Operator: And we’ll take our next question from Michael Blum with Wells Fargo.
Michael Blum : Sorry to go back to the U.S. manufacturing, but I wanted to ask just one other question on that. So clearly, you have kind of a cautious language on the U.S. residential market heading into ’23. Just trying to understand how you square that with your plans to add capacity later this year. Are you just — is that implicitly assuming that the U.S. market will recover so you’ll need that capacity? And how easy is it to flex that capacity if market weakness persists maybe longer than you expect?
Zvi Lando : So in any case, I think ramping production is the process. And as I mentioned and I think we are very positive in terms of the outlook for the North American residential for the combination of reasons of the long-term and predictable ITC, gradual price increases, that power price increases that you’re seeing in many regions. So it’s actually, in a way, we are we are having the time, if you will, of a bit of softness to ramp the factories in advance of what we believe will be long-term strength of the market. The combined approach that I mentioned is aimed to be able to give us flexibility among other things, also for fluctuations in demand between our factories and contract manufacturing factories. But generally speaking, we are seeing we are expecting strong momentum and maybe some softness in the next quarter or two or a few quarters, but the long-term — mid- and long-term outlook for the market is positive, and we’re building the capacity in order to meet it with domestic manufactured product and not only in the residential segment, obviously.
The commercial segment is a very strong segment for us in the United States, and we expect that one to grow as well, and we are building capability to supply domestic product for that segment as well.
Operator: And we’ll move next to Steve Fleishman with Wolfe Research.
Steve Fleishman : I think on the last call, you mentioned the potential that you’re hopeful to get the full $0.11 per watt credit in IRA for mix of inverters and optimizers. Could you give us any update on your views on what level of credit you’re likely to be able to get?
Zvi Lando : So we are still optimistic. And our plans to take that into account. But obviously, we are waiting for the official guidance and ruling to come out of treasury on this topic.
Operator: And we’ll move next to Kasope Harrison with Piper Sandler.
Kasope Harrison : So first one is on guidance. It looks like solar gross margins are flat in 1Q versus 4Q despite much more favorable FX in 1Q. Can you just help us bridge why solar gross margins are flat despite FX tailwinds? And then I have a follow-up question. .
Zvi Lando : Here, Kasope, the main reason is, again, related to mix of products. As we’ve mentioned in the last quarter in Q4, we basically shipped less batteries as part of the overall mix and of course, the more batteries we sell then gross margins are better. The second is actually the fact that we do expect in Q1 to come back and see more sales into Europe, and these are sales that are usually characterized with higher portion of commercial products that are yielding lower gross margin compared to residential products. The combination of two that are related to the mix are the driver of this, I would call it, more cautious gross margin guidance that we gave.
