Teradyne (TER) 27 Jul 222022 Q2 Earnings call transcript

[Abrupt Start] 2022 Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] I would now like to hand the conference over to Andy Blanchard. Please go ahead.

Latif. you, Thank and recent everyone, our of discussion Good results. welcome most financial Teradyne’s morning, to I’m by this and joined morning our Greg Jagiela; CFO, Smith; President, Sanjay Mehta. our CEO, Mark

our remarks, issued provide along opening last our the release evening. XXXX. for quarter outlook XXXX’s quarter containing our Following our with details of second second performance we’ll quarter, of Press third for results was

the Replays that of on ends. the discuss call after following factors Investor may website be slides differ the in the Harbor release, include forward-looking current statement in page helpful as will providing encourage management’s today earnings risk most available our We’re the The be well of cause review discussion. this will same Teradyne’s We we filings. via you that to page materially involve matters recent the Safe from that results SEC to call statements contained expectations. that the as to could you

are today, call. Additionally, as developments this after forward-looking to and occurring a result as them obligation no statements update those take of we made of

we’ll measure call, the page posted to non-GAAP of most financial website. reconciliation measures. GAAP measures, reference information on concerning today’s During these to additional financial comparable directly the were including make available financial non-GAAP We’ve the Investor

Goldman next and Looking KeyBanc, Sandler Davidson, by hosted call, ahead, Bank, in Teradyne Evercore, now industrial-focused and Piper investor conferences earnings technology Jefferies, between our expects or to participate Citi, Sachs. Deutsche

Now let's the get the with of on rest agenda.

quarterly call more quarter. answer on new our results for Sanjay guidance questions, market We'll as the conditions hour. Mark? will scheduled on quarter. with third Greg and the your the our comment offer we then and our this one then recent along Mark and is results for First, will enter details

details, you technology including will XXXX. financial take Greg results, will Sanjay and the for third year and then I'll our outlook the our quarter. us. QX everyone, thanks for through we and drivers expect comment Greg? joining on summarize the full Hello, outlook in

profits $X.XX were in profit signals. per in Mark, everyone. Thanks, we're and good perspective, mixed midpoint guidance morning, with market and the and $XXX above quarter sales a sales million seeing of non-GAAP earnings of and From share. our Teradyne's second revenue

times ramp already complex test device get factor. strong a Eagle to capability voltage in to drove to value. delivering on were ever, be significant lead highly double-digit production family design Test and we test sales Flex products our as served growth. test At for and seeing test automotive by quarter Wi-Fi strategic XX it sort final customers markets ultra industrial opportunities better have through is flash of The we're first the application call, plan wideband memory, and markets notably X year-on-year was higher strong In were wins Systems is enables accurate wins design where growth to on development test board architecture strong navigating we're half up sets this production seen R&D teams. with the for year in Wi-Fi a quarter, throughput the with Ultra strong Notably, in design similar in so. quarter design mobility, work into test these high is wireless and interest in and While us time of in mobility Wi-Fi XX Eagle from major growth both measurement This and for line share year's issues, and wafer Automation, products a of Also, Industrial growth expect continue market in had the two strongest demand, semiconductor to test large competitive in markets. date, platform lower specifications, strong pressure or a the try win system's few In largest volume for test. details the test, grew a systems storage Semi Test range with LitePoint, The perspective, that where design From some There R&D of qualified a complex we revenues expand design-in we in in in devices product first end quarter. chipset at wins DRAM improve how markets. to were as solid than all warrants our when to the devices to half. management as for end QX where This plan growth. wide to last half ramp. some higher as and end won over environment. are important battery especially vendors In now to applications our demand today's XX% in some provide we the market our we half next attributed the year-on-year supply first Wi-Fi we'll the production had faster XX% XC, factors supports In revenues second with comments. the were and Diving softening planned context an test will for X to profits. of primary were test market. like looks the IA were have second

was to exchange. factor linked euro. The The the majority of IA first is foreign revenue

full growth the XX%. the saw half revenue was robust euro the the on appreciation region first the unit For has first a to and growth UR, outlook. dollar dollars we will the respect comment that a further in year example, with UR headwind Europe, half XXXX exchange XX% within The but Sanjay of at decline to of in revenue in foreign muted

at of partner In partners the in is in we've factor traced past, distribution the COVID region-specific that can and second rate ongoing The America variety growth. remains demand an that same demand shortages distribution causes, lower end regional our including be lockdowns as challenge. where IA staff to China staff quite Staff a North to for shortages is grow integration strong. noted partners struggle demand

and software and make robust is applications the important an critical this to build technology But partners equally strategy Our channel. a to part these to strategy UR+ productive. shorten plug-and-play to overcome the of staff time deployment OEM more to use from is MiRGo

is mostly example, these of an these For to existing OEM half at can includes maintenance verticals like important reach Universal our The Robots, our doing proportion order grid operation is the distributor-based have OEM for beyond distribution XX% channel, revenue in power that much partners customers channel put in many that well, welding, our complete OEM add than can almost a in to deliver complement scale fulfillment network support. growing their customer which to first efficiently solution be distributors cases, and partners channel staff because channel. an XXXX. customers that more growth These immediately. traditional In OEMs very can

We are OEM partners these serve market to new new and actively adding verticals.

Now I'll market, the year. outlook hand drivers for demand Mark it second the on the next to more and back half

Greg. Thanks,

impact While recent in drivers will year remain the firmly deceleration the results. test in long-term our in test and experiencing full markets we're our automation place,

the strong compute shipments in associated second few RF. management market smartphones, across in device and past wireless demand Over including of and extends market continue happening few weeks I realignments will declines weeks of and end half slowdown QX seen to these products and When and power we a entering to marked are the These and that seen infrastructure. are real over SOC we apps weeks, processors, this in types, customers demand the seen we've multiple tester XXXX, the adjustments in demand coming. we've related past auto the remains MCU, forecasting their demand time, no of industrial new will these half in test and projecting are and This this not the next note a markets. several that inventory -- the in reality. and further deceleration as memory are plans are align expecting are continues levels test adjustments we've second blip demand to production adjustments

in At also capital that smartphone already the year. have of phase, to additional accelerate macro the the reductions we QX we customers they volumes a lead assuming review which assume through are are some a China's to remainder impact several not we've will demand. will level, Beyond indicated seen,

believe will consistent half, resulting also conditions forecast weak, IA, In half digestion. our our in inventory that below achievements but electronics about the associated short-term level, business first at remain in global we to second economic XX% XX% and grow softening We with our year-over-year continue consumer that goal. demand will a

our second resulting abate. muted. lower all Greg half expansion China roughly will second in revenue that of FX than be highlighted, headwinds up, to half, demand not Distributor the first the first will and XX%, short-term half, labor in we As in it will expect installation split. rate the America now believe we Summing North limit remain a slightly half shortages XX%

forecast at projects To XXXX from memory, we identified be $X latest to assumes will to of the in continued decline be our test estimate the quarter. Our that $X.X demand while yet about of forecasted market in will April down $X billion, reiterate, billion the slowdown expect $X.X fourth range billion, our about market SOC in remain much billion. of

resiliency and both a to The momentum. Automation, also application our these over recently strong uncommon six after strengthened this we kind supply each only their the is subsequent demand by we've years, as remains of as market all [ph] and and year growth operating as compelling, world after of in transitions questionable Industrial digestion. imminent. remains of and Hyperscalers and of growth years period test ramp In the in anticipate entered new in has corrections expand XXXX, another three XXXX. last chip SOC months of labor ahead, this packaging demand XX to Flash a slowdown challenging, of the XXXX ROI design corrections, increased built silicon Predicting swings. further in seen increasing consecutive gate X-nanometer depth continue And model proposition not the six ahead. multi-chip as Interface to showing starts short followed Looking in starting around with is have motivation class but gaining while value drivers unaltered DRAM most of duration a robust growth. the automate. the of of in growth, This returned to are we've AJI

outlined while unfolded as months we half expected the roughly three than second softer considerably first is of half January, the ago. looking just So as we in XXXX

capitalize through focused take our the and Sanjay growth confident financial are now However, will to we that on that so strategy long-term our design-ins are positioned are of serve. on execution you we Sanjay? of we and programs growth markets of details. these R&D

and markets I'll and supply shortages morning, our color we're results, details Today, provide the Thank in Good everyone. how on additional outlook. QX on QX you, some others addressing our and Mark. describe slowdown offer

to Now QX.

main lower for The items tax rate, slower hiring. had the operating to rate were or million the an now $XXX sales Please planned million should year was IAG non-GAAP a mid we with OpEx our and $XXX expenses non-GAAP were tied Industrial million, -- than driver quarter in you tax -- XX.X% two non-GAAP use EPS and XX% excluding to $X.XX, XX.X% note, non-GAAP below Group quarter discrete XX.X% main Non-GAAP guidance. $XX the The Second Automation revenue driver margins quarter. of of non-GAAP compensation was for lower customers XX.X% were planned projections gross sorry full due on the than basis. lower profit rate. was variable operating the

XX% HDD due in both at wafer LitePoint, Wi-Fi Looking of Test shipments revenue Defense by Storage $XXX XC and from million were led systems. primarily $XXX was combined group strength final results $XX XXXX. by sort. Semi board production million, from revenue up $XXX and industrial in strong prior test of test automotive including million system-level up the grew and in and X% and million. revenue year-over-year. unit XX% was sales, million, to year driven $XX and aerospace Test was $XX DRAM Test a X revenue flash Memory the SOC solutions QX quarter, was UWB At million, System test Wi-Fi was test year-on-year. and XX% business perspective. markets. from up had revenue which

breakeven QX, from to the year, growth calls. in discussed the QX still the in growth, in the Now the IA basis Europe. range XX% grow we IAG profit operating IA to roughly And was our of short-term Automation as historical full in to rate as related low the up Industrial in UR down Automation. the $XXX to noted. where under we pattern through financial IA slightly for a the follow year. the we MiR towards view Northern and non-GAAP expect plans remain as year-over-year. Greg end XX% as model, second up than million This was quarter. sales X% a $XX were on Despite Industrial we lower long-term perspective, revenue past company with were XX% IA highest in the the model tightening We in group and based was revenue discretionary expect the on year-over-year Group situation, profitability, unchanged. QX spending move Greg million, in operating lower quarter. appropriate. million sales But the to naturally $XX investment noted. up X% spending and expected, Shifting XXXX a From growth X% of flex we're strategy growth supply. Like be

to of we're guidance range, revenue test continues of demand. ranging impact production. businesses. analog approximately QX primarily our from shortage $XX The $XX supply inability in a FPGAs Our our excluded excluding customer million similar our revenue of tied to QX, to industrial In to from guidance semiconductors million our

we the in supply I've higher calls, actions note As challenging. our line balance supply and enabled remain noted constraints factors to we're these even and in situation I actions, to cash test, expect Shifting flow. sheet mainly improved these harden other numerous QX, chain will in our supply shipments. actions taking but which with to prior

any the saw which of and timing had quarter shipments days, occurred Over Our billion of down supplier cash DSO and prepayments. to retirement share uses Other end our XX million half way debt XXXX than through $XX million. $XXX QX. October of $XXX buybacks dividend free XX% the two-thirds marketable the in note with in will million, the cash our June sorry, of cash to securities approximately the of $XX payments share of included shipments the our updates in year. $X.X of $XX in million flow our end million of million October the of in and $XXX quarter, share end At plan. more for remaining. In $XXX at of May repurchase the million, buyback expect of quarter our the in the We we'll expanded reflecting we we're plan -- decline at from call, second and QX, totaled

points. result businesses, on the IA's four IA strong reduces a to like points XX% bonds of margin and results. several To half, converted. debt. our I'd rate euro-linked large euro. their approximately of its The dollars, date, the in Test have US in impact so foreign $XXX convertible In and dollar exchange the impact. million Regarding In our on the early of note dollars. other is In revenue are of FX IA portfolio, about hand, there's first also to tied material and regarding expenses have amount the as dollar revenue not majority the our and revenue reduced the expense gross strong impact a growth

rate, expect our the growth for points remain six to compared January full year with headwind Assuming exchange projection. of exchange rates July's we consistent

strengthening marginal benefit revenue and dollar that IA the by margin OpEx offset a degradation gain, OpEx the IA, neutral effect our yielding has is For on on a operating profit segment. for the side.

in demand extending Now than material QX. outlook to three for months of to shortages and results in lead reduced slowing QX China outlook Europe A demand test, lower and times expected ago. automation a due our combination we and

between we extended $XX won't and guidance to guidance won't Also, $X.XX XXX With trade noted, are non-GAAP to shutdowns QX see shortages diluted in EPS $XXX that due in million and with to million material facilities As the of of on shipments expected the range be million, $X.XX any see a excludes due in new we to any $XXX COVID, primarily of test. said, sales production restrictions. approximately assumes shares. million

third quarter acquired of the guidance excludes amortization The intangibles.

XXXX to and investment gross QX quarter product Third due resiliency wage estimated mix, inflation. from XX%, down at XX% margins are supply chain to

and XX% margin is at of operating of range run model XX% XX%. Some our is quarter remain The transitory, expect third guidance the XX% OpEx of to to to profit effects intact. mid-term earnings quarter sales. at XX% rate we third are gross non-GAAP expected midpoint these to of our

noted, full first below approximately of expect be to Mark revenue the half, As we year half XX% second sales.

revenue prior Given reduction OpEx half guidance. to the driven guide now outlook year, is just of annually second planned X% the for prior operating from the reduced are to expenses our to X% grow in XX% XX% two factors. our by The planned versus

reduced our decline First, approximately the half is revenue. variable of to model tied compensation

QX not Spending which we split IA, delayed Second, we impact to revenue be roughly we and the months both projected model some expecting levels. and believe second of all competitiveness. to ago, but go-to-market. varying three between evenly profit and will it our engineering we're our and than in Summing year test half operating lower the have in resilient revenue are up, long-run is savings expenditures

lead other reduced reduces revenue expense, model, to ahead, the automation long-term and model the markets. us and through compensation our variable operating experience A the we're challenging, Andy. over With and to steps on whatever and our lies have the of taking that, appropriate. always our in focus customers industrial we confident things opportunities the we're is strategy turn downturn I'll but needs test as keeping level, With while

limit questions. question Sanjay. we’d one Latif, now to and to reminder, a And a Thanks, please as like take yourself some follow-up.

Bank comes of of the of Arya, go from [Operator America. please Vivek line first Vivek Instructions] question Arya Our ahead.

pre-COVID think I I if I be your your get I would Thanks guiding seems that roughly is And to it levels. I levels. below QX into million, decline realize there Did in which that of are that be that for why million, guidance which be, my a QX around account, $XXX I suggest non-IA clarify $XXX think, almost million, to $XXX And headwinds, but IA you're wanted right? sales XX% such question. taking pre-COVID just kind sharp take will QX outlook?

Yeah. with been reduced million remarks, where of just our second I that have I prepared Roughly it to speaking, my half communicated known one-third of targets And about mentioned to come of $XXX demand has those is that think, that on a About the somewhere as us probably weakening just soften. in beginning are conversations based vein is maybe customer to projection of more million. to we $XXX revenue customers. right. between Two-thirds are

a is So and to not all there's -- clear related of this mostly test.

clear So not a portion, the of experience that the decline we've test prior industry there's cycles sort of there's it's identified suggest but two-thirds to come. more and that seen just in

If year-over-year a was example, of correction, XX% the that beginning through to back go you when XXXX, the significant of for went kind market trend. this

talking market last about we're of peak here, year. correcting about Now a off X% of the

that's the to but this of yet projecting history So much is phases. digestion in market using kind guide -- identified modest -- we're turns more be these a us and correction we're how to how

to I'm much exposure iOS testing how you. then, that alleviate perspective? Thank interplay still thinking what any year an iOS just next side? year, year be Got a of and Android the this benefits Android year? what you're year about Mark, you on And it. can between versus or last think is your will and So And from that a this the to offset curious, And that X-nanometer continuous? smartphones is headwind -- do next

Yeah.

segment bit a Obviously, a in than is significantly smartphones Android to year share year of up higher segment. exposure that We've unit in it's this picked our bit market that years. down this is in volume. think past little been little I

the reason having forecasting the we're the half. that's here for principally in So second declines -- the that's

what's smartphones phones, China -- in to XXXX, Now when of tell XXXX to the hard demand Android and XXXX. strong don't happened sub-segment related part But hopefully the what's look going how at part declines happen of in Android terms of the we with consumer we predicting of it's for to this China rebound yet will is have forecast XXXX in as a for recovers.

can't that. a give you color I of on So really lot

you. Thank

Thank you.

of line the from is Goldman next open. line of Hari, your question comes Sachs. Hari Toshiya Our Toshiya

Hi, well, and taking the the on good for question. Thanks much as morning. had so two Semi Test IA. one other I on

to in for you Test On Mark, was the terms year. hoping side, expectations speak I of the could your market share Semi

at like were the had you year seeing months the Test Given Semi is largest of market market I today three given that you little weakness perhaps thinking this level share feel opportunity incremental position a bit derisked wanted side? the than on your I with that you're clarify to customer. and better ago. your as just your for what

Yeah.

pieces soup. on it's On Memory, how consistent with there's of Semi percent market more compute really I of Memory which compute, share, to is competitors, think in so the in terms and happens going much of year. Test it on depends last -- be two SOC, XX-ish decline SOC our happens market on the side strong what

So statistical significant I customer the market our I quite a on, that that's in said, the decline -- -- again, from hear All that baked But year-to-year. to but in is that upper XX% compute know think decline we'll bit share believe imminent in few our suppliers around Test is this something a moves range switching upper mobility we've weeks, being about. strong market, based and we versus SOC compute as a weak think more that's next competitor, mid- in mobility. We year. in over

it. on side, as follow-up That's IA then helpful. question. Got a the my And I two-part guess

that seemed the noted The because is I guess, reduced fundamentals the the second just I for, in I the question remain outlook to half for clarify technical first And wanted part strong. you transitory. pretty business asked the reasons

You FX. talked about

You China shortages COVID talked in about the and US. staff in lockdowns

grows And going I and percentage today healthy do two, still on couple Thank of you a one. vis-à-vis profitability curious, business? your IA? district that does where dynamic, as that guess [ph] number OEM years? is And intact? you. is a And number see of in how as that impact just channel fundamentally, OEM So the channel big then that's business the how

is Greg. this Hi,

and take me Let that. try

that effects of fundamentals of IA through believe extent euro. should very is the the lockdowns through going see China be this that are the The a eased FX still We some the strong we both We of year. believe to market. headwind of and staff the the year. in shortages to don't rest significant consistent So the rest appreciation

overall is into continue that's right to Automation revenue for to lower able translation growing channel XX% a growth of that grew of the Group. So UR our for of the now, the And growth expect half, kind going take couple to it entirety first second terms our in top of your denominated XX% for represents that we to off dollars Industrial at it it's and euros. a revenue in about points the rate. be question, OEM -- of maintain To

impact on And profitability?

is distribution OEM pricing channel. favorable So a the through little pricing in bit our our normal to channel

we channel to any to impact negative don't So expect see grows. profitability as that

Great. Thanks for the details.

you. Thank

next of from comes Chatterjee the line Our JPMorgan. Samik of question

open. is line Your

I questions. a as taking have couple for my well. Thanks

autos industrial Test, you're in Semi within think and continuing I mentioned robust Semi Test. you within see to demand

So I weakness And well seeing then go you're Semi the in the autos within was automation, are trends I just wondering, you in industrial through and a in have any year as incremental follow-up. you industrial remainder as baking Test? of given the

think to the and industrial strong quarter the we've mobility will really. in that remain of baking the auto the confirmation in, yet end Most No, year. more not in get fourth But in on we is we're of and through again, compute and really infrastructure. weakness

back here. as same on planned I in you see that last at much CapEx were revenues -- structure the I to a that you're lower SG&A, if the about start the year. What's expenses maybe you're could structure to you you obviously the terms were higher follow-up have. delays of you when and long-term that cost pretty your as much for relation drivers -- of taking year your were you strategic just to running this you're flexibility buy Thank the But think rate mean, some just you. And that pair greater postponing rightsizing of revenue or secular of in some some announcing for customers the terms pushouts in it the of some spend today? seeing doing maybe cost you've

It's Sanjay.

our as of structure. cost a on comments just business model relates So couple it to

you majority test as contract our portfolio the So know, has manufacturing. of

really with provides great down our partners assets. and So outsourced up it scalability fixed

by on So wages But in plan revenue that or of from employees. and profit we variable up, a to compensation along a margin the as portion that perspective, an the then as have is line. it flexible of our key that passed that expense goes helps But part operating is is expected goes midpoint a it year half driven growth prepared a which the reduction remarks, down, of of the -- it's about growth driver of from of reduction of about my noted of this XX% I one as in variable is to the half midpoint compensation. that X%,

will our basis basis. up, intact operating long-term. the for our goes market on our And, goes have and expenses the increases, the increase investing reduce believe variable a while or expenses workforce as ability we So revenue let's on lower, the as rebounds time a market operating moves to say, that our we'll on obviously, variable and keeping then

color. Thanks you. the for Thank

you. Thank

from comes Evercore of question C.J. the ISI. next of Muse Our line

Your is open. line

taking kind I good is the a If then. SOC on margins. think question I Yeah, margins, you exceeded question. gross positive think I you're for revenue of I Thank at the at that gross rate, a on morning. terms first mid-XXXX what guiding side, look that's guess of discussed actually back run mix, yet you've the in worst

worse IA? than I'm a issues driving is Is is it margin hit mix other what here? FX curious contemplating, gross SOC in So what or it perhaps the much around kind the of

C.J. Sure,

think there's than corporate Test, average. think is you degradation is within mix which when average so mix, Semi the than yeah, some less higher I the IA, expected the than which also wireless less higher of product So and test, is corporate there as but

of I mix. of in et our seeing component spent costs those that effort other But multi-country and through supply resilient remarks. incurred And lot are of chain qualification is of noted that on in drivers second my the XXXX. prepared XXXX through cetera. you be making So couple going half to and manufacturing, money a A are we've a lot

we significantly curtail them be XXXX. that but there those have XXXX, will will So that in the curtail, majority some of in

those then we're ourselves partners. as also transitory. and little wage think of So for inflation And both bit seeing a our of

follow-up, I'm in guess or that seeing I how terms like? think curious changes heterogeneous sizes afoot test, terms dye with how of And you're thinking XXXX seeing a could effect XXXX, smaller you sizes, you or of you much. larger in cancellations? into might in so Thanks and advanced -- actual declines my then packaging. of your obviously, share market helpful. pushouts whether growth slowdown further compute, chiplets about the see dye what Very are look lot as and as net that we you're about

you. Yeah. Thank

the than in are and test So as effects the pins tailwinds in X-nanometer test all packages a increase changes computing multichip design. be for All and anything associated is that's a XXXX, associated intensity The coming or monolithic delays think any on in good chiplet in chiplets, known for design to us. would don't planned. toward positive test. I around heterogeneous there the dye, trends more with that. We see

and over in occurring the more of, say, been years phase that package have we'll let's next as to the continue prevalence. gains in method those several assembly market Now and more

year. that another in gives the model is that the we tailwinds that So midterm earning confidence produced the earlier in one of us

of customers point. a is around have So any seen else, basis for pushouts in the no cancellations on more to significantly, demand versus seeing what we place it's disappeared. those unbooked principally beliefs in at were we're cancellations. But that XX-week few terms and versus XXXX some of our our some been unordered XX change And not this hold pushouts, testers but there's we basically anything to do window for that key delivery that capacity a

Thank helpful. Very you.

you. Thank

next from Our line Graham the question comes of Robert Capital. Loop [ph] of

Your line is open.

morning. and theoreticals, question, welcome have Good for aboard, mind. don't XX,XXX-foot you more two Thanks taking if Greg. my I maybe

the idea warrant launch the may, to has was framework The launch, to think perhaps -- much more by new today, just decides next changed in XXXX market we tester I that was saying your year's your smartphone determined this their that X-nanometer. largest complexity curtail year, you, more complexity Mark? it even we've is would their importantly, tester I Has first enough with is or largest not started that be when correct, customer as anything in because year, to have a mind, weaker to the what that aided if more customer -- purchases,

Yeah, no changes on front. that

overall Our declines largest despite in pretty well year unit customer this has fared smartphones.

our a so and view anything is we nothing of XXXX. And And spot, market of robust. segment that it's there's that would expect the -- smartphone every heard we've bright change else that if --

Teradyne that seen then this your a more Very XX-month start past, eyes, good. essentially to in customer? was does numbers, slowdown that XX-month that And start far as the in six the is the half documented timetable in XQ actually that Mark, now? Does with specific whole you've as thing six obviously in first which because to large

inventory one declines customer and periods phases again, pretty broader and suggest phase were the sort as of now I down we into out would that well and this, lower inventory It's repeat side it in tighten bit believe of the period. in going digestion demand impact infrastructure. -- like that like think. more overhangs smartphone we people We've think we're to our isolated down working but you're half -- six going and certainly set big right, I of caution overall compute an is a now to we on categories. a coming in typically market levels And it's that it's I'll there's And little a more something are of the than it slow part first is XX-month through inventory there quarter head to has there a go projection sense been part. channel this economic that market. classical, having historically bit as on for orders that a in into markets What of to take the seen devices that and in the growth Yes. for third those and view starts in because

in QX, think, I six to is plays safe how and we'll starts So a out. XX-months, it yes, see bet,

extension just lower didn't jeopardy? extension of the to I I'm end way. in more into is framework likely, that one if you the By at the end thank now Mark, lower because that, XXXX put sneak that by -- just wondering deck? in. By the to this could framework you does for that maybe is that or the

think look up in either. projection and of in the much look is and XX% a -- see you and we look, and you year-to-year wouldn't market, that a markets end No, move could XXXX snapback I year. how of subsequent I play, if XX%, characterize I low at think down the at historically, growth the history When easily as it our intact model framework, earnings

I So based now. in any we're what wouldn't XXXX on seeing way right call

helpful. Very you. Thank

you. Thank

question line Brian Chin of next from comes Stifel. Our the of

open. is line Your

letting us seeing within TAM. just million again delineate a it's Good versus few Maybe ask in just any for sort chips questions. well? And compute morning Can reduction or maybe server the reduction? backtrack the client the PCs, and $XXX weakness on just to SOC high-performance whether compute as mobility that thanks zooming you in TAM, you anticipating or of also processors compute for are of outside hyperscale

TAM take of it. the side I'll

So estimates million. mobility million midpoint, auto about estimate where a our $XXX tied billion is sorry, an $X.X in million million $XXX in seeing $X.X in $XXX our -- seeing in compute, of decline million, we're and increase to $XXX really decline about we're our

So that's really, Brian, it. where we're seeing

occurring signals infrastructure weakness. the we service. question And correction corrections some anticipating early in immediate little seeing or of related the moment consumer not then a the laptops, in cloud compute on of bit getting of to are PC right the or enterprise area. at are where the now, Certainly, We're market

say, areas would I going coming. in suggest are there probably discussions that those that on that's However,

both in segments, projections we've QX some projections what of in part modest starting however. assumed so in those And QX declines and our to are market revenue relative mobility,

interesting. kind part like existing not delaying rates or to supply? switching if and supply not also curious complementary That's projects. the -- second automation also of IA demand, seeing? had next including headwinds, are been other MiR, but just heard that's And how even totally also I'm back and for anticipated is, growth thinking of to given year fair automation. for only Maybe that that your you XD cameras about We've conveyance it's Okay. products issues, then but then gears something not you're ask,

in The hearing North procuring some of elements So -- the we from definitely they're Greg. And are that's large of hi, complete books. our a that staff partially of off need constraints, this there's partners supply headwind seeing having of that there's terms -- projects in that get is issues, that their building. think number they also that to we're are I and part solutions trouble they the America of

latter happen constraints will start as that supply as we probably come ease, So that, a those think the of that year. this constraint. And to we off towards expect will part

growth In XXXX, it's end early, really any to market we because for see strong. of very reason range been in deviate very to terms about we've talking projections long-term, of that very, XX% are from the growth terms but fundamentals don't IA the XX%

where in of markets we a big We penetration market play. and the low have factor all scarcity still is very labor

Okay. Thanks I appreciate Greg. the color.

you. Thank

the from line of comes of question Bank. next Deutsche Sidney Ho Our

double-click I want Thanks. market. the on Great. mobility to

that mean more this in they meaning demand? more say, pattern But the growth customer I largest because QX, getting meet tested wait to think revenue we customers are will The little not end ask have your sales, more of to tied capacity a or year, is you until us customer. the reason revenue by the to of start later? I may if levels, order that excluding is smartphone smartphone inventory extra tested that closely we current growth your of normal do understand most start closer longer reflective seeing of hearing does

Yeah.

capacity world, three smartphone by would production unit say question. roughly So I about good precedes months. that in tester the

seeing capacity demand in in So smartphones quarter reduction a reflects for tester the third fourth quarter primarily. in the production our what unit we're decline of

if should return would year, up tester prior market, to start example, to back thinking So phone for sort then model. or launches see three the we're next major that's demand China to in months of we about growth -- the we a pick

question follow-up My the test. helpful. on is That's memory Okay.

to about year. the You test second likely $X memory quarter, called billion you CapEx But out to TAM cut in expect many be suppliers the still strength memory this in and are going these bit these and production. a or quite When to gains in is revenue, market think slow you headwinds? increased enough do and adjustments offset your will Thanks. down share feel complexity you

Yeah.

there's the in brand-new occurring to different tester XXXX interfaces the are growing And of see world that server that it's growing in -- fab LPDDRX obsolescence device and next place memory, we the a some into the phone expect this half all in new produce in and will of require in facilitated with in class share put little don't and been think the to year. in be of start that's in need capacity in because I testers correction world, DRAM world should in XXXX much testers. the a to year DDRX second that going

on I from events a on capacity growth tester have what of we're at tester in the obsolescence of the solved and of with end despite there's front else bit between these least the through So and CapEx the we part a early investment additional lag reused. everything be memory old think investment the tester back think that bit terms will the obsolescence end. XXXX, the -- in suppliers to hearing be of can't technological just because And

Thank Okay. you.

you. Thank

question line Our next Joseph from of of Morgan Stanley. comes the Moore

is the guys In diverging which to us will do you. call not on market, little can a you some a to just would of little make -- presumably portion seeing discontraction relationship now. about expect on with But of coming capacity bit relationship. kind bit contract. and online the Thank probably think stuff asking which that that logic you're most fab particularly WFE, your past, have us at need context Great. talk I'm much obviously, the SOC give and logic I tested? a much the and you're that be about you seems equipment relationship how you how test -- Just And talked between wafer odds business,

time but period wafer some sit It undiced, is capacity or -- right, In themselves keep period would odds. may a on. untested, suggest fabs It banking correlate be for be time. devices either of there the underutilized there will for fab going other will it die at the running, You're words, some unpackaged that of doesn't underutilized well.

months. to case is be coming that what next to correction. a at in itself I of for of little that end that's usually, to But of likely historically, six the bit XX-month the out So X kind I the a would the expect. washes of six But period think time back

referenced kind Okay. for last my question of follow-up, the you on Thank transitions technology you. And memory. then in

If getting year, Is talked of bit in tell year? that you factor a your a can this what talk that but next back? about about you you hear being and a is lower little DRAM timing it, pushed little does DDRX DDRX, business didn't I kind for Memory prospects about

of does. expected to our year, year, bigger we absolutely quarter business DDRX be fourth Yes, in the -- it in a you back XXXX. would part last the if the market This go of

out. pushed such and With a XXXX, into the Sapphire that lot Rapids delay of of tooling

very because been in the new All what However, ramping long, market behind up investment capacity. was held of year filled some for China. they've that aggressively robust suppliers in kind pretty

out, XXXX turns good DDRX, Memory. a delay it is despite for pretty year the in And so

So incremental look could XXXX, more into bit a when little be delay. an there of we

or I think. think to We're is Rapids I get to hearing everybody another escape it's months few so. velocity, coming. maybe getting close about Sapphire is going But out split

the So coming for orders capacity the orders, -- and for in we're now. we're that seeing seeing

some us Memory side we're So gives confidence on -- that's what more side. seeing pretty SOC bit a than little on the the

Okay. Thank you very much.

you. Thank

the of Sankar Krish Our of comes next Cowen. question from line

Your line is open.

had two I -- them. of Question

or Greg, follow-up. mobile your extent a segment that about could answer margins, then to Do transition? and how question If think answer getting it, more you demand year. next industrial Mark worry rollover, if a it, next detrimental I that be the on year better have you when that can First do you and on the auto wouldn't and you starts can to and

the mix close shift Yeah, that going us, pretty They're a blended headwind there's there that auto wouldn't for each a a margin say on think be to to frankly. that significant I and or I don't going between mobile it's is tailwind. other.

XQ our that As just to largest on based a to return, know their we to that introduction timing at see pattern from -- that's customer mobile the expect phenomena. change least And that's when cycles. we no would QX, we from product

would in to little Teradyne's introductions, would occur periods. changes of expect say, quarter. the the a phone There related some point we is modest a of XQ, those pickup to view, I manufacturers, QX, bit in other be big big So for two should pickup, but XQ

you the some for spending like for seems have continuing. China still front-end spending, evolves slowed follow-up, Chinese Teledyne? test to it. that, just very of investments. of got I and test how which And It like upon wanted on the a WFE China. but of OSATs That's touched spending it, decoupling I'm view between kind little is Got down then helpful. curious and is your a go a bit into just front-end one of subset of

Yeah, the not unabated. generally speaking say are continuing is fab but -- China, China and it's investments I that just would

that. back hugely of that a have could to question, now X-nanometer off is that the the back yet are revenue you year to argument been produced over make no Going that made utilization be underutilized investments because going

the to for has the X-nanometer an recipe tool the tooling time and advanced So -- become cycle. tune long unprecedentedly

and fab tend specifically added is, There's get test, flowing' a back times thinking all so to equipment ad. that of market until a Test of to in quarters lead slug tends production the revenue China. starts. spot all starts installed capacity year capacity And whole of fab be before to Fabs as front-end next “underutilized” with disconnect put between and a times.

fab the facilitated quarters So a in up ramp initial test as in fab running, of well. quarter, and up test an ramps devices the subsequent gets once capacity in starts the up ramps incrementally output

national at thing, And mainly say, priority fab I of to therefore, independence a counter time. maybe viewed a same there. I China, in most, more, access deployment fab. technology So would has a And the and smoother therefore, I'd fab say, last it's enabling just test invest been is around and resilient to technology threatening capacity and there's than focused on as the economical much is then the the think, in on going course, push

in strong. very Our business is China

single have is strong we very We largest we have of in equipment decent one somebody and which that, is very growth that consumer Huawei China, headwind, test major But seeing a of business a the serve. we're there. outside cannot

Thank you very much.

you. Thank

question of Our Mehdi Hosseini final SIG. from comes

line Your is open.

back XG a two grew want the towards factors on Thanks which for -- test you're And SOC I perhaps last taking my to question. in SOC at there. $X.X incremental be of we're away the level. end I the Mark, late the XXXX, have started year-over-year decade XXXX test. look basis. XXXX. since now and to go still there the parallel billion, guiding that are here, test And trends The helped is above the to to also went when

especially as follow-up. a not largest a that what with should everything with quick leading gives snapback in we customer confidence a XXXX So SOC you And moving in see next to the since to context, the have that your nation? continue bifurcation, test expected I is

Mehdi. Good, Okay.

line volatility is with earnings business model, manage And trend run too. and to midpoint expect growth line the off XXXX true. You're the of still billion market the is view in XX% has business growth CAGR. our trend been a along, the XXXX the said And all right. Monotonic current And the in since and XXXX, even CAGR line. we midterm $X.X we of with the XX%

of to of XXXX. is have my snapback bit the very part preface and around monotonic that. sensitive tester tester customers. thing history our it's growth in long know not So growth our so that's just demand not market strange, One think rewind that us is a hard to our I to of or so of business, I most might and on been of rate the want maybe many years and sequential after enough to remarks absorb all But

is So, units creates of the for of first -- driven their demand if derivative, small and we us X% ours because a be for off impact acceleration for can let's demand year If small, certain at X%, our us. customer demand a growing X% from and a on of increases that customer say, is nominally XX%, for their to a growth. example, growth tester rate Teradyne, business, XX%

our customer that to what to And reading economically, that's obviously, kind market to the we've lagging around on tell or and going happen. macroeconomic XXXX digestion not going world in sensitive customers. QX and maybe from million what baked the going rate to is the be now. X-nanometer, early so are issue going in The be in we're is QX, tea out inventory based be around $XXX anticipating leaves said demand growth to what's very the hard in I smartphone conditions largest our I happen. will the move about technological of we're think to what happen, drop may seen Macro the and on of which right kind We're into it's to of of

on or really want are in but those wouldn't I the far So too XXXX, factors to limb get the out play. at forecast

Sanjay. quick one And detail. the follow-up for for Thanks you. Thank

color the your guide, like this revenues all it OpEx seems be Given only of year, mid-teens, X%. down to adjusting you're and plus-minus. growth could X% And

I a mid-single-digit Looking an that or benefit get minimal should OpEx to we assume like, into do percent, accelerate that growth your again, say, OpEx should would XXXX will I from to let's easy next the XXXX, compare year, from growth if snapback, be you X%? assume

Yeah.

And increase line, that Test expenditures to XX%. going noted, still intact plan. we had aren't With XX% call in and on said, backdrop, we IA. long-term I out some And laid we we manage delaying anticipated in OpEx a earnings that, the our as model plan Mark that So in January the that and Mehdi, fundamentals we business to curtailed to impact an competitiveness. believe we obviously, and we are our this did a the as year, trend believe have

We haven't detailed planning in through the XXXX. gone

market that going we'll going in to penetrated my what's provide example, that going the successful secure believe to to we're in our investing good we're in Of on companies to us forward. the we're market that that very on going in We sub-X% portfolio the help that positions to fashion. January. course, for And focus market go update automation going is But -- still be is that to in keep expectation keep industrial long-term.

now, that help to our a the We're capture which going is weaker right good top but going numbers and have the the at -- half keep there exact same. road more bit So X% don't to little this and going operate on to still I through to our the that second back, strong very business continue have at my we're of we're gas expectation still and our keep than But will drive occurs. we some the going go-to-market in But Test business. are line a fundamentals to we intact. And XX% through snap we're predicting a to quarter we're to investment anticipated. go foot point, thesis of portfolio, to a grow ensure map the

variable talked we earlier. pool with And as comp revenue

you. Thank Right.

for of attention. are thanks, the time. we and and Folks, Okay. their everybody Mehdi, thank out you question, for questions

and to days please we out, look have you the Bye-bye. and to reach in forward talking follow-ups, weeks If you ahead.

conference for This call. concludes participating. today's Thank you

disconnect. now may You