Jeff Shealy: And Tony, let me add to that. On the Wi-Fi front, as Dave mentioned, some of the — you see platforms on Wi-Fi 6 going absolutely. And so it’s — the Wi-Fi 6E, Wi-Fi 7 segment is what’s being replaced with it. And the ASPs are a little bit better there. And then, as Dave mentioned on the base station front, I just want to point out that, in that particular end market, the ASPs are on the order of 4 times to 5 times higher for that market segment. And that can — and those can be — and it can be even higher than that depending whether you’re talking about Small Cells or massive MIMO. So, clearly, we want to mix into higher ASP opportunities, but it’s a little covered at least on kind of the segments there.
Ken Boller: Tony, let me talk a little bit on the gross margins. So as we’re modeling out here, our march towards operating cash flow breakeven in the next 12 months to 15 months. We are looking to also improve our margins significantly through two different levers. One is increased back utilization. Also some land and size reductions for some of our existing products, which will significantly cut our back-end off. Certain price negotiations with suppliers and our newer products have a smaller form factor and are more cost effective even additionally. And then last but not least, we mentioned WLP in the December quarter. That is the lowest back-end off of all of our packaging. So we expect significant improvement as we go through the next 12 months to 15 months in 2024, margin towards approximately 30% margins. And then of the 40% and 50% plus as we move forward through the out years.
Jeff Shealy: And let me add to that, Tony. I think Ken gave a good — the size reductions on these packages, you’re talking about 4 times to 5 times smaller and really is up to 10 times smaller depending on the part moving from what we historically had was in chip and wire getting over to CSP and WLP. The other aspect of it, when you hear us talk about mobile, you hear us talk about WLP is a portion of that package, which we hope to eventually bring all of that in house. But a portion of that package today is actually fabricated inside our chip fab. So we’re absorbing that back end cost internally at really our marginal cost to produce at the full wafer level. So that’s a little bit more color on that.
Anthony Stoss: Got it. Just a follow-up for you, Jeff. Related to, I guess, more on the mobile side of things, for Akoustis and your opportunity. On the ASP side, it’s clearly a lot more competitive on cellular mobile than on the Wi-Fi side. Where do you think you’ll fit in? Are you able to get a little bit more premium pricing for your better performance or do you have to match up kind of with current pricing?
Jeff Shealy: You have to — it is a — for the customers we’re engaging with is a performance driven market. With that, you have to be cost sensitive and you have to be able to drive cost savings. I think the true benefit to us, if you look at all the puts and takes here is that predominantly as I previously mentioned, the comments on the WLP being able to be produced inside our chip fab, that’s a better cost structure for us, number one. Number two, we get a significant more number of die for wafer. So once you figure the back-end cost along with just the products per wafer. If you look at the revenue per wafer, which is kind of what I look at, it’s significantly higher and more favorable for us than what we’re seeing in Wi-Fi. So it is a favorable mix for us to move into.
So even though it’s a more aggressive market and we obviously have to be aware of the cost savings we’ve got to extend upon our customers as well. But the starting point for us is very good from a gross margin standpoint given the economics I just kind of walk you through.
Anthony Stoss: Hey, three updates Yeah. Go ahead.
David Aichele: Tony, I was going to add a couple more points too. It is definitely a performance play for us. If you look at premium filter, demand in the 5G market is continuing to grow year-over-year if you look at the major Tier 1 OEMs on the smartphone side, the percentage involved designs that are going into the FEMs and into the applications are higher. And where we’re playing is where applications are demanding that coexist even up at the higher frequencies, which is where technology is leading performance. But also down at lower frequency as well where you got the carry aggregation demand that’s pushing for really high performance filters that don’t have modes that give you that good coexist and also the high rejection.
And also more important is being able to handle the higher powers as they’re going up in frequency. So it’s definitely a premium play. And so we can, as just highlighted demand a dollar per wafer that is attractive for us modeled against the other market segments that we’re targeting as well.
Anthony Stoss: Thanks for the color Dave. Appreciate it.
Jeff Shealy: Thanks Tony.
David Aichele: Thanks Tony.
Operator: Our next question comes from the line of Suji Desilva with ROTH Capital Partners. Please proceed with your question.
Suji Desilva: Good morning, Jeff, Dave, Ken. Congrats on the progress from me as well. On the mobile side guys, you have four customers I think. What’s the timing of when maybe all four of those are ramping? Just to understand how far ? Is the revenue opportunity here contingent on the CHIPS Act funding and bringing the back end in house or is that not really required to get to ramp for these work?
Jeff Shealy: So good morning, Suji. I appreciate your kind comments. Dave, start with — and start with addressing his questions and I’ve got a couple of things, I’m going to follow-up.
David Aichele: So let me step back a little bit Suji. Yeah. With respect to mobile, we’re categorizing two areas. One is the smart phone and then the other one is non-smartphone mobile. So with the non-smartphone mobile, these are good opportunities for Akoustis that we’re introducing the diplexer technology, which is also of interest to the smartphone market once you start looking at Wi-Fi 7 in the multi-link operation. But the volume opportunities there within our capacity, but they’re very attractive for the ARVR mat (ph) market, the PC modem market. With respect to the smartphone side, this first design win as we talked about is good volume targeting the China mobile market and it’s within our capacity. And there are potential other opportunities with this Tier 1 RF component supplier.
That would stay in that similar vein of volume. And the other guys that we’re talking to, they’re targeting more of the Tier 1 OEM market. And as we highlighted in the script that it’s more towards 2025. So there’s alignment with the CHIPS Act. If that does come through to build up the capacity to support it and there’s other means as well. So we’re working closely with these other customers to align. So we’ve got multiple pathways that we’re pursuing right now to stay engaged and continue to grow in the mobile market.
Jeff Shealy: Yeah. And Suji, let me add to that because I want to be clear on this point. You mentioned the CHIPS Act and supply chain for the back end manufacturing are, as we’ve mentioned, have been very vocal on our wafer level package, which is used for these mobile customers that process and manufacturing process is fully qualified. It currently uses a combination of both in-house as well as outsourced manufacturing, but we’re dealing with very large OEMs on what we’re outsourcing. So we don’t think we’re constrained at all in terms of supply chain being able to service that market. What the CHIPS Act does for us potentially is, as we kind of mentioned is to be able to in source that back end manufacturing to not only control the quality of that, control the cycle time more tightly with that, but also scale that up as well.
As we also had mentioned on our scaling up our wafers up to 8 inch diameter would be a substantial expansion for us, using that legislation or leveraging that legislation. So that’s — I just want to be clear that the supply chain is already qualified for mobile. What we’re talking about with CHIPS is scaling it up to address multiple Tier 1 opportunities.
Suji Desilva: Okay. That’s very helpful guys. And then my other question is on Wi-Fi. I’m curious the supply chain constraints, how that’s impacting the transition from Wi-Fi 6 to newer 6E and 7 designs, if they’re being end of life-ed (ph) faster because of the supply tightness or if they’re being kind of held longer because of the supply tight just curious how that transition is happening — supply chain constraints. Thanks.
