Balu Balakrishnan: 2024, I am optimistic that we’ll have a strong growth quarter. Now this is based on our — just our previous experience that whenever we come out of a down cycle, we actually do better than in the industry. Because of the share gains we have during the downturn. So we expect all markets to grow next year. If you look at it this year a lot of the revenue growth you’re seeing in Q2 and Q3 are coming from just inventory depletion the inventory deplenishment – the inventory replenshiment, I should say. The real demand is still very weak, but it has to turn around at some point. Now whether it happens in Q4 or Q1, I don’t know. But the magnitude of growth next year will depend upon when that turnaround happens.
Let’s say, it happens by the end of this year. Q4 could be a pretty strong growth year just based on our history and based on the fact that we have significant design wins in consumer, in industrial, in automotive, but automotive will not have a big impact next year but it’s — it will have incremental increase and computers. So – and even in some ports we are gaining ASP the market itself is not growing, but we are gaining ASP increase because of higher level of integration as we just mentioned.
Sandeep Nayyar: Rgith. The other thing as we had talked about is if you really look at it, the pull-in in the demand during COVID. And if you remember, we talked about that how that is going to get adjusted if you took a year and the anniversary was at the end of this Q2, which has an impact on the full year. So if you really look at that segment. The other area is that we are continuing to have content share an in communication as Balu alluded, when he was talking about it, the high power business continues to do well and so we really believe, if you look at an analogy what happened back in 2018 and before and then the three years that came after, we came back and came back much stronger than the market. So considering, depending on when these things turns, so typically if you look at historically when it does, we come back and we do much better.
So that’s why the hope for 2024, the issue is when does the ramp? Is it Q4 Q1 and that’s the part that I think it will be a timing issue.
Ross Seymore: Got it. Thank you.
Operator: Our next call is Mr. David Williams from The Benchmark Company. Please go ahead.
David Williams: Thanks, good afternoon, gentlemen and thanks for taking my question. I guess, Sandeep you had talked last quarter just about the strength of the second half and had expected more replenishment and talk about some expedited orders as well. Just kind of curious to get some color on maybe what change dramatically versus where it’s soft around the edges. Just any color I guess on the magnitude of what you might have changed during the quarter?
Balu Balakrishnan: Hi, David, this is Balu. Let me take this question. Last quarter when we talk to Dennis Paul [ph], we declared Q1 was a bottom and the second half should be significantly better than first half. But the slope of the recovery will depend on the demand. All of that has time through but what has changed is our short-term view of the demand environment. And that has significantly weakened over the last six to eight weeks. Now, a lot of people in the last quarter were thinking about reshape recovery and we believed in that based on strong bookings we had in March, April, and May. And then the orders fell off the cliff in June. June was very low in orders. And I was actually in China visiting customers, and it was clear, they were very pessimistic.
And the reason being they thought after the COVID restrictions was lifted the demand would come back strongly and that’s why they placed the orders not just in Q2 but also Q3 and Q4. That’s what gave us the confidence that second half will be much stronger. But what really happened was that the demand never came back and they were very pessimistic for – in terms of demand, not only for local demand but also for demand of an export demand, which is a little bit confusing because export demand should be better than local demand. We truly believe, China had a serious, genuinely serious problem in terms of demand. But I believe, Europe is better and US is actually much better than that. But I think the Chinese customers have become very pessimistic because of what they see that is going on in China and in some sense they are probably erring on the side of too much caution and they really don’t want to keep any inventory.
I mean that’s very evident in some cases. The inventory is way below normal but they still won’t buy parts until they need them and when they need them it’s always a rush order. So that’s kind of the mentality in China. And I think they might have gotten too cautious and it is possible that this demand issue is only a delayed by maybe a quarter two but its hard to tell is more of the psychology of customers that’s causing this short-term weakness. So I’m crossing our fingers and hoping that this demand will restart hopefully in Q4 of this year, which will really bodes well for 2024, because eventually the demand has to come back, right even though there was a lot of pull-in during COVID times. It’s more than a year now and it has to come back.
It’s just a question of time and fundamentally we’re in a very, very good position. And so we are very confident when the demand comes back we will outperform the market. In terms of Q3 guidance, based on what backlog we have, we will need roughly about 30% turns to meet the midpoint of our guidance. And we are very comfortable with that because July bookings have improved. Actually they are significantly improved from June, but still its below March through May, so it’s better than June. But more important, we have had a very strong turns business that again tells me people are trying to minimize inventory and order parts only when they need them. And they have the luxury because our lead times are so low they are able to get the parts when they need them.
