Ladies and gentlemen, thank you for standing by, and welcome to the Alpha and Omega Semiconductor Fiscal Second Quarter 2021 Earnings Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Mr. Gary Dvorchak.
Thank you. Please go ahead, sir.
Good afternoon, everyone, and welcome to Alpha and Omega Semiconductor's conference call to discuss fiscal 2021 Second Quarter Financial Results. And Gary Dvorchak, the Investor Relations representative for ALS. With me today are Doctor. Mike Chang, our CFO Yifan Liang, our CFO and Stephen Chang, our President. This call is being recorded and broadcast live over the web.
The replay will be available for 7 days following the call via the link in the Investor Relations section of our website. Our call will proceed as follows. Mike will begin with strategic highlights, then Steven will provide business updates and a detailed segment report. After that, Yifan will review the financial results and provide guidance for the March quarter. Finally, we will have the question and answer session.
The earnings release was distributed over Wiley Services today, February 4, 2021, after the close of market. Release is also posted on the company's website. Our earnings release and this presentation include certain non GAAP financial measures. We use non GAAP measures because we believe they provide useful information about our operating performance and should be considered by investors in conjunction with the GAAP measures that we provide. A reconciliation of these non GAAP measures to comparable GAAP measures is included in the earnings release.
We remind you that during this conference call, we will make certain forward looking statements, including discussions of the business outlook and financial projections. These forward looking statements are based on management's current expectations and involve risks and uncertainties that could cause our actual results to differ materially from such expectations. For a more detailed description of these risks and uncertainties, Call. Please refer to our recent and subsequent filings with the SEC. We assume no obligation to update the information provided in today's call.
Now I will turn the call over to our CEO, Mike, to provide strategic highlights.
Mike?
Thanks, Gary. I would like to welcome everyone to today's call. I'm excited to be speaking with all of you again today and to report an excellent quarter and finish to calendar year 2020. In December quarter, we saw solid shipments across most of our product categories leading to result ahead of our expectations. We grew revenue by 35% year over year to $159,000,000 We achieved high utilization at our manufacturing facilities.
We continued to be disciplined with our spending. All of these led to record in non GAAP gross margin of 31.4% and a non GAAP EPS of $0.65 Eeva will go into more detail on our financial performance later. I'm really pleased by our team execution. The operational control and efficiency that we have implemented are possibly impacting our bottom line. For investors who may be new to our store, This mission drives our strategic focus and the work we do.
Computing has been a core market for us, We have successfully diversified our business by expanding into other market segments, including consumer, communications, power supply and industrial. Our strong engineering team and technical expertise enable us to develop a broader variety of power discrete and Power IC Technology Platform. This positions us to expand our product offerings and deliver complete power solutions for more targeted applications. On the manufacturing front, We continue to ramp our capacity at our JV fab in Chongqing. This provide us with platform capacity management and geographically diversified our supply chain, which is critical to supporting our growth for years to come.
Yifan will update you on the progress of the JV fact in a few moments. I'm proud of what our team has accomplished and the groundwork we are laying for long term and sustainable success. Obviously, we faced tremendous challenges in current year 2020, including the global COVID-nineteen pandemic, trade conflict and political and social unrest in different parts of the world. Despite these challenges, We made significant progress toward achieving our target of $600,000,000 annual revenue for calendar year 2021. We did this by developing healthy pipeline of new products, new design wins and the new customers.
Now I will turn the call over to Stephen for an update on our business and a detailed segment report. As you know, we recently promoted Stephen to present. He will now be responsible for all day to day operations of AOS. My role will gradually transition to a higher level leadership role, overseeing strategic disruptions. Steven has done an outstanding job at AOS over the years, and I am fully confident in his ability to lead AOS in the next phase of rapid growth.
Stephen, the floor is yours.
Thank you, Mike, and good afternoon, everyone. I will start with an update on our business and then provide detailed segment highlights for the December quarter. Our business momentum has accelerated over the past several quarters due to our advanced product portfolio, marketing strategy and growing production capacity. As we stated previously, Our strategy is now to create advanced total solution products in close partnership with our customers. These products leverage our expertise in power and move beyond commodity parts into multi socket optimized solutions and make our customer products more reliable and efficient.
For example, our recent design wins in a gaming system and in a new PC graphics card platform as well as our high growth in home appliance applications and battery protection solutions demonstrate how we have deepened strategic partnerships with Tier 1 global OEM customers. We expect to accelerate growth by winning new customer engagements with an expanding pipeline of new products and increasing FOM content. Of course, our large global customers would not partner with us if we could not deliver our solutions at scale. As you know, we have been ramping production at the JV fab in Chongqing. Supply from the JV fab has enabled us to win new large scale customers, while also regaining market share at others that we were struggling to supply.
We have crossed several milestones at the JV fab, which Yifan will elaborate on shortly. In addition to the traction we are gaining from the successful execution of our strategy, we are also blessed with strong industry tailwinds. Industry wide supply is tight as demand remains strong across the various market segments, including computing, consumer and communications. We are on allocation as well and are optimizing our operations, product mix and capacity allocation to key product lines. We are closely working with our strategic customers to meet their procurement needs.
Our customers appreciate our commitment Enabling the growth and executing on our mission. Now let me provide a detailed review of each of the business segments. Let's start with Computing. Revenue was up 32.9% year over year, representing 40.7% of our total revenue. Revenue was down 2.3% sequentially after an unusually strong September quarter.
Graphics cards were strong, while demand for PC related products declined seasonally as we pass the T field for the Western holidays. This momentum in computing is a direct result of our strategy of partnering with our customers to create total power solutions, which increases our content. Looking ahead, we expect overall computing revenue to return to sequential growth in the March quarter. We expect solid demand at our ODM customers attributable to ongoing work from home and remote learning trends. This will be partially offset by a slight decline in graphics card shipments due to the Chinese New Year holiday.
While we are on allocation, We expect to have sufficient capacity to resume sequential growth. Moving on, the Consumer segment was up 67.3 percent year over year, representing 22.3% of total revenue in the December quarter. Like computing, consumer revenue also decreased sequentially by 3.4%, which was expected when comparing to the strong September quarter. Home Appliances drove growth in this segment as a key strategic customer in Korea ordered high volumes of intelligent power modules. In contrast, our new gaming console customer reduced its build plan in response to shortages of other system components.
This enabled us to redirect some production to support other customers and products. Gaming is anticipated to resume growth in the March quarter. We are excited about this gaming customer as it shows the strength of our strategic supplier approach. In their console, we have multiple sockets covering several of our products, including power ICs and MOSFETs, a great example of how we can drive growth through greater percentage of bond. We expect this segment to decrease double digits, primarily due to the seasonal decline of TV business and a decline in home appliance business due to a delay in supply.
These declines will be partially offset by meaningful growth in gaming. Next, let's move to the Communications segment, which was 17% of total revenue in the quarter, up 32.5% sequentially and up 27.9% year over year. This segment played out as expected, driven by the strong demand for battery protection during the peak build season for one of our global smartphone customers. We also grew revenue from China based smartphone customers in the December quarter. As we passed the peak build, We expressed a sequential decline in the March quarter.
However, our long term outlook is solid as we have broadened our battery protection design wins and multiple customers globally, and we are supporting this overall growth from our towing JV fab. Finally, let's discuss the Power Supply and Industrial segment, which accounted for 18.2% of total revenue. This segment was up 15.4% sequentially and up 14.3% year over year. The solid growth was due to two factors. 1st, the chargers were exceptionally strong due to demand for travel adapters used for tablets as well as the shift in China from 60 volt to 100 volt.
Sequentially, we doubled shipments of 100 volt products. Meanwhile, we regained our market position in both cost effective 60 volt quick charger solutions and at a power tool customer. The recovery was due to our ability to supply those customers from the JV fab. Looking ahead, we see continued strength into the March quarter and expect this segment to be up single digits as quick charger remains strong and ACDC continues to grow. Overall, I am excited by the momentum we are seeing in our business.
We have a strong pipeline of design wins with our major customers. Our strategy to focus on more differentiated product solutions that have higher value and margins is paying off, and our operational discipline is adding leverage to our model. I am very encouraged by our execution and the progress we are making towards a stronger future for ALS. With that, I will now turn the call over to Yifan for a discussion of our fiscal Q2 financial results and our outlook.
Thank you, Stephen. Good afternoon, everyone, and thank you for joining us. Before I dive into the financials, I want to highlight some key milestones at the JV Company, which Stephen alluded to a few minutes ago. We started the construction of the JV company 4 years ago as we anticipated additional capacity requirement based on our longer term growth plan at that time. The 12 inches fab commenced its production in July 2019 and Assembly and Test Facility started a bit earlier.
The JV Company's production ramp in the past year has played Significant Role in Our Recent Business Growth. In the December quarter of 2020, The JV Company achieved a positive EBITDA for the 3rd consecutive quarter. We are very encouraged by the progress the JV Company has made in this production ramp. Beginning in the December quarter, we no longer report the production ramp up cost as a non GAAP item. We expect the JV company to generate another sequential volume growth in the March quarter and approach the Phase 1 target run rate in the September quarter.
Beyond Phase 1, The JV company will provide us with flexible capacity management and geographic diversification of our supply chain. Now let's turn to financial results. Revenue for this December quarter was $158,800,000 up 4.8% from the prior quarter and up 34.8% from the same quarter last year. In terms of product mix, DMOS revenue was $118,500,000 up 3.6% from the prior quarter and up 19.3% year over year. Power IC revenue was $37,400,000 Up 8.5% from the prior quarter and up 122.2% from a year ago.
Assembly service revenue was $2,900,000 as compared to $2,700,000 last quarter $1,700,000 for the same quarter last year. Non GAAP gross margin for the December quarter was 31.4%, up from 29% in the prior quarter and up from 28.3% in the same quarter last year. The quarter over quarter increase in non GAAP gross margin was mainly driven by the higher utilization and Operational Efficiency as well as favorable product mix. Non GAAP gross margin excluded $800,000 of amortization of purchased IP for both December September quarters. In addition, non GAAP gross margin excluded $400,000 of share based compensation charges for the December quarter and for the prior quarter as well as for the same quarter last year, respectively.
Non GAAP operating expenses for the December quarter were $31,500,000 compared to $28,600,000 for the prior quarter $25,700,000 for the same quarter last year. The quarter over quarter increase primarily reflected Higher Variable Compensation Occurs based on the better than expected results for calendar year 2020. Non GAAP operating expenses for the quarter excluded $2,800,000 of share based compensation charges $10,800,000 of legal expenses related to the government investigation. This compares to $2,500,000 of share based compensation charges and $1,100,000 of legal expenses related to the investigation for the prior quarter as well as $2,100,000 of share based compensation charges for the same quarter last year. Income tax expense for the quarter was $700,000 compared to $1,000,000 for the prior quarter $0.6000000 for the same quarter last year.
Non GAAP EPS attributable to AOS for the quarter was $0.65 per share as compared to $0.55 for the prior quarter and $0.23 for the same quarter last year. AOS continued to generate positive operating cash flow. AOS on a standalone basis generated $35,700,000 of operating cash flow in the December quarter as compared to $12,700,000 in the prior quarter $12,500,000 in the same quarter last year. In the December quarter, we received $10,000,000 customer deposit for securing supply. The JV Company generated positive operating cash flow of $400,000 in the December quarter compared to $2,900,000 $3,500,000 of cash flow used by the JV company in the prior quarter and the same quarter last year, respectively.
Consolidated EBITDAS for the December quarter was $31,600,000 compared to $27,600,000 for the prior quarter and $13,900,000 for the same quarter last year. EBITDA attributable to AUS for the quarter was $25,300,000 as compared to $22,200,000 for the prior quarter $12,500,000 for the same quarter last year. EBITDA for the JV Company was $6,000,000 in the December quarter as compared to $4,600,000 for the prior quarter and negative $2,200,000 for the same quarter last year. Now let's look at the balance sheet. We completed the December quarter with cash balance of $181,000,000 including 100 and $42,300,000 at AOS $38,700,000 at a JV Company.
This compares to $154,700,000 at the end of last quarter, which included $112,700,000 at AOS $42,000,000 at the JV Company. Our cash balance a year ago was $107,200,000 including $86,200,000 at AOS $21,000,000 at the JV Company. The bank borrowing balance at the end of December was 100 $5,200,000 including $28,500,000 at AOS and 146 point $7,000,000 at the JV Company. During the quarter, the JV Company borrowed $7,700,000 working capital loan. AOS and the JV Company repaid $2,100,000 $9,600,000 of existing loans, respectively.
Net trade receivables were $24,900,000 at the end of the December quarter as compared to $26,300,000 at the end of the prior quarter $33,900,000 for the same quarter last year. Base sales outstanding for the December quarter was 21 days compared to 18 days in the prior quarter. Net inventory was $144,300,000 at the quarter end, up from $137,700,000 last quarter and up from $117,600,000 in the prior year. Average days in inventory were 115 days for the quarter compared to 113 days in the prior quarter. Net property, plant and equipment was $430,800,000 up from 400 $21,600,000 last quarter and up from $416,100,000 last year.
Capital expenditures were $13,400,000 for the quarter, including $6,900,000 at AOS $6,500,000 at the JV Company. With that, now I would like to discuss the guidance for the March quarter. We expect revenue to be approximately $157,000,000 plus or minus $3,000,000 GAAP gross margin to be 28.7 percent plus or minus 1%. We anticipate non GAAP gross margin to be 29.5 percent plus or minus 1%. Non GAAP gross margin excludes $800,000 amortization of acquired IP $0.5 expenses to be in the range of $33,800,000 plus or minus $1,000,000 Non GAAP Operating expenses are expected to be in the range of $29,500,000 plus or minus $1,000,000 Non GAAP operating expenses exclude $3,300,000 of estimated share based compensation charges $1,000,000 of estimated legal expenses relating to the government investigation.
Income tax expense to be approximately $700,000 to $1,000,000 loss attributable to non controlling interest to be approximately $200,000 As part of our normal practice,
We have our first question from the line of Craig Ellis from B. Riley Securities. Your line is now
open. Thanks for taking the question and congratulations on the strong calendar 2020 and the start to 'twenty one. I wanted to start with a higher level question and maybe I'll direct you to Stephen. Yes. Sure, Mike.
Yes, business has come a long way and it's been an incredible journey with the 300 millimeter fab and nice See that doing so well here with the $6,000,000 EBITDA. My first question is just around the nature of order visibility that the company has at present. We've heard from some companies that their visibility extends well into the second half. For some, it's already extending all the way through calendar 'twenty one. Stephen, maybe you can just comment on order of visibility you have across the main end markets.
Where is it comparatively longer? And where might visibility be a little bit shorter? Sure. And again, I think this year continuation of last year in terms of non seasonal patterns that we're seeing now. But overall, backlog is I mean, Yvonne can probably comment on that afterwards.
But overall, we're still in a very tight market overall. We do see just kind of going through some of the key segments, computing story needs to be fairly strong. We are still exiting what is traditionally the peak season, a normal season. But it's still and we still expect it to be relatively strong going into this The March quarter of this year. Overall, in general, we're in a still a fairly tight market.
So demand is pretty strong across most of our segments. I wouldn't necessarily say that we have visibility all the way to the end of the year. I think We still think that we're in unusual time. So there could be corrections that will happen to certain segments. Overall, we are on an allocation stage right now.
So we are trying to best serve our customers while also, of course,
Yes. I echo Steven's comments. I mean, the Backlog has been healthy and stable throughout the quarter. Right now, I mean, I wouldn't say we can see it far enough Toward the second half of the year, this calendar year. So there are a lot of dynamics and risks out there.
So we just want to be a little bit cautious.
Stephen, can you elaborate further on the allocation statement that was made in the prepared remarks and in your answer to that last question? How broad based are they? And can you provide any color on when they started to emerge? And just where they stand here as we start February. Sure.
I think allocation in terms of overall tightness in the markets, that probably started towards the second half of last calendar year. As soon as Yes, I think our Q3, we had a pretty strong quarter. But it really wasn't just us. It was the industry wide that we were seeing some general shortness here and there, whether it's in some raw materials or detons being stretched out. And we're pretty good at our operations, But we're not immune to that.
So it is something that's high priority for us to make sure we have a secure supply chain for it, just like any other company in the space. So we see it also in the marketplace as well too in terms of the demand across segments coming in pretty strong. As Ivan mentioned, we just talked about the backlog is very high. And the big part of that is in reflection to the overall industry shortness in addition to the demand that we're seeing because of COVID, because of other segments that are strong now. And if demand is strong and if there are allocations, why wouldn't the JVPAP Phase 2 start to ramp up earlier to alleviate that demand.
Can you just talk about where products are being sourced that are related to of some of the tightness and why there wouldn't be a pull in on the Phase 2 ramp if there is tightness? Yes, I'll speak generally first on that. Yes, for the CQ, CQ is ramping actually pretty well, Especially compared to the beginning of the last calendar year quarter end, we're very, very fortunate and happy to The CQ is ramping and ready to support us with the growth. So we will be depending on this JV more going forward. Yifan, you want to provide some more color on the expansion?
Sure. We have been continuously running the JV Company. I mean, over there, as you can see, started from last calendar year's June quarter, September quarter and December quarter continue to ramp. And then we do expect in the March quarter will continue to ramp, but it takes time for brand new fab to ramp. So At this point, we do expect we can ramp up Phase 1 target run rate by the September quarter of this year.
That sounds good. And then last question for me before I jump back in the We've heard from a number of companies, and it's widely reported that there has been an increase in various types of input costs, and that is triggering some more tactical pricing moves from all types of semiconductor suppliers. What's the status of that type of activity at AOSL? And how should we think about whether either, A, you would be doing that or, B, to the extent that you're not, if there's an opportunity to gain either intermediate or long term share gain from customers that are raising prices. Sure.
And certainly, we are seeing the cost of raw materials increasing in general, and whether it's from Actual Physical Raw Materials or the services. We see that in lead times and it's all is affecting the cost and it's a reflection of the overall market supply chain being tight. We will be adjusting and we actually are already adjusting some of our pricing to reflect the cost increases. But I do want to make a note that this is not a Time for us to there aren't any weak out in our customers. We're because we are focusing on long term relationships, especially several of these Many of these Tier 1 customers that we're really establishing ourselves to be a close partner with them.
So we are being intentional and selective about how we implement the cost increases.
We have our next question from the line of David Williams from Loop Capital. Your line is now open.
Thank you. I appreciate you letting me ask the question. And first off, Stephen, congratulations. It's great to see you moving through there. And then also congrats on the fantastic results.
And you guys are really you're really building on your success, and it's nice to watch and to
see the growth. So congratulations there. Thank you, David. Appreciate it. I wanted to see maybe if
we could kind of talk a little bit about the incremental capacity that you may have at the JV. Obviously, you're still ramping, you're not quite there yet. But do you think that there's an opportunity and you kind of maybe alluded to this in the past, if you might be able to What do you think the actual run rate is? And then maybe if you could just remind us what your full ramp is and if that's changed at all in terms of the revenue ramp.
Okay. Sure, David. We have been Ramping up JV fab over there. I mean this will continue to ramp. Right now, there's we still have some room to go.
That's a good thing for us actually. So we'll continue to fill up the fab. In terms of the March quarter, March quarter, right now, we guided 157,000,000 dollars plus or minus $3,000,000 And then I mean, that's reflecting Some production lower productions during the quarter because of Couple of factors. One is in the Lunar New Year, and I mean, we would expect some lower and Output at our factories. Another thing is we will have 1 week shutdown at our Oregon fab for scheduled annual maintenance So facility maintenance once a year, so that would also lowered some production output there.
So overall, I mean, one to seeing the continued ramp for the JV company.
Okay, great. Thanks for the confidence there. And then maybe a little bit on your customer, kind of how they're posturing themselves. Are you seeing your orders coming in with maybe longer lead times. Are you seeing customers maybe place orders today that are for the 3rd Q4?
And then this was asked a little bit earlier, but in terms of the visibility, Do you think that's improving overall in terms of you've got a lot of volatility still in the market, but demand has been very strong. I guess I'm trying to get a sense on how comfortable you are that Demand level can remain at these elevated levels. And then what happens as we get into the second half? Do you predict or can you foresee time that maybe the COVID tailwinds subside and we start seeing a little bit of pullback there. And just how do you think about that and posture for that scenario?
Okay. Let me take it first. I mean, the Backlog right now, yes, it is strong. Then we are monitoring it very closely. So the March quarter and some June quarters already filled it up.
And I would not ruling on some top ordering those situations. So we are monitoring order patterns and then triangulating with our design wins at customers So that we don't need to ship in the kind of whole lot to certain customers but then cost other customers lying down. So that's what we are doing on a daily basis right now. So overall, I mean, things could change. And then I mean, I will not comment on the second half of the year.
Yes. In general, just to Right now, because of the strong backlog and demand from our customers, we're doing quite a bit of Scrubbing to sort out what is the critical business to support, whether strategic business or whether it's our key customers that we're trying to grow or key products that we're trying to grow. So it's a good chance for us to choose and be selective about what we want to support. But at the same time, we know that this is we don't have long, long term visibility. So we have to so we're carefully watching to see if ties are turning for certain markets or yes or one way or the other or this upside that's coming
Okay, great. And then one more, if you don't mind. On the gross margin side, That was up nicely in the quarter, north of 30. And so it's good to see. How do you think that trends as we go forward?
Can we keep these types same types of incremental, I guess, margin rates or do you see this moving down significantly? And then maybe if you could just touch on what the impact was on others' utilization mix. Was the mix more product specific or was it more maybe the IC versus some of your discretes that maybe helped with
the margin?
Okay. Sure. We are very encouraged by the historical high of non GAAP gross margin, 31.4% in the December quarter. It demonstrated we can achieve our 30% gross margin target for calendar year 20 2021. I mean that December quarter's performance gave us more confidence that we can achieve our near term target.
And I mean, I would expect that, yes, we're on track to achieve the 30% gross Margin Goal for the calendar year 2021. And I mean, the March quarter, we guided 29.5 percent plus or minus 1%. And then that primarily Results. I just talked about Lunar New Year and 1 week shutdown at our Oregon fab for annual maintenance. And I mean, of course, and then I mean, it's When I give guidance, I would like to finish at the high end of our guidance.
So we're pretty confident at this point in
Great. Thanks so much and best of luck to you on the quarter.
Okay. Thank you.
Next is Jeremy Kwan from Stifel Nicolaus. Your line is now open.
Yes. Good afternoon. And let me add my congratulations on In terms of the can you give us a little bit more color? I just want to press in a little bit more on the allocation situation. Is this both Are you also putting customers on application and are suppliers placing you on application, maybe for things like So it's a raw material.
And can you just give us a little bit more insight into where the shortages are?
Sure. It is happening on both ends. And again, it's not just us, it is industry wide. Just right now, I think capacity as well as and for the foundries as well as back end as well as all the raw materials. I will say it's generally across the board that we're seeing shortages in the overall market.
That also means downstream to our customers. We're and at the same time, the demand has also has shot up quite a bit as well too. As Yifan mentioned on the backlog is quite high right now and much higher than our capacity. So as a result, they are on allocation because of us, too. So there is restriction on both ends.
Good thing is that, Jeremy, We have the majority of the manufacturing operations in house. So then that's Better part than a fabless company.
Yes. In this situation, it's certainly competitive advantage for you guys. Can you give us a little bit more insight also into The pricing trends that you're seeing from your suppliers, I know you touched on some of the pricing, but For your customers, you're still you're not really necessarily passing that along, but can you give us some of the magnitude of this effect and if that impacts things further down the line?
Pricing increase on the supply side and kind of a very Very recent, quite a bit. Some demand increased and some increased some, some of them a little bit high, and I mean, this All over the map. So for us, we focus on the long term relationship with our customers. So our adjustment is try to offset or mitigate the cost increase run at this point.
Got it. And Maybe if I can switch gears a little bit to the $10,000,000 customer deposit that you got. Is this included in the $35,700,000 operating cash flow on the ALS side? Yes.
Yes. Okay. Yes. It's a
part of that $35,000,000 operating cash flow because we recorded in the other liability, long term liability.com.
Got it. Okay. And then Turning to the comms side of the business, you mentioned China smartphones that's responsible for a big part of that Nice growth that you've seen. Can you give us a sense of how big that is? How The proportion of revenues of the comms business is from these Chinese smartphone wins?
I would say it's as big as the big global customers that we normally serve. But the story behind this is that these are actually not new customers that we've the Chinese customers are not new customers. We've been accustomed to this before, but because of allocation, you could say, we chose to prioritize the global business before that. And but because now that our capacity has expanded some, especially because of CQ and the JD fab, we've been able to go back to these customers and actually grow our business again. So size wise, I would say they're not together, they're not as big as The global customer, but there's significant enough for us to mention.
And we believe that is part of our growth going forward to really be a leader globally in the space.
Great. Thank you. And then I guess speaking of the JV, It's nice to see that hit operating cash flow breakeven. We noticed that the CapEx also increased a little bit meaningfully. Is this the last Phase 1 spending or is this kind of maybe a little bit preparation for what you plan to do on the Phase 2?
And until you announce the plans for Phase 2, what can we expect in terms of the CapEx going forward for the JV?
Sure. CapEx spending kind of fluctuates from time to time Depending on the payment term and when we purchase some, we need to put down payment and some at a tail end and after quality of execution and a trial run, we need to pay the last portion of the Payment. So right now, we are in the process of planning the Phase 2 expansion. We'll have some flexibilities there. And then as I mentioned before, the current Phase 1 clean room, we still have some space there, so we can squeeze in some equipment to solve some bottleneck areas so that we can lift up the total output.
So right now, we will provide more details in the quarters ahead.
Maybe just a little bit more clarification. Can you give us a sense of how much the JV Phase 1 is being utilized because I know the targets in the past was that JV would help you reach that $600,000,000 run rate. And this quarter and next quarter, you're ahead of that. So where's this excess coming from? Are you able to squeeze more out of the origin fab?
And how much room is left for the on the JV side?
Okay, sure. The overall increase in our production is Partially come from the Oregon fab, and we increased our product mix and some newer products and providing higher revenue per wafer and also some Power IC products. And you saw we grew quite a bit year over year. Those are the IC products and portion of it related to the IC drivers and Those wafers we purchased from 3rd party foundries, not from our Oregon fab. So for the JV fab, yes, there are still some rooms to go.
I would say At this point, we ramped up to, I would say, 2 third of it or 70% of it. So we still have another, I would say 30% room to go.
Great. Thank you very much for the clarification.
All right. Thank you.
We have Craig Ellis again from B. Riley Securities. Your line is now open.
Yes. Thanks for taking the follow-up questions. I just wanted to follow-up on a few points that we've talked about at different times in the past, team. In the past, the company has mentioned that there could be potential for design wins with follow on Gaming System Products. I'm wondering if there's any update to the potential for such.
Yes, but the consensus is still there. It's still not the timing of when the decision is being made yet. So I don't think that will be until probably the middle of the year, and the calendar year. But yes, that's always something that we are preparing ourselves for. And Yes.
We hope to be able to gain some sockets or at least gain more share in existing sockets. But right now, there's not much in the news. It's not the timing yet for that. And then on the gaming card side, I think the company has mentioned good participation at the high end of the gaming card line. What's the opportunity for following that up with content in midrange cards, which I think are rolling out through the Q1?
Sure. I think that's ongoing right now. And some of that was already happening at the end of the last quarter. So yes, we do plan to participate and as part of the rollout of our customers. Yes.
So right now, again, graphics cards roll out for over a period of 2 years before the next platform is released. But in between that time, Yes, they're coming out with more additional models based upon those chipsets. And how would you characterize the content differential for AOS between a mid range to high end part, Steven? Still a good amount of driver losses being used. It's the high end could be quite a bit we're not really quoting the actual specific dollars, but I will say maybe 2 a half to 2 thirds of the BOM content of the high end card will be an independent card.
And that range is pretty kind of why. Yes. Good for you. And then lastly, guys, just given the Real strong December and the strong above seasonal March guide. Great to see those.
Really, the question is, With Fab Phase 2 sounding like it's not starting up in fiscal 3 or 4Q, does that mean that we're looking at a pretty steady stable revenue profile as we go through the calendar year? Or would we be able to see fab phase 2 ramp up so that there would be more meaningful sequential growth coming through as we get into the back half?
We may have some incremental expansion at JV Company. Right now, as I mentioned, the Phase 1 clean room still has Some space there. So we will place some equipment there to solve some bottleneck areas so that we can get some incremental output. I mean, overall, again, In terms of bigger expansion, again, we need to get cleanroom expand. So that will take some time.
Got it. Thanks, Yifan. Good luck, everybody.
All right. Thank you.
Thanks. Bye.
We have a follow-up from Jeremy Kwan from Stifel Nicolaus. Your line is now open.
Yes. Thank you. Just two quick questions here. The first is, Can you give us some a picture maybe of your channel inventories, what the situation is there with your distributors? And related to that, the kind of lead times that you're quoting to them and quoting to your customers and what kind of the magnitude, how that compares to last quarter?
And a quick question on the JV. It looks like you're rolling over some of the debt there. Can you give us any update on in terms of like Capital Plans, whether refinancing is needed or where things stand in terms of the JV? Thanks.
Okay, sure. In terms of our channel inventory, right now, channel inventory is It's below the low end of our target. We target in 2 to 3 month channel inventory. Right now, it's below the Global End of the target. Right now, we don't see much in China stuffing at this point.
In terms of JVs second phase, yes, we are in the process of doing our planning work. So we have some options on the table. We could raise money from bank and from the market and then we'll evaluate all the options there. So we will discuss more, I would say, in the quarters ahead.
And what about the lead times, both that you're seeing from your suppliers and if you're offering to customers? How has the change been?
Lead time right now is from our supply side, yes, lead time is Getting longer, reflecting the tightness of the overall market. How long lead time to our customers. I mean, right now, there's well on allocation. And then, I mean, if we cannot supply, We'll tell our customers and lead time generally longer than the normal time, I will
say. Thank you very much.
All right. Thank you.
There are no further questions at this time. I will turn the call back over to the presenters for closing remarks.
This concludes our earnings call today. Thank you for your interest in AOS, and we look forward to talking to you again next quarter. Thank you.
Thank you. And thank you all.
Thank you presenters. Ladies and gentlemen, this concludes today's conference call. Thank you all for participating. You may now disconnect. Have a great day.