Ross Seymore: Thanks for the color. And I guess one kind of on utilization, inventory and gross margin all tied into one for Bill. It’s impressive to see that your utilization is dropping and your gross margin is still staying at 58%. I guess, in the DIOs, is there a limit to which you would go on the upside there? I know your long-term target is 95%. I also know that you’ve been very clear as to why you’re going above that right now. But is there a limit to how high you would go on days of inventory internally before you’d really have to ratchet the growth – the utilization down? And if so, how does that fold into what the gross margin that would be the outcome in that scenario?
Bill Betz: Thanks, Ross. Yes, you are correct in a way that when we look at inventory, we look at both the internal and the channel together. So as you can imagine, right, the channel inventory today at 1.6 months, basically, we can move that up by about another 25 days if we wanted to, to our target of 2.5 months of sale. Clearly, with the softness in several of the areas, we are monitoring this. We’re keeping it strategically on our channel. And as Kurt mentioned, as conditions do approve, we will release some of that and want to go sell-through one-to-one. Now the good news is the inventory we have on hand is all long lived and has very low obsolescence risk. At the same time, I’d say, unfortunately, we’re still constrained in several selective nodes.
Remember, we buy about 60% externally. We do about 40% internally. That 40% really – more than two thirds of that internal capacity is linked to Auto and Industrial. So that’s going to keep us at nice levels of utilization for the rest of the year. So again, we’re going to be more flexible, yet disciplined to support our customer service levels and the potential for future growth. But to give you an example, right, if we have the orders, as Kurt mentioned, and we shipped that $500 million and went to 2.5 months of sales, assuming none of it sells through, this would basically have an effect on our revenue and our COGS and basically say NXP’s internal inventory would have been below 90 days. So you have to look at them combined. We’re doing this very proactively and intentionally to prevent inventory buildup.
So I think from an internal DIO, if we kept the channel at 1.6, I’m comfortable holding probably another 15 to 20 days on top of the level that you see today.
Operator: Our next question comes from C.J. Muse with Evercore. Your line is open.
C.J. Muse: Yeah, good morning. Thank you for taking the question. I guess a follow-up question on gross margins. You started the call talking about expectations for higher ASPs given higher input costs. It sounds like you’re very optimistic around accelerated growth areas that should benefit mix. You’ve cut back utilization, and it sounds like that should trend higher over time, and that’s focused more on proprietary mixed signal, which I assume, again, is better mix. And then you guided CapEx essentially flat to down year-on-year, which means depreciation shouldn’t be moving higher. So the question is this, I guess, are there any kind of headwinds to gross margins that we should be thinking about in ’23?
Bill Betz: I mean the only thing I would say that could cause gross margin to go below the long-term model that 55% to 58% is probably a prolonged global recession, that affects all of us, right? But if we’re having the – what we’re seeing right now, we think we’ll – we will and plan to stay within that 55% to 58%, C.J.
C.J. Muse: Thank you. And I guess as my follow-up, on the Comps Infrastructure and Other line, can you give a little more color on what led to the weakness in December? And how we should be thinking about the different moving parts for that business for all of ’23? Thanks so much.
