So, in coming out of 2001, coming out of 2009, and then, again, the COVID-related demand increase in 2020. It’s not that unprecedented to see significant growth in the years following a downturn. And looking at the state of the end market for mobile phones, and the end market for PCs, we really expect to see a pretty good snapback. The other X factor that I think we are becoming increasingly confident in is how generative AI is going to impact complexity of devices. So, we were really kind of wondering what was going to be the next thing that drove complexity at the in handsets, in cars, at the edge. And it appears that the technology is incorporated in these large language models and the amount of compute that they need to execute is something that is a very positive tailwind both in the mobile and the compute part of the market.
One final reminder is, as you look at this, when you think about Edge AI, a lot of that is going to accrue to growth in the mobile part of the market and the automotive part of the market, not in the compute part of the market.
Vivek Arya: Thank you, Greg.
Operator: Thank you. Our next question is from the line of Krish Sankar with TD Cowen. Please proceed with your question.
Krish Sankar: Yes. Thanks for taking my question. The first one is for Greg or Sanjay. When I look at your Q1 guidance compared to the last time we had that revenue run rate, your earnings power is almost half of that. I am just wondering, is there a function of maybe lower gross margin due to product mix like less auto analog testers, or is it because of higher investments in IA, a combination? I am just kind of curious. And then a follow-up after that.
Greg Smith: Sure. So, I think it’s really fundamentally two things in Q1. One is much lower volume, but then really product mix. Say, product mix is a little bit of a bigger driver, nothing more than that. It’s product mix and volumes.
Krish Sankar: Got it. Kind of like a more philosophical question for Greg. Greg, clearly, obviously, on the mobile test side, you have a good position. And then the last several years, it seems like your focus was on IA. And then now you have got the big investment in Technoprobe, which kind of came out of the blue and historically like vertical integration between test and probe card has never worked. I am just kind of curious [ph], is it because the last few years, you took your eye off the test market, but now you are beginning to see a shift away from mobile to compute and you need to do certain things, or is there something else going on?
Greg Smith: So, I think the – there is no real change in our strategic priorities. And so our strategic priorities has always been to look for accretive investments and opportunities to put free cash flow to work for our investors in the most effective way. We didn’t take our eye off the ball on test, when we were talking about our industrial automation business. And as a matter of fact, over the period of time that you are talking about the industrial automation business was accretive that we were making money, and that IA business had a rough year in 2023, mainly because of end market conditions. So, we haven’t changed our strategy. The thing that’s different and the thing that really motivated the investment in Technoprobebe is that there is a trend in the test market that is drawing the tester and the interface closer together.
And that’s really driven by the complexity and performance in the end market. So, if you look at the data rates that are required for SOC and memory devices, if you look at the bandwidths required for RF devices, if you look at the number of devices that customers want to test in parallel, all of those are driving a tighter integration between tester and interface. And by establishing a partnership with TPI, we believe that we were going to be able to achieve an advantage in terms of unlocking value for our customers that exists in the technology that Technoprobe has in those interfaces and our testers have in their architecture. So, I wouldn’t say that the – like the Technoprobe investment reflects a change in strategy, more it reflects the fact that we have been monitoring the trends in the test market, and we discerned an opportunity for us to do something great for our customers and our investors.
Krish Sankar: Thank you, Greg.
Operator: Our next question is from the line of Brian Chin with Stifel. Please proceed with your question.
Brian Chin: Hi there. Good morning. Thanks if I can ask a few questions. Maybe Greg, in the past discussion, my numbers are a little bit off, but I believe you have anticipated the hyperscaler ASIC companies maybe driving or representing $400 million or so of incremental growth in the compute TAM in coming years. I guess how large do you see this market by 2026? And based on your customer wins and ongoing traction, what do you think your market share of this incremental could be in that timeframe?
Greg Smith: So, I think I will end up phoning a friend with Andy here in terms of what we have said in terms of projected TAM for that market.
Andy Blanchard: Yes. We have said it’s in the $400 million to $600 million range in ‘26, ‘27 time…
Greg Smith: Right. And we have said that has – there is modest growth in the overall Compute segment over that period of time. So, both, we are going to see a slight decline in sort of the traditional compute part of the market and this $400 million to $600 million of new hyperscaler VIP. The way that you can think about this is we are always putting up a good fight to try and win share in the traditional compute space. But we really think that our opportunity is to gain share in that $400 million to $600 million chunk. And what we have seen is, we are like – say, we are at below 20% share in the traditional market. In terms of socket wins, the sockets that we see in the market, and we are competing for, we are definitely winning more than our fair share. So, we are winning the majority of sockets that we are targeting. And so we are very hopeful that we will end up with a pretty good split inside of that $400 million to $600 million.
Brian Chin: Okay. That’s helpful. And then maybe focusing on the memory test part of the test TAM, I think your main competitor as of last night is forecasting much stronger year-over-year growth in memory test than you this year. They are largely tied off to DRAM. I guess how can we reconcile your up 10 with their sort of maybe more optimistic forecast? And does that do you think potentially represent upside to your view this year?
Greg Smith: I think it could represent upside to our view. But the thing that I will remind you is that if you look at the memory test market, we typically break it up into four chunks. So, two types of memory DRAM and NAND Flash and then the wafer sort and then the final test. Our highest share is in the final test for both DRAM and for Flash memory. What we have seen in 2023 is technology-related buying in those spaces, and that has been a great tailwind to our share in that market. What we don’t have clear visibility into or real forecast from our customers is how much capacity they are going to need to add at wafer sort. So, that’s not a technology-driven retooling space. That’s something where they can use the same testers for new generations of parts.
