Alpha and Omega Semiconductor Limited (AOSL) on Q3 2022 Results - Earnings Call Transcript
Operator: Welcome Alpha and Omega Semiconductor Fiscal Third Quarter 2022 Earnings Call. My name is Bailey, and I will be your moderator for today's call. . I would now like to pass the call over to Gary Dvorchak. Gary, please go ahead.
Gary Dvorchak: Good afternoon, everyone, and welcome to Alpha and Omega Semiconductor's conference call to discuss fiscal 2022 3rd quarter financial results. I'm Gary Dvorchak, Investor Relations representative. With me today are Dr. Mike Chang, our CEO; Stephen Chang, our President; and Yifan Liang, our CFO. This call is being recorded and broadcast live over the web. A replay will be available for 7 days following the call via the link in the Investor Relations section of our website. Our call will be as follows: Mike will begin with strategic highlights. Then, Stephen will provide business updates in a detailed segment report. After that, Yifan will review the financial results and provide guidance for the June quarter. Finally, we'll have a question-and-answer session. The earnings release was distributed over wire services today, May 5, 2022, after the close of the market. The release is also posted on the company's website. Our earnings release and this presentation include certain non-GAAP financial measures. We use non-GAAP measures because we believe they provide useful information about our operating performance that should be considered by investors in conjunction with the GAAP measures that we provide. A reconciliation of these non-GAAP measures to comparable GAAP measures is included in the earnings release. We remind you that during this conference make certain forward-looking statements, including discussions of the business outlook and financial projections. These forward-looking statements are based on management's current expectations and involve risks and uncertainties that could cause our actual results to differ materially from such expectations. For a more detailed description of these risks and uncertainties, please refer to our recent and subsequent filings with the SEC. We assume no obligation to update the information provided in today's call. Now I will turn the call over to our CEO, Dr. Mike Chang, to provide strategic highlights. Mike?
Mike Chang: Thank you, Gary. I would like to welcome everyone to today's call. It is good to be speaking with all of you again. Q3 was another great quarter. And once again, we succeed in outperforming our guidance. Revenue was a record $203 million, which represented 20% growth year-over-year and was the first time in our history to cross the $200 million threshold. This was achieved by obtaining additional wafer capacity from our existing foundry partners and continuing to optimize product mix. This resulted in non-GAAP gross margin of 36.7% and a record non-GAAP operating profit margin of 19.9%. Non-GAAP EPS was $1.34, representing a 74% growth year-over-year. I am extremely proud of this result and continue to be amazed at our team's efforts and ability to execute quarter of the quarter in such uncertain and challenging times. However, I am very saddened today by the evolving situation in China, particularly the lockdowns in Shanghai. As you know, our in-house packaging and the testing facilities are in Shanghai, which handles a good portion of our final packaging and the testing requirements prior to shipping. After the initial lockdowns were imposed in late March, our Shanghai strategic and testing facilities remained operating because our dedicated employees made an extraordinary sacrifice to the inside the facility to keep operations going. However, continuing operations required daily testing and negative COVID results. In early April, a few of our employees tested positive for COVID19. And our operations were forced to shut down by the Shanghai government. Therefore, our ability to complete the assembly of our products and ship to customers were severely limited. Fortunately, at the end of April, the Shanghai government classified AOS as an essential business and a clear to restart operations. We are quickly getting production starting again. However, the pace at which we can resume for full operations still remains challenging due to defaults in bringing back labor workforce, procuring certain raw materials and resolving logistics bottlenecks. At this time, timing of when the lockdown will be lifted is still unknown. Even after the mark down for , we expect some time before all the support supply chain issues are fully resolved and the business there returned to normal. As a result, we expect our revenue in the June quarter will be impacted based on the latest estimate, including 3 weeks or limited operations during April and ongoing logistics and supply chain challenges. We expect the lockdown will impact June quarter revenue by approximately $20 million to $25 million. However, we still anticipate June quarter revenue to be around $190 million. This represented 7% growth year-over-year. Excluding this Shanghai lockdown impact, we estimate growth would have been 20% year-over-year for the June quarter. As our operator went back to full capacity and the surrounding supply chains normalize, we do anticipate to recover a portion of the lost revenue in the second half of the calendar year as our wafer production was not impacted by the lockdown. As a result, we actually built a stock of preassembly state wafer inventory. Given the global wafer shortage over the past years, we expect this buildup or wafers will help fully utilize our packaging assembly lines once things return to normal. If I will provide more details on our guidance during his portion of this call, but please understand gross margin is currently more difficult to focus as our allocation mix for each business line is still moving around where we reramp our assembly lines. On a positive note, we have been strategically diversified our packaging and testing operations and have begun to accelerate the pace of these initiatives. Our JV internship team already handles a good portion of our back-end requirement. And we also have begun the process to outsourcing some of these steps to other contract manufacturers, although that will take some time. Also, I think it goes without saying, we are very thankful to have our Oregon production facility, which is not exposed to this kind of risk. The impact of Shanghai lockdown to our operations highlights the benefit of our capacity diversification strategy. We believe this impact will only be temporary and make us even stronger in the long run. The global trend of electrification of everything is just getting started and our power products sit at the forefront of that trend. We are building a very resilient and diverse global business and remain well on track towards our goal of achieving $1 billion annual revenue and beyond. Before I turn the call over to Stephen, I want to say our hearts go out to everyone in Shanghai that have been affected by this situation, and we create a quick resolution. I also want to give a very special thanks to our employees for their extreme sacrifice and dedication during these very challenging times. Their dedication to us has really been all inspiring and made me realize once again, how special our team truly is, and I'm very grateful to have their support. Thank you, and I will now turn the call over to Stephen for an update on our business and a detailed segment report. Stephen?
Stephen Chang: Thank you, Mike, and good afternoon, everyone. I will start with an update on our business and then provide color on our segment results. In the March quarter, we once again set new records for revenue and profitability driven by strong demand across all our business segments, particularly among our Tier 1 customers. The current favorable supply and demand environment has given us more ability to optimize our shipment allocations to higher margin and strategic accounts. Moreover, we can quickly adjust to changes in customer orders by strategically redistributing parts to other parts of the business. Looking forward, in addition to the challenges of the ongoing lockdown situation in Shanghai, we are beginning to see early signs of a market demand slowdown in certain of our end markets, such as PC, smartphones and home appliances. However, our total backlog is still a lot higher than our current capacity to meet it even after baking in macro softness. While the Shanghai situation has been very unfortunate, it serves as a tangible reminder that our strategy to diversify our supply chain is the right one, and it further strengthens our commitment in that direction. In the March quarter, we accelerated our Oregon fab's R&D facility upgrade and capacity expansion. We purchased more advanced lithography and related production equipment and continued the clean room construction. The product remains on track to be completed at the end of the calendar year and will contribute to approximately $70 million of additional annual revenue once in full production. Further, we also received additional wafer capacity support from our third-party foundry partners as well as our Tenshin JV. Now let me drill down into each of our business segments. Unless otherwise noted, the following figures refer to the March quarter of 2022. Starting with computing. Revenue was up 28% year-over-year, up 2% sequentially and represented 44% of our total revenue. These results were somewhat stronger than our prior expectations as the March quarter is typically our seasonally weakest quarter following strong holiday shipments. The main driver of this outperformance was continued strength in notebooks, particularly from OEM customers that have a higher concentration of their business serving commercial laptop applications. We believe this was driven by return to office trends and company's refreshing employee work laptops. We deliberately targeted a higher mix of commercial projects during the past years since our power ICs and power MOSFETs have higher performance specifications and higher prices that better suit commercial markets. This benefited us as the consumer market is beginning to see weakening demand. Finally, in computing, we also saw continued strong demand for our products in high-end and gaming desktop PC applications. Looking ahead, we do see early signs that the PC market is beginning to soften. However, overall demand for our products remain much higher than what our capacity can fulfill. In the June quarter, we expect the Computing segment to be lower due to temporary operational limitations and lockdown in Shanghai. We are optimistic that we can recover a portion of lost sales in the second half of the year once Shanghai returns are normal and as we ramp for our seasonally strong September quarter ahead of holiday sales. Turning to the Consumer segment. Revenue grew 24% year-over-year and 14% sequentially and represented 22% of total revenue. The year-over-year growth was driven by share gains in gaming with a Tier 1 OEM. The sequential results were largely in line with our prior guidance. As the timing of some game shipments near the end of the quarter were delayed, but we could anticipate to catch up in the June quarter. Looking ahead, home appliances are slowing, which is 1 of the larger revenue contributors to our consumer segment. We expect the June quarter to decrease high single digits sequentially, but due to overall capacity constraints, we are able to shift production to other segments to offset revenue impacts. Next, let's discuss the Communications segment, which was up 6% year-over-year and up 14% sequentially and represented 14% of total revenue. This segment performed slightly better than expected due to stronger demand for our battery protection products from the leading U.S. smartphone maker and share gains with Chinese OEMs. Looking forward, we expect June quarter shipments to remain flat at these levels sequentially. Finally, let's talk about the Power Supply and Industrial segments, which accounted for 19% of total revenue. This segment was up 16% year-over-year and down 0.3% sequentially, which was slightly better than our expectations. In the March quarter, we strategically reduced allocations to our AC-DC power supply and quick charger business following strong consecutive quarters of shipments and anticipated China smartphone weakness. Our performance was due to strong demand from our power tool customers. This is an emerging application for us with great synergy, given our product strength in low- and medium-voltage products targeting battery management and brushless DC motors. Looking forward to the June quarter, we expect to maintain about the same level of allegations for our Power Supply and Industrial segments and therefore, anticipate revenues to remain about flat. To wrap up, the Shanghai lockdowns has temporarily stalled our momentum and really stress tested our entire organization. However, the situation also brought into light aspects about our business that we didn't appreciate enough before, like extreme resilience and dedication of our employees and the level of support from our business partners and customers. We are immensely grateful for this and are even more driven to keep working hard towards our goals of $1 billion in revenue. With that, I will now turn the call over to Yifan for a discussion of our fiscal third quarter financial results and our outlook for the next quarter.
Yifan Liang: Thank you, Stephen. Good afternoon, everyone, and thank you for joining us. Once again, March quarter was a record quarter for us from the top line to the bottom line. Revenue was $203.2 million up 5.1% sequentially and up 20.1% year-over-year. In terms of product mix, DMOS revenue was $140.6 million up 4.1% over last quarter and up 14.6% year-over-year. Power IC revenue was $60.4 million, up 9.6% from the prior quarter and up 39.1% from a year ago, which puts our Power IC revenue over $200 million annual run rate. This reflects our strategic actions to drive Power IC business to enhance our product mix. Assembly service revenue was $2.2 million as compared to $3.2 million last quarter and last year. Non-GAAP gross margin was 36.7%, flat quarter-over-quarter and up from 31.9% a year ago. Non-GAAP gross margin excluded $1.3 million of share-based compensation charges as compared to $1.7 million for the prior quarter and $0.4 million last year. In addition, non-GAAP gross margin excluded $0.8 million of amortization of purchased IP, the same amount as last quarter and a year ago. Non-GAAP operating expenses were $34 million compared to $33.5 million for the prior quarter and $30.9 million last year. Non-GAAP income tax expense was $2.3 million compared to $1.3 million for last quarter and $1 million a year ago. The quarter-over-quarter increase of tax expense was primarily due to higher profit as well as increased stock-based compensation for employees from the higher price of our stock in the March quarter. In sum, non-GAAP EPS was $1.34 per share as compared to $1.20 for last quarter and $0.77 a year ago. Moving on to cash flow. GAAP operating cash flow was $61.8 million, which included $6.4 million net customer deposits. By comparison, operating cash flow in the prior quarter was $50.8 million, which included $11.2 million customer deposits. Operating cash flow a year ago was $33.3 million, which included $20 million customer deposits. EBITDA was $48.4 million compared to $46.7 million last quarter and $36.2 million a year ago. Let's move on to the balance sheet. We completed the March quarter with cash balance of $323.1 million compared to $269.3 million at the end of last quarter. The cash balance a year ago was $192.1 million, which included $33.8 million at the JV company. During the March quarter, we drew down $45 million equipment loan at our Oregon fab and repaid $2.3 million on our existing term loans. Therefore, at the quarter end, our bank borrowing balance was $65.2 million compared to $22.7 million a quarter ago. In terms of trade receivables and inventory, day sales outstanding for the quarter were 28 days, flat quarter-over-quarter. Given the uncertainty of the global supply chain, we increased our inventory balance by $14.5 million, primarily in raw materials. Average days in inventory were 94 days, reduced by 11 days versus last quarter, primarily due to the impact of deconsolidation of the JV company. Finally, property, plant and equipment was $245.8 million, an increase of $49 million quarter-over-quarter. Our capital expenditures for the March quarter were $43.4 million. We expect a similar level of CapEx for the June quarter. Our Oregon fab expansion project is on track. Clean room expansion was over 80% down at the end -- at the quarter end and a small portion of the equipment has been moved in. We expect the clean room construction can be completed and a majority of the equipment can be moved in during the June quarter. And we anticipate additional capacity to come online in the December quarter. Now I would like to discuss the June quarter guidance. We expect revenue to be approximately $190 million, plus or minus $10 million, primarily reflecting the production lost at our Shanghai factory due to the impact of the Shanghai COVID lockdown. Our Shanghai factory has resumed partial production at the end of April. This guidance is based on the assumptions that our Shanghai factory can remain COVID-free and continue to gradually ramp up its production in May and return to normal production in June. GAAP gross margin to be 31.9% plus or minus 2%. We anticipate non-GAAP gross margin to be 33% plus or minus 2%, reflecting the estimated impact of lost production and incremental expenses needed to cope with the Shanghai COVID shutdown and the production recovery. Non-GAAP gross margin guidance excludes $0.8 million amortization of acquired IP and $1.3 million of estimated share-based compensation charges. GAAP operating expenses to be in the range of $44.3 million, plus or minus $1 million. Non-GAAP operating expense is expected to be in the range of $36 million, plus or minus $1 million. Non-GAAP operating expenses exclude $8.1 million of estimated share-based compensation charges and $0.2 million of estimated legal expenses relating to the government investigation. Interest expense to be approximately $0.8 million and income tax expense to be in the range of $1.3 million to $1.5 million. With that, we will open the call for questions. Operator, please start the Q&A session.
Operator: . Our first question today comes from David Williams from Benchmark.
David Williams: Congrats on the spectacular results. Yes. And we certainly see and understand the lockdowns in China. I know it's a very challenging situation for you and your employees, but I wanted to see maybe if we could spend a minute and talk about the appliance market. You said you're seeing some slowdown there. Do you see that maybe from a geographic perspective? Is it more broad based? And do you get a sense that maybe it's a demand side issue? Or is it simply more kitting issues where others are being affected with component shortages as well?
Stephen Chang: This is Stephen. We're seeing a little more from the demand side. It is the ongoing trend towards variable speed motors is still ongoing. The overall trend is moving. But in terms of the shipment growth, it has -- it appears to be slowing down a little bit. And I don't think it's necessarily geographically concentrated.
David Williams: Okay. Fantastic. And then maybe if we kind of think about the -- on the OpEx side, it looks like in June, you're expecting about a $2 million sequential increase there. Is there any component of that or maybe to what magnitude is the lockdowns in China contributing maybe just some of that step-up in spending?
Yifan Liang: David, yes, this is Yifan. The guidance in our OpEx, yes, primarily, we are anticipating some additional investment in our R&D and sales and marketing areas, increased headcount and increased hiring activities there to support our business growth, so that our goal is to achieve $1 billion in revenue and beyond. So we are investing. Yes, some expenses also baked in for the -- related to those recoveries. But by and large, is the investment in our R&D and sales marketing area.
David Williams: Okay. Great. And maybe one more just on the gross margin side. Obviously, some impact there, understandable. How quickly do you think that can recover? Can we see a return back to the pre lockdown levels? And maybe what pace can you continue to maybe see some expansion there on the mix shifts?
Yifan Liang: Well, for the September quarter and ongoing, we have to wait until next quarter's guidance. I mean the right now, the situation over there is quite a bit challenging, and then we have to wait next quarter to give more great estimate.
David Williams: Okay. And that's fair. But I guess, do you get a sense that you can recover the margin profile as you move forward and more normalized notwithstanding further shutdowns? Do you think that's -- because it seems like those changes for the margins had at least have been very structural in nature. And it seems like those would rebound once you get there. Do you think that's the case? Or is it a similar level for market...
Yifan Liang: Well, yes, at this point, yes, I would expect -- our business is still intact we are confident that we can continue to grow and the business is still there. And so it's just temporarily right now got impacted by the Shanghai production loss.
Operator: Thank you, David. The next question today comes from Craig Ellis from B. Riley Securities.
Craig Ellis: Congratulations on annualizing revenues at over $800 million in the quarter, guys, nice accomplishment. I wanted to follow up on the China packaging facility issue in Shanghai. So clearly, we have a shift in revenue from the fiscal fourth quarter out in fiscal '23. The question is this, do you think, based on your interaction with customers that you can recapture 65%, 75%? How much of the $22.5 million at the midpoint gets recaptured? And then what's your sense based on the product programs that you're involved in? And when that happens, would it be 75% in the first half of the fiscal year and the balance in the second half? Or how do those dynamics play out based on how your salespeople and other folks interacting with customers?
Yifan Liang: Okay. I mean this we would expect yet a portion of the production loss we can catch up as our overall wafer production was not impacted our organic and our foundries and the joint ventures and continue to produce wafers. So right now, we're actually accumulated some wafer inventory on hand in the time of April. So I mean, we would expect on our back end can catch up some things go back to normal, then in terms of percentage, it's hard to I mean it depends on the production dynamics in the second half of the year. But we would expect a good portion of it, we can recover.
Craig Ellis: Okay. So it sounds like it's at least half and maybe more than that to either recover timing a bit TBD. One of the things you mentioned that in response to what was happening in Shanghai on is that the company is looking at moving some of the work to Chongqing and looking at moving some of the work to external back-end partners. And so that might imply a product requalification. But the question is this, for the changes that are being made, what's the incremental cost of packaging, whether it's moved to Chongqing or externalized -- and to what extent is that in the 33% gross margin guidance? And the question David asked earlier to what extent does that linger in the back half of the year?
Yifan Liang: I mean this -- right now, this the production planning and then the customer coordination, all those things kind of are still ongoing. And I mean, right now, it's kind of fluid at this point. The 33% an estimate for the June quarter's gross margin, non-GAAP gross margin is primarily based on the loss of production in our Shanghai facility and some incremental expenses we have to deal with the Shanghai lockdowns and logistic challenges and transportation, those things. I would expect a good portion of it that we can return back to normal in the second half of the year, yes. That's my current estimate. But we have to wait until next quarter to give more clear guidance.
Craig Ellis: Yes. That's totally understandable. It's been a fluid issue over the last 2-plus years now, right? So moving on to some product-related questions. I wanted, Stephen, to ask you a few things. One, given the real heightened focus on the mix of the PC market for investors, can you just give us some sense of what you think your enterprise mix would be versus consumer mix in compute? And then relating to compute, I think it's generally well understood that there's some very significant gaming card product refreshes coming, some of which based on a lot of the information that's out there could be significantly higher power. Can you just talk about how you're looking at content in the gaming card business as you move into the back half of the year and we move into what is typically a period of product refresh activity for your customers?
Stephen Chang: Sure. So you're asking about the graph quite specifically, not computing. Is that right?
Craig Ellis: So well, the first part of the question. The first is just computing mix on the PC side between consumer and enterprise. And then the second one was the gaming card question.
Stephen Chang: Sure. Let me address both. So on the PC side, in general, AOS over the past few years has been gravitating more towards addressing commercial applications within PC. And this is kind of the nature of our product mix as we develop more higher performance MOSFETs as well as higher performance power ICs, we naturally gravitate towards the higher performance pockets. And those tend to be used in commercial platforms at our -- at both our notebook as well as our PC customers. In general, content can be significantly higher. It depends what you're comparing against consumer also can vary from home books, although up to even higher performance consumer laptops. But in general, I would say that the BOM content for commercial type platforms are generally 30% to 50% of higher bond content potentially, depends how imports there are. It depends what kind of processes you have that needs to be powered and that determines the bond content within PC.
Craig Ellis: Okay. And then on the gaming card side? Yes.
Stephen Chang: Yes. On the gaming card, yes, we're in the process of designing and getting design into the next platform at our big graphics card customer. We are expecting content to increase. There are more phases. The account is increasing in general. So that basically means more driver losses that will be used there. We still are in that design and in mode right now. So it's a little early to comment on the portion of the business that we'll be getting. But right now, we're expecting at least the BOM content to be increasing in the next platform.
Craig Ellis: Yes. Great to hear. And then lastly, Yifan, turning it back to you. There was mention made at the $45 million fab equipment loan associated with the expansion that's been well known there. The question is just given how high the cash balance is, why finance the equipment through that loan rather than just cash on hand?
Yifan Liang: Sure. I mean, yes, we do have a good cash balance right now. And right now, the fact terms along like 5 years long and become available to us, I mean the rate is pretty attractive, especially compared to the inflation right now, than Jan, I would like to strengthen our balance sheet. And then yes, we do need some cash to support our continued growth and then CapEx expansion. So yes, that's how we decided to draw down the $45 million equipment loan.
Craig Ellis: So is that a mid-single-digit rate? Or is that more low single-digit rate?
Yifan Liang: Has the low single digit and so on.
Operator: The next question today comes from Jeremy Kwan from Stifel.
Jeremy Kwan: Yes. Let me add my congratulations on the $200 million quarterly milestone. I just wanted to follow up a little bit on the early signs of softness that you're seeing. I understand it's merely coming from consumer and maybe both the consumer portion of PC and also the consumer appliance segment. But can you elaborate a little bit more in terms of what signs that you're receiving? Is it -- are there kind of order cancellations or changes in backlog customer behavior? Can you just give us a little bit better insight there, please?
Stephen Chang: Sure. You find a comment on the overall backlog. But in terms of the PC customers, we are seeing a drop in demand for the consumer portion. We're not 100% commercial. We still serve the consumer segment of the market, just that we were much heavier in the commercial side. So we do see some impact there from demand softening there. Well, that just means we just serve the commercial area more. So it is coinciding with what we're hearing kind of in market reports also that well, the Chromebook has already started to drop even in the past couple of quarters. So now and assuming the standard consumer laptop demand also starting to drop a little bit. That it's just continuing that trend.
Yifan Liang: Okay. backlog, backlog right now, we have still very strong, and I mean, steady, strong and then much higher than what we can ship. I guess this reflected our customer base, changes in the past few years, we are having a lot more Tier 1 OEM customers and ODM customers. So then we are forming strategic partnerships with those Tier 1 customers. Those customer deposits can indicated the mix changes our customer base. So while we're down to the downturn, coming up and those deposits would have another way to mitigate our downside risk.
Jeremy Kwan: Great. And maybe just going back to the Shanghai facility challenges there. Can you remind us again what percent of your revenues is handled by this facility? I understand there's -- you've got some more standard equipment located in and then Shanghai has proprietary packaging and testing. Just to get a sense of what that is right now and what the utilization rate may get this facility was prior to the lockdown.
Yifan Liang: Sure. I mean, Shanghai back end, handles a good portion of our overall capacity. I mean, I would say, more around half of the overall assembly and test over there. In the past, yes, some packages were fully utilized in some, we still had some additional capacity. So that's why we said with more wafers accumulated on hand in the second half of the year, we are expecting to catch up a good portion of the production that we lost in April, partially in May. So that's the overall situation.
Jeremy Kwan: I guess my question was is it was fully utilized prior to the lockdown. Have you been able to kind of add incremental capacity to do the catch-up?
Yifan Liang: Yes. I mean before the lockdown, some packages were fully utilized and some were not. And then yes, also during the markdown time, we rearranged to more to the subcontractors to utilizing their production capacity. So there are some redirecting, shuffling around. Yes, we are doing the operation planning management.
Jeremy Kwan: Got it. Great. And then maybe if we could turn to the -- I guess, on the Chongqing side of things. Can you give us a sense of what maybe the potential lockdown risk is there? Does your designation as an essential business by Shanghai government help you get something similar in Chongqing?
Yifan Liang: Right now, Chongqing is not locked down. I mean this in China just city by city right now. So Shanghai is in locked down situation, not in Chongqing.
Jeremy Kwan: Okay. And I guess last question for now is the -- on the inventory side, it sounds like you've built some nice supply of preassembly wafers. But then you saw most of your increase is due to the raw materials. Is that considered raw materials for you? Or is the way preassembly wafers is that considered kind of more work in process? Just wondering where kind of the buildup is and what are kind of the main drivers, if it is a substrate costs, things like that, and what kind of things you're seeing on the cost side from the inflationary pressure standpoint?
Yifan Liang: Okay, sure, sure. The increase in our inventory, primarily in raw materials in my comments was mainly referring to our quarter end, March quarter end balance increased compared to December quarter end. During the March quarter, we intentionally increased some raw materials inventory, yes, in anticipation of the global supply chain challenges. The wafer stock pile up, and Mike was referring to the April time frame. When of Shanghai assembly house was shut down. But on our Oregon fab was continuing to produce so that other foundries and our JV. So I mean that's why in the month of April, we had some additional wafers piled up. So that's where we say we expect the second half of the year, we can catch up some of the production loss at our Shanghai factory in April and partially in May.
Jeremy Kwan: Got it. That's very helpful. And sorry, if I could just ask 1 more question on the Chongqing side of things. Can you give us an update in terms of their capacity expansion plans? Are they still tracking to -- have they been able to receive and install equipment and get things ramped up? How much incremental capacity do you expect from them over the course of this year?
Yifan Liang: Yes. As you know, CJV, they raised $80 million in January. And then they already placed the order for the capacity expansion. So -- but that lead time for the equipment is quite a bit long. Nowadays so we do not expect the have additional capacity come online this year.
Jeremy Kwan: Got it. So the growth that you're expecting for the remainder of the year -- or sorry, for I guess in the calendar year, is it dependent upon in ramp up then, that's where you're seeing all the incremental gains?
Yifan Liang: Incremental gain would come from yes and Oregon capacity expansion and ramp up as well as foundry and supply. We have been working with foundry partners since last year. So we should be able to see some additional capacity supply during the course of this year, remaining of the calendar year.
Operator: The next question today is a follow-up question from David Williams of Benchmark.
David Williams: Just wanted to maybe touch on this quarter and the revenue upside. Was that driven more by volume or pricing or maybe even more so from mix shift? Just any color around what drove the upside would be helpful.
Yifan Liang: Sure. Primarily, in the March quarter, we received additional wafer supplies from our foundries as well as JV. So that's where we can produce them more and shut down more.
David Williams: Okay. Great. Any thoughts on maybe what the unit volume growth would have been perhaps sequentially?
Yifan Liang: I mean mix definitely changed in the during the quarter. And I mean the unit, if you talk about the total unit may not be higher than the December quarter, but the mix definitely in favor of higher ASP type of products. For example, Power IC products continued to have a strong growth in the March quarter. So I mean product mix, some products ASP at 10 or a couple of cents. And then the same in the over dollar. And then I mean that's kind of pretty wide spectrum in terms of selling price of our products. So I mean, the product mix during the quarter can impact on the revenue mix quite a bit.
David Williams: Okay. And maybe just the last one for me real quick. Any commentary around the design win activity or any traction you're seeing, how the design win has been anything in particular there that you're seeing either slowing down or picking up pace?
Stephen Chang: Design wins, I think, are still steady. Now we continue to work in our business both for this year as well as for next year. Our -- we've been focusing not only on our core markets, PC, smartphone and home appliances. I know we talked about that a lot. We're also working on and building up some of our newer and newer markets. We talk about power tools this time as an emerging area that as we continue to diversify the breadth of our products and their applications, we're also getting closer to do our -- the big customers or the Tier 1 customers. So it's in a good shape.
Operator: Thank you, David. There are no additional questions waiting at this time. So I'd like to pass the conference back over to the management team for closing remarks.
Yifan Liang: This concludes our earnings call today. Thank you for your interest in AOS, and we look forward to talking with you again next quarter. Thank you.
Operator: This concludes today's conference call. Thank you for your participation. You may now disconnect your lines.
