Linear Technology Corporation (LLTC)’s Q2 2015 Earnings Conference Call Transcript

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Operator

We will take our next question from Jim Covello. Go ahead. Your line is open. Jim, your line is open.

Paul Coghlan

The results were so good, Jim, you are just speechless, huh?

Operator

You might check the mute function on your phone, Jim.

Jim Covello, Goldman Sachs

Can you hear me now, guys? Sorry about that. I apologize.

Paul Coghlan

Yes, Jim. I can just hear you now.

Jim Covello

Okay. Sorry about that. Paul, you guys had been growing really nice kind of 10% year-over-year clip for a handful of quarters. Last couple of quarters, closer to 5% or the 7% range, you commented that you think your goal is 10% growth. The end-markets — all of your markets collectively don’t grow 10%, so that would imply your ability to gain share. Which markets do you think you would be able to most gain share in and where you think that share would come from? If not from specific customer or competitors, what products do you think you could gain share and to make up the difference between your 10% growth targets and the end markets which collectively do not grow.

Paul Coghlan

Yes. I can take a stab at that. If you look at the overall analog market, it is maybe a $44 billion market and if you look at what segments are growing in that market, it is really long-term the industrial market has steadily grown. 10 years ago, it was 7% of the analog market, today it is over 20% of the market. A similar story is in the automotive market where a few years ago it was not a big part of the business, now it is over 20%. So, the industrial and automotive markets for total analog are maybe 43% of the market and they are growing roughly 2% or 3% market share every year. So, in a few years, automotive industrial is going to be the lion’s share of the analog market and that is where we as a company are very focused on. So not only are we in the markets that are growing the fastest, it is becoming a bigger, bigger portion of our business as well.

Granted maybe the overall analog market is growing slower, how we look at it is that we are in the segment that is growing fastest and we don’t even necessarily have to take market share. We just have to ride along with the growth of the automotive and industrial markets and then to a lesser extent just hang on to the business we have in communications. That will allow us to do this 10% growth.

Bob Swanson, Executive Chairman

If you look at the number, if the overall market grows by 5%, that is a $2 billion increase incrementally. If we could get $150 million of that $2 billion, we are just growing by 10%, so like we have a 80% market share year or even 20%, we have a small market share.

Jim Covello, Goldman Sachs

If I could specifically on the follow-up focused on the automotive business, I mean, I think that automotive has been a terrific market for the whole industry and then certainly for Linear in your particular for a little while now. If I think about your 2% to 3% long-term global auto unit growth and about 5% content for box that would make that may be a 7% or 8% kind of core market in an average year. Do you think those estimates are wrong or. Again, I mean, do you just think the share gain that you can have within automotive can make up the gap between that and that is maybe 40% or going forward 50% of your business, but then the other 50% still would not grow 10%. I am just trying to bridge the gap between the 10% targets and even the best end market looking like long-term that is probably 7% or 8% growth.

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