Morris Young: Yes. Silicon photonics, I think, is doing fine, although the data center market from what we read in the marketplace is that it’s not doing well. I mean, they say pause as you know — I mean even I read Microsoft, their data center business is not doing well. So, they are taking a correction, and so is Amazon. So, all these big data center, if they’re not buying, then our silicon photonics aren’t doing well. But on the other hand, I would still say, as far as Internet and cloud computing is concerned, there is going to be more and more data transferring back and forth and you need more data, more — bigger data center and you need fiber optics to solve the bandwidth and the speed problem. So, I think that’s all going good for indium phosphide material.
So, I think longer trend, there’s no question about it. I think it’s — we’re going to see growth. But short term, we’re going to have inventory correction. I’m even Microsoft, their business is sort of being soft right now. Everybody is looking at possible slowdown in the overall economy.
Gary Fischer: Yes, I would add that one of the strengths of our business model is that the lifecycle for some of these key applications is really quite different than the general semiconductor industry. As we all know, every 18 months or 24 months, you’ve got to come out with a new chip. But the data center is a good example. That’s going to be here for — and be a driver for silicon photonics and therefore for indium phosphide for probably five to 15 years. I mean, there’s really — it’s hard to believe it would ever slow down. So — and if you look at our history in gallium arsenide, the life cycle for some of those products was 15 years — or 12 to 15 years. So, it’s quite different, and it’s — but it’s a positive difference. So…
Matt Bryson: Got it. Thanks so much for the color.
Gary Fischer: Thanks, Matt.
Operator: Our next question comes from Richard Shannon with Craig-Hallum.
Richard Shannon: Well, thanks, guys, for taking my questions. I’m going to hit on the gross margin topic here and ask a very direct question, Gary, as I usually do here. Trying to fit the guidance to get to the bottom-line and guessing on OpEx here and I was coming up with gross margins that are around a little bit below 20%. As I look back in history to the last quarter around $20 million per quarter, I saw a number of around 26%, 27%. Clearly, you’ve got a negative mix here with indium phosphide, but that difference seems fairly dramatic. So, I wonder if you could tell us how close we are in doing our math here.
Gary Fischer: So, Richard, are you describing the Q4 results or the…
Morris Young: No, Q1.
Gary Fischer: Q1.
Richard Shannon: First quarter.
Morris Young: I think Richard wants to know how do we compare with the last cycle? I mean, when we had $20 million quarter, Richard is saying our gross margin was better than what you telecasted or forecasted.
Richard Shannon: Yes. Is 18% approximately right, because it’s a lot different than last time you’re at this sales level? So, I just want to get a little bit more clarity there.
Gary Fischer: I’d say it’s too low. I don’t know for sure what it’s going to be yet. Obviously, given the mix in the…
Morris Young: I think, what our model says is more than 20%, I think. Yes, 21%. But that’s our model.
Richard Shannon: Okay. Well, you clearly got some other parts to model, so we’ll follow-up offline there, but just want to get that one out of the way here. That is helpful. And just wanted to make sure I caught this correctly. On the first quarter, do you expect indium phosphide to be down more than 50% sequentially? And this was entirely due to consumer and data center? Were there other elements of it? Just want to make sure I caught all of them.
