Randy Abrams: Okay. That’s great. And for the advanced packaging, where I think you’ve had that plan to triple by midyear. I’m curious if you’re getting any indications for further capacity increase. So once you bring that on, the lead times are quite long. So are you making — do you see any need for further step-up to continue to ramp beyond that tripling or do you think we’re catching up to demand and starts to stabilize?
Giel Rutten: Yeah. No, we have a fairly strong product pipeline and project pipeline for 2.5D, diversifying our customer base, but also our service portfolio going into the year. So we expect after the tripling of capacity that will come online by the end of the second quarter, that we will continue to invest in line with market demand. And like we normally do, we have all the elements in place in order to ramp up where needed and as needed without being too specific here at this point in time.
Operator: Thank you. [Operator Instructions] Our next question comes from Ben Reitzes with Melius Research. Please state your question.
Ben Reitzes: Yeah. Hi. Thanks. Giel and Megan, if the second half of the year ramps to be — like 2022 is there any anything that would impede you from getting to similar gross margins as that time in the second half of 2022 this year, if it’s a similar type of performance? Thanks.
Giel Rutten: Well Ben, let me hand that question to Megan. Making one remark on that, I mean, I would say the fundamentals are still in place, to get back to that level. Our profitability and gross margins are very much determined by utilization of our lines. We’re currently running at the utilization level, let’s say, below 65%. And with business coming online, we expect that could go back to 2022 levels, when we were running at 85% utilization levels. But now, let me hand over to Megan to give her view.
Megan Faust: Yeah. Hi, Ben. So as far as the second half ramp, we would expect to have our financial model of incremental flow through to gross margin and possibly expect a better flow through given we’ve been really tightening up during this cycle. So as far as Giel mentioned, it will depend on how the utilization progresses in that second half. I wouldn’t expect that we would be at the same levels of utilization at the second half of ’24 compared to the second half of ’22.
Ben Reitzes: I’m sorry, I missed that at the end, you would think you would be or would not be at the same.
Megan Faust: Yes. So you’re pointing to our ’22 gross margin of 18.8% and that implied as Giel said, peak utilization levels, that we were experiencing at the height of our growth. So depending upon how the ’24 year shapes up and where we’re starting at in the first half, I wouldn’t anticipate that we would be achieving an 85% utilization by the second half of ’24.
Ben Reitzes: Okay. I got it. I’m sorry to make you repeat it.
Megan Faust: Yeah. No problem.
Ben Reitzes: The other question which is around your CHIPS Act a pre-application and potential application. Is there any news around that? I understand that you mentioned that you may have — you’re not going to spend a lot on the announced facility, but is there a chance that we get some news around CHIPS Act and their ability to help you guys out with the domestic supply chain here in the U.S.
Giel Rutten: Yeah. First, we — the second part of your question, Ben. We are continuing full speed with preparation for the U.S. facility, specifically optimizing the factory design, aligning with our customer base on loading and technology requirement, and working with contractors to plan out the building cycle. So it’s not that — nothing is happening there on the execution side. With respect to the CHIPS offers, I think we’re going there after the pre-application. We’re preparing the final application, and we’re working closely with the CHIPS offers where we have multiple communication points on a weekly, by weekly basis. So we expect that full application will go in soon.
Ben Reitzes: Thank you.
Operator: Thank you. And our next question comes from Tom Diffely with D.A. Davidson. Please state your question.
Thomas Diffely: Yes. Good afternoon, and thank you for taking my question. Giel, maybe first, when you look at 2024 below seasonal first-half, above seasonal second-half, where is kind of the view for the full year on a year-over-year basis at this point?
Giel Rutten: Well, Tom, that is not so easy to answer because they’re certainly in the first half and Megan already alluded to that. We see still significant uncertainties. We don’t guide for the second quarter, for example, but the second half of the year we clearly see significant opportunities for further ramp-up. Megan already gave them. We have 2.5D capacity coming online with a full pipeline of products. Also there we have a new customer for the share on wafer, let’s say portfolio. We have a meaningful ramp for new IoT wearable programs in the second half and we definitely expect that Android, memory, PC, and automotive will be back on stream in the second half of this year. So to quantify that and to give a full-year outlook, I mean, in general, we are confident with our product portfolio, with our customer engagements that we should, let’s say, grow with or above the market.
Thomas Diffely: Okay. That’s helpful. And then when you look at what’s driving the weakness in the first quarter between iOS and the automotive inventory, did anything change over the last month or two? Anything gotten worse or is this kind of the view you’ve had for a little bit here coming into the new year?
Giel Rutten: I mean, at the end of the year in general, I think that’s the end of the first ramp-up in the iOS system, you generally see that stock is taken on the performance. So there are always some corrections. So the corrections may be a little bit higher than normal seasonality. But I already indicated earlier that it’s not in the same order of magnitude as in the first quarter of 2023. So nothing extraordinary from our perspective.
Thomas Diffely: Okay.
Megan Faust: And just to give some color, Tom, on automotive specifically, what we experienced in Q4, I would say, order of magnitude is what we’re seeing kind of going into Q1. So, we haven’t seen anything. I would say, recently that suggested, it’s deeper, we saw this coming in Q4.
Giel Rutten: Yeah.
Thomas Diffely: Okay. And then maybe Megan — maybe to follow it up. Could you maybe provide a few more specifics on what drove the cost savings, the cost management you referred to earlier?
Megan Faust: Sure. So as far as our approach to cost management, especially in times of temporary declines that we’re experiencing now, it’s very much ensuring that we don’t structurally change such that we’re not able to support significant ramps, whether that’s seasonal ramps or coming out of this cycle where we want to be ready to capture that future growth. So the types of programs centered around our labor cost are very intentional as far as monitoring overtime and ensuring in certain locations where appropriate, we can extend furloughs to manage that cost. On the other manufacturing costs, there is strict work happening in areas such as energy usage, as well as monitoring repairs, maintenance, and supplies, such that we’re being very prudent without sacrificing quality.
