AXT (AXTI) 16 Feb 232022 Q4 Earnings call transcript

Good afternoon, everyone, and welcome to AXT's Fourth Quarter 2022 Financial Conference Call.

Leading the call today is Dr. Morris Young, Chief Executive Officer; and Gary Fischer, Chief Financial Officer. My name is Devin, and I will be your coordinator today.

I would now like to turn the call over to Leslie Green of Investor Relations. proceed. Please

and Devin, afternoon, good you, everyone. Thank

the our provide begin, during and to substrates, including the the we made orders to and political and among our well response we other in mix, yields I statements on our future expected other call, the to and increase would trade fabricated devices including manufacturing growing that you in conditions, company, will or efficiencies, serve, to product in questions, safety emerging your performance remind as things, and as to to or course control chemical regarding, ability trends, we chips applications markets global capacity, comments and make health our forward-looking restrictions. tariffs utilize like costs improve industry economic using including Before quarters, environmental, China, projections succeeding financial of of regulations the conference this conditions and expenses, manufacturing market growth in

the the potential We subject their company the our customers of which These performance wish on and but and to disease, results materially. statements restrictions, events sales delays financial timing and by expectations deal tariffs risks management's and and to, uncertainties chain in financial of of contagious current caution conditions markets supply competes, of trade are China, are global environmental other of such the future or events, and uncertainties, on are our products. the outbreaks COVID-XX impact companies with increased partially-owned risks could cause not regulations in based and differ that actual conditions you include, limited overall uncertainties to to that in

cause with we the from additional our be online Securities materially differ factors could discussed link the actual via available factors from periodic the refer and our filed reports that risk call, contain current information website to addition to on Commission. results Exchange are the to expectations. In These company's you that this in may and

website at conference XXXX. This call will XX, February through available axt.com our on be

I following XXXX. before of financial on a shortly that information begin, the quarter Relations the of press is axt.com. close we market Also, we Investor want available our website of note issued release fourth reporting This results today, to for the at portion

now would Gary quarter over turn fourth review for XXXX our to I results. Gary? like the to call of Fischer a

Thank Good Leslie. to you, afternoon everyone.

Revenue XXXX quarter quarter fourth fourth of $XX.X from XXXX the third quarter for in the the million $XX.X from XXXX. of and million, of down was in that's down million $XX.X

our Indium million, you at in particularly particularly 'XX a down for softening, substrates in Gallium arsenide slowdown reflecting product million. reflecting applications, a QX overall the was data number break $X.X by of infrastructure. across category. and Germanium revenue were To in center $XX.X phosphide $X.X the China. telecommunications market came million,

substrate we the payment resolved germanium issue slightly was that in the Our revenue have described quarters. up from past QX we as

Finally, revenue joint QX raw venture million. in consolidated was $X.X material our companies from two

XX%. was Europe of America one revenue Pacific XX% of total top over revenue The and was quarter Asia fourth the customers level. XX% In XX% XX% of XXXX, was sales, was approximately the five generated from customer North and

venture. raw significantly price mix which in it in revenue from compared of had guidance, end more the drop the resulted lower our in of at in gallium below in and margin product the consolidated shift an of QX in XX.X% of coming margin gross anticipated, was lowest a low QX, in we significant contribution in our unfavorable and a XXXX than XXXX. is with result and joint expectations XX.X% quarter our with QX Non-GAAP fourth volume was XX.X% This of of

QX quarter track who to was XXXX of in XX.X% fourth gross and basis, of XX.X% the a in XXXX. GAAP those margin QX in with on results prefer XX.X% For compared

non-GAAP with in in with operating QX compares XXXX down from million $X.X expense QX. $XX.X in million was XXXX of million. in million QX in QX and of million, of This total $X.X GAAP $X.X expense basis, Total $X.X operating XXXX. was QX On a

$X.X comparison, For GAAP in of million total QX operating expense was XXXX.

line fourth a and $X.X QX Our quarter of was of compared non-GAAP $XXX,XXX XXXX of loss operating million operating QX XXXX with profit in of for a non-GAAP XXXX. the million of in $X.X

compared For with for $X.X of XXXX. in an quarter profit of operating profit a of of $X.X the reference, line fourth XXXX GAAP million QX an in $X.X operating our and was loss QX operating of million million

below gain of other regard] in the favorable and fourth full million, (ph) was in $X.X other the breakdown a The of grant million. strength quarter Non-operating items is China. of presence This and [positive our included of and for income release. a good 'XX press our $X.X the for reputation line operating government and net example expense a of our is

weighted in QX $X.X comparison, XXXX and income $X.X or diluted shares share $X.X the in XXXX per $X.X GAAP with million or net $X.XX third XXXX. in of QX $X.XX compared QX million was a For of was $X.XX share. income or of net the $X.XX share or had quarter in QX income we net The non-GAAP per XXXX. $X.X in basis, million outstanding $X.XX million $X.XX or On XX.X million income QX million By average share. or share, $X.X quarter of third net of per was per Non-GAAP share XXXX, was per of million. in a per

year. $XX $XX and million $XX.X million million cash Difficulty] by this Cash, investments equivalents of December [Technical as XX were reduce to it approximately

This results. concludes quarterly financial the of discussion our

process STAR to in Year, plan give New the on a Market Tongmei let had in me have you Chinese the subsidiary update. brief China Since our list Shanghai, to we our they to Turning with a Commission, called us thorough, is the asked active dialogue of Their again to detailed China items. Regulatory and also and additional the have respond CSRC. couple Securities

remain months. that and so of are we now will in coming approval doing CSRC optimistic We in get process the the

the brief a and summary plan process We the website. our on have of posted

I'll Morris? turn a Morris business over that, call now With to our and for of Young the Dr. review market.

Thank you, Gary.

macro saw believe of revenue environment and the as will and customers continued QX. reduce across back a needs the softening QX, During they their environment portfolio to evaluate coming estimated our channel quarters. Overall, as the approaching are We we their expected. conservatism in with continue step XXXX for in inventory digest the the in demand need further

active vibrant. markets [indiscernible] that for prospect longer-term near-term the we're that inventory What environment significant using applications continuing and mid-term investments is is With and technology see while said, correction, development through tells material. this us a working to new are for our the

applications our and today, health revenue in more uses driving automotive the a to shape sensing consumer core that taking new very addition product, way. are are in real In sensing display

focused Tier that we years, efficiency have of very of X of on and created raising To entire our two have and and proud last accomplishment future readiness the world-class customers. work operation, a need current AXT business team. the the the For end, supporting of done capable are the of we I'm that

and positive R&D dramatic We in results substrate build recycling of gallium program projects a demand cost completed relocation out good a efforts. wafers, progress that two larger major our benefit indium structure to ESG for have on the our made to germanium successfully our support phosphide implemented to produce wafers, diameter our capability arsenide and in manufacturing, drive our increase and continued

ability technology as as more quality scale us positioned customers has today and as our to work well in both with well landscape. gains our particularly This favorably than our before, progress. our innovation, market indium and enable ever deliver as the and enhancement for that competitive ability share, to of Collectively, our specification phosphide, includes reputation

For these optimistic reasons, our about we the return market to growth are when recovers.

the As believe into that is and are as continue exacerbated shutdown the slowdown in China. inventory. the business lingering effect COVID Year well of We as of head across QX, business our Chinese effect a in we portfolio reducing by typical we're seeing New interruption evaluating customers QX as

such, for in could -- see expect beginning are a As major we do fully. China do reopens that but in improvement as but QX reset we QX, not we we more planning

data The coming continued off peak, down fairly well market in telecom has (ph) cooling in in in was phosphide the but [pounds] softness Indium a as down been ongoing result XG QX, its particularly resilient. infrastructure, as -- primarily was China. of market center was as

we the first in in inventory our of well we because applications, meaningful perform of a to digestions, addition, but XXXX. pause consumer take half continue expect In it to

have currently development to We this are ability shipping for programs two that and are the in we build market. relationship excited important long-term

beginning with off Our appears devices and impact in revenue the customers to in significantly. down a is and and gallium slowed markets, as display. After we using highs, wireless having China such see incremental We're strong could headset as applications improvement for mid-'XX on arsenide its LED lasers, a gallium IoT seeing lighting arsenide stabilizing be significantly market industrial QX. strong decline, well

product be a X-inch microLED We consumer are in progress cornerstone will good of This gallium a for adoption devices. variety making wafer in our arsenide development.

a year, While expected to this prime are a this begin year. to positioned the begin qualification to until ramp is next player revenue AXT scheduled product sometime market. be isn't meaningful substrate level at in well

significant We view power to the well as its microLED X has to industry. arsenide reshape are colors. brilliant believe efficiency improvement consumers it as substrate brightness advancing for as the development as a it we greater Tier and in more breakthrough is companies and expected display deliver technology potential gallium

germanium our revenue and have report that saw customers in to improvement QX. a payment with we issue in resolved pleased We're small we the

While macro by coming we growth been working will in quarters. softness, has be the the market germanium the substrate sequential affected also towards

chain pricing accounting see (ph) operating supply and QX And in environment. contribution to raw our finally, companies. continue below down pressure equity from turning do was good material our] our softer [contributing a the supply Consolidated companies line. to chain due demand revenue to We

price While which our for offset line. company negative Tongmei, is improved raw contribution material below can increasing be like of the a by certain

to is and compared our strategy chain supply a focus unique as is strong is us for customers. XXXX. to Our attractive This competitors in our

macro leader and remain indium when the of application are the Tier driven innovation very much softening intact. they phosphide are market. a to reset come our environment X customer customers though to their world we a expansions closing, that revenue, trend In trajectory, new we are company has and been growth our Today, that in beginning has

focus improve raise with we and delivering differentiation we'll continue to competitors. capability, have technical bar to creating of clear the continue on to efficiency our We worked profitability. hard our Further,

our our As such, are optimism. ahead and to we're future solid business with in fundamentals looking the

for first quarter I Gary? to turn the will back now our call Gary guidance.

Thank you, Morris.

impact result inventory correction the continuing between $XX in as in be shutdowns to This a significant lower impact expect mix revenue expected China, have as $XX the Year will margin. and is revenue impact QX which phosphide. QX our of fewer units, less for expected as Given million negative a over being Chinese is lower Product to a spread indium New gross million. on from favorable well revenue COVID have also we manufacturing overhead and on and

range As will such, loss $X.XX. approximately be $X.XX, non-GAAP loss net we in XX.X the will our GAAP the expect to range to count and $X.XX million. of $X.XX will of share in be be The net

will Morris to questions prepared concludes comments. now. our and this Okay, your I Devin? be glad answer

[Operator Charles comes Instructions] first Needham question from Company. & with Our Shi

I Thank Gary Good obviously, Morris. for my first, did a start, want to is and commentary. more QX Hi. taking positive had some you But I hear you relatively afternoon, question. reset. Maybe

a bottom -- your if I gallium example, I first not down cautious, maybe indium in about more cycle as us may think, to beginning improvement the to together, tie share color? were QX, What for I want you're Can bit to indication if this there maybe at QX But pause even, the or be of in some this of you. what Yes, arsenide, you related thank that you, me seems 'XX. be hear your did be But thoughts half customer yes, possibly QX. to in For the hard comments point? with some for some all side? phosphide little slowdown you. seeing QX

Charles. Sure,

I think let -- me put way. this

I of business but different a whole AXT our covers range products. is although company, a small think,

handsets, the the well And know, stages. germanium gallium goes I high-power is lasers. infrastructure, wireless the into prime segment the not only arsenide, every you cell, in different as and As the as business and high-brightness of LEDs, covers demand solar believe in

of a HPT there. out device strong that took the will can is we I later, gallium inventory quite little driver you hand, say a the problem still up, up, come China demand that and was early the reopening other in is QX. that back handsets Infrastructure COVID correction the the when on way, major wireless and instance, arsenide with consumer HPTs. for bit For think market But hear hit, inventory came

is for let's consumer Q say, phosphide mid -- late indium as concerned, we until indium phosphide far didn't As in QX. softness see in the product

recover in consumer, depends to they but significant Difficulty] center, different out such will much, of market will will indium give and have, recover they and [Technical when downshift the it So, sort some segments, significant to phosphide start business does it data how contribution. us QX, balance and in upon it then demand as enough inventory soon the

interruptions whole recover. business have But visibility. lot So, visibility say. we've used of we'll or the to year, what I coming right I it last been six it's think is -- throughout pipeline. business hard We in quarters, inventory think corrections, a saying AXT of lose is what the of last I clarity can that we that is don't because improved having of the to just now, five, say seeing

in with definitely flat in coming bounce back I of be China, I start think QX going consumer market to to but QX will back in this QX, year. think hope, it's we and probably the

Gary...

Thank you.

response. it's think going summary yes, in a QX month another bottom, and find to the think, out I is good is, short The we'll all two. or be we

So, yes.

thanks. Yes,

longer-term. maybe little a So, bit

end where shipping, two wafers you much year? have end the two can of when start Or ramp volume that indium program my year products your I maybe get the is this if the visibility there about the Do year maybe again? second question. the bit to stage you that half phosphide, when maybe a get said to programs to a second those you production expand products -- more this really to continuation your of That's get production ship You can existing customers customers. to mean, we a third programs,

tell, any consumer this see Yes. for line sets aren't I if they demand If increasing customers visibilities. sets count I their all inventory the their they indium any if the there's don't giving applications us phosphide demand. demand then to because probably digest and would the we top inventories new is goes after lower product and cannot that say, some phone drive from may increasing year. the

As very of Charles, in a me far among the concerned, inventory right as future is sort had corrections. you here development

in ask had where for, of back? you definitely to a to in never as vehicle. me lasers what's things used growth But that When potentials, you are pessimistic. autonomous need fairly gathering high safety indium if it marketing, was in our as possibility, interest us So, don't year, think well sometime I information, that product the market. were lot what what's delivering phosphide inquiry materialized. we our is I are especially But sizable mean, sensors, know. come last I customer late it but will there

for Again, product I think product. is production. healthcare customer potential a product the site beta other picking our was pilot

production I production there, we materializing a When I have think come become and major product is will visibility, come yet. unfortunately major but demand not becoming just it back? demand will it is a the interest don't that to now. think

Definitely to this understand. your the I chain customer customer probably to -- is a Yes. it's whether you Thank tell no that minute only go, mean, that, almost well, understand supply the last going you, end go, totally Morris.

So, I diameter think microLED last arsenide around question my application. gallium the larger really for

year, -- ship does how I look think us you right? the going revenue that that's and some the XXXX, of they generating much that some kind you're don't revenue said think like? kind but see your start to look top volume recently revenue implies next to year, I of idea of your said ramp terms in -- revenue this will ramp in time to customer that application. of in of to revenue I the you year one But meaningful which Can that, this start it's revenue their they're lead XXXX. from know the meaningful volume, shipping you. going How microLED how give like? could this Thank of

Sure.

are We customers. of shipping wafer to hundreds

well be, think as I seeing And epi their runs you. ways, production to need doing all pilot and their through pilot with at and they we they in running the how going flat wafer lines. are including think as agree I different looking wafer

I -- I the be going think was start up have in late projection think production to than it's XXXX XXXX. early we it's think rather a although that but it's to going to ramp earlier XXXX,

So production with that matches big ramp. your XXXX

like spread the to applications. the I'm see customer known very program, be taking could I to is how is and Because this and the glad project. it's our be think will But it will has you cost, this successful of well different the lead I and XX how just performed. a us to as eventually, overall is many, this it that think like initial really demand I how project how project told upon and start But bigger other something that goggles. looks reduce wearables, many this the run going shape eyeing to major project But microLED they this as know, this five such does such microLED and volume times can can as applications, And they depend think, as competing to are the technologies for well is. there

because So, are positioned supplying is increase only are also And win making, we this gallium a this but demand we big will going for I in raw I arsenide some we materials, significantly. are think arsenide. in very for which not -- other well to substrate because is benefit the think us, gallium

the ramping to when the be. I think to think I be production, is XXXX. late volume it, as of that's timeframe commercially up view in what it's XXXX I going think said, way probably But I the I microLED they will

by with kind first, up you wafer, the or they ramp it. Morris Gary. recognize right, Got you. because hope little they wafer, the your that It more their may revenue, to thank recognize ship makes much, sense, revenue. process catch lead But you -- you soon. you very Thank of a I and like you customers' wafer revenue sounds bit, up

Charles. Thanks,

question Bryson Our comes from next Matt with Wedbush.

thanks Hey, questions. taking my for

when impacting some of First you look margins, at you to can the mentioned quarter? that's as of -- some or factors the the provide one idea three gross Gary, is, those on weight each you factors weight of

the say, good the is wasn't expected. lower product we revenue as would story of key the I as mix part Well, the and

business. more of it's those things. A little material bit companies, So, the around probably substrate are two from really the expectation the raw main below but

gross But coming on expect impact think the take will shifting we other a product on hand, of to the mix, major I towards probably because down, is hit the QX margin the for then guidance more indium the major the correction. inventory phosphide

So, will impact that That overall. will drop gross our significantly. margin

correct. That's

fair? so we're then gross to margins, revenues you're Understood. about the up, -- two still normal you margins that gross But they been thinking you're then when Is were quarter to that a at level able or if looking enjoying ago. the return had

absolutely. Oh,

I I of -- there's from although but not think customers a significant good, is are there we mean, pressure overall margin. looking not when it's a drop not price business --

stable is we fairly business our increasing Our and also efficiency.

joint supply. new material of raw the ventures care have We taking

business I XX%s. we're think -- And should confident. even return, we So, mid-XX%s as forward high be and yes, looking to

factor, make of just No. that'd to be... pricing a more of a -- sure the more Understood. right, wanted wasn't I wasn't because it

there's just not said. factor. what I the time, to is but a really from time Yes, the pricing reason price is No, big pressure really key --

rebound, gross marketplace because improve that when last we've the the it's things in for that taking done So margin, It's we're to to just stuff all blossom now. pause disruption going again. a two right years confident of and the -- the

which Or customers one photonics still potentially on silicon that your on my difficult question And talk talked I you Understood. developing the about being there's programs to see guess, seeing you front, some the is, there? other makes sense. you progress can put anything given more as are market But how environment, AXT? you at hold for then,

center in as you it's their doing I marketplace business we mean well. data doing photonics, not even not think, data they is Yes. well. is that I the fine, read market what from pause although I I Silicon say the Microsoft, know center mean, read is -- doing

correction, a and is so they So, are Amazon. taking

if aren't So, buying, well. center, all they're these our photonics data silicon not big doing then

and But problem. solve on and be and concerned, more and would still data fiber as cloud the I optics the and more transferring is need is as to hand, to there computing Internet bandwidth forth back data, and you need data other you more going speed -- the center more say, far bigger

So, that's going I phosphide material. think all indium for good

there's I longer So, think no trend, it. question about

-- now. we're we're possible right Everybody short even going growth. have overall is being it's slowdown I'm sort Microsoft, to business at going I correction. their of looking But inventory is soft see think to in the economy. term,

one than add is for semiconductor our Yes, quite the I business model that of general key is the that the lifecycle of of strengths applications these industry. would different some really

is every As it's chip. -- and months and XX here for That's -- it example. hard there's a we to indium you've therefore the months, for would for I all come photonics believe good to out for got But know, down. driver XX with slow new a really XX years. be center or be data to to probably phosphide ever a five mean, silicon going

the years to at -- years. arsenide, if XX was you cycle of XX in gallium and our -- life products those So or some XX for history look

but it's -- it's and different, quite a difference. positive it's So,

So...

the so Thanks color. for it. much Got

Matt. Thanks,

[Operator from Instructions] Craig-Hallum. with Our next Shannon question Richard comes

to a the thanks, the OpEx here margin guidance fit I'm guys, up here. XX%. I to topic bottom-line taking ask Trying gross below usually to and hit going as that direct guessing coming a Gary, for around do margins are little was questions. question, bit on and very on with Well, to the get here my gross and I

quarter, I but a that per got fairly Clearly, of a with look XX%, seems back $XX quarter history the difference saw As phosphide, you've negative mix to around last around here I dramatic. XX%. in number million indium

how math wonder doing are us if could you our So, we in tell I here. close

So, the... Richard, are you or describing results the QX

No, QX.

QX.

quarter. First

than million was had gross I you quarter, saying mean, our telecasted do with to last wants Richard we cycle? the what $XX forecasted. Richard better how margin I when know compare or think is we

it's at a level? want there. lot just because Yes. Is right, clarity sales approximately XX% more I different than last time bit this So, little a you're to get

I'd say the... in sure know I to given going be low. it's too Obviously, it's the yet. mix don't what for

what is I model. XX%, says But I model than think. think, Yes, our our more XX%. that's

parts we'll clearly there, this model, some but That follow-up caught one the so other sure that correctly. here. just got offline just to you to Well, wanted to want way of helpful. get Okay. is make I And out

quarter, On this to sure you do down entirely want center? the indium was data be elements expect it? phosphide Were there first make more to due caught other than And of XX% sequentially? them. and consumer all Just I of to

Yes.

consumer... think not the significantly consumer. helping, but the is is most And I data center

Okay. All right, great.

take ...part correction recently, didn't big until a and... inventory

Yes. then. that's so that We enough their doesn't fair surprising, cycle, certainly understand necessarily so

to however expectations also And fairly since comment seems to has here, least you temporary guess $XX build hole CapEx inventory about like much the I to phosphide, recently. away. it prepared here a the a and may made taking -- (ph) Gary, cash in it last especially remark Wonder and be got right the a lot here here, you've which of flows at here to of you you build topic the a year, given kind are multipart inventory, of of what on to this trying the urgency kind significant topic [churns] been million good this indium for burn thinking here, if year. million of your have question see of year, CapEx CapEx as don't $XX relative about is year

want there. last to just degree needs kind your of to be CapEx your -- it year? what Let's of I So, high cut to get as off sense as

be Okay. short won't as the is last Well, answer as year. high it

clamping on on we're as to inventory, CapEx well. brakes the put down going addition In to

So, modify I we $X if things million back. can would bounce that say, to $X And million.

talks But we'd they're already to and lot anyone out has a be trouble. like CapEx, of got shotgun his investments about going to have We make. in if Morris

So...

did spend of for building pick second was customer towards year were that the the the I aggressively mean, last and to if very we why way is even deliver. were because Well, half year. even ability we outstripping business up, our demand That's to

there. some So, hanging are out still of those builds

recover, the grow, it business it. to and were So, even to we to continue can we expect handle will do if at recover all. No think I it -- problem

Yes.

which we're where building And in we it's then other hope -- going are use consumer come two indium will if to phosphide, start to again. other I seeing only or product

the hope I understand I forecasting a going to I -- think that So, you mean, it's lag, grow. it's right? we're

it's build. at but cut the out remnant going hanging think want for there. not I because we're But to So, But it's probably value I there's some Because don't phosphide customers. will capacity near deliver to plan those Yes. to future we think indium build risk. on, absorb all or extra we capacity [shortchange] to able then then, be (ph) break our don't we to a the when a off, obviously put

enough. And a... that's Fair

Yes.

cut Please, Sorry, there. Morris, to off didn't mean finish. you

not finished. Oh, I planned, it's said, built I last we year. we no. but

Morris, those one regarding Last enough. fair applications. off of dovetailing general of question sensing Okay, remarks me, there, for of kind in just

think customers I and kind as I don't in thinking they perhaps How development about said applications if other us to large following regarding what they I are there. long-term big versus or late-stage you correctly, programs you and calendar sensing, early-stage and year, asked Maybe years? impact give this new of got in the could picture degree such in earlier question just an about of in any expect current customer kind your year. more think broadly this

development much think my said, is asking now. think have I I pause. think I you I we healthcare a X,XXX had look phosphide I for quote, I they're games hanging is But customer it how a Richard, were think us, were But almost -- giving big the But as automotive, down Yes. -- if I head at taking a application, a although think mean indium for to phosphide, per and and ready -- calculating playing we X-inch us okay? build they through, and I month, didn't extra indium build okay? we will don't with they were come but formal capacity cost them,

of other was to off now. devices. market pause And those goggle, I have one many use XX experience need right improve a improve So, to as were take told these program the indium Meta a phosphide that progress, there many, will are users, -- such lot to if using you're being think going think that indium are handheld phosphide consumers' And of I which us told sensor. to developed development customer their I projects you and if there's course, many of a then But phosphide. eye-tracking taking but indium there are

if but asked me I'm a which think well, you [Technical Difficulty] in -- I but I to there's maybe conservative last year, more XXXX, fruition So come could taking few think,

Okay.

that, big And Let to me automotive us comment. life well-being. kind add and own, to a of leader going and a in too. sensors, It's something watch. indium be health great there's But be robust. to phosphide a it's its material. going picture taking gaming, for on kind that's this of is It's into of It's exciting to stuff

of taken definitely the it's life itself. on So,

Yes. you're say And think the looking if would to short up looking China is for I I economy. term, pump

want may government infrastructure to build. do the think I some

available point, wants fiber which base on U.S. going connection think, and I the used think build Difficulty] I anything of which is built, infrastructure big with so this help. -- demand is to low telecommunication point, States, United infrastructure for government-pumped any to think, materials I is throughout I Internet low thinking not point. – this on anything to they build, [Technical as, far the is basic a station phosphide. on about may at communication, indium of As do But XG have But optic make a help is think

you. me from Thank all That's Perfect. Okay. guys.

Richard. Thanks,

Our Hamed with comes question final BWS. from Khorsand

Hi.

Just you're not a in business as you're in the to if out in that resetting reset confidence QX? will why What's business it really talking structure QX, understand is? you wanted about you considering your the bottom giving

I Hamed. think reset, we're a taking

I think...

I agree.

our down material. We're We're construction... not buying most shutting of

CapEx. Lower

-- CapEx. budget. possible at looking Lower tighten our ways We're to all the

Lower inventory.

to year, look back looking as because gallium X-inch a keep [indiscernible] didn't Lower no as But mean, we a That's such not not can to that cutting on were care reset. if we're is yield well going is saying Hamed, customers. anymore. But it, we is the by our that inventory. at (ph), this business. cutting can when so the as reset. that's ask developing arsenide, capacity although, of to as last able we probably take increase to to indium revenue we're going We're robust to to area I are we that we? building not said, more. is capacity we're back so take if want a -- we mean, you come phosphide. us our That were yet. [R&D] XX%, I have So, of on more the deliver company, we're future that cautious capacity a going we capacity building

it is the any the far as concerned, the then, time around? And Okay. business inventory becomes risk as by that obsolete turns

will have punishment other customer already the that most I customer the only is which take mean, to it where I X% material, and cut is we? severe don't customer. and gallium so can't which XX% No. -- sell material bankrupt, XX% has specification, go that's even raw never to arsenide we time And specification. they anything will or X%, indium is or gallium away, product of and don't then, without think raw material, and the which go product our only is arsenide, bad. lost polishing pay here cutting phosphide so never XX mean, go lost. can okay? The the for we been work-in-process, been And years, inventory any XX, our here I has we even is raw

think of risk lot don't inventory. a whole I for there's So,

the science that of But in out this a from I background. we that. that out managing start and for the -- come a because micro like it's are of management to model semiconductor, and raw fact obsolescence material company be not and different materials, business Yes, lot there's again need we watching and with things

So...

you. Thank Okay.

Thanks, Hamed.

Morris Dr. There are I turn over now remarks. the no for further call Young closing questions at time. to this back

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you please call. up directly, the me, near set or look As would to like with contact always, speaking a to you future. Gary free Green Leslie if We forward feel Fischer in to

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