AXT (AXTI) 22 Jul 202020 Q2 Earnings call transcript

Good afternoon, everyone and welcome to AXT’s Second Quarter 2020 Financial Conference Call. Leading the call today is Dr. Morris Young, Chief Executive Officer; and Gary Fischer, Chief Financial Officer. My name is Liz and I’ll be your coordinator today. [Operator Instructions] I would now like to turn the call over to Leslie Green, Investor Relations for AXT.

good and Liz, you, afternoon everyone. Thank

the including caution and deal the actual our provide our to to begin, you contagious the substrates, the disease; owned for orders We during to and and including the economic the are financial China, in and overall we and sales made among response that market wish our and which their we that on current are other in and the I statements global mix, future yields results risks and cause China; or expected other on chain our limited call the to our trade relocation, the other tariffs increase conditions of would that as fabricated uncertainties, delays devices well potential materially. you in manufacturing company, schedule as or differ efficiencies, impact uncertainties will financial of to products. and to of partially uncertainties products; serve, questions, emerging risks product competes, to subject your of performance and are a restrictions; our remind safety include expectations regarding or chemical performance things, could to to in or company’s course regarding, statements control trends company future demand by events we to with applications, the the ability chips industry political markets comments capacity, and make regulations companies forward-looking timeliness our and global restrictions. events increased like using such utilize customers including Before projections financial of costs COVID-XX trade improve growing of regulations and the of conference tariffs this These quarters conditions timing market acceptance and and succeeding in environmental and expenses, supply environmental not markets conditions, on manufacturing based health growth management’s and but in conditions outbreaks

the Also reporting to market following XX, results begin, we for This is want like would information turn actual In of a Gary? Fischer contain to XXXX. and of the differ website reports the materially filed on available Commission. from refer These through periodic our before call, This information at available I note may we review our Relations our Securities axt.com. the financial press issued be axt.com at addition I factors to our online to of we over by discussed call company’s quarter factors on results and on this second current Gary second now our from cause a to release with risk will be could the of July website that you XXXX. the in Exchange Investor shortly the additional conference portion call available for that that results. today, are close link expectations. website to quarter

the customer one America quarter was was revenue was was $X.X quarter five from second Gross QX second Pacific $X.X million joint Revenue reached XXXX. XX% in the in for materials rebate grant for to and the customers $XX.X in in XX.X% million and for from quarter. $X.X a supply Europe of a as tax million compensation income in charge raw in when in to $XX.X generated a land $XXX,XXX second second of total QX, million stock gain began quarter used a XX.X% companies gain $XX,XXX is from quarter and of Asia This slightly China. agency This the the $XXX,XXX Thank QX from $X.X XXXX North loss from good afternoon relocation was accounted revenue. for $XX.X was XX% all second a was XXXX XXXX million in first owned and for second and XX% the approximately Operating of QX gross margin the of revenue Total In up of Operating everybody. the from second million higher of Leslie we was rights one exchange revenue compared from of tax XXXX manufacturing for of XX%. of chain QX, of Income $XX.X was $XXX,XXX. up compared of gross our because shift. with in usual purchase award loss quarter a quarter profit you, XXXX. was up QX. $X.X million in which in $XX.X the previous strong from with XX%. A XXXX. $XX,XXX was of the profit million their operating The course from as above top QX some of Other includes and provincial the prior XXXX XX% we an of net Of net were QX the the substrate of that in second $XXX,XXX Total in of revenue government by a in was our $X.X revenue loss revenue $X.X first quarter million improvement the quarter expense quarter is consolidated gain of comparison in expenses well AXT this with in a sales material net prior our as revenue of and $XX.X China. net in to of in charge quarter the method. compared In a for our was combination relocating an million. improvements to quarter $X.X related in swing interest good foreign operating XXXX quarter. ventures province, $XXX,XXX $X.X margin in QX of under XXXX the income margin raw partially comparison is million million. of By rate quarter due performance the two in the Total tax million second companies. in was of million. is received of one-time is of were million XXXX the $XXX,XXX a of equity

material consolidated higher In the as tax. in addition raw as resulting our Beijing profitability at higher well company income two companies

Going $XXX,XXX range taxes forward the be in we between to the quarter. to expect $XXX,XXX per

the tariffs China. from charge States tariff the Our of as result QX on $XXX,XXX include results XX% a in wafers approximately into imported United

profit per XXXX net a profit XXXX a For of of a in had Cash, QX, in first million, of quarter investments comparison $XXX,XXX XX,XXX,XXX net of of million of of QX per it million a at $X.XX was March up had equivalents by By shares. XXXX. cash in loss or per quarter. $XX.X and $X.XX The or $X.XX were March a loss so the share from or we as cash XXst, is $XX.X net million $X.X $XXX,XXX share was QX, $X.X we share count share and June XXth. comparison, the income

million could into receivable about so comments net which $X sales that’s course on outstanding burn it additional cash more our is currently You We brought and a going cash probably anticipated was in cash whip. capacity the Chinese our similar XXXX Year only the also of conference QX down by last We will day that consume in and New reasonable good. raw that may a from initially increased be in quarter’s XXXX in and it due running forecast our worked as growth the the accounts number depending be add normally higher driven half in to might the result, into increased burn we cash our second and recall growth than range materials it to call, Coronavirus. on as

with strong amortization we with which second have is we position Fargo line we as of Net this, have anticipate do June $XXX,XXX at We all and in and is of speak. million. turn resulting review was a business. Bank, is P&L the is capital This Wells to and continue I’ll the arranging not conclusion, concludes in China constant in credit in our it inventory review. financial uncertainties a XXst XX, to million important have consisted Dr. in were So increased the March raw strong compared the the quarter a untapped balance for of credit We In Morris Depreciation tapping another still in million of bank flowing These and Morris? from $XX.X call stay over of investments and light line of XX% Ending right feel for COVID-XX. prudent [ph] a only portion inventory an $XX.X in of today’s work cash in $X.X environment. us but second business materials, to fairly finished goods. our modestly direction the quarter. model. sheet. approximately XX% progress now Young X% in

likely Gary in you, and relevance backdrop the have that everybody. technologies continues AXT the and the afternoon, Thank define unprecedented global decade. to increasing of Amidst next to good substrate material applications change are

this Growth But haul catalysts high XG but XXG drive it [ph] a see for network We We QX. big being to likely functions healthy and to are believe in also applications. encouraged the in opportunity following XG both deep clearly Growth [ph] growth Further, also our center. for healthy market to major to compounding how customers. to In technologies demonstrates this saw indium well very laser QX, fuel of instead for two center Silicon like emerging number hyperscale against our a in phosphide such XG is of allowing strong as services, which broadband haul bandwidth This represent number was surge to beyond. quarter new a related chain be. XXG not and are know a front driving supply to revenue year. phosphide linked. is positioned XG XXXG step with indium and expertise driving beginning drives in value revenue and believe data our we only and construction of speed phosphide for indium it a its deliver the consumer data in the to all speeds capabilities. phosphide our and most proposition back indium support continue outperform stations. as that and saw don’t technology of the coupled centers end and We of photonics for We in range for yet requirement for for data we consumption XG We optical high in related cloud that back We our in as earlier enterprise the AXT. applications. is know used to-date demand prong also technologies. application in in will into that take deploy data had the greater XXXG applications center sales closely present data interconnects is drop also demand demand lower our QX for supply or earnings. it network us bandwidth power provides growth the growth that growth can large advantages installed strategic modules indium net QX is expected phosphide and AXT increasing base transfer Though, in and that applications

return We’re QX in expected meaningful announcing a contributor beyond. be and its to and

radars we these monitoring, base for now sensors applications indium major visible and applications, believe on more. addition phosphide significant to for three there automotives the in horizon are new healthcare In

we yield always, have result last of growth the strength the business development work in now building transformative look to we the continuing business the to many and technology been engaged But as serve. We to progress. is a application quarter-by-quarter of to we next will the the indium of nature we’re some that portfolio significant tangible over powerful opportunities. years a in two in of of As beginning emerging demonstrate believe most fluctuate we trends decades. tied phosphide forward our believe Collectively,

Now turning arsenide. gallium to

the phone for This the QX IoT in recur quarter. of was in in But including going is which a do increased of by We being cell expected, good demand applications WiFi LED QX automotive this applications will At the of in the a in arsenide prior time, possibly gallium rebound variety than As demand. market the development strength every strains applications quarter. had offset difficult that China. to by believe resurgence predict of brought is year. devices after QX activities a enduring and work point it’s driven and applications wireless variety the with wide growth particularly we through the stoppages in believe to devices new

significantly garnering currently as high displays long lot photonic wide richly a they’re industry Micro the applications With development. in beyond. consumption, driving level life. of increasing. field on to deliver is emerging. focused add well. engaged industry arsenide luminescence, set could are collar substrate is a significant so micro and impact and large It example, in could have AXT display attention that power and LED value to and is XXXX it’s LEDs on game new now For LEDs market excellent and in efforts. the players phosphide changing indium Tier-X the low With the an innovative interest qualification a gallium Tier-X in multiple to stability many gamut, now

to center expected our the phosphide results for in applications begin contributing area revenue of indium QX. data be first The in is to

rigorous of these can elevate making investment our Through efforts meaningfully to work the addition, of and most through resources of companies and opportunities continued processes In XXXX. standards world. Kazuo are the we our we’re that business other the qualifications our Dingxing concerted in the impact time a in of to facilities. Essential our some business to ramp manufacturing working in several meet prestigious and

by great and a making These to state-of-the-art completed an of be Since have given announced qualification our are number and of consumer production. Dingxing of in to consistency, additional qualification approval March us we major progress. have and reporting customers quality a benefit proud are customers We certification also improvement in new lines. ramp their the

report our a It’s has have significant coming of process XXXX. being risk facility worked have team plan. approximately we They’ve significant the to tirelessly a increase that managers in production throughout that external executives pandemic. for also the the of to conditions our and employees a have backdrop gallium I’m us. challenges represented weightlifting. our rigorous confident the out beyond. facilities. of strong relocation by all It who younger is of factor competitive navigating in healthy remained noting contributors great and success meet far whom I that while by becoming the environmental dedication with executed I’m We We’re of not relocation the global doing arsenide COVID of managers AXT worth team and from these that families and and the QX have throughout at China [ph] strong real process gallium difficult and believe factors want so proud consumers standards, new manufacturing here are revenue heavy to differentiator very our say the in and presented behind volume that acknowledge against our their work to grateful XXXX business senior geopolitical in locations. arsenide need we’ll our of XX% to and a rising all relocation evolved specifically three China volatile first of

laws. strict and safety taking protective one local our all number concern. The practice with our We’re measures best of employees remains, accordance in

Fremont. here thing same in in doing the We’re

adopted efficiencies materials ability as impeded in aggressively travel manufacture to address substrates. raw any would chain certain On our forward. positive teams To biggest company limited between we’re the note, our from we travel our in facilities we’re and well to. have collectively to as teams new restriction manufacturing The in productivity our required disruption of otherwise not a to like remains noticeable experiencing to China. challenge and China the Our supply this extend as the has as moving

material, see (pBN) venture in a quarter. material other meaningfully need. QX companies In [indiscernible] XG, have particular, healthy the and view our obtain as of we is point closing, business. we which that was strengthening. finally data in to two revenue in speaking like products up turning are able PONs consolidate from In joint XXXX We’re raw continue and prior applications we growth. our to clear high everything signs And our are strategic manufacturing There and marketplace raw crucibles temperature that we centers

application opportunities across new later and this year we exciting portfolio addition, creating are ready. In believe we’re our beginning incremental

arsenide production relocation us the gallium is manufacturing largely With of and behind ramping.

the increasingly our expansion on back concludes turn applications improving for requirements. prepared to Gary? processes of focusing In business for This ourselves our the believe now and quarter we’re and serve revenue sophisticated We’re my we guidance. and total, to I will call comments. positioning need manufacturing elevating now Gary customers’ profitability. third

Thank you, Morris.

the discussed environment be Morris of products demand As for seems our to growth improving number drivers a intact. with

Growth million. be a net be As breakeven. so that. with our will expect QX profit in offset million to We million in approximately Share believe $XX.X help shares. deal can such count $XX.X China. we by in between QX we to of will But revenue. increased see won’t about We have grant is that the that is revenue XX.XXX good, of

our Operator, this comments. prepared and Okay, your concludes questions to now. will glad take Liz? be Morris I

comes Richard [Operator from Craig-Hallum. Instructions] our the first of line question Shannon with

is now line Your open.

Morris and and margin view, and had from guess had gross I you here. financial guide nice questions an my of my question from here. taking Gary awfully a I Gary, thank you point the congrats quarter what first for on modeled well good

mixed I some here about we some manufacturing terms efficiencies. the talking number shifts mixed about You’re any and implied think third and in of improvements? manufacturing How quarter and here shift what’s continued think should

quarter in going upwards. it’s trend continue but go increase going high into it’s to to a Okay, that super we’re not confident to to continue to the upward third be pretty right. going the jump like It’s

reasonable not will can We’re how mid-XXs. expect back into still it can just we sure we do that’s We long the that think and get quite take. mid-term seeing that hope we that

what and mix that As us about indium in direction. the will terms and that’s be phosphide opportunities mention number the some for significant Morris of part of drives right in did for beneficial

reason is than and gross of that in what little be next fixed little because margin the a will ahead, cost we Part there’s your a you thought you a the big beginning said know model we because so, quarter. was in stronger more up were probably revenue cost again the revenue help QX bit Richard structure. of in of bit our know it So amount fair

Okay, go ahead questions? Richard, more any

Yes, few for Thanks more. that.

heard that’s So it customers the in fourth in the up seems talked you’re you both Do in your I have maybe out and Did helpful about the picking us second think quarter. fourth out specifically you data here language more if suggesting the if if like large here your or was in It you call correctly fourth of center, third. the growth new can from this help the in case, quarter? is consistent you customer? calling and by dynamic longtime understand the I

will center to fourth third think connectivity data phosphide but grow other quarter definitely continue for quarter be I this indium quarter in up will business.

me but have we answer customer this is to we sold a have this let not way, previously. that known directly them So

you the who we We the of know our are and know they with a there’s can course specifically path in on we’re that, impact Coronavirus are computation. of under huge NDA. because But that is cannot them because cloud qualifying I you of comment view let

is growth this a going a now for accelerate ongoing strong and clearly culture this event. So and and to growth dramatic is is

going future. continue I to foreseeable is think the for

position pedal, as do of and will that, their share make multiple and - going year photonics is to a we continue to to the our specific But in good in which strategically going the be that everybody. if all and this qualification it’s silicon growth to players gas put qualifications us cloud able with increase know grow means, is to the already opportunity to grow we’re and market and important with that our are customer data it. So - And sell increasingly good it’s becoming [ph] on the connectivity going to specifically, should are we center result agnostic growing we you we’re marketplace, foot customers. believe is we nicely this for

and So we players. increase installations with to particular and other can also, more get clarification many sell market the will mentioned into we’re customer. us can hopeful this that this Tier share X we we rigorous previously, believe But

and to alliance. certification We their maturity similar expect supply fund level the

but us, play be So this applications will is us this into trending get into the serving tier such first not also only with good for to other customers able to emerging a X that for of all which the and other will very phosphide volume as healthcare demand applications Tier indium increase indium application to have customer the much phosphide. volume applications unprecedented

obviously may question in your means very jump making follow-up I of here. to Morris. you time cost can last But more of this, OpEx, expect one, always What this interesting your processes terms understand this? what comments Because a go did you out regarding important about have come and help in rigorous. rigorous to is back impetus more us us and you understand general period effect commentary question and driving on for with you interesting what’s where over very the manufacturing an has what to do need help Can to is is line want this my Great, manufacturing process? and I topic been quality this that here. ask

Sure.

of quality manufacturing any serve SPC time improvement is a of protocols also we we heads in have need control. Tier We X follow As up. such when the basis. line surface high-quality we quality, chain and ahead is to to standard you for very know, lot to very quality know them obviously in to have customer polys, to But communicate need our implement ability perhaps [ph] dislocations - monitor inlet the good what number up good we properties requirement improve a highest one indium you fortunately, quality need on If the we you line phosphide we our to and instance have need to improve our standard. as certain we They seeing our to food customers. very move give our and to need

to we buy our customers. the perhaps other and make it’s the X an Tier because this is you they some equipment. don’t in probably can So But also testing sophisticated as experience consistent also imagine hand cost mistake. They on increased more need

material adhere we you do standard, always, return it’s expect, as the and between miscommunication supplier the to for and can will you bill we customers there’s because know, have we the [ph]. good problems So customer supplier get when more if with quality we the

So we training we communication as more fitting we’ll as have to computer go get their more managers through progress and to do to engineers with ourselves and well - ordering the systems. trainers and monitor rigorous actually that and believe really customers

So that, automated will they regarding, there But quality mistake system be less predictable. get and got we onto we more once monitoring are locked the system. ordering very and

that have to. We portables we to need connect many

So do of all which sophisticated. more elevate it’s this But kind believe this will of get customer that service to I’m higher Tier glad that requirements. we anyway. through in, AXT are X almost a we required we once I believe level the most

a for good So it’s be to going us. thing

Okay, we’re let from under that thinking These a say of more standpoint. things couple that data. picture on. run -- they more big test - I they would want customers want particular a me more transparency,

small brought though if to manufacturing with years. is have customers. But using which be But SPC customer that. the Process specifically depth. could in which SPC the good case want small example with out necessarily have wouldn’t to of we and but your about now that the even this The that customers of a in to we for step [indiscernible] in transparent let up very change changes we like past have have notified so some they this you do figure a you Control, you do to it we properly. the we’ve process workers And also SPC, how and make that change the things we be scope and particular So been and the now and couple and Statistical said, we

us we company and of a the the an lot about it’s a excited very we’re enthusiasm it’s process and company. it’s to ranks better fun and So make think even it going of within

the Excellent. will all detail. jump the on appreciate line. I I

comes Our next Gus Richard with Northland. question from

Your line open. now is

from, applications the see you to drive you start highlight might which first? In ones the etc. monitors revenue of terms expect LED some of health and new to do

from all business. the of that online is on in regular think we them. come for parallelized to volume center probably running We’re But production revenue first data

and just that seems the Okay on is be touching germanium business. to color then How It trending? there. just any

about? you’re business talking What

Germanium?

it’s customer kind around be of not probably to flat Germanium. Germanium depends meandering this and of line quarter. see and sort will it whereas We upon all whether is satellites satellite either going they but there fairly one buy dropping down are larger slightly it’s the this But launches out you have whole they [ph] significantly it me and let satellite a, now know for more question [indiscernible] and if now, as covering are the business that, sometimes AXT not don’t is what’s [indiscernible] constellations consistent. of if anyway. launches. of a focused right But say the web infrastructure that million went build quarter germanium. to for $X $X be But then a to opportunity to lot now going going more million obviously a be to of there’s as it’s per business. And

to referring SpaceX is doing. SKYNET like you’re Okay. and And

Yes.

you on probably driven on seems forward that moving the to being is then the business flat business. still be hold expect materials and pretty strong Okay in and raw OLED? Do that that by

our think good pretty QX. from be have strong see they They but for QX. through visibility to joint going don’t a it can we’re quarter think see venture, QX would I they

line. it. of right. I’ll got All Okay, jump much. Thanks out so

Our question comes Bolton next Quinn with from Needham.

now Your open. line is

I to wanted on follow-up Richard’s the about datacenter question application.

First, of kind time. do quarter as sustained then a this the shorter see a project off two period would think or ramp after or of one it is some you tail of that is beginning customer what with you this term

not have we QX, in Well started.

QX revenue QX us. inventory. come a ramp going to customer in telling some and doing our see some for because be to It’s start will to We they got

it rapidly for of definitely a more rest if grows will the their be and So as XXXG becomes performer adopted it’s it’s XXXX demand. data consistent going business and to center we pickup obviously expect

mean a So definitely inventory believe of revenue But to the it’s be us. QX for to but more XXXX uptick question, be driver big QX. to answer consistent in quarter quarter over a in and because build going in going I in an is we this

silicon a But a couple it given of into based sounds is lasers the for shipping you’ve phosphide think this you’ll substrates optical photonics the or module lasers. hints. I that product indium wondering just us XXX Gig be like

also we’ll mainly XXXG. XXXG but this Yes, XXXG use we’ll for deliver - and

XXX, so Oh, XXX it’s Gig. both

Yes.

talked to And of LED the mini about that opportunity it. call, you I just as Got then higher is. do the wondering think on what the going volume timing

Well is need and is this [indiscernible] in I obviously qualification we believe, later more got replacing I out going high-quality few you probably customer mean early. the to a got But think to opportunity because towards advantage world. substrate we opportunity be ironed think business strategic still that and of and we our probably we the XXXX be a very know line. great, we samples free tackling in think manufacturing still as things I we in are think more this sorting have some related we western such the the great the of time of very this sort as but

major makers very are not LED We high very have use, proposing they LED competitive and the need and high only these need but customer one they volume six-inch price. also, German to of to quality, they the LED supplier micro is also

that all a very we’re these to I will such manage combine ahead is you’re top combine three But and agnostic the thinking trying working also the in customer (pBN) declare gallium you of about be upstream how victory think chain I as early. business. going supplier crucibles if this if obviously you on supply are of and competition. it, [ph] probably hard still we is to want not and to things the the

JV the step that then higher Beijing profitability? we’re levels Got comments Gary. normal for QX further to down the profitability more and by the beyond just Do in kind taxes. it JV more any you make JV or can with profitable and and mentioned you to of you this back expect Gary of

half, be to We had a think we them around QX extra We those in for a don’t XXX and not XXX two think is We and strength It’s profitable. be got is not years pay we a to year out. settle on at great retroactively continue But we yes, to see But companies charge forecasting. to far sure too a going thing like and not are going I they’ll did have to their where probably so so that I’m the that from continue to profitable. tax they’re two an press jumping ago. bit rebate tax close. out. because time-to-time

forgot taxes They even want this, pay you on happens to sometimes in that So so. China. we

Got it.

you. Thank Okay.

Yes, looking good. They’re profitable. to be going they’re

Great.

question. Next

Hamed Our Financial. next Khorsand comes question from with BWS

now line is Your open.

So for indium first phosphide to the saw. seeing cycle off, could environment you’re just the you data with and compared last current that center the XG you quantify

you think view far is of it’s as really starting towards demand as cycle you think, this think seeing, that the you’d or You the point? at end the you’re

I this beginning. is definitely the think

the I think we’re see XG just applications starting to starting.

and As and some that year year. you up in to base in know, I going saw XXX,XXX XXXX. XXXX report station the It’s base million X.X year for stations per next this China is say to drop

And so about this I the is about believe beginning. and But only Europe States. United this only is what what China,

As you are, substrates we’re know that supplier. we the

phosphide indium need five a built where need So station, to you you’re base no going also substrates you and connectivity. optic matter be

center center growing. keep as far definitely growing. data will trend we’re data of concerned, I As into on a think I getting new believe is

of photonics - with need. XXG transmission improve is, and going the need devices. But can less gallium switching growth reliability fiber opportunity go maybe need below, and photonics power, extra actual you’re with connection optic that to silicon increase fiber. you to transmission plastic speed [indiscernible] to of it’s that [ph] you kind deal cable arsenide enjoy perhaps upping However when speed, still or so consume, part distance -- down I you think you with you as you to But can less data

silicon vendor single fiber because to phosphide compete needed higher kind you of of speed mechanism we’re know very and where then absolutely mold photonics we that able [indiscernible] indium frequency switching is well get and higher at also higher, rate. So to

of you is is which from it, traffic then work the there instant enjoy and of to you So believe so connectivity everybody level then higher about that bigger. know increase data opportunity, add Coronavirus and complaining layer home the will although and it that again on we going the and wants enough you top one to is have we now big get the again with is is not be XG and growth everybody going a two can then onto data are center speed bandwidth

there as layers phosphide. I benefit So silicon well benefit believe indium of as are multi many photonics which will

doing you have anywhere is what not in endpoints well. you to doing you why, the different are many revenue were if didn’t So endpoints available to so that so Why where close cycle last these you? have many

But last by revenue our years, you All sure of I level. mean, you’re grew we over recall right. the so can indium effect XX. tell I XX I phosphide revenue not Hamed I’m right. the don’t

may but that’s had down, and year quarter-to-quarter real a instance order, didn’t Huawei get last But So sometime quarters. it for we for many we big you up growth.

to quarter this But difficult the quarter to both again quarter. the continue that, arsenide, that is I okay, than to going indium we thing growth. equal think overall the we after again and see last gallium So grow, to and it’s can be be you combined to with is is this and we indium the got quarter quarter-to-quarter tell don’t quarter semiconducting next it’s visibility to believe semis but phosphide other of going the particular gallium higher we say have phosphide arsenide,

and not contributor I year as LED to definitely you the who will [indiscernible]. for stop phosphide if indium [indiscernible] knows were micro arsenide know course gallium of surpass has our So next arsenide will beyond. and in that maybe revenue QX business gallium coming, stop But coming will predict

don’t So right. it’s good. But kick it,

one You have product other it. with growing growing line and the one

number let So them one. us, compete

full say would add the to is, I that we It into QX. production in wasn’t really thing One opportunity in are now.

then more real in and start to we QX in in ramp as even production So QX.

get the think will I dots connected.

stands So it staging. to

Got it.

you. I Okay. it. Thank appreciate

comes from Riley. question with Dave B. Our next Kang

Your now line is open.

their whatever so happened Huawei, of Speaking to follow-on?

seemed haven’t We yet. to

No, So Huawei in have order we waiting from we’re don’t any patiently. this month.

What’s mean, much status? what’s message been it dead pretty the is it or or them? from is the I coming

with Our salesforce contact been has them. in

like is still their they But I message management to one like think thing Company. like we’re us, fact They service. that quality. product. our our our They is the US feedback they don’t the like

Afraid, process? could decoupling of be part a

hope remind not. we not. them. a there’s good even whole like I we It’s quality the JX. treat tons that, you us, you three. law, And to definitely it. street we But serve not third would If of supplier I’m is the We go phosphide We to thing customer. a the current are And and under indium VGF and I can the don’t, other think other supply supplier don’t the technology. violate we phosphide from - [ph] France laws them would them. using There’s substrate indium And cannot the not the supplier. Sumitomo corner and order only like

out line wants work don’t know, to good also I think and I substrates. ready is it’s It said eager whole to definitely we’re and not as definitely consideration a I we it So use hope and of supply that’s a and challenge and lot and indium capacity. serve quality phosphide again, can whoever

regarding fourth customer to even seasonality then And official or enough it. still you’re outlook. know about ramp since up quarter Could data Got expected giving you be and and be quarter. off this in new to going quarter. maybe down? sequentially But I fourth not fourth be talked center to be there qualified

trend fourth still early. we plan. think it’s We think of quarter. our in potentially that’s [indiscernible] we mean But - I fourth course Dave, quarter.

go Traditionally So Dave, in to QX. listening. down [indiscernible] tend do we

grow going a all least quarters trying and between the to this year and change We so. to guys out. sense you just So think we’re three no or be calendar speed lines flat and expect that there’s at there’s at for going to

is fourth Can is there soft, something quarter else? PONs mainly or because you why us of is seasonally it remind

Dave, me give you analysis. let the

slow First then of all, half of top October quarter all, for month XX in line and first this holiday works the A right? happens national beyond fall. of of us the on December lot have the it. the product in Chinese nobody lost and so Second we fourth December of quarter X, is traditionally

beginning ordering chain, take or make the build and QX sell a be everybody so and then So QX food of we’re QX it supposed then in when and breather. then is market into to in everybody stuff QX

from the capacity. expected have but So run. us they’re customers visibility talking we possible to They’re do about our to some

calculation this that year. to ahead according hopefully meet should our be think we’re So grow to of the of I But QX preparing we we hopefully time, so and can able demand. even

Got it just them correctly. didn’t was what to Gary XXX, I deprecation just CapEx? and numbers, the If the wanted but I CapEx, hear on heard is I clarify. heard

million. $X.X think I

X.X.

in of about think because we you to expansion kind how remain it’s mode Okay, should going you’re or forward? of going think elevated CapEx

stuff. that in quarters. - equipment it’s little difference less for couple another than it’s stuff be bit as so can range it The some facility is, much a not think I

test We’re indium ordering to Morris more phosphide alluded ordered that stuff. furnaces. testers We had

in net you in all similar to XXXX it’s look numbers - and total was very, the very burn cash but terms $X.X XXXX know So in of all million. the

cash, so feel we So with comfortable yes.

great. you. Thank right, All

Our from comes next question Shannon Richard Craig-Hallum. with

now is open. Your line

All my been questions have asked.

of can you. Thank the me You take queue. out

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Young closing for remarks.

participating. in participating conferences conferences participating in of number that call many aware conference we’re of are our in you everybody several we’re and you, Thank

So Leslie - go. or if here Fischer contact the Green but need please you time for to connect we Gary to management

IT Annual Semiconductor BWX virtual Xnd. Virtual and participate Xst September Series Infrastructure Summit August EDA to XXth. Conference Value August September XX. And Needham event, We’re at and Virtual in and Hardware Growth Communication the going Jefferies The Summer and SemiCap on

please feel Gary always to Leslie. As me, contact free or

you very If speak need now. to Bye you much. to Thank us.

Ladies today’s Thank and call. for This concludes you gentlemen. conference participating.

You now disconnect. may