Operator: Our next question comes from the line of Harlan Sur with JPMorgan.
Harlan Sur: Maybe another one on just the inventories. Last quarter, you talked about the lower-than-expected sell-through in China which was largely responsible for the rising channel inventories in June? Or do I think days increased, I think it was 5 days back in June, days increased another 6 days here in the September quarter. Was this primarily continued disti [ph] sell-through weakness in China? Or was the pickup more pronounced in other geographies?
Eric Bjornholt: I’d say that [indiscernible] sell-through was not strong in any geography. So we did not see any significant improvement in distribution sell-through So…
Ganesh Moorthy: And China has continued to be weak. We have not seen the level of improvement we expected out of China and there’s plenty of news information about what’s happening from an economy standpoint here.
Harlan Sur: Ganesh, you talked about the relative strength in aerospace and defense. You’ve — your data center and compute franchise, I think probably now it’s about 20% [ph] of your business. Mix demand trends here as well but you guys are exposed to some of the stronger areas like accelerated compute? How is this end market trending for the team?
Ganesh Moorthy: So I think on data center, I think the last breakout there was about 17% or so in that range. But there are many subsegments that go into it. We clearly have a tailwind on anything and everything that goes into the artificial intelligence and the generative AI space, etcetera. But in terms of the volume that, that drives and the dollars that it drives, while it is meaningful, it’s not big enough to offset some of the other weakness we have in other parts of data set.
Operator: Our next question comes from the line of Joe Moore with Morgan Stanley.
Joe Moore: Ganesh, you talked about every cycle being different in this cycle in the upturn, it seemed like the shortages were more severe. You did see prices go up more on a like-for-like basis and your margins got higher than we’ve seen before. So I guess as you think about the downturn, is that going to reverse? Or do you have a situation where there’s more awareness of the supply chain people want to hold more inventory because of the intensity of the shortages? Can you just tell us like how the strength in the last couple of years might portend for the next couple of quarters?
Ganesh Moorthy: I think different customers have different levels of strategic versus tactical thinking. Last night, I have been with the CEO of one of our largest customers and extremely thoughtful about not just the next one quarter but about the next 3, 4 years of time and how they want to plan for it. I’ve also had similar discussions with people who were for 2 or 3 years suffering for with lack of product and all of a sudden they’ve forgotten about all the things that they need to be able to do. So it’s all over the place and it really depends on what the pressure they’re under. But for the most part, what we see is our customers or our customers’ customers in many cases, who are people who build many of the high-value systems are much more thoughtful about how a small piece of the bill of material is not where they need to be able to make a saving, while they have substantial value that they’re trying to create at the overall system.
So there’s no single answer because we serve 100,000 customers. It’s all over the place. But without a doubt, short lead times are giving them more flexibility in terms of what are they trying to place on us and how much time do they need to give us in many cases.
Operator: And our next question will come again from the line of Ambrish Srivastava with BMO.
Ambrish Srivastava: With a follow-up. I had a quick one for you, Eric. What’s the target days of inventory for distributors?
Eric Bjornholt: So we don’t really have a target. It’s been all over the place historically. It’s been as low as 17 days and it’s been as high as, I think, is 47 in our history and probably as high as 41 over the last maybe 10, 12 years. So it’s a broad range. And ultimately, it’s the distributor’s decision on the product that they purchase and how they support their customers. And obviously, they need a certain amount of inventory to effectively serve their customer base. And if they don’t hold that inventory, the end customer will find another channel buy that product through. So we don’t drive it to a certain number of days. I would not be surprised in the current environment that distributors with interest rates where they are, if they try to take their inventory down to some degree. But where that goes to, it’s very hard for us to predict.
Ganesh Moorthy: If I can add to the distributor business over time has also changed. They do the warehousing services for many OEMs, where they actually carry in pipeline inventory for them. So they have programs that are not the traditional distribution where they are carrying the product and the turns rate is not the same when they are pipelining for very large OEMs. So inventory, as Eric said, something that each distributor has a model for what they’re trying to accomplish and what they want and what they need is where they end up at.
Ambrish Srivastava: And your business has changed a lot also over the years, you have airspace. It depends what you don’t have several years ago. So that’s why I was asking. And I think you gave a helpful answer a little bit on the target of inventory days, Ganesh, that depend is also you’re carrying at the end of life. So you’re not that far out of the range on where you are versus your target shared at the Analyst Day.
Operator: Ladies and gentlemen, there are no further questions at this time. I’d like to hand the call back to management for closing remarks.
Ganesh Moorthy: Okay. I want to thank everybody for participating in the call today. And we do have many events that we will be at during the course of this quarter and we look forward to talking to you more at those events. Thank you.
Operator: This concludes today’s conference. You may now disconnect your lines.
