Gary Yu: Hi Gary. This is Gary. So, I think for the years, we have a manufacturing service agreement in places for our OEM customer in both [ AT ] and the foundry service. So not only limited on the foundry service, just want to make sure that we understand on that. And their loading can be adjusted time to time by their end demand and [Indiscernible]. With that, we do see some impact on revenue and GP from third quarter last year. But not much we can control that. I cannot disclose too much detail about that. Just in case you have any question related to that, kind of demand stop or not. However, while we’re working very hard in the past couple of years, it’s continuing to offload our outside loading from our partner in the different foundry and continue qualifying internally and get all key customer approval.
But as you know, you’re absolutely correct for those kind of SPFAB form Onsemi and GFAB from TI, and we are doing our best to qualify our technology and our product over there. But at the same time, we do need to have our customer to approve our PCN to change wafer fab. That take a little bit longer time, Now especially after COVID and the demand softened at this moment, the customer’s willingness to change the PCN or change the different wafer fab on site will be much slower than the time we have a shortage area, okay? That’s the way you need to understand. But so far, our progress, internal cooperation is very good, and we do see some project ahead of our June schedule, as I can tell you at this point. So, just like Emily said, at this moment, we do see the loading risk on those two wafer step and as well as some loading in our assembly side.
But in the nearly future, I do believe and I do have a very good confidence if those new products can be qualified in both our site and our customer side as that ramp-up.
Gary Mobley: Okay. Thanks for that, Gary. As a follow-up, I do have another clarification question. With respect to the green shoots of improving demand, should I assume that’s primarily on the 3C side of the market as inventories have been normalized there? And given that those businesses are your most seasonally sensitive businesses and you’re seeing green shoots of then demand, would you expect this normal second half seasonal patterns where the third quarter is up maybe high-single digit percent sequentially, the fourth quarter down mid-single digit percent sequentially?
Emily Yang: Yeah. So, Gary, this is Emily. Let me answer the question, right? So I think I did talk about it before, right? So what we’re seeing is automotive inventory rebalancing will probably continue into the second quarter because it’s not across the board customer and part and program varies a lot. So it’s not going to be like one way or the other. So it’s going to gradually change. Industrial, because it’s a broad market, so most likely, the correction will last into the second half of the year, right? 3C, from the computing point of view, inventory is clean and we do expect the second quarter as well as the second half stronger than the first half. From the consumer side, I think overall demand is still slower than our expectation, but we still expect some of the new programs will start ramping in the second quarter and peak in the third quarter, right?
And then because the [ holiday build ], usually fourth quarter maybe only half month or a month only benefit from this market segment. And then from the communication point of view, right, the networkings, the telecoms, I think the demand is more on the slow side. So the inventory correction is actually slower to digest the inventory, and it will probably last into the second half of the year, depends on the customers as well. On the smartphone side, I think it’s driven by the demand. And overall, I would say the demand is still slower than expectation. But with all adds up, we actually strongly believe that Q2 will be a stronger quarter than Q1. That’s the reason we actually guided 4.6%. We also believe second half of this year will be better than the first half, right?
So, that’s still – we actually, based on what we have as a backlog, we look at the book-to-bill ratio, we look at different factors. So I would say yes to your question, the second half will be stronger than the first half. We’re not here to call out the percentage of the improvement, right? Because I think there’s still a lot of uncertainty going on in the market. But if you combine both, second half is better than the first half for sure.
Gary Mobley: Thank you.
Operator: [Operator Instructions] Our next question will come from Tristan Gerra with Baird. Please go ahead.
Tristan Gerra: Hi. Good afternoon. Are you able to quantify the percentage of the product that you’re migrating to internal manufacturing on the front end? What is the percentage that you’re currently outsourcing, what that percentage will be as you qualify more product internally and is that mostly for your analog product as opposed to discrete?
Brett Whitmire: Tristan, on this one, I think what you’ll see is what we’re — it’s a blend of both our analog and our discrete that we’re bringing inside. What we’re really trying to do is the technology nodes that run in a decent volume that are right down the fairway, making sure we have flexibility inside and out. And as we’ve been doing in the past, really, we look at wanting to be able to in-source between 50% to 60%. And during softer times, we’d like to run that higher, and we’d want to make sure that we have SPFAB and the Greenock fab being able to carry the brunt of that because they’re kind of our foundational fabs across the two different platforms we have. And that’s really where the initiative is, is not being on so dispersed and spread out, but really getting integrated into those factories and really trying to drive leverage, both from a cost and scale and be able to drive both revenue opportunities as well as cost over time.
So that’s kind of what we see.
