Bill Brennan: Yes, I definitely see the hyperscaler market as the market that’s going to drive the near-term growth. But I can say that as the enterprise moves higher speed, there’s going to be an opportunity there. I would say that even markets that are outside of what we consider hyperscalers, I think, there can be significant contribution from a revenue standpoint. We’re already engaged with the first 5G carriers and that’s about the same order of magnitude as hyperscalers. But if we look at the different engagements that we’ve kind of quickly converted into customers, I think collectively, they can look like one of the major hyperscalers in the total size of revenue for us. So I don’t think there is — in the near-term, I guess, our very, very primary focus is on the hyperscalers to drive the revenue quickly. But we are engaging across the board with many others that again collectively can add significant revenue for us.
Unidentified Analyst: Okay. Thanks Bill.
Operator: Thank you. And our next question comes from the line of Vijay Rakesh with Mizuho.
Vijay Rakesh: Yes. Hi, Bill and Dan. Just a quick question on the quarter, I know, the IP came in light, but it looks like you made it up well with the product side. Just wondering where the strength was, was it in cable or optical, if you can give us some color? And was it specific to some customers or markets?
Bill Brennan: So it was a strength in AEC as you would expect. And that has been with our lead customer that we’ve discussed in the past.
Vijay Rakesh: Got it. And then on the JDM side, the joint development program, do you expect that to become a bigger mix of your distribution as you look at the calender ’23 or fiscal ’24, would those have similar margins to your direct sales?
Bill Brennan: Definitely, when we talk about a joint development model, what we’re really referring to is that the hyperscaler would be involved in the selection of the DSP or other components. Typically even under a JDM model, we would be selling to the optical module manufacturer. And so I do expect that this JDM model or if we kind of back up and we say the model where the hyperscaler gets involved in the decision making, I expect that to be more and more popular as we go forward for Credo. If we kind of look at it from a Credo development perspective in the market, how we’ve been progressing. Really, our view is that, first, we succeeded engaging three JDM customers, where the end customer selected the DSP component from Credo.
Now the ramp to high volume looks delayed, due to the first two hyperscalers being in China, but kind of in the second phase here, we’ve gained traction among Tier 1s. We’re talking with all of them directly on high volume deployments. And so we see multiple programs in sight on 200 to 400 the major benefit that we give is a refresh that got a better combination of performance, power and cost. And it’s becoming more important to the hyperscalers and the optical companies running high volumes. CapEx and OpEx are more and more can focus recently, and so if there’s low hanging fruit, it seems like it makes sense. And I might have mentioned in the last call, but I feel even more confident that we’re going to officially engage with a Tier 1 hyperscaler in the U.S. on a 400 gig optical solution and it will include the DSP with an integrated driver, as well as the TIA.
And so that’s more than kind of line of sight. That’s basically a few stages left to entering a contract with them. And then I would say that kind of the third phase of this is for the next generation or 800 gig, and now that we’ve opened up conversations, about their existing high volume deployments. The same kind of compelling performance power and cost benefit that we offer additive to that will be the fact that we’re on time. Our time to market is good for the 800 gig devices and for the 800 gig market. And so the first testing that’s been done by the customer base has been very well received. So they see very clearly the performance is clearly good enough. The power is clearly good enough and the cost is compelling in a sense, because we’re building in 12 nanometer versus a more advanced process like seven or five.
And so given the fact that we’ve established market credibility through our first three engagements and the engagements that we’re pursuing on existing programs, I expect the wins for 800 gig to come as the market takes off.
Vijay Rakesh: Got it. And just a quick question. I know China is again going back into COVID restrictions and all that. And looks like you have been — you have actually resolved many of your supply constraints, it feels like because it didn’t really come up on the commentary. So can you talk to what you’re doing in terms of might be diversifying your supply chain, I think, talk about Vietnam or Philippines, or what you’re doing there in terms of getting around this whole restriction?
Bill Brennan: So I feel good about where we are today. Even if we face disruptions in China, we’ve signaled that we’re going to build inventory. That’s a surefire way of making sure that we’ve got the product that our customers need as they ramp. We’re going to continue to be in that mode until we can land ourselves in something in a location that’s not dependent on China. We’ve made progress in the last 90-days and my expectation is that will be in production in less than a year in alternative locations for our current supply chain. And I think that, that kind of matches with what the customer base is looking for as well.
