威騰電子 (WDC) 2023 Q3 法說會逐字稿

Good afternoon, and thank you for standing by. Welcome to Western Digital's Fiscal Third Quarter 2023 Conference Call. (Operator Instructions) As a reminder, this call is being recorded.

下午好，謝謝你的支持。歡迎來到西部數據 2023 財年第三季度電話會議。 （操作員說明）提醒一下，此通話正在錄音中。

I would now like to turn the call over to Mr. Peter Andrew, Vice President, Financial Planning and Analysis of Investor Relations. You may begin.

我現在想把電話轉給投資者關係財務規劃和分析副總裁彼得安德魯先生。你可以開始了。

Thank you, and good afternoon, everyone. Joining me today are David Goeckeler, Chief Executive Officer; and Wissam Jabre, Chief Financial Officer. Before we begin, let me remind everyone that today's discussion contains forward-looking statements including expectations for our product portfolio, cost reductions, business plans and performance, demand and market trends and financial results based on management's current assumptions and expectations and as such, does include risks and uncertainties. We assume no obligation to update these statements. Please refer to our most recent financial report on Form 10-K and other filings with the SEC for more information on the risks and uncertainties that could cause actual results to differ materially.

謝謝，大家下午好。今天加入我的是首席執行官 David Goeckeler；和首席財務官 Wissam Jabre。在我們開始之前，讓我提醒大家，今天的討論包含前瞻性陳述，包括對我們產品組合的預期、成本降低、業務計劃和績效、需求和市場趨勢以及基於管理層當前假設和預期的財務結果，因此，是否包括風險和不確定性。我們不承擔更新這些聲明的義務。有關可能導致實際結果出現重大差異的風險和不確定性的更多信息，請參閱我們關於 10-K 表格的最新財務報告和向美國證券交易委員會提交的其他文件。

We will also make references to non-GAAP financial measures today. Reconciliations between the non-GAAP and comparable GAAP financial measures are included in the press release and other materials that are being posted in the Investor Relations section of our website.

我們今天還將提及非 GAAP 財務措施。非 GAAP 和可比較的 GAAP 財務指標之間的對賬包含在我們網站投資者關係部分發布的新聞稿和其他材料中。

With that, I will now turn the call over to David for introductory remarks.

有了這個，我現在將把電話轉給大衛作介紹性發言。

Thank you, Peter. Good afternoon, and thank you for joining the call to discuss our 2023 third quarter results. Western Digital's third quarter performance exceeded expectations with core metrics at the high end of our guidance range, demonstrating the company's resilience in a challenging market environment. We reported third quarter revenue of $2.8 billion, non-GAAP gross margin of 11% and a non-GAAP loss per share of $1.37. .

謝謝你，彼得。下午好，感謝您加入討論我們 2023 年第三季度業績的電話會議。 Western Digital 第三季度的業績超出預期，核心指標處於我們指導範圍的高端，展示了公司在充滿挑戰的市場環境中的韌性。我們報告第三季度收入為 28 億美元，非 GAAP 毛利率為 11%，非 GAAP 每股虧損為 1.37 美元。 .

Over the last several years, our team is focused on enhancing business agility and delivering a range of innovative, industry-leading products that address the increasing data storage demands of our customers. The groundwork we laid combined with the actions we have taken since the beginning of this fiscal year to rightsize and refocus our business have enabled us to navigate a dynamic environment.

在過去的幾年裡，我們的團隊專注於提高業務敏捷性和提供一系列創新的、行業領先的產品，以滿足客戶不斷增長的數據存儲需求。我們奠定的基礎加上我們自本財年開始以來為調整業務規模和重新調整業務重點而採取的行動，使我們能夠駕馭充滿活力的環境。

I am pleased that we delivered non-GAAP gross margin at the higher end of our guidance range due to strong execution across both our HDD and Flash businesses. In HDD, our early actions to streamline our manufacturing footprint and focus our product offerings on delivering the best value for our data center customers have resulted in gross margin upside and profitable market share gains in HDD.

我很高興我們在我們的指導範圍的較高端實現了非 GAAP 毛利率，因為我們的 HDD 和閃存業務執行力很強。在 HDD 方面，我們早期採取的精簡製造足跡和專注於為我們的數據中心客戶提供最佳價值的產品供應已導致 HDD 的毛利率上升和有利可圖的市場份額增加。

In Flash, our broad go-to-market strategy anchored on our enviable retail franchise and a strong client SSD portfolio enabled us to optimize bit placement and bolster gross margin. During the fiscal third quarter, we saw signs of demand stabilizing across various end markets. In consumer, our Flash and HD results were consistent with the expectations we shared in January. In client, demand for each major product area came in better than we expected across PC OEM, channel, mobile and gaming. In cloud, demand for capacity enterprise hard drives improved, whereas the demand for flash drive was consistent with our expectations set in January.

在閃存方面，我們基於令人羨慕的零售特許經營權和強大的客戶端 SSD 產品組合的廣泛上市戰略使我們能夠優化位佈局並提高毛利率。在第三財季，我們看到了各個終端市場需求趨於穩定的跡象。在消費者方面，我們的閃存和高清結果與我們在 1 月份分享的預期一致。在客戶方面，PC OEM、渠道、移動和遊戲領域對每個主要產品領域的需求都好於我們的預期。在雲中，對容量企業硬盤的需求有所改善，而對閃存驅動器的需求與我們在 1 月份設定的預期一致。

Before I jump into updates on our HDD and Flash businesses, I would like to reiterate that the strategic review process is ongoing, and we will provide updates as we have them.

在我開始介紹我們的 HDD 和閃存業務的更新之前，我想重申戰略審查過程正在進行中，我們將提供更新。

I'll now turn to the business update, starting with HDD. During the fiscal third quarter, our HDD revenue improved sequentially with growth in capacity enterprise offsetting seasonal declines in retail and client. During the quarter, our 22 terabyte CMR drive became the highest volume product among all of our 20-terabyte-and-above capacity points, demonstrating our leadership position at this capacity point. In addition, we expect to complete qualification of our 26 terabyte UltraSMR technology in the fiscal fourth quarter. These innovative products provide multi-generation benefits to our customers.

我現在將轉向業務更新，從 HDD 開始。在第三財季，我們的 HDD 收入環比改善，產能企業的增長抵消了零售和客戶的季節性下滑。本季度，我們的 22 TB CMR 驅動器成為我們所有 20 TB 及以上容量點中銷量最高的產品，證明了我們在該容量點的領導地位。此外，我們預計將在第四財季完成我們 26 TB UltraSMR 技術的認證。這些創新產品為我們的客戶帶來多代利益。

Turning to Flash. Total exabyte shipment came in higher than expected in consumer, mobile, PC OEM and channel products. Despite the industry experiencing the worst downturn in over a decade, Western Digital delivered positive product gross margin, excluding underutilization charges driven by our unique combination of premium retail brands, broad go-to-market channels and low-cost flash supply from our joint venture fab with Kioxia. Furthermore, we continue to see encouraging signs of price elasticity-driven content growth in retail flash led by WD_BLACK SSD optimized for gaming as well as mobile PC OEMs and channel within client.

轉向閃存。消費、移動、PC OEM 和渠道產品的艾字節總出貨量高於預期。儘管該行業經歷了十多年來最嚴重的低迷，但西部數據仍實現了正的產品毛利率，不包括我們獨特的優質零售品牌組合、廣泛的上市渠道和我們合資企業的低成本閃存供應帶來的未充分利用費用與鎧俠合作。此外，我們繼續看到以 WD_BLACK SSD 為首的零售閃存價格彈性驅動內容增長的令人鼓舞的跡象，該固態硬盤針對遊戲以及移動 PC OEM 和客戶渠道進行了優化。

On the technology front, BiCS6 achieved its anticipated cost crossover during the quarter. Moreover, on March 30, Western Digital and Kioxia announced our next-generation BiCS8 node, a groundbreaking technology that builds upon the success of BiCS5 and BiCS6. This new technology is based on circuit bonded to array architecture which provides several benefits, including reduced cycle time, faster yield ramp, better lateral scaling and industry-leading I-O performance when compared to products based on circuit under array architecture. We continue to aggressively productize BiCS8 for a broad range of applications, which will position Western Digital for success as business conditions improve.

在技術方面，BiCS6 在本季度實現了預期的成本交叉。此外，3 月 30 日，Western Digital 和 Kioxia 宣布了我們的下一代 BiCS8 節點，這是一項建立在 BiCS5 和 BiCS6 成功基礎上的突破性技術。這項新技術基於與陣列架構結合的電路，與基於陣列架構下的電路的產品相比，它具有多項優勢，包括縮短週期時間、加快良率提升、更好的橫向縮放和行業領先的 I-O 性能。我們繼續積極地將 BiCS8 產品化以用於廣泛的應用程序，這將使 Western Digital 隨著業務條件的改善而取得成功。

As we look to the fiscal fourth quarter, in hard drives, overall demand will be impacted by ongoing inventory digestion at cloud customers and a sustained decline in client. However, we are beginning to experience improved demand at certain customers in China. In Flash, we are seeing signs of stabilization and content increase per unit. PC OEMs have emerged from inventory digestion and are now shipping closer to end demand. Gaming will remain strong, while enterprise SSD for cloud applications will remain soft. We anticipate modest growth in bit shipments into the fiscal fourth quarter.

展望第四財季，在硬盤驅動器方面，整體需求將受到雲客戶持續庫存消化和客戶持續下滑的影響。然而，我們開始感受到中國某些客戶的需求有所改善。在 Flash 中，我們看到了穩定和每單位內容增加的跡象。 PC OEM 已經從庫存消化中脫穎而出，現在出貨更接近終端需求。遊戲將保持強勁，而用於雲應用程序的企業級 SSD 將保持疲軟。我們預計第四財季的比特出貨量將適度增長。

Before I hand the call over to Wissam, I would like to thank the Western Digital team for the response efforts they made in addressing the network security incident we disclosed on April 2. Our team took proactive and precautionary measures to secure our operations and successfully executed on our business continuity plans.

在我將電話轉交給 Wissam 之前，我要感謝西部數據團隊為解決我們在 4 月 2 日披露的網絡安全事件所做的響應工作。我們的團隊採取了積極和預防措施來確保我們的運營並成功執行關於我們的業務連續性計劃。

With that, I'll turn it over to Wissam.

有了這個，我會把它交給 Wissam。

Thank you, David, and good afternoon, everyone. Fiscal third quarter results reflected the challenging market environment with continued pressure on revenue and profitability. Total revenue for the quarter was $2.8 billion, down 10% sequentially and 36% year-over-year. Non-GAAP loss per share was $1.37. Looking at end markets, cloud represented 43% of total revenue at $1.2 billion, down 2% sequentially driven by an increase in capacity enterprise drive shipments which was offset by a decrease in flash shipments. Nearline bit shipments were 79 exabytes, up 31% sequentially. Year-over-year, revenue declined 32%, primarily due to a decline in shipments of both hard drive and flash products as well as price decreases in Flash.

謝謝你，大衛，大家下午好。第三財季業績反映了充滿挑戰的市場環境，收入和盈利能力持續面臨壓力。本季度總收入為 28 億美元，環比下降 10%，同比下降 36%。非 GAAP 每股虧損為 1.37 美元。從終端市場來看，雲佔總收入的 43%，為 12 億美元，環比下降 2%，這是由於容量企業驅動器出貨量的增加被閃存出貨量的減少所抵消。近線位出貨量為 79 艾字節，環比增長 31%。收入同比下降 32%，主要原因是硬盤和閃存產品的出貨量下降以及閃存價格下降。

Client represented 35% of total revenue at $1 billion, down 10% sequentially and 44% year-over-year. On both a sequential and year-over-year basis, the decrease was driven by price declines across our flash products and lower client SSD and hard drive shipments for PC application. Finally, consumer represented 22% of total revenue at $0.6 billion, down 22% sequentially and 29% year-over-year. Sequentially, the decrease was due to a seasonal decline in shipments of both retail hard drive and flash products as well as price declines in retail flash. The year-over-year decrease was driven by lower retail hard drive shipments and price declines in flash.

客戶佔總收入的 35%，為 10 億美元，環比下降 10%，同比下降 44%。在環比和同比基礎上，下降的原因是我們閃存產品的價格下降以及用於 PC 應用程序的客戶端 SSD 和硬盤驅動器出貨量下降。最後，消費者佔總收入的 22%，為 6 億美元，環比下降 22%，同比下降 29%。環比下降的原因是零售硬盤和閃存產品出貨量的季節性下降以及零售閃存的價格下降。同比下降的原因是零售硬盤出貨量下降和閃存價格下降。

Turning now to revenue by segment. HDD revenue was $1.5 billion, up 3% sequentially and down 30% year-over-year. Sequentially, total HDD exabyte shipments increased 15% and average price per hard drive increased 10% to $109. On a year-over-year basis, total HDD exabyte shipments decreased 23%, and average price per unit increased 9%. Flash revenue was $1.3 billion, down 21% sequentially and 42% year-over-year. Sequentially, flash ASPs were down 10% on a blended basis and 12% on a like-for-like basis. Flash bit shipments decreased 14% sequentially and 1% year-over-year.

現在轉向按部門劃分的收入。 HDD 收入為 15 億美元，環比增長 3%，同比下降 30%。隨後，硬盤驅動器艾字節總出貨量增長了 15%，每個硬盤驅動器的平均價格增長了 10% 至 109 美元。與去年同期相比，HDD 艾字節總出貨量下降了 23%，每單位平均價格上漲了 9%。閃存收入為 13 億美元，環比下降 21%，同比下降 42%。隨後，閃存平均售價在混合基礎上下降了 10%，在同類基礎上下降了 12%。閃存位出貨量環比下降 14%，同比下降 1%。

Moving to costs and expenses. Please note that my comments will be related to non-GAAP results unless stated otherwise. Gross margin for the fiscal third quarter was 10.6%, down 6.8 percentage points sequentially and 21.1 percentage points year-over-year. This includes $275 million of charges for manufacturing underutilization, inventory write-downs and other items.

轉向成本和費用。請注意，除非另有說明，否則我的評論將與非 GAAP 結果相關。第三財季毛利率為 10.6%，環比下降 6.8 個百分點，同比下降 21.1 個百分點。這包括 2.75 億美元的製造未充分利用、庫存減記和其他項目費用。

HDD gross margin was higher than anticipated at 24.3%, up 3.6 percentage points sequentially and down 3.4 percentage points year-over-year. Sequentially, the increase was primarily due to higher capacity enterprise volume as well as lower manufacturing costs and underutilization related charges. Underutilization charges were less than projected at approximately $40 million or 2.7 percentage points, partially benefiting from the actions to streamline our manufacturing footprint and offsetting other charges of $22 million.

HDD 毛利率高於預期，為 24.3%，環比上升 3.6 個百分點，同比下降 3.4 個百分點。隨後，增長主要是由於更高的產能企業數量以及更低的製造成本和未充分利用相關費用。未充分利用費用低於預期，約為 4000 萬美元或 2.7 個百分點，部分受益於精簡製造足蹟的行動並抵消了 2200 萬美元的其他費用。

Flash gross margin was negative 5%, down 19.5 percentage points sequentially and 40.6 percentage points year-over-year. Underutilization charges associated with the reduced manufacturing volumes were approximately $160 million or 12.2 percentage points, less than expected as we focused on lowering manufacturing costs. During the quarter, we incurred $53 million of flash inventory write-down charges resulting from projected selling prices falling below the cost of inventory. We continue to tightly manage our operating expenses, which were at $602 million for the quarter, down $57 million sequentially and $138 million year-over-year.

閃存毛利率為負 5%，環比下降 19.5 個百分點，同比下降 40.6 個百分點。與製造量減少相關的未充分利用費用約為 1.6 億美元或 12.2 個百分點，低於預期，因為我們專注於降低製造成本。本季度，由於預計售價低於庫存成本，我們產生了 5300 萬美元的閃存庫存減記費用。我們繼續嚴格管理我們的運營支出，本季度運營支出為 6.02 億美元，環比下降 5700 萬美元，同比下降 1.38 億美元。

Operating loss in the quarter was $304 million driven by underutilization charges inventory write-downs and other items totaling $275 million. Income tax expense was $60 million. Despite the consolidated loss, we continue to have taxable income in certain geographies resulting in taxes payable in those areas. Fiscal third quarter loss per share was $1.37, inclusive of a $9 million dividend cost associated with the convertible preferred equity.

本季度的運營虧損為 3.04 億美元，原因是未充分利用費用庫存減記和其他項目總計 2.75 億美元。所得稅費用為 6000 萬美元。儘管出現綜合虧損，但我們在某些地區繼續有應稅收入，導致這些地區需要繳納稅款。第三財季每股虧損為 1.37 美元，其中包括與可轉換優先股相關的 900 萬美元股息成本。

Operating cash flow for the third quarter was an outflow of $381 million, and free cash flow was an outflow of $527 million. Cash capital expenditures, which include the purchase of property, plant and equipment, and activity related to our flash joint ventures on the cash flow statement was $146 million. Gross debt outstanding was $7.1 billion at the end of the fiscal third quarter. Trailing 12-month adjusted EBITDA at the end of the third quarter, as defined in our credit agreement was $2.5 billion, resulting in a gross leverage ratio of 2.8x compared to 2.1x in the fiscal second quarter.

第三季度經營現金流流出 3.81 億美元，自由現金流流出 5.27 億美元。現金流量表中的現金資本支出，包括購買物業、廠房和設備，以及與我們的快速合資企業相關的活動，為 1.46 億美元。截至第三財季末，未償債務總額為 71 億美元。根據我們信貸協議的定義，截至第三季度末，過去 12 個月調整後的 EBITDA 為 25 億美元，導致總槓桿率為 2.8 倍，而第二財季為 2.1 倍。

As a reminder, our credit agreement includes $0.7 billion in depreciation add-back associated with the flash joint ventures. This is not reflected in our cash flow statement. Please refer to the earnings presentation on the Investor Relations website for further details. At the end of the quarter, total liquidity was $5.3 billion, including cash and cash equivalents of $2.2 billion, undrawn revolver capacity of $2.25 billion and unused delayed drawn term loan facility of $875 million.

提醒一下，我們的信貸協議包括與快速合資企業相關的 7 億美元折舊加回。這沒有反映在我們的現金流量表中。有關詳細信息，請參閱投資者關係網站上的收益介紹。本季度末，流動資金總額為 53 億美元，包括現金和現金等價物 22 億美元、未提取的循環貸款能力 22.5 億美元和未使用的延遲提取定期貸款額度 8.75 億美元。

Before I cover guidance for the fiscal fourth quarter, I'll discuss the business outlook. We expect HDD revenue to decrease sequentially due to ongoing inventory digestion at cloud customers. We expect flash revenue to decrease sequentially as modest growth in bit shipments is more than offset by ASP declines. We expect flash bit shipment growth to accelerate in the first half of fiscal year 2024. In the fiscal fourth quarter, total gross margin will be negatively impacted by underutilization charges and flash pricing. We continue to tightly manage our cost structure through this dynamic environment and expect operating expenses to be below $600 million.

在介紹第四財季的指引之前，我將討論業務前景。由於雲客戶的庫存持續消化，我們預計 HDD 收入將環比下降。我們預計閃存收入將連續下降，因為位出貨量的溫和增長被 ASP 下降所抵消。我們預計閃存位出貨量增長將在 2024 財年上半年加速。在第四財季，總毛利率將受到未充分利用費用和閃存定價的負面影響。在這種充滿活力的環境中，我們將繼續嚴格管理我們的成本結構，並預計運營費用將低於 6 億美元。

For fiscal year 2023, we project gross capital expenditures to be approximately $2.2 billion and cash capital expenditures to be approximately $0.8 billion. The projected cash capital expenditures represent more than a 50% reduction from our forecast as we entered fiscal year 2023 and approximately 35% reduction from fiscal year 2022.

對於 2023 財年，我們預計總資本支出約為 22 億美元，現金資本支出約為 8 億美元。預計現金資本支出比我們進入 2023 財年時的預測減少 50% 以上，比 2022 財年減少約 35%。

I'll now turn to guidance. For the fiscal fourth quarter, our non-GAAP guidance is as follows. We expect revenue to be in the range of $2.4 billion to $2.6 billion. We expect gross margin to be between 3% and 5% which includes underutilization charges across flash and HDD totaling $220 million to $240 million. We expect operating expenses to be between $580 million to $600 million. Interest and other expenses are expected to be approximately $90 million. We expect income tax expense to be between $60 million and $70 million. We expect loss per share of $2.20 to $1.90, assuming approximately 321 million shares outstanding.

我現在轉向指導。對於第四財季，我們的非 GAAP 指引如下。我們預計收入將在 24 億美元至 26 億美元之間。我們預計毛利率在 3% 到 5% 之間，其中包括閃存和 HDD 的未充分利用費用，總計 2.2 億美元到 2.4 億美元。我們預計運營費用將在 5.8 億美元至 6 億美元之間。利息和其他費用預計約為 9000 萬美元。我們預計所得稅費用在 6000 萬至 7000 萬美元之間。我們預計每股虧損 2.20 美元至 1.90 美元，假設流通股約為 3.21 億股。

I'll now turn the call back over to David.

我現在將電話轉回給大衛。

Thanks, Wissam. Over the past few quarters, we have successfully ramped a series of industry-leading storage products and commercialized innovative technologies while concurrently rightsizing our cost structure. Our proactive actions have positioned Western Digital favorably for the future as demand gradually returns to normal levels.

謝謝，維薩姆。在過去的幾個季度中，我們成功推出了一系列行業領先的存儲產品和商業化創新技術，同時調整了我們的成本結構。隨著需求逐漸恢復到正常水平，我們的積極行動使西部數據在未來處於有利地位。

In closing, I would like to thank our team members for their unwavering commitment in advancing innovative products and driving operational efficiency. Their exceptional efforts have allowed Western Digital to deliver industry-leading gross margins across our HDD and Flash businesses despite the challenging and rapidly changing landscape. Additionally, I am immensely proud to share that Western Digital has been honored for the fifth consecutive year as one of the world's most ethical companies by the Ethisphere Institute. This recognition is a testament to the dedication and support of our people worldwide, and we remain committed to upholding the highest ethical standards in all that we do.

最後，我要感謝我們的團隊成員在推進創新產品和提高運營效率方面的堅定承諾。儘管形勢充滿挑戰且瞬息萬變，但他們的非凡努力使西部數據能夠在我們的 HDD 和閃存業務中實現行業領先的毛利率。此外，我非常自豪地告訴大家，Western Digital 已連續第五年被 Ethisphere Institute 評為全球最具商業道德的公司之一。這一認可證明了我們全球員工的奉獻和支持，我們仍然致力於在我們所做的一切中堅持最高的道德標準。

Okay. I look forward to your questions. Let's open it up.

好的。我期待著你的問題。讓我們打開它。

(Operator Instructions)

（操作員說明）

Our first question comes from C.J. Muse from Evercore.

我們的第一個問題來自 Evercore 的 C.J. Muse。

I guess I'd love to get a sense for where you're seeing demand stabilize versus where you still see pockets of inventory. And as part of that, I guess, embedded in your revenue guide, it looks like you're kind of suggesting HDD down maybe 10% to 15%, SSD down 5% to 10%. So I guess is that kind of the right way to think about it? And then as part of that, where do you think we're seeing stabilization? And where do you think we need to work down inventory some more?

我想我很想了解您看到需求穩定的地方與您仍然看到庫存的地方。作為其中的一部分，我猜，在你的收入指南中，你似乎在暗示 HDD 可能下降 10% 到 15%，SSD 下降 5% 到 10%。所以我想這是正確的思考方式嗎？然後作為其中的一部分，您認為我們在哪裡看到穩定？您認為我們需要在哪些方面進一步減少庫存？

C.J., thanks for the question. Good to hear from you as always. Yes, I think as we talked about in consumer, we're seeing some stabilization there as far as demand. PC OEM, we've been talking about now for 3-plus quarters, and I think we see them mainly shipping to true demand. I mean nobody is building inventory right now, but we think the inventory correction there is mostly behind us. Our channel business performed really well this past quarter, I think, above what our expectation was; the inventory issue is still very much in data center, and it's very lumpy. We have some big cloud customers that are consuming. We have others that are really in full inventory digestion and aren't taking anything. So that market is still where we see a lot of a lot of inventory digestion going on. And I would expect that to be lumpy for the next couple of quarters.

C.J.，謝謝你的提問。很高興一如既往地收到你的來信。是的，我認為正如我們在消費者中談到的那樣，我們看到需求方面出現了一些穩定。 PC OEM，我們已經討論了 3 個多季度，我認為我們看到它們主要是針對真實需求發貨。我的意思是現在沒有人在增加庫存，但我們認為那裡的庫存調整基本上已經過去了。我認為，上個季度我們的渠道業務表現非常好，超出了我們的預期；庫存問題仍然主要存在於數據中心，而且非常不穩定。我們有一些正在消費的大型雲客戶。我們還有其他人真的在完全消化庫存並且沒有採取任何措施。因此，該市場仍然是我們看到大量庫存消化的地方。我希望在接下來的幾個季度中會出現波動。

We are seeing some signs of stabilization in China. We talked about that. I think it's setting up for a recovery in the second half of the year, a lot more activity around RFPs and discussions about what demand is going to look like in the second half. So that's a bit of an overview of where we see the market. I think on your numbers, you're probably down a little more than we are on HDD. I think that's probably more a single-digit kind of number on a sequential basis.

我們看到中國出現一些穩定跡象。我們談過那個。我認為這將為下半年的複蘇做好準備，圍繞 RFP 開展更多活動，並討論下半年的需求情況。所以這是我們對市場的看法的概述。我認為根據您的數字，您可能比我們在 HDD 上的下降更多。我認為這可能更像是一種按順序排列的個位數。

Very helpful. And as a quick follow-up, can you kind of walk us through what you're thinking today in terms of underutilization charges beyond the June quarter?

很有幫助。作為快速跟進，您能否帶我們了解一下您今天在 6 月季度之後的未充分利用費用方面的想法？

Yes. Well, let's talk about it for each business. I mean I think in HDD -- and I'm sure Wissam will have a little bit to add here as well, HDD which is the smaller part of the number, but still significant, we're going to see a drop in volume next quarter. So we'll see some underutilization there. On the Flash side, we continue to underutilize the fab. We're managing it in a very dynamic way, kind of week-to-week, month-to-month to make sure we fully understand demand and keep our inventory in a position where we want it. And so -- but we will definitely see underutilization on both sides of the business next quarter.

是的。好吧，讓我們為每個業務談談它。我的意思是我認為在 HDD 中——我相信 Wissam 也會在這裡添加一點點，HDD 是數量的較小部分，但仍然很重要，接下來我們將看到體積下降四分之一。所以我們會在那裡看到一些未充分利用的情況。在 Flash 方面，我們繼續未充分利用晶圓廠。我們正在以一種非常動態的方式對其進行管理，每週、每月，以確保我們充分了解需求並將我們的庫存保持在我們想要的位置。所以 - 但我們肯定會在下個季度看到業務雙方的利用率不足。

Yes. And just to add -- C.J, sorry, just to add a bit more color. I think we -- in our guide, we're estimating around $220 million to $240 million, the range of underutilization charges. And by business, this is roughly 2/3 Flash, 1/3 HDD -- or 1/3 HDD.

是的。只是為了添加 - C.J，抱歉，只是為了添加更多顏色。我認為我們 - 在我們的指南中，我們估計未充分利用費用的範圍約為 2.2 億至 2.4 億美元。就業務而言，這大約是 2/3 閃存、1/3 HDD——或 1/3 HDD。

Our next question comes from Joe Moore from Morgan Stanley.

我們的下一個問題來自摩根士丹利的喬摩爾。

Great. You mentioned that you're taking lower cost or market charges on NAND. Can you talk about the methodology there? Is that -- do you pool that and then take a charge overall? Or is it any time any individual product falls below the market price, you adjust it down?

偉大的。您提到您正在對 NAND 收取較低的成本或市場費用。你能談談那裡的方法嗎？那是——你把它匯集起來然後整體收費嗎？還是什麼時候個別產品跌破市場價，你就下調？

So Joe, with respect to our LCM charges, we do it at the finished good product level. It is not pooled.

所以喬，關於我們的 LCM 費用，我們是在成品級別上進行的。它沒有合併。

Got it. Okay. And then in terms of the underutilization charges and things like that, do you know how the covenants are going to be defined? Are you going to be able to remove those charges from the EBITDA number as defined in the covenant?

知道了。好的。然後就未充分利用費用和諸如此類的事情而言，您知道契約將如何定義嗎？您是否能夠按照契約中的定義從 EBITDA 數字中刪除這些費用？

Those are typically allowed to be added back per our credit agreement to the EBITDA.

根據我們的信貸協議，通常允許將這些添加回 EBITDA。

The next question comes from Aaron Rakers from Wells Fargo.

下一個問題來自富國銀行的 Aaron Rakers。

Yes. Just to build on that last question, just to be safe, your gross margin expectation in this current quarter, I'm guessing the commentary assumes that you're not expecting another inventory charge in the Flash business? And if so, why not?

是的。只是為了建立最後一個問題，為了安全起見，您對本季度的毛利率預期，我猜評論假設您不期望閃存業務再次收取庫存費用？如果是這樣，為什麼不呢？

So Aaron, we typically factor into our guidance all the expectations. And when we exited Q3, just like a typical quarter, we do our reserve reviews and we take the -- we make sure that the balance sheet is properly stated. And so based on our forecast, everything is baked into the guidance. Typically, we have a small amount in the guidance just like we did also in the past quarter.

所以 Aaron，我們通常將所有期望都納入我們的指導中。當我們退出第三季度時，就像一個典型的季度一樣，我們會進行準備金審查，然後我們會確保資產負債表得到正確陳述。因此，根據我們的預測，所有內容都包含在指南中。通常，我們在指導中有少量，就像我們在上個季度所做的那樣。

Okay. And then I guess my follow-up question is on the hard disk drive business. I can appreciate you guys seeing some cloud customers kind of -- it sounds like purchased really no product this last quarter. I'm guessing from a competitive perspective, how would you characterize the current environment? Have you seen increased price aggressiveness? How do you guys think about the discussion around HAMR and your road map going forward, et cetera?

好的。然後我想我的後續問題是關於硬盤驅動器業務的。我很感激你們看到一些雲客戶——聽起來上個季度真的沒有購買任何產品。我猜從競爭的角度來看，您如何描述當前環境的特徵？您是否看到價格進取性增加？你們如何看待圍繞 HAMR 的討論以及你們未來的路線圖等等？

Yes. I mean I think there's always price pressure in this market, Aaron. But we've been very disciplined about the value of our products. I think one of the things we feel very good about is we've been investing in our HDD road map, things like OptiNAND, ePMR, UltraSMR. These products are really now starting to ship in volume. We talked about the 22-terabyte CMR drive was the highest volume drive at 20 and above. So we feel very good about where the portfolio is, about where it's going.

是的。我的意思是，我認為這個市場總是存在價格壓力，Aaron。但我們對產品的價值一直非常嚴格。我認為我們感覺非常好的一件事是我們一直在投資我們的 HDD 路線圖，比如 OptiNAND、ePMR、UltraSMR。這些產品現在真的開始批量發貨了。我們談到 22 TB CMR 驅動器是 20 及以上容量最高的驅動器。因此，我們對投資組合的位置和發展方向感到非常滿意。

We've got a number of very large customers qualifying SMR right now. That's clearly the next step in the data center. Our UltraSMR product there, the [2060.] We talked about we'll finish up calls this quarter and start deploying next quarter. So we feel like we've got a portfolio that is aligned with what the market needs. And that's showing up in kind of how we're able to monetize that portfolio and not have to compete on price. So future technologies like HAMR will be there. We're still a ways away before that product is going to be a volume-type product. The volume products are the [22s] going and then SMR are going to be the big volume products over the next couple of years. And after that, we'll get to HAMR. And we feel confident about that technology. It's been in development for a long time. We're in the final stages of it as an industry. And I think everybody is excited that it will be the road map for 30 and above when we need it.

我們現在有許多非常大的客戶符合 SMR 的資格。這顯然是數據中心的下一步。我們在那裡的 UltraSMR 產品 [2060.] 我們談到我們將在本季度完成電話會議並在下個季度開始部署。因此，我們覺得我們擁有符合市場需求的產品組合。這體現在我們如何能夠通過該投資組合獲利，而不必在價格上競爭。所以像 HAMR 這樣的未來技術將會存在。在該產品成為批量產品之前，我們還有很長的路要走。大批量產品是 [22s]，然後 SMR 將在未來幾年成為大批量產品。在那之後，我們將進入 HAMR。我們對這項技術充滿信心。它已經開發了很長時間。作為一個行業，我們正處於它的最後階段。我認為每個人都很興奮，因為當我們需要它時，它將成為 30 歲及以上的路線圖。

Our next question comes from Sidney Ho from Deutsche Bank.

我們的下一個問題來自德意志銀行的 Sidney Ho。

I want to ask about the network security breach. Can you give us an update on the recovery there? It looks like your operations are back to normal levels. But have you experienced -- or do you expect any more issues with production or your ability to ship products?

我想問一下網絡安全漏洞。你能給我們介紹一下那裡恢復的最新情況嗎？看起來您的操作已恢復到正常水平。但是你有沒有經歷過——或者你是否期望在生產或你的產品運輸能力方面會出現更多問題？

Yes. We've been very transparent about that incident. When we noticed it, we let folks know. We took our -- we basically disconnected ourselves from the public Internet to protect ourselves and then restore the environment. We still have capabilities inside the companies. And the factories were operational throughout that. Clearly, a tremendous amount of work by the team, but we feel like we're nearly all the way back now as far as operation. We've got to bring the store online in here in another week or so. But it was really, really good to see our business continuity plans. You don't want to rely on them too often, but when we had to, they were there and they kept the company moving forward.

是的。我們對那件事一直非常透明。當我們注意到它時，我們會讓人們知道。我們採取了——我們基本上將自己與公共互聯網斷開連接，以保護自己，然後恢復環境。我們在公司內部仍然有能力。工廠在整個過程中都在運作。顯然，團隊做了大量的工作，但我們覺得我們現在幾乎已經回到了運營方面。我們必須在一周左右的時間內將這裡的商店上線。但看到我們的業務連續性計劃真的非常好。你不想經常依賴他們，但當我們不得不依賴他們時，他們就在那裡，他們讓公司向前發展。

Sidney, I just wanted to add that for fiscal Q3, we don't have any impact in the numbers to the network security.

西德尼，我只想補充一點，對於第三財季，我們對網絡安全的數字沒有任何影響。

Okay. That's great. Maybe my follow-up question is Samsung in early April talk about the cutting production. I'm curious if your conversation with your customers have changed since that announcement? And related to that, do you expect the June quarter to be the bottom for your bargains for your Flash business?

好的。那太棒了。也許我的後續問題是三星在 4 月初談論減產。我很好奇您與客戶的對話自發布以來是否發生了變化？與此相關的是，您是否預計 6 月季度將成為您 Flash 業務討價還價的底部？

I would say we have -- I mean, obviously, we have very robust conversations with our customers all the time. I wouldn't pin the tone of those conversations on to how any one particular player in the market is acting or what they're doing. We stay very focused on our business. As far as -- whereas the bottom, I mean, we expect the market to come into balance as we go through the second half of the year. I think we're clearly taking a lot of actions in our own business to closely manage it. Supply and demand, keep the utilization of the fab close to where our demand is, so we manage our inventory. Clearly, we're going through one of the most severe downturns in a while. But we think as we move through the second half of the year, the market will get in -- will come into balance.

我想說我們有——我的意思是，很明顯，我們一直在與客戶進行非常有力的對話。我不會將這些談話的基調固定在市場上任何一個特定參與者的行為方式或他們正在做的事情上。我們非常專注於我們的業務。至於 - 而底部，我的意思是，我們預計市場將在今年下半年達到平衡。我認為我們顯然在我們自己的業務中採取了很多行動來密切管理它。供求關係，使工廠的利用率接近我們的需求，因此我們管理我們的庫存。顯然，我們正在經歷一段時間以來最嚴重的衰退之一。但我們認為，隨著我們進入下半年，市場將會進入——將達到平衡。

Our next question comes from Mehdi Hosseini from SIG.

我們的下一個問題來自 SIG 的 Mehdi Hosseini。

One near term and more to do with inventory. Your inventories are absolute dollar value keeps going higher. And I want to understand how the mix is changing between wafers, finished good and other materials? Is there any way you can give us a color how incremental changes are happening for different categories within our inventory? And I have a follow-up.

一個短期的，更多的是與庫存有關。您的庫存絕對美元價值不斷上升。我想了解晶圓、成品和其他材料之間的混合如何變化？您有什麼方法可以告訴我們庫存中不同類別的增量變化是如何發生的嗎？我有一個後續行動。

Yes. We typically don't break that out as much on the call. This is a bit too much detail, Mehdi, for me to discuss here. The one comment I would make, though, when we think of inventory, our operations team is really focused on minimizing where we can. So we basically try to stage it in the places that makes the most sense from a demand perspective.

是的。我們通常不會在電話會議上講得那麼多。 Mehdi，我在這裡討論的細節太多了。不過，我要發表的一個評論是，當我們想到庫存時，我們的運營團隊真正專注於盡可能減少庫存。所以我們基本上嘗試將它放在從需求角度來看最有意義的地方。

Let me rephrase the question. How do you -- how should we think about the risk of inventory write-down?

讓我改一下問題。你如何 - 我們應該如何考慮庫存減記的風險？

The -- I mean, the inventory write-down typically is -- it's really based -- the ones -- that was, for instance, I called out is based on basically the inventory value relative to where the market price is. And so if -- when prices decline by a lot, then we do have to take a closer look and see if there's any impact. But that's -- yes, that's what I would say about that.

我的意思是，庫存減記通常是 - 它實際上是基於 - 例如，我提到的基本上是基於相對於市場價格的庫存價值。因此，如果——當價格大幅下跌時，我們就必須仔細觀察，看看是否有任何影響。但那是——是的，這就是我要說的。

So would -- are you assuming that the rate of price decline is moderating, so maybe that would minimize the downside risk?

那麼——你是否假設價格下跌的速度正在放緩，那麼這可能會最大限度地降低下行風險？

What I'm saying is we -- what I'm saying is at the end of every quarter, our balance sheet is properly stated because we do look at where the inventory value is versus where the demand is and the prices most particularly at the finished good level. And so where we see differences, we have to adjust our inventory value. Otherwise, it is properly stated. I guess your question is more around trying to predict where the price is going. And we typically don't necessarily do that.

我的意思是我們 - 我的意思是在每個季度末，我們的資產負債表都得到了適當的說明，因為我們確實查看了庫存價值與需求的位置以及價格，尤其是在完成良好的水平。因此，在我們看到差異的地方，我們必須調整我們的庫存價值。否則，它被正確地陳述。我猜你的問題更多是關於試圖預測價格走向。我們通常不一定這樣做。

Okay. And then the question for David, looking at longer term, more than just one quarter. I think there is some confusion or unknown factor how new type of AI would impact demand for HDD versus SSD. Do you have any view how this incremental demand created? These are expensive working stations. How is it going to impact SSD versus HDD?

好的。然後是大衛的問題，從長遠來看，不僅僅是四分之一。我認為存在一些混淆或未知因素，即新型人工智能將如何影響對 HDD 和 SSD 的需求。您是否了解這種增量需求是如何產生的？這些是昂貴的工作站。它將如何影響 SSD 與 HDD？

We're doing analysis on that, Mehdi. What I would say is, to me -- I'll even go a little longer term, bigger picture. This just reinforces the value of stored data. I think that it just seems like there's this constant ways for people can figure out how to use all the data they've stored to do very productive things with it. And I think the latest is training these AI engines. And so we just think it's another element of the long-term value of data storage and it's just a big secular tailwind for the HDD business and the enterprise SSD business. I mean, again, you know that they're both -- they both have big TAMs in the data center, and they're both growing. And we think this is another reason why people will store more data is because they can monetize it in different ways in the future.

Mehdi，我們正在對此進行分析。我要說的是，對我來說——我什至會放眼更長遠、更大的圖景。這只會加強存儲數據的價值。我認為人們似乎有這種持續不斷的方法可以弄清楚如何使用他們存儲的所有數據來做非常有成效的事情。我認為最新的是訓練這些人工智能引擎。因此，我們只是認為這是數據存儲長期價值的另一個要素，它只是 HDD 業務和企業 SSD 業務的長期順風。我的意思是，你知道他們都是——他們在數據中心都有很大的 TAM，而且他們都在增長。我們認為這是人們存儲更多數據的另一個原因，因為他們可以在未來以不同的方式將其貨幣化。

But I guess I was hoping you would shed some light as to how the HDD CAGR would change. I don't think this is going to lift the TAM for each different types of stores at the same rate. Is there any thoughts that you can share with us?

但我想我希望您能闡明 HDD CAGR 將如何變化。我認為這不會以相同的速度提升每種不同類型商店的 TAM。您有什麼想法可以與我們分享嗎？

I think it will -- HDD is the lion's share of storage in the cloud. So you would expect that's where the bigger lift would be across those 2 technologies.

我認為它會——HDD 是雲中存儲的最大份額。所以你會期望那是這兩種技術之間更大提升的地方。

The next question comes from Shannon Cross from Credit Suisse.

下一個問題來自瑞士信貸的 Shannon Cross。

My first is, as you look at what you're doing on OpEx in terms of holding in cost, how do you think about the -- how you're -- where you're investing? And how are you making those decisions? And how should we think about potential impact to future projects at this point? And then I have a follow-up.

我的第一個問題是，當你從持有成本的角度來看你在 OpEx 上所做的事情時，你如何看待你投資的地方？你是如何做出這些決定的？我們應該如何考慮此時對未來項目的潛在影響？然後我有一個後續行動。

Yes. We've been very -- obviously, we've been -- one of the things we've been building into the business over the last several years as we've restructured the business as more agility and the ability to proactively respond to the market we're in. I think that's kind of the hallmark of the organization we're trying to build is agile and dynamic. But clearly, on top of that, Shannon, we went to a business unit structure for a reason. It's because we have 2 very, very focused organizations with very sophisticated leaders in them that is constantly doing the ROI analysis of where we put our OpEx, and we get the most out of it. And I think quite frankly, that's led to the portfolio we have today. I think we have the best portfolio we've ever had.

是的。我們一直非常 - 顯然，我們一直 - 在過去幾年中我們一直在業務中建立的事情之一，因為我們已經重組業務以提高敏捷性和主動響應的能力我們所處的市場。我認為這是我們試圖建立的組織的標誌是敏捷和動態的。但很明顯，香農，除此之外，我們採用業務部門結構是有原因的。這是因為我們有 2 個非常非常專注的組織，其中有非常老練的領導者，他們不斷地對我們將 OpEx 放在何處進行 ROI 分析，我們從中獲得最大收益。坦率地說，這導致了我們今天的投資組合。我認為我們擁有有史以來最好的投資組合。

And that's an effort that goes on constantly, continuously. And so as we continue to draw down OpEx to resize the business to the realities of what the market are -- is. We've built the capability over the last couple of years to do that in a way where we can make sure we're going to get -- first of all, the OpEx we spend, we get the best ROI out of it, the best return and that we make sure that we're making -- we're taking actions to the business that don't harm the long-term value of it, and we make the right decision on a day-by-day, week-by-week, month-by-month basis. So I think this is really a capability we've built in the last 3 years, and I think it's serving us well right now to make sure that we are we're not cutting in ways that are going to impact the long-term health of the business.

這是一種持續不斷的努力。因此，隨著我們繼續縮減 OpEx 以根據市場的現實情況調整業務規模。在過去的幾年裡，我們已經建立了能力來做到這一點，我們可以確保我們將獲得——首先，我們花費的運營支出，我們從中獲得最好的投資回報率，最好的回報，我們確保我們正在做出——我們正在對業務採取不損害其長期價值的行動，我們每天、每週都會做出正確的決定-按週、按月計算。所以我認為這確實是我們在過去 3 年中建立的一種能力，我認為它現在對我們很有幫助，以確保我們不會以影響長期健康的方式進行削減的業務。

That was helpful. I'm curious -- and maybe I'm trying to make lemonade out of lemons. But I'm just wondering, as you've cut capacity on the HDD side, and you've had these underutilization charges, are there things that you've learned in terms of maybe how you manufacture in the past ways to drive incremental productivity? I'm just thinking it's kind of -- it's certainly a unique time to maybe take a step back and look how things are -- how things have been done and what you can do in the future.

那很有幫助。我很好奇——也許我正在嘗試用檸檬製作檸檬水。但我只是想知道，當你削減 HDD 方面的容量，並且你有這些未充分利用的費用時，你是否從過去的製造方式中學到了一些東西來推動生產力的提高？我只是想這有點——這當然是一個獨特的時間，也許可以退後一步，看看事情是怎樣的——事情是如何完成的，以及你將來可以做什麼。

I'll make a few comments. I suspect Wissam will have a few comments as well. I mean this is -- there's been a lot of focus on this in the last year of how do we become more efficient, how do we automate more. Several of our factories have won World Economic Forum Lighthouse awards for automation. How do we rescale our employees? And how do we just -- we've been very focused on driving a level of automation, driving productivity and just lowering our fixed cost asset base in the HDD business.

我會發表一些評論。我想 Wissam 也會發表一些評論。我的意思是，在過去的一年裡，人們非常關注我們如何變得更有效率，我們如何實現更多的自動化。我們的幾家工廠因自動化獲得了世界經濟論壇燈塔獎。我們如何重新調整我們的員工？我們如何 - 我們一直非常專注於推動一定程度的自動化，提高生產力並降低我們在 HDD 業務中的固定成本資產基礎。

And I think our fixed -- I don't think, I know, our fixed costs in that business are now the lowest they've been in well over a decade. So I think that's paying off in the way we're able to generate margin in the business, that lower volume levels. And then as the volume starts to pick back up, we've got capacity to meet what the market needs, and I think we'll do that at a much lower cost basis.

我認為我們的固定成本——我不認為，我知道，我們在該業務中的固定成本現在是十多年來的最低水平。因此，我認為這在我們能夠在業務中產生利潤的方式中得到回報，即較低的數量水平。然後隨著銷量開始回升，我們有能力滿足市場需求，我認為我們會以更低的成本做到這一點。

Yes. I mean the one thing I would add also, in addition to what David said, some of the activities that we drive in terms of the manufacturing side are taken back into the development organizations to think about things that come on platforms and the ability to improve on the way our products are designed for manufacturing efficiency, even increasing manufacturing efficiency going forward. And of course, with that comes a better cost structure.

是的。我的意思是我還要補充一件事，除了大衛所說的，我們在製造方面推動的一些活動被帶回開發組織，以考慮平台上出現的事情和改進的能力我們的產品旨在提高製造效率，甚至可以提高製造效率。當然，隨之而來的是更好的成本結構。

Our next question comes from Krish Sankar from TD Cowen.

我們的下一個問題來自 TD Cowen 的 Krish Sankar。

David, first question is on your NAND ASP decline in March quarter, seems to be better than what your competitors had. I'm just kind of curious, any puts and takes if you talk about your specific pricing versus competition in March, how to think about it in June? And along the same path, you mentioned the supply-demand balance later this year and bit shipment for Flash growing. Are you baking in some kind of a mobile recovery that's going to help you drive that? And then I have a follow-up.

大衛，第一個問題是你的 NAND ASP 在 3 月季度下降，似乎比你的競爭對手好。我只是有點好奇，如果你在 3 月份談論你的具體定價與競爭，那麼在 6 月份如何考慮呢？沿著同樣的路徑，你提到了今年晚些時候的供需平衡和閃存增長的比特出貨量。您是否正在烘烤某種可以幫助您實現這一目標的移動恢復？然後我有一個後續行動。

Yes. I think on pricing, it's kind of the same story all the time, right? Whether it's a down market, upmarket, mid-cycle market, which is -- really have a diverse portfolio. We've talked about this a lot from retail to the channel business, PC OEMs, enterprise SSD, gaming has become a very nice part of the portfolio and growing part of the portfolio. And it's just that -- mobile, obviously, is a big part of our portfolio.

是的。我認為在定價方面，它一直都是同一個故事，對吧？無論是低端市場、高端市場、中期週期市場，都確實擁有多樣化的投資組合。從零售到渠道業務、PC OEM、企業 SSD、遊戲已經成為產品組合中非常好的部分，並且是產品組合中不斷增長的部分，我們已經討論了很多。就是這樣 - 顯然，移動是我們產品組合的重要組成部分。

And it's just mixing across that where we get the best return, right, putting our supply and our bits in the places where we can get the best return. I do think that, that is a -- that go to -- that breadth of go-to-market is in markets that we can reach literally from every single consumer to the largest technology companies in the world and kind of everything in between. And just the ability to mix across that with a strong portfolio and a strong set of brands as well, SanDisk, SanDisk Professional, WD_BLACK, puts us in a good position to get the best return on our supply.

它只是在我們獲得最佳回報的地方混合，對，將我們的供應和我們的比特放在我們可以獲得最佳回報的地方。我確實認為，那是——進入市場的廣度是我們可以從每個消費者到世界上最大的科技公司以及介於兩者之間的一切的市場。並且能夠將其與強大的產品組合和強大的品牌組合，SanDisk、SanDisk Professional、WD_BLACK，使我們處於獲得最佳供應回報的有利位置。

Next quarter, we don't really want to comment on future pricing. It's all into the guide. We've talked about the individual markets. What I would say is we're pricing in or we're putting in what we think is going to do on an individual market-by-market basis and then how we'll mix that next quarter.

下個季度，我們真的不想對未來定價發表評論。一切都在指南中。我們已經談到了個別市場。我要說的是，我們正在定價，或者我們正在考慮在各個市場的基礎上做些什麼，然後我們將如何在下個季度進行組合。

Got it. Got it. And then I have a follow-up on the CMR side, it's kind of nice to see the total like 23 terabyte is now bigger than 20 terabytes in terms of volume. How should we expect that to grow? And what is its impact on gross margin?

知道了。知道了。然後我在 CMR 方面進行了跟進，很高興看到 23 TB 的總量現在大於 20 TB 的容量。我們應該如何期望它增長？它對毛利率有何影響？

I think that's our focus -- on a CMR drive, that's our focused capacity point and it's significantly ahead of other CMR drives above 20. So -- or above the 20 terabyte drive. We expect that to be our premier drive for the next -- until we have a different CMR product in that part of the business. So we expect that to be a very good growth engine, and we've talked a lot about that drive of -- it provides a lot of value. It provides a lot of TCO value for our customers. And we -- it contributes an appropriate amount of margin from that perspective as well.

我認為這是我們的重點——在 CMR 驅動器上，這是我們關注的容量點，它明顯領先於其他 20 TB 以上的 CMR 驅動器。因此——或 20 TB 驅動器以上。我們希望這將成為我們下一個的首要驅動力——直到我們在該業務部分擁有不同的 CMR 產品。因此，我們預計這將成為一個非常好的增長引擎，我們已經談了很多關於這種驅動力的——它提供了很多價值。它為我們的客戶提供了大量的 TCO 價值。而且我們 - 從這個角度來看，它也貢獻了適當的利潤。

Our next question comes from Wamsi Mohan from Bank of America.

我們的下一個問題來自美國銀行的 Wamsi Mohan。

It's Ruplu filling in for Wamsi today. David, I think maybe another pricing question for you. I think you talked about price elasticity. Could you just elaborate a little bit on what exactly you're seeing either in flash or in HDD? And a related question to that is there's some worry that maybe a lot of memory inventory might be built again this quarter from the likes of some OEMs like Apple because they want to maximize their favorable component pricing, do you think this could lead to a further elongation in the recovery of the market, even though in the near term it might get a little bit tighter. So just your thoughts on that. And what exactly are you seeing in price elasticity?

今天是 Ruplu 代替 Wamsi。大衛，我想你可能還有另一個定價問題。我想你談到了價格彈性。您能否詳細說明一下您在閃存或 HDD 中看到的究竟是什麼？與此相關的一個問題是，有人擔心本季度蘋果等 OEM 可能會再次建立大量內存庫存，因為他們希望最大限度地提高其有利的組件定價，您認為這會導致進一步的增長嗎？市場復甦的延伸，即使在短期內它可能會變得更加緊俏。所以只是你的想法。您在價格彈性方面究竟看到了什麼？

I think the elasticity in NAND is mainly what I was talking about. I mean, we're seeing PC OEM up mid-20s year-over-year on capacity. I think it really interesting number to me is the elasticity across our consumer franchise, which is tens to hundreds of millions of devices we sell a year in that channel up 1/3 year-over-year on capacity per unit. Gaming up more than that, and mobile up even more than that. So I think we're seeing the market work. Even in the midst of a great downturn, you expect -- well, especially in the midst of a great downturn, you expect to see elasticity start to kick in, and we are starting to see that across the portfolio. What was the second part of the question, again?

我認為 NAND 的彈性主要是我所說的。我的意思是，我們看到 PC OEM 的產能同比增長了 20 多歲。我認為對我來說真正有趣的數字是我們消費者特許經營權的彈性，即我們每年在該渠道銷售的數千萬至數億台設備，單位容量同比增長 1/3。遊戲不止於此，移動甚至不止於此。所以我認為我們正在看到市場運作。即使在經濟低迷時期，您也期望——嗯，尤其是在經濟低迷時期，您期望看到彈性開始發揮作用，我們開始在整個投資組合中看到這一點。問題的第二部分又是什麼？

It was about customer...

這是關於客戶...

It was for mobile...

本來是給手機...

Prebuying. Yes. I think you do see -- I think we are seeing instances of that. I wouldn't say it's pervasive, but we see instances of it. And I think it -- I think maybe it's a sign of where the customers think we are in the cycle as well.

預購。是的。我想你確實看到了——我想我們正在看到這樣的例子。我不會說它無處不在，但我們看到了它的實例。而且我認為 - 我認為這可能是客戶認為我們也處於週期中的一個標誌。

Got it. So for my follow-up, if I can ask a quick one to Wissam. How are you thinking about free cash flow going forward? I mean is it -- what needs to happen to get to positive free cash flow? And is that possible in this calendar year? So just your thoughts on that? I mean, how are you looking at working capital and thinking about free cash flow?

知道了。所以對於我的後續行動，如果我可以快速向 Wissam 詢問一個人。您如何看待未來的自由現金流？我的意思是——需要做什麼才能獲得正的自由現金流？在這個日曆年有可能嗎？那麼你對此有何看法？我的意思是，您如何看待營運資金和自由現金流？

Yes, Ruplu. So we are totally focused on free cash flow. As you've seen us since the beginning of the year, we've been very proactive on OpEx, reducing that quite a bit on CapEx as well as taking underutilization to manage and preserve our cash and not build inventory. And so this is very important to us.

是的，魯普魯。所以我們完全專注於自由現金流。正如你從今年年初看到的那樣，我們在運營支出方面一直非常積極主動，在資本支出上減少了很多，並利用未充分利用來管理和保留我們的現金，而不是建立庫存。所以這對我們來說非常重要。

In fact, we continue to make improvements. I mean, if you look at our CapEx trend, it's gone down quite a bit. This year, we'll probably be spending approximately if not even more than 35% below last year. With respect to the next few quarters, we typically do not guide for free cash flow. But what I could say is that this is, as I said, a top priority for us and is a big focus, as you would imagine, as we navigate the dynamic environment.

事實上，我們還在不斷改進。我的意思是，如果你看看我們的資本支出趨勢，它已經下降了很多。今年，我們的支出可能會比去年減少大約 35%，甚至不會超過 35%。對於接下來的幾個季度，我們通常不會指導自由現金流。但我能說的是，正如我所說，這是我們的首要任務，正如您想像的那樣，這是我們在動態環境中航行時的一個重點。

The next question comes from Tom O'Malley from Barclays.

下一個問題來自巴克萊銀行的 Tom O'Malley。

My first one is related to the HDD side of the business. Your competitor recently talked about a recovery that initially was expected to be in June and is now pushed out to the December quarter. Could you just frame the way that you're thinking about the recovery? Is it kind of in line with that? You're obviously guiding the HDD business down, but any color you could give on the back half of the calendar year about when you expect that business to recover?

我的第一個與業務的 HDD 方面有關。您的競爭對手最近談到了最初預計在 6 月出現的複蘇，現在被推遲到 12 月季度。你能簡單地描述一下你對複甦的看法嗎？這有點符合嗎？你顯然是在引導 HDD 業務下滑，但你能在日曆年的後半年給出關於你預計該業務何時復甦的任何顏色嗎？

Yes. I think, Tom, it's -- I would say as we go through the second half of the year, it will get better. The issue is that these revenue levels and these unit levels, it's just very lumpy. You have very large customers that if they buy or not buy, it can impact the TAM and the available market in a very significant way. So -- and that's what we're experiencing next quarter. I mean, this quarter, we saw things were a little better than we thought on capacity enterprise shipments. We'll see a sequential decline in that, and then we're expecting to go back up as we go in the second half of the year.

是的。我認為，湯姆，它是 - 我會說，隨著我們經歷今年下半年，它會變得更好。問題是這些收入水平和這些單位水平非常不穩定。你有非常大的客戶，如果他們購買或不購買，它會以非常重要的方式影響 TAM 和可用市場。所以 - 這就是我們下個季度所經歷的。我的意思是，本季度，我們看到企業產能出貨量比我們想像的要好一些。我們會看到它的連續下降，然後我們預計會在今年下半年回升。

But I expect it to be lumpy as we go through this inventory digestion because a lot like we saw in the PC OEM space, a lot of customers are just completely focused on inventory digestion, which is basically new purchases just go to 0. And customers at this scale with this kind of business that has an impact. So I expect to see a lumpiness over the next several quarters. I do have a level of optimism about China in the second half of the year. We're seeing better activity there. And so we expect to see that improve in the second half of the year as well, which should also help the business.

但我預計在我們進行庫存消化時會出現波動，因為就像我們在 PC OEM 領域看到的那樣，很多客戶完全專注於庫存消化，這基本上是新採購量變為 0。客戶在這種規模上，這種業務會產生影響。所以我預計在接下來的幾個季度會出現波動。我確實對今年下半年的中國持樂觀態度。我們在那裡看到了更好的活動。因此，我們預計下半年也會有所改善，這也應該有助於業務發展。

Helpful. And then just a follow-up is on the flash side. You guys talked about a mix of customer behavior, right, where some are still consuming inventory and then others are more aggressively purchasing to various degrees. I don't want you to speak on specific customers, but we've heard this across the ecosystem, particularly through this earnings period here where there is a discrepancy in terms of spend. Could you help maybe just frame where you're seeing that spend? Is there a certain type of customer that's spending more than others? Or is it really just random where guys came in with certain inventory levels and are working through that. Just any color there would be really helpful as we've heard that data point from multiple companies here?

有幫助。然後只是跟進是在閃存方面。你們談到了客戶行為的混合，對吧，有些人仍在消耗庫存，而另一些人則在不同程度上更積極地購買。我不想讓你談論特定的客戶，但我們在整個生態系統中都聽到了這一點，尤其是在這個收益期，支出方面存在差異。你能幫忙勾勒一下你看到這筆支出的地方嗎？是否有某種類型的客戶比其他客戶花費更多？或者它真的只是隨機的，人們進來時有一定的庫存水平，並且正在努力解決這個問題。那裡的任何顏色都會真正有用，因為我們聽說這裡有多家公司的數據點？

I guess I would say that customers that are different segments of the market that are through their inventory digestion are now more or less shipping to end demand being lean on inventory. There are instances of people doing strategic buys in that -- in some of those cases where they've got their inventory to where they want it, but now they're making their own -- they have their own view of the cycle. That's a very small number, I would say.

我想我會說，通過庫存消化的不同市場細分客戶現在或多或少地運送到終端需求依賴庫存。在某些情況下，人們會進行戰略性購買——在某些情況下，他們的庫存已經達到了他們想要的水平，但現在他們正在製造自己的庫存——他們對周期有自己的看法。這是一個非常小的數字，我會說。

And then the other one is just -- where they're at in their the data center customers especially are just in -- there's a variability of the level of inventory at each customer, and they're so big that it can impact the entire market. So -- and like I said, ones that have heavy inventory are basically working that down in an aggressive way. And so I think it's going to -- like I said, I think it will be lumpy for a couple of quarters until we get through that.

然後另一個就是——他們在數據中心的位置，尤其是客戶所在的位置——每個客戶的庫存水平都存在差異，而且它們是如此之大，以至於可以影響整個市場。所以——就像我說的那樣，那些擁有大量庫存的公司基本上是在積極地降低庫存。所以我認為它會 - 就像我說的那樣，我認為在我們完成之前的幾個季度內它會變得不穩定。

Our next question comes from Toshiya Hari from Goldman Sachs.

我們的下一個問題來自高盛的 Toshiya Hari。

David, 3 months ago, you mentioned that you were cutting production in your NAND business by 30%. I'm curious if the magnitude of the cuts today are kind of in that ZIP code, if anything has changed materially? And going forward, what would you need to see to start taking up your utilization rates in the Flash business?

大衛，3 個月前，你提到你正在將 NAND 業務的產量削減 30%。我很好奇今天的削減幅度是否在那個郵政編碼中，是否有任何實質性變化？展望未來，您需要看到什麼才能開始提高 Flash 業務的利用率？

Yes. We're kind of at the point where we're -- I think it's -- I think probably the same ZIP code is probably a fair way to say depending on where you live. ZIP codes can be pretty big if you're in the country, I guess. But it's really about managing to where we see the demand and keeping our inventory relatively in check. We know it's going up somewhat, but we want to make sure it doesn't get away from us. So we'll use the fab in that. I mean, we're just -- we're going to have to see demand signals for our customers is just as simple as that.

是的。我們有點處於 - 我認為 - 我認為可能相同的郵政編碼可能是一種公平的說法，這取決於你住在哪裡。我想，如果您在國內，郵政編碼可能會很大。但這實際上是關於管理到我們看到需求的地方並相對控制我們的庫存。我們知道它有所上升，但我們想確保它不會遠離我們。所以我們將在其中使用晶圓廠。我的意思是，我們只是 - 我們將不得不看到我們客戶的需求信號就是這麼簡單。

We have a very close relationship with a lot of them. We're in the -- obviously, in the market every single day. A lot of these consumer and channel markets are more transactional, where we can see the business across a wide swath. And then, of course, we're talking to the biggest customers biggest technology companies in the world. So we'll get a -- we have a pretty good idea of where their demand is, and we'll set the fab appropriately to make sure that we keep the right inventory position and we have the product when they're ready.

我們與他們中的許多人有著非常密切的關係。我們在——顯然，每一天都在市場上。許多這樣的消費者和渠道市場更具交易性，我們可以在其中看到廣泛的業務。然後，當然，我們正在與世界上最大的技術公司的最大客戶交談。所以我們會得到一個——我們非常清楚他們的需求在哪裡，我們會適當地設置工廠，以確保我們保持正確的庫存位置，並在他們準備好時擁有產品。

Got it. That's helpful. And then one follow-up for Wissam on the balance sheet side of things. I know you don't guide free cash flow on a quarterly basis or annual basis, but just curious how we should be thinking about inventory, whether it be dollars or days, going into the June quarter and working capital overall. Is that going to be a consumer of cash in the June quarter? Or do you think you can generate some cash from working capital?

知道了。這很有幫助。然後是 Wissam 在資產負債表方面的後續行動。我知道你不會按季度或年度指導自由現金流，但只是好奇我們應該如何考慮庫存，無論是美元還是天數，進入 6 月季度和整體營運資金。這會成為 6 月季度的現金消費者嗎？或者你認為你可以從營運資金中產生一些現金嗎？

Sure, Toshiya. The -- with respect to inventory, we -- the current projection is, I would say, flattish in terms of dollar. But in terms of days, I anticipate we should see a downtick from here. Well, we continue to, as David said, manage it on a very, very regular basis very closely. And so that's probably the biggest in terms of the working capital. That's the number that would be moving the most. We're -- again, we don't guide the free cash flow, so I wouldn't want to make any more comments around working capital. But I think the answer on the inventory would be a good indicator to what working capital will look.

當然，Toshiya。關於庫存，我們目前的預測，我想說，以美元計算是持平的。但就天數而言，我預計我們應該會看到從這裡開始下降。好吧，正如大衛所說，我們繼續非常、非常定期地非常密切地管理它。因此，就營運資金而言，這可能是最大的。這是移動最多的數字。我們 - 再一次，我們不指導自由現金流，所以我不想就營運資金發表更多評論。但我認為關於庫存的答案將是一個很好的指標，表明營運資金將會是什麼樣子。

Our next question comes from Harlan Sur from JPMorgan.

我們的下一個問題來自摩根大通的 Harlan Sur。

The market share numbers are out for last year, you guys drove a strong #2 position in client SSD, strong double-digit sort of percentage share position, right? But in enterprise, you guys drove sort of low single-digit enterprise SSD market share last year, and it sort of hovered in this 4% to 7% range for a while now? Like what is the team doing to try and drive its share in this fast-growing market to more of what I would call appropriate sort of double-digit percentage share profile?

去年的市場份額數據已經公佈，你們在客戶端 SSD 中佔據了強大的第二位，兩位數的百分比份額，對吧？但在企業領域，你們去年推動了企業 SSD 市場份額的低個位數，現在它在 4% 到 7% 的範圍內徘徊了一段時間？就像團隊正在做些什麼來嘗試將其在這個快速增長的市場中的份額提高到我稱之為適當的兩位數百分比份額的比例？

Yes. Thanks for the question, Harlan. Always good to hear from you. It's -- we've talked about this quite a bit over the last year. It's about qualifying the products at the big players, qualified in the channel. We just qualified this last quarter on BiCS5 enterprise SSD with some of the biggest customers. So the road map is moving forward as we expected. It's just a very dynamic market right now. So it's difficult to judge share. Obviously, our goal is what we've put out there is to drive that higher. And I have every confidence we'll do that as the market stabilizes and some of these big customers get back to their normal rates of purchasing.

是的。謝謝你的問題，哈倫。總是很高興收到你的來信。這是——我們在過去的一年裡已經談了很多。這是關於在渠道中對大玩家進行資格認證的產品。我們剛剛在上個季度與一些最大的客戶就 BiCS5 企業級 SSD 進行了鑑定。因此，路線圖正在按照我們的預期向前推進。現在這是一個非常活躍的市場。所以很難判斷份額。顯然，我們的目標是我們已經提出的目標是提高它。我完全有信心，隨著市場趨於穩定，並且其中一些大客戶恢復到正常的採購率，我們會做到這一點。

Our next question comes from [Sarine Pajari] from Raymond James.

我們的下一個問題來自 Raymond James 的 [Sarine Pajari]。

I have a question on the cost side, Wissam. So it's a little tricky to figure out given all the, I guess, onetime charges. I'm just wondering, you previously talked about NAND cost declines in the mid-teens, I believe, just wondering if you're tracking to that. And then as we go to BiCS8, how should we think about the cost declines, especially -- I guess, historically, we've had 30% to 40% bit demand growth. And going forward, if that dynamic changes, if it's lower than 30%, do you think we can still kind of get to that mid-teens cost declines? Or do you need the 30% to get to that level?

Wissam，我有一個關於成本方面的問題。因此，考慮到所有一次性收費，要弄清楚這一點有點棘手。我只是想知道，你之前談到過十幾歲中期的 NAND 成本下降，我相信，只是想知道你是否正在追踪這一點。然後當我們進入 BiCS8 時，我們應該如何考慮成本下降，尤其是——我想，從歷史上看，我們的位需求增長了 30% 到 40%。展望未來，如果這種動態發生變化，如果它低於 30%，你認為我們仍然可以達到 15% 左右的成本下降嗎？還是您需要 30% 才能達到該水平？

Sure. So thanks for the question. In terms of Q3, we have to think of it basically with and without underutilization. When you factor in the underutilization charges, we wouldn't be -- we wouldn't have reduced cost -- or cost income down by mid-teens. However, if we exclude that, then we're close to mid-teens in Q3. .

當然。所以謝謝你的問題。就 Q3 而言，我們必須考慮基本上有和沒有未充分利用的情況。當你考慮到未充分利用的費用時，我們不會——我們不會降低成本——或者將成本收入降低到十幾歲左右。但是，如果我們排除這一點，那麼我們在第三季度接近十幾歲。 .

Now to your question on BiCS8. I mean this is -- with the way our road map works and the timing of when BiCS8 starts ramping, it is pretty much designed in a way to allow us to continue that mid-teens reduction -- cost reduction over time. I wouldn't want to comment about the exact sort of percentage and so on in terms of the crossover because I think it's a little bit premature to talk about this. But conceptually, that's what we're aiming with ramping BiCS8 slightly earlier than previously anticipated.

現在回答你關於 BiCS8 的問題。我的意思是——根據我們的路線圖的工作方式和 BiCS8 開始增加的時間，它的設計方式幾乎可以讓我們繼續進行十幾歲中期的減少——隨著時間的推移降低成本。我不想就交叉方面的確切百分比等發表評論，因為我認為現在談論這個還為時過早。但從概念上講，這就是我們的目標，即比之前預期的稍微早一點推出 BiCS8。

Our next question comes from Karl Ackerman from BNP Paribas.

我們的下一個問題來自法國巴黎銀行的 Karl Ackerman。

Yes. I was hoping you could discuss the trajectory of exabyte demand of your cloud customers in the next couple of quarters? And whether there's a divergence and a recovery across on-prem and public cloud. And I guess as you address that question, how do you assess whether you might be shipping below normalized replacement demand?

是的。我希望您能討論下幾個季度您的雲客戶的 EB 需求軌跡？以及內部部署和公共雲之間是否存在分歧和復蘇。我想當你回答這個問題時，你如何評估你的出貨量是否低於正常的更換需求？

It -- I think we see the enterprise and the cloud market, they're both soft right now. So we don't see a huge difference between the 2. Again, the difference is, Karl, that you got this idiosyncratic behavior at really big customers. So a customer that usually buys a significant amount of hard drives in a quarter, hundreds of millions of dollars goes to 0. You can pretty much assume they're buying under replacement demand. So that's kind of where we're at. We just -- again, other customers are going along more according to plan. So the inventory levels a bit distributed across big customers. So we look at this quite a bit to understand like where do we think the exabyte growth is and where are we setting the -- our long-term production capabilities and all of that. But right now, it's just a little difficult to draw long-term conclusions and some of -- a little bit behind some of your question, given just the way the market is -- the lumpiness of the market.

它——我認為我們看到了企業和雲市場，它們現在都很疲軟。所以我們沒有看到兩者之間有很大的區別。再次強調，不同之處在於，卡爾，你在真正的大客戶那裡得到了這種特殊的行為。因此，通常在一個季度內購買大量硬盤驅動器的客戶，數億美元變為 0。您幾乎可以假設他們是在更換需求下購買的。這就是我們所處的位置。我們只是 - 再次，其他客戶正在按計劃進行更多。因此庫存水平有點分佈在大客戶之間。因此，我們對此進行了相當多的研究，以了解我們認為艾字節的增長在哪里以及我們在哪裡設置 - 我們的長期生產能力等等。但現在，要得出長期結論有點困難，而且有些——有點落後於你的一些問題，考慮到市場的方式——市場的波動性。

The next question comes from Vijay Rakesh from Mizuho.

下一個問題來自瑞穗的 Vijay Rakesh。

Just a quick question. I don't know if you talked about Elliott strategies, and I think they had filed some data filings, but just wondering how that process is progressing. I don't know if you can talk to it.

只是一個簡單的問題。我不知道你是否談到了 Elliott 策略，我認為他們已經提交了一些數據文件，但只是想知道這個過程是如何進行的。我不知道你能不能跟它說話。

It's progressing, very active. Everybody in it is under NDA, so I can't say anything about it, and we look forward to talking about it when we reach a conclusion.

它正在進步，非常活躍。裡面的每個人都在保密協議下，所以我不能說什麼，我們期待在得出結論時再談。

Our last question comes from Ananda Baruah from Loop Capital.

我們的最後一個問題來自 Loop Capital 的 Ananda Baruah。

Maybe for Wissam. I might have missed it, but just wondering if there's any context you can provide about how you're thinking about the debt due in February of '24? How you're going to handle that, go back handling that (inaudible)?

也許是為了維薩姆。我可能錯過了，但只是想知道您是否可以提供有關您如何考慮 24 年 2 月到期債務的背景信息？你打算如何處理，回去處理那個（聽不清）？

Yes, Ananda. The -- with respect to the $1.1 billion of convert due in February '24, the plan is to address it over the next couple of quarters.

是的，阿南達。 -- 關於 24 年 2 月到期的 11 億美元的轉換，計劃是在接下來的幾個季度內解決它。

Okay. Jason, is that the last one?

好的。傑森，這是最後一個嗎？

Yes, that was the last question.

是的，這是最後一個問題。

All right, everyone. Thanks for joining us today. We look forward to seeing you through the quarter. Take care.

好的，大家。感謝您今天加入我們。我們期待在本季度與您相見。小心。

Thank you.

謝謝。

This concludes today's conference call. Thank you for joining. You may now disconnect.

今天的電話會議到此結束。感謝您的加入。您現在可以斷開連接。