One is, as you mentioned and I mentioned in my prepared remarks, in AI-optimized servers in the data center, we have a very good position in the control management and security of those type of servers. And generally, we have a higher — and equal to — or higher level of dollars of content per server on an AI optimized server than a traditional general-purpose server. Another application is in AI-enabled PCs, where Lattice devices are already used today and doing AI tasks on PCs, such as Lenovo ThinkPad. I also mentioned in the prepared remarks, ADAS, but there’s lots of different industrial applications, industrial robotics, industrial automation. And in particular, computer vision processing and technology is really important to those type of applications.
And so that’s a place where we see great synergy from the acquisition we made a couple of years ago on computer vision software technology used with Lattice devices to gain more Lattice position and growth in industrial applications. So it’s really a number of different applications that we see. And yes, and as I said in my prepared remarks, we expect the AI-related revenue across all of our applications to roughly double over the next few years. And frankly, when we look across all of our end markets, that is the fastest growing usage case or application model across all of our end markets is AI-related growth.
Operator: Our next question comes from the line of Matt Ramsey with TD Cowen.
Matt Ramsay: I wanted to — it’s really helpful that you gave us a little preview, Jim, of the June quarter just as you see it now as well. So if we’re going to be around these revenue levels for a little bit as you ensure that the customer inventory levels get sold through and digested. I wonder if you could give us a little bit of an estimate — I mean, you guys — going back to the Analyst Day, talked about sort of mid- to high teens growth for the company on a long-term basis and the product roadmaps are all there to support that. I’m trying to get an understanding of what you guys feel like sell-through is sort of a revenue level in the first quarter and the second quarter that represent like true end demand for the product. So at $140 million a quarter, any sense as to how much inventory you’re actually burning through with the customers? And sort of what a steady state end consumption for Lattice’s business looks like at this point?
James Anderson: Thanks, Matt. It’s a tough question to answer because while we have really good visibility on inventory that’s in the channel with our distributors, we have over 10,000 end customers, and so we just don’t have perfect visibility of the inventory levels across all of those customers. And so it’s hard to judge that. But we believe at that $140 million level that was the midpoint of our guide, we believe that’s below the natural consumption and usage of our end customers. And the difference is the inventory that they’re drawing down. And so we’re not sure exactly how much that is, but we do believe we’re shipping in below the natural consumption. And we believe that will continue into Q2 as well. And — but that inventory effect that we’re seeing in the — that’s dampening demand in the first half of the year, we believe that dissipates into the second half of the year, and we get back to more normal levels of consumption from our customers.
Matt Ramsay: Just a couple of quick things and follow-up, I guess, to that question. One, the first one is, if you look at the first quarter, if you kind of ex out the under-shipment relative to inventory burn, do you feel like the end markets are back to some level of normal seasonality? Or are they sort of end consumption well below where you would think normal seasonal behaviors are for your business? And I guess the second follow-up is for Sherri, the disti percentage of revenue was a bit different than it’s been in the past. Is this a strategic change? Or is this just the sort of how much inventory or how much sell-in happened direct versus disti was kind of dictated by who was burning through inventory at what rate? I’m just trying to think if there’s anything strategic changing there as to your disti strategy or not?
James Anderson: Matt, on the first part of your question on the Q4 to Q1 decline that we’re forecasting. Yes, definitely part of that is normal seasonality. Typically, Q1 is a seasonally lower quarter. But the forecast that we’re giving for Q1 is beyond normal seasonality. And that beyond normal seasonality is really two factors. It’s the inventory digestion and rebalancing that I was talking about, as well as our customers are seeing lower demand from their business as well. So it’s — they’re seeing lower demand, and they’re also drawing down inventory at the same time. So that Q1 is a combination of those three things: normal seasonality, lower customer demand and then drawing down their inventory levels as well.
Sherri Luther: Yes. And then, Matt, on the second part of your question in terms of the disti percentage versus a direct percentage of revenue. When you look at ’23, the full-year 2023, and you compare that to 2022, it’s very similar. So you don’t see a whole lot of difference there for the full year versus the full year. On a quarterly basis, you can see — expect to see fluctuations in that percentage of revenue. But I really wouldn’t read any more into that. It’s just sort of typical in the range of what we have seen historically, even if you look back to 2022.
Operator: Our next question comes from the line of Melissa Weathers with Deutsche Bank.
Melissa Weathers: So for my first question, I wanted to touch base on your communications and compute segment, specifically on the compute side. I think we’re hearing some mixed signals on overall demand for non-AI servers in 2024. Some people are talking about March being down seasonally. So, I know you guys have higher content in the next-generation servers this year. So how should we think about the level of growth that we should be looking for in 2024? What would the second half look like in computing for you guys?
