So, basically new products, new opportunities more so than the general capacity, that is not happening so much at the moment.
Ross Cole: Okay, great. Thank you for clarify.
Operator: Our next question comes from the line of David Duley with Steelhead Securities.
David Duley: Yes. Thanks for taking my question. I was wondering when business does recover, which segments of your equipment, do you think the handlers or testers will recover first? And perhaps maybe just handicap which end market you think will turn on first for Cohu?
Luis Muller: Hi, Dave, Luis, again. So we’ve been thinking that and it’s really a good question, but we’ve been thinking that the mobile segment and computing will start coming in first. With that said, with that comment said, the reality of utilization dynamics today, it is still higher in the Automotive and Industrial segment. When we look at utilization by market and auto and industrial is hovering at about 78%. So it’s pretty close to that capacity addition threshold that we call that is at 80%. While computing is much lower at 66% and mobile is at 67%. So it’s a tale of two stories here because, one, we believe that the mobile and computing should be the one coming on first. On the other hand, we’re a lot closer to that threshold in the auto and industrial. I think that’s another way of saying, it could actually flip from what I have originally said. It could come back on the auto ahead of mobile.
David Duley: Okay. And with industrial and automotive utilization rates hanging in there, I guess that suggests for you and your customers that that in market has stabilized and we’re done – I don’t want to say done with the inventory correction, but were done going down in the – in your biggest segment of business.
Luis Muller: I think that’s correct, Dave. I think we’re done going down across segments right now. I mean mobile has been fairly depressed for the last three quarters. And auto and industrial is also very depressed right now. What is encouraging about auto and industrial is our customers’ ability to actually operate just below that 80% threshold. It hasn’t really sunk – the utilization hasn’t really sunk in as much. Nevertheless, customers have largely stop buying capacities right now. They are buying specific technologies, but not general capacity. So yes, I’m encouraged by the auto and industrial guys.
David Duley: Okay. And then – can you just remind us what your lead times are now? I imagine they’re back to normalized levels, but I’m just kind of curious what normalized levels are now.
Luis Muller: They’re largely unchanged from last quarter, Dave. It’s a little tricky to talk about lead times when we’re selling new technologies, right? So if you talk about our handlers, about 15 weeks is a fair number, testers about 12 weeks, and contactors about 7 weeks. With that, I have to say we’re selling a lot of handler configurations that are brand new, a super high power dissipation, T-core system for sort of for processor test. Well, that’s a new head. It’s a new thermal system, and the lead time on that is a little longer. So we’re selling new technology applications, the lead times are a little longer. I would expect if we get more capacity buys of standard products that despite having greater demand, we probably would see lead times go down a little bit first – at first before they go up again.
David Duley: Okay. Now final question for me is – when you kind of look out over the server upgrade cycle that’s pending for artificial intelligence and all the associated components that are going to go into those new servers? There’s going to be a lot more GPU and CPU content. Could you just talk about how that upgrade cycle might impact your product lines? Like I would think that maybe your thermal conditioning handlers would see an uptick from the server upgrade cycle. So that’s my question is like when we do hit the that part of the AI upgrade cycle for servers. How will that impact your business?
Luis Muller: Yes. So the server upgrade cycle is going to be better for us than the actual data center cycle. The data center cycle is lower volume, very high ASP semiconductors, very low volumes. The data center you changes the equation here, you get a bit more volume. So computing was, I think, 5% or 6% of our revenue last quarter – sorry in Q4, it came out at about 3% in Q1. I would expect it to improve a little bit on the second half of the year, assuming that that, that data center cycle is really going to pick up momentum as it’s being said.
David Duley: And just so I understand when you’re saying the data center versus the server, what do you mean just help me understand which cycle you’re referring to there? Traditional servers or AI servers or.
Luis Muller: I’m sorry. I’m sorry. I meant to say the server cycle.
David Duley: Okay, thank you.
Luis Muller: Thanks.
Operator: Our next question comes from the line of Krish Sankar with TD Cowen.
Unidentified Analyst: Hi, this is Robert [indiscernible]. Thanks for taking my question. I know a bit of it has already been answered. But just in terms of the auto and industrial markets, how those have sort of shaped up over the – compared to, I guess, 3 months ago. If I remember correctly, the December quarter, sales were down, but the test utilization was actually on the higher side, and you mentioned you can continue to see a bit higher utilization in the March quarter despite sales down a bit. Just trying to think of how you are looking at that business or market entered the June quarter in the second half of the year.
Luis Muller: Yes. So, look, I am going to start with first quarter, right. The utilization, as I have said, it’s holding up pretty well, but revenue was down first quarter sequentially from fourth quarter, both in the – both on the auto and the industrial side and pretty much the same – at the same rate. Looking at – looking forward, we don’t really go ahead to predict revenue by market segment for future quarters. But I would be tempted to say just based on the order pattern that industrial – industrial will be weaker, automotive – automotive may hold up a little bit better than the industrial side. I think the industrial side continue to lose some ground relative to the other markets in the first quarter orders and therefore, second quarter revenue.
Unidentified Analyst: Great. Thank you, guys. Very helpful.
Operator: [Operator Instructions] Our next question comes from the line of Craig Ellis with B. Riley.
