Operator: And our next question comes from the line of Chris Danely with Citi.
Chris Danely: Question on the geos, I guess. So in terms of all these cancellations and pushouts in the forecast, have any geographies fared any better or worse as we’re going through this correction?
Ganesh Moorthy: No, because a lot of our customers can be in multiple geographies can be headquartered in the U.S. but manufacturing in a different geography. And so the intensity or the requirements for push out and help is — has no geographic signal that would be different.
Chris Danely: Okay. Yes, I know you said North America was flattish in the previous quarter. I was wondering if anything was still holding up or worse. As my follow-up, so we’ve seen some of these internal China OEMs finally start to do their own analog or mixed signal chips. BYD doing their own BMS solution is one of them. And it seems like they don’t really care about quality or cost or what have you. Can you give us a sense if you know of roughly how much of your business goes to domestic China? And do you see any risk that the non-China MCU business could kind of issues with this?
Ganesh Moorthy: So the proportion of what goes into China for China of a broad-based product line, I would say it’s probably under 5-ish percent or in that range. I don’t have an exact number, so don’t hold me to that. The difference is that, this is not new that we have competition in China. The business is extremely fragmented. There’s hundreds thousands customers and applications that are there. And so even previously, we would have had some designs where somebody didn’t care about quality or didn’t care about something else and said I’m just going to use this. And that’s not unusual in where it happened. So it is something we are paying attention to but not something which is creating a dramatic change in the business itself.
Operator: Our next question comes from the line of Christopher Rolland with SIG.
Christopher Rolland: Can you guys talk about or give us a rough idea of what percent of bookings coming into any of these quarters are being pushed out each quarter? And is that representative basically of the December sequential drop that we’re getting here? As you guys mentioned, like that you really didn’t have any turns business into the quarter. And I think December has traditionally been somewhat flat. And are these levels of pushouts, are they increasing progressively as we move along here?
Ganesh Moorthy: So let me start and then Eric might want to chime in here as well. So firstly, new bookings are not the place where people are trying to push things out, because if they are new bookings within the last 3 to 6 months of time, those are with much more informed sense for demand, supply market, etcetera. A lot of the pushout requests for backlog that was placed 9, 12 or longer months where, as time has gone on, the need as they perceive this when they place the orders and the need as they see it today when they are facing the reality of what the markets have changed to, are different. So new bookings actually are in far better shape just because they are much more informed about current market conditions.
Eric Bjornholt: Right. Well, I guess what I would add to that is those new bookings have been pretty modest that have been coming in, right? So bookings have been lower. We don’t break out a book-to-bill but bookings have been low. And the bottom line is, I think it’s very difficult for customers to know what they need, particularly with those orders as Ganesh was saying they were placed 9 or 12 months ago. But we have had certain instances where customers have actually asked for a pushout and then the next month, they’re coming back to us and asking for us to pull it in. So I think it’s just a very uncertain environment at the customer level and obviously, that causes some churn on our backlog and the request that we get for push out activity.
Ganesh Moorthy: And they have a benefit today of knowing that supply is readily available, that lead times are short and they are taking advantage of that which would make sense.
Christopher Rolland: Yes, I think that’s a great tie-in maybe to my next question. I guess with hindsight, how do you guys evaluate instituting that 12-month PSP was that a good thing, a bad thing? Would you do it again? And if so, were there any changes you would make?
Ganesh Moorthy: It’s a question we ask ourself all the time. But I think you also have to look at not 12 months as a stand-alone piece of information, right? It is what were the lead times. So even if — when lead times are 52 weeks, you really can’t offer somebody something inside of that because there isn’t — all the capacity within that window is already consumed. So like all programs, they have to be designed with a sense of the information at a given point in time and they have to evolve as that information changes. And so even on PSP, right, it used to be 12 months. Today, 6 months. We made that change several months ago. The flexibilities, etcetera, around or have changed. And each program is designed to create a customer solution.
And that solution has to be sensitive to what problem we’re trying to solve at a given point in time. PSP was a fantastic program for ’21 and ’22 and parts of ’23 when there was very long lead times, then the customers who participated got the most benefit from there. Today, it has less value when cycle — when lead times come down dramatically and for other than a small set of customers, it is not as important to provide that much visibility.
Eric Bjornholt: Yes. And I’ve said this to investors time and time again that if we had not had PSP, I am confident that our backlog would have been higher but we wouldn’t have known what was good backlog and what was bad backlog and we would have made the wrong decisions in terms of foundry orders that we made, capital equipment that we are putting in place. And so the PSP program was designed in a way where we were trying to service customers in a very long lead time environment where we were capacity constrained and give the customer an option to do that but then have skin in the game also where just not all that risk sell on Microchip. So there’s a lot of good things that came with PSP. Obviously, when the cycle changes, customers can feel differently about the backlog that they place than they did when they placed the order but there were a lot of happy customers that we serve us well because of the program.
