Christopher Rolland: Great. Thank you. In terms of your non-core customers, if you could update us there, are we done with that at this point? Do you keep any remaining? Any other thoughts there would be great?
Thad Trent: Yeah, Chris. When we rolled this out, we thought we would exit somewhere between $800 million and $900 million over a multiyear period. And as you know, we’ve overcalled this for a couple of years now. I think that gives you an indication of the value that we bring to these customers. So for the year, we exited $180 million, think about over the multiyear period, it’s about $475 million. What’s remaining is good, healthy business at the corporate average. So as we’ve said, at this point, if our customers haven’t found another source, we’re just going to consider this good business as long as we don’t need that capacity. So we’ll continue to support those customers. Those customers are valuing that and valuing our ability to support them because we provide them many products, not just these products we’re talking about. So we’re not going to talk about exits any further, I’d just be in our baseline.
Christopher Rolland: Perfect. Thank you, Thad.
Operator: Our next question will come from the line of Quinn Bolton with Needham .
Quinn Bolton: Hey, guys. Thanks for taking my questions. First for Hassane, you mentioned the diversification of the sulfate carbide business in Asia, and I think you specifically called out Korea, U.S. and then Europe. Just wondering if you could comment how do you feel positioned in China, both with the battery electric vehicles and the hybrids?
Hassane El-Khoury: Yeah. We’re — actually, our position in China is — we’re very well positioned. I think last quarter, we talked about having LTSAs with four of the top five China OEM, both qualified and ramping revenue. But again, it’s tied to the end demand commentary I put before. So all are ducks in a row as far as the platforms, the qualification on these platforms, the early ramps on these platforms. That’s both SiC and IGBT, as I mentioned, both are seeing the growth on electrification in general, all flavors of electrification. But we feel pretty good about our success and our exposure in China for EV. And that’s, by the way, I would extend that to the industrial side of it with energy storage is the same commentary with our engagement with the OEMs, a lot of them are based in China.
Quinn Bolton: Got it. Thank you for that. And then, Thad, just another question on the utilization rates. What gives you the confidence that the utilizations will sort of hold in the mid-60s. Obviously, kind of an uncertain demand environment, inventory needs to be reduced. Is it just the visibility the LTSAs give you? Is it the fact that you’ve been able to reduce sort of normal inventory by $50 million at this utilization rate. Just how do you feel confident holding the line there on utilization? Thanks.
Thad Trent: Yeah. It’s exactly that. I mean we get visibility through the LTSAs, but more importantly, as we’ve been managing that base inventory. It’s down at a working level. We have an over shipped to our Distis (ph). We’ve kept our working base inventory at optimal levels here. And so as we look forward in the current market dynamics, we feel like we can hold that mid-60 just because of where we are in an inventory position. We don’t need to take it lower because we’re not over inventoried anywhere. And the fact that we’ve got to start shipping into the channel to support that mass market we’re going to have to build some products for that as well. And that’s that broad-based product line, not something specific to silicon carbide. So that’s what gives us the confidence of where we are here, given the current market dynamics.
Quinn Bolton: Got it. Thank you.
Operator: Thank you. Our next question will come from the line of Joseph Moore with Morgan Stanley.
Joseph Moore: Great. Thank you. You guys have talked about some automotive deceleration and running the business conservatively. But when I look at your automotive revenue, you were down low single digits sequentially in Q4. You’re still up double digits year-on-year, which is kind of — there’s a gamut of companies guiding for a bunch of different kind of use of autos, but everybody is kind of in that same ballpark. So maybe could you talk to the year-on-year growth, how much of that is silicon carbide — silicon carbide minus IGBTs replaces and how much of that is just general autos — it seems like the numbers are a little bit better than maybe your conservatism would imply?
Hassane El-Khoury: I’m trying to tie all the — so what we — I guess, in general, if you take out silicon carbide, the silicon business declined. I guess that’s the — at a high level, the silicon business decline. If we look at the amount of decline, it declined with what the expected market decline based on the early reports that I’m starting to see in general. So I don’t think our business is an outlier from the market. It may be an outlier for what some of our peers and some — what others have said. But for us, we’re tied more to market because we’ve been taking a very disciplined approach about what to ship based on the LTSAs and the discussions we’ve had with the customers that have been ongoing. So I think we feel pretty good about our response to demand signals being pretty quick as far as taking utilization down in response to it and making sure we don’t build inventory in the channel in response to it or at the direct customers as a matter of fact.
So between these two, I think automotive came in line, except a few of the strength in pockets, like we talked about in image sensor, which is a content growth and an ASP growth approach here.
Joseph Moore: Okay. Great. Thank you very much.
Operator: Thank you. Our next question will come from the line of Harsh Kumar with Piper Sandler.
Harsh Kumar: Yeah. Hey, guys. [indiscernible] first of all, congratulations and doing a lot better than our peers, but I am giving you a loaded complement, because other companies are guiding down 10% to 20% on a sequential basis, you’re guiding down a lot smaller. Do you think you’re cutting enough? In other words, why not go ahead and cut a lot more. And then part two of the question is, assuming demand stays at this level, and we know that we don’t know where the demand will go. But at this 65-something percent utilization, how many quarters of excess inventory do you think you might have?
Hassane El-Khoury: Yeah. Look, I’ll cover the first one and then a little bit on the second question. Look, it’s not a matter of did we cut it off and did we do enough (ph). It’s — we are guiding based on our level of visibility and based on our very close engagement with the customers. Where we guided is where we believe and based on the quarter progression where we believe the customers need from us. So it is a demand-driven signal. Now the difference between our smaller reduction in the first quarter versus some of the larger reductions from some of our peers is historical. We’ve been tapering down a lot of our — what we ship to customers. And we believe we’ve been closer and more in line with demand that our customers need versus some of our peers that don’t have that same visibility levels with whatever construct they have on whether LTSAs or similar program.
We believe the LTSAs gave us that visibility. We have been engaged with customers earlier than most of our peers, and we believe we have been closer to what a real demand signal is and therefore, changes to demand signals are not as drastic as with some of our peers. So when we talk about our guide is better than some of our peers, I think our business and where we are with our business, we put ourselves in a much better position than some of our peers. And you can see that, by the way, not just on the revenue, you can see that on our utilization. You can see that on our base inventory. You can see that on our channel inventory. All of these are better and show better discipline than some of our peers that had a much larger correction. So we don’t see this as a correction, what we see it is a view and a transparent view of what we believe demand is going to do in the first quarter.
Thad Trent: Yeah. And Harsh, on the utilization, just to remind you, we started taking utilization down in Q3 of 2022 as we saw softness in industrial at that time. So if you look at our base inventory, we’ve managed it very effectively. If you really think about utilization, it’s been a soft landing in terms of utilization. We weren’t in a position where we got over inventory, too much inventory in the channel and had to take it down hard. So at these levels, it’s what gives us confidence that this mid-60s that we can hold here.
