... I'm gonna turn up the lights.
Okay, great! Is this on? Thanks, everyone. Chris Danely, your friendly neighborhood semiconductor analyst here at Citi. It's our distinct pleasure next to have up ADI, Analog Devices. We have Rich Puccio, the CFO. ADI is one of our favorite companies, and we think that, you know, one of the reasons or a couple of the reasons why we like the stock so much is you, you kinda get the best of both worlds. As we've seen at this conference, there's a lot of cross currents going on out there. I leave it to Rich to sort all those out, the Oracle of Boston.
But, you know, whether or not we have this continued upturn and things get even better, ADI has the leverage, as evidenced by, I think they've had the best revenue growth of any of their peers this year. On the other hand, if these macro issues do continue, and we have a little bit of a pause in the upturn, ADI has the high sustainable margins and generous free cash flow to prevent any or minimize the damage from that. So you get the best of both worlds, at least that's what I tell people. Anyway, so Rich, thanks for coming.
Thanks for having me.
You know, you guys, are probably one of the more recent companies to report. So if you could just give us a brief recap from, I think it was two weeks ago, the conference call, and then we'll dig in from there, and again, thanks for coming.
Appreciate you having me. So, you know, for us, and we've been talking about this for a while, we were pretty confident that industrial was gonna lead our recovery back out of the cyclical trough. Rewind back to, you know, our Q2 of 2024, you know, we felt like we had hit the bottom of the trough, and we expected that we would start to see some re-acceleration in the business, you know, with some modest sequential increases in the back half of 2024.
And then as the cyclical and idiosyncratic drivers for ADI started to play in, we'd see more growth. And that has, in fact, started to play out. You saw in our results, very strong quarter, growth led by our industrial business, which is important. That is the bedrock of our business.
It's also the most profitable part of our business, and it has grown strongly, and we expect that it will grow again in Q4, which will be, you know, pretty far above typical seasonal for us to see as much growth as we've forecasted into Q4. You know, and that's a really important part of our business. And one of the things, you know, as we've worked through this cycle, and I think a little bit of the chop that we've all seen, is not all of the subsegments, whether it's in industrial or our end markets, have followed the same pattern, but for us, we've gotten to the point now where all of our end markets and all of our geographies are growing on the industrial side, and we feel really good about some of the...
We'll talk more about them as we go, I'm sure, some more of the idiosyncratic things at ADI that are helping us grow, in addition to some of the cyclical pieces. You know, obviously, we had you know a really good overall result. From an end market perspective, you know, the only thing that was a little bit different, which we've talked about now for two quarters, is we did have a little bit of incremental pull-in activity that we think is gonna correct in the Q4. You know, we've had two quarters now, and they were a little bit different.
So if you remember the conversations coming out of our Q2, we thought we saw auto pull-ins and estimated that in Q2 in North America and Europe, and then in Q3, we saw some incremental pull-in activity in China. So when you look at the opposite of the strength we're seeing in industrial for 4Q, we will see a sub-seasonal quarter from an auto perspective as we get that correction behind us, but we still feel really well-positioned. And 2025 will be a record year for us from an auto perspective. You know, obviously, we continue to have very strong consumer results. We've talked about the broadening of our portfolio of sockets there, and we've continued to have new wins ramping in that space.
Feel really strong across both, you know, handsets, hearables, wearables, gaming devices, so that's been a strong part of our business. And then you look on the communication side, which for us is, you know, wireline and wireless. On the wireline side, we've continued to see really strong growth in support of the data center.
You know, because in the data centers, you know, we're selling in our optical modules and connectivity, and we're also selling in, you know, power management products and for hot swap power management, et cetera. So that's been a really strong market for us and growing very rapidly in the back half of the year. So that leads us to, you know, where we feel pretty good about where we are in the end of quarter and heading into the 4Q.
We've, you know, as we've talked about a little bit, you know, we are seeing the signs of the cyclical upturn that we've been talking about happening for us, right? We're, you know, now multi quarters into pretty, pretty strong growth.
Mm-hmm. If we sort of take out the pull-in volatility, maybe talk about like how the recovery in your core business has gone, the other 95% of it. Maybe start with, you know, at the beginning of the year, a lot of uncertainty out there. You guys were one of the first companies to talk about, "Hey, business is getting better, bookings are getting better." I remember you were first to talk about the industrial business stabilizing a year ago, where you said, "Hey, half of our industrial business is starting to get better and the other half is not." And then pretty soon it was, everything is better. So, maybe just if we X out the-
... the pull-ins, we'll talk about that in a little bit, but your core business, how that sort of trended this year, starting in, I guess the Q1 or the first print.
That was a great tee up. You know, we were really leaning hard on two parts of our industrial business, in particular, where we've talked about we had real strength in our aerospace and defense business and real strength in our automatic test business. So those two pieces of our business were very strong from the get-go. And as you think about those, right, the aerospace and defense has been a good market, and all of the external economic data and reporting about the increased spend, military and otherwise, you know, as Europe rearms itself and other parts of the world start doing that, you know, we feel really good about where we're positioned there for currently and going forward on aerospace and defense.
Then again, tied into this huge infrastructure boom is on, on the ATE, you know, all of that infrastructure requires high bandwidth memory, high-performance compute, which requires more complex testing, which means more content for ADI in the testers, and we have a very strong share in testers. So that was the initial part of the growth.
Right? And then as we started to progress into the year, and I talked about automation in a couple of quarters, we started, the automation started to turn, and automation has now grown two straight quarters. We are seeing growth in our digital healthcare businesses, and we're also seeing growth in our any peak energy management area. So across the industrial sub-segment, you know, we feel like we've done really well, and that's the idiosyncratic piece. Also, if you think about it from a cycle perspective, we were out in front of reducing inventories pretty quickly. So we've been reducing inventory both in our channel and in our customers for the better part of two years now.
And I think that positions us really well because we are, you know, at the, you know, some of the lowest channel levels we've ever been. We're well below our sort of historical seven-to-eight-week channel model, so we feel good about where we're positioned there. And the work we do to look at what's on our non-disti customers' balance sheets from an inventory perspective, you know, that has, you know, the signs there are that has normalized back down to levels, and we see it in the orders, net new orders for some of those customers coming through.
So we feel good there, and I still think there's room to run because, you know, if you think about the sort of consumption line, you know, assuming that industrial business would typically, you know, grow 5% or 6% CAGR over any period of time, if you run that line out from pick your starting point to where we are today, even with the strength of the industrial recovery, we'll still be below that trend line. We're also still 30% below our peak in industrial.
And I think that's an important thing. So I think that we continue to see room for us to grow, given we're below that, still below the trend line and below our peaks. So I think that's an important piece on the industrial side. And other than auto, all of our businesses are still below their peak values.
Yeah. By the way, we had a couple companies talk about how strong the aerospace and defense mil aero business is. How big is that for ADI? Is that like double digits % of revenue?
Aerospace and defense is about 20% of our industrial.
Oh, 20% of industrial. Got it. I'll take it. All right, so maybe just talk about, since you guys just reported the linearity of bookings last quarter, did you see, like, a steady increase, or was it a little more volatile? How'd that go last quarter?
Our booking was pretty linear, you know, obviously, increasing. And whether you looked at it on a four-week trailing or a 13-week trailing, or you looked at the actual just weekly bookings- ... you know, that was a, it was a pretty linear progression throughout the quarter. You know, obviously, stronger on the industrial side, you know, as we've talked about, and probably a little bit weaker on the auto side- ... given what we've talked about previously, but pretty steady.
Another one of your competitors talked about the automotive-
I got to get on this first, so you can't compare me to everybody.
That's kind of the object of the conference. We're happy to put you on anytime you want. So they mentioned that while the automotive order rates to the semis are down, like, the end demand for autos is still pretty good, and they're just working through some inventory. Is that pretty much concurrent with what you guys see out there, and any guess as to when the automotive supply chain will be through digesting the inventory?
It's interesting, if I use what we see in our business, you know, we never got as far out of place on inventory in automotive as maybe our other end markets.
Yeah.
But also with what we've seen in the area where we continued to see some inventory burn, which had an impact on us, was the BMS part of our auto business. But if you look across the rest of our business, you know, I don't think other than this correction for the anomaly in the pull, and you know, I don't think there's still a big inventory burn there.
And, you know, an important part of that auto story for us is the continued content gain, right? Because if you look at our business over, you know, pick any a ten-year or a five-year window, our auto business outgrows our-
Yeah
... by low double digits. So, and what's interesting, and you probably all see this, anybody who's bought a car recently, whether it's a high-price car, low, or medium, there's more and more content. And so with our leading positions in, in connectivity, whether it's A to B or GMSL, functionally safe power, all of this in-cabin immersive experience, the level 2 ADAS that's being pushed into cars, those are all real content gains for us.
Yep.
And so that 10% content gain that we got over a ten-year period-
Mm-hmm
... if you actually bifurcate that and look at the last five years, it's actually almost a 15% spread. Now, it's a combination of content gain and some share gain, but a big piece of that is the content gain because we're continuing to see more sensor modalities and more microphones, cameras, speakers, et cetera, in cars that need connectivity and functionally safe power. So, you know, I think that positions us well in that market.
Got it. Yeah, just to touch on the industrial revenue, I mean, it's really, it's bouncing back pretty hard for everybody, but in particular for Analog Devices, but this is a fairly common theme we've heard throughout the conference. Why do you think industrial is coming back so strong? Do you think it's just because for most folks, it was down 40-something%, and we have to do some inventory replenishment. Has demand gotten a little bit better, some combination, something else out there? What's your sense as to why it's been so good? And you said it was still 30%-
On a trailing twelve-month basis, industrial is still 30% below our peak. I do think an element of this is it was the most severe inventory correction we've ever seen, which, you know, and it lasted longer than we've typically seen a correction.
Yep.
And I think companies leaned out their balance sheets, but as the industrial piece starts to pick up. Now, look, the macro signals are still mixed around industrial. But the build for the rebound for us has been pretty strong, and I think that the inventory treatment has varied by customer, by-
Yeah
... vendor, and by end market-
Mm-hmm
... which is a little bit of that choppiness that we're seeing.
Yep.
But I still think the majority of that is because of the severity of the inventory overship during that run-up after the supply chain breakage.
Because your industrial business has bounced back so hard, has there been any change in lead times of any of the products? Have you started to run out of anything out there?
The majority of our products are still running lead times under thirteen weeks. You know, Vince talked about on the call that we had some longer lead times in a few spots, you know.
Yeah
... particularly in aerospace and defense, which we, you know, expect will get corrected over the next quarter. but otherwise, you know, we haven't seen any significant deterioration in our lead times. You know, I think in a few of the high runners, maybe in ATE, we might be a little bit longer than 13 weeks on some of the parts-
Mm-hmm
... but the majority of our parts are under thirteen-week lead times.
Okay, um-
which is, you know, it's great. It's also one of those limiting things from a visibility perspective for us-
Yeah
... because we are at thirteen weeks.
Yeah. We'll get to visibility in a second.
All right.
One other thing that Vince did talk about was this macro uncertainty, and you mentioned it. Can you guys just define that a little bit? Is it just the whole tariff thing? Is it what you're hearing from your customers, what you're reading in the paper, all of the above?
So I would say a couple of ways, and it's uncertainty both ways because it's the tariff and trade uncertainty. And for us, you know, and we've talked about this before, the tariff and trade uncertainty is less about the direct impact to us, right? The impact of tariffs as they exist today is pretty nominal for us. But what it does matter is, what is it doing to GDP, and what is it doing to demand creation slash demand destruction? Because our products are in a lot of end markets where there are tariffs already.
Yeah.
And does that drive down demand, and what does that do to GDP? That's certainly an uncertainty, and that clouds the picture because two of the largest economies in the world are still in negotiations with our administration around the trade policies, right? So we still don't yet know where China and India will land on this spectrum.
Yep.
We've still got some potential, even additional tariffs in our space specifically to come.
Mm-hmm.
Right? So I think that's a level of uncertainty. Second piece, I mentioned a little bit, you know, if you look at, which for us, industrial is a really good barometer for us. The PMIs have been choppy.
Mm-hmm.
Right? They're hovering around 50, but we've had a couple of months of contractionary PMIs. So, you know, you've got to pay attention to that because it does... You know, it has historically been a leading indicator-
Yep
... for where we're headed. The other piece is uncertainty around SAAR, right? The number of vehicles are going to be produced.
Mm-hmm.
You know, you look at the pressure, the rebates being removed in the US, the tariffs and the impact they're having on auto demand, and it's unclear what auto production plans might look like in 2026.
Yep.
Now, I feel good that we'll, you know, be able to get more than whatever SAAR is because of content, but we still don't have a good look in SAAR. So those are some of the things from a challenging macro perspective. The flip side is, given some of the other macro data and the pressure that's now on the Fed, you know, we might see rate decreases, which the market's been pricing in a little bit, and there's a lot of anticipation for that.
Mm-hmm.
That could be positive. And if we can solve in the next, you know, three months, or between now and the end of the year, the remaining tariff things, getting some certainty will help us better shape the outlooks for twenty-six-
Yep
... broadly across our industry and our customers' industries.
If we look at auto versus industrial, longer term, which end market for ADI do you think will grow faster, let's say over the next, like, three, five, ten years?
It's a great question. I mean, industrial is the core of our business. It has and it is our most powerful franchise, you know, and I think if you look at, you know, some of the continuing opportunities there where we see growth, you know, whether it's the AI-driven, whether it is the trend in automation and robotics, you know, I think we'll continue to grow very strongly on the industrial side.
Okay.
Um-
Great. And then in terms of geography, you know, there's this whole China for China fear. Well, the last I checked, that's been around for, like, twenty-five years since I got into the business. How does that impact ADI, if any, and how has your China business trended this year?
Our China business has trended strong. It was the first into the downturn for us. It was the first out, and it has grown strong across all of the markets. It's been your strongest very, very dominant from a growth perspective on the auto side. But now, you know, more broadly, you know, as the year progressed, you know, all of the markets in China are growing. But that's also an interesting point for us is we're still below peaks in all of the end markets in China, except for auto, and well below, at least 30% below in each of the other ones. Auto has been super strong, but we're still well below peak in the others. And the competition there is strong, but we continue to deliver and win there.
Yeah.
Look, we do a lot of those things, right? We have a design team in China that designs in China for China. You know, we do have some small manufacturing, you know, through a partner in China. But what we do today from a China perspective is, you know, very low percentage is actually manufactured in China. But, you know, from a performance perspective, you know, where they need the highest performance products and they still need analog, they're still buying from us. You know, even in places where they've tried to push and get locals, you know, at the high performance end, we're still winning.
So I think that's an important differentiator for us, is we tend to play more in the high performance and less in the good enough, sort of low ASP area. The low ASP bands are not a big part of our business.
Yeah, yeah, you guys are, thankfully, you're not there. So just to dig in a little bit on the auto space, you know, and your industrial business has basically done the Statue of Liberty move this year. How's the auto business trended? And then I just wanted to clarify, have the pull-ins, have they been all in the auto business or has it been in other businesses?
So we have not seen. Look, it's impossible to be perfectly precise-
Your crystal ball's way better than mine, so I-
People don't call and tell us they're pulling in orders. But we saw pretty clear signs, both in our data when it was, you know, around bookings and what we were hearing from our field teams around the pull-ins in auto.
Yeah.
You could see it, you know. We overachieved in Q2 in two regions in auto that we didn't expect, which was the U.S. and Europe.
Yep.
China's been strong, and we weren't expecting it to be as strong in the Q3. So that was, you know, confirmatory evidence to what we heard. And we do think that sorts itself out here in the Q4. But overall, you know, it continues to be a very strong growth market for us. We feel very like we're very well positioned. You know, we had. And if you want to, you know, think out more medium long term, you know, we had record design wins in China in 2025, and we continue to see increased design wins in China again, sorry, record designs in 2024 and increases in 2025. And so we feel like we're very well positioned there in the market broadly. And we like the growth trend we're seeing there.
Okay. And, you know, with the business getting better, how has your visibility changed? Are you seeing, like... Are you allocating for, like, less turns in general? Have you seen your turns business increase, and has your visibility changed at all for, say, three, six, or nine months versus, you know, last quarter, the quarter before?
So I would say visibility hasn't really changed much for us. You know, we're probably-
So lead time is still flat?
Because of the relatively short lead times or in quarter lead times, visibility is still largely out of quarter. Do we have some order book in backlog that's beyond the quarter out? Yes, enough to give a concise point of view on where a quarter beyond where we are now. We just don't have that kind of data, given the short lead times and the way customers order.
Mm-hmm.
And then what was your second part of that question?
Oh, just about backlog.
Oh, yeah. So we do have some backlog, but we've, you know, one of the trends we've seen overall at the company is, last three quarters, we've seen increasing backlog.
Yeah. Yeah. Great. One question is pricing. So there's been some reports of one of your larger competitors raising pricing. Are you guys raising pricing, too? Is this an opportunity to gain share? What's that mean for ADI?
I won't comment on what my competitors are doing. You know, what we've said, and Vince actually said it again on the call, is pricing for us has been pretty stable, right? We had a lot of price increase in 2022 and 2023. 2024 and 2025 have been pretty stable from a pricing perspective. That said, we've invested pretty significantly in resiliency in our hybrid manufacturing process-
Yep
... which come, which comes with a cost. Also, broadly, many of the inputs are inflationary, so we continue to track and monitor that and the market to evaluate whether we should alter our pricing. So we will continue to watch that, but right now the forecast is for stable pricing.
And how are you guys treating your own inventory and your own utilization rate plans? And I think right now you're fifty-fifty in-source versus outsourced-
We're about-
-manufacturing.
Yeah, we are about split half internal, external. You know, from our inventory perspective, and I started talking about this a few quarters ago, maybe it might have been four quarters ago, that we would start to build back some after very aggressively taking inventory off our balance sheet-
Yeah
... we've started to build back some of that so that we have inventory available to capture what is turning out for us to be the cyclical upturn. So we are doing that. Now, you see our days are coming down because of the revenue growth, but we still put another $70 million of inventory, and we're trying to capture as much of that at the die bank level to give us more flexibility going forward, you know, as we see the growth. We are continuing to run our channel very light, well below our historical levels, and we are continuing to be able to meet the service obligations as is our channel partners. But if we continue to see growth there, you know, we will likely need to have some more inventory in the channel.
Can you give us a sense of ADI's inventory now and what the goal or the target is?
So, currently we're running under six weeks, and I think that we probably, you know, we will need over the longer growth period to get back probably closer to something six weeks or six weeks plus.
Okay.
But I don't see us getting much higher than that, given what we've done on the back end, 'cause our back end cycle time is about six weeks.
Are there any plans to change that fifty-fifty mix, by the way, in terms of internal and outsourced manufacturing?
... Not right now.
Any difficulty getting any wafers, given the increase in sales, or can you guys pretty much get what you need on the factory side?
We have not had any kind of challenges with wafer supply.
And how about, I ask every company this, 'cause it's obviously in the news. There seems to be a move to get more manufacturing in the U.S. by the semiconductor companies. I'm sure you've heard about that. How does that impact ADI? Does it impact ADI?
We already have a pretty substantial portion of our manufacturing in the U.S., so if you think about our manufacturing footprint, you know, we've got two factories on the West Coast, in Washington and Oregon. And in fact, when we talked about the resiliency build that we were doing, a big part of that investment was in our Oregon fab. So we've got significant manufacturing in the West Coast, and then we've got two manufacturing locations here on the East Coast, specifically in Massachusetts. And then, you know, you guys know the rest of the story. We've got manufacturing in Ireland, and then we've got, you know, back end spread across a number of facilities.
Yep
... in Asia. And so, you know, if you think about the push for domestic, we are already building pretty significantly. In addition, we continue to expand, not just the manufacturing, but R&D presence. We're, you know, adding design centers in the U.S., and these are all the things that, you know, the administration is looking for, right?
Mm.
Because the design leads to more manufacturing and more things happening in the States. So we feel like our hybrid model and our global diversity positions us pretty well.
Yeah. So I would be remiss if I didn't start asking a CFO up here about cash and all that fun stuff. But first, I wanna take a bit of a step back. You know, you guys have been very successful in M&A. This is pre-Rich days, but starting with Linear and then with Maxim. I remember when you guys first bought Maxim. I think it was five, six years ago. You talked about synergies from a cost side, which I would assume are all done, but also from a revenue side.
Sure.
We haven't talked about that in a while. Any update on-
Sure
... those?
So when we talked about what we said at the time of the acquisition is by 2027, we'd have about $1 billion worth of revenue synergies out of the Maxim deal. So 2024, we, and if you think about the typical design and life cycle, you know, it was gonna take us a few years to get there. 2024, we had tens of millions of dollars of what we would have called synergies. 2025, we will have hundreds of millions, and we are on track to hit the $1 billion. And so if you think about, so what are those, some of those synergies? You know, GMSL, which has been one of our high growth, very high growth products, one of the key synergies that came from that deal.
The other is, if you think about some of the things we've talked about in the wins in the consumer space, where you combine Maxim's low-power features with ADI's ability to do vital signs monitoring and sensing. You know, and how that's impacted our ability to sell in the hearables and wearable space. Some of the Maxim power is helping us do the things we're doing in the data center. So we're, you know, across a number of parts of our portfolio, we're seeing those synergies come through. And, you know, literally, my team and I meet quarterly to review where we are against the $1 billion, and we are on track for that $1 billion.
In twenty-seven?
Twenty-seven.
Great. And then can you just refresh us on the long-term margin targets for ADI, and then the, I guess, the portion of the gross margin leverage you get from mixed utilization rates, et cetera, et cetera?
Sure. So, when my predecessors put out the model, the operating margin number was, I believe, 42%-50%, and the gross margin was, we would try to stay above a 70% floor.
Yeah.
Which we know was a challenge during the downturn, although I felt pretty good, we were able to hold, given the severity of the downturn. And as we talked about on the call, we're guiding, getting back to 70%, in our Q4. And there, you know, there's a couple of drivers there, particularly if you think about it, the gross margin line, where we get a ton of leverage, it's our mix-
Yeah
... and it's the utilization and what it does to our variance accounting. Think about the mix. If you take our guide for Q4 industrial, you know, we'll, we would end with that guide at about a 40%-49% industrial mix-
Yeah
... for the quarter and maybe 46-ish for the year, which is still well below our peaks. When we were at our highest profitability, I think the industrial was more like 53% of our business.
Yeah.
But every, you know, the increase in industrial for us is more gross margin accretive. The other thing is just the sheer volume increase and the utilization improvements, driving better absorption in our internal factories, which we're seeing both. You know, if you go back to the peak and where we dropped to in the trough, you know, it was roughly half each. Half was utilization driven, half was mix driven.
Yep.
So as the mix rebounds and utilization rebounds, we continue to see upside gross margin opportunity.
Great. So yeah, here we are, kind of bouncing off the bottom, and you guys still generate a ton of cash.
Thirty-five percent-
Yeah
... cash flow margin.
For those of you keeping score at home. What are the plans to deploy the cash? And then, you know, could we see more M&A, given the success you guys have had previously?
So what we've told our investors is we will return over the long term, post-tax over the long term, 100% of our free cash flow to shareholders, and we are on a path to do that. And the way we allocate that is roughly 40%-60% of our free cash flow goes for our dividend, which for those of you paying attention, we've increased again this year for our twenty-first straight year of increasing dividends. And then the residual we will use to retire shares. And you saw a pretty aggressive step-up in share retirement and buybacks in the Q3. And that's a planned activity. We tend not to buy as much back during our Q2, given the dynamics in that quarter, so we will continue to do that.
The other thing that you and I talked about this when we were chatting yesterday, you know, we did do an opportunistic bond offering earlier this year. The markets were very constructive, and we were able to actually do a really good deal to essentially pre-fund our next two maturities in our debt tower. Not that different from what we did months after I started originally. We did a bond offering to retire the two tranches we just retired, late 2024, early 2025. So market was favorable, gave us an opportunity to de-risk it. So that's a little bit why we have a bigger gross cash number than we've had in the past, is capturing that, and it's on our balance sheet.
And fortunately, we're able to invest that at yields that, you know, is a pretty neutral cost, having done that. So that's a good thing. On the M&A front, look, we are very satisfied. Vince says the same thing. Very satisfied with our analog, mixed signal, and power portfolios. We are continuing to aggressively invest internally in software and digital and AI, and we continue to look for opportunities there. So, you know, there are anywhere we can find something that can help us solve a customer problem, accelerate time to market with a solution, we're looking at those types of transactions. So we will continue to look at that.
Great. And then, since I have the CFO, touch on the CapEx and depreciation over the next few years.
So obviously, we went through a significant resiliency campaign as we were building out our hybrid model, and we spent about $3 billion on CapEx between 2022 and 2024-
Yep
... to build out that resiliency and also to cross-qualify our products internally and externally, and to make sure we had resilient supply chain outside of China. So that work is largely complete. Some of the resiliency will get fully completed when we get our capacity online with TSMC and Japan.
Mm-hmm.
which, you know, will be really important. We'll be able to do 95% of our manufacturing of product outside of China and Taiwan.
That's two years from now?
Yeah. So that was really important. Now, we've also said we're getting back on our long-term model, which, and for us, we're historically CapEx light. That means 4%-6% of our revenue dollars will go to CapEx. You know, we're tracking to that 4%-6% for 2025, which you know is another reduction from where we were in 2024.
Yep.
And 2024 was a very significant reduction from 2023. Now, what that has done, as you guys are all great at math, is that resiliency campaign increases the level of revenue we need to get back to the margins we saw in the earlier peaks.
Yeah.
Right? You know, roughly, you know, you guys can go figure out $30 million in average depreciation lives. You know, it's, you know, it's at least 150 basis points ahead when-
Yeah
... from a depreciation perspective, coming through from resiliency campaign.
When does depreciation peak for ADI?
It's a great question, and I don't know the answer when it peaks.
Okay, last question.
Mm-hmm.
Would it ever make sense for you guys to do your own 300mm fab, or because you outsource 50%, is that-
We have incredibly strong partnerships, which gives us confidence that we don't need to do that. It's also an incredibly expensive, incredibly CapEx-heavy-
Yeah
... process. I am quite happy to use my partner's capital.
Got it. Great, we're out of time. Thanks, Rich.
All right.
Thank you, everyone.
Thanks, Preston.