Just the belief is that higher interest rates, the fact that there’s been the restocking of car lots is largely behind us, start to affect the end market demand in terms of new automotive sales. And so we’re assuming that, that market begins to soften this quarter. On the second part of your question, on the lead time differences between the two, I don’t think we see any significant lead time differences between the two. But again, that segment for us is much more heavily weighted towards Industrial. And so we tend to be a little bit more focused on the industrial impact because of its heavier weighting. On the third part of your question, which I think was around specific customers and applications, what I would say is that the demand softness that we’ve seen is really broad-based.
It’s we kind of talked about by geography. But within those geographies, broad-based across many customers, many different applications. So we’re certainly seeing that across things like industrial automation, applications, robotics applications. Yes, I would really, and we anticipate automotive electronics. I would really categorize it as a pretty broad-based softening.
Matthew Ramsay: Got it. And I appreciate the patience with the multipart question. My second question, really quick for Sherri. You and I talked a lot about the performance of the company on a free cash flow margin basis. And I think you got a question earlier about OpEx. But when you think about sort of floors and margins on an operating basis or a floor and free cash flow margin, is there a certain trend that you would see in the end markets that would make you dial back spending? Or is this an environment where you have all these new products with Avant that are about to launch, and you guys are going to sort of spend through the cyclicality and see where we end up on the other side because of the confidence in the products?
Sherri Luther: Yes, Matt. So I would say that on the OpEx front, investing for the long-term growth of the company is definitely something we’ve been focusing on. We’ve been doing that quite a bit with all of the new products that we’ve launched. But that is — continues to be important. And the target that we put out at our Investor Day for R&D spend, in particular, is 18% to 20%. So as a long-term model, that model remains intact. I think though, what I would say is that the way we’ve been investing has always been in what we consider to be a disciplined way. And so we’ll continue looking at the way that we’re making those investments in a very disciplined way. And in terms of — you can see the guide for Q4 in terms of what that’s looking like.
We, the company has very strong free cash flow, strong cash generation, free cash flow. We’re really pleased with that. We are thrilled to be 40% free cash flow margin for the quarter, was really good results. And we’ll continue to focus on that. We’ll continue to focus on making sure that we’re investing in the right things. Gross margin, we believe our gross margin is durable. We’ll continue to execute on our gross margin expansion strategy and focus on that area. So we just really view that we’ll continue to execute toward our long-term model that we put out earlier this year.
Operator: [Operator Instructions]. Our next question comes from the line of David Williams with Benchmark.
David Williams: So I guess, Jim, first. Just kind of understanding how small the Auto is relative to the Industrial segment. It is a greenfield opportunity for you. I’m just wondering if you could maybe talk about where you see the growth opportunities there, and what do you think the mix optimization would be if you think about those two. Would it be a 50-50? Or is there maybe a less of a mix that would be more optimal for the business?
James Anderson: Yes. Thanks, David. So definitely, the Auto, within Industrial and Auto, Auto is a smaller component. But it has been a faster-growing area for us over the past quarters. The applications that we would address would be ADAS and infotainment systems. Actually, one of the recent wins that we announced with the customer was in new Mazda models of cars, we’re used in their ADAS system. The Lattice device gets used between the camera that’s at the front or the rear of the vehicle. It gets used in that data stream to do some preprocessing of the video stream. And so that’s a very typical, Mazda application, very typical application that we get used in automotive applications. But there’s many other examples as well.
So we do see automotive electronics, over the long term, as first of all, kind of an obvious secular growth area for the semiconductor industry overall. But definitely a great growth area for Lattice as well. The combination of our devices being very power-efficient, very size-efficient, having an incredible amount of flexibility in terms of the interconnect that we can service and the ability to reprogram those devices and customize those for specific applications. We see all those kind of feature and power efficiency benefits as being really well positioned to support automotive applications. And that’s why we continue to see automotive electronics as just a really strong growth area for the company over the long term.
David Williams: And then secondly, just, Sherri, we’ve talked about the gross margin, and it’s been surprisingly robust here. And you’re pointing to that resiliency in the past. But I think this is the first time that we’re seeing it really maintained on the softer outlook. And I guess, does that give you greater confidence just in that trajectory and the sustainability of it? And then does this maybe signal there could be more upside opportunity incrementally on the rebound?
Sherri Luther: Yes, thanks, David. So gross margin, 70.6%, a record. So we’re really thrilled with that and the sequential improvement as well of 110 basis points or year-over-year rather improvement. But gross margin is something, an area that we continue to focus on. I mean we’re in our fifth year now, as I mentioned in my prepared remarks, and the factors that we’ve been executing on there. We continue to focus on you can see fluctuations in gross margin from 1 quarter to the next quarter. But at the midpoint of our guide, it is a range, right, 70.5% plus or minus 1%. It is a range. We will continue to focus on gross margin, and we believe our gross margin is durable. And when you look at our Investor Day earlier this year, where we increased our gross margin target to the low 70s, that’s our long-term target model, and we’ll continue to drive towards that.
James Anderson: Yes. And maybe I’ll just add. One of the benefits we’ve seen on gross margin is a software attach rate. As Sherri mentioned, gross margin can fluctuate quarter-to-quarter based on things like just mix of product. But one of the longer-term trends that we think benefits our gross margin is software attach. As we’ve seen a higher percentage actually now over half of all Lattice Silicon Design wins have what we call a software attach, which means they’re using one of the six software solution stacks that we’ve launched into the market. And when customers adopt that solution stack, that combination of silicon and software generally has a higher ASP. And a higher ASP design win usually has a higher gross margin associated with it. So I think that’s one of the tailwinds over time, higher software adoption and the benefit that we see over time.
Operator: Our next question comes from the line of Ruben Roy with Stifel.
