as of for important longer-term evolution where so margin strong and we're X both the that company? volume

Mike Chang

both I provide the support for yes. Sure. thing the I the can their to to it mean, first is help us mean, but volume us. ends, capacity, expanded

So that would and in I Phase can front probably I to X the mean, the and margin on expect yes, benefited extent. in that and X also some

Craig Ellis

That's great. Thanks, Thank you. guys.

Mike Chang

you. Thank

Craig Ellis

Thank you.

Operator

you. Thank

We from of Jeremy line Stifel Nicolaus. questions have the follow-up Kwan from

open. is line Your

Jeremy Kwan

you. thank Yes,

pricing. question quick the a on Just

now any kind costs reflect an pricing doing terms about the about you quarter it. where your from. of of cost being thinking maybe you're see update in own increases, of benefiting very things input things to and you selective mitigate think, that last pricing mentioned I adjusting that you're that but I'm

Mike Chang

Yes.

on in are current increases certainly think cost seeing that’s like just I this So we climate this. anybody else

implementing what the wide and we're understand pass of time support share also being that in they customers customers cost. along this of order Again, our nature and that. in need We of implementing up We selective we last price our absorb about at that but gain too. putting to some said are and situation business, that terms their to industry

that are we is something that So implementing now.

Jeremy Kwan

There call the other as remarks. would you. this management questions back audio no closing like moment. Great. of the are to the Thank to turn for you. I Thank

Yifan Liang

Sure. to This your today. forward quarter. look concludes again for Thank interest call you next in you and Thank our to we AOS, earnings talking you.

Operator

you much, call. concludes and you so all today's speakers. joining. gentlemen, conference Thank this Thank for Ladies

disconnect. now may You

Alpha and Omega Semiconductor Limited (AOSL) 6 May 212021 Q3 Earnings call transcript