Joe Moore: Great. Thank you. I guess, I wonder if you could address a couple of the bear cases that I hear. One, you’ve sort of talked about PSP and what it accomplished and what it didn’t. Do you think that having more flexibility about customer cancellations when they started to slow down, would that have sort of made the issue less bad now? Is the PSP part of the reason why the hole is a little bit deeper, maybe?
Ganesh Moorthy: Perhaps. And I think, again, in retrospect, as a Monday morning quarterback, I know exactly what I would have done. But we were under for many, many, many quarters and even as recently as last March and June quarters, there were CEO-level calls that we’re pushing and driving for getting more product than we had. If you remember, we would provide the statistic about how much of unsupported, which is what customers wanted and we couldn’t ship was there. So in the throes of all of that, where there parts of it where perhaps we should have taken our foot off the accelerator perhaps. But it isn’t something that was now able as we went through it. And if we ever were to do a PSP program again, those are some lessons learned we’ll take, and we’ll look at how would we adjust the program so that the intended outcomes are available and as many of the unintended outcomes are avoided.
Joe Moore: Great. Thank you. And then the other kind of negative question that I get, China obviously building significant amount of trailing edge capacity. Can you talk about what types – I don’t think you see a lot of direct competition from sovereign China today, but can you talk about how much of your business might see competition from that direction over the next few years? I think you’ve talked about that being single digits, but maybe if you could just update us on your thinking there.
Ganesh Moorthy: Sure. So Mainland China today is about 20-ish percent of our revenue. About half of it, we estimate is designed elsewhere and just happens to be manufactured in Mainland China. And some of that is, frankly, moving out of China as people diversify other things. So it doesn’t – the point of design is outside of China, and we’re comfortable with that. So the other 10% of our business that’s in China that is designed in China has another half of that, which is very complex designs, and these are not the ones that are easy to dislodge and would have a significant amount of knowledge about systems, the software that goes with it, the hardware and software interaction and all that. So that means about 5% of our business, about one-fourth of the business in Mainland China that is our more broad-based microcontrollers and analog and those type of products.
And there, fragmentation is our friend. It is a very, very fragmented market. Any one opportunity is a small percentage of revenue, and it is not easy to go to place. But theoretically, you could say if somebody had an identical offering. And by the way, a lot of that business is not just about having silicon. It’s about having silicon, having tools, having design guides, having software that we make available. There’s a lot of help and self-help that we provide for our customers as well that is there. So, yes, there is more going on in China with trailing edge, both technologies and capacity. And we will pay attention, and we will, through our product line and innovation, cost reduction be continuing to work to go head-to-head against that.
But it’s the portion of the business that you might think about is more broad-based where they would come after that business is less than 5% and is very, very fragmented and difficult to get at. Does that help?
Joe Moore: Thank you. Yes, so much. Thank you.
Ganesh Moorthy: Thank you.
Operator: Our next question comes from the line of Joshua Buchalter with TD Cowen. Please proceed with your question.
Joshua Buchalter: Hi guys. Thanks for taking my questions. I wanted to ask about utilization rates and sort of the strategic decisions you’re making to shut down the fabs for two weeks in March and June and also keep utilization rates lower over those two quarters. I guess, why start and stop the fabs but also why not just take the utilization rates much lower in the March quarter then see where things play out and given you’re trying to get inventory down, but expectations are that it will still go up in March? Thank you.
Ganesh Moorthy: It’s a balanced decision that we had to think through and make. But as inventories climbed, there is a point at which the pain gets high enough. And as we looked at that, we felt on balance and we don’t know what other supply-demand dynamics may take place. But on balance, this is a way in which we could navigate to different scenarios that might play themselves out. And in the meanwhile, the inventory is high enough that we’re comfortable that if the recovery would accelerate, we’re in a good place. And we are – if the recovery were something different, that were ahead of us and we have options on what we can do in the June quarter. But right now, we need to prepare for where March and June to the best of our ability to call it is going to be, and that includes be running at a lower utilization and taking a two-week shutdown in the – in our fabs in each of the two quarters.
Joshua Buchalter: And then as my follow-up, and I know you have a formulaic approach to your capital return program, but you’ve also in the past talked about opportunistically potentially going above the rates that you’ve outlined as we go through this period where you’re going through the digestion and free cash flow is depressed versus where it was the last few quarters, any thought to using the balance sheet or returning more than you would have been returned under the formula that you’ve outlined? Thank you.
Eric Bjornholt: So, maybe I’ll start. So I mean, we actually have a very healthy cash return this quarter, right? We increased from 77.5% to 82.5%. The adjusted free cash flow in the December quarter was quite high. And even though the dividend is going up again, we are going to have kind of record share buyback in the quarter based on that formula that you spoke to. So, we think it’s appropriate. We’re glad that we’re going to be buying back a bunch of shares this quarter. Steve, Ganesh can give commentary if the Board would think of doing anything different, but I think that program is kind of in place as it is. And if the market changed and the stock price decline significantly, it would be a discussion with the Board.
Steve Sanghi: I think it just came out naturally that our cash flow was extremely healthy last quarter. And with returning 82.5% back to shareholders with dividend increasing, it still creates a record stock buyback in a quarter, record that we have ever done before, $386.8 million. So it’s a very, very healthy buyback. If there was not to be the case, where the cash flow wasn’t as healthy as last quarter, then the question would be valid, should we do an extraordinary stock buyback this quarter, if the stock were to become weak. But I think we just formulate – by formula is a very, very healthy amount of cash reserved for stock buyback this quarter.
Ganesh Moorthy: For the last many quarters, we’ve been steady as she goes. I think having a program that doesn’t try to have quarter-to-quarter major variations has been a way in which to establish consistency of the capital return program. And I think Steve and myself and the rest of the Board see that as a way that we should continue with this thing.
