But we put up a lot of inventories in the VR13.5, it became a serendipity. And again, we have a few project design win and other supply — but we ship a lot. So that’s where you see the server data center growth. That’s because of that. And for next years, we were told to get ready to have those projects ramping up in a rapid supply, let’s call it. And so when these markets are already ramping up, MPS are there.
Bernie Blegen: I think, Tore, you hit on a couple of very good points that as far as the AI GPU opportunity, we’re very well positioned both for the near term, in 2024, but more importantly, longer term. And as Michael just emphasized, there is a differentiated market there and we want to stay at the high end of that market. So we’ve always been aware that there would be competitors entering this space and that’s how we’re differentiating ourself. And then as far as the CPU and GPU markets what we’re preparing to do is to manage the uptick in demand that we’re anticipating by building that inventory during the next couple of quarters.
Michael Hsing: Oh, yes. That’s what I forgot, while I tried to make a point. And MPS doesn’t want to be known as AI power company. We want to focus on the diversified growth. And we do have a lot of greenfield products still haven’t realized yet. These are across the segment. And also in the consumer side, in the last years, okay, because last couple of years because the shortages we kind of neglect it. And that will — in the last half years, we developed a low-cost product and we introduced the market where you’ll see the growth. That’s only on the — because of very short design cycle, you will see revenue from next year. And all the other product like industrials, automotive, in tracking inverters, in chargers and also ADAS, these were ramping up. And so we want to achieve very diversified growth, not only on the AI side.
Tore Svanberg: Great color. Good job with the buyback. Thank you.
Genevieve Cunningham: Our next question is from Ross Seymore of Deutsche Bank. Ross, your line is now open.
Ross Seymore: Hi, guys, can you hear me?
Michael Hsing: Yes. Hi, Ross.
Ross Seymore: Hi, there guys. So I guess the question I have is, I don’t know cyclicality or seasonality is carrying the day. But the last couple of quarters, you’ve talked about weakness. You’re not unique in that. But the fourth quarter, you seem to be guiding pretty much back to a seasonal drop. If I look into the first quarter, is that something that you expect to continue, or is visibility just too limited to really comment on that quite yet.
Michael Hsing: Yes. Well, the numbers kind of reflected seasonal, but the reality is it just happened that way, we can’t call it seasonal. This is a fast-changing market, I mean, it’s very difficult for us to forecast. That’s difficult. Unfortunately, we have a lot of capacities. But these capacity were still the lead time still shorter than our production cycle and we have to get ready just that.
Bernie Blegen: Ross, you bring up a really good point is that if we look at the outlook for Q4, a portion of that is how competitive we were at going after the notebook market. And so the Q4, we’re experiencing a little bit of a decline as those are seasonal sales. When we look at Q1, Michael said it best, there isn’t a lot of visibility. But as we look at this cycle, we believe that next year is really back half-weighted. And so I would probably indicate that we’ll have a more conservative profile as we look at the first half of 2024.
Michael Hsing: Yes. Also, I forgot to mention about it. And we talked about beginning of the year, we’ll be aggressive on price and especially within the course of board. And then we have a new product in the consumer segment come out — already came out. And also in a notebook area, we pretty much have a large market share in the commercial side. In the beginning of the year, we were very starting — become very aggressive on the price. And now, fourth quarter, you see it in our notebook side start to gain more shares in the consumer side.
Ross Seymore: Got it. Thanks for that. And my one follow-up, I want to just pivot over to the gross margin side of things. You mentioned, Bernie, in your script that you’re at the low end of your guidance because of mix. I was a little surprised that enterprise data more than doubled sequentially, but yet you pointed to mix. Can you just talk a little bit about what’s going on? What mix were you referring to because I think, whether correctly or incorrectly, at least I assume that enterprise data would be an accretive gross margin category.
Michael Hsing: Sure. Well, consumer notebook, margins are very low. But it’s an easier money to be made.
Bernie Blegen: Yes. Michael is exactly right, is that we have been aggressive on pricing across the board. And while that isn’t called out specifically as a contributing factor to the lower gross margin, it is reflected in the overall mix, notwithstanding the impact of the GPU and AI business.
Ross Seymore: And has that pricing dynamic, is that starting to kind of normalize from here? Or is that an incremental headwind that we should consider going forward?
Bernie Blegen: I believe that as the market begins to stabilize, that will return to a more normal profile as far as pricing. Again, a very specific point to make here is that most of our customers are attracted and we secured design wins because of our innovation as opposed to pricing alone. So I believe that as the market stabilizes sometime in 2024 that we’ll probably return to a more normal pricing environment as well.
Michael Hsing: Yes. You said product mix, right? But also, there’s other capacities, and capacity utilizations in [indiscernible] and also add a lot of capacity cost for us. So it’s a mix of all of them, not only the product mix.
