All right, welcome back, everybody. I'm Joe Moore, Morgan Stanley Semiconductor Research. Very happy to have the executive team of Silicon Labs here. Matt Johnson, President and CEO, and Giovanni Pacelli , Senior Director of Finance. So maybe if you guys could just start out, you know, you have kind of a unique business model and strategy. Maybe just give us an overview of that, and then we'll go into specific Q&A.
Sure. Maybe the start at the top, just for-
Sure.
Yeah, for anyone not familiar with the company. Oh, thank you, all. Appreciate it.
Great.
For anyone not familiar with the company, long story short, we are a company that's focused on embedded wireless IoT. It's a pure-play company. We're the largest in the world at what we do, and, you know, if you think about our products and solutions, easy way to think about it is, you know, think of a wireless SoC that has the wireless capability, the compute and processing for general purpose compute, machine learning, from an AI perspective integrated, power management, security, all of that on one chip. And then on top of that, all the requisite software, development tools, and customer support across multiple wireless technologies. So this is what we do across multiple end markets, whether it's home, life, industrial, commercial, smart cities. And what we do and why we're different, is we have a platform approach.
We're one of the only companies in the world that has all the requisite wireless technologies, and we know how to make them work well and work well together. And we have a platform approach, which is critical, that we release maybe 2, 3, or 4 wireless SoCs a year, and we do hundreds and hundreds of software products on top of those every year. So our end market, as a way to think about it, is growing, you know, outside of this cycle, around 15% annually, and our goal is to always be gaining share within that market space, which we've done over the last decade consistently at at least 20% growth on top. So that's, that's a little bit of who we are and what we do as a company.
Yeah, it's a really interesting model, and, I mean, you've been very disciplined about that. You've divested businesses that you could classify still as IoT b ecause you want to stay focused in this, in this kind of area. What benefit does that give you when you're competing with much bigger companies that have more, you know, maybe breadth overall, but you have this unique focus?
Yeah, more than we thought is the honest answer. Like, when we divested, the non-wireless capability a few years ago now, to Skyworks, we did that because of a long- you know, a mid and long-term strategic view, that it was big enough, it would be self-sustaining. We saw more opportunity than any of us had ever seen in our careers to go do something amazing, and we thought it would take many years to see the impact of that focus. In reality, it's paid off much sooner than we thought. Internally, having the entire team as one team, one mission, and being obsessed with that mission, you know, burning the boats and bridges, has helped us tremendously, and it's also helped us externally. I think our story is much more understandable, much more clear in terms of what our focus is.
Our suppliers love it because most of our suppliers want to index and have exposure to IoT, and we're the largest pure play that's focused on it, and that's helped as well. So I think it's still early days of the impact of that focus, but it's coming through. And versus our competitors, I think it serves us very well. We're the largest pure play and getting larger. Every year, we're gaining share. And the companies that have this as a sideshow, it doesn't give our customers confidence, right? That they're gonna be able to bet the farm on one company, that it may be a fair weather investment. They come into the market, out of the market. It might not be their core priority as a company, and that's what we saw during the supply crisis.
A lot of the bigger companies retrenched and allocated supply elsewhere, really spooked our customer base. So the supply crisis was actually good for us, not the inventory build but the crisis itself gave people even more confidence in us. So the focus has been good.
Yeah. Maybe talk to the kind of cyclical aspects. I mean when companies do have high growth, you often are prone to these types of inventory corrections along the way. So, you know, yours was pretty severe.
Yeah.
Revenue's falling, you know, I think almost 70% peak to trough. Can you talk to that? You know, why that was so severe and whether that gives you any pause on that long-term growth trajectory that you had talked about?
No, I think the end market hasn't fundamentally changed at all. I mean, truly, the need for these types of products has almost accelerated in the sense that the adoption, the economics behind it, is getting stronger, and our position in the market is getting stronger, as well. I think in terms of, you know, the cyclicality of it, I mean, we can't deny that with tens of thousands of customers, it's very hard not to be influenced by the market ups and downs.
Yeah.
We definitely have some strong secular trends within it. You know, good examples are, if you think in smart cities, like, smart meter and gas, water, electric, in, you know, the commercial space, like, digital shelf labels or in healthcare, like, continuous glucose monitoring, those are powerful trends that can certainly, you know, ride through these economic cycles. But because we have so much customers elsewhere and such broad market exposure, we will go up and down with the tide.
Mm-hmm.
What we'd say is, no matter what it ends up being, we'll always grow faster than our competition, and like I said, we've done that for a decade now.
Yeah. You mentioned to me after the last earnings call, you sort of talked about, you know, the fact that you hadn't seen these kinds of inventory corrections before.
There's probably some learning that takes place- when you go through this kind of thing. But, you know, can you talk about that a little bit and how you kind of plan to mitigate that in the future?
Yeah, quick answer is a ton of learning, for sure. I mean, this is the first time we went through anything this severe, in terms of, you know, collectively, so many people thinking demand was higher.
Yeah.
Collectively, you know, building up so much inventory and then realizing the demand wasn't as strong and the inventory was too high. You know, for us.
To be fair, this is an extreme set of circumstances for everybody.
But it was brutal, right?
Yeah.
I think, you know, for us, you know, multiple learnings. We learned we weren't carrying enough Die Bank, we weren't carrying enough distribution inventory in the channel. We learned that we need-- you know, obviously, we obsess over internal inventory and channel inventory, but tracking end customer inventory with this diligence and focus, that's not something we've had to do historically for us.
Yeah, yeah.
Now we have mechanisms to do that, but too late, right?
Okay.
I don't want to pretend next cycle we got it dialed in.
Yeah.
I do think we've at least learned this cycle a lot, and it positions us for whatever comes next. I'm sure we'll have to learn more all over again.
Well, and having a more severe drawdown and then a quick recovery is in some ways better than just dragging it out.
Yeah.
At least you kind of felt that pain early on.
Yeah, and I mean, that's, you know, part of what gave us confidence to... You know, we went out in Q4, and we definitely said, "Look, we're not calling the market bottom-
Yeah
But we are calling our bottom.
Yeah.
“We can grow sequentially from here.” I think people were surprised that we had the confidence to say that, but we know our consumption's well above our revenue level.
Yeah
As people work down end inventory. We know that we have design wins ramping. We've won a tremendous amount of designs over the last few years that are just starting to come to fruition now.
Mm-hmm.
So, you know, you put those two things together, we don't need the market to recover to drive sequential growth from here, but the market will recover at some point and that'll give us additional lift as well.
Okay. And can you talk to the state of inventory, both at distribution and at the end customer?
Sure. So, I'll even add a third one, internal inventory w e built up internal inventory, intentionally. We have no contractual obligations to do so.
Mm-hmm.
That was just a learning from this cycle. We need to give our customers confidence with all these design wins we can support them as they ramp.
Yeah.
So that's, that's one. Channel inventory is low. In fact, our channel inventory, in terms of revenue and units, is the lowest it's been in the last three or four years, actually, lower than it was in the supply chain crisis, which is a remarkable statement, if you think about it, but it's, it's low. I'd be worried that it's so low if we didn't have the internal Die Bank.
Yeah
To give us the ability to, to respond on the other side. End customer inventory is still high. In Q4, we said that our customers are carrying excess of a quarter, more than a quarter than they should. And in last quarter, we said they'd worked that down, and both on the moving average and in the count of customers that have too much, but we're still working it down in Q1. And we've told people... You know, everyone wants to know what's the actual consumption right now. We haven't said that level. It, it's not precise, but we have said we know it's over 160 million a quarter.
Yeah. Okay. So you're kind of under-earning relative to where the trend is-
100%
For sure, yeah.
Yep.
Okay. Are you seeing any change to any of those dynamics? Are you seeing, you know, distribution want to restock? I mean, I'm a little surprised to hear you talk about people drawing it down so low, you know, a year and a half after there was a crisis around shortages.
No, we're all simple animals.
Yeah
At the end of the day, right? I mean, if you think about it, you know, we went too far. There was this, you know. This isn't unfair, but a little bit of groupthink, that demand is high.
Mm-hmm
At a new level, and it's gonna stay high forever.
Mm-hmm
And everyone needs to get as much inventory as they could. I think we've all gone the other way, and the pendulum swung the other way, that everyone's worried about, you know, channel inventory. They're worried about end customer inventory, even internal inventory. So everyone's going the other way, right? And I think, you know, lead times are short. People are ordering within lead times. As an industry, we usually don't handle these well, so it'll probably... You know, someone will place an order at some point, and the response will be further out than they want-
Mm-hmm
And the industry will start going the other way again.
Yeah.
I think it's just everyone's trying to work it down, and everyone's been beaten up, right?
Yeah.
I think there's a lot of conservatism.
Okay.
And to be clear, we'd be pushing for more channel inventory if we didn't have our Die Bank.
Yeah. Yeah, and that Die Bank, you know, you're—do you think that mitigates people from needing to build it over time? Or do you think, I mean, inevitably-
I think it gives us-
It's still better.
It's a tool to help navigate-
Yeah
However this plays out. Because what we learned is, you know, simply said, lead times are long for a semi cycle.
Yeah.
You know, for building, you know, from when you do your starts to when you're actually shipping product. And it serves you well to have a strategic Die Bank to give you flexibility with your suppliers-
Mm-hmm
And with your customers, and we were carrying very little.
Mm-hmm. Okay. Okay, great. Can you talk about pricing? You know, and you've been very—I feel like you've done a great job of being transparent-
Thank you
Through the upturn, what the pricing was looking like, what you know, you were passing along increases that you saw and not more than that. Can you talk about the role of pricing now? You made some comments on the call about, you know, a more aggressive competitor. Nordic was here earlier, talking about, you know, some of the low-end discrete Bluetooth pricing being weaker. Just what are you seeing in terms of the pricing dynamics?
Sure. Yeah, you know, like we said in the last call, like-for-like pricing has been pretty stable, right?
Okay.
In our space, really what we see is price discovery is happening at the design win phase. Very rarely will we move pricing or get pressure to move pricing, you know, mid-ramp or, you know-
Mm-hmm
Once it's up and running. So yeah, you know, as you alluded in the last call, we did talk about one competitor who is maybe acting a little bit unusually on price at this point in the cycle.
Mm-hmm.
Very little overlap to us, but we're really just trying to give a fair picture of what we see out there.
Yeah.
Yeah, but, you know, the reality is, you know, pricing is pretty inelastic, and if you look at, you know, where revenue has gone, you know, in Q4, we would've bought our way out of it if we could, right?
Mm-hmm.
You know, similarly, on the foundry cost side, right? We're not seeing a lot there, and, you know, costs went up, prices went up. You know, we're not seeing the reverse happen yet either.
Yeah. Okay, great. And then, any of these dynamics different between the two segments that you guys report, the Home and Life and-
Yeah, not as pronounced as one might think o r might desire.
That one was earlier than the other one.
Yeah, I mean, Home and Life was earlier in the cycle, so we, you know, we believe it'll be earlier out, industrial, commercial, a little bit later. Specifically, I think Home and Life, we started to see it in Q3 of 2022. Industrial, commercial, started to see it in Q2 of 2023. To answer your question, though, we are seeing bookings improve consistently over multiple months.
Mm-hmm.
You know, book-to-bill's improving. We're starting to see, you know, the, you know, discontinuation of, you know, push-out requests. Now we're seeing pull-in requests, and that's encouraging. Not saying we're out of the woods, but it's going in the right direction.
Yeah.
And between Home and Life, Home and Life, it's stronger, more pronounced, which makes sense, 'cause it was first in.
Yeah.
But we're also seeing it in Industrial & Commercial , just not as pronounced, 'cause I think it, it started later and still has more to work through.
Okay, great. And then, can you talk about how all of this has affected your design win pipeline? You know, where-
Yeah
You've had a lot of progress over the years. Do you have to make some adjustments 'cause you're like, "Okay, demand for some of this isn't quite what we thought," or how do you think about that?
Yeah, I mean, it, you can't deny that, you know, this whole environment has been distortive, distortive on almost everything-
Yeah
Over the last few years. But big picture, easy way to think about it, in 2021, 2022, you know, we doubled our revenue during that timeframe. And during that same timeframe, we more than doubled our design win progress. And then last year, you know, it was ugly. We were down 24%.
Mm-hmm.
Our design wins were still up, which is weird. Usually when, you know rev, there's some correlation there. We're still able to drive design wins. It's just on the strength of Series 2 and that portfolio and those products. That platform is cleaning up the industry in terms of its adoption, and it's really become the de facto standard for a lot of our customers.
Okay.
So we love that progress, and the impact of those designs really hasn't started yet. We're just starting to see the impact of those designs in 2024 ramping now.
Okay.
That's why we started to share, you know, when you're guiding in a trough like we were in Q4, we thought it'd be helpful to share some of those ramps that... You know, we mentioned, like, the India smart metering rollout that's starting to ramp now.
Yeah.
We've shared, Samsung for smart TVs. We've shared Dexcom for CGMs. We said one of the largest two EV makers in the world is adopting our products and, and ramping those in 2024. Those are all happening, you know, kind of in this quarter, next quarter, as we move forward.
And what really helps us have confidence that, again, we don't need the market to recover. We just need end inventory to come down, so revenue goes up to consumption and those design wins to ramp, and, and it puts us in a meaningfully different place than we are right now.
Yeah. Okay. Great. I mean, you talked about a lot of examples just there. You know, anything that particularly excites you, that you think—you know, you mentioned the medical could be a pretty big driver. What are the biggest dollar drivers that you sort of see over the next couple of years?
Sure. Yeah, I think, you know, simply said, if you, if you step back and look at big picture, there's multiple vectors. One, I think Matter and Amazon Sidewalk are still exciting and will help our industry over time, and will ultimately be a growth catalyst for the industry and for us. If you go and look at it from a technology perspective, you know, areas where we've historically been strong, 15.4 and sub-GHz, those are getting pulled into the mainstream.
Okay.
So our market leadership positions in IoT are getting pulled into the mainstream by some of the biggest companies in the world. That's exciting. I'd also say technology-wise, Bluetooth. You know, we put our focus on Bluetooth, you know, 3, 4 years ago.
Made huge progress there. We are unequivocally gaining share and taking chunks out of competitors like Nordic, who was up on stage earlier, and we see that continuing in the next few years. Wi-Fi, earlier in, but we like the progress we're making. We've scaled that site that we acquired from 200 to 700. We just released our first product based on our combined technology, called the 917 . That brings power consumption to Wi-Fi that is new to industry. Simply said, a Wi-Fi 6 product that has 45%-50% less power consumption than any competing alternative.
Hmm.
So if you're, you know, put yourself in our consumer shoes like us, that means you change your batteries way less often, and the battery life is meaningfully longer. So early days, but the opportunity potential is equal to what we're seeing in Bluetooth. So those are category growth catalysts that we're excited about. And then, if you look at it from an end market perspective, CGM is fantastic, right? CGM is a market that's helping people. It's doing good.
Mm-hmm.
At the same time, it's a market that has volume potential that is just somewhat astounding from a semiconductor perspective, right?
Okay.
It's disposable. The market penetration's low for these companies, but the need is great. So that's very exciting. Shelf labels, very exciting. Geo-wise, I think almost every major geo in the world is adopting, most of the major retailers are adopting, and the volumes are substantial. So that's another one that we're very excited about. Smart metering, gas, water, electric, you know, India's rolling out smart metering now. That's 250 million units over the next few years.
Mm-hmm.
All of those are awesome growth engines on top of everything else we've been doing all along.
Okay. Okay, that's great. You talked about Series 2 doing really well. Can you talk about what that brings to the market? And then maybe talk about Series 3 as well.
Sure
For those who aren't aware, Series 2 is probably poorly named because it's our fourth generation technology. It's a platform approach that is taking all of our wireless technologies from a hardware perspective and creating a platform that we can easily move around, create, you know, derivatives and permutations of. And then on top of that, we do hundreds and hundreds of software products every year on that platform. What's unique about it, if you're a customer, if you use one, the next one is easier and more efficient from an R&D perspective. You get massive reuse. If you're a customer, you get multiple wireless technologies, all the requisite wireless technologies you need, not just the one that some company wants to push, right?
Because most customers want Wi-Fi to talk to the cloud, they want Bluetooth to talk to their phone, they want sub-GHz to talk to the network, as an example. So that has been very powerful for us from a Series 2 perspective. On top of that, Series 2 brings, without any contest, industry's leading power consumption, industry's leading security, industry's leading wireless performance. So you have that platform that'll gives you a lot of reuse for customers, for R&D efficiency, it has all the technologies they need, and it gives them a lot of reuse and customization through software. So it's just knocked it out of the park. That $18 billion pipeline that we have, the bulk of that is being driven by Series 2. The design win momentum over the last few years is being driven by Series 2.
The revenue for us for the next 5, 6, 7 years, the bulk of that will be driven by Series 2. And we will keep investing in that for the next decade, from a software perspective. You can, you know, that's awesome, that's cool, we're excited about it, but we can never get comfortable, complacent, and we got to stay paranoid. We are reinventing ourselves all over again with Series 3, which is where the bulk of our R&D is going right now, to take that platform, which is the de facto standard in the space, and make it meaningfully better and step function up. This isn't one product, and it's not leaning on, you know, just the process technology.
It's taking literally, you know, almost two decades of knowledge, four generations, and making our fifth generation something that's unstoppable in the industry from a performance perspective, a scalability perspective, a reuse perspective for our customers. So to make it real, compute, we're talking 100x improvement, general purpose and AI. Scalability, we get to reuse all of our code that customers have out there and can apply it to this generation. So if you're sitting there, an investment in Series 2 is also an investment in Series 3, which our customers love. So we're excited about it, but it's still early days. We're only sampling, you know the first half of this year. So, you know, we'll see growth in Series 2 for a long time, while we're also seeing design wins and momentum building in Series 3.
And how much of that value proposition is the software? And, like, sort of how much software expertise do you have in your R&D?
So in terms of how much is the expertise, you can't separate them.
Yeah.
I want to be clear about that. We, you know, people say, "Oh, we monetize in hardware." You can say that technically, but our products don't do anything without the software that goes with them. We're really selling a solution that is an integration, a synthesis of those two things, and they go well together, and they can't be separated, so that's important.
And that's fairly unique, right? I mean, if you don't see it-
We have meaningfully more software developers than IC designers which most people don't realize.
Yeah.
Because in our space, the market's too broad, too diffuse, too many applications customers to service it in hardware. You'd die of your own weight trying to do that many wireless SoCs. I mean, we do 2-3 times more wireless SoCs every generation or platform. It's not enough. That's why each year we're doing over 500 software products, and that's scaling up quickly. That's how customers get the custom approach, that's how they get their application serviced and feel like, "Oh, wow, they had a solution that was for me, and does exactly what I need it to do." So it's a critical part of our differentiation, but tough to separate.
Yeah. And if you have, you know, potential customers who are doing Wi-Fi solutions or Bluetooth solutions, you know, and you kind of want to sell this capability to them, you wanna kind of broaden out their ca- Is, is it difficult to find those people? Is it difficult to y ou know, or are people really struggling with these situations where they're trying to merge these different technologies?
You know, it's been kind of fascinating. I'd say if I go back five years ago, if I'm honest about it, most of our customers were really kind of picking point solutions. You know, it's like: I want this product, and I need it to do these things.
Yeah.
That was the vast majority of our opportunities. I'd say it's completely, completely flipped now, where the vast majority of our opportunities, they're picking the company, they're picking the platform, and all the things that platform can do. Because some of our customers, that, without exaggeration, have over 200 designs, they can't work with multiple suppliers.
Mm-hmm.
If they can have one company that has all the requisite capability and technology, and they get reuse within that, that's their win. So it's completely inverted now, where most of the people are coming to us, not for the product, though the product still has to be the best.
Yeah.
But it's, they're picking the company, they're picking the platform. Honestly, they're picking the management team. They wanna know that they're betting their future, 'cause most of what we do is sole source.
Yeah.
They wanna know they're betting their future on a company they can bet on.
Yeah. And I'm a bit surprised at just how broad the business is in that, you know, you talk about what... The things you're saying, I mean, there are some customers who do a lot-
Yeah
In these areas with lots of different products, I mean, you know, like Amazon's-
Yeah
Guys like that.
Industrial.
Yeah.
Yeah, yeah.
You know, do you expect over time that you'll actually have some higher customer concentration with, like, a lot of products at those customers?
If it happens, it's okay, but we're trying not to.
Yeah.
I mean, we're working the both, both ends of it hard in terms of, you know, continuing to grow big customers, but we've invested tremendously in mass market and long tail to have, you know, a meaningful piece of our business that's low to no touch. If we don't do that, we can't scale as fast as we need to, right? If we have to white glove every opportunity, we'll never scale. So that piece, the, that doesn't happen by, you know, default. You have to invest in it, you have to be purposeful about it, and we're making awesome progress. I, I would argue there's no company in the world that is addressing as much mass market wireless as we are.
Mm-hmm.
That's not a trivial statement.
Yeah.
We're excited about that, but it's critical. If someone grows super fast, great.
Right.
But we're really trying to keep the diversification.
Yeah. Okay. So maybe if we could talk about financials, a little bit. Gross margins, I guess, a little lower than expected last quarter, but, you know, you have, you have a lot of things going on within that number. Can you talk about the long-term trajectory of gross margin?
Sure. You want to? You want to-
Yeah. So with the revenue levels being what they were in Q4 and what we're anticipating in Q1, just anomalous things are gonna pop out, right? Even though we're fabless, fixed cost absorption-
Yeah
in our manufacturing organization, supply chain organization is becoming a topic that we never thought we'd talk about, right?
Yeah.
Nothing has really changed, though, in terms of the longer term, right? As we get back to breakeven and back to consumption, you know, our model is still intact, right? You know, I've heard Matt say many times, you know, at the peak, at the trough, that's not the time to really change a gross margin model, right?
Mm-hmm.
So, mid- to high fifties-
You didn't at the peak either, like, to your credit.
No, that's right.
There was a lot of pressure, I tell you.
I remember.
We had a 67% quarter I don't know, 3, 4 quarters ago.
And people wanted your analyst, and people wanted you to-
Yeah, it's got to be north of 60.
Yeah.
You know, and so, you know, we're definitely holding to that model. You know, at that level, it is a premium gross margin in the industry, in our space.
Mm-hmm.
You know, we anticipate being able to maintain that.
Okay.
You know, there is a little allowance for growth in Bluetooth and Wi-Fi, just structurally have, you know, slightly lower gross margin profiles. But that kind of gets lost in the wash with mix, and with geos, and end markets, and that kind of thing. So we're very confident in that longer term model.
Yeah. And then OpEx, I mean, you have a pretty large opportunity in front of you, but also pretty difficult conditions. I assume there's some controls on that.
Yeah. I mean, if you look at what we did in OpEx in 2023, it went down sequentially for four quarters, right?
Yeah.
What was interesting is each quarter, as we're, you know, looking at the next quarter, we thought the next quarter would be a growth quarter, right? You know, so we got to Q3 and executed what we anticipated to be just temporary reductions, right? There were executive team pay cuts. We shut off the bonus plan, shut down travel, really slowed the pace of hiring to just a bare minimum. And as we started seeing how Q4 was taking shape, we had to convert a lot of that to structural changes, right? So we had a 10% reduction in force, the biggest cuts that we've ever done, really painful but necessary.
Mm-hmm.
Recalibrated our cost structure.
Mm-hmm.
So, you know, as we look ahead in 2024, you know, we're gonna start to open up spending a little bit. You know, it's gonna be calibrated to the pace of the recovery, to the slope of the recovery. Not dollar- for- dollar, but just you know, incrementally as we go. Investments that we need to make, we've got to have sales teams traveling, out visiting customers, and, maintaining, our roadmap, so.
Yeah. Yeah. Okay. And then last question from me, open to the audience. So uses of cash. You know, you talked about 2024 buyback. You know, obviously, cash generation is not where you want it to be long term, but it will come back.
It will.
You know, how are you thinking about that? Is there still M&A that you need to think about doing long term, things like that?
Yeah. I mean, from a—you know, obviously, we're gonna be, you know, cautious. You know, we, we have our, our cash position for a reason.
Mm-hmm.
It's coming in handy right now. I think that big picture, you know, we've been acquiring about a company a year for the last decade to gain capability and technology for our space. I now feel that, you know, we're not looking for SAM expansion. We don't need more market. There's plenty of opportunity, and we have all the requisite technologies. So what we do now, from an M&A perspective, would be about going faster and more aggressively in the spaces that we're in.
Okay.
So not expanding into new areas. We have what we need. It's about going faster in the areas we're in. If we saw something that we thought would be a good fit culturally and allow us to step function in terms of scale and addressing these markets, that would be of interest, but not a lot going on out there either, so.
Mm-hmm. Right, right. For sure. Okay, good. Question in the back.
Tell me more about Die Bank and how that's a strategic asset. I don't know the concept and-
Oh, sorry.
Given the new standards, maybe certainly new spectrum that comes in, like, if you're holding all these die in a Die Bank, I understand the software application, but how do you manage the risk of obsolescence in this Die Bank?
Sure. So, let's see. First, first things first, we have to have integrity in statements. There's always risk and, you know, it's not without risk, but in, as far as risks go in our space, it's relatively low risk, and, and I'll explain why. In the crisis, we learned that from, you know, the Die Bank, we weren't carrying enough internally. Lead times are long for a fab cycle. And, you know, orders are coming in much faster than that. So to have some cushion in terms of managing your suppliers, in terms of your starts and rates, and servicing your customers, having that buffer margin in the middle is very powerful. That's one. Two, we don't have that many Silicon products. Most of the, the change and differentiation in terms of customization is in software.
So you know, we have wireless SoCs that have thousands of customers, and they will last for, you know, a decade or more, easily. You know, our products, we're still shipping in 110, 180, 90 nanometer, as you know, we still are ramping in 40. So that's the first thing, that imagine that, you know, these are things that can last a long time. We're carrying right now, we do what I think about 1 turn. We were carrying 3-4 turns before. Something in the middle is probably where we're gonna land, but we have to be ready to support these ramps. We've committed to these customers. These are mostly sole source. We do not want to let them down. So we'll. You know, I'm not saying it'll be perfectly linear as our revenue comes out of this.
We'll use it as a strategic tool, as we see fit, to support ramps and to support our suppliers in the best way possible. But over time, it'll probably end somewhere in the middle of where it was. Yeah?
I mean, you're talking about being a wireless connectivity company. Cellular is kind of missing there.
Yeah.
Some of your larger competitors probably have that. Do you think you need that longer term? Where's the market going?
Sure.
Just trying to understand-
Sure
and if there is demand, how you would interpret?
Yeah. So cellular, first of all, easy way to think about it, it is wireless, can't deny that, but it's apples and oranges, right? So if you think about cellular, you're talking, you know, order or orders of magnitude, more power consumption and cost. You know, think of this, you know, battery life, days, if you're lucky. What we do, we're talking years and years on a watch battery, 7-10 years. It’s not the same domain. So this different application space, different needs. For us, where we see the biggest opportunity in volume is at the extreme edge, where we could have, you know, hundreds, if not thousands of devices on the extreme edge, taking benefit of that power consumption and cost point, talking to cellular.
So cellular is, you know, meaningfully lower volume in the IoT, and I don't think there's anyone that debates that. It's orders of magnitude. And the cost, the power consumption, service models, make it prohibitive in terms of scaling. And there's no one doing meaningful IoT cellular volume out there today. It's been talked about for over a decade or more. You know, the only company that's really, you know, I think, in our space, dipped their toe in that water, you know, Semtech. You know, we can debate how that's gone for them, but I don't think it's been transformative. And Nordic has been working on that for seven or eight years, and it's, you know, they're still spending more than they have for revenue. It's not something that we see as inherently strategic, asked for, or needed by our customers.
You know, for us to double or triple the company, we don't need cellular to go do that. That being said, if it ever did become relevant, we'd make or buy it, depending on what made the most sense. But right now, we are not seeing the demand, the need on the, you know, relatively near and midterm horizon, and there's no shortage of opportunities in the markets that we're in. Hopefully that addresses the point.
I feel like I do get reports of Qualcomm trying to sell $50 chips into an $8 socket. They're going after these-
Apples and oranges.
Yeah.
Yeah.
But that's it. They are trying still.
Well, I mean, that's what the answer is, right?
Yeah.
It's we have literally built a custom ground up capability for the extreme edge, which is where... You know, think of it this way, y'all. I mean, you know the volumes in PCs and handsets and automotive, what we're talking about for this edge is billions and billions and billions of units annually. We've never seen this type of volume potential in the semiconductor space. Even just one application space, like CGM, is remarkable in terms of its potential. So, that's exciting to us and, you know, we don't need cellular to do that, but if we ever do, we have no problem going after it. Any question?
If I may, one add-on question on the Matter standard.
Yeah.
Seems to be a bit underwhelming from the big players. Maybe you have a different view.
Yeah.
I would like to hear your view, and what do you think there is the reason there's maybe too much...
Hype?
Well, too much, probably, buying ahead of consumers so basically, it's hard to find a killer app?
Yeah, I think, you know, let me be clear, never fast enough, and never easy. But I think what Matter intends to do, for anyone who's not familiar, Matter is oversimplified, an application layer that goes over the top of Wi-Fi, Bluetooth, and Thread, to make it easier for the ecosystems of the hyperscalers to work together. Think of Apple, Google, Amazon, Samsung. Their ecosystems historically didn't work well. So as a consumer, you get something for one, and it can only work within. The vision of Matter is that if you buy for one, it'll work across the others. Not saying it'll be fully enabled within each ecosystem, but it can work across, which is a much better user experience.
From a developer perspective, you also get the benefit of developing for one, you're developing for all, which is much more efficient, instead of having to do it individual. So that's going well. What we love about Matter, you know, full disclosure, is it pulls one of our strong positions in 15.4, where we're a market leader. We actually invented the technology, essentially, pulling that into the mainstream. So we're very supportive. We think net-net, it's good for the industry because easier to use, better consumer experience, better developer experience, and for us, it's a net positive, pulling our technology into the light. But the problem is, it's been talked about too much, right?
I mean, if we're honest about it, it came out in this hype, and everyone's like, "Oh, my gosh, this is gonna be awesome!" Hadn't even started it yet, right? So have to go through that cycle of, you know, the hype and the valley of despair, and then we're crawling out of it, and now it's becoming real. It's coming out in products, and for the next few years, you'll see more and more products coming out, working through the warts and bugs that are inevitable with anything new. I think the fundamentals are sound, so I think you'll see over time, continued growth and progress in Matter. But I would not think of it as a step function and, and everything's better. I think it's a long journey, and, you know, we're pretty far down the road.
Biggest companies are working together, the standards out there, it's being put into Silicon, and it's being rolled out to customers. It just takes a while. All these things take longer than we all want. Any other questions?