Welcome everybody to our 2023 Capital Market Day. I'm Rafael Duarte, Head of IR at u-blox. Today, we have a full room here in Horgen, Switzerland. 40-50 people in the audience, and we have about 100 people online. Last number that I received. It's good to see some known faces and some new faces as well. Let's start with our team for today. Pleasure to announce our Chairman, André Müller, CEO, Stephan Zizala, CFO, Roland Jud. Our co-founder, Head of Product Center, Andreas Thiel. Our co-founder and Head of Production and Logistics, Jean-Pierre Wyss, and Head of Market and Sales, Markus Schäfer. You probably already saw we have a packed day, so we have a lot of information to cover today.
So we are gonna start with a welcome, diving directly into the business, where we are gonna talk about our strategy, our new financial model. Right after, we're gonna talk about our markets with a level of detail that you haven't seen before for u-blox, so we're happy to show you that. Right after, we are gonna show our focus markets, where we are gonna focus. There are four of them. After a short financial update on some key points that we need to cover today, and at the end, we have a Q&A. So all the Q&A will be concentrated at the end, so please take your notes and make your questions at the end. With that, we get right in with our Chairman, André Müller, CEO Stephan Zizala. Please.
Ladies and gentlemen, welcome to the 2023 Capital Market Day, also from my side as the Chairman of u-blox. Traditionally, I have not actively been involved in those presentations. I was holding back in the presentations and would rather be in the shadow and then be available for Q&A, and also for individual discussions, leaving the platform to the operational management.
Today is an exception as we have two major events. The first is our new CEO, Stephan Zizala. It's his first CMD. As you will see, we bring a very interesting approach to our business. The second is we welcome a new major shareholder as an anchor shareholder, as announced in the press release from last week. We focus on long-term growth drivers such as autonomous driving and Internet of Things. I'm glad that we are in a business where we have two stable, growing segments for our business. Our innovations set the standard in the industry, and that includes the current chip, cellular chip that we are selling. We have refined our strategy and are happy to share the key outcomes with you today, and you will see there's a lot of things that are going to be slightly different.
Our focus, innovate, execute strategy is the right step to unlock u-blox value for year sto come, and that is the goal of today's announcements is the long term set the stage for the business. Our strategy is supported by a highly motivated u-blox team, including all teams at the different product centers, and is also supported by the new anchor shareholder. CEO is an excellent partner, and I can welcome today Fabian Rauch and Rémy Oullion, the two leaders.
The two partners that we will have, we will work together. We are looking forward to their contribution and to the partnership that we'll have with them. With that, I wish you the best during the dive into the world of u-blox and the fantastic world of semiconductors, and I hand over to Stephan.
Thank you, André. Thank you, André. And, well, it has been now almost one year when I started as CEO of u-blox, and of course, there are some learnings out of this year. And, first and foremost, I'm really highly delighted, and we really admire how innovative, how creative, how open-minded the u-blox team is. This is exactly the team you need to be successful in the high-tech environment. Second, also not a big surprise, at least for those who follow us for a longer time.
The key markets we go after are structural growth markets, and we have the right technologies, the right products to benefit from this. And third, as important, the team and I share the view that we can be even more successful in the future by a more stringent focus, better execution performance, while keeping our innovation power. Now, one could say now, wouldn't be better market conditions easier for a new incoming CEO? I would say exactly the opposite, because I can't change the markets anyway.
Yeah. Those market conditions we have right now have a certain challenge, and for us, we see them as a trigger point to become better, to initiate change, and therefore, also evolve our strategy. And what is u-blox about? Well, u-blox is about leading the world to reliably locate and connect everything. That's the mission, which is right in the center of the Internet of Things. Now, let me summarize our strategy, and our strategy changes on the next page. Well, as mentioned, we have the privilege to work in an environment where we can serve structural growth drivers.
Automated driving will be one of the big innovations in the automotive industry in the years to come, and we will contribute to this significantly. We also have asset tracking and management. You remember the times during or shortly after COVID, where obviously the containers were everywhere, just not at the place where you needed them. So asset tracking and management, not only for containers, for a lot of things, are becoming a major growth driver.
We are also talking about bringing back industry to Europe or the U.S., but of course, nobody wants to have the cost back, which was the original reason why those industries were offshore. So industrial monitoring, industrial automation, will be essential for this. Our products contribute to this. We also have the topic of remote healthcare, which is becoming a more and more important driver.
On top of this, we all learned over the last years that having a trustworthy partner for high tech, with a reliable supply chain, is a long-term driver for u-blox. Now, in this environment, we decided three major strategic changes. First, we will focus more on our highly differentiated and our highly profitable positioning business. We will address new applications, and in order to achieve this, shift R&D teams exactly in this area.
Second, our connectivity business is not positive in terms of profitability right now, so we see this as a task to turn it around, and one measure to get there is we stopped our future cellular chip development for this reason. A second point here is we will aggressively go for scale by addressing customers as a trustworthy Swiss partner in a multipolar world. Now, third, as mentioned before, we think we can improve our execution performance by an agile development approach and an increased bottom line focus. And you will see this a bit later, that's not only a process topic, it's also a cultural topic. And taking this together makes us confident that we will meet our over the cycle financial model.
So these want to make us also measurable according to those targets over the cycle. More than 10% revenue growth over the cycle, on average, 14% EBIT, and an 8% free cash flow margin. Now, before we dive now deeper into the strategy and the changes, let us introduce u-blox as a company to make sure that we all start from a similar point. And I would invite my colleagues, Jean-Pierre and Andi, to the stage. What about this one?
Who is u-blox? Well, u-blox, as a company, we do not own factories. Actually, we do not even own the buildings where we work. We are asset light. What we have, what our asset is, is an incredible team of more than 1,300 experts. It's a very diverse team, spread over the globe, which is important because also our markets and customers are global. We offer chips, modules. Module is, in simple terms, several chips in a subsystem, plus some software on top of it, and services, which is a digital data stream to our products to make them better in the field. And those three basic technologies we address or we use in our- Now it's better. We use in our positioning business, in our cellular business, in our short- range business.
Our revenue in 2022, which was our record year, with CHF 624 million, was focused on industrial products and automotive products. Regionally, well diversified, with a very large customer base we serve globally. Now, to make this a bit more tangible, I would say the likelihood that everybody in this room, and probably also in the call, got in contact with a u-blox product within the last 24 hours is high. So let's have a look on this, how this could be. So when you got up in the morning and went for a run, and maybe you used a fitness tracker, there's a certain likelihood that a u-blox positioning chip was in this watch. Thereafter, you maybe went to work and used your navigation system. There's a very high likelihood that a u-blox positioning chip was in there.
When you were at work, and you went to the factory floor and started communicating with your, with your equipment on the factory floor, there's a certain likelihood that our short-range products supported this job. If you were in certain industries where you use high-end equipment, those equipment is nowadays connected via cellular to the manufacturer to do predictive maintenance. Now, of course, you also need some breaks, and at the breaks, you maybe checked your Amazon account, where this delivery is, and maybe you got a precise understanding that it's currently on a container over the ocean, in the ocean, and this means there was positioning and communication with this one.
At the evening, a bit tired, you used all the automated driving features of your Level 3 autonomous driving cars, and there's a very high likelihood that you used the higher-end u-blox positioning products. Now, before you go to bed, maybe at least in Switzerland, we do this, maybe you went for a walk, and you passed by a cow herd, and there was no fence. Now, of course, animals which are tracked need a position and also a connectivity to the cloud. Here we are, with our products.
The last application, we are all happy if you don't need it, but in case you need it, for example, a ventilator, if you need it to be a bit more safe during the night, there's a very high likelihood that this one is connected via a u-blox cellular product to the manufacturer or even to the doctor. So in this sense, our products and our business, which is a 100% B2B business, affects more or less everybody. Now, how did we get here, Jean-Pierre?
Thank you, Stephan. Good afternoon from my side. I'm Jean-Pierre Wyss, co-founder of u-blox, and responsible for sourcing, production, logistics, and quality within the group. So now, how we get there? So we founded the company in 1997 as a spin-off company of the ETH Zurich. We had the goal to make electronics smaller, and we developed, at that time, the world's smallest GPS module. The base was still from a chipset made in the U.S., and we made it smaller.
And with that, we also won then two big main customers in the beginning. One was a Finnish company, a mobile phone company from Finland, and together with them, we developed first navigation phone in the market, so we were already leading then. And another big project was the Swiss Maut. So also there, we could deliver our GPS modules. And then back in 2000, we made a decision, together with our main investors, at that time was Partners Group and Zürcher Kantonalbank, that we want to heavily invest into the IP, doing our own chipset on the GPS side.
So invested into the, that we were able to make hardware as well as the firmware running on these chips on our own. And since then, we are the technology leader on this market segment, so GPS market, as well as we have a good market position, as you will see later. Then in 2007, just about 10 years after the foundation of the company, we did the IPO here on the Swiss Stock Exchange and also got fresh money. The goal was to expand our portfolio with the fresh money, and we did a few acquisitions there to expand the portfolio.
It was always, and it's still the case, that we have many cross-selling opportunities. Normally, we use GPS modules together with a connectivity module, either on a cellular technology or short-range technology. And with that, as an example, also this year, we did an innovation that we had the world first module combination of cellular technology as well as satellite technology.
But you will hear more from that from Andy then later on. Then, how was the track record now over the last 20 years? As you see here on that slide, we could outperform the semiconductor market by far. So we had reached an annual growth rate, compound annual growth rate of 21% over the last 20 years. So we are true growth story, since the startup of the company. And now I hand over to Andy for more technical explanations.
Thank you, Jean-Pierre. And as already said, my name is Andreas Thiel. I am also one of the founders responsible for the product centers. And I talk now a little bit about what it takes to reliably locate and connect everything, as we heard in the mission statement of u-blox. And we have built over the 25+ years of u-blox, an enormous amount of competence in our technical team, which I am really proud of. So I always explain it's like we, we can do everything in u-blox. We can start from the transistor and end up in the cloud, and I think this is a quite unique situation that we have, that we have all these competencies, all these capabilities under one roof.
We can start with silicon design, and we can end up with very complex software solutions in the cloud, and we can build out of this, those solutions that are needed to do these kind of connections and location determination. If we look a little bit more into the detail here, it starts on the one side, with the signal processing. Signal processing is turning algorithms into things that computers or hardware can execute. This is at the heart of every modern communication system, and we have here a lot of experience accumulated. We started in GNSS 25 years ago, we added cellular, we added short range, so there's a lot of things that we built around the signal processing topic. The next one is, we do it for embedded systems. This means we are always constrained in power consumption, in size, in cost.
We are usually producing products that you can carry around, that are mounted in automotive vehicles, that are moving, so power consumption is critical, size is critical, cost is critical, especially also when we think about the consumer space. Last but not least, and that's also falling into the area of Jean-Pierre, of course, is the quality, the reliability. Our products are going predominantly in industrial and automotive applications, and their quality, reliability, dependability is of essence, and over the long history of u-blox, we have built a lot of good relations to customers in these areas, and we can prove that we can just supply really to what is needed in those markets.
I want to give a little bit more detail on how this innovation engine works when we look, as an example, into the positioning domain. So here we can see, we start from something that everyone can read in a textbook. It's pretty simple. When you read it, you need four satellites. You can calculate a position with that. It's an algorithm in that sense. You have four unknowns, and you need four inputs for this, and you can solve this. And this sounds simple. However, if you look at it in the first stage, already, the precision that we have here is amazing. We measure distances of 10,000 km to the satellite.
That is a fast-moving thing with an accuracy down to millimeters. So that's already a challenge. But if you then look at the real world, and this is where the huge experience of u-blox really plays, and we have very complex scenarios. So in today's product, we can track around about 100 different satellites. We have very fast convergence time to an accurate position. We have algorithms that deal with the multiple reflections that we get from the environment, from tall buildings and so on, and still, we get a very precise position everywhere in the world that our customers can rely on in their application.
And we add also sensor fusion on top of it to make it even more reliable. Last but not least, also more and more important, security as an aspect, so we have to deal with intentional and unintentional jamming and spoofing of our receivers to make sure customers can really rely on what they get as an output. Now, when we look a little bit in the history of this, how that manifests itself in our product generations, and here we can see that over time, let's say with around 18 months cycle, we release always new platforms. So we started with the u-blox 7, way back in 2012. That was the first single chip solution. So of course, we had another 6 generations I'm not talking about today, but just to give an idea here, how we move forward.
Then we added u-blox M8, which was the first solution that supported multiple satellite constellations. Then came u-blox F9, which really was a game changer in that it made high precision available to mass markets. So for the first time, we supported multi-frequency and also correction data to allow high precision location. So high precision in this sense means better than decimeter, so basically being able to determine a position on the globe with better than 10 centimeter accuracy, in some cases, even down to the sub-centimeter level.
Then also important for our innovation, we cannot only aim at the high end, we also need to serve more diverse markets, and here, u-blox M9 came in. Basically, a cost reduction on the F9 platform, giving us good performance at a reasonable pricing. Now, going forward, 10th generation u-blox M10 did bring additions to the M9, especially here, the power consumption, again, for portable applications, and again, a cost optimization step.
And last but not least, F10, a product which we just announced, bringing here again, the multi-frequency, but to a lower cost point, and so serving again more demanding market needs. A special case is a little bit the u-blox F9 that we have here. This is a derivative of the F9 platform addressing safety-critical applications, so this is a product that we bring in autonomous driving applications. It's the first GNSS product that is end-to-end certified according to the so-called ASIL B standard, and is driving on the road.
Now, that was a look into how it looks in positioning in a very narrow field. If we now widen our view again and look at the whole u-blox, I think apart from this technology depth that I mentioned before, from transistor to the cloud, we also span a wide area of markets here. And if you look now at the three product centers that I'm happy to lead, we have positioning, cellular, short range. Positioning is the satellite-based positioning.
Cellular is everything that is relating to cellular standards, and short range is what you know under Wi-Fi and Bluetooth. So u-blox covers this whole breadth of wireless communication standards, and most of them in the form of chips, modules, and also services that enhance really the solution that we can give to our customers.
You can compare here with other brand names that you may know or not, but we can see clearly here that we have a unique position with what we can bring to the market, and in many cases, we are happy to supply to our customers more than one solution, a broader product portfolio, and can help them in this sense, also with time to market, easing their design, dealing with less suppliers to achieve the same goal, all aspects that are positively recognized by our customers. Now, how we bring these products to customers, Jean-Pierre will continue and explain a little bit more on our supply chain.
Thank you. So since the beginning of u-blox, we run the business model as a fabless company. So we don't invest CapEx into production capacity; we want to invest that into the R&D. As you see here on the top left side, so we do the R&D in-house for chip development, as explained by Andy, GNSS chips, module development. We do the whole certification and qualification part of those products, and of course, a big portion is software development.
And then we have our own sales organization; Markus will tell you more about that, which brings the products to the market and also supports the customer in the designing phase. And then we have a big partner network where we do the production. We mainly use top worldwide manufacturing partners. For the wafers, we have GlobalFoundries, both in Germany as well as in Asia. We have also TSMC for doing wafer production, and then for the module production, we have 2 main fabs.
One is Flex in Europe, and the other one is Inventec in Malaysia. With that setup, we can run the business and also, really grow the business without any big investments into the CapEx. So we could easily grow, double it, so, it's really a setup where we are quite flexible. We have chosen these suppliers, which can support the quality requirements from our customers, and it also was important in 2022, where we have seen that there was quite a big allocation situation in the market, so it was a supply crisis, and even in that conditions, we could grow by 50% revenue, during that crisis and support our customer well with that partner network.
For most of these partners, we work together since more than 20 years, so we have a good, strong relationship with these partners, and they support us well, also in difficult market conditions. This is important so that we can act as a reliable partner from a supply chain point of view, also in difficult times, and support automotive and industrial customers. With that, I hand back to Stephan for strategic ambitions.
Thank you, Jean-Pierre and Andy. I think we could demonstrate what u-blox is about. It's, of course, about technical innovation, but it's also about managing a very complex supply chain and having the right setup for thousands of customers. And this was our secret sauce for success in the past, and this will continue to be in the heart of what we are doing. Now, let's talk about our strategic ambitions. At the center, as mentioned in our mission, we locate things, and we connect them. And we do this in a way which is more precise, more reliable, easier to integrate, as many around us. More and more important is also being a trustworthy supplier in our world, and this makes the Internet of Things, in many cases, possible. So we are in the heart of the Internet of Things.
Now, we are embedded in those mega trends. We have the climate change, which is omnipresent. More automated driving will reduce traffic jams, which means less wasted energy. We have resource constraints globally. Precision agriculture, using positioning or cellular products, will help, help to release this. Data are always and everywhere, sometimes much more transparent than we wish. Having a trustworthy partner who transmits those data will be important.
Here we are with our connectivity products. We have the demographic development, so we are all getting older, so more home healthcare will be very beneficial, and we will, participate in this. We have the urbanization of the cities. I don't know how many of you made the experience that you drove an electric car, finally, you found a charging station, but then the app didn't connect with the charging station. This can be solved with our short-range products, which enable automatic connection from the car to the charging station, also in a way that an automated billing will be just the logical consequence.
And we also need to face the fact, if you like it or not, that the world is getting more multipolar. And as a Swiss trustworthy supplier, we can be a good partner to many customers globally. Now, if you see those mega trends, on the one hand, you can say we contribute to them to make them possible, so we are enabler for those mega trends. On the other hand, you can also clearly see we will benefit from this economically. Now, let's step back one more step. There's a study from a World Economic Forum that more than 80% of the Internet of Things application contribute to sustainability.
This means, in other words, those Internet of Things applications we enable will also contribute to make our planet a bit more sustainable. Let's make this also a bit more tangible. I think I mentioned some of the applications already. So asset tracking, this will be helpful to optimize flight routes. Automated driving. Another example is, if you think of our congested cities, it would be so much nicer if the car finds a parking spot somewhere else, and it doesn't stay on the street. It just comes back when you need it again. So it improves quality of life.
The remote healthcare, I mentioned. And another aspect of industrial automation and monitoring is obviously, our products can be used to monitor the quality of air, water, or soil to detect any flaws in there. So here we make a contribution. Now, this is the business part of it, but of course, there's also an internal part of it. We act consistently also internally. We have sustainability as part of our daily business life, and we agreed on a roadmap how to become better here, also step by step.
I don't go into many details in here because we will elaborate this step by step. Important for me is we act consistently, we benefit of many of those trends which contribute to sustainability, and we also act accordingly internally. Now, let's go back to the business. We are active in the semiconductor market, and if you look on the semiconductor market development since 2007, you clearly see it's nicely growing. It's one of the nice growing markets we have.... If you look on the lower chart, you see u-blox outperformed the semiconductor market consistently. The other thing you also see on this chart, it's a volatile market. Overall, on average, it's growing nicely, but in individual years, there were setbacks and there will be setbacks. That's part of the business.
This is, we call a semiconductor cycle, and such a cycle can be somewhere between three and seven years, at least in history. Obviously, it's not possible to predict how long the next cycle will be. But looking backwards, this was, an order of magnitude. Now, in this context, we defined our target financial models, which is our long-term, midterm growth ambition. So first of all, we agreed that we want to grow with more than 10% over such a cycle. Now, one can say on the one hand, that's too ambitious, because semiconductor market growth is on average lower.
There, I would say we showed in the past that we can outperform the semiconductor market. We are working on those mega trends, so we feel confident enough to have this as an ambition to outgrow the semiconductor market over the next cycle. On the other hand, you could say that's too low, because in the past, u-blox showed higher growth. And, which is true, in the past, we showed higher growth, but reflecting our size, the market environment, the trends we are going, we feel confident there to say more than 10% over the cycle is a good target for us for growth. If you look on the EBIT margin, we want to achieve on average 14%.
This means, again, it could be higher in really good years, and it was higher, for example, in 2022 when we had a good year, but it also can be lower if there's a market dip. So it's a measure over the cycle. And already on the first slide, we said we want to create value for our shareholders, and therefore, we agreed to include a cash flow metrics around 8% free cash flow over the cycle. Now, those three together make our mid- to long-term financial target model. And in this context, we also see the current market situation. In 2022, as mentioned before, there was a very heavy semiconductor supply crisis, so all companies delivered more or less whatever they could deliver to the market.
In 2023, the industry came out very quickly out of this supply crisis. Now, what happened towards end of 2022 was that many customers asked for long-term agreements for their products because they wanted to secure their growth. And we did the same back-to-back with our, with our suppliers, for example, wafer manufacturers or chip suppliers. So we also made a long-term agreement with those. Now, as you know, the market situation in 2023 is different, and we also see that the market demand, real end market demand, is lower than anticipated from many of our end customers and also ourselves. And this leads to the fact that in 2023, we delivered more to the market than the real demand from the end customer side was there.
Now, this will take us a while to dissolve, and therefore, we see a weak first half year, 2024, especially a weak first quarter, before we return on our structural growth path in the second half of the year. So putting this together, we have an ambitious and, in my opinion, realistic mid and long-term financial model. We have the volatility of our industry in the near term, which is inevitable in our industry. Putting it together, it's not a contradiction, it's just a fact that there are weak years and strong years, and we feel very comfortable on our long-term growth path. Now, how to make it happen? Back to strategy. I mentioned before, the semiconductor industry overall is growing significantly in the last years.
The highest growth sectors in this industry are automotive and industrial electronics, exactly the area where u-blox is active, which is already a very good starting point. Now, if you look now what we address in this market, and in this chart, you see bars from the top to the bottom of our positioning product line, of our cellular product line, and our short-range product line. Overall, we are currently addressing 40% of the total available market, which means 60% would be there as a growth opportunity in terms of market. So we have the right technology, but maybe there's a feature missing, or maybe our cost position is not there, that we feel comfortable to address it, but the base technology is there, and that's a good starting point to work on further expansion.
If we also then deep dive into our largest business, this, so let's start on the left-hand side with our positioning business. We are the undisputed market leader in positioning, with around 28% market share. Those are the 2022 numbers, of course. Now, that's great, and this is a great base, but 28% also leaves us enough room to further grow, even in our positioning, home turf. Oops! On the cellular side, which is our second-largest business, the situation is different. Even if you just look on the market outside of China. The largest player is the Chinese company, Quectel, and u-blox has a market share of 7%. So I would say there's a lot of potential to gain market share in the cellular area, and this is what we will focus on.
Now, if you look now on our businesses, we put it in two clusters. One cluster we call it Locate. This includes our positioning business and our service business, which is small and in majority focused on positioning. There we see that in 2022, this was more than half of our business at a profitability higher than 30%. That's remarkable, and very clear task for us is to continue on with this rock-solid business on a profitable growth path. In the cluster, which we called Connect, which puts together our cellular and our short-range business, there we had a very good success in growing the business. So we grew our short range and cellular business significantly over the last years. But we also acknowledge that the business itself is not profitable, and therefore, there's already now a transformation in place.
Let's elaborate a bit more on those, this topic. Now, first, let's have a look on the location topic. If we want to grow our business, we could benefit from market growth. We can address new applications, or we can win market share at existing applications. In positioning, we will benefit of market tailwind, so the market is growing very nicely, as we will show in a second, and we also target new applications, and this will bring us to a continued profitable growth. On the connectivity side, the story is slightly different. So market growth is lower than in positioning, and also new applications opportunity are less than in positioning. However, as I showed before, there's significant possibility to win market share, and this is what we want to do.
Now, third, also already mentioned in the introduction, as we need more innovation power on the Locate cluster, we shift development teams from cellular chip development to positioning chip development. Now, again, let's have a look on some more details. For positioning, we want to go into new applications and new customers, and this means we will intensify our R&D efforts in this area, and we already started with this.
So if you would look now on where do our R&D engineers work, you would find out that already today, 60% of our R&D engineers work on positioning. This assumes already the shift from the cellular chip development to the positioning chip development. And we will continue on this path, and therefore, we feel that we have the innovation power to address new applications. We also will use services in this cluster to have further differentiation.
In the connectivity cluster, it's about winning market share. Why? Because we need better economy of scale to also turn around the business. And here we have a unique opportunity that we can position us, ourselves as a trustworthy partner for our customers, and they appreciate this because it solves them a problem in a multipolar world... We also will use our scale to become the best and cost leader in there. And of course, we will continue with our cellular and short range module innovation and development. For example, to develop modules which contain cellular positioning, chips or even short range chips in one module, that's something not many companies can do. And just in the summer, we announced such a product where we can do satellite communications via a cellular chip.
So there is, of course, a different dynamics in the different clusters, but there is one commonality, we have a lot to win and a lot to go of there. Now, I mentioned several times that we stopped a cellular chip development. Now, let me explain this a bit better. In a cellular module, there are several chips, and among those, there's a cellular communication chipset. And we decided to stop future development of such cellular communication chipset. We will continue to develop modules for cellular. Now, why did we start it in the first place? And the answer is simple. Not so long ago, there was no offering of third-party chips how we needed it, and therefore, the company they started to develop those, and this enabled us a growth. Now, this situation changed. What we need, we can buy.
The second point is looking forward to the next generations, like 5G chipsets. The R&D effort for an own 5G cellular chip would be even higher for the previous ones, so that the economic feasibility would be even tougher. Number three is, obviously, we also expected a margin advantage out of our cellular chip development, and due to the fact that this market is highly competitive, this did not realize in the way we anticipated. Now, the consequence is we will stop future cellular chipset development. We will focus our chip development resources on positioning, and we had to reassess our business plan in the cellular area, due to our decision to stop future cellular chip development, and came to the conclusion that there's an impairment charge, as we announced earlier.
In effect, we will see less R&D spending for cellular in future. The POS team gets immediate access to an experienced development team on, on the chip side. That's a big advantage. We do not need to find those people externally, but we can take our teams from the cellular and bring them to the positioning side. And as Andy mentioned, the base technology is signal processing, so there, this is possible. Third point, third outcome is our relationship with third-party cellular chip vendor will grow to a next level because they wouldn't see us as a competitor anymore.
So we have expect, and already see benefits here. And last but not least, we will significantly reduce future impairment risks, as majority of the capitalized R&D is on our rock-solid positioning, business. So Roland will dive deeper into this topic. Now, with this overview on where we will play, how we will win, I would like to hand over to Andy to give us more color on the product lines.
Thank you, Stephan. So I have the pleasure to share a bit more light into how all this breaks down into the various product lines. And starting from a baseline here, I mean, Stephan already explained what is the growth rate of the semiconductor cycle, and it is here very nice to see that on the, what we call Served Available Market, the SAM, we see a growth predicted of around 7% year-on-year for the next five years. So this means the Served Available Market, what we serve today with our products, grows in line with the semiconductor growth. That gives us a basis of 7% year-on-year. Of course, we want to aim for 10%, and in the following slides, I will explain a little bit more, where do we plan to grow more than this semiconductor market, and how do we want to achieve this?
But looking again at this picture here, we can nicely see how positioning shows the strongest growth of the market, and we see also nice growth in the other areas like cellular and short range. Overall, we serve here a market that is expected to grow from around about $5 to 8 billion in the next couple of years, and you know our revenue figures, so we have ample room to grow in this Served Available Market. Now looking into the Product Centers a little bit more detailed. If we take here positioning, for example, we can see that automotive is a very big portion today. I have to explain this diagram probably a little bit, because this is quite complex.
We see on the left-hand side, actually, our revenues in 2022, and how they were split up on the various market segments. And here you see automotive, very strong, followed by industrial and a little bit of consumer. On the right-hand side, what you see there is how the SAM evolves and is expected to evolve from 2023 to 2028, so for the next five years. And here we can nicely see that, automotive, the market we are already strong, is expected to grow even stronger over the next couple of years.
So with the 16% growth that we see for automotive, we expect, we can also then fuel the growth of the positioning business with a 13% year-on-year growth rate, which takes us well above, what we have seen before and what we set ourselves as a target of 10%. So a little bit more in detail, success factors in the positioning business, what led us to the point where we are today. We have an attractive combination of features for the mass market. This comes back to accuracy, I explained it already. First to the market with affordable high-precision navigation, generally quite dependent, position information, time to first fix, fast acquisition times, all this at a very low power consumption.
A lot of products work with sensor fusion, so we integrate inertial measurement units to allow navigation also in areas where no satellite reception is there. The reliability, performance in challenging environments, and last but not least, our products are easy to use. Customers who select u-blox products, they do not have any concerns that their product will work in the intended application. Now, looking forward, what we see as future success factors, and before, in the earlier part of the presentation, I was stopping with the generation 10, of course, but you can imagine we are working already on 11, 12, and maybe 13 in our labs, and this is where this will take us. So we will see even higher accuracy. A new aspect that will come also into the topic is the question of integrity.
For many applications, it's now important to understand how dependable the position information is. Can I really rely on that? Those of you who have ever used a GPS receiver, and probably everyone has, you know, from time to time, it's completely off track, and it shows you a position that is totally useless. It is important for many applications that our products can indicate when a position is reliable and dependable and when not, and you can imagine, absolutely crucial if you use GNSS for autonomous robots or autonomous driving. Functional safety, I mentioned already, is getting increasingly importance in our product as applications rely for safety on the GNSS, so autonomous driving again. So we get more and more into formal requirements on safety. Then another trend that we see going forward, more and more satellite systems.
So far, until today, we really worked with mostly governmental systems. So we have the American GPS, we have the European Galileo, we have the Chinese BeiDou, and so forth, and a lot of local augmentation systems. But what we see now is a lot of startups that also want to get into this market with their own LEO satellite systems, and certainly room for expansion there. And last but not least, advanced sensor fusion, so integrating additional sensors, into the navigation solution to make it even more robust and reliable. As you can see in a nutshell, innovation doesn't stop with generation 10 . There is a lot of ideas around, a lot of demand from our customers to push forward with positioning, and this is exactly what we mean by growing markets.
So we have a high market share, as Stephan already said, in positioning, but we see all the time new markets, developing. I just want to give you one example to make this a little bit more visible. You may all know these autonomous lawnmowers that go around and mow the lawn in your garden. Until not too long ago, no one could imagine why a GPS receiver should go into these lawnmowers. Nowadays, with the high precision that is available since our u-blox 9 generation, so the F9, we can drive these lawnmowers autonomously without the need for the cable that limits their movement. So the machine can learn the size of the lawn and will stop in front of the flower and without any fixed installation.
This is a new feature, a market that was not accessible to us for our products, became accessible with innovation, and now we see this becoming a trend that more and more of these products are getting autonomous and simplify the use for the user. So this is just one nice example how over time, GNSS positioning solutions get in more and more applications and open up new markets for us. Now, second product center, cellular. Here we have quite a different situation, and I think, it's also important to look a little bit at the scale. If you recall, before, we have been looking at a much smaller SAM in total numbers. Here, the SAM is really a 10x of what we have as a business in 2022. So as Stephan already said, there is ample room to grow in gaining market share.
Today, we have a very strong position in the healthcare. That's a market that we systematically did go after, and we are, we're very successful. But as you can see on the right-hand side, healthcare is just a small portion of the SAM. So this means for us, there's a lot of room to grow, especially also in the industrial segments that we see here, and this is what we want to address and where we want to position our cellular business. Looking again here at the success factors, I think very important to us is the understanding of the cellular market. In cellular, the products are defined by standards, so there is always a cellular standard defined by the standardization organization, which is called 3GPP in cellular, and standards evolve over time.
There are generations moving forward, and it is important to catch the wave when a new standard comes alive. You all may recall the change from 3G to 4G, and it's important that you be there when the standard is available, and you can win new sockets when customers demand a new technology. We were super successful here when the new standard Cat-M came out. This is one specific LTE standard for machine-to-machine communication, and we could grab a substantial market share. By today, we are here, the market leader in this type of IoT modules, and this is a strategy that we want to continue. We want to be first to market with new products when a new standard becomes available.
Then, of course, over time, we have aggregated a lot of experience what our customers actually do with our product and what is important to them. This we can bake into our products and make them finally easy to use. We mentioned many times the aspect of quality. Many of our products, we know they stay in the field for very long. We have an average lifetime of our products in our customer products around nine years, so we need to make sure that the products live that long and can serve the needs of our customers. Last but not least, also very important in this environment, and Stephan already, I think, talked about the supply chain challenges in the last two years.
We have established our supply chain, that also Jean-Pierre explained, in a way that we can really be a reliable partner in this very complex setup to our customers and make sure that even in difficult times, we don't let them down, and we can supply the products as they need them. All this makes our products super easy to use and gives our customers a peace of mind when selecting u-blox. What is coming here in addition, when looking into the future, it's really that situation of the multipolar world, where we can establish ourselves as a trustworthy Swiss supplier. Faster time to market, supporting new standards for us in the, in the IoT world, 5G is still pretty new, so this will be the next challenge here to tackle, to bring out products at a time where customers need it to capture also the 5G wave.
And last but not least, many of our cellular products serve really the the need to connect the physical world to the cloud. We want to make it easier to our customers to bridge that, communication from the physical world, from the end device up to the cloud, make this as simple as possible. Today, there are many hops in that line, and we want to, here really break ground with some, technology that simplifies these steps. Last but not least, short range. Today, again, similar situation as we have it in cellular, a huge SAM that we serve and comparably, still a relatively small business. However, here we have already very strong position in automation, in industrial automation. This is basically what you also know under the topic of Industry 4.0.
So in this area, we have already quite a good foothold, but again, here highlighted in red, this is just a small piece of the SAM. However, it's also nicely growing, so this is also an element, where we can still grow with the market, but we have also, again, here, ample room to grow in adjacent market segments. So here, again, summary of the success factors. We have a very broad portfolio, so in the Wi-Fi and Bluetooth domain, we have a lot of variety of the standards. We, as u-blox, can say that we have the broadest portfolio in this market. We can really serve all the customer needs here, from a low cost, very simple module, to highly complex modules, with a high performance. So this is unique in the market.... We have a good relationship to our suppliers.
We work with many suppliers in this field over a very long time. Again, also key for our success during the supply crisis in the last two years, to have these good relations, to make sure our customers can get the products as they need them, and this was also highly recognized by our customers. On the sales side, these products run very well through the distribution chain, so we have built this over the last couple of years and can now capitalize on this. Quality and ease of use, as for all of our products, key success factors that separate and differentiate us from our competitors. Going forward, again, the same topic as we have it in cellular, the trustworthy Swiss supplier in the multipolar world.
A new topic coming up here, and growing importance, and very nicely fitting also to our positioning story, is that we see more and more of these short-range standards supporting indoor positioning, and this is where we put a lot of effort in our innovation work, to bring out products that are really easy to use for this. And we also integrate around our short-range products, our other products, help with the software design so that if we take a short-range product as a core of a system design, we can easily add positioning products and cellular products to provide a full system solution to our customers.
Looking a little bit further down the road, we also see so-called edge computing coming up, bringing more intelligence to the edge, where the cellular is mostly used to connect the edge to the cloud or the physical world to the cloud. In our short-range modules, we also address the need for having a little bit more intelligence at the edge, so to do certain computing functions also there. So that was hopefully a little bit outlook on what we want to do here and how we plan to grow with our product centers. I hand now over to Markus Schäfer, who will talk more about how we bring these products then to our customers.
Thank you, Andy. Good afternoon. My name is Markus Schäfer, and I joined the company four years ago as head of sales, and of course, I will talk about our go-to-market strategy. But what can you expect for my discussion for my presentation in the next few minutes? I will answer to you three questions. First question: How successful are we in winning new business? So how successful are we indeed to win new business? The second question is: What are the applications and customers we focus on to achieve our plan and to drive above-average growth? Third question is: So what are we doing as sales? What are the sales initiatives to execute on this plan? So going to the first question: How successful are we indeed to win new business?
I want to refer you to the following information, to the following, slide. u-blox is very successful as its target customers today, and won business with CHF 1 billion lifetime value, ramping in 2024 and beyond. So this is not a forecast, but this is indeed what customers have decided for going with u-blox products, designing into their applications, and this business will come and ramp in 2024 and beyond. So let me be now even more specific on the automotive side, where you see information on the left side of the slide and the industrial side on the right side. So looking at automotive, and you see the logos there, these are the top 20 OEMs in the world by cars that they are selling.
So these are the top 20 OEMs, and we are very proud that 18 of these top 20 OEMs are using u-blox GNSS technology today. So we are successful at traditional, but also at new auto players. And China in the EV market is in a lot of people's mind, and you were wondering, "Okay, how successful is u-blox in China with EV car manufacturers?" And here we are within seven of the top 10 EV car manufacturers in China today. But as you have heard also too, before, a growth market area is autonomous, driving, automated driving, and we are in design activities with leading customers in all regions, in the Americas, in MEA, and also in Europe. Now, going to the industrial side, you see there the who's who of industrial customers.
Classical industrial customers that are our customers today, but also innovative startups globally, that have decided to work with u-blox in their leading designs and leading products. We are very successful, as you heard before, on the healthcare applications. But also to emphasize here, these are leading customers in their field, but there are many, many, many more customers out there, hundreds of thousands of customers out there, and we have a very clear strategy of expanding here also with our distribution partners, to also address here the broad market. Coming to the second question: What are the applications and customers that we are focusing on to drive above-average growth? And this is a very busy slide, and I will explain it to you. You see 21 market areas, 21 applications that we are addressing as u-blox today. There are four automotive applications on there.
There are 17 industrial applications, and there are 3 consumer applications. We are engaged in all those markets and applications today. That is also what you expect from a broad portfolio that we have with positioning, cellular, short range, and services, and we are working in all those markets. But I have highlighted also in red here, for other markets: automated driving, asset tracking and management, healthcare, industrial automation, and monitoring. Why have we selected those markets, areas? That is what I will explain to you in my next slide. Now, in these four market areas, we expect above-average growth. What does that mean now in numbers? In 2028, we believe that in these 4 focus market areas, our revenue will be based on 40% of our revenue will be within those focus market areas.
Now, that doesn't mean we are neglect, neglecting the other applications. No, the other 17 base segments will also contribute here to our revenue, but we will see significant growth in these focus applications that I have highlighted before. Why? First, we know that those markets are strongly growing. There is a need of our products in those markets, as you have heard already before. But also, secondly, our barrier of entry is relatively low. We are engaged with leading customers here already today, and we can expand with those gorillas, so to speak, in the value chain. And thirdly, and this is what I will explain in my following slides, we have a very good technology. We have a perfect technology to service those markets. Now, I start with the car.
This is a very busy slide, and you see there are a lot of use cases for positioning, for Bluetooth, and Wi-Fi. What you can't see here is the service element of it. But we know this application very well, and we know that there are three distinct areas that are needed and where it is, innovation as a base for growth here. One area is the automoted driving. So we see an increasing demand, also, as Andy has shown before, on high precision accuracy in this particular segment. There is a demand for safe GNSS and service requirements, and we are very good in these kind of technologies already today. This market will expand further. Advanced telematics. We have an increasing attach rate of standalone GNSS in this particular market.
Now, we have engaged on the TCU side at advanced telematics over the last few years, and there are quite a few players also with integrated solutions. However, we see here a very strong migration to multiband, and we can differentiate here with our GNSS. There is a requirement for standalone GNSS in these future cars. Last but not least, infotainment and navigation. We can say today that we have the largest share in the car in this particular application. It's a dominant share. We are actually the leader here for infotainment and navigation with GNSS. But here we can work now with customers that rely on our technology today, also with a differentiated Wi-Fi and Bluetooth portfolio, and we have a very solid, a very differentiated roadmap here and have started very significant programs with Bluetooth and Wi-Fi in this particular application.
Now, going in my next slide to asset tracking, healthcare, industrial automation. In those three market areas, you see they are actually quite broad, and they are pockets of growth. They are use cases that we believe we have the perfect product for, and those are growing above average. This is container tracking and trailer tracking, livestock tracking, and pet tracking on the asset tracking and management side. It is remote patient monitoring and assisted living for healthcare. It is predictive maintenance, connected tools, safe, connected worker for industrial automation and monitoring. Now, I said the barrier of entry is relatively low for us in these particular areas, because over the last two decades, we have been working with customers on the positioning side here already, and in those applications, connectivity has become instrumental.
So we can offer here, and you heard it before, Stephan mentioned it, or Jean-Pierre mentioned it, cross-selling. We have a very broad portfolio that can be used, and I listed also here in the symbols, P for positioning, C for cellular, S for short range, the technologies that we can sell into these applications. And this is where we believe we can address a very large market share and can drive growth. Now, I come to my third question about that I want to answer to you, which is: What are the sales initiatives to execute on to achieve this growth? We strengthen our direct sales to our top 200 customers, and we lever the power of partners for the mass market. Now, I give you some numbers here, what it actually means.
Today, 75 customers make 50% of our revenue. 75 customers make 50% of our revenue. And luckily, 25 of those customers are leading customers in our focus segments, and those 25 customers have a very high growth potential for us moving forward. 50 of those customers are already very high, very large customers. They have kind of a medium growth potential, but of course, we want to service and maintain those customers, and we need the appropriate resources for this. Now, 150 customers we have identified for our focus markets that we believe are future leaders in those markets, and we are working with them to actually achieve this growth.
These are new customers and new opportunities, and having the right competency in the sales team, having the right focus on those customers, we are very confident that we can grow this new customer base. So we believe by focusing on these 200-250 customers, this will be a very important basis for us for our future growth. Now, I give you a number. In 2020, we were servicing about 4,000 customers directly. This year, we are servicing 1,000 customers directly. Next year, we will service 250 customers directly. But that doesn't mean we will get less customers. No, it's a matter of focus. We focus on those customers that we can help to grow.
But then on the other side, we have built a very, very strong distribution network to do an even better job of servicing all the other customers. Now, what are all the other customers? In the last Capital Day, we were talking about 14,000, 15,000 customers that we service today. But we have teamed up with partners that are addressing a million customers, one partner easily. So we believe we are, this is just the beginning of expanding, really, our mass market approach. Now, talking about these partners, they have a very important, a very important element, for our growth, as I have elaborated, and I wanted to show you how we executed on this, in the last, few years. So 2019, we started with, Digi-Key and Mouser. We added Richardson RFPD.
With Avnet, Avnet Silica and Avnet over the last few years. But I want to give you some data points. Already in 2020, we exceeded to add 5,000 new customers. Then in 2021, we were becoming one of the top 20 suppliers at Digi-Key out of 900. In 2022, we became a leading supplier out of the top 25 at Future, who has 350 suppliers, and one of the Future executives said u-blox is the fastest-growing wireless supplier starting a new franchise ever. So we see there is a demand out there with many, many more customers utilizing our products, and we have started to execute on this. Now, I want to finish with my last slide, which is to summarize again our four go-to-market initiatives for our future growth.
First one, increase the focus on our strategic customers to maximize our share of wallet, execute on the project funnel that they have awarded to us. Number two, develop new customers and new business with customers leading in our focus segments. Number three, leverage the power of leading distribution partners in order to, A, increase further our number of customers, as mentioned before. Increase, at the same time, the service level for our broad mass market customers. And last but not the least, enable our direct sales team to focus on our direct customers that will fuel our future growth. Last but not the least, make it easy for our customers working with us, leveraging those distribution partners, but also design partners that we have been teaming up, again, to make life easy for our customers. And with this, I'm handing back over to Stephan.
Thank you, Markus. The theme of our strategy update was: focus, innovate, and execute. So let me give some color on the execute part. Operational excellence is getting, for us, more and more important as a growing company, and therefore, we put focus on it. I will talk a bit about the advantages of an agile development approach on the next slide, so I skip it on here, despite the fact that it's very important for us. We decided to increase our effectiveness with the introduction of a company-wide ERP system. Currently, we have several of those, but we want to be able to make the right decisions timely, and therefore decided that we will go in this direction. So this will make us future-proof, making sure we take the right decisions at the right time. We also put much more focus on profitability.
And now you can say, okay, this is a question of process and transparency and so on, but at the same time, it's also a cultural topic, and we want to embrace this. Because, of course, many of us are proud engineers, yeah? And we like to do innovation. But being an engineer myself, I can promise you what we engineers like even more, if we create valuable innovation, and this is where we will put our emphasis on. Now, on the efficiency part, being larger also gives more opportunities, and we in 2022 had a purchasing volume of more than CHF 200 million. Actually, CHF 300 million. And therefore, we decided to bundle all of our procurement activities in a newly restructured sourcing and organization in the company. This will bring benefits, very clearly.
We also said earlier in the cellular part, we will focus on becoming the best and cost leader. To reach this, we will introduce a design-to-cost toolset right from the beginning. Reducing cost is, of course, requires a good procurement organization, but it also requires the right products, which are designed for the cost. We will improve our working capital management, and we will also take advantage of our global footprint and our global site presence to further optimize our cost. Now, I said before, several times, that agile development is important for us. So why? Let's have a look at this chart on the left-hand side and start at the top left.
The typical traditional development approach spends quite a lot of time in understanding customer requirements, doing feasibility studies, doing planning, down to several stages until the code, for example, in a software, is really developed. And then on the right-hand side, it's tested that the requirements and specifications are met. Quite often, such a process from the upper left to the upper right takes several years. And obviously, this is a very good approach if you solve a known task. So for example, if in the automotive industry, to take the advantage, the example, if you design the tenth generation of a combustion engine car, this is a good approach, and many traditional auto players are using such an approach. So it's a perfect plan to execute for a known task. An agile approach is an iterative approach, so much shorter cycles.
So the intention is to have a first working product as quickly as possible, to get feedback from customers, and in most cases, already start with doing business. So faster feedback, in many cases, faster revenue. And of course, you need a few of those cycles until you reach the final product, comparable to the left-hand side. This approach is really good if you want to have a fast time to market of a first product, if you want to have fast feedback, and that's important for highly innovative, dynamic environments. So therefore, quite a lot of the new auto players, to stick to the automotive examples, in the electric vehicle space, are using such an approach. This is why we put so much focus on this.
It will improve our time to market, it will give us the possibility to get feedback from customers earlier, and to have also revenue earlier. And that's why we decided that using an agile approach is a very good way for us to develop products in our dynamic markets. Now, there's a piece missing still, and I would ask Roland to share us an update from the financial and capital market side.
Thank you, Stephan. My name is Roland Jud. I'm since 12 years , CFO of u-blox, and although this presentation is mainly about strategy, I will take up some a few financial topics. The first one is the topic about capitalization, and if you look into our capitalized R&D on the balance sheet, end of September, we had capitalized roughly CHF 200 million R&D cost into the balance sheet. The main part, 94%, is based on our two big product areas, cellular and positioning, nicely split it, 46% goes to cellular belongs to cellular, and 47% belongs to positioning.
Now, we did the review of the business plan every year, and this year, the cellular business plans showed that they will not cover the anticipated economic profit, and this, at the end, is the main reason for the decision we took to stop cellular chip development for the future. With that, implies an impairment charge, as Stefan already mentioned, between CHF 65 million and CHF 70 million, which will be booked in December 2023, so which belongs to the 2023 figures. Assuming such a charge, this will change the picture on capitalized R&D in the balance sheet. So what remains is roughly CHF 138 million capitalized R&D.
Now, 69% of these belongs to the positioning business, which is rock solid and has so to say big headrooms, and the risk of a further impairment is minimized. We also take, due to the change in strategy, this will also lead over a longer time to a reduction of the capitalization rate of our R&D efforts. That means not that we not invest anymore into further development, that just means that less will land on the balance sheet, we have more in the expense side. The next topic is net working capital management, as Stephan mentioned already. In the current situation, from 2018 to 2021, working capital components were improved gradually, so the net working capital, compared to revenue, came down.
The deterioration in 2022 and 2023, to enable the significant growth we had in 2022, led us to increase our inventory and let also go up net working capital against, compared to revenue. So the goal now for the future is to reduce working capital again, to bring it again down below 20% of revenue. And how can we achieve this? We can achieve this through review of the payment conditions. We are in discussion with our suppliers about payment conditions, which has, of course, an impact on net working capital. And secondly, by better forecasting, this helps us to better manage our inventory, brings the inventory down again, which has also a positive impact on net working capital. The first improvement will be visible already throughout 2024.
To give you an enhanced transparency, we decided or changed regular reporting more often and decided to give out short-term guidance and a long-term financial model. We already, as you can see, the first time for the full year results, we moved that by one week ahead. So the first, the full year results will be presented March 6, 2024. And you will get the first trading update for quarter one 2024 on April 24. And here we add not only revenue, we will also give you some information about EBIT adjusted. And always, with the numbers, we provide the next guidance for the next, for the following quarter. Also, half-year results are even 10 days earlier, August 7, and trading update then for Q3 on October 23.
As I mentioned, the quarterly guidance we issue will contain revenue and EBIT adjusted, and, as presented already by Stephan, the target financial model, which, we give you a view on the long term, how we see the long-term future, what we wanna achieve over the cycle, with a revenue growth of, over 10% and EBIT adjusted to 14%, and then a free cash flow margin of around 8%. And this was, in short, the financial part, and now I ask Stephan to wrap up and, this Capital Markets Day with his summary.
Thank you, Roland. Let's summarize what we have seen. The theme of the Capital Market Day and our renewed strategy is focus, innovate and execute. And I, I feel privileged that we work in markets where we have long-term growth drivers, and we elaborated on those over the presentations. We did three major strategic changes. Number one, we will increase our focus on positioning. Number two, we tackle the turnaround of our connectivity business, and one measure to do this is stopping our future cellular chip development, while on the go-to-market side, aggressively going for higher shares.
And number three is to improve our operational excellence by a better execution performance. By this, we feel comfortable to show our target financial model, which we will be measured against, and we feel confident that we will execute according to this. With this, the future with us will be precise, smart and sustainable. Now, concluding it with the very last slide, u-blox is a company which is very strong in structural growth markets, and that's an asset. We are the undisputed leader in positioning with a unique IP, and we create sustainable value, and we have actions in place to make this even better in future. With this, I would like to conclude today's presentations. Thank you a lot.
Okay. Thank you, Stephan. We covered a lot of ground, and we even did it ahead of time, so I think we, we did great. Before going to the Q&A, why don't we take a 10 minutes break? So let's say we come back at 10 to, 10 to 4, and then we can start. Should we do it? Okay, so we are slowly coming back, energized after a coffee break. So quick word here. So we will take first the questions in the, in the audience and then turning to the, to the phone in case if there is any questions there. So everybody is here ready for the questions. So who, who is gonna break the ice, here in the audience? Maybe you can mention the name, institution, then make the question.
Hello, Audrius Balaišis , Investment Management Company, Prudentis. I have two questions, if I may. You have plans for free cash flow, so I would like to know where it's gonna be used over the cycle. And, the second question: can you walk, how do you get to the 14% EBIT margin? Because it seems that, positioning part of the business is much, much higher, and the rest is much, much lower. How does it—how these two, what are the dynamics over time of these two businesses in terms of EBIT margins? Thank you.
Okay, sorry. So I start with this one. So I understand your first question is a bit more the capital allocation, how do we do this? And there is basically no change on this one. So for us, the priority number one is making sure we stay on our innovation path, so we will continue to invest in our own R&D to generate the.
[crosstalk] No, no, automotive industry.
Still the same.
It's a telephone choker.
So that's our priority, number one. And, of course, we will also continue to look on to screen the market on board on acquisition targets, as we did in the past. And also no change to the conditions there. We want to—must be accretive, and it must be something which creates shareholder value in a very reasonable time, timeframe. So also no change here. And then, of course, there are two more levers to give back value to our shareholders, and one of them is, as usual, our dividends. And obviously, we also discuss when and when it makes sense to introduce and talk about a share buyback.
But that's nothing what we decided, or can announce, and it's probably also not the right time to do this right now. But, as mentioned, priority number one, internal R&D, and if there's a good opportunity for a bolt-on acquisition, we would like to take it. Your second question about a bit the balance of the very profitable positioning business and the cellular business. Well, it's always a balance. So first of all, we said we will invest more to grow in new applications in positioning because it's highly profitable, differentiated, so we think we can gain more. So that's one level. And investing more, so shifting chip development resources from cellular to positioning, is first of all great because they're effective from the day one.
We don't need to train them. But of course, it's an investment, and we are happy to do this investment because we are on a long-term structural growth path, so it's a good investment. And on the other hand, I said we need and can gain scale in the connectivity part. And that's another topic. And of course, there will be several... So this, in other words, means the connectivity cluster is, as you could see, not as profitable as the location cluster. If we try to gain share, which we need to gain to get the right economy of scale, there might be some years where this pulls down the average. Just getting a bigger part, which is not as profitable as the other part.
Now, I must be very careful. Now, the overall target to make this non-profitable part profitable stays fully intact. This was not a disclaimer on this part, but there, there's a long way to go from below 0 to above 30%, and then you have this. And the other aspect, if you look on the 14%, that's not a precise prediction for a certain year. We have the semiconductor cycle, so we will have better years, and we will have worse years. But nevertheless, we want to give something where we can measure us against.
Actually, three questions. Two, just on cellular. I can, you know, show a couple of slides with the market shares, and it looks like you're still far behind your competitors. Assuming the market is growing, just try to understand, you know, how can you really get that market share up? And like, the, the second question is: Do the competitive dynamics change in that market without or with you not having your own cellular chipset? And then the, the second question is slightly different, but it, it's. So having followed the company for many years, it's good to see also stability in the management and also in the board. But it raises a bit the question about the thinking process behind that decision, because for many, many years it was the right decision to have your own chipset.
We heard that in many investor discussions, this is needed, you know, it will increase the margin. And now with the change of the CEO to you, Stephan, we see after a year, this change. I just try to understand, you know, what's the thinking process, really? And, I mean, how credible is really that move to say now, "Yeah, we stop that," and it will still be good for us without the chip? I'm just trying to understand that, because I've heard otherwise for many years, so maybe you can shed a bit more light on that. Thank you.
You start first.
Yeah. No, you go first. You go first.
Okay.
Let me start with the second question. It's now even a bit closer, and then maybe André can even add. So for me, that's not so much a question about management here and there. It's much more a question if the company, the board is able to look on changing market conditions, changing external environments. And the answer is clearly yes, because this is not a CEO topic. This was a topic we discussed with the board of directors, and we came to the conclusion that that's the right step.
I tried to elaborate a bit why we took originally the decision to have an own cellular chipset, but it doesn't make sense to if facts change, if we see we can now buy a lot of those chips on the market at a price where it doesn't make a lot of sense to take a risk and do an own cellular chipset development. Those are external factors, and I would say it's a strength of the board of directors and the colleagues who are here for much longer than me, to come to such a decision. I don't know, André , would you want to?
I think, I think this is a good question, and as a long-time member of the board, I had to pose that myself, because when I arrived, I think the cellular was already there. Positioning, obviously, short range was just popping up, and it had a tripod, and that tripod made sense at the time. And we were able to develop good chips in the cellular.
Our chip is still market high tech, capable at the cost of low EBIT that you have seen in the presentation today. And the questioning of the cellular chip business, not the cellular business as modules, has been long going on. I mean, that's not was not initiated by the arriving of Stephan. It was challenged for quite a while, but, I mean, the opportunity came with the new blood on the—with the new kid on the block to change it, and that's where we stand today.
Yeah, I think I must be fair. I must actually, you were very clever. You said two questions. Actually, it was three questions. But I still try to remember. So your second question, so I do it now, vice versa. Your second question was, is it a competitive disadvantage not to have an own cellular chipset? If you look on all the players above us in the ranking, none of them has an own cellular chipset. So that this cannot be the reason why some of our competitors have higher market share than us. And your first question, is it reasonable to gain for more? And I think absolutely yes, because you look what Andy showed on his slide, why customers are buying u-blox modules.
Customers are not buying a module because of a certain chip in there. They buy a functionality. And, and we have a lot of good selling points, and, that's for sure something where we are very strong. We have good products, we have good service, and, they are easy to use, they are reliable, and in many cases, they set the standard with being very first at the market. This is, very important, for us. And the second thing, and I also want to underline this, connectivity.
Connectivity of healthcare equipment, connectivity in cars, connectivity in factory, topics. This is sensitive, so customers worldwide are concerned about which components are in there, globally. Having a great technology and being a Swiss supplier to provide this trustworthiness and prove this to our customers in our multipolar, complicated world, is an asset. I'm absolutely confident that we can leverage on both.
Hello, this is Felix Remmers from z Capital. Three questions, if I may. On the profitability in cellular, if you just would, you know, not, you know, shift the resources from cellular to positioning and, you know, well, you would, you know, need a hard decision to get rid of the people, would then be, just theoretically or mathematically, cellular already be profitable or not?
My first question. So the answer is, no, that's not the case. Okay, two more, if I may. One is, I think it's really important and a great decision to put Free Cash Flow into your operating model. Is that also now part of the management compensation? Because so far, that hasn't been the case, and you could just capitalize whatever you want and achieve your targets. Is that going to change?
So first of all, first of all, it's a difference what might be theoretically possible and what is possible then to communicate to our shareholders. So we are very transparent on this one. So, let's rather... so therefore, it's not so easy as your question would indicate. But as of today, we did not touch the compensation model. We have the operating cash flow as part of our compensation. This was not the main priority of today.
Okay, then I hope we will see some changes as well. Final question, sorry. It's just on the cellular know-how, I mean, you have built up quite substantial know-how in that area. You have developed successfully a chip, which is in the market. It's proven. There has been a very small competitor, Sequans, being acquired by Renesas for a very, very high price. Have you also looked at monetizing your IP in the chipset, which you have, you know, developed over the last couple of years?
I cannot comment about a competitor in this area. What I can say is we developed our cellular chips exclusively for the use in our modules, and this is the reason why we came to the conclusion as we did. I think there was a question.
Yep. Yep, that's automatically well done. Thanks. Tobias Schulte, UBS. A bit, a question: If I look where the profitability is of the positioning activities versus cellular and short range, I was wondering why not to focus and the growth even, which, I was a bit surprised that we might have a brighter picture in the positioning than in the cellular in terms of even growth. Why not to focus even more on positioning, focus less on cellular? You want to gain market shares. Essentially, I don't know why somebody would like to gain market share in a market where even if you stop the R&D, I think it will be not very profitable. It's very crowded, so it's even difficult to gain market share.
Why not to focus in certain niches in the cellular segment instead of trying to grow? Or even, I asked the question to Mr. Seiler, so he answered a bit to me, but I was thinking, 30% EBIT margin, 13% growth in the positioning. Why not just to focus on that? You have CHF 375 million sales.
It's, I would say, even okay in terms of the whole amount. So a little bit challenging, why you still need to be in a segment where probably even after the measurements you are taking, as I see from the 14% midterm guidance, the profitability will stay low, even going forward. It's very crowded. You could have sold this asset maybe to a better price to somebody else. A bit on this topic, maybe if you can illustrate why to keep on and why to try to market to gain market shares here? Thanks.
So I think, first of all, what we showed in the chart, with the 13%, is the market growth in positioning. That's one part, and we showed also the market growth in cellular and in short range. Now, growth for us as a company, you also need to consider, your current market share in the individual areas. So it's very clear from a 28% market share, you still have some growth, but you cannot win market share forever. With a 7% market share in cellular, the headroom is much bigger, so this growth track, trajectory will last longer. So that's one reason why we think, we need to look at this.
If we look overall on the cellular opportunity, the situation is currently as it is. We are convinced by 5G becoming significantly larger, especially winning shares, not necessarily developing new chipsets for cellular or tons of new products. But gaining shares with our current products and doing this quickly, this will help our economy of scale significantly, and this is why we are putting the focus on top. And the third point is also currently there is an opportunity to do so, because companies around the globe appreciate a trustworthy supplier. So, there is an opportunity.
If you look a bit more to the inside of the company, if a salesperson goes to a customer and sells them a positioning chip, the same purchaser and the same R&D manager will also take care about the connectivity. So this fits together very nicely. And then there's the last point, what you mentioned and what we clearly also capture. Of course, if there are certain applications where we even combine positioning and cellular and short range, this makes us pretty unique in the market. We will capture those, but this niche alone is too small to survive. So to make the answer short, we see a growth potential there, and we see as our task to capture on this.
Yeah, maybe another challenging. Since I remember, so long time, the market share in cellular has been around this 10 or below, or 7% now, and it's a long time. Well, and I thought with the chip, maybe you have a USP selling proposition to certain clients that your chip is working better than other ones, which is now not there anymore. And it's still an add-on on the question before, but I still don't understand exactly how we can, how you can make sure to us that you are able to gain market shares going forward if you didn't manage it over the last, let's say, 10 years. Is there anything changed, or is there anything where we can have a little bit more confident that that's happening?
Well, if you look on this, I would say for a customer, it's not so relevant if there's our chip inside or a competitor's chip inside, as long as it works. Because, and that's a huge structural difference to positioning, cellular follows a standard, and you do not get a lot of credit from your customer for better fulfilling the standard, because then it doesn't communicate with other networks anymore. And this also explains a bit why the same team, more or less, can develop, on the one hand, chips, and they are an essential part of our success in positioning, which come with very high profits. And on the other hand, there's a certain limit.
For us, what changed is now we clearly set the focus, what we do, what we don't do. We put the focus a lot on the go-to market, how to support customers, how to win share quickly in this area. That's a change which might not sound so radical for you, because it's not a big R&D topic. But for us, as an organization, it's an important change to go out there, sell very aggressively what we have on our roadmaps, selling our advantages, that our products work, they are reliable, they are trustworthy. And there's a lot of room to win there. I wouldn't see an obstacle. Yeah, we have to prove this, and we will do so.
Okay.
My name is Hans Berryutz. I'm a private portfolio manager. I have two questions. I have read that u-blox had a claim in the States against a competitor, I think, InterDigital, and I think you moved to Delaware court. Can you explain better this case? I did not understand properly what is behind this and how in which way it affects the business or improve the business. The second question is the Swiss franc, the strong Swiss francs. How will you handle this in the future? Have you to expect further? How with the results in October, for end of September, that you have to make, I don't know, a special measurement or provisions, and the stock exchange was shocked afterwards, or can you ensure that you will handle this better in the future? Thank you.
Yeah, I may try to give an answer to the first question on the InterDigital. This is quite a complex topic to explain in a nutshell. First of all, InterDigital is not a competitor. InterDigital is one of the companies that develop new cellular standards and invest a lot of R&D into this. And, basically, they develop a patent portfolio. They don't do a lot of own products. It's just about developing the technology. And then as the patents they get for this work are part of a standard, there's also an obligation to license them on fair, reasonable and non-discriminatory conditions to all the people who want to implement the standard. So that's, we could talk hours about this.
The point is, u-blox, as an implementer of cellular technology, is of course interested in licensing this technology for its products, and in the context of this, we are negotiating with the owners of so-called Standard Essential Patents. In the course of this, we have been for many, many years a licensors of InterDigital technology. Things have changed a little bit on their end, and we are at the moment in a phase where we negotiate the next round, continuation of our business relation, and in this context, unfortunately, that was brought also in front of jurisdiction. We in the process of this are still continuing this little dispute with InterDigital, but we don't see really a big impact on our business.
Cost you a lot more?
Not so much so far, but it's a part of doing our business. That's a special element we have in the cellular domain, unfortunately, because there these Standard Essential Patents and the way they are treated is quite special in the industry. But that's normal part of doing business in cellular.
And you want to give an answer on the second question?
No, I tried to give an answer to the Swiss franc topic. So, we took some measures for the future. The Swiss franc, we will disclose our guidance at constant currency rates, which means that the deviation we might have, or we have had, through the US dollars, that the first guidance issued in March 2023 for 2023 was based on a US dollar rate to Swiss francs of 0.98. So, as you all know, the dollar rate is rather at 0.90 now, and this creates a deviation to the growth predicted and to the Swiss franc disclosure we have. But it has nothing to do with hedging or things like that, because our business is a dollar-based business, and euros.
We have a business which is at least until the gross margin naturally hedged, so also the main costs are in US dollars and euros. Down to EBIT, of course, we have an impact on foreign currency, because, for example, the salaries in Switzerland we pay, of course, in Swiss francs. Salaries in Sweden are paid in Swedish crowns. There are various other currencies which we have to deal with, anyway.
But this is not the major impact. The impact coming, you mentioned, is coming from the deviation between the rates used for the guidance and the effective development of the exchange rates. And to avoid this, although we had given the calculation measures, how to calculate what will happen if the currency rates are different, we now decided, no, we change this, and we'll have it at constant currency rates so that this deviation does not occur in the future.
Okay. Yes, it's Harold from ZKB. Three quick questions, please. And first, I mean, knowing now how your cellular business is performing, I think congratulations to your past results, no? I think with 60% of the business achieving those margins on group level is well remarkable. And now the questions. Now, first, regarding your approach to scale up your cellular business, is there any kind of timeline or probably some kind of stage gate process?
I mean, because if your geopolitical argument doesn't work, I guess you might be-- you might need to offer some kind of attractive pricing and potentially fostering a vicious circle, no? Second one is automotive. You highlighted CHF 1 billion lifetime value. What are the key components in this computation? Is it basically volumes of the OEMs that have been communicated? Third question: Could you comment on pricing environment? Probably, is there any kind of deflation you are seeing, while probably simultaneously facing price inflation from your, from your foundry partners? Many thanks.
Okay, to answer your first question, so of course, as every strategy, it's good to have a strategy, and it's even better to check it very regularly. So we will have a regular check in our scheduled annual review to see where we are and also decide if we need to change direction or if we keep direction or whatsoever. So that's nothing which is in... This I try to highlight. A strategy is, of course, shouldn't change every day, but it's absolutely natural in a dynamic environment that it requires regular checks, and this we will do so. The second question, I think Markus can answer best, right?
Yes. So thanks for the question. Also, to clarify, on the slide, I showed CHF 1 billion of opportunity value, not only for automotive, but also industrial. Remember, I showed the top OEMs, but also the industrial customers. Now, a funnel is typically developed by finding new opportunities that you're working on with customers to the point where the customer then decides for the business. And what I showed is the CHF 1 billion value of the business that customers have decided for us, not the whole funnel. Bu i t is a combination of automotive and industrial.
And your third question, well, that, first of all, yes, 2022 was a good year in terms of price negotiation, because at least for us as supplier, maybe not so. Maybe our customers would answer differently, yeah. But we also need to acknowledge that's not the normal in the semiconductor industry. So I clearly don't expect this to continue. But also, our suppliers are part of the semiconductor industry, and they have no intention to make us non-competitive, because that's also not a sustainable business model for them.
So of course, the discussions are different, but the mechanics of this industry is unchanged. This is what also I would say triggers a lot of innovation in the semiconductor industry, this continuous possibility to develop new products, which either do the same job at lower cost or have more functionality at the same cost. We are proud to be part of this.
Margnus, thanks. Anyone else?
Thank you. Rolf Renders from AMG . Two questions, please. Can you give an update on services? Because that was a relevant topic not that long ago. The other question is more for the Chairman: With this, let's say, refocus, how long are you planning to stay around? Not in life, I mean here, for u-blox, to be precise.
So sorry, give me, give me a hint, what? Now, you made me laugh. About... Ah, the services. Thank you. Well, the theme of today's Capital Market Day update was focus, innovate, and execute. And we decided also in the content to focus on our two biggest businesses. Now, our services businesses is a single-digit million CHF business, and we didn't do any deep dive what was going on there and how it's going on there, except that we said we want to use our service business to make our positioning business in this locate cluster even stronger. But we did not provide a deep dive to services. That's correct.
First of all, thank you that you give me only one question, because once you move from the operational to the governance to the corporate governance, you become a serial guy, one after the other. So the succession. Obviously, we have a succession planning at u-blox. It's governed by the nomination committee, and the nomination committee makes a proposal to the board of directors, and the board of directors obviously makes it to the shareholder meeting.
The current plan of the nomination committee is that I stay at least one additional year, and this in the sake of continuity. You have seen how we transitioned from Thomas Seiler to Stephan Zizala. It was smooth, it was organized, it was calm, and I have a very good cooperation with Stephan during this nine months that we had to, have to work together to get this strategy in place. I think the continuity should continue at least one additional year. And as you see, I love this business.
Just, you mentioned you expect overstocking to continue into Q1 next year. I mean, you have a very fragmented client base, customer base, and you serve many different markets, end markets. So how do you actually gather data in your sales organization to come to such conclusions that there is an overstocking? And where do you see this overstocking, in which end markets? You know, traditionally, you have been a company with very limited visibility due to the very fragmented customer base you have and various end markets. How has the intelligence gathering changed in your company under your reign since you introduced the head of sales?
So I'm going to answer, because it's more than a sales topic, on honestly speaking. Well, you're right. It's not so super easy. We cannot just go to 10 customers and ask for their forecasts or even look in their warehouses and know this. But we very clear, there's a very clear sign of overstocking, and this is how do customers order? And so you're right, I cannot say for 10,000 customers, what Markus mentioned, what is exactly in their warehouse. But if I look on the sum and I see, hmm, they are not ordering according to my theory, and if it's lower than the... and we see that they are still, on average, doing business, there is a stocking effect.
We did this estimate, what's going on. We also know what agreement we had in place for 2023 and what we agreed with those customer. This also gives us an insight, and those two factors we used to do this estimation. Now, going forward, I mentioned we see a normalization of the industry, and therefore, also the lead times are getting shorter. So there is not this huge visibility which we used to have in 2022 on customer demands. That's for sure also a correct observation.
And what we show there, or what I commented on, was not a guidance for the first half year or the Q1. It's the current assessment of the market situation and the business situation in a volatile environment, and we want—I mean, we wanted—to share this with you in order to be transparent how we currently assess this. So it's not facts that I know this will be exactly Q1, and this will be exactly Q2.
Felix, Felix Morger, Suva. Related to that, you announced a 10, larger than CHF 10 million, cost program or efficiency program. Can you provide more details, what is in there?
Well, on the one hand, it's very obvious. If we see a certain slowdown, of course, we want to prepare for this, yeah. And we came together as a team, and obviously, we already took some decisions where we take out costs and where we. And we also have certain measures which are in a feasibility phase, and certain measures which are ideas. So it's a whole new pipeline. But we came together and say: We don't let 2024 just happen and see what happens, and so we that we want to take whatever is possible without endangering our long-term strategy, and that's always an act of balance. In doing this, we came to this assessment that there will be a double-digit cost saving possible. We do not want to break it down to greater details at this point in time.
Well, Stefan Zahler, Zahler Capital. Just, one brief question, easy to answer. First of all, I greatly appreciate the increased transparency. I tried to find the Q1 2024 guidance, but I couldn't. When are you going to start with that tradition? Wouldn't now be the time to do that?
We will start with this tradition in Q1 2024. Anyone else? One more.
I would like to ask one more question. With all the new change of strategy, for example, could you make a kind of a, yeah, proposal or a estimation, the. How is called this, the earnings per share in the future, based on your business you have, approximately, only?
So you put my joker?
That's simple. No, this will mean to make a guidance for the future, and this will mean, we cannot make a guidance at this point in time, as Stefan already mentioned. So EPS is nothing else than profitability. If you know the number of shares, you could calculate the profitability, and then, then you are there. So, no, we can't.
Financial analyst, they do, right?
Yeah, financial analyst, they do. But if we do it, we are doing a guidance. That's the problem.
One more question, Aldris from Prudential. Do you have, like, medium- to long-term contingency plans for the foreign exchange situations that you are in? I mean, the market and the product pricing is in dollars, and the US is prone to printing dollars, and the dollar, if you look back 50 years in terms of Swiss franc, doesn't behave, you know, very well, and large part of your costs are in Swiss franc. So if you. As G&A, R&D, now?
In a large.
So, what's. How do you solve that?
No, the large part of the cost is not Swiss franc. The large part of the cost-
I know that.
Is material expense, so that's half of.
The overhead and the R&D.
The overhead in R&D is also, we have 75% of our employees outside Switzerland. So also, these costs are not in Switzerland. It's only the headquarters here. It's the roughly 200 employees in Switzerland who get a Swiss franc salary. But also, other costs in Switzerland are not in Swiss francs, are also in U.S. dollars. Partially of licenses we might have for, for software needed to develop or, machines we build, we buy, or we need measurement equipment, we need, are U.S. dollars, euros. So,
It's the problem with the Swiss franc is more a disclosure problem than a real cash problem to how dollar develops. So the business itself is a dollar business on the revenue side, and also more on the cost side. But of course, on the close, on disclosures, you have this big impact on dollar, because at one point in time, at least for disclosure, you need to translate all the dollars into Swiss francs, and then you have it.
Just to, just to explain, I, I was not talking about the sales, but about the margin profile. And that's-
Yeah, there, there
So you answered my question.
Yeah. The margin profile is also US dollars.
Sorry. Just, an additional question on maybe volumes and pricing. On the 10% growth, which you are giving out for the midterm guidance, I was wondering what kind of maybe pricing are you assuming, and what kind of volume growth are you assuming? Yeah, I was used to see pricing usually going down a few percentage every year, 5%-10% in the past, but we saw a reversal of that in recent times. So a little bit wondering, are we going back to price declines, and you have to have even above 10% volume growth to get to this 10%? Or is there something really changed in the market that you have more pricing power going forward and, yeah, we need less volume growth to achieve that?
So as our design and business is also, let's say, taking two to three years, right? To design in until we see the revenue. So there is some time, obviously, that we have to manage the pricing also, because we had very long lead times the last two years, right? So our material was bought on a high price. And also here, with the customers, they are very well aware of this. They know, okay, they can't expect such a big price drop. Of course, they would like to negotiate this. So there will be some normality. We see price negotiations going on, where customers say, "Hey, I want 5%, 10% price decrease." And that is, of course, a matter of negotiation, but it doesn't go from this year to next year.
But yes, prices are, and that is also what we see in the negotiation of, with our suppliers. Pricing will go down, but they are not yet at the normal levels.
Okay, thanks.
Did you see in 2022, overstocking already, or was it just a 2023 topic?
Sure. So the crisis started actually earlier than 2021, right? So it was kind of middle of 2020 or second half of 2020, where the crisis actually started, and customers couldn't really get the products and started ordering. And also, some of the overinventory started from the time where, you know, there was the golden screw aspect, so you couldn't really finish basically the product. So it's not just high inventory, you know, that that is there. It's actually products were built to the point where they couldn't be where they couldn't be finished. So it started actually earlier than 2022, where some kind of stocking was happening when products couldn't be finished.
Maybe you heard also of cars being, you know, whole parking lots standing of cars that couldn't be finished. So again, there was a question before on overstocking by industry. So the car industry there is a little bit different than the industrial sector , but it takes some time. It's like on the autobahn, right? You will sometimes wonder, okay, where is this traffic jam coming from, right?
And that is a situation that we're in. It will start, it will take some time until the traffic jam is actually released. And that is what we are seeing there: customers have inventory, we have inventory, and that is going to be changing in 2024, as Stephan has outlined.
Okay. So do we finish here? Any more questions? If not, I understand there is no question from the phone, so all the questions were here. Stephan, do you wanna finish?
Sure. So obviously, now I need to say, you did obviously an excellent job asking all the questions, also relevant for the people on the call, which were around 100. So thanks a lot for following up with those questions. What I would like to say is, we are going on the road, so please contact our investor relations team. We are happy to follow up, and we really think that's well invested time, because I think it's important that you understand where we are going strategically.
So don't hesitate, reach out for us. Some of the days we are pretty booked, some other days we have a bit more space, but we will find the time. Contact our investor relations team. Now, last but not least, I would like to thank you for coming here, also joining on the webcast, showing your commitment into u-blox. I highly appreciate this. I hope we could bring more transparency in what we are doing and why we are doing, and especially where we want to go, and we are happy to see you again very soon. So thanks a lot for today.