Joshua Buchalter : Got it. For my follow-up, you called out bridge inventory to support the fab transitions and silicon carbide ramps. With days above 160, can you walk us through how this unwinds? Basically, I just want to make sure that as your peers are cutting inventory levels at their end customers that that won’t become an issue as you complete some of the fab transitions and SiC ramps more fully.
Hassane El-Khoury: Yes. So strategic inventory for fab transition usually are committed backlog. We call it no change, no return. So we build the bridge inventory given that the customer needs that bridge between the old fab and the new fab. So we see this as a very low risk and will work itself down over a few quarters as we shut down the old fab. And before we start on the new fab, we will bleed inventory to a level, and then we’ll ramp it back up into other fabs. So we don’t see this as inventory jeopardy, which — which allows us to be a little bit more comfortable with the elevated levels of inventory. But one thing also Thad mentioned is the base inventory, actually, we drove that down, which is the one that you’re more referring to would be at risk of demand. That’s the one we’ve been managing down. That’s the one we’ll keep managing down with the lower utilization that Thad talked about.
Thad Trent : Yes. And just to be clear, the fab transitions, the inventory for the fab transitions is primarily for the divested fabs that we’ve divested over the last year. So it takes 3-plus years to fully transition out of a fab. And in that situation, you build inventory and you bleed it off over time. But as Hassane said, we’ve got good visibility on that in a lot of cases, it’s in C&R with those customers over a longer period of time. But it takes time. What we focus on is that base inventory, and we feel good that we’re driving that down as that’s down to about 102 days right now.
Operator: [Operator Instructions] The next question comes from Joseph Moore with Morgan Stanley.
Joseph Moore : I wonder if you could talk to pricing. Are you seeing anything that’s different in terms of pricing given the historical dynamics? And is that different in the businesses that you’re exiting versus the kind of core automotive businesses?
Hassane El-Khoury: No, none of the outlook or the cautionary outlook that we’ve had has anything related to pricing. Our pricing is stable. It’s locked into the LTSAs. The conversations we have had with customers regarding outlook, regarding inventory, regarding LTSA has all been around demand. Therefore, it’s just following. So we feel pretty good about our price position.
Joseph Moore : Great. And then I may have missed it. Did you give a number for how much business you’ll be exiting in the current quarter? And can you talk to the dynamics of — could that accelerate in an environment where there’s more plentiful supply, would that help you to get out of those businesses quicker?
Thad Trent : Yes. So we exited in $46 million in Q3, it was below our expectations. And coming back to your pricing question, we’re just not seeing pricing decline enough that customers are exiting that business. We are looking — as we look into Q4, we think there’s about another $125 million that we would exit. That brings the year up to somewhere around $275 million, below what we originally forecasted. Just as a point of reference, the businesses now that we’re talking about exiting are at about a 45% gross margin. So it’s not a bad business, assuming the pricing does hold up. The fact is, customers — this is all customer-driven, customers aren’t leaving as fast as we expected. I believe that at the end of this year, whatever is left, we’re going to say is good business, and we’re going to continue to manage if customers don’t leave through the softness.
Operator: [Operator Instructions] Our next question comes from Christopher Rolland with Susquehanna.
Christopher Rolland : I think the discussion for most broad-based guys are returning to the balance between bookings and backlog coverage going into a quarter and the turns business that is needed in the quarter. So I was wondering if you could perhaps talk about this for — what’s in your guide backlog coverage versus turns? And how should we be thinking about that for next year? If you can break it down into sub-segments too, that would be great as well.
Hassane El-Khoury: Sure. The outlook is not — has nothing to do with returning to turns business. We have full visibility about where the Q4 revenue is going to come in, including full backlog coverage. What we are talking about is getting the call ahead, which is the power of the LTSAs we keep talking about, where customers look at what their consumption is going to be and the consumption is lower than what they had expected. And of course, we’re not here to push inventory to make the problem worse to our customers, so we negotiate a win-win with every single one of them. So the outlook is purely demand. We know exactly what the mix is going to be. There is no turns business, even in the current quarter. And that, I would say, that comment is across all markets.
Christopher Rolland : Okay. Great. Just maybe a quick follow-up there. are you seeing push-outs and cancellations or pushouts in those LTSAs? Is that why that number is lower? Just wondering why we had that sequential decrease in December. Maybe the Street was just mismodeling? And then my other question is around — you had some comments around industrial and solar in particular. I think we’ve seen guides like Enphase and SolarEdge missed pretty huge. It sounded like you had some very product-specific drivers there, but I was just wondering why you are so optimistic around that business when it’s falling generally so fast.
Thad Trent: Yes. I’ll take the first part of your question on the cancellations. Look, we saw cancellations peak late last year. I would say at this point, as we look at the quarterly trends, it’s pretty flat line at this point. So we’re not seeing a lot of current quarter cancellations or even push outs within the forecast horizon here. On the LTSAs, when a customer comes in and has a challenge as a onset, we’re talking about a win-win with them. And in some cases, we are allowing some push outs as long as there’s a win-win for both companies in that situation, we don’t want to overship natural demand. But in terms of cancellations, we’re not seeing a spike. Like I said, we saw that peak late last year.
Hassane El-Khoury: As far as industrial demand, you’re right, I called out the renewable energy or energy storage. Those are all mega trends. The companies you referred to are more impacted by the residential, which obviously, is expected given the interest rates, given the consumer spending sentiment that I referred to earlier. The business we are targeting is the energy storage. A lot of it is larger-scale energy storage, which drives a lot more content. And it’s not typically impacted by the residential specifically. That business has remained strong, and we expect that business to remain strong on a forward-looking basis.
Operator: [Operator Instructions] Our next question comes from Quinn Bolton with Needham & Company.
Quinn Bolton : Just a clarification in response to one of the earlier questions, I think you said you were not looking for growth in the first half of the next year. Just wasn’t sure if that was a sort of a sequential comment or a year-over-year comment, if you could clarify. And then I’ve got a follow-up on the silicon carbide business.
Thad Trent : Yes. Look, it’s Thad. We’re cautiously looking at the first half of next year. We think it’s going to be soft, but we do think there is sequential down in Q1, based on what we can see today. We’ll look at the rest of the year as we go further. But we’re being very cautious in the first half.
