高塔半導體 (TSEM) 2020 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the Tower Semiconductor Third Quarter 2020 Results Conference Call. (Operator Instructions)

As a reminder, this conference is being recorded November 12, 2020. Joining us today are Mr. Russell Ellwanger, Tower's CEO; and Mr. Oren Shirazi, CFO.

I would now like to turn over the conference call to Ms. Noit Levy, Senior Vice President of Investor Relations and Corporate Communications. Ms. Levy, please go ahead.

Thank you, and welcome to Tower Semiconductor Financial Results conference call for the third quarter of 2020. Before I begin, I would like to remind you that some statements made during this call may be forward-looking and are subject to uncertainties and risk factors that could cause actual results to be different from those currently expected. These uncertainties and risk factors are fully disclosed in our forms 20-F, F4, F3 and 6-K filed with the Securities and Exchange Commission as well as filings with the Israeli Securities Authority. They are also available on our website. Tower assumes no obligation to update any such forward-looking statements.

Please note that the third quarter of 2020 financial results have been prepared in accordance with U.S. guests. The financial tables and data in today's earnings release and in this earnings call also include certain adjusted financial information that may be considered non-GAAP financial measures under Regulation G and related reporting requirements as established with the Securities and Exchange Commission. The financial tables include the full explanation of these measures and the reconciliation of these non-GAAP measures to the GAAP financial measures.

Now I'd like to turn the call to our CEO, Mr. Russel Ellwanger. Russell, please go ahead.

Thank you, Noit, and thank you, everyone, for joining our call today, discussing our 2020 third quarter business and financial results.

Firstly, with regards to the cyber event that we announced at the beginning of September, our IT safeguards had identified a security incident on some of our systems.

We took immediate actions to prevent damage, closing our Israeli and U.S. IT systems, hence halting those facilities. In less than a week, all factors will return to operational capability. Due to the effect of procedures, there was no damage to the functional quality of the work in progress with company and customer data protected. Activities further securing the company's IT environment were put in place.

The impact of this event on our operations was between 8 and 12 days of new wafer starts, and as the incident occurred during the last month of the quarter, during a demand ramp, we lost multiple weeks of full fab activity levels.

This impacted utilization levels for the third quarter, which I will address later in this call.

Third quarter revenues were within our guidance range at $310 million, resulting in EBITDA of $79 million and net profit of $15 million. Oren Shirazi, our CFO, will provide an in-depth review of our third quarter financials later in the call.

We are guiding the fourth quarter to a mid-range of $340 million, representing 10% quarter-over-quarter and 11% year-over-year growth or an organic growth of 17% quarter-over-quarter and 14% year-over-year.

Looking at our activities in our different business units. Within our Analog Business Unit, our silicon germanium optical business has grown throughout the year, and is again expected to increase in the fourth quarter. Up to our third quarter, growth was driven primarily by demand for 5G infrastructure. Now additionally, we see growth in data center demand. In both markets, we build optical transceivers, operating at 25 gigabit per second for 5G infrastructure and predominantly at 100 gigabit per second for data centers, using high-speed silicon germanium technology.

Growth in silicon germanium is supported today by increased utilization of our Newport Beach facility and in the future, will be further supported by increased utilization of our San Antonio facility. We continue to see a good flow of new designs in our most advanced technologies, targeting 200 and 400 and even 800 gigabit per second products to maintain our market as these new standards ramp.

At these higher data rates, we also anticipate increased adoption of our silicon photonics platform. We are presently in low volume production at the 100 gigabit per second node with silicon photonics and expected technology to be adopted more widely in the 400 and 800 gigabit per second transceivers.

Our Mobile business is experiencing surge growth, both in immediate orders and very importantly, in longer-term customer forecasts. This strength is broad-based and includes advanced products running in our 300-millimeter facility in Japan and 200-millimeter facility in Israel. And also midrange products running in our San Antonio facility. Last quarter, we provided an estimate of year-over-year growth in this market of 10% to 15%.

But based on the strength we see now, we are increasing our growth expectation for 2020 over 2019 to about 25%. Considering that 2019 was reported at over 40% year-over-year growth in RFSOI, these high sequential numbers can only be achieved by very strong increases in market share. Growth in this market will continue as 5G handsets are expected to proliferate over the next several years and which handsets require substantially, namely 30% to 50% more RF content.

Our Power IC business is also seeing renewed broad based strength, both in consumer and industrial products, with automotive demand now stabilized. We anticipate exceeding the expectation we had set last quarter of 20% year-over-year growth for our Power IC business.

This strong growth is primarily a result of market share gains due to strong technology platforms, which offer industry-leading performance across a broad range of voltages and applications. This, along with our updated high-voltage 200-millimeter RESURF and SOI technologies, an industry-leading 65-nanometer BCD 300-millimeter offering, has driven the present market share growth and enabled a healthy funnel of new design activity for future increases.

Our power discrete business, predominantly Tier 1 MOSFET customers has shown a year-over-year decline that is consistent with what has been published for the discrete market. New order levels have stabilized with customer forecast now increasing, which signals a recovery for this market. Moving to our sensors and displays business unit. First, looking at non imaging sensors, we are steadily growing our manufacturing volume of MEMS microphone products, expecting continued increase throughout the next year. While in parallel, co-developing new platform offerings. We have several customer products and platform development stages, such as MEMS speakers, radiation centers and remote infrared thermal sensors. Our magnetic sensor, TMR activity with Crocus technology is expected to wrap to mass production in the first half of next year with numerous state-of-the-art sensors. On the display front, our development program with Aledia has accelerated and is expected to capture a large market share with their unique 3D micro LED technology. We're also working on micro OLED screens for the VR market.

Moving to imaging sensors. We have achieved very good results and expect manufacturing to start shortly for lens-type fingerprint sensors. On time-of-flight sensor front, we also received very good results from our lead customer sensors and are moving according to the plan to production in the first half of next year. This would be our first product moving to mass production, using our 300-millimeter stacked wafer backside illumination pixel-level bonding platform.

We continue to see weakness in 2 market segments, the X-ray dental sensor market and the industrial sensor market, however, we begin to see a rebound in customer bond forecast for industrial sensors.

Third quarter 2020 utilization levels are impacted by the cyber event, as mentioned. In Migdal Haemek Fab 1, our 6-inch factory, we had 50% utilization; fab 2, the 8-inch factory, was at 60%; group RT Beach, California, Fab 3 was about 70%. San Antonio Factory Fab 9 was at 60%; our TPSCO 8-inch factories in Japan, Foundry business was at about 60% rate; in our 12-inch factory, we had a 10-point increase in layers processed versus the second quarter.

We also increased our photo layer capability by 25% as a result of the previously announced capacity expansion. And hence, the resulting utilization was 70%, allowing for Q4 and continued in 2021 revenue growth against a high customer demand. With that, I'd like to turn the call over to our CFO, Oren Shirazi. Oren, please.

Welcome, everyone, to our call. And thank you for joining us today. We released our third quarter 2020 results today and provided a strong Q4 2020 revenue guidance.

Before analyzing the P&L results, balance sheet and cash flow reports, I wish to comment on the cyber event. Since Russell already described the event and its impact on the business and utilization, I will only relate to the financial implications of it.

Obviously, this quarter results were impacted by the manufacturing disruption, which caused lower utilization and reduced starts and moves in the factory and resulted in lower revenue than we could have achieved, lower work in progress with, and hence, higher COGS and lower derived margins.

The event had no impact on our cash flow report or balance sheet, sale from its impact on having lower WIP as an asset in the balance sheet.

I will now provide the P&L highlights for the third quarter and then discuss our cash flow and balance sheet financial statements.

Revenues for the third quarter of 2020 were $310 million as compared to same figure in the prior quarter and $312 million in the third quarter of 2019. Gross and operating profit for the third quarter of 2020 were $53 million and $19 million, respectively as compared to $58 million and $22 million, respectively, in the prior quarter and as compared to $58 million and $23 million, respectively, in the third quarter of 2019.

Net profit for the third quarter of 2020 was $15 million or $0.14 per share, basic and diluted, as compared to net profit of $19 million or $0.18 basic and diluted earnings per share in the prior quarter and to $22 million or $0.21 basic and diluted earnings per share in the third quarter of 2019.

Analyzing the income tax P&D line, our $3 million increase in income tax expense in the 9 months ended September 30, 2020, as compared to the 9 months ended September 30, 2019, resulted in 6% all-in effective tax rate in 2020 as compared to 1% in 2019, mainly due to the higher revenues and profits we generated from the Japanese factory, where the tax rate is approximately 30% as compared to 21% from profits we make in the States and 7.5% in Israel, which 7.5% has no cash impact due to the NOLs we have in Israel.

In addition, in 2019, we received certain tax credits resulting in a low 1% all-in effective tax rate. The increase in the Japanese factories revenue and utilization also resulted in a higher noncontrolling interest amount in 2020 as compared to 2019. Regarding the additional capacity expansion in Uozu for the future, since it is fully Tower's funded investment, Tower will enjoy all the incremental margins and the minority rights are not expected to significantly increase despite the associated revenue that will be generated from such investments.

I would now like to describe our currency hedging activities. In relation to the Japanese yen, since the majority portion of TPSCo's revenue is denominated in yen and the vast majority of TPSCo cost are in yen, we have a natural hedge over most of our Japanese business and operations.

In order to mitigate part of the remaining yen exposure, we executed 0 cost cylinder hedging transactions. The 0 cost hedging transactions hedge the currency fluctuations to be contained in a narrow range as compared to the spot exchange rate. Hence, while the yen rate against the dollar may fluctuate, the impact on our margins is limited. In addition, in relation to the Japanese yen impact on the balance sheet, we have a natural hedge on Japanese yen cash and Japanese yen loan balances due to the extent to the extent the loans amount does not exceed the cash amount. This helps to partially protect us from potential impact of yen fluctuations.

Lastly, in relation to fluctuations in the Israeli shekel currency, we have no revenues in this currency. Since approximately 10% of our costs are denominated in the Israeli currency, and we have some liabilities denominated in shekel. We also hedge a large portion of this currency risk by, a, engaging 0 cost cylinder transactions to mitigate exposure resulting from our NIS denominated cost; and b, investing a portion of our cash in Israeli marketable securities denominated in the Israeli currency to mitigate exposure resulting from our shekel denominated liabilities.

Looking at the balance sheet, we present a strong and stable financial position. Our shareholders' equity reached a record of $1.41 billion. Total assets and balance sheet totaled $2 billion, our cap table consists of 108 million outstanding ordinary shares and an additional 2 million ESOP related share, resulting in a fully diluted share count of 110 million.

Current asset ratio, defined as current assets divided by short-term liabilities was 4.1x. Short-term debt in the amount of $87 million, which is included in the balance sheet, includes approximately $40 million principal payment of debenture CFG, to be paid during the next 12 months and approximately $50 million of other debt liabilities.

And a last note on the cash flow report. In the third quarter of 2020, cash flow generated from operations was $69 million as compared to $67 million in the second quarter of 2020.

Investments in fixed assets, mainly for CapEx were $67 million, which included payments relating to the 12-inch Fab capacity expansion program. In addition, we repaid $26 million of our debt during the third quarter of 2020. During the 9 months ended September 30, 2020, we generated $204 million cash flow operations. Invested $192 million in fixed assets, mainly for CapEx and paid $56 million of debt. And now I wish to turn the call back to the operator. Operator?

(Operator Instructions)

The first question is from Raji Gill of Needham & Company.

Congratulations on the strong guide for December. Just a question on the cyber event, the impact on the utilization rates, how do we think about the utilization rates going into Q4? Are we expecting kind of a snap back and then also, is there any change to the 50% to 55% incremental gross profit fall through as we go into Q4 on the new revenue given the cyber event. Just wanted to make sure that the gross margin should start to improve off the low base in September?

Yes. Thank you. Our gross profit and model will be the same. Of 50%, 55%, like you mentioned, we don't expect any impact from the cyber event on the margins or anything in Q4. It's already behind us.

And the utilization rates, it's not PAUSE necessarily just a snapback. We were in the midst of a ramp in Q3, but the ramp is very real. So the utilization rates should be across the board very good in Q4.

Okay. Great. And then when we look at the increase -- the sequential increase in Q4 from organic growth, we're looking at 17% sequential growth, 14% year-over-year organically. How would you describe kind of what's happening in the smartphone segment in the data center segment? And then how do we think about those trends going into 2021, we're thinking about overall organic growth rate. We had a little bit of an impact. We had an impact in case of COVID in the first half for a variety of kind of markets. But when you're thinking about organic growth rates into next year, I'm curious to see how you're thinking about it if we start getting to more normalized economy. And you are seeing kind of a rebound in some of the specific markets that were impact because of COVID. I'm just curious how you're thinking about that?

As I -- I believe stated during the script, the area of handsets in specific RFSOI, we had a very, very substantial increase in revenue percent 2019 over 2018, and that was above 40%. And we're projecting that at the end of this year, it will be an additional 25%.

That's certainly much bigger than the market itself grew. So the only way that, that can be explained is market share and all indicators are that handsets sales themselves will be very good next year. And on top of that, a higher percentage, almost a doubling of 5G handsets to where the RF content is somewhere between 40% -- 60% higher than in 4G and lower end models.

So I think we're in extremely good position to continue to maintain organic growth and strong organic growth in that area.

The silicon germanium for 5G infrastructure as well as data center, it appears that, it will stay strong in the next year. Customer forecasts look good. And the power management will, it appears to, continue to be at its present rates or maybe higher. The big thing is, I believe, that the organic growth that we've had, and it was good organic growth was with the headwind of having a decrease in the power discretes, and a decrease in industrial and dental sensors. So the growth that we've had, obviously, the numbers we say on organic has to first make up for the deficit in those other 2 markets. And then it pops up well beyond it.

With the power discrete market, right now, looking that it will be coming back. And the -- certainly, the industrial sensors, we have all indications that that's going up. That's customer forecast and as well, really backed by market research, we would see that the other businesses that have been strong appear to be going stronger. And that that headwind will be returning to some degree against 2020 results.

So I believe that the organic growth for next year will be on a much stronger trajectory than it is this year, although this year, I think it's been very good.

And just to follow-up, when we're looking at the Q4 guidance. How would you characterize the increase? You talked a little bit about the smartphone growth as well as the data center growth. Is any of the improvement in the Q4 guidance represents lost business from Q3? And how do we think about that makeup of that catch-up in Q4 relative to Q3?

On a net, I think that the cyber event actually had a negative impact on Q4, not a positive. Certainly, the -- whatever amount of a few millions of dollars that we didn't ship in Q3 because of a cyber event we're able to ship in Q4, but missing 8 to 12 days of starts, that's all Q4 revenue. And additionally, without getting too much into the mode of the details, when you have an event at the end of a quarter to where we by design, and fortunately, by design, we're able to -- or needed desire to stop the operations of facilities, you have to move all the substrates to safe inventory points that are within cue times. So you have a lot of the WIP that you've manually moved and you build up bottlenecks at those stations where the line then, when you start it back up, it's nonlinear. So where I had stated in the script that we had multiple weeks of the Fab not working or the Fabs, not working to their optimal activity levels, it's because of where you put the Fab to shut them down in a safe position.

And it is then no longer linear. Now on top of that, you have the last month of the quarter and many customers that really need to get their products. So you're now putting a huge amount of energy in the back end of the line, that would have been in the front end of the line in order to make up for a disruption in the activities, so another negative impact on the upcoming quarter.

So that all being stated, the $340 million guidance on a net is negatively impacted because of the event, not positively. And had there been no event, we would have anticipated that the guidance would have been higher. So it's really a very strong demand, which I think is a strong attribute to what we've done with our customers, having good products being in the right markets.

Now in the net, I think we're in good shape. But the direct thing, I wouldn't want someone to think that the $340 million guidance for Q4 is a pushout of Q3. It's really not the case at all.

Okay. Okay. Got it, right? It was underlying demand that really drove it, and it would have been higher if it wasn't for those 8 to 12 days that were closed down.

8 to 12 days on the non linearity of line, compensating for the 8 to 12 days of the line disruption.

The next question is from Cody acree of Loop Capital.

Russell, just looking at the cyber event, can you make any delineation on spending capital spending versus operational spending? And how much of that carries on into Q4 or falls off in Q4?

Cody, we didn't have any capital spending because of the event. We just had an impact on the week. Meaning there was less quantity, like Russell said, there was a NIS of 10 to 12 days of lost start or moves in the line, right? So obviously, the quantity of inventories of WIP in the end of September was lower than it would have been if there was no event. So this just impact the COGS line in the P&L. And it's only a P&L loss of about a few million dollars.

Okay. Good. And then, Russell, can you just talk about your expectations for your split in Newport Beach and in Japan for silicon germanium between the earlier ramp for infrastructure for 5G infrastructure and now your ramp in data center is that you're sitting. Can you just tell us what you expect that to look like, the mix, in next year?

So I believe you said Japan, but it's not Japan, it's San Antonio. So silicon germanium in Newport Beach and in San Antonio. San Antonio is well along on 2 different platforms for qualification, what we call our H2 and our H3 and in very good shape there. I not, at this point, 100% sure of how much will be run in San Antonio next year. We have the ability to probably -- okay. Yes. So probably we can increase another 20% on capacity through the capacity that's being qualified in San Antonio. And it's -- at this point, it's really just a question of the customers driving the qualifications quick enough to be there. What had happened that slowed down the San Antonio qualification and not the internal qualifications of the platform, but the customer qualifications of their parts was that we brought it up throughout 2019. But at the end of 2019, as you know, the demand was very down for silicon germanium. So customers didn't have a lot of urgency to ensure enough capacity for the future, Newport Beach in their minds was more than sufficient. And at this time, there's multiple customers that are very desirous and excited to qualify additional factory within our fleet to ensure not just hitting forecast, but to ensure the ability to supply to short-term upsides.

The next question is from Mark Lipacis of Jefferies.

So Russell, you've in the past, you typically have been ahead of the need-to-add capacity. And it sounds like the utilization rates and the capacity utilization is going to be high in in Japan, particularly in a 300-millimeter facility. I think in the past, you said that the capacity that you're adding, you believe will be we'll be close to filled by the second half of next year. So -- and you just mentioned the silicon germanium.

So what is can you just maybe give us a preview? Like how are you thinking about adding capacity past then? And can you just review your framework like around just buying new equipment and putting it in versus inorganic opportunities to add capacity?

And what does the market look like on those organic opportunities? That's the first question.

That's a very big question. I appreciate the question. It's a good question. On the 200-millimeter side, I believe that we have enough footprint to increase organically whatever it's needed. If it's adding a few tools, it is even expanding a site, there's much that we can do as far as taking gray area into wide area should the needs be there. And that was 1 reason that we extended and expanded the silicon germanium offering from the on Newport Beach into San Antonio. So we have a big enough 200-millimeter footprint that we can grow, I believe, within the 200-millimeter demand that we'd have over the next years.

The 300-millimeter is a different story. And we have done, I think, substantial growth for the 300-millimeter factory in Japan. As stated, it's a very good position to be in right now that we left Q3 after adding photo capacity at a 70% utilization level of a factory that would have been beyond the 85% model that we have, had we not added the photo capacity.

So we have room to continue to grow Q4, Q1, Q2 of next year and maybe even Q3 of next year. But you're correct, come Q3, Q4, we'll be hitting somewhat of a limit against an ever increasing demand. So that must be done inorganically. And how does the, if you will, chessboard look on inorganic activities? At the moment for us, I think it looks very good.

Okay. Great. And then on the silicon germanium side, you said the data center is really starting to emerge as a growth driver. Can you help us understand what's driving that? Is this because those data center transceivers are shifting from some other technology to the higher speed optical, and so -- and that's where you are? And on all that topic, can you give us a sense of your share in silicon germanium? And that's all I had.

I believe our share in silicon germanium is sitting somewhere about 60%, 65%. I think that's where we sit. The data center, certainly, in the past years, there are still 4x10s that were being sold. It's now really almost fully on our side for 4x25 and we are selling higher end, not at the -- I mean, the 400, which is a 4x100, not at very high volumes now, but it will be going.

But I believe what happened in data center is there really was just an over inventory of parts for whatever reason. And it's very clear that data centers must continue to grow. The amount of information traveling all the time is huge. So I think it really was just there was for whatever reason and overbuy. And even with our own customers and overbuy, but from the data centers themselves that happened at the end of 2018, beginning of 2019, that caused a slowdown of that market. And maybe as well, there was maybe a delay in some of the computing activities that they needed to have because of releases of certain companies' parts. But with the release of the new computing capabilities, then everything tied in and it just came back to a normal growth rate.

The next question is from Richard Shannon of Craig-Hallum.

Maybe a question on gross margins in the third quarter. A step down in percentage terms, even with revenues flat. Are there some sort of cost in a onetime nature related to the cyber event that had an effect here? Or is there some other understanding what drilled those down a little bit?

Yes, Richard, exactly, like I said in my part, I mean, the issue is that because of there was the onetime fiber event, I hope it's onetime, right? So -- and this created a lower quantity of WIP because we started less for 10 to 12 days averagely, we didn't start wafers or we started much lower than the regular run rate. So we produced less layers.

So eventually, as of September 30, 2020, there is less amount of quantity, there's less quantity of work in process in the line. So obviously, you can mathematically allocate less cost over WIP, which is done in every financial statement closing.

So the COGS became higher by amount of a few million dollars one-time because of that impact. Of course, you should exclude that from considerations or because this is included. So this is a onetime that a lower WIP than in any regular quarter by a few million dollars.

So Oren, does that mean that you're going to catch up in that somehow? And therefore, we should think about this 50% to 55% incremental gross margin coming off of not the third quarter base, but the second quarter base then?

Yes.

Okay. All right. That is helpful. Russell, a question on the fourth quarter guidance, you're talking about seeing forecasts improving here for power discretes. Is there any effect in benefit in your fourth quarter guidance? Or is that to come in '21?

That's all '21. I said in forecast, I didn't say in order. So it's customer forecasts that are coming up, and that would be for the -- at the earliest, the end of Q4 starts. But yes, so it would be snapping back in '21.

Okay. Fair enough. A question on RFSOI. You're talking about gaining some very nice share here. Do you -- I mean, are those share gains coming from improved performance that your competitors can't match? Or is there a pricing aspect in here? And do you expect any competitive response from the share gains that seem to be very strong this year?

Competitive response. I think that the competition that we have within that isn't desirous to dump the market in pricing. So I think that the competition really deals on performance, and that's a place that it should be. I think that our gains are because of performance. And performance always has multiple things. It's the specific technical performance of what you're shipping as well as your ability to really meet customer needs and to tie into customers to be aligned on their road maps and to be able to serve them very quickly if they have upside demands to be able to get them there. So it's technical performance. But as I'll always state, once you have a good customer, you have to keep your road map alive and going with them technically. But the best salesperson you can have is a silicon wafer that ships on time and good yield.

So the performance part isn't just technical, it's the relationship. And if they need something to be able to give it and to move that way. And I believe that we've been able to show that with our big customers across the board. So there's the ability is there. But the biggest growth is our most advanced platforms. It's 300-millimeter.

Okay. So are you expecting to maintain those -- that share or even gain share next year?

We're certainly expecting to maintain. And if I look at forecasts, everything is -- revenue is still going up quite substantially. So I'm not sure how much of that is related to the market just going up at this point.

What I can state very clearly is that the revenue percentage gain that we had in '19 over '18 and '20 over '19 is much bigger than the market grew. So that can only be shared.

I don't yet know what the market growth will be exactly next year. From what we're reading, it would appear that from customer forecast, we'd still be gaining substantial share next year. But it's -- until you really see how many units are being sold, and what is the content of those units, it's a little bit hard to -- for me at this point to talk about gaining market share. But I can certainly state that the market share that we have gained will be driving a substantial revenue increase next year.

Okay. Excellent. And then my last question for Oren. How should we be thinking about CapEx in the fourth quarter and into 2021? You've had a few quarters of spending in the $60-plus million range per quarter. Is that still a level to think about for next year? Or will that get back to the levels we've seen maybe in the mid-40s. How do we think about that?

Yes. I believe that for the coming quarter and maybe even Q1, still will be the high levels of 60-something like was for Q1, Q2, Q3 because we still have those not still. But we have those $100 million of investments in mainly in Uozu, which tools arrived in Q2, Q3 installed and needs to be paid. So that's on a gradual payment schedule. So I believe Q1 -- Q4, Q1 will be still the remaining of this. So in addition to the $45 million regular model, I would expect additional $20 million per quarter. And from Q2, supposed to be back to the $45 million level unless we announce I mean, approved and announce other expansion, which Russell have actually indicated that we may do. But for now, there is nothing that was approved one-off.

The next question is from Lisa Thompson of Zacks Investment Research.

So I guess, one of the only things I wanted to ask about is you're talking about reaching capacity limits maybe Q3 of next year and that you would buy something. So what should we look for as far as timing as to when things might happen, announcements or decisions? Or how is that going to work?

Yes. I honestly wish I could give you an exact date, but if I could give you an exact data, I would have already needed to be publicly released. So there's always things we're looking at and working on. The specific question I was asked was what does the landscape look like for deals? And for us, I think it looks very good. But when and how it will be a deal if a deal does complete, we would do it, that's we would have to announce.

As stated previously, we always have the ability to increase organically within the footprint that we have, even in Japan, however, at this point, it might be more financially viable to do something inorganically than to continue organically in Japan, but the ability to go organically in Japan still sits as an option.

So when I state that we'd be seeing a Q3, most likely Q4 to where we would enter into Q1 2022, maybe with an over demand of the capability that we now have. That gives enough time to make a decision to grow organically if we needed to in Japan. But the indication and what we would prefer to do at this point is to do something in an inorganic basis with substantially more capacity and nominally possibly a better ROI scenario than continuing at this point to do the next node of growth in Japan.

I wish I could give you more granularity, but obviously, it's nothing that we're talking about to a point that it's publicly released.

So could I interpret that as meaning you could possibly do something from today to the end of next year? Or you're not even going to think about it until the end of next year?

By the end of next year, we either have to do something inorganically or make the decision to do another organic investment in Japan and well before the end of next year.

The next question is from David Duley of Steelhead Securities.

It seems like 8-inch and 12-inch foundry capacity is fairly full throughout Asia. And you're seeing some of the foundries there raised pricing. I'm just wondering from a macro perspective, what you're seeing there. Are you are you seeing the ability to increase pricing or have pricing go down less than it does normally given the overall tight capacity in both 8- and 12-inch foundry?

We haven't seen really pricing pressure in 12-inch. However, that being stated, we've been in a ramp position in 12-inch for the past 2 years, and that's always a good thing, introducing new technologies and new platforms. On 8-inch itself, and as a company-blended ASP, we've been able to maintain a stable average selling price per layer for multiple years. Now there's always with a good customer over time, some year-over-year reduction on previous platforms, but the ability that we have to maintain the ASP is by putting out new platforms that reset the price curve to a higher level maybe the same level as the previous one or even higher, and that's a benefit to both.

The new platform has greater capability and sometimes efficiency so that you can get more chips per wafer. So it's always a win-win. And I think that, that's the best way to go.

We have never yet raised prices with any customer, and I don't believe we ever will raise prices for customers because of a capacity crunch. I think that, that's a very, very good way to lose customers and lose the customers trust.

The same as we had one supplier, a big supplier for starting material that unilaterally raise prices to us, and we've done everything we can to eliminate the entire supply from them.

So I think when you have somebody in a very crunch position to use that to hurt their business model is not the right way to go. So no, we don't raise prices. And I don't believe that we ever will, at least not as long as I'm here. But we have been able to, through partnership and developing new platforms, maintain a very good ASP throughout the company for multiple years.

Okay. And then now that you've given Q4 guidance, could you take a stab at what you think your -- as far as the overall calendar 2020, what your revenue levels would be in your largest buckets of the segments that you talk about?

I'll do that at the end of the year. I mean, I think we've been pretty granular as to how much growth there are on the different areas. And so maybe off of last year as you could calculate that.

But we really just give by product group once a year on the actual breakdown, and we'll give it very detailed. So when we release Q4 at the end of the year, we'll give all of those numbers.

Okay. And then final question for me. Just it's a little bit of a review. But it just sounds like the RFSOI business is going to grow nicely next year. The silicon germanium business is going to grow nicely next year. It seems like power management will do the same. It seems like several of your major large buckets look on a pretty good strong growth trajectory for next year. And I'm wondering, do you have some sort of target you might share with us for what given the ramp that you can see now can you grow 10% next year or 15%? Or what is kind of the range of expectations we might think about with all these sectors being fairly strong?

I believe to the extent that we're going to forecast 2021 in this call tonight, that's a Q3 release call, we stated that we see the areas that have grown this year, growing at the same rate or stronger next year. And we see the headwinds coming back to some extent. So I don't think there's any reason that the organic numbers we've had this year couldn't be maintained or increased for next year.

There are no further questions at this time. Mr. Ellwanger, would you like to make your concluding statement?

Certainly. Thank you very much. Well, I thank everybody for, again, your interest in the company for participating in the call.

I'm grateful for the analysts that cover us and very good questions today, so I appreciate all of it. Thank you very, very much.

In summary, the industry is experiencing a strong surge in RF demand. As the handset market is rebounding from the COVID-19 slowdown and new models are ramping, and 5G adoption is beginning and accelerating. Unlike 2020, 2021 is expected to be a strong growth year in overall handset unit sales with even stronger adoption of 5G.

5G-enabled handsets are anticipated to nearly double in 2021 versus 2020. If we consider the RF content increase in the 5G handsets, the RF supply growth should be well beyond a forecasted high handset market growth. And as I believe, stated well because of the questions that were asked, or at least the questions were good, our share gain over the past 2 years should put us in a very good position to enjoy both the RF content increase on top of the market rebound for handsets as a whole. Power markets, both IC and discrete, are expected to see growth in 2021, in part due to recovery from COVID-19, slowdown in handsets as well as infrastructure, automotive and industrial markets.

Analysts anticipate a 10% rebound in automotive sales in 2021 after a down year in 2020 and is expected that electrical vehicles, which include more of our content, we'll grow at an even faster rate.

We have experienced a slowdown due to COVID-19 pandemic situation for dental X-ray and due to geopolitical situation for industrial sensors market. We see signs of recovery in the industrial sensor market and expect this market to rebound in 2021 based on our customers' inputs and strongly supported by market research.

Considering the very high customer forecast in what they're demanding in 2021, backed by market research, we look forward to a strong 2021. And by a strong, I mean, a very strong demand and growth.

So that really does more or less conclude my comments. Other than stating, we started this week, our 2020 Annual Technology Global Symposium online event. The online event consists of a series of webinars, presenting the company's premier Analog technologies, manufacturing solutions, and recent developments across all of our platforms.

Similar to our traditional TGS event format, the webinars are presented by Tower's leading team of experts, with the added benefit of direct and easier access to interact online with the presenters and learn more about the company's platforms and offerings.

All information about the timing and the specific venue well, the venue is virtual, but the specific topics of the seminars are on our website, sign up information is on our website. So there's very strong attendance of these. And the fact that it's virtual, it can be as big as you wish.

So everyone is invited to look at these and sign up. In addition, on November 30, 2020, and Dr. Marco Racanelli and Dr. Avi Strum will represent the company at the Crédit Suisse Virtual conference. With that, I say thank you very much. Wish everybody, really, health, peace, security, happiness as we head into the holiday season. Thank you very much.

Thank you. This concludes the Tower Semiconductor Third Quarter 2020 Results Conference call. Thank you for your participation. You may go ahead and disconnect.