Good day,
and welcome everyone to the Vicor Earnings Results for the 4th Quarter and Year Ended on December 31, 2021 Call. My name is Matthew, and I'm your operator today. During the presentation, our lines will remain on listen only. One question and a follow-up. I would like to advise all parties that this call is being recorded for replay purposes.
And with that, I would like
to hand it over to your
host, James Sims, Chief Financial Officer. Please proceed.
Thank you, Matthew. Good afternoon, and welcome to Bicorp earnings call for the Q4 and the year ended December 31, 2020. I'm Jamie Sims, Chief Financial Officer, and with me here in Andover over are Patricio Vinciarelli, Chief Executive Officer and Phil Davies, Vice President of Global Sales and Marketing. After the markets closed today, we issued a press release summarizing our financial results for the 3 month 12 month periods ending December 31. This press release has been posted on the Investor Relations page of our website, vicorpower.com.
We also filed a Form 8 ks today related to the issuance of the press release. I remind listeners this conference call is being recorded and is the copyrighted property of Ichor Corporation. I also remind you various remarks we make during this call may constitute forward looking statements for purposes of the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995. Except for historical information contained in this call, the matters discussed on this call, including any statements regarding current and planned products, Current and potential customers, potential market opportunities, expected events and announcements and our capacity expansion well as management's expectations for sales growth, spending and profitability, are forward looking statements involving risks and uncertainties. In light of these risks and uncertainties, we can offer no assurance that any forward looking statement will, in fact, prove to be correct.
Actual results may differ materially from those explicitly set forth in or implied by any of our remarks today. The risks and uncertainties we face are discussed in Item 1A of our 2019 Form 10 ks, which we filed with the SEC on February 28, 2020, we presented certain updated risk factors regarding the COVID-nineteen pandemic And our current construction project in our Form 10 Q for the Q3 filed with the SEC on October 30, 2020. Both of these documents are available via the EDGAR system on the SEC's website. I remind listeners that the results announced today are preliminary as are subject to the completion of annual audit procedures by the company's independent registered accounting firm, KPMG. As such, these results are unaudited and subject to revision until we file our Form 10 ks for the 2020 fiscal year, which we expect to occur by the filing deadline of Monday, March 1.
Please note The information provided during this conference call is accurate only as of today, Thursday, February 25, 2021. Vicor undertakes no obligation to update any statements, including forward looking statements made during this call, and you should not rely upon such statements after the conclusion of this call. A replay of the call will be available beginning at midnight tonight through March 12, 2021. The replay dial in number is 888-286-8010 followed by the passcode 3,310,701. This dial passcode are also set forth in today's press release.
In addition, a webcast replay of today's call along with a transcript will be available shortly on the Investor Relations page of our website. Let me begin this afternoon's discussion by providing some color My decision to step down as Vicor's Chief Financial Officer, effective June 30, 2021. As noted in today's press release, I have informed Patricio and the Board of my intent to pursue other interests and different types of challenges during the next phase of my career. I've had a remarkable run as CFO of Ichor, but I feel time is right for me to look for other opportunities and forms of personal enrichment.
As stated, we have kicked off
a search for our next CFO and I will be focused on a smooth transition to the leadership of my successor. I will be leaving behind a highly talented team, a strong balance sheet and a clear roadmap for future success. Now I'll turn to a review of our Q4 financial performance, after which Phil will review recent market developments. And Patrizio, Phil and I will take your questions. In my remarks, I will focus mostly on the sequential quarterly change for the P and L and balance sheet items and refer you to our press release or our upcoming Form 10 ks for year over year comparisons.
As stated in today's press release, Vicor recorded total revenue for the Q4 of 84,300,000 up 7.9% from the 3rd quarter total of 78,100,000 For the full year, 2020 revenue totaled $296,600,000 up 12.8 percent from $263,000,000 for 20 19. Quarterly advanced product revenue rose 10.4% sequentially, reflecting the continued ramp of shipments of our lateral power solutions for AI acceleration. Demand for our 48 volt direct to CPU solutions and the first volume shipments of our new satellite solutions. Brick product revenue rose 6.1% sequentially, reflecting a broad resumption of shipments to our North American customers after the pandemic related trough of the 2nd and third quarters. This increase offset a sequential decline in shipments to China With those export volumes of brick products returning to trend from Q3's high level.
Shipments to stocking 20 totaled $106,100,000 up 41.5 percent from $75,000,000 for 20 19, While Brick Product revenue for 2020 totaled $190,300,000 up 1.3% from $187,800,000 for 20.19. Exports for the 4th quarter declined sequentially As a percentage of total revenue to approximately 64% of consolidated revenue from the prior quarter's 73%, Reflecting the factors just mentioned regarding North American and Chinese shipments. For the full year, exports increased 35% and represented 64.4 percent of total revenue. For Q4, Advanced Products share of total revenue rose for the 5th consecutive quarter to 40% with Brick Products share correspondingly declining to 60% of total revenue. We believe advanced product sales will expand further as a percentage of total revenues, especially once new manufacturing capacity comes online.
Given the high growth segments we are targeting with our 48 volt technology, including AI, data center and automotive, in contrast to the mature growth of the segments we serve with Brick Products. Turning to Q4 gross margin. We recorded a consolidated gross profit margin of 48%, an increase of 5 points compared to the margins reported for Q2 and Q3. Higher volumes and improved mix contributed to higher profitability as did a reduction in cost variances. Gross margin dollars rose 21% sequentially.
Margins remain under some pressure of high tariff charges, which totaled 1.5 $1,000,000 representing approximately 1.8 margin points for the whole quarter. We did see a reduction in quarterly tariffs As Q4's total was 18% lower sequentially, in part reflecting our ongoing efforts to reduce component imports from China. We expect to see further improvement through 2021. I'll now turn to Q4 OpEx, which rose just under 6% sequentially, but were consistent with longer term trend reflecting periodic swings in discretionary spending. The amounts of total equity based compensation expense for Q4, including included in cost of goods, SG and A and R and D were approximately $242,851,000 $504,000 respectively, totaling $1,600,000 For Q4, we recorded operating income of 11,600,000 Representing an operating margin of 13.8%.
The sequential 90% increase in operating income reflects the operational leverage in our Turning to income taxes. We recorded a net provision for Q4 of $788,000 representing an effective tax rate for the quarter of 7%. Net income attributable to Vicor for Q4 totaled $1,200,000 GAAP diluted earnings per share was 0 point 44,772,000 shares. For the year, net income attributable to Vicor totaled $17,900,000 representing diluted EPS of $0.41 up from the prior year's $0.34 Before I To protect the health and safety of our employees following federal and local guidelines for employee well-being. As a designated essential manufacturer Using masks and practicing social distancing from the onset of the pandemic, we have continuously 3 shifts at our Andover manufacturing facility.
With only a few exceptions, our engineering sales and administrative personnel returned to their offices In early Q2, I refer listeners to our Q3 2020 10 Q filing, We'll accept further details regarding our response to the pandemic and the impact this has on our operations As is well known, coronavirus infections rose Domestically during the Q4 and the daily total of reported infections only has begun to decline in the past few weeks. Vicor experienced higher absenteeism from December through January, largely the consequence of quarantine requirements. However, our ability to adjust shift staffing in the factory allowed us to avoid meaningful disruption of production schedules And we hope the worst is behind us as absenteeism has recently returned to low levels. Nevertheless, because of the potential The influence of the COVID-nineteen pandemic is associated with risks outside of our control. We cannot estimate Turning to our cash flow and balance sheet.
Cash, cash equivalents and short term investments totaled 212,000,000 Dollars, a sequential increase of 4%. Accounts receivable net of reserves totaled $41,000,000 at quarter end, essentially unchanged sequentially with DSOs for trade receivables slightly improving to 37 days. All balances are current. Inventories, net of reserves, declined 1.5% sequentially to 57,300,000 Annualized turns improved to 3.1. Reflecting the favorable swing in working capital, operating cash flow $19,300,000 for the quarter.
Capital expenditures for Q4 totaled $11,800,000 representing the value of equipment placed in service during the period. We ended the quarter with a construction in progress balance of another $15,000,000 and We have approximately $42,000,000 of our capital budget scheduled to be spent through the year. Our factory expansion project is proceeding I'll now address bookings and backlog. Q4 bookings totaled $91,500,000 a 1.2% sequential increase. The overall book to bill was approximately 1:1 with advanced products at 1.4 and Brick Products at 0.9.
Q4 bookings largely reflected the same circumstances we saw with Q4 shipments, a strong recovery of North American volume, offsetting a return to trend for Chinese bookings And to a lesser extent, the natural lumpiness of orders from Asian contract manufacturers. At year end, 1 year backlog totaled $147,600,000 an increase of 5.4% sequentially. Turning to our outlook for the Q1 of 2021. We expect continued revenue growth. We continue to address the sources of gross margin pressure and are forecasting improvement in product level profitability.
Further, we do not anticipate any meaningful increases in operating expenses. While substantial further improvement And gross margin will have to await production from our new vertically integrated expanded factory. We expect incremental revenue to drive earnings per share given the scalability of our operating model. Phil will now provide an overview of recent market developments and then Patrizio, Phil and I will take your questions. I'll ask that you limit yourself to one question and a related follow-up so that we can respond to as many of you as we can in the limited time available.
If you have one more topic to address, please get back in the queue. So, Phil? Thank you, Jamie.
I would like to start my comments with a short review of our progress in 2020, which I would Our position is the leading supplier of high performance power modules to customers in the data center, advanced processor and high performance computing markets. In 2020, we not only expanded our customer base, but also solidified our position with large customers by starting next generation projects for higher performance processes with significantly higher power levels, currently under development and scheduled for introduction in 20222023. Our leadership position is clear in that customers worldwide are selecting Vicor because of the increased performance that they can achieve with our factorized solutions, which are characterized by much higher power and current density. In 2021, we will begin to ship our new proprietary Vertical power delivery modules in volume to customers developing highly advanced supercomputers. These supercomputers utilize large clusters of AI processors in close proximity to enable faster parallel processing of heavy and complex Such as those found in autonomous driving applications.
These complex systems can utilize greater than 50 processes, all requiring a vertical power delivery module from Vicor. I'll now turn to a new product strategy and growth initiative that was Launched in 2020 and what should bring additional opportunities and revenues in 2021. This is our new line of single phase and 3 phase AC power modules incorporating our latest advances. These are successes to our former RFM assemblies. As RAC and data center power requirements grow, The need to leverage existing facility footprints and rack infrastructure becomes a priority.
VAICL's new High density AC front end product families will meet this challenge head on. These new OEM customer funded products are scheduled to ship in Q3 of this year and we are excited about the future of this product line, which significantly expands our available market. As the 48 volt market continues to grow and as new customers introduce AI and HPC solutions, Vicor is extremely well positioned to meet its growth objectives for this business in the coming years. Editors trying to catch up with 48 bolt based solutions have started to set foot on our minefield of intellectual property. Misinformed and unscrupulous competitors are exposing OEMs purchasing infringing converters to significant risk of supply chain disruption.
Having learned how to protect its inventions and assert its IP, Vicor's IP strategy is to hold OEMs accountable for OEM products Incorporating infringing power modules from unlicensed module manufacturers. OEMs seeking an alternate source to can take an OEM license to Vicor IP. Licensing revenue from a comprehensive IP strategy should contribute appreciably to Vicor's gross margins. So let's move on to our progress in the automotive market. As we all recognize, electrification of cars, light vehicles and trucks is advancing rapidly with major investments and aggressive new model introduction plans announced by almost all of the major automotive OEMs.
I am very pleased with the progress we made in 2020 and establishing several direct OEM funded product development initiatives for electrified vehicles, which are scheduled for introduction in 2020 which achieves unparalleled power density and low weight. In Q4 of 2020, we received funding from a large North American OEM for a solution that we expect to deliver to the customer next week with an expected start of production in 2024. We are also working closely with several other global OEMs with which we expect to sign agreements in the coming months. The automotive market offers Veiko a large incremental revenue stream for 2023 and beyond in both the mild hybrid and pure electric Pure electric automotive market for our high power, high efficiency and lightweight modular solutions. With a range of $100 to $1500 per vehicle for our power modules, the revenue opportunity for Vicor is substantial.
In addition to the data center and automotive market, we
see further growth in the 5 d commission market both for power delivery to network processors and high density profile agency front ends.
The opportunity for Vico lies not only in land based systems, but also in satellite constellations. We recently announced a collaboration with Boeing for a new MEO based constellation for which we developed the family of radiation tolerant power modules. These modules are now being sampled to other satellite customers in this emerging and growing market. And we are also collaborating on the development of additional customer funded power modules. The products and technologies developed for these growth markets are also ubiquitous to power delivery networks in many emerging applications such as robots,
unmanned vehicles such as drones and delivery vehicles, which should continue to expand our available market. We are selectively pursuing promising opportunities across such emerging applications.
So in summary, we made excellent advances in 2020 and I expect increasing traction in 2021. I'll now turn the call back over to the operator so that we can take your questions. Operator?
And we already have a few incoming questions. The First one is coming from the line of John Wantang. Please proceed.
Hi, guys. Thank you for taking my questions. Very nice quarter, and It's nice to see that the strength is continuing. First of all, Jamie, congratulations on your decision. It's been great working with you and hopefully we'll cross that in the future.
I was wondering if you could repeat your gross margin commentary heading into Q1, I'm not sure I caught it all. And maybe address the components of that given the volatility we've seen in the world, whether it's component pricing availability, freight costs and timing, All the things that are impacting the world at the moment.
Well, obviously, as I And the tariffs continued to have an impact, but it was roughly $300,000 lighter. We really benefited from higher volumes and a much better mix profile.
The
Volume of our advanced products based on the leverage in that model, Higher volumes allow us to absorb a great deal of our overhead and that was the driver of the increase right there. So it's 48% for the quarter.
Got it. I was actually asking about the quarter as we head into it, the outlook you had and what the gross margin commentary there was?
For this quarter. We expect, All other things being equal to actually have some incremental improvement as the trends continue.
So I would add though that one should not expect an improvement on the scale of the one We just recorded in the most recent quarter.
Yes, we're not going to pick it. So
Margin, expectations on margin improvements. The next major contribution to margin improvements will come about With the Virtu integration in a new facility, the Significant inefficiencies, long cycle times, bottlenecks, some
Hello? Hello?
Okay. This is the operator speaking. You are now back live in the call. Okay.
So we suffered Yes, where did we end?
An interruption. I think I was setting expectations with respect to margin And at least I'm repeating myself, I want to be clear with respect to this. We saw obviously a substantial step In the most recent quarter, we do expect some further improvement this quarter and in quarters ahead. But the bigger opportunity will come once we can leverage the Verte integration at the expanded manufacturing site.
Understood. Thank you. Can you hear me?
Yes. I just wanted to make sure you
were back on.
Yes. No, I'm here. Thank you. And then just wanted to address all the new opportunities and success you've had in 2020 and heading into 2021. You've mentioned a lot of applications.
Automotive has obviously been on the radar. This new data center product at the satellite opportunity. As I understand it, you're opening your new facility as soon as you can and you need all of that capacity Just to supply current customers, how should we think of your expansion plans beyond that and the growth of the deep products over a 2 or 3 year time And how you're going to address those needs?
Phil, you want to take that?
No, you do. We do address it In the 10 ks? Yes. Which will be published on Monday.
Yes. So generally speaking, the factor expansion It gets us to the $0.75 billion toll capacity. As we had discussed in prior conference calls, as soon as The dust settles with respect to this capacity expansion. We're going to start pursuing the next phase. Yes, to say, as we get further out with automotive opportunities going into Volume production, there is plenty of opportunity for growth.
I think in the near term, The progression with respect to bookings and backlog should continue This quarter we're ahead of where we were last quarter at this time. So it's a positive trend that It will guide us through this year and into next year before we get To the beginning of participation of the MODID programs. Phil, do you want to expand on that?
No, I think that's a great summary. I think that The focus is going to be continued growth through data center and artificial intelligence design ins and wins that we've gotten as that business Growth itself will grow along with it. And our expanded customer footprint will add Revenues at the end of this year and through 2022. So as we start to move to 'twenty three when automotive kicks We're going
to need follow on facilities later on. So there are various dimensions to this, right. While The dimensions is the footprint in AI, data centers, all these applications are point of load applications, so to speak. They address the escalating current requirements of AI chips, servers, those kinds of opportunities. These are all fundamentally what we call DC to DC converter type applications.
As suggested in the prepared remarks, There's a complementary dimension of AC2DC systems, which are also called front ends. They are, in effect, providing a power system functionality upstream of the point of load to the extent that we succeeded in Making 48 volt the center of gravity in AI, the center applications and to a standard 48 volt It's also becoming the standard for a lot of electrified systems in automotive. There is opportunity in effect Going from 48 to the point of load, autonomous driving, other kinds of applications, AI applications, And there is at least as much of an opportunity getting to 48. So we think of this in The airline analogy of 48 volt being the hub and there is as much opportunity taking The load to 48 as there is going from 48 to the point of load.
Great. Thank you for that color and nice job again.
And the next incoming question is coming from the line of Hamed Khorsand. Please proceed.
Hi. I wanted to
I had one clarification and One question. The clarification, Jamey, could you just repeat what your growth expectations are for Q1? Is that Sequential for the revenue line or is that year over year?
No, it's sequential. We expect Some degree of improvement across the P and L sequentially.
Okay. And then my question was, are you seeing any kind of Inventory stocking, order stocking as far as customers go, given what's going on in the industry with Lead time expansion and any ordering trends?
Yes, this is Phil. So Yes, I would say that in January February, we saw a lift in what we call POA, bookings placed on us by our Large distributors, global distributors. It wasn't massive. It was certainly an increase above what we forecast, but not by a huge amount. But there's definitely going to be some of that going on, right, given the whole supply chain, sort of horror stories Coming out from lots of different places.
So we can expect some of that as we go through the year, sort of as we did in 2018. And That was actually a very big year of over ordering, if you like. So yes, there's some of that going on.
Okay. Thank you.
And the next incoming question is coming from the line of Quinn Bolton. Please proceed.
Hi, guys. Congratulations on the nice results. And Jamie, pleasure working with you and best wishes on your Next endeavor. Wanted to start with the new single phase and 3 phase AC to DC power conversion units for data center Units for data center applications, that historically has been, I think, a fairly low gross margin business. When you look at folks like Ortesin or Delta or Lydon, I don't think those guys are getting 50% type gross margins.
Can you talk about, Are there factors that will allow you in that front end or AC to DC market to Drive good corporate gross margins. And can you give us any sense, I think you said it was going to start to ramp in Q3, 3, what kind of revenue opportunity you might be looking at with the AC to DC?
So we believe The margin opportunity for front end products is on the same on par To the margin opportunity for point of load devices, which as discussed earlier, we're looking to expand well On 50%.
The
Don, if you compare with the level of capability that we offer, The density that we offer in our front ends is literally an order of magnitude greater than those solutions. So those are not really effective solutions in applications that are challenged from a power density perspective
It ends at our system solution.
So I have no concern whatsoever with respect to margins In terms of our front end business, either AC2DC or It's under valve for under valve type of DC systems. We have an even more, If you will, unfair advantage visavis the competition. Regarding the part of your question has to do with The level of revenue that we expect from ACTC products this year, it will be small. It won't move the needle On other revenue or bottom line this year, but the issues start contributing to top line What I regard is The most advanced supercomputer on a wafer that will Benefit from our AC to DC solution to take it to its next Level of proficiency, and we expect that's going to be a significant contributor next year.
Understood. Thank you, Patrizio. The second question I think is probably going to take
some of those you talked about in power density as it applies to
the automotive market. What kind of advantages do you have, whether it's power density, lower weight in the cabling Versus the competition in the electric vehicle market. I mean, you talked about the content opportunity is somewhere between $100 to $1500 But Can you just give us some sense how much weight you can take out of the vehicle? How much longer you can get out? How much longer drive time can you get with a better power efficiency and power density of your solutions as you move into the automotive market over time?
Thank you.
So an example of the level of capability that our technology In apples, we have a chip that measures 60 millimeter by 20 millimeter and it's 8 millimeter thick, and that's a very small device, right? You can hold between 2 of your fingers. And that device is capable of roughly speaking 5 kilowatts of power conversion, It undervolts to 400volts, and that's a major market opportunity. It is so dense and so efficient. The efficiency is pretty close to 99%.
Its density is very, very high as you can infer from the numbers I quoted. It can be cost effective to the automotive OEMs, while being very high margin for us. And in terms of value proposition in electrified cars, as Weight and the reduction in weight is a direct contributor to range. So there's a strong value proposition there that the technology enables.
Great. Thank you, Patrizio.
Thank you.
And the next incoming question is coming from the line of John Dillon. Please proceed.
Yes, guys. Congratulations on the quarter, especially the gross margins and the cash flow from operations was really outstanding. Jamie, I'm really sorry to see you leave. And I personally want to thank you for your service. I really appreciate your help over the years.
Thank you.
So Mike you're welcome. We're going to miss you. Yes. I'm going to ask the same question about the front end products to start off with. Maybe, Phil, you could give us some more color on the customers.
This seems like a major product, and I just want to get customers lined up. At one time, I think I heard that there may be one customer who could take all the capacity of Vicor. And I'm just wondering, what does it look like for the customers? And what does it look like for next year's revenues?
So John, we're obviously starting with some lead OEMs that are helping with funding projects and that's a great thing, right? I mean they're committed to us and we see really revenues, as Patrizio talked about, in 2022 from the supercomputer company that we've been working closely with. So what we're going to be doing now is expanding beyond that and taking that technology to the list of Companies that we deal with on the point of load solutions because every single one of them is challenged by what I talked about in my remarks, which is The fixed footprint of the data center and the fixed footprint of the racks where the power is going up, They're looking at new cooling technologies such as liquid cooling. And so having something that's incredibly dense, Power dense and the performance is very, very high on efficiency is really, really meeting a big challenge that they have. And so our plans this year will be to now leverage off of those initial customers, and take that technology To the big customer base that we have for point of load.
So that's what we'll be doing.
Nice, nice. My follow-up question is on the automotive. And you've talked a lot about automotive. It sounds like things are really going well there. In some of your presentations before, you're forecasting about $250,000,000 in revenue, I think, in 2023.
With all the advances, do you see that number going up?
I think we have a great opportunity to drive that number up. Yes, I do. I think that the engagements that we have, it wouldn't be in the 2023 time frame by the way, but certainly The number is big. The opportunity is very, very big. And the success that we've had in 2020 and what I see happening in 2021, I think we'll double our engagements with customers in 2021.
And so that's really building an incremental revenue Stream for us that was critical to our desire and opportunity here to become a $1,000,000,000 company. That's the plan.
Sounds great.
Just as a reminder, this is still the other Yes. The amount of contribution is still relatively long term, right? It's still a few years out. I mean, going back for a moment to the ACDC And giving you a little bit more quantitative sense of things. So we have a couple of customers These are lead customers, as Phil articulated earlier.
I would think that the supercomputing Application is a few $1,000,000 in the next year. The LED lighting application is $10,000,000 to $15,000,000 in the next 12 months. So these are the test cases where the technology gets proven out and the benefits get Display and to Phil's point, we've been Keeping our palate dry with respect to showcasing this capability to our major customers to the point of load, We believe they are going to see the value proposition. There are also opportunities in 5 gs. Yes.
I don't
know if you want to say a few words about that or Yes.
I mean, what we're seeing in 5 gs, I mean, particularly on again, also in the edge, if you like, edge networks, customers are looking for very low profile systems, and that's where We come in, if you look at the profile of our chips, our modules, I mean, they're incredibly thin and incredibly dense. So It really fits a real high demand that we see emerging with 5 gs systems of all Different kinds and particularly also in edge computing. So we're talking to one quite large customer They are at the moment and they are very excited about this new family that I talked about earlier. So those conversations will go on in the next few months and I'm hoping that will turn into Another customer funded program for product development for us.
In the meantime, we have received a few more incoming questions. The next one is coming from the line of Richard Shannon. Please proceed.
Thanks guys for taking my questions. And Jamie, it's been great working with you. Look forward to another call, but been great. So congratulations on your next move.
I guess A tactical question
for me, if I did my math right on the bookings here, your brick bookings went down a fair percentage here in the 4th quarter. How does that play out into your thought process in the Q1? And maybe understand the reasons why the bookings came down here. You Can you talk about some geographical changes, maybe give us some color on that, that'd be great, please?
Yes, sure. Richard, this is Phil. So basically in Q2, Q3 last year, we saw quite large bookings coming from the China market for our bricks, Driven by the trade wars with the United States, the distributors and the customers down there were stocking up. And then that sort of corrected back in Q4. We've seen good bookings Through the 1st 8 weeks or so of this start of this quarter.
So there was a sort of a bit of a correction in Q4, but I think Things will get back to normal now through this year for Bricks.
For Bricks, okay. And then just thinking about the Q1 guidance, is this I mean, we're going Growth in Advanced Products and Brick coming down or any way you'd help us understand those differentials there?
I think bricks will be flat, maybe
a little bit up as the North American military market is a little stronger. As for the advanced products, they will continue to increase.
Okay, great. And then my follow on question is related To the IP situation, it sounds like you're inferring that there are and you have identified OEM customers who may be using products out there. Maybe you can talk about to the degree to which you're seeing that and should we infer that we could be seeing some sort of license or multiple license agreements happening Year and the near
term? We are seeing evidence of Infringement, we are gearing up to deal with it. We're having discussions with OEMs that recognize that they might have a serious issue. So stay tuned. That's all I can tell you at this point.
Okay, great. Thank you, Patricio. That's all for me.
And the next incoming question is coming from the line of Christopher Hillary.
With the broadening demand for your products from several of these large end markets and industries, Do you see potentially a larger role for a licensing and royalty contribution in future periods as you Look to meet the sizable demand that's building?
We do. So we recognize that OEMs have real challenges with respect to continue to supply, access to In technology, needless to say, their preference would be to have a multiplicity of sources. And when we have the situation that is present Industry today with Vicor, literally 5 years ahead of any competitor in terms of technological capabilities, That creates, in effect, a stress that needs to be addressed. And we're mindful of that. We're considerate Of our customers, we want to address their needs.
We We view ourselves as a reliable supplier, but we do appreciate the fact that it takes a good deal of faith To put all your eggs in one manufacturing basket, the Vicor basket. So We want to provide the level of flexibility that OEMs would prefer to have, do it in a way that Makes sense all around that gives proper credit for The investment that VIGO has made, not just in recent times, but over the last 20 years. So we built the technological edge we've Achieve with a major investment, we're literally talking $500,000,000 in R and D, A lot of sweat in terms of creativity, innovation, loss of patents. And we see the value of the IP side of the business Running on a parallel path to our core Competency of development and manufacturing, in particular, automated U. S.-based Manufacturing of state of the art products.
So it's a complementary opportunity, one that to your point Should contribute to the total margin and net profitability of the company. And it's got to work on hand, right? It's got to work for our customers and it's got to work for ViGo.
Great. Thank you.
Thank you.
The next incoming question is coming from the line of James Lieberman. Please proceed.
Thank you. Always good to hear such a fabulous Presentation and best regards to Jamie.
Thank you, Jim.
Could someone
give some color on the magnitude Are the opportunities, market size that you see developing in the advanced robotics and drone markets that you've been starting to talk about?
Yes, this is Phil. It's a little bit difficult to do only because it's early stages for a lot of these Market segments and it's really difficult to peg from the how the growth is going to go. It's just that, again, you start to see All of this, all of the robotics going on, all of the different drones, underwater, unmanned aerial vehicles, All of the delivery, vehicle investments going on, factory automation, smart cities, all of that stuff. And it's certainly going to be a very, very large market. And where Vico comes in, of course, in any market that we participate in is bringing tremendous value to customers that value And we'll pay for the density, the performance, the efficiency, the modularity of our solutions.
And so we're working with some Really, really top notch leadership companies in those market segments that I talked about. And Our early introduction is in 48 volt systems, of course, and also in some of the tethered vehicles, in drones With our high voltage bus converter technology, which again is very dense, very efficient, high performance. And These markets will emerge over time, but it's definitely going to be a very big opportunity for us, but it's very difficult to put a number on it.
Yes. It almost had to be a visionary to see how it's going to play out, but it sounds extraordinary. Yes, it's huge investments,
right, going on in all of those areas.
So it's going to be big. Going on in all of those areas. So it's going to be big.
Thank you.
And the next incoming question is coming from the line of Alan Hicks. Please proceed.
Yes, congratulations on all the progress you're making and the great quarter. And I second everybody's comment. We are going to the long term investors are going to miss Jamie. So Anyway, my question is about on capacity, there's been some question that have you been able to keep up with All the orders you're getting, and I see you spent, I think it was $11,000,000 last quarter. And I think I heard a number of $19,000,000 from new equipment possibly for this year.
Are you putting in new equipment in your existing plant to keep up with Orders and can you just give some color on that?
Yes. So we're doing A combination of things. First of all, we've been adding equipment within The walls of the existing facility, we have ordered equipment for the new facility. Some of that equipment is going to get delivered into the new facility as early as the Late April, May timeframe. But it's not going to be until the end of this year that the lion's share of the equipment In the new facility, we'll get installed.
And between here and there, there's going to be more equipment deployed Within the existing walls as well. And by the way, the new facility is about to have walls. I mean, it's The seal is in place and the roof is in place and the walls are coming up as we speak.
Okay. So you're adding Capacity for Advanced Products each quarter to keep up with that?
We're adding capacity for Advanced Products each quarter. We're getting more out of our outsource partners in the interim while We get Verti integrated. We will retain access to the outside partners even after Verti integrated for So, 1st capacity or incremental capacity. So, it's obviously an exciting
Ongoing
requirement, and it's frankly a very good challenge to have. Okay.
My second question was, Intel says they're shipping in volume this quarter, their new Ice Lake servers processors. I know they have the great majority of the market. Has that added to your Orders in the last quarter and this quarter? And then looking to the future, are you getting any engagement on The new processors that are being developed like the Facebooks or Microsofts or Amazon.
Yes. So let's talk about the Intel CPU line and new line. So the way we're participating in that particular at this point in time, For the majority of it, we'll be with 48 volt to 12 volt non isolated bus converters, our proprietary MBMs. Those will We'll be ramping in production Q2, Q3, Q4 of this year with several Of the hyperscalers, we're using 48 volts now. And then with regards Follow on process of developments, we're focused on the high current processes, right, providing To where there are really difficult challenges at the point of load with our again, our proprietary current multiplier technology.
So yes, we're engaged on next generation and even generations after that of process development with our Leading customers today and several new ones that we've been able to work with in 2020.
Okay. So you're saying that the impact of Intel is still yet to come Q2, Q3, Q4?
Yes, yes, it is, yes.
Okay, good. We're
shipping solutions today, of course, for the older VR, The VR-thirteen, but the VR-fourteen will start towards the back half of this year, which is where we'll participate then.
Okay. And you are in discussions with some of these customers with the new processors?
That's right. Yes. No, we're engaged with Most of them in terms of GPU, ASIC, FPGAs, a lot of great engagements.
Yes. So fundamentally, A good way of partitioning these opportunities is, to your point, is Intel and the rest of the world. So Intel is for a long time now rely on An internal switching regulator scheme to Enable the power source for their devices to be At the somewhat higher voltage, it's typically around 1.8 volt. So, at that level, While our technology offers benefits, they're not nearly as compelling as they are For sub-one volt, AI ASICs, whose current requirement because of the lower voltage Tend to be much higher. So there we're seeing escalating Set of requirements, both in terms of applications and the current levels of these applications, which Are getting past 1,000 amperes with peaks in some cases exceeding 2,000 amperes.
So there the value proposition of car modification, which is at the heart of our point of load technology is greater than it would be In Intel Process, so running from 1.8 volts, let's say a couple of 100 amps. So at a couple of 100 amps, they still Some level of flexibility with respect to traditional multi phase, so to speak, Solutions. Now where the power source has transitioned from 12 volt to 48 volts, to Phil's point, We have a role to play in converting the top plate to 12. But that opportunity, frankly, Given that the rest of the world is focused Farley lithography running directly from voltage levels down 2.6, And further down and with that higher and higher car levels, that's where the car multiplier solution with a higher Value contribution comes into play.
Okay. So it sounds like you're saying the best is yet to come for your technology.
Yes. Certainly, the center of gravity and that will we'll have to include Intel before too long, right? The center of gravity is shifting From higher voltages at lower currents to lower voltages at much higher currents And that's where our point of load technology shines.
Okay. Thank you very much.
Thank you. I I don't know if there is one more question, it will be the last one.
And the last incoming question is coming from the line of John Dillon. Please proceed.
Hi, guys. Are you seeing more hyperscalers going to 48 volts? It sounded like from the last question answer to that question, There are some people going to 48 volts and you're going to be using the 48 to 12 for the Intel chip.
Yes. So if you go down the hyperscalers here in the United States, they're all moving to 48 volts, some of them moving slower Then others, I expect in 2 years, they will pretty much all be at 48 volts.
Great. And Phil, in auto, can you talk just a little bit about do you have a what solutions do you solve in auto? Do you have a building block approach From all the way from 800 volts to the point of load. And are you winning design wins for all the different aspects of those? Like for example, do you have point of loads for autonomous driving design wins for that?
So to answer the question, the Point of load design ins we have for autonomous driving are in the data center. That's where we're participating today. In terms of The question about 800 volts, John, when I talk about $1500 content per car, that's what I mean. If you go we go from $800 to $48 and 48 to 12. And we do it at many, many kilowatts.
So there's lots of dollars there. So yes, we have a customer actually doing that with us. It's So really nice chipset, modular chipset that we're supplying, and they'll be in production in 2023 with that chipset.
And that sounds really exciting. So it's a building block approach where they can go all the way from 800 to the point of load in the car, and you're really Getting all the content of the converters, it sounds like.
Yes. Part of the value proposition that we have, one of the many elements Our intellectual property is the opportunity to actually eliminate some of the batteries because with our technology, You can store energy at a voltage, distribute a voltage that is relatively high I initially distribute with copper wiring that is not near as heavy and is more cost effective. And then using a 48 to 12 bus converter service legacy loads are still running at 12 volt and be running at 12 For quite some time, in these electrified vehicles, without having to have duplication of battery systems That carry with them extra weight, extra cost and extra complexity. So in a typical system of this kind, you might have 800 to 48, then 48 to 12 at, in some cases, 5, 10, 15 kilowatts.
Excellent. And then you'll do 48 to point of load also, I would imagine?
Well, to Phil's point, as of now, We're not yet engaged on point of load as in powering processors at 1 volt or Thereabouts in a vehicle. We are heavily engaged with respect to Vertical power delivery system for autonomous driving applications, but that's really not Moving with the car, it's obviously supporting that emotion, But from Stashtrane's side.
Got you. Got you. Is that because the processors in the cards are not as Not powerful as the ones in the data center? They don't need the amps that you provide?
Right. Needless to say, to the extent that one can do the heavy lifting in terms of computing in a stationary site Away from the vehicle and rely on very high bandwidth communication with the vehicle. That's a preferable alternative because Obviously, in the session I saw, you can burn a lot of power to do some intense computing without Limiting mileage in Electric Vehicle. So the strategy for obvious reasons The other makers are following is to remote as much of the computing as possible.
You want to really
sort of Push that compute to the edge, right? And then the edge will communicate with the data center on the heavy, heavy lifting.
Got you. Got you. Okay, cool. Very good. Congrats, guys.
Really sounds good.
Thank you. And with that, we'll be done for today. Thanks, Jamie.
All right. Bye bye.
Thank you very much. Everyone, that concludes our conference call for today. You may now disconnect. Thank you for joining and enjoy the rest of your day.