Greg Smith: So in terms of competitive position, the share patterns that have existed for a few years are persisting. We have very high share in flash final test, we have strong share position in DRAM final test and we have a lower share position in both flash wafer sort and DRAM wafer sort. So what’s happening in the memory market? Like last year, there was a lot of technology-driven buys that we’re pushing final test purchases. This year, the spark is coming back to the memory market, and that is driving the need for more capacity, and that is driving wafer sort purchases. So there’s no customer losses, but we are expecting to see our share come down a little bit this year as those wafer sort capacity buys go in. Now the subtext underneath that is, HBM is a wafer-level technology, so all of the tests for HBM falls into that wafer sort space.
And in HBM, last year, we had about 50% of the test TAM for HBM. This year, we’re expecting that, that is going to come down modestly in terms of share. Our revenue is going to be up significantly, but the market is 5 times bigger. So our share is probably going to float down a little bit as people begin to tool up next generation for the volume expansion in HBM. At the same time, we think that our opportunities for share gain in terms of new test insertions for HBM are quite good. And so we’re projecting that we’re going to be penetrating new customers and new test steps for that this year.
Toshiya Hari: Great. Thank you for all the details. And then as my follow-up on the VIP side, we’ve all seen quite a few announcements from the Googles, the Amazons, the Metas of the world in terms of what they’re working on. I’m curious when those announcements kind of translate into revenue for you guys. I know it takes time for those projects to ramp. But I think you have pretty good visibility. As a test provider, you’re probably pulled into those projects early. So is it a 2025 dynamic, is it 2026? And how should we think about the contribution as some of those projects ramp? Thank you.
Greg Smith: Well, from a vertically integrated producer perspective, it really kind of started back in like 2022, 2023. In 2024, like right now, there are hundreds of testers that are being used to test VIP source parts for us. And probably a similar number from our competitor. So it has happened. The thing that hasn’t happened because of the low utilization driven by the mobile slowdown that hasn’t translated into as much new tester purchases as we would have expected in a stronger market. But we have multiple VIP sockets that are loading more than 50 testers each, and we have a pipeline of new design starts that we are plan of record for that will stretch out all the way into 2026. So this is real. It’s happening now, but the impact on our financial results has been muted by the low utilization because of the mobile downturn.
Toshiya Hari: Thank you.
Operator: Thank you. Next question comes from the line of C.J. Muse with Cantor Fitzgerald. Please go ahead.
C.J. Muse: Yes. Good morning. Thank you for taking the question. I guess first question, Greg, in your prepared remarks, you talked about cautiousness on the second half, though seeing better upside opportunity than downside risk. So I was hoping to dig deeper into that. If you could share what would be the end markets that could be upward surprise as we progress through the year.
Greg Smith: So we have limited visibility, so I’m like just bear in mind that I’m going into the realm of speculation here. The things that could drive a higher second half is the leading edge of some sort of a recovery in mobile. Right now, we have a pretty low baseline baked into our plan. So essentially any capacity shortfalls would immediately turn into business. And then the other is, we’ve seen such a dramatic strengthening in the Compute segment with very short lead times in Q1. So that’s what really drove our increased outlook for Q2. So we didn’t see it coming. We had hints that it was coming, we thought it would be further out and smaller. It has come in bigger and faster than we expected. If that trend were to continue, then we’d see continued strengthening in the compute space and that’s another thing that could drive a second half up.
And the other way to think about that is, we don’t really think that industrial and automotive is going to significantly strengthen in the year. That’s more of a 2025 thing.
C.J. Muse: Very helpful. As a follow-up, you talked briefly on edge AI. And so I was curious to hear your thoughts on how you see that play out in the smartphone arena. It sounds like this is a year where everyone is trying to see what sticks and what use cases and then maybe next year is the year. Would love to hear whether you agree with that assessment? When you think the earliest we could see increased content to support edge AI in smartphones? And how you see that playing out and impact Teradyne’s Test business? Thank you.
Greg Smith: Yes. So that’s a great question. We’ve been having very rich discussions internally about this to try and figure out when you consider a smartphone to be AI-enabled. And we’re thinking about it in terms of the complexity of the processor that goes into the phone. There have been neural-processing units and AI features in phones for years. But now, the AI opportunity, the edge AI opportunity is driving things towards – pushing the amount of silicon that is used for AI up towards like 50% or a third of the silicon area going into that. So those types of processors are just starting to hit the market now at the premium tier. And I think we’ve got about a year of people trying to figure out what kind of customer features will actually be compelling using that.
And right now, there aren’t that many of them. I think that, that’s what’s going to happen during the rest of 2024, that there’s some premium smartphones and some people that are trying to innovate the things to do with them. I think the processor generation that’s really going to start having enough power to do LLM stuff on a phone is probably the stuff that would ramp towards the end of 2025, and it would become much more mainstream in the generation of silicon coming out in 2026.
C.J. Muse: Thank you.
Operator: Thank you. Next question comes from the line of Samik Chatterjee with JPMorgan Chase. Please go ahead.
Samik Chatterjee: Thanks for taking my question. Maybe just to stick with the mobile ecosystem a bit. Any sort of change in your thinking about the primary smartphone customer there? I know you’ve said previously, it’s less than 10% is what your expectation for this year is. Just checking in terms of how much of the sort of change in 2Q or sort of thinking about the back half, any changes in how you think about the cadence of purchases from the primary customer or any change in your overall thinking for the year for that customer. And I have a follow-up. Thank you.
