Earnings Call: Q1 2021

Apr 29, 2021

Quarterly report

You may begin your conference. Hello. Are we live? Yes. We are live. All right. Good afternoon, everyone. Sorry for the delay. There were some technical difficulties with the conference call provider. I'm Joe Shiffler, Director of IR for Power Integrations. And with me on the call today are Balu Balakrishnan, President and CEO of Power Integrations and Sandeep Nair, our Chief Financial Officer. During the call, we will refer to financial measures not calculated according to GAAP. Non GAAP measures exclude stock based compensation expenses, amortization of acquisition related intangible on the tax effects of these items? A reconciliation of our non GAAP measures to our GAAP results is included in our press release. Our discussion today, including the Q and A session, will include forward looking statements denoted by words like will, would, believe, should, expect, outlook, forecast, anticipate and similar expressions that look toward future events or performance. Such statements are subject to risks and uncertainties that may cause actual results to differ materially from those projected or implied. Such risks and uncertainties are discussed in today's press release and in our Form 10 ks filed with the SEC on February 5, 2021. This call is the property of Power Integrations and any recording or rebroadcast is expressly prohibited without the written consent of Power Integrations. Now I'll turn the call over to Balu. Thank you, Joe, and good afternoon. 1st quarter revenues came in well above our expectations, growing 58% from the Q1 of 2020? This outsized growth rate reflects prevailing demand conditions in our industry, But also our growing market share and the impact of our secular trends that are expanding our addressable market and driving customers toward our highly integrated products. These trends include energy efficiency, Electrification, Renewable Energy, Home and Building Automation, Smart Connected Appliances, LED lighting, advanced mobile device chargers and the replacement of high voltage silicon switches with gallium nitride. We expect these trends to endure well beyond the current semiconductor cycle, and we are making the necessary investments in products, people, facilities, capacity and infrastructure to capitalize on the opportunities in front of us. One such investment is our newly redesigned power.com website, which was launched earlier this month. The new website serves as an extension of our sales and applications engineering team, putting our renowned PI expert design tool Front and center to let engineers tap into our vast reservoir of design know how. The site also better reflects our recent Expansions into automotive and motor drive markets incorporates advanced personalization capabilities and features Returning to Q1 results. Revenues were $174,000,000 up 15% from the prior quarter And 58% year over year, demonstrating the leverage in our model and our non GAAP Operating margin expanded to 28.6 percent and our non GAAP EPS Doubled year over year to $0.76 Cash flow from operations was also very strong at $58,000,000 All 4 end market categories exhibited strong year over year growth in the Q1. Revenues from computer category Nearly tripled from a year ago, driven by strong demand for tablets, PCs and monitors as well as penetration of fast charges in the tablet market? Revenues from communications category were up more than 170% year over year, Driven by growth in handset market, share gains by our OEM customers and most importantly that our continuing adoption Advanced charges and our success in capturing a large share of that market. We have built a commanding lead in advanced charges, thanks to our highly integrated InnoSwitch products, including our GaN based InnoSwitch devices, which offers the highest level of efficiency in the market. Efficiency is essential In fact charges because any heat resulting from wasted energy must be dissipated through the surface of the charger. Most heat requires more surface area, which means that bigger charges. Even worse, inefficient high power chargers often require heat sinks, which add size, weight and cost. The efficiency of our Innoswitch products help solve these thermal challenges, enabling the smallest, lightest and fastest chargers on the market. We won a broad range of new advanced charger designs in Q1, including OEM branded chargers as well as aftermarket designs From a proliferating number of brands, many of these designs feature multiple charging ports and provide enough watts to power a notebook while rapidly charging a phone or tablet. We are seeing tremendous uptake of our GaN products in such designs. And as a result, we believe we are on track to grow our overall GaN revenues by at least 3x this year. Our particular node is a 65 watt USB TV charger using a GaN based InnoSwitch IC Alongside our GaN based mini cap chip, which shrinks the charger by drastically reducing the size of the input capacitors. This design, which you mentioned on the last quarter's call, was introduced earlier this week by a major OEM as the inbox adapter for the newest line of slim notebook computers. In its promotional video, the OEM prominently mentions It's use of GaN in the adapter to save energy, but also highlights the combined weight of the notebook and the adapter. This is in contrast to the familiar experience in which we buy a notebook based on its advertised size and weight Only to find out that it comes with a huge clunky adapter. Notably, The OEM is also offering this same adapter as a super fast charger for use with their cell phones, Demonstrating the paradigm shift occurring in the mobile device market, thanks to technologies like GaN and USB PD. We believe this is just the beginning of a long term trend towards advanced multiuse chargers With high performance semiconductors and far higher dollar content than charges of the past. Continuing with the Q1 results, industrial revenues were up high teens year over year driven by home automation And IoT applications as well as battery powered tools, 2 of the faster growing verticals in our industrial category? Consumer revenues grew in the low teens driven by strong demand for appliances As well as continued share gains and rising dollar content. China's new efficiency standards for air conditioners are also contributing to the growth in our consumer category. Notably, we achieved double digit growth in consumer Despite a very strong Q1 last year that included panic buying in the early stages of the pandemic. Regarding the current demand environment, Like most semiconductor companies, we have seen extremely high order rates in recent months. Lead times have extended on many products And we have experienced sharp reductions in inventories both in house and in the distribution channel. However, while not immune to the challenges of the current environment, we have mitigated them to a large extent, thanks to our decision to build inventory As demand softened in the early stages of the pandemic. Another cushion against the current demand shock is our unique manufacturing model. Our proprietary process technologies enable us to rely not on traditional merchant foundries, but rather on trailing edge facilities Our vertically integrated suppliers. We believe our long term partnerships with such suppliers and our industry Our history of maintaining relatively steady production levels in periods of weaker demand help to ensure That we have access to fab capacity when demand surges. Similarly, we have been able to mitigate The tightness in back end capacity across the industry, thanks to the use of proprietary IC packages, our ownership of equipment used and testing of these packages and our substantial investment in new capacity over the past year. Looking ahead, we continue to expect that demand will begin to normalize at some point in the coming quarters as the impact of work from home begins to dissipate, Appliance makers catch up with demand and the dislocation caused by Huawei sanctions plays out. However, in the near term, demand continues to be very strong. We entered the Q2 with a record backlog And bookings have remained elevated throughout the month of April. Distribution sell through far exceeded sell in again in the Q1 and distributors ended the quarter with an unsustainably low level of inventory. As a result, we expect the 2nd quarter revenues To be flat compared to the Q1, plus or minus 5%, which at the midpoint would be up more than 60% year over year. Looking further ahead, while some cellphone OEMs have likely overbuilt in an effort capitalize on Huawei sanctions, our OEM customers have been major beneficiaries of the transition, Which will magnify the share gains we have achieved through our success in advanced charges. More broadly, we believe We have gained share across number of end markets over the past few quarters, which should benefit us well After the current cyclical noise subsides. Finally, on behalf of our Chairman, Bill George, I'd like to note the appointment of Jennifer Lloyd To our Board of Directors, effectively approved 1st. As leader of a major business unit and analog devices, Jennifer brings an exceptional combination of technical expertise and executive management experience to our Board As well as deep knowledge of analog semiconductor industry. We are delighted that she has joined our Board of Directors. And with that, I will turn it over to Sandeep. Thank you, Balu, and good afternoon. As usual, I will focus my remarks primarily on the non GAAP results, Which are reconciled to GAAP in our press release tables. 1st quarter revenues were $174,000,000 up 15% sequentially with all 4 end market categories up from the prior quarter. Communication revenues increased more than 25% driven by continued strength in advanced charges. Computer revenues were up low double digits driven mainly by fast charges for tablets. Industrial revenues were up low double digits sequentially driven by broad based industrial application as well as strength in metering, Home and Building Automation and High Power. Consumer revenue grew mid single digits driven by the broad based strength in appliances, Which comprise the bulk of our consumer category. Revenue mix for the quarter was 38% communication, 29% consumer, 25% industrial and 8% computer. As expected, Gross margin was sequentially lower, reflecting the greater percentage of revenues coming from the communication market. Non GAAP gross margin was 49.4% for the quarter, down 70 basis points from the prior quarter. I noted on last quarter's call that we expect Q1 to be the low watermark in terms of gross margin, And I still expect that to be the case as we should see the benefits of manufacturing efficiencies over the next several quarters And possibly a more favorable end market mix in the second half of the year. Non GAAP operating expenses were $36,200,000 for the quarter, down $1,800,000 from the prior quarter And below our expectations, primarily reflecting the timing of hiring. Non GAAP operating margin for the quarter was 28.6 percent. Other income for the quarter was about $600,000 while the non GAAP effective tax rate for the quarter Was 7.1 percent resulting in non GAAP earnings of $46,700,000 or $0.76 per diluted share. Cash and investments on the balance sheet rose by $42,000,000 from the prior quarter driven by strong free cash flow. Cash flow from operations was $58,000,000 while capital expenditures were $11,000,000 We paid out $7,800,000 in dividends following the $0.02 increase that we announced last quarter. Reflecting the strength of our balance sheet, our Board of Directors has allocated an additional $50,000,000 to our share authorization, bringing the total to $91,300,000 Internal inventories fell to 92 days, a decrease of 30 days from the prior quarter, while channel inventories fell to approximately 2 weeks As sell through once again exceeded sell in. Looking ahead, we expect 2nd quarter revenues to be flat compared to the 1st quarter, Plus or minus 5%. Gross margin should improve as the impact of manufacturing efficiencies begin to flow through the P and L. Specifically, I expect non GAAP gross margin to be in the range of 50% to 50.5%. Operating expenses will increase sequentially in Q2 driven by annual merit increases, which took effect in early April as well as continued growth in headcount. For the full year, I expect non GAAP OpEx to increase by about 10%, Coming off a flattish year in 2020. Other income for Q2 should remain at a similar level to March quarter, While the non GAAP effective tax rate should also remain steady at around 7% to 8%. And now, operator, let's begin the Q and A. Thank you, sir. Our first question comes from the line of Karl Ackerman from Cowen. Your line is open. You may ask your question. Thank you and good afternoon, gentlemen. First off, clearly supply chain constraints have been pervasive across the semi supply chain. I know you are fab light, but I think you've been capacity at your Japanese foundry partners for the last few quarters. I mean, given the very strong results in Q1 into the outlook for June, I guess at what revenue level are you able to service demand before needing to secure incremental capacity? Hi, Carl. Thanks for the question. Right now, I believe we have enough capacity to meet the ongoing true demand, Not enough to supply all the parts customers want to buy. And as you can imagine, customers are ordering way What they need, but we are trying to make sure that we keep all of the inventory in one place that's with us rather than have individual customers build Their inventory, at some point they'll have to. But at this point, we are trying to manage that so that we can serve all customers Well. So we think for the rest of the year, that will be the case Unless something changes. And also, as we all know, the current booking rate is in excess The normal run rate, thanks to work from home and learn from home demand. But there will be a time that will normalize. We don't know exactly when it is, but it could be in the next few quarters. Our expectation The second half will be lower in revenue than the first half, and that's because we believe it will But they will have to wait for a while to build inventory. And that's also true for distributors. We will Thanks for that. I guess that dovetails in my second question, which is just giving a little bit better understanding of your view for gross margins Right. You just indicated that, hey, distributor lead times are quite low. At the same time, many Peers across the supply chain have spoken about rising substrate and shipping costs. And I appreciate the outlook that you are giving for June. If I read between the lines, perhaps it's due to A little bit less mix in mobile. But I guess with many larger peers raising prices across the distribution channel and lead times extending? How are you thinking about volume versus price and the value that you are offering Many of your customers. And I guess, purely in volume, are you able to sign longer term volume agreements with these customers going forward? Thank you. I think the way to look at it is, yes, there are a lot of moving parts, Whether it's cost, whether it is the impact of foreign currency reduction, The way I think the best to answer you, we provided guidance at the beginning of the year that our gross margin for the year would approximately around be around 15%. We still believe that with all the moving parts, we will still achieve the 50%. And I'd also like to add that one of the reasons we feel confident about meeting the true demand Is that we are, I believe, in a better position than most of our competitors. So we will not be The long pole in the tent because of the precautions we took, we built a lot of inventory. We have committed capacity from our fab partners and we are continuing to build additional capacity in preparation for growth Next year. I think we are in much better shape than most other companies. Thank you. Thank you, sir. We do have another question from the line of Thor Edson Berg from Stifel. Congratulations on the record results. Balu, when it comes to share gains, I guess in this environment, there's several ways to gain that share. But you mentioned one of them, obviously, Your inventories high and the capacity. But the other way, of course, is by having a more integrated solution. And when discretes are Probably selling at very long lead times. I would guess that is also a good reason why you would gain share. Could you comment a little bit on that? And would those have sort of equal weight on your ability to gain share? Thanks, Tore. Yes, you hit on several reasons you're gaining shares. The biggest one is we have by far the most attractive solution in terms of efficiency, size and rate. In fact, if you want the smallest size adapter, There is no other place to go. You have to make that asset bigger, our power supply bigger to use somebody else's solution. That's number 1. And so we have been gaining share independent of the current cycle and that has continued through the cycle. But on top of that, You hit on the right point. Because it's hard to get discrete components, we have a huge advantage because our Solutions are half the components compared to our competitors. So they prefer our solution. There are a couple of other things going on. As you know, our customers are gaining share from Huawei. And so that kind of magnifies The share gains that we have. And on top of that, a number of our competitors are having trouble Shipping products because they have they are prioritizing other areas like automotive To ship into. So as a result, we are getting share gains sometimes because there There are dual sourcing at the power supply level. But sometimes even otherwise, because what happens is that if they cannot get a particular type of charger Because of our competitors having challenges, they just substitute our charger. In some cases, They've gone from a 15 watt charger to a 33 watt charger the 33 watt charger using our solution simply because The 15 watt charger, they cannot get components from China, 10 watts China for that matter. So in some ways, it's accelerating the migration Of advanced fast chargers into lower end phones. So there are many, many reasons we are gaining share. The good news is we believe a lot of this is permanent because once they ship the share to us, they get used to The benefits we bring. So we are very, very thrilled that we are gaining so much share faster than we thought originally, Thanks to the current cycle. And in October, there are other areas like appliances where the standards changes happen. And that change, there's a switch from the variable frequency motors to the fixed frequency, the linear power supplies Substituted with electronic power supply. And again, it's an area where we have great products and that is enabling us To gain further market share. So the market share gains that we are dropping on, we are seeing in all end applications. That's the big switch that we are seeing right now, things coming our way. That's great perspective. My second question is on the channel inventory at 2 weeks. I mean, that's the lowest it's ever seen. And I think normalized is like 7 to 8 weeks. Did you think that these things will try and build back to that level? Or is there sort of a new norm or a new supply chain Where that is not the number we should use going forward. No, no. The 1.9 weeks or 2 weeks is Unsustainable. They just can't serve the customers at those levels. My expectation is That could come up a couple of weeks in Q2. And that's one of the reasons we think Q2 is going to be flat. If you remember, originally, We now expect Q2 to be flat. So unless the demand increases further, We expect some buildup in the channel inventory. Great. And last question, You mentioned there's a good chance that demand will be lower second half versus first half. I assume that's Primarily associated with the communications market or would you say that applies for other segments as well? Well, it will apply for other segments like computer and Consumer markets. If you look at the demand, it looks like it's all driven by work at home and learn from home situation right now. So people are buying more computers. They're buying more appliances. In fact, if you look at appliances right now, if you try to buy an appliance, you'll have a hard time doing that. Whirlpool just announced that their backlog is now 5 to 6 weeks to their retail chain. So the appliance demand is still pretty high. And at some point, those demand will be satisfied, Especially if we recover from COVID, at some point, it will have to normalize. The demand has to normalize. I don't know whether normalization will occur in Q3, Q4 or Q1. Our best estimate is That second half will be lower than first half. The other thing, if you remember, last year, we did a 16% growth. So as you know historically, we see the upside sooner and then things turn and normalize. We will see that sooner. That's why you're seeing us talk about it in this way because things will normalize and we tend to see that sooner. Yes. I really appreciate the We do have another question from the line of Ross Seymore Strong results. It's very impressive. I guess the first question is on the channel side, Balu, you talked about it refilling that as a little tailwind for the I guess there's 2 ways if I blend the channel inventory, Con, and then the second half might be a little weaker. There's 2 ways that the weeks of Do you believe that it will rise solely by you guys actually shipping more into the channel or are some of the orders and the bookings rates and revenues of your Customers going to drop so that they will actually have more weeks of inventory in the same dollar amounts from you guys? That's a good question. I have no way of knowing. All I know is that it's a very dynamic situation. Even though we have very strong bookings and very backlog. We also see that the backlog gets adjusted in many different ways in terms of mix, in terms of push outs, pull ins and so on. So I just feel that at some point, this has to normalize. Whether said it happens in Q2, I don't know. I mean Q2 looks pretty strong to us. That's why we're giving the guidance we are giving. But I am thinking that Q3 or Q4, there will be some normalization. It is hard to predict, but it's just a gut feeling at this Fair enough. I guess as my follow-up and it might fall into the same gut feeling category, but The second half versus being below the first half, I think your logic makes tons of sense. And again, like Tore said, I appreciate your Transparency on that most companies wouldn't front run any potential bad news. Any sort of magnitudes, you said you have the ability to To what you deem to be real demand or true demand, but not all the bookings. Any sort of color as far as What the delta is between those numbers, the magnitude first half to second half, even roughly that you're considering? Well, again, it will be pure speculation at this point. My feeling maybe Raj Sandeep add to it because we both always speculate on what's going to happen. I believe it will be slightly lower than first half. The reason we don't ship to whatever customer wants is because that's just going to cause more problems Because you'll end up building inventory at the customer, which means that the normalization will be more drastic or steep. What we want to do is make sure we take care of our customers, keep all the inventory in one place, so that it will be more smoother in normalization Than if they end up building a lot of inventory. The other reason we do that is that we can serve everybody better. If our inventory gets distributed among several customers, we have no way of getting it back in case Ship to customers who are over the same the lower booking simply because they're panic. They may be booking at multiple Multiple semiconductor companies. So is it a perfect situation? No. We have no way of absolutely knowing That we are not shipping into inventory. In some cases, we are much more confident like in cell phones because we know how many cell phones are sold from each OEM. It's a lot harder, but it's fragmented like appliances and industrial markets. So we just have to work with the customer and hope that Customer cooperation with us and only takes products that are needed to run the production, Not build inventory at this time. Eventually, we'll have to build inventory because they will need safety stock. And of course, our distributors will have to get our inventory back to the normal levels, This is in the 5 to 7 weeks, but that won't happen for a while. That's very helpful. I guess one final question And you just alluded to it a little bit by saying that the handset market, you have better visibility. Last quarter, you also highlighted that You know the share that Huawei is losing and you know the gains that everybody else is trying to take on that and the latter is bigger than the former. Any sort of update on how that has progressed? It obviously didn't seem to hurt you at all in the Q1, but any update on that dynamic for us? Absolutely. You know that we have a very good share in the Chinese OEMs, And all of them have benefited from the Huawei situation more so than non Chinese OEMs. And since we already have a very good share, we indirectly benefited from it. We not only were growing share within their We didn't hear demand. They also got this additional share from Huawei going away. And so we got the benefit of that. So I would say that as far as we know, to the best we can calculate, There is not much inventory. There's almost no inventory at the power supply guys, meaning the power supply guys who build that after for The Chinese OEMs. What we don't know, of course, is that whether the OEMs have inventory of chargers In anticipation of building more phones and selling more phones to get more share from Huawei. But overall, I am more comfortable that we are shipping to demand in that market than more fragmented markets because we have no way of Knowing how many appliances are built, how many IoT devices are built, how many HBA devices are built, How many power tools are built? Those are much harder to manage. They're also smaller customers, so we don't have the bandwidth To manage, but we do what we do is we push back if they are booking excessively compared to their run rate, We push back and see whether they really react. And if they say, yes, we want this new design, we need more parts, and we provide them with the parts. But it's a non exact game. It's but I think we are doing a pretty good job by the way. Thank you for all those details and congrats again Balu. Okay. Thanks, Raj. Thank you, We do have another question from the line of David Williams from Loop Capital. Your line is open. Thanks. And I appreciate you letting me ask the question. But the first thing is congratulations obviously on the very strong quarter. But Balu, I think you've been right since you've been just talking about the market backdrop and what you've seen in the inventory build. So clearly, you have a better read, I think, on the markets than a lot. But congratulations on the read and the steady hand managing the business through this. Thanks, David. If I could maybe a little bit around the automotive. Obviously, you're not generating But anything in terms of design activity that you've seen or maybe what if you could size up that opportunity as we Look out over several years. But longer term, what do you think that could be in terms of the size of your business? Excellent question. We are making very good progress getting into a lot of these automotive customers. We have a automotive version of Innoswitch, which is a fantastic fit. Almost every customer who visited Wants to use that product. So our expectation is that there'll be a lot of design activity going on this year and next year, But we probably won't see significant revenue until maybe couple of years from now because that's how long it takes to get designed to automotive. No. InnoSwitch is just a door opener. We have other products, especially the driver products that go into the Inverter that drives the motor. And those products are very good fit As the voltages on the batteries go up, right now, most of the cars are 400 volts, but there is a Strong trend where these cars will move up to 800 volts and the bigger vehicles like trucks Are already at 8 intervals. And at that voltage, we really have an advantage because we have our drivers Have a very robust isolation scheme that this is using the flux link that we use in the industry. It's the same isolation. That provides a significant advantage in that market. Plus, we have so much expertise in driving IGBT modules and silicon carbide modules that our drivers are far superior in terms of Their ability to get the most efficiency out of these modules and to provide the highest level of protection In terms of under abnormal conditions. So we are very optimistic. It's just that because we are new to this market, it takes a long time to get there. But all indications are that we will get there. We will have a tiny little blood revenue this year. It will grow some next year and the following year, But it really will take 2 or 3 years before we go into applications where it is related to the safety of the car like The motor drive is harder to get into simply because it takes 2 to 3 years to go through all the qualifications. Sure. Makes good sense. But it does seem like you've got a large contingency, maybe a product design in that you're working around. And so once that does ramp, it could be very meaningful longer term. Is that fair way to think about it? Absolutely. Absolutely. We are fully committed to this market. We are working with a number of customers, well known customers, and we are very optimistic. It's just a question of time. Great. Thanks. And then secondly for me, maybe around the GaN capacity, you've obviously had some very good reception there. And can you talk maybe a little bit just about from a capacity standpoint, what you have in terms of GaN? And anything maybe there that you're seeing incremental terms of maybe winning additional design wins? Any way to size that up, what the GaN aspect does for your business? Sure. We mentioned that our GaN revenue is going to grow at least by 3x compared to last year. And every day passes by, we get feel better about our GaN. The good news is we have plenty of capacity for GaN, And we are also investing more because we see a dramatic growth in GaN over time. And so we don't expect any restrictions on GaN capacity. In fact, when somebody brought up the question about How much capacity we have, it really depends on the mix. Obviously, all Silicon capacity is tight around the world. We are in a much better position because of our proprietary technology and the fact that we are working with Partners with 10 year contracts where they really support us very well. But when it comes to GaN, That's completely separate capacity. And we have plenty of it right now and we will add more to it. I don't see that as a restriction for the even in the most optimistic case we can come up with. And that's also true for high power. High power is a totally different capacity, and we have plenty of capacity in high power. So if those 2 grow, that's independent of The capacity that we have on the silicon side. Okay, great. And one more if I can maybe for you, Sandeep. On the margin as we kind of think about the mix of both products and maybe even your from in the communication I think about the mix of customers. How do you think that the margin can trend as you move, I guess, from that business, thinking about the 3rd party or aftermarket chargers and then maybe some of the Chinese OEMs. Do you think that margin holds fairly steady or could you see some uplift there? Well, definitely in the aftermarket, you will see the margin improvement because it's higher power level, multi port. And as I had mentioned, again, products We'll have much higher ASP generating more much higher gross margin dollar. But when the volumes are lower, you get even the pricing benefits there. I think for the year, the gross margin will move in the right direction. And for the year, as we had said, we should still meet our original guidance Around the 50% mark for the year. We do expect the mix in the second half to be a little more favorable than it is for the first half Because we've had a lot of benefit in the first half from the Huawei's transition. And we do expect that the mix will slightly go favorable in the second half. Thanks so much. Appreciate it. Thank you, sir. We do have another question from the line Guys from Northland Capital. Your line is open. Yes. Thanks for taking the question. Well done, guys. Thanks, Doug. A question on the semiconductor I'm sorry, on the cell phone side, How much of your growth is units versus ASP? Very good question. We have grown both, But the revenue share is significantly higher than the unit share Simply because our ASPs are much higher, especially when you go to the real high end of the market. We talked about a 65 watt charger For a cell phone, which is a lot of power for a cell phone, they call it the supercharger. You're talking about significantly higher ASPs than we used to get on the low end of the business. We are talking about 5 to 10 times more ASP for a simple reason that the power level is very high, 1. Secondly, it's GaN because they're looking for the smallest adapter. And to do that, you need very high efficiency, which means you end up Having to pay more, the customer ends up having to pay more. But on top of that, we have multiple products In that one charger, it's a single port charger, but we have 3 chips in it. 1 is our You know Pro using GaN as a switch. The second one is a mini cap, which also uses GaN as a switch. But we also sell Cap 0, Which is another product we introduced some time ago. So we have a lot more footprint, lot more dollar content as The whole market moves towards the high end. Right now, the high end is a relatively small business. You saw we talked about a notebook adapter using that solution, the same solution being used on the high end of the cell phone. And so it's actually quite reasonable volume, but I think we have a lot of room for us to grow the content And therefore, our SAM in the cell phone and notebook market. Okay. Got it. And then, How much in terms of dollars, how much inventory do you want on the balance sheet? Ideally, our model is 120 days. And quite frankly, in the environment, I wouldn't mind being even higher than that. But I think it's going to be a bit of a challenge with the demand where it is right now until things normalize. Obviously, the channel inventory, as Paolo indicated Earlier, we do expect that to pop up a bit in the coming quarters. I mean, I won't be surprised even in Q2 it's popping back up because 2 weeks is not sustainable. But internally, I would at least like 120 days, even though in the short term, I wouldn't mind being even a little higher. Okay. And assuming the current revenue run rate. Yes. And We're gaining a lot of share. I think what we have tried to tell you is that at some point, things will mobilize. And As we talked about having that 16% growth there, we do see upside sooner and the normalization impact we will see sooner. So we've always tried to guide even, Kale. I think we will continue to grow our business over the next several years, irrespective of what's In this marketplace right now. Now I know some quarters have the gyrations of demand. But even as things normalize, In the long term, we believe in our model because of the share gains that we are seeing across the different end markets. Yes. One thing I want to clarify is that we will outperform, I believe, the industry Because of the share gains. So I can't predict when this normalization of demand is going to happen. Because of the share gains, we will outperform our peers, we believe. Let me try to get at the sort of the run rate. When I think about your older products, pretty steady runners, top switch, tiny and some of the older inner switch products. What has the unit volume done over the last couple of quarters relative to what the run rate was? It has gone up significantly. I mean, I can't even believe it. These are legacy products that are some of them are 25, 30 years old, But the unit volume and the revenue has been growing. And to the point that we are believe it or not, we are adding capacity for those old for those old processes and also for the old packages. These are really old PDP packages and SOAs and We still have to add capacity because of the demand increasing because these are used in appliances and industrial markets And those are doing very well. So can you put a number on it for me? How much Pop switch increased from run rate from, let's say, 'nineteen to now I'd like to rely on Sandeep here. He's looking up the tables. But I can tell you that it's still a significant part of our revenue. It's something like that I think the top switch is in the High teens percentage of revenue and TinySuit is in the same high teens percentage of revenue And the LinkSwitch is about the low teens of our total revenue and the rest of it is InnoSwitch related products. So units with the products is roughly 50% of our revenue plus or minus. Right. But what I'm curious about is What has the unit trajectory been? Is it up the unit I don't have that handy on the unit. Yes. We are looking for it. We don't have it handy. Perhaps we can We'll follow-up. Yes, that'd be super helpful. I'll let it go. Thanks so much, guys. Thanks, guys. Thank you. There are no further questions at this time. Presenters, you may continue please. All right. Thanks everyone for listening and thanks for your patience with our technical difficulties at the start of the call. We'll leave it there and this call will be available as a replay on Thank you, sir. Ladies and gentlemen, this concludes today's conference call. You may now disconnect. Thank you for participating.