Ladies and gentlemen, thank you for standing by, and welcome to the Alpha And Omega Semiconductor Fiscal Q1 twenty twenty Earnings Conference 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. Thank you. I'll now turn the conference over to Seung Zhong.
You may begin.
Thank you. Good afternoon, everyone, and welcome to Alpha And Omega Semiconductor's conference call to discuss fiscal 2020 first quarter financial results. I am Soehan Jong, Investor Relations representative for the company. With me today are Doctor. Mike Chang, our CEO Yifan Liang, our CFO and Steven Chang, our Executive Vice President.
This call is being recorded and broadcasted live over the web and can be accessed for 7 days following the call get a link in the Investor Relations section of the website at www.aosmd.com. Yifan will begin with a review of financial results for the quarter and Mike will review the business highlights followed by Steven, who will provide a detailed segment report. After that, Yifan will conclude with guidance for the next quarter. Then we'll have the question and answer session. The earnings release was distributed by Business Wire today, November 4, 2019 after the close of market.
The release is also posted on our company's website. Our earnings release and this presentation include certain non GAAP financial measures. We use non GAAP measures because we believe we provide useful information about our operating performance that 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 our earnings release. We remind you that during the course of this conference call, we'll 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 For more detailed description of these risks and uncertainties, please refer to our recent and subsequent filings with the SEC. We assume no obligations to update information provided in today's call. Now I'll turn the call over to our CFO, Yifan to provide an overview of the 1st fiscal quarter financial results. Yifan?
Thank you. Good afternoon, everyone, and thank you for joining us. Revenue for the September quarter was $117,800,000, up 5.3% when compared to the prior quarter and up 2.4% from the same quarter last year. In terms of product mix, MOSFET revenue was $100,600,000, up 4.3% sequentially and up 9% year over year. Power IC revenue was $15,700,000, up 14.1 percent from the prior quarter and down 19% from a year ago.
Assembly service revenue was $1,500,000, as compared to $1,700,000 for the prior quarter and $3,400,000 for the same quarter last year. Regarding the segment mix, computing represented 39.2 percent of the total revenue, Consumer 18.2 percent, power supply and industrial, 23.2 percent, communications, 18.1% and service 1.3%. Non GAAP gross margin for the September quarter was 28.3% as compared to 27.4 percent for the prior quarter and 29.7 percent for the same quarter last year. The quarter over quarter increase in non GAAP gross margin was mainly driven by the improvement of operation efficiency and product mix, partially offset by price erosion. Non GAAP gross margin excluded $400,000 of share based compensation charge for the September quarter as compared to $400,000 for the prior quarter $500,000 for the same quarter last year.
Non GAAP gross margin also excluded $6,000,000 of production ramp up costs related to the Chongqing Joint Venture for the September quarter as compared to $2,600,000 JV company's 12 inches fabs started production in July 2019, all fab related costs were moved from G And A to cost of goods sold for the September quarter. Non GAAP operating expenses for the September quarter were $25,600,000 compared to $22,600,000 for the prior quarter and $24,500,000 The quarter over quarter increase in non GAAP operating expenses was primarily due to the increase in R&D Engineering expenses and our annual merit increase started in the new fiscal year. Non GAAP operating expenses excluded $1,900,000 share based compensation charge as compared to $2,100,000 for the prior quarter and $2,600,000 for the same quarter last year. Both GAAP and non GAAP operating expenses included $2,800,000 of digital power controller team expenses for the quarter, as compared to $2,300,000 for the prior quarter and $2,700,000 for the same quarter last year. Our digital power controller team continues to engage with customers in product designs and is making steady progress toward our product roadmap.
Income tax expense for the quarter was $400,000 as compared to income tax benefits of $600,000 for the prior quarter, and income tax expense of $600,000 for the same quarter last year. Non GAAP EPS attributable to AOS for the quarter was for the prior quarter $0.36 for the same quarter last year. Historically, AOS has been generating positive operating cash flow. However, in the September quarter, net cash used in operating activities by AOS was $4,200,000. This was largely impacted by 2 items, totaling $15,100,000.
First, $9,200,000, one day delay of receivable payment from 1 of our major distributors due to the bank shutdown on September 30th, 2019, because of Typhoon MidTech in Taiwan. 2nd, $5,900,000 net intercompany receivable impact from the JV company. For the prior quarter, AOS generated $15,200,000 operating cash flow and $18,400,000 for the September quarter last year. The JV company generated operating cash flow in the operating activities for the prior quarter The $1,600,000 operating cash flow was largely attributable to the $5,900,000 intercompany payable to AOS and a $2,700,000 interest refund received from the local Gauch under the joint venture agreement. This refund program will continue Consolidated EBITDAS for the September quarter was $14,300,000 compared to $14,200,000 for the prior quarter and $15,400,000 attributable to AOS for the quarter was $13,800,000 as compared to $15,100,000 for the prior quarter and $16,700,000 for the same quarter last year.
Now let's We completed the September quarter with cash and cash equivalents of $103,100,000 including $88,000,000 at AOS and $15,100,000 at the joint venture. This compares to $121,900,000 at the end of the last quarter, which included $100,700,000 at AOS and $21,200,000 at the JV company. Our cash balance a year ago was $113,200,000, including $81,200,000 at AAOS and $32,000,000 at the JV company. Bank borrowing balance at the end of September quarter was $136,400,000, including $41,000,000 at AOS and $95,400,000 at the JV company. In the September quarter, AOS borrowed $2,000,000 from a new line and paid back $2,100,000 of the existing loans.
The JV company borrowed $800,000 from a new working capital line and paid back $1,700,000 of the existing loans. Net trade receivables were 39 point $3,000,000 as compared to $24,300,000 at the end of the last quarter and $37,100,000 for the same quarter last year. Day sales outstanding for the quarter was 25 days compared to 24 days in the prior quarter. Net inventory was $118,600,000 at the quarter end up from $111,600,000 in the last quarter and from $98,000,000 in the prior year. Average days in inventory came down to 114 days for the quarter as compared to 100 and 17 days in the prior as compared to $409,700,000 in last quarter and $368,500,000 last year.
Capital expenditures were $14,400,000 for the quarter, including $8,300,000 and $6,100,000 at the JV company. Before I turn the call over to Mike, I would like to share the progress at our JV company. During the September quarter, Assembly and test production continued to ramp up and the 12 inches fab started small mass production in July 2019. We expect to continue to ramp up phase 1 of the 12 inches fab in accordance with our plan to approach the target run rate by the September quarter of calendar year 2020. With that, now I would like to turn the call over to our CEO, Doctor.
Mach Chen, who will provide the business highlights for the quarter. Mike?
Thank you, Yifan. Good afternoon. We are pleased with our performance and the financial results. In the September quarter. AOS achieved a record quarterly revenue of $117,800,000.
Marking the 15th consecutive quarter of year over year revenue growth. The strong top line performance was driven in part by additional supplier contribution from the 12 inches fab at the JV company. Gross margin came in higher than the midpoint of our guidance, which was more than enough to offset the investment in R&D. And delivered healthy earnings for the quarter. 1 of the major growth drivers for us its mobile applications, such as smartphone, battery protection, and the quick chargers.
I will take a few minutes to share with you the exciting progress we are seeing in this business. It always starts with strategy. As a relatively young company, we identify applications that give us a head start with our core technology as well as the volume to scale. Once we link, we expand our footprint with multi dimensional initiatives, including share gain, content increase and the customer expansion to become a market leader. We then use this success as a springboard to dip to the next market and replicate the success.
We have demonstrated our ability to execute this strategy in where we grew from 0 to about 200,000,000 in annual revenue. We plan to do the same in the mobile market where the served available market opportunity is more than double that of the computing market. We have successfully landed at each of the 7 largest smartphone OEMs worldwide worldwide as one of their key suppliers. Our mobile business combining battery production and quick charger products is growing significantly. In the September quarter, we downloaded mobile business revenue from the same quarter last year.
Now that we are aligned with top tier global brand OEMs and the ODMs, We will continue to keenly focus on expanding our presence to multiple generation smartphone models and the peripheral devices. As a case in point, last year, we initially penetrated into a global brand OEM with a 1 year model as a new supplier. This year we won new models on top of the last year's model and further penetrate into several adjacent sockets. We plan to grow our on the multiple global OEMs and ODMs. The JV company is expect to play a vital role as a reliable and scalable supply chain for many years to come.
In the meantime, to support the current demand for our mobile products for these years models, we are diligently working to make room at the Oregon fab by transferring production of some of our products to the JV company. Typically, transfer activity takes approximately 6 to 9 months depending upon the complexity of applications, as well as the number of OEMs and ODMs involved. Generally speaking, transferring products for applications with short cycles such as the PC is relatively faster with a simpler re qualification process. We have already started the re qualification process for some computing products and are making steady progress. Given that the market is less tight, and the macro environment is uncertain.
The re qualification process is returning to a normalized pace rather than the accelerated pace we experienced last year. Nonetheless We expect this transfer activity to still help us back to seasonality with slight growth. In the December quarter following the record high September quarter. The products manufactured at a JV company are already in customers hence for qualification and the design momentum for these products disputing. We are confident in our ability to reach the phase 1 target run rate by the September quarter next year, as we discussed on our last earnings call.
In addition to the mobile business, we are also encouraged by healthy demand across our product lines. As a computer industry expense to include artificial intelligence, big data and the internet of things, Our customers increasingly value our high efficient and high performance products, especially for Vcore and system power. Our IGBT solutions also contribute also continue to establish strong footing at a broad base of home appliance customers. We also see solid demand for our products for ACTC power supplies. Notably, the Oregon fab has been running at the full capacity.
And some products few there are still on allocation. Despite Marco headwinds and growing market uncertainty, we are generating positive results by executing our prudent business strategy. Our diversified products are well positioned with strategic players in multiple key market segments. We are committed to even better serving those customers. Through increasingly sophisticated and total solution and a reliable supply chain.
We are encouraged are tremendous growth opportunities ahead of us, which give us confidence in achieving our calendar year 2021 target of $600,000,000 of annual revenue. With this solid start in the first quarter, we will continue to execute on our growth strategy. And build strong momentum in our business in fiscal year 2020 onward. Now I will turn the call over to Steven for a detailed segment report, Steven.
Thank you, Mike, and good afternoon. Let me start with computing. It represented 39.2 percent of our total revenue in the September quarter. Revenue was down 6.1% sequentially and down 8.3% year over year. As planned, we served our computing customers in the peak season utilizing channel inventories on hand.
Computing sell through grew by double digits sequentially to reach a record high. Our Vcore business is strong and we see some early adopters While the CPU supply constraint is easing it is expected to remain challenging in the December quarter. Based on that, we are estimating conservatively a modest increase for the December quarter. Now let's discuss the Consumer segment, which represented 18.2 percent of total revenue in the September quarter. Revenue increased 2.5% sequentially and was up 0.6% year over year.
The sequential growth was driven mainly We continue to grow our business in refrigerators and air conditioning systems as our IGBT products provide our customers with the performance and reliability demanded by these applications. We are on track to achieve another 40% growth with our IGBT product line in this calendar year, the 2nd year in a row at that level. Going into the low season a seasonal decline in TVs. We expect a double digit decline in the consumer segment for the December quarter. Now let's turn to the power supply and industrial segment.
This segment accounted for 23.2 percent of total revenue, up 19.1% sequentially and up 25.4% year over year. Our quick charger momentum accelerated during the September quarter. We again achieved double digit growth from the strong June quarter because of our strategic position as global smartphone OEMs in their peak season. We also saw a rebound in the quick charger business will slow as we exit the smartphone season. However, we expect to maintain overall segmental revenue at the September quarter level due to growth from other applications.
Finally, let's discuss the Communications segment. Which was 18.1 percent of revenue in the quarter, up 24.6% sequentially and up 19.2% year over year. Rising demand for our battery protection products resulted in substantial growth in this segment in the peak smartphone season. Our products are based on our leading low voltage MOSFET technology which enables higher efficiency and cooler operation during battery charging and discharging. We saw some softness in the 5 g telecom business during the September quarter in the midst of trade tensions.
Looking to the December quarter, we expect the battery protection business to decline slightly. This will be offset by some recovery of our 5G telecom business. Therefore, we expect to maintain this segment's revenue in the December quarter. With that, I will now turn the call over to Yifan for the guidance.
As we look forward to the second quarter of fiscal year 2020, we expect revenue to be between $117,000,000 and $121,000,000. GAAP gross margin to be 22.3%, plus or minus 1%. Non GAAP gross margin is expected to be 27.3percentplusor-1percent. Note that non GAAP gross margin excludes $400,000 of estimated share based compensation and 5 point $8,000,000 of estimated production ramp up costs relating to the JV company. GAAP operating expenses to be in the range of $27,400,000 Non GAAP operating expenses are expected to be in the range of $25,400,000 plus or minus $1,000,000.
Both GAAP and non GAAP operating expenses include $3,100,000 to $3,300,000 of estimated expenses relating to the development of our digital power controller business. Non GAAP operating expenses exclude an estimated share based compensation charge of approximately $2,000,000. Tax expense to be approximately $500,000 to $700,000. Loss attributable to non controlling interest to be around $3,600,000. On a non GAAP basis, excluding estimated production ramp up costs relating to the JV company.
This item is expected to be approximately $900,000. As part of our normal practice we're not assuming any obligations to update this information.
And our first question comes from David Williams with Loop Capital.
Hey, thanks and thanks for allowing me to ask a question and congrats on the quarter and the progress being made. First, from a design win perspective, just kind of getting a or trying to gauge the customer level and interest. What are you seeing in terms of design activity and, in terms of projects kicking off? Are you seeing any delays there or maybe some acceleration. I know in the past you've talked about some delays and push out those certain projects.
Are you still seeing that, or are you seeing customers maybe a little more, willing to go and step in and kick these projects off?
Sure. This is Steven. Good questions. Our design win on is is very healthy. Right now, it's, it's in the we probably know most seasonal patterns, several of our, you know, of our peak segments are computing and smartphone related.
And those tend to be heavy peaking in the Q3 timeframe. So our design wins are going well in terms of tracking into those new projects. Going into next year. So we are happy with the progress that we see there.
Great. Thanks. Then secondly, in terms of the the demand trend and what you're seeing in in terms of channel inventory or distributor inventory, of, I guess, more broad based, if you're looking across all geographies, even in all end markets. Are you seeing the demand levels or excuse me, the, the inventory levels have come down? Are they lean?
Are they still a little heavy? And what do you expect in terms of of maybe a possible replenishment of the the supply chain?
Sure, David. This is Yifan. Right now, our channel inventory remains at a healthy level. Right now, this at the toward low end of our target range of 2 to 3 months. So right now, we don't see much general inventory stuffing at this point.
Okay. Do you expect to see some replacement or you have level that you would expect to see some pull in from that as we head into the December and and maybe, the the 1st calendar quarter?
Well, as we stated in our prepared remarks, in different sectors, and we may see different, a little bit different scenarios there. Overall, we see our productions is catching up and in the so that it can allow us to buck the season now and then I mean, that's the overall picture over there. So in terms of segment and in the computing area, we would expect some strong segment selling over there.
Okay. Fantastic. And then just kind of thinking about it, and you, you talked a little bit about this earlier. But but can you talk bit about the the design wins and the the, I guess, the additional sockets that you're picking up in the share gains, you're making up some of the major OEMs and and what expectation is there. I know there's some periphery, type sockets that we've talked about in the past, but what kind of headway are you making in terms of if we think about the next do you think that you are drill pickup share?
And what is the opportunity, I guess, to move into, first or maybe even the second source position at those handset OEMs where maybe serving maybe a third source position.
Sure. I'll take that question. So in our smartphone business, there's 2 main applications that we can into. 1 is the, the battery protection. And the second is, the quick charger, which is us, sold in the box with many of these handsets.
So right now, our position is is growing stronger. We are, as Mike mentioned, in each of the, the 7 leading smartphone makers. And, some of these are relatively newer, some are, have been long, longer term customers of AOS. So we'll continue to layer on top of our, of our business, with, and with, as additional models continue to to roll out The same thing goes also with our quick charger business.
Okay, great. And then one last one for me, if you don't mind. Kinda think about the margin profile, with as soon as JV comes online. And I understand the benefits and cost savings of the 12 inch fab will take some time to really work given the yield efficiencies and the likes. But given the size of the revenue potential, what could the incremental margin contribution look like once that fab hits its right?
Sure, David. Right now, we expect on the weekend our ramp up to the target run rate of phase 1 12 inches fab in the September quarter. Now next year timeframe. So, at that time, we're currently estimating our, 12 inch wafer costs on a per diabetics will be on par with our current 18 wafer. This is only phase 1.
I mean, so right now it's for the additional phase I would expect some cost benefit generating from there.
Great. Thanks so much and best of luck on the quarter.
And your next question comes from Craig Ellis with B. Riley.
Yeah, thanks for taking the question and congratulations on your first full quarter of 300 millimeter fab output. Yifan, I'll start with some clarifications for you. So first, you mentioned two items that hit at the end of the quarter that were in total $15,000,000. So is it fair to say that if not for those operating cash flow and end of quarter cash would have been $11,800,000 $103,000,000, respectively. And I assume that those collections came in right start of the fiscal 2Q.
Is that fair?
Yes. Yes. Exactly. The $9,200,000 came in on October 1st. So, that was the way it is.
Okay. Secondly, I think we had been looking for an increase in operating expense in the quarter, but it came in about $1,000,000 above what I was expecting. I anticipated that digital power would be ramping up. But were there any one time items in the quarter or was the increase really all about fringe and performance accruals, etcetera?
Yeah. Our OpEx in the last quarter was relatively low. Was fluctuating to a low point. This quarter, it it fluctuates back and also, we also increased some investment. So to beef up our R&D activities.
So we would expect those R and Ds will support us for the next year and the futures growth.
So is it fair to say you'd expect a flatter OpEx trajectory from here or is there something that would cause OpEx to move higher as you go through the second half of fiscal twenty twenty.
I would expect, yes, in the March quarter probably in line with the current level in the June quarter, I would expect an increase At that time, we have more activities for the R and D design wins for the following year.
Okay. My last clarification and it's a follow-up to the earlier question. I know 3 months ago, we were worried about distributor channel inventory, particularly in the PC space and distributor intent to get inventory level down. I know you talked about, inventory levels overall, but are you also saying that within that, you're happy that with PC inventories and that PC inventories are at normal levels?
Yes. Last couple of quarters, actually, we managed that dynamic between our internal inventory external inventory and our own productions. So we knew in the September quarter, we would have computing and the mobile and both major businesses and that will be in the peak season. So with our limited constraint capacity, when managing those dynamics so that we used our channel inventory to support our September's quarter's PC peak season. So that's why from the real business perspective, you know, our sell through PC revenue actually reached a record high in the September quarter.
So just with, spare them more capacity to support mobile side of the business growth.
Okay. Thanks for that and congratulations on the record sell throughs with compute. I'll use that as a segue to ask Stephen a few questions. Stephen, just on the communications business, can you help us understand, one that agree to which the wins that the company is getting is for 4 g phones versus 5 g. And given the very significant increase in expectations for 5G phones next year, which I think consensus is probably around 250,000,000 units.
How does the company feel about its ability to get designed into those phones since that's where a lot of the interesting growth is going to be coming from in calendar 2020.
Sure, Craig. So in general, the higher the power, the higher the battery that's needed, the more power content is there is for AOS with the advent of 5G, we're anticipating that the usage will go up. There's more video streaming and there's more demands on the battery, whether you're charging or discharging. So for us, we're we're happy to see, a push for a greater performance out of the power products. So for us, we believe that this could be continued to be a growth area for us.
As battery capacities are increasing as the MOSFETs basically have to be more efficient.
Does that mean you think that a majority of your design wins are 5G or just that a majority of your design wins are at the very high end of the of the performance continuum for the 7 smartphone OEMs that you and Mike have mentioned?
We don't really spell or split it out that way. In general, we the higher performance ones are the higher end smartphones. And it's 5G is one of the trends that's pushing for the higher battery. It's not the only trend that's pushing for the bigger capacities and the higher power consumption. To us, it's a bit of a spectrum in terms of the demand on the phones themselves.
Okay. And then, lastly, in the communication space before I flip it over to Mike, I think right now, just given the the significant baseband released activity out of Asian players, there's a forming view that the 1st calendar quarter or your fiscal 3Q and potentially even fiscal 4Q could be above seasonal as a lot of the 5g OEMs, 5g smartphone models launched from China OEMs and others what's your sense for the strength in the communications business beyond the current quarter? Is there potential for the business to be flat in the first quarter, potentially even grow, given what we're seeing with new model launch activity around the corner.
Generally, smartphone, again, the peak is in this September quarter. Definitely, Andy, we're seeing more models kind of filling in the gap between the peaks. But in general, I don't think that will be big enough to offset the normal seasonal pattern for phones. The major vendors still tend to be releasing around that September timeframe.
Got it. One for Mike, and then I'll ask my final. Mike, it's it's helpful to get your perspective on land and expand in the strategy the company is deploying and certainly there are some encouraging signs of success and communications. Might my question is this, as you look at the the penetration rate and adoption capacity of the 7 different OEMs, in a better case environment, if all OEMs were to march at the pace of some of your best adopters within that group, how big can communications be in a year, 2 years from now? If it's 18% of sales now, does it does it have the opportunity to get into the mid 20s in in 12 months and maybe even, towards 30% longer term or what are we looking at if, if things really hit with land and expand?
For the mobile, mobile business there, definitely, we're looking for about 20%. That's for sure. Okay. So the healthy one would be 25% to 30%. And we look into the momentum, we think this, which is pretty, pretty, practical and probably in the Q3, we probably reached 25%.
That's great. And that helps answer my last question. I'm not sure, if this is for you or Yvon or even Steve, but, 1, Yifan, can you clarify what the 300 millimeter is within the fiscal 2nd quarter guide. And from the 1st fiscal quarter, if we got the $7,000,000 we were looking for, then there's about $30,000,000 of revenue to get to that run rate level in the September quarter of next year. If we were to break that down 10,000,000 in 3 buckets, how do we how do we bridge the gap between where we are now and where we need to be late next year so that we're that $37,500,000 run rate.
How much of that said differently comes from comms, from compute, from IPC, etcetera?
I'll start with this question. Yes, we said, and we're confident to reach the target run rate in the September quarter next year. This is right now is when gradually ramping up the 12 inches fab it may not be linear. Right now, it's what doing design YINs and wins using the products produced from the joint venture. And also we're transferring some productions of our products to the joint ventures so that, it can spare some room for our Oregon fab.
So that transferring production requires a re qualification with our customers. So those two things. It depends on how it played out. And so I would expect We need some time, like, as, Mike and Steven mentioned, some, it takes some time to designing and re qualification. So I would expect that in the in the June quarter, you probably will see some and then in the September quarter, you will see the most.
And just want to chime in. This is Steven. The the move to Chongqing actually helps not only the products that are moving to Chongqing, but also the products that stay behind in our 8 inches tab. So it actually helps with the total loading. So, basically, I think every segment can benefit from the additional total capacity after we opened up a chunking that to that level.
But, Steven, in terms of getting from here to the the target run rate with the new fab. Is it fair to say that a majority of that is going to be communications or is it really going to be broader based participation with the with the other segments?
We're starting right now the initial segments that are we're ramping would include on computing as well as various consumer applications. But like we said, we're trying to make room going into Q3, which is a peak season for both computing as well as communications to make room for both of those applications when we're hitting that crunch time that we did this year. So next year, with the more balanced opened up capacity, we expect to more naturally more comfortably address that demand.
And your next question comes from Tore Stanberg with Stifel.
Yes, this is Jeremy calling for Tori. Let me add my congratulations on the cash flow profitability for the JV. And I do know that some of that came from that intercompany payment. Can you tell us a little bit more about what that is and also what the, the 2,700,000 interest refund is?
Sure. I mean, that $5,900,000 impact and is the was intercompany receivable payables and balance. So, right now, the joint venture in the final stage of processing this loan like a paperwork. So, you know, the loan itself has been approved and and right now it's going to final going through the final stage of the paper work, you know, there are quite a bit miracrocracies over there. So we have to be patient.
In terms of that $2,700,000 interest expense refund. And that was a part of the joint venture agreement So finally, we got approval from the local government. So the refund came in in the September quarter. And then for the next 2 years at each sub quarter for the next 2 years. The joint venture is expect to receive that same amount of refund.
For the next 2 years?
So that refund, it's basically interest that the JV paid to the finance company, and that's being returned back to you?
No. No, sir. The the the ones that refunded on the interest expense that they paid on the lease financing and loans. So the JV, they pay the interest on
the lease finance loans and they get some of that back, at the end of each year?
Yes, yes.
From the local.
Got it. I see. Okay. And then in terms of that intercompany receivable, you said that's related to a loan that's been approved. So that No, no, no, no.
That's not related to a loan. That's a normal business Okay. The company balance.
Okay. And that and that's basically for, I guess, is that for that based on expenses that AOS incurred on behalf of the JV?
Well, they purchased something, materials and wafers from goods to us. I mean, those ins and outs.
Got it. Okay. And then that loan that you mentioned, that's still in the work do you have a quantification of how much that's going to be?
We'll disclose it when we signed and agreement.
Okay. Great. And then I guess if we can move on to the, the JV, can you give us an idea of how much, business is currently running through that, through the to the JV?
For the September quarter, yes, it supported us for the incremental revenues. I mean, right now, it is that we, for the December guidance, we also factor in there, on ramp up.
Got it. Okay. And maybe, just kind of getting at some of the earlier questions, but maybe looking at it a different way. If we look at that, you know, again, that incremental 37,500,000 that you expect from the JV. Can you do you have an idea of how much is based on products new products that you've introduced over the last maybe a year or so or how much of it is related to maybe expanding opportunities from existing products.
Well, those are relatively, as Stephen mentioned, when getting some existing products right now qualified with PC customers initially, when transferring some productions to the joint venture, relatively speaking for the PC re qualification process, and anomalies and shorter than the other products. So we'd started from there. Later on, yes, we'll adding in other, products that we'll produce from the 12 inches fab in the consumer area, in the power supply area as well.
Very good. And I guess, also you mentioned price erosion earlier, can you help us or at least pricing pressure impacting gross margin? Can you quantify that for us and maybe what the expectations are for the next year or 12 to 18 months?
Okay. Sure. In the last 2 years old. So I would say the the mass threat in the industry, was relatively tight. And you know, supply was tight and us sold in, ASP environment that was relatively favorable to us.
This year, the market has been loosening up and So, after a couple of quarters and now it's getting to the point. Back to the normal, I would say, So right now, they said, in the normal ASP erosion, situation. What we want to do is to overcome those ASP erosion is to rolling out our new products. And so provide in a better performance and you have commanding, the better margin. So So that offset in those ASV erosion.
Of course, that depends on the the timing and dynamics of those existing products versus new products. So from time to time, you may see new new products and overcome the old products and sometimes that you may see some erosion, temporarily.
And in terms of the normal erosion, is that on the order of 3% to 5% annually? Is that kind of what you're looking at?
More like mid single digit to high single digit. It depends on the years and the market situation. I would say.
And that's compared to maybe flat to slightly down in the past 2 years?
Yeah. Mhmm.
Okay. And then if we look at the on the communication side, with the smartphone exposure, would you say the ASP dynamics there are similar to your rest of your products, or is it that a different dynamic. And also in terms of the gross margin relative to corporate?
In terms of ASV environment, I would say similar than it, or slightly better. In top in terms of margin profile in that segment, it is above our corporate average.
Very good. I think I'll just leave it at that and maybe come back for more questions later. Thank you. Congratulations.
At this time, there are no further questions. I'll now turn the conference back over to your host 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.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.