Tony Balow: Yes, I’ll start and then let Bernie jump in. I think what you’ve heard from us in the past is that for us, because we lead on innovation and we’re trying to work on the next generation platforms and work on where we really have a differentiated advantage to our technology, we’re probably less susceptible to pricing than some of the segments that are volume-related or might be more mainstream. So, I do know there’s lots of reports out there about pricing right now, but I’d say right now that’s not impacting us in any way, and you can kind of see that in our outlook. And so, Bernie, if you want to add some more on that.
Bernie Blegen: Yes, and fundamentally, part of the issue that’s driving prices, both additional capacity in China, as well as additional capacity that’s coming on with a large North American company, and on the cost side, we’ve always been very, very competitive, regardless of the end market opportunity.
Michael Hsing: Regardless of what the margin is, we always have to drive the cost down. Oh, I should give you more than you asked. And it’s a little bit from the futures. And so far, nobody has asked a question yet. We saw in the near-term market in the next couple of years, the AI truly trickles down to all applications, not only in the cars, in all the sensors, in the building for the phones, and all kinds of things trickle down to different levels. And we see now all kinds of activities is going on now. And there’s a lot of design, initial phase to forming the product ideas. And these are requests from our customers. And we don’t see that in the end of last year, even in the beginning of this year. Recently, we see a lot more. So, that will drive those products, definitely will drive the gross margin up.
Gary Mobley: Okay. Thank you for that comprehensive answer. Last quarter, your distribution inventory, I think you characterized the distribution inventory as being a little bit above the target level. What is it now? Have you been able to work that down to more of a normalized level?
Bernie Blegen: Sure. So, there’s sort of two ways to look at our channel inventory right now. If you keep it narrow to really the AI supply chain, we’re trying to keep that elevated so that that inventory is basically available on demand. But then with regard to all of the other end markets, we’ve seen it coming down nicely.
Gary Mobley: Thank you.
Operator: Our next question is from Tore Svanberg of Stifel. Tore, your line is now open.
Tore Svanberg: Yes, thank you. I just had two quick follow-ups. I’m intrigued by the consumer segment, Michael. I know that’s surprising when everyone’s talking about AI, but I think this is the lowest percentage it’s ever been. But you did talk about getting some share there in the downturn. So, any particular applications that we should keep an eye on as you start to grow back in the consumer area?
Michael Hsing: Yes, that’s a good question. Like, I mean, yes, as I said earlier that we fell into an unhealthy percentage. We want to have a diversified growth. We neglected our consumers. But on the other hand, during this period, a lot of our competitors care less about cost and we have less effect. But we didn’t lower the price in the notebook market segment. And that’s probably what you see now. We grow the notebook revenues faster than the notebook market growth. And these are low-margin products. But when you’re looking forward, audio product, a lot of them relate to a consumer product. Maybe Tony, you can mention a lot– you can talk about this.
Tony Balow: So, I’ll go and then Michael can certainly talk a lot more. But I’d point you back to what we announced last quarter on our Axign acquisition. And we really looked at their technology and saw an opportunity to participate in the high-end audio market. And MPS’s scale and Axign’s technology really offered an opportunity to go after customers. And we’re seeing some traction in that area. So, consumers got a wide base of potential applications. And I think we’ll continue to pick our shots where we can really add value with our innovation.
Michael Hsing: Yes, I can tell you, we will start to ship in Q3, but Axign and MPS together as a bundle.
Tore Svanberg: Yes, that’s exciting. And my last question is on communications. It was actually up sequential this quarter. Everything that we’re hearing, of course, is that market is still very weak. In your prepared remarks, you said that that growth was driven by networks. So, can you elaborate a little bit what’s going on there? Are you actually starting to see that market turning? Or is this just pure share gains?
Bernie Blegen: It remains a flattish market. I think that in quarter-by-quarter, we’re going to see infrastructure go up or down. But the full-year outlook is that it’ll probably be flat with ’23.
Tore Svanberg: Sounds good. Thank you.
Michael Hsing: Yes, I’m betting on a communication market. It will trickle down from than of the speed and the domain of a higher speed. We’ll trickle down to all these segments. And we have a lot of design wins in 5Gs or using other high speed or the Wi-Fis. And we’re ready for that.
Tore Svanberg: So Michael, what you mean is AI will trickle down. And as that happens, the comm sector will revive.
Michael Hsing: That’s right. Yes, it has to. That’s no-brainer.
Tore Svanberg: Great. Love the color. Thank you.
Michael Hsing: Okay.
Operator: Our last question is from Melissa Fairbanks of Raymond James. Melissa, your line is now open.
Melissa Fairbanks: Hey, guys. Michael, I love a no-brainer. I mean — [multiple speakers] So, I love that. I love that.
Michael Hsing: Yes, I don’t even have my brain to talk about that.
