Power Integrations Inc (POWI) 2022 Q3 法說會逐字稿

Good afternoon. My name is Dennis, and I will be your conference operator today. At this time, I would like to welcome everyone to Power Integrations Third Quarter Earnings Call. (Operator Instructions) After the speakers' remarks, there will be a question-and-answer session. (Operator Instructions)

午安.我叫丹尼斯，今天我將擔任您的會議主持人。現在，我謹歡迎大家參加 Power Integrations 第三季財報電話會議。 （操作員指示）演講者發言結束後，將有一個問答環節。 （操作員指令）

I would now like to turn the conference over to Joe Shiffler, Director of Investor Relations. Please go ahead.

現在，我想將會議交給投資者關係總監喬·希夫勒 (Joe Shiffler)。請繼續。

Thank you. Good afternoon, everyone. Thanks for joining us. With me on the call today are Balu Balakrishnan, President and CEO of Power Integrations; and Sandeep Nayyar, our Chief Financial Officer.

謝謝。大家下午好。感謝您的加入。今天與我一起參加電話會議的還有 Power Integrations 總裁兼執行長 Balu Balakrishnan；以及我們的財務長 Sandeep Nayyar。

During this call, we will refer to financial measures not calculated according to GAAP. Non-GAAP measures for the September quarter excludes stock-based compensation expenses, amortization of acquisition-related intangible assets, and the tax effects of these items. A reconciliation of non-GAAP measures to our GAAP results is included in our press release.

在本次電話會議中，我們將參考未依照 GAAP 計算的財務指標。 9 月季度的非公認會計準則指標不包括股票薪酬費用、收購相關無形資產攤銷以及這些項目的稅務影響。我們的新聞稿中包含了非 GAAP 指標與 GAAP 結果的對帳表。

Our discussion today, including the Q&A session, will include forward-looking statements, denoted by words like will, would, believe, should, expect, outlook, plan, forecast, anticipate, prospects, and similar expressions that look toward future events or performance. Such statements are subject to risks and uncertainties that may cause actual results to differ materially from those projected or implied. Such risks and uncertainties are discussed in today's press release and in our Form 10-K filed with the SEC on February 7, 2022. Finally, this call is the property of Power Integrations and any recording or rebroadcast is expressly prohibited without the written consent of Power Integrations.

我們今天的討論，包括問答環節，將包括前瞻性陳述，用諸如將、會、相信、應該、預期、展望、計劃、預測、預期、前景等詞語以及展望未來事件或表現的類似表達來表示。此類聲明受風險和不確定性的影響，可能導致實際結果與預測或暗示的結果有重大差異。今天的新聞稿和我們於 2022 年 2 月 7 日向美國證券交易委員會提交的 10-K 表中討論了此類風險和不確定性。

Now, I'll turn the call over to Balu.

現在我將把電話轉給巴魯。

Thanks, Joe, and good afternoon. Two quarters ago, we called attention to a slowdown in the smartphone market and signs that other markets may begin to fade after the strong demand of the prior 2 years. Last quarter, we noted that distribution sell-through had in fact slowed across all of our end market categories, likely signaling a broad-based downturn in demand. We also reminded investors that PI has historically been among the first in our industry to experience cyclical and macro-driven slowdowns. The summer slowdown has given way to a more rapid deterioration in the business environment over the past couple of months. The end demand appears to have declined significantly and distribution sell-through has continued to slow, particularly in our consumer category, which is about 1/3 of our business and is dominated by appliances.

謝謝，喬，下午好。兩個季度前，我們呼籲關注智慧型手機市場的放緩，以及其他市場在經歷前兩年的強勁需求後可能開始衰退的跡象。上個季度，我們注意到，所有終端市場類別的分銷銷售量實際上都有所放緩，這可能預示著需求全面下滑。我們也提醒投資者，從歷史上看，PI 是我們行業中最早經歷週期性和宏觀驅動經濟放緩的公司之一。夏季經濟放緩已導致過去幾個月商業環境進一步惡化。終端需求似乎已大幅下降，分銷銷售持續放緩，特別是在我們的消費類別，該類別約占我們業務的 1/3，且以家電為主。

Our revenues for the third quarter were within our guidance range, but below the midpoint, down 13% from the prior quarter, and we expect December quarter revenues to be down more than 20% sequentially at the mid point of our range. For those less familiar with our history, it's not uncommon for us to experience large cyclical fluctuations than our peers, because we sell primarily to power supply manufacturers and therefore have an additional layer of inventory between us and the end markets. The same dynamic applies on both the downward and the upward swing for the cycle.

我們第三季的營收在我們的預期範圍內，但低於中點，較上一季下降 13%，我們預計 12 月季度的營收將比預期範圍的中點下降 20% 以上。對於那些不太熟悉我們歷史的人來說，我們經歷比同行更大的周期性波動是很常見的，因為我們主要向電源製造商銷售產品，因此我們和終端市場之間有額外的庫存層。相同的動態適用於週期的向下和向上擺動。

And just as we are typically among the first to see a downturn, we have historically been among the first to see the eventual upturn. And while it's difficult to predict the timing of a recovery, we do see indications that our business is likely to hit bottom over the December and March quarters. For communications category, which was the first category to experience the downturn, distribution sell-through and our direct business were sequentially higher in Q3 and channel inventory fell significantly during the quarter. Across the entire business, cancellations were lower in Q3 than in Q2, and we have seen a modest uptick in turns orders in recent weeks, with many customers already having eliminated much of their excess backlog.

正如我們通常是最早看到經濟衰退的人群一樣，從歷史上看，我們也是最早看到最終復甦的人群之一。儘管很難預測復甦的時間，但我們確實看到有跡象表明我們的業務可能在 12 月和 3 月季度觸底。對於第一個經歷下滑的類別——通訊類別，分銷銷售量和直接業務在第三季度連續增長，而渠道庫存在本季度大幅下降。在整個業務中，第三季度的取消訂單量低於第二季度，最近幾週我們看到輪換訂單量小幅上升，許多客戶已經消除了大部分過剩積壓訂單。

When the broader demand outlook improves, we expect recent market share gains and contributions from new products to enable the kind of outperformance we have historically delivered coming out of a downturn. In the meantime, we will focus on what we control, managing the business for long-term growth and profitability rather than short-term operating metrics, though we do expect to be within our target range of operating margin in 2023. Design activity continues to be robust. Several competitors have retreated from the market and we are not slowing down our efforts to capitalize on the opportunities in front of us.

當更廣泛的需求前景改善時，我們預期近期的市佔率成長和新產品的貢獻將使我們在走出經濟低迷時期取得歷史上優異的表現。同時，我們將專注於我們能控制的事物，管理業務以實現長期增長和盈利能力而非短期運營指標，儘管我們確實預計 2023 年的營業利潤率將處於我們的目標範圍內。一些競爭對手已退出市場，但我們並未放慢努力利用眼前的機會。

We've talked in depth about these opportunities at our recent Analyst Day, and I encourage anyone following our story to view the replay of the event on our investor website. Our presentation covered a wide range of topics including our unique system-level approach to integration, our history of innovation in high-voltage process and device technologies, including GaN and the contribution our products are making to [a cleaner planet].

我們在最近的分析師日上深入討論了這些機會，我鼓勵任何關注我們故事的人在我們的投資者網站上觀看活動的重播。我們的演示涵蓋了廣泛的主題，包括我們獨特的系統級整合方法、我們在高壓工藝和裝置技術（包括 GaN）方面的創新歷史以及我們的產品對 [更清潔的地球] 所做的貢獻。

We also presented a detailed view of our plan to double our addressable market to 18 -- $8 billion by 2027, driven by a combination of investments in new products and technologies and big picture market trends creating opportunities in areas like renewable energy, home automation, appliances, advanced charging and transportation. We expect the largest contribution to SAM expansion from motor drive products, as we expand our BridgeSwitch family to cover a wide range of brushless DC motor applications in the years ahead.

我們還詳細介紹了我們的計劃，即到 2027 年將我們的潛在市場規模擴大一倍至 180 億美元，這得益於對新產品和新技術的投資以及宏觀市場趨勢，將在可再生能源、家庭自動化、家電、先進充電和交通運輸等領域創造機會。隨著我們在未來幾年擴大 BridgeSwitch 系列以覆蓋廣泛的無刷直流馬達應用，我們預計馬達驅動產品將為 SAM 的擴展做出最大的貢獻。

Current BridgeSwitch products covering applications up to 400 watts are rapidly gaining adoption at customers in major appliances, as well as air conditioners and ceiling fans. As we mentioned last quarter, new regulations in India are driving a wave of design activity in ceiling fans by essentially forcing the adoption of efficient brushless DC motors. During Q3, BridgeSwitch was also designed in at a top tier European appliance maker for a next generation refrigerator, a design that would contribute meaningful revenues in 2023. The designs we are winning today will not only generate near-term revenue growth, but also pave the way for the higher power BridgeSwitch products in our pipeline.

目前，BridgeSwitch 產品的應用範圍高達 400 瓦，正在迅速獲得主要家電以及空調和吊扇客戶的採用。正如我們上個季度提到的，印度的新法規強制採用高效的無刷直流電機，推動了吊扇設計活動的浪潮。在第三季度，BridgeSwitch 也被一家歐洲頂級家電製造商用於下一代冰箱的設計，該設計將在 2023 年帶來可觀的收入。

Unlike [discrete] solutions, BridgeSwitch and our Motor-Expert software provide a platform solution that can easily be adapted to a wider range of end products by customers once they are familiar with the architecture. We expect an equally large increase in SAM to come from automotive, where the EV transition brings substantial high voltage semiconductor content to passenger cars and commercial vehicles. As we explained at the Analyst Day, we have a content opportunity of more than $60 today in a passenger car, which we expect to increase by more than 2x as we expand our product offerings in the coming years.

與[離散]解決方案不同，BridgeSwitch 和我們的 Motor-Expert 軟體提供了一個平台解決方案，客戶一旦熟悉了架構，就可以輕鬆地將其適應更廣泛的最終產品。我們預計 SAM 的成長幅度也將同樣巨大，因為汽車產業將向電動車轉型，為乘用車和商用車帶來大量高壓半導體內容。正如我們在分析師日所解釋的那樣，目前我們在乘用車領域擁有超過 60 美元的內容機會，隨著未來幾年我們擴大產品供應，我們預計這一機會將增加 2 倍以上。

Heavy vehicles like buses, trucks and construction equipment, will have even greater dollar content. While the major revenue ramp is still few years away, we are making excellent progress establishing ourselves as a key supplier to the EV market, adding almost 200 designs to our opportunity pipeline so far this year. A majority of these projects involve our silicon carbide-based InnoSwitch ICs, which are ideal for next generation 800 volt systems. Our success in converting opportunities into wins has been highly encouraging and speaks to the degree of differentiation we provide with InnoSwitch in terms of ease of use, reliability, space savings and efficiency.

公共汽車、卡車和建築設備等重型車輛的美元價值將更高。雖然距離收入大幅增長還有幾年的時間，但我們正在取得顯著進展，成為電動車市場的主要供應商，今年迄今已為我們的機會管道增加了近 200 種設計。這些項目中的大多數涉及我們基於碳化矽的 InnoSwitch IC，它們是下一代 800 伏特系統的理想選擇。我們成功地將機會轉化為勝利，這令人欣喜，也證明了我們透過 InnoSwitch 在易用性、可靠性、節省空間和效率方面提供的差異化程度。

Overall, we have now secured design-ins at 7 of the top 10 Tier 1 automotive suppliers, and we expect to be in production with about 15 end customers this year, a number that should at least triple in 2023. These include not only a wide range of power supply applications at automakers in the U.S., Europe and Asia, but also several designs using our SCALE-iDriver gate drivers in drivetrain inverters mainly at Chinese EV customers.

總體而言，我們目前已獲得十大一級汽車供應商中的 7 家的設計訂單，預計今年將與大約 15 家終端客戶一起投入生產，到 2023 年，這一數字將至少增加兩倍。

Another key topic of our Analyst Day was a detailed discussion of our GaN technology, a cornerstone of our product roadmap and also a near-term driver of share gains and higher dollar content. We presented not only the rapid growth in GaN-based product revenues over the past couple of years, but also the $100 million opportunity pipeline we are working to convert to design wins and revenues. These opportunities cut across a wide range of end-markets, with more than half coming from industrial and appliance applications. In fact, half of our GaN design wins in Q3 came from industrial and appliances.

我們分析師日的另一個關鍵主題是對我們的 GaN 技術的詳細討論，它是我們產品路線圖的基石，也是近期推動股價上漲和美元含量提高的因素。我們不僅展示了過去幾年基於 GaN 的產品收入的快速成長，還展示了我們正在努力轉化為設計成果和收入的 1 億美元機會管道。這些機會涉及廣泛的終端市場，其中超過一半來自工業和家電應用。事實上，我們在第三季一半的 GaN 設計勝利都來自於工業和家電領域。

Going forward, GaN power switches will feature prominently in the automotive and motor-drive products that will drive much of our SAM expansion. We also have GaN-based products in our pipeline that will open up new markets for us, such as data center and comm equipment, another major piece of our SAM expansion roadmap. We also expect growth in the SAM for our high-power gate driver products driven by wider adoption of renewable energy and the efficient DC transmission infrastructure. Our high power business struggled to grow over the past couple of years, as projects was slowed by the pandemic, but we have seen a healthy rebound in this business in the past several months, and it is now on track to grow double-digits this year. We expect strong growth in high-power again next year driven by design wins in solar, wind, and electric locomotives.

展望未來，GaN電源開關將在汽車和馬達驅動產品中佔據重要地位，這將推動我們SAM的大部分擴展。我們的基於 GaN 的產品線也將為我們開拓新的市場，例如資料中心和通訊設備，這也是我們 SAM 擴展路線圖的另一個重要部分。我們也預計，隨著再生能源和高效直流輸電基礎設施的廣泛應用，我們的高功率閘極驅動器產品的 SAM 將實現成長。過去幾年，由於疫情導致專案進展放緩，我們的大功率業務成長舉步維艱，但過去幾個月，我們看到該業務健康反彈，今年有望實現兩位數的成長。我們預計，受太陽能、風能和電力機車設計勝利的推動，明年大功率馬達將再次強勁成長。

In summary, our long-term growth story is on track and we are looking past the current downturn to the exciting future that we laid out for you at our event in September. As a reflection of our confidence in that story, as well as our strong balance sheet and ongoing cash generation, our Board has allocated $100 million for share repurchases which we expect to begin implementing in the days ahead.

總而言之，我們的長期成長故事正在步入正軌，我們正在擺脫當前的低迷，並展望我們在九月份的活動中為您描繪的激動人心的未來。為了體現我們對這一情況的信心，以及我們強勁的資產負債表和持續的現金創造能力，我們的董事會已撥款 1 億美元用於股票回購，我們預計將在未來幾天開始實施。

And now, I'll turn it over to Sandeep for a review of the financials.

現在，我將把財務狀況交給 Sandeep 進行審查。

Thanks, Balu, and good afternoon. We are well-positioned financially to weather the current downturn, thanks to our strong balance sheet and our lean expense structure. And we believe market share gains, new products and secular growth opportunities will enable us to emerge stronger on the other end. As we manage through the downturn, we will be guided by the long-term mentality that is integral to our culture and which was a key theme of our Analyst Day presentation.

謝謝，Balu，下午好。由於我們強大的資產負債表和精簡的費用結構，我們有足夠的財務實力抵禦當前的經濟衰退。我們相信，市場份額的成長、新產品和長期成長機會將使我們變得更加強大。在我們度過經濟低迷的過程中，我們將以長期思維為指導，這是我們文化中不可或缺的一部分，也是我們分析師日演示的關鍵主題。

Accordingly, we are adjusting our spending plans, but we'll continue to invest in new products and greater sales reach. We are moderating production, especially the conversion of wafers to finished goods, but we will keep our foundries active to ensure access to capacity when demand recovers. While internal inventories will run above our model for the short-term, our products have long live and are fungible across application and customers, resulting in virtually no risk of obsolescence. This approach paid-off when demand came back after the initial pandemic shutdowns, and we are following the same playbook now.

因此，我們正在調整支出計劃，但我們將繼續投資於新產品和擴大銷售範圍。我們正在減緩生產，特別是將晶圓轉化為成品，但我們將保持代工廠的活躍，以確保在需求恢復時能夠獲得產能。雖然短期內內部庫存將高於我們的模型，但我們的產品壽命長，並且可以在應用程式和客戶之間互換，因此幾乎沒有過時的風險。當疫情封鎖結束後需求恢復時，這種方法得到了回報，現在我們也遵循同樣的策略。

I will now discuss the Q3 numbers and the outlook, before we begin the Q&A session. Revenues for the quarter were $160 million, within our guidance range, but below the midpoint, as demand tapered down over the course of the quarter. Revenues were 13% lower than the prior quarter. Consumer revenues fell more than 25% sequentially, driven partly by seasonality in air conditioning, but more so by softer demand and elevated inventories in major and small appliances. China continues to be the primary source of weakness in the appliance market, but the slowdown is not isolated to China.

在我們開始問答環節之前，我將討論第三季的數據和前景。本季營收為 1.6 億美元，在我們的指導範圍內，但低於中點，因為需求在本季度逐漸減少。營收比上一季下降了 13%。消費者收入環比下降逾 25%，部分原因是空調的季節性影響，但更重要的是需求疲軟以及大型和小型家電庫存增加。中國仍然是家電市場疲軟的主要根源，但經濟放緩並不僅限於中國。

Communication revenues were down more than 20% sequentially, reflecting continued weakness in the smartphone market. Computer revenues were up slightly from the prior quarter, driven by strength in tablet chargers, as well as recent design wins in notebooks with our GaN-based InnoSwitch products. Industrial revenues also increased slightly from the prior quarter, driven by strength in our Gate Driver business across a range of applications, including solar, wind, energy exploration and rail.

通訊收入季減逾20%，反映出智慧型手機市場持續疲軟。電腦收入較上一季略有成長，這得益於平板電腦充電器的強勁成長，以及我們基於 GaN 的 InnoSwitch 產品最近在筆記型電腦設計中的成功。工業收入也較上一季略有成長，這得益於我們的閘極驅動器業務在太陽能、風能、能源勘探和鐵路等一系列應用領域的強勁表現。

Revenue mix for the third quarter was 41% Industrial, 32% Consumer, 16% Communication, and 11% Computer. As expected, non-GAAP gross margin was sequentially lower at 57.8%. The sequential decrease was driven by less favorable pricing environment, as well as lower back-end manufacturing volumes. Non-GAAP operating expenses for the quarter were $40.8 million, below our forecast and down sequentially by more than $1 million, driven by slower-than-expected hiring and the timing of spending, which pushed some expenses out to the December quarter.

第三季的營收結構為：工業41%、消費32%、通訊16%、電腦11%。如預期，非 GAAP 毛利率較上季下降至 57.8%。環比下降是由於定價環境不佳以及後端製造量下降造成的。本季非公認會計準則營業費用為 4,080 萬美元，低於我們的預測，且比上一季下降超過 100 萬美元，原因是招聘速度低於預期以及支出時間安排導致部分費用推遲到 12 月季度。

Non-GAAP operating margin for the quarter was 32.4%, and non-GAAP earnings were $0.84 per diluted share. Weighted average diluted share count for the quarter was 57.6 million, down 700,000 from the prior quarter, reflecting the impact of shares repurchased in the June quarter. No shares were repurchased during the September quarter. But as Balu noted, our Board has allocated $100 million for additional buybacks, which I expect to put to work in the days ahead.

本季非公認會計準則營業利潤率為 32.4%，非公認會計準則每股攤薄收益為 0.84 美元。本季加權平均稀釋股數為 5,760 萬股，較上一季減少 70 萬股，反映了 6 月季度回購股票的影響。 9 月季度沒有回購任何股票。但正如巴魯所指出的，我們的董事會已撥款 1 億美元用於額外回購，我預計這筆資金將在未來幾天投入使用。

We had $363 million in cash and investments on the balance sheet at quarter-end, an increase of $36 million during the quarter. Cash flow from operations for the quarter was just under $50 million and we used $5.5 million during the quarter for CapEx, and paid out $10.3 million in dividends. Inventories on the balance sheet rose 29 days from the prior quarter to 161 days. As I noted earlier, the long lives and flexibility of our products afford us the ability to build wafers -- wafer inventory during a downturn, ensuring continued access to capacity at our foundry partners. I expect internal inventories to remain elevated through the first half of 2023, and then begin to taper back towards our target level in the second half of the year.

截至季末，我們的資產負債表上有 3.63 億美元現金和投資，比本季增加了 3,600 萬美元。本季的經營現金流略低於 5,000 萬美元，我們在本季使用了 550 萬美元的資本支出，並支付了 1,030 萬美元的股息。資產負債表上的庫存天數較上一季增加了29天，達到161天。正如我之前提到的，我們產品的長壽命和靈活性使我們能夠在經濟低迷期間建立晶圓庫存，從而確保我們的代工合作夥伴能夠繼續獲得產能。我預計內部庫存將在 2023 年上半年保持高位，然後在下半年開始回落至我們的目標水準。

Channel inventories at quarter-end were 13.6 weeks, up 2 weeks from the prior quarter. Sell-in exceeded sell-through for the full quarter, though we saw a crossover in September with sell-through exceeding sell-in for the month. Based on our preliminary checks, this also appears to be the case for October and we expect it to continue through the remainder of the quarter, resulting in a meaningful reduction in channel inventories as we exit the year.

季度末通路庫存為 13.6 週，較上一季增加 2 週。整個季度的銷售量都超過了銷售量，不過 9 月出現了一個交叉，即當月的銷售量超過了銷售量。根據我們的初步檢查，10月份似乎也存在這種情況，我們預計這種情況將持續整個季度，從而導致今年結束時渠道庫存大幅減少。

Importantly, distribution inventory for Communications category decreased significantly during the quarter, and sell-through was up sequentially, indicating that the worst of the inventory correction in smartphones may be behind us. We expect revenues for the December quarter to be $125 million, plus or minus $5 million. And again, we expect sell-through to be higher than reported revenues, as we work to bring down channel inventories.

重要的是，本季通訊類別的分銷庫存大幅減少，而銷售量則環比上升，這表明智慧型手機庫存調整最糟糕的時期可能已經過去。我們預計 12 月季度的營收為 1.25 億美元，上下浮動 500 萬美元。而且，由於我們努力降低通路庫存，我們預期銷售量將高於報告的收入。

I expect non-GAAP gross margin for Q4 to be between 56% and 56.5%, with a sequential decrease driven by lower back-end manufacturing volumes and a less favorable end-market mix. Non-GAAP operating expenses for the fourth quarter should be between USD42 million and USD42.5 million and the non-GAAP effective tax rate should be between 9% and 10%.

我預計第四季非 GAAP 毛利率將在 56% 至 56.5% 之間，由於後端製造量下降和終端市場組合不佳，毛利率將出現環比下降。第四季非公認會計準則營業費用應在4,200萬美元至4,250萬美元之間，非公認會計準則有效稅率應在9%至10%之間。

And now, operator, let's begin the Q&A session.

接線員，現在讓我們開始問答環節。

(Operator Instructions) And your first question is from the line of Tore Svanberg with Stifel.

(操作員指示)您的第一個問題來自 Stifel 的 Tore Svanberg。

This is Jeremy calling for Tore. A quick question, first on the communications. Is there -- can you give us maybe any, I guess concrete signs of -- or early signs that you're seeing of potential bottoming, besides the channel inventory is kind of the crossover in sell-through versus sell-in. Are there discussions with customers that you can point to, anything that you can give us a little bit more clarity on would be very helpful.

這是傑里米 (Jeremy) 呼叫托爾 (Tore)。一個簡單的問題，首先是關於通訊。除了通路庫存在銷售量和銷售入量上的交叉之外，您能否給我們一些具體的跡像或早期跡象，表明您看到潛在的觸底跡象？您能否指出與客戶進行過的討論，任何能夠讓我們更清楚地了解的情況都將非常有幫助。

Sure. Jeremy, thanks for the question. The Chinese cell phone companies, it looks like most of the inventory at the OEM has been depleted and they have started pulling products from the channel. But in case of Korea, they still seem to have inventory and so they are yet to deplete their internal inventory. But we think that it's -- the tide is turning right now. We see the overall communications inventory at the channel has decreased significantly, but we still have some ways to go. We are thinking that by perhaps the second half of Q1, we will start getting higher shipments to this market.

當然。傑里米，謝謝你的提問。對於中國手機公司來說，看起來 OEM 端的大部分庫存已經耗盡，他們已經開始從通路撤出產品。但在韓國，他們似乎仍有庫存，因此尚未耗盡內部庫存。但我們認為，現在情況正在轉變。我們看到渠道的整體通訊庫存已經大幅減少，但我們還有一段路要走。我們認為，也許到第一季下半年，我們將開始向該市場提供更高的出貨量。

Great. Maybe a question for Sandeep. With the weak yen, you're kind of -- you guys are beneficiary of a weak yen with your manufacturing in Japan. Are you taking advantage of that you kind of build some long-term strategic lower-cost inventory at this time? And then maybe is there anything you can kind of forecast in terms of the potential impact to gross margin?

偉大的。這可能是針對 Sandeep 的一個問題。由於日圓疲軟，你們在日本的製造業從日圓疲軟中受益。您是否利用此時的優勢建立了一些長期策略性的低成本庫存？那麼，您能否預測一下對毛利率的潛在影響？

Yes. So the way we have always done it, and if you just take a step back just pre-pandemic, we continued to build because we wanted to keep up our foundry partners economically profitable, as well as what we know that we always come out of this downturn. And when it comes, we do really well, and that really helped us with the having that inventory. This time it's going to be no different. As we -- I have talked earlier, these downturns take 3 to 4 quarters and typically, this could be a quarter more, but as a result of which I'm expecting that we may have a reversal of this year, where next year could be like the back half of this year, whereas the back half will be a much stronger back half. So from a margin standpoint, I think I've given you the guidance for Q4, for next year I think we should be still in the 55% to 56%, mainly because the communication sector will come back and the mix is going to be a little less favorable next year compared to this year on an annual basis.

是的。因此，我們一直都是這樣做的，如果你回顧一下疫情之前的情況，你會發現我們一直在繼續建設，因為我們希望讓我們的代工合作夥伴保持經濟盈利，而且我們知道，我們總能走出這場低迷。當它出現時，我們做得很好，這確實對我們擁有庫存有幫助。這次也不會例外。正如我們——我之前談到的，這些衰退會持續 3 到 4 個季度，通常還會再持續一個季度，但因此，我預計今年的情況可能會出現逆轉，明年可能會像今年下半年一樣，而下半年將會更加強勁。因此，從利潤率的角度來看，我認為我已經為您提供了第四季度的指導，對於明年，我認為我們的利潤率仍應在 55％ 至 56％ 之間，主要是因為通信行業將會復甦，而且與今年相比，明年的利潤組合將略遜於年度水平。

And one last question.

最後一個問題。

Sorry, Jeremy. As far as the impact of FX, the recent weakening, we'll have to go through our inventory before we get the P&L benefit. That won't happen until the second half of next year, but you also have to remember that our input costs have gone up, that will also flow into that. At a very high level, they will offset each other to a large extent.

對不起，傑瑞米。就外匯的影響和最近的疲軟而言，我們必須先檢查庫存，然後才能獲得損益。這要到明年下半年才會發生，但你也必須記住，我們的投入成本已經上漲，這也會流入其中。在很高的層次上，它們會在很大程度上互相抵消。

And just one last question, you mentioned competitors exiting or at least withdrawing from the market. Can you remind us how easy or difficult it is for these competitors to try to re-enter if they wanted to, or is it the case that once customers switch, the architecture is different enough that, that switching costs are too high for the customer?

最後一個問題，您提到競爭對手退出或至少撤出市場。您能否提醒我們，這些競爭對手如果想重新進入市場，難度是多大，還是有多大，或者是不是因為一旦客戶轉換市場，架構就會有很大差異，以至於轉換成本對客戶來說太高了？

Yes. So that's a good question. I think that the level of integration, level of innovation we bring, makes it very difficult for Western competitors to compete with us and make good margins. So it's a question of -- if they can make more margins elsewhere they would rather go elsewhere. That's what is happening right now. In some cases, they have completely decided to close down, like Panasonic has closed down, but many others are retreating from this market, basically they are shipping what they have, but they are not building new products. They look at our product, and it's very difficult for them to think about how to compete with us without infringing on our IP. And as you know, we have been extremely protective of our IP and we've been very successful protecting our IP. So I think we're in such a strong position in terms of being years ahead of our competition and we will continue to innovate. I mean that -- that's never going to stop. So I am pretty confident that this is not a reversible situation.

是的。這是個好問題。我認為，我們的整合水平和創新水平使得西方競爭對手很難與我們競爭並獲得良好的利潤。所以問題是——如果他們能在其他地方獲得更多利潤，他們寧願去其他地方。這就是現在正在發生的事情。在某些情況下，他們已經完全決定關閉，例如松下已經關閉，但許多其他公司正在退出這個市場，基本上他們在銷售現有產品，但沒有製造新產品。他們看著我們的產品，很難思考如何在不侵犯我們的智慧財產權的情況下與我們競爭。正如你所知，我們一直極力保護我們的智慧財產權，並且我們非常成功地保護了我們的智慧財產權。因此我認為，我們處於非常有利的地位，比我們的競爭對手領先數年，而且我們將繼續創新。我的意思是——這永遠不會停止。所以我非常確信，這種情況是不可逆的。

Your next question is from the line of David Williams with The Benchmark Group.

您的下一個問題來自 Benchmark Group 的 David Williams。

I guess, Sandeep, on the first, if I kind of think about the Industrial revenue which if I'm not mistaken, is one of the higher margin segments. It was up considerably in terms of percentage of business overall, and it seems like that's still hanging in there and is fairly healthy. I guess, as we kind of think about that, can you maybe give us the puts and takes on the margin profile as we kind of think about just that Industrial segment and just maybe any moving pieces there?

我想，桑迪普，首先，如果我考慮工業收入，如果我沒記錯的話，它是利潤率較高的部分之一。就整體業務百分比而言，它大幅上升，而且似乎仍保持這種狀態，而且相當健康。我想，當我們考慮這一點時，您能否給我們提供利潤率概況的利弊，因為我們只考慮工業部門以及那裡可能存在的任何變動部分？

Yes. Industrial is the highest, but consumer follows behind that closely. And as you saw, the Industrial kind of did well, but the consumer was quite weak during the quarter. So that kind of offset. Added to that, you heard, we obviously with the volumes being lower, that had an impact on the margin, and also the pricing environment is not as favorable as it used to be and that has started to also, because we do value pricing has started to also have a bit of an impact and will have some impact in the coming year also.

是的。工業級是最高的，但消費級緊隨其後。正如您所看到的，工業表現良好，但本季的消費表現相當疲軟。這是一種抵消。除此之外，您也聽到了，我們顯然由於交易量較低而對利潤產生了影響，而且定價環境也不像以前那麼有利了，而且由於我們確實重視定價，所以這也開始產生一些影響，並且在來年也會產生一定的影響。

Okay. Great. Appreciate that. And then, maybe can you talk about maybe any specific demand trends within Industrial that are either positive or negative, is that holding in? And what are the expectations maybe as we go out even past the fourth quarter, but longer-term, how do you see that industry in general for your business?

好的。偉大的。非常感謝。然後，您能否談談工業領域內任何特定的需求趨勢，無論是正面的還是負面的，是否有所保留？當我們走出第四季度時，我們的預期是什麼？ 但從長遠來看，您如何看待您所在行業的整體情況？

The high power part of Industrial, which is roughly, let's say 25% or so, is doing very well. As you -- as we mentioned in the script, the last 2 years, lot of projects, infrastructure projects have been delayed. But it has come back nicely this year. We expect double-digit growth this year, and it looks like next year also would be double-digit growth. These are things like renewables, solar and wind, high-voltage DC transmission systems, traction, that is electric locomotives and so on. So that's doing very well.

工業的高功率部分，約佔25％左右，表現非常好。正如我們在腳本中提到的那樣，過去兩年，許多項目、基礎設施項目都被推遲了。但今年它已經強勢回歸。我們預計今年將實現兩位數成長，而且看起來明年也將實現兩位數成長。這些包括再生能源、太陽能和風能、高壓直流輸電系統、牽引力（即電力機車）等等。所以這做得很好。

The home and building automation so far has done well, but there is a possibility that could soften. I've heard it from other companies. We haven't seen it yet, but that scenario that could soften, and the same is with the tools. But the rest of the market, we think we'll do fine. But the overall Industrial, at least going into Q1, it could be roughly flat, maybe slightly down depending upon as a percentage of revenue.

到目前為止，家居和樓宇自動化表現良好，但也存在疲軟的可能性。我從其他公司聽說過這個。我們還沒有看到這種情況，但這種情況可能會緩和，工具也是如此。但我們認為，其餘市場我們會表現良好。但整體工業，至少進入第一季度，可能大致持平，或許略有下降，取決於收入的百分比。

Your next question is from the line of Ross Seymore with Deutsche Bank.

您的下一個問題來自德意志銀行的羅斯·西摩。

This is Melissa Weathers. I'm on for Ross. I guess for first question, can you talk about like the linearity of demand that you saw throughout the quarter? I guess what changed from the guidance that you gave 90 days ago? Did anything change significantly from when you had your Analyst Day? And I guess it's a good sign that cancellations have dropped quarter-over-quarter, I think if I heard you guys correctly. So how confident are you guys in your visibility that -- that this is sort of bottoming out in the December and March quarters?

這是梅麗莎·韋瑟斯。我支持羅斯。我想對於第一個問題，您能談談整個季度所看到的需求線性嗎？我想問一下，與您 90 天前給予的指導相比，有什麼變化嗎？與您分析師日相比，有什麼重大變化嗎？如果我沒聽錯的話，我想取消量逐季下降是個好兆頭。那麼，你們對於這項預測有多大信心——這項預測將在 12 月和 3 月季度觸底？

Well, in terms of the bookings, they have been declining and I would say that, when we started the quarter, we had indicated that we are within the range of what we are -- what we had guided. But what happened throughout the quarter was, there were bookings, but there were also push outs and cancellations, that basically offset. So we never moved to the middle of the range.

嗯，就預訂量而言，它們一直在下降，我想說，當我們開始這個季度時，我們已經表明我們處於我們所指導的範圍內。但整個季度發生的情況是，有預訂，但也有推遲和取消，基本上抵消了。所以我們從未移動到中間範圍。

As far as going forward, the bookings as I said was relatively low in the last couple of months. As a result, we currently have bookings that is within the range. And based on that, we have given you guidance. But the good news is, there is definitely a turnaround in terms of the turns business. The turns business that we are seeing now is actually more than the cancellations and push outs. So we expect some turns business this quarter, and significantly higher turns business next quarter.

就未來而言，正如我所說，過去幾個月的預訂量相對較低。因此，我們目前的預訂量是在這個範圍內的。並在此基礎上為您提供指導。但好消息是，轉彎業務確實出現了好轉。我們現在看到的轉變業務實際上不僅僅是取消和延遲。因此，我們預計本季業務將有一些轉變，下個季度業務將有顯著增加。

So that's why we are saying, it is stabilizing. Therefore, we think that fourth quarter and the first quarter would be roughly bottom of the cycle. And we also mentioned that the cell phone inventories are coming down very nicely. So we expect that to come back first, and then appliances and industrial. So going into Q1 quarter, our best estimate is, we would be similar to Q4 and then Q2, our expectation is that it will be incremental growth. But second half is where we expect a stronger demand, as this downturn turns into an upturn. That's our best estimate right now.

這就是為什麼我們說它正在穩定。因此，我們認為第四季和第一季大致是周期的底部。我們也提到，手機庫存正在大幅下降。因此，我們預計這一領域將首先復甦，然後是家電和工業領域。因此，進入第一季度，我們最好的估計是，我們將與第四季度和第二季度類似，我們預計它將實現增量成長。但我們預計下半年需求將會更加強勁，因為經濟從低迷轉為復甦。這是我們目前的最佳估計。

That's all really helpful. And then I guess just a follow-up. I just wanted to touch on, you mentioned some softer pricing this quarter and that you expect it to continue into next year. What sort of expectations can we have for that on gross margins? And then also, is that -- is that a temporary headwind just as we work through the cycle, or is there something else going on there?

這些都非常有幫助。然後我想這只是一個後續行動。我只是想提一下，您提到本季定價有些疲軟，並且您預計這種情況將持續到明年。我們對毛利率有何預期？而且，這是否是我們在整個週期中遇到的暫時逆風，還是還有其他事情發生？

Well, we price it -- price our products on value. That means that the components we replace, whatever they cost is what reflects our price, of course, we get some additional for the integration and so on. So the discrete components, prices are coming down, supply chain issues are improving. At least in China, it has improved significantly. So that has some impact on our value pricing as we go forward. But also we have had impact from manufacturing being lower, because of the lower revenues and lower back-end manufacturing, our absorption is not as good. So that has also had a negative impact on the gross margin. As far as going forward, I will let Sandeep explain for next year.

嗯，我們根據價值來定價我們的產品。這意味著我們更換的組件，無論其成本如何，都反映了我們的價格，當然，我們也會因整合等獲得一些額外的費用。因此，分立元件的價格正在下降，供應鏈問題正在改善。至少在中國，已經有了明顯改善。因此，這會對我們的價值定價產生一定影響。但我們也受到製造業下滑的影響，由於收入下降和後端製造下降，我們的吸收能力不太好。因此這也對毛利率產生了負面影響。至於未來如何，我將讓 Sandeep 解釋明年的情況。

Yes. As I had guided, even at the Analyst Day I had said 56%, but right now I'm guiding to 55% to 56%, because the volumes are much lower. And as I said, the mix is more going to [slot] towards Communication. And as Balu had indicated, the cost increases from wafers will be offset by the yen, more or less, and obviously the value pricing we are expecting to have some impact in the coming year. Putting all that together, the non-GAAP gross margin guide to the best we can do and with the best indication we have for the mix is 55% to 56% for 2023.

是的。正如我所預期的，即使在分析師日我也說過 56%，但現在我預期的是 55% 到 56%，因為交易量要低得多。正如我所說的，這種混合更傾向於 [slot] 通信。正如 Balu 所指出的，晶圓成本的增加或多或少會被日圓所抵消，顯然我們預期價值定價將在未來一年產生一定影響。綜合所有這些因素，我們可以得出非 GAAP 毛利率指南中的最佳值，而我們得到的最佳預測是 2023 年的非 GAAP 毛利率為 55% 至 56%。

Your next question comes from the line of Christopher Rolland with Susquehanna.

您的下一個問題來自 Susquehanna 的 Christopher Rolland。

So I guess just digging into let's say the comms market a little deeper here. So you guys have peaked in [$60 million's] per quarter and probably down now to mid-teens per quarter. I guess first of all, how do we think about that inventory burn versus a downtick in demand for next quarter? Is it balanced like at 50-50? And then secondly, what do you guys think kind of a cruising rate is or cruising altitude is once everything normalizes for your comms business?

所以我想，我們只需更深入地挖掘一下通訊市場即可。因此，你們每季的收入最高達到了 6,000 萬美元，現在可能下降到每季 15% 左右。我想首先，我們如何看待庫存消耗與下個季度需求的下降？它是像 50-50 那樣平衡的嗎？其次，你們認為一旦你們的通訊業務一切恢復正常，巡航率或巡航高度會是多少？

That's a difficult question to answer. Let me tell you the landscape, perhaps you can judge for yourself. In China, as you know, because of lockdowns and all of the business -- the challenges they've had in terms of the economy slowing down and so on, many of the consumers are delaying purchase of cell phones. They used to purchase a new phone every 18 months. Now I think they say, okay, I'll keep the phone because I can't afford to buy a new phone. When they will start buying, I don't know. We are going through this time frame where the demand for the phones in China is low.

這是一個很難回答的問題。讓我告訴你那裡的風景，也許你可以自己判斷。如你所知，在中國，由於封鎖和所有業務——他們在經濟放緩等方面面臨的挑戰，許多消費者都推遲了購買手機。他們過去每 18 個月就會購買一部新手機。現在我想他們會說，好吧，我要保留這支手機，因為我買不起新手機。我不知道他們什麼時候開始購買。我們正處於中國手機需求較低的時期。

And in fact across the world, things are slowing down as you know, because of inflation and so on, people are not replacing phones as often. But the actual performance is different for each and every OEM, it differs from one to the other. So Chinese OEMs are doing the worst right now. And then as you know, the other geographies are doing better. So our -- that -- how much that is in distribution? We said some time in Q1, we will -- they will start ordering products.

事實上，正如你所知，世界各地的情況都在放緩，由於通貨膨脹等原因，人們不再頻繁地更換手機。但每個 OEM 的實際表現都不同，彼此之間也存在差異。因此，中國原始設備製造商目前的情況最糟。如您所知，其他地區的表現更好。那麼我們的 — — 那 — — 分配額是多少？我們說過，在第一季的某個時候，他們就會開始訂購產品。

Now I have to be careful. They are already ordering some products because there is a mix issue. If they need a product that's not at distribution, we still have to ship. Obviously, we are still shipping products, but it is to non -- more to non-Chinese customers and less to Chinese customers. So our best estimate is that it is likely to come back strong in the second half. We will see I believe a -- some revenue coming back in Q1, but higher in Q2, but the bigger change in demand will be in the second half. And that is our best, I would say speculation of when the demand will come back to normal.

現在我得小心了。由於存在混合問題，他們已經訂購了一些產品。如果他們需要尚未分銷的產品，我們仍然必須發貨。顯然，我們仍在運送產品，但運送給非中國客戶的較多，運送給中國客戶的較少。因此，我們最好的估計是，它很可能會在下半年強勢回歸。我相信，我們會看到——第一季的一些收入會回升，但第二季會更高，但需求的更大變化將出現在下半年。我想說，這是我們對需求何時會恢復正常的最佳猜測。

Okay. And then secondly, I was wondering if you had some extra color into the guide from a segment perspective, whether you want to force rank that or just call 1 or 2 out or however you want to do it?

好的。其次，我想知道您是否從細分市場的角度為指南添加了一些額外的內容，您是否想強制對其進行排名，或者只調出 1 或 2，或者您想怎麼做？

If you're talking about Q4 --

如果你談論的是第四季——

Q4, yes.

Q4，是的。

Yes. I think comms and computer will be higher. And you will see the other segment, that's why bit of the margin impact. But I think all 4 segments will be down in terms of the -- in terms of the dollar wise. As a percentage, it's kind of in the direction I gave you.

是的。我認為通訊和計算機的價格會更高。你也會看到另一個部分，這就是對利潤率造成影響的原因。但我認為，從美元角度來看，所有四個細分市場都將下降。從百分比來看，它有點像我給你的方向。

Sorry, all of them down in the same on a percentage basis?

抱歉，所有的下降百分比都一樣嗎？

Well, I would say the Industrial will be down in that -- Industrial will be down from where it is and all 4, I would say the direction is down in dollars, but percentage wise you will see comm and computer slightly up.

好吧，我想說工業將會下降 - 工業將從現在的水平下降，所有四個，我想說方向是美元下降，但百分比方面，你會看到通信和計算機略有上升。

Your next question is from the line of Gus Richard with Northland.

您的下一個問題來自 Northland 的 Gus Richard。

Yes. Just real quick, I just want to make sure I get this right. Did channel inventory decrease by about $15 million in the September quarter?

是的。只是非常快，我只是想確保我做對了。 9月季度通路庫存是否減少了約1500萬美元？

The channel inventory in, in dollar terms, decreased from Q3, are you talking from Q2 to Q3?

以美元計算的通路庫存從第三季開始減少，您說的是從第二季到第三季嗎？

Correct.

正確的。

Yes, it went down about -- yes, about $10 million -- roughly around $10 million or so.

是的，下降了大約——是的，大約 1000 萬美元——大概 1000 萬美元左右。

Okay. And sort of what do you expect the cash burn to be, I'm sorry, the inventory burn in the fourth quarter, how much do you expect to come out?

好的。您預計第四季的現金消耗會是多少，抱歉，庫存消耗會是多少？

You are talking -- the channel inventory went up.

你說的是──渠道庫存增加了。

It's going to say.

它會說。

Yes, that's one. So channel inventory went up by $8 million.

是的，這是一個。因此渠道庫存增加了800萬美元。

Yes, channel inventory went up in the last 2 quarters, but in Q4, we expect the channel inventory to come down. In fact, we are trying to get that down. So it's higher than we need in the channel. And our expectation is roughly about -- roughly about $15 million will be the reduction in Q4. Obviously, we won't get to our target weeks until a few quarters later. We can't correct all of it over night.

是的，過去兩個季度通路庫存有所增加，但在第四季度，我們預期通路庫存會下降。事實上，我們正​​在努力降低這一水平。所以它比我們在渠道中需要的要高。我們的預計是，第四季的減少額約為 1500 萬美元。顯然，我們還要幾個季度後才能達到我們的目標。我們不可能在一夜之間糾正所有問題。

And the weeks calculations get impacted by the denominator.

且週數計算會受到分母的影響。

Yes. So even though weeks look big, you have to remember that there is a double whammy, right. The dollar value goes up, but the denominator also comes down and that amplifies the change in the weeks.

是的。因此，儘管這幾週看起來很重要，但你必須記住，這是一個雙重打擊，對吧。美元價值上升，但分母也下降，擴大了幾週內的變化。

Yes, absolutely. And then do you have any sense, I think in the communication market, you do. But for the other markets, your customer's customer, the OEMs, do you have any sense of what the inventory looks like downstream from your customers?

是的，絕對是如此。那麼，您是否有任何感覺，我認為在通訊市場中，您確實有這種感覺。但是對於其他市場，您的客戶的客戶，即 OEM，您是否了解客戶下游的庫存情況？

We have a rough idea. They've been relatively open. Obviously, we can't do it with all customers, but the top customers, as I mentioned, the biggest challenge we had was in China, and that inventory seems to be -- seems to have come down, because we see them pulling from the channel. And then the -- now more recently I would say from Q2, the China we saw the inventory problem in Q2, but in Q3, we saw a significant inventory correction in Korea, both in the cellphone and appliance OEMs. And they are really correcting very hard right now and that won't be corrected until probably end of Q1, because they do have -- they have built more inventory based on their concerns before during the pandemic.

我們有一個大概的想法。他們一直比較開放。顯然，我們無法與所有客戶都做到這一點，但正如我所提到的那樣，對於頂級客戶，我們面臨的最大挑戰是在中國，而且庫存似乎已經下降，因為我們看到他們從頻道中撤出。然後——現在我想說的是，從最近第二季度來看，我們在中國看到了庫存問題，但在第三季度，我們看到韓國的庫存出現了大幅調整，無論是手機還是家電 OEM 廠商。他們現在確實在大力糾正，而且可能要到第一季末才能糾正，因為他們確實——根據之前疫情期間的擔憂，他們建立了更多的庫存。

The whole thing, if you look at it what happened was, they were trying to build enough inventory so that they don't have supply chain issues, but the demand dropped off so abruptly. They were not prepared. So they now are trying to correct it. And China to a large extent is corrected at the OEM level, not at the channel level, but in Korea, it's still there at the OEM level.

整個事件，如果你看一下發生的事情，你會發現他們試圖建立足夠的庫存，以免出現供應鏈問題，但需求卻急劇下降。他們沒有準備好。因此他們現在正在努力糾正它。而中國很大程度上是在OEM層面進行了糾正，而不是在渠道層面，但在韓國，這種糾正仍然存在於OEM層面。

(Operator Instructions) At this time, there appear to be no further questions. I will now turn the call over to Joe Shiffler for any closing comments.

（操作員指示）目前，似乎沒有其他問題。現在我將把電話轉給喬·希夫勒 (Joe Shiffler) 來徵求他的結束語。

Alright. Thanks everyone for listening. There will be a replay of this call available on our investor website, which is investors.power.com. Thanks again for listening, and good afternoon.

好吧。感謝大家的聆聽。我們的投資者網站（即 investor.power.com）將提供本次電話會議的重播。再次感謝您的聆聽，下午好。

Thank you all for joining today's call. You may now disconnect.

感謝大家參加今天的電話會議。您現在可以斷開連線。