Release Date: November 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Power Integrations Inc (POWI, Financial) reported a 9% sequential increase in revenues for the third quarter, reaching $216 million.
- The company achieved a non-GAAP gross margin of 55.1% and non-GAAP earnings of 40 cents per share, slightly above guidance.
- Power Integrations Inc (POWI) expects strong growth in 2025, particularly in the industrial segment, driven by high power and high voltage DC transmission projects.
- The company is making significant advancements in its GaN technology, with recent introductions including the industry's first 1,700-volt GaN switch.
- Power Integrations Inc (POWI) has a healthy balance sheet, allowing for a 5% dividend increase and authorization of $50 million for share repurchases.
Negative Points
- The revenue outlook for the fourth quarter is projected to decrease to $105 million, reflecting a soft demand environment.
- There is a build-up of appliance inventory at Chinese OEMs, impacting the consumer segment, which accounts for nearly 40% of sales.
- Channel inventory increased to 8.6 weeks, up from 7.8 weeks in the prior quarter, driven by higher consumer inventory.
- The company experienced losses in the China cell phone market earlier in the year, affecting overall 2024 revenues.
- The consumer segment is facing challenges due to the delayed and varied impact of China's government stimulus program on appliance demand.
Q & A Highlights
Q: Can you discuss the recent 1,700 volt GaN announcement and its potential demand and applications?
A: The 1,700 volt GaN is essential for automotive applications, particularly for vehicles moving to 800 and 1,000 volt battery systems. It also fits well in three-phase industrial applications due to its ability to handle significant transients. Currently, this market is served by Silicon Carbide, but GaN offers better efficiency and cost advantages. - Balu Balakrishnan, CEO
Q: How might the new administration impact your business, particularly in renewables and energy efficiency?
A: The trend towards electric cars and renewables is unlikely to slow down, as renewables are now cheaper than coal. High voltage DC transmission, crucial for efficient power delivery, will continue to grow, benefiting our business. Increased oil production could positively impact our high-power business, particularly in applications like fracking. - Balu Balakrishnan, CEO
Q: How does your high-power GaN technology compare to Silicon Carbide, and what are your competitive advantages?
A: Our 750 volt GaN is nearing cost parity with high-end MOSFETs and is very competitive with Silicon Carbide. For higher voltages, GaN is competitive up to 100 watts, and we are developing new technology to compete at higher power levels. GaN's manufacturing process is less energy-intensive than Silicon Carbide, offering long-term cost advantages. - Balu Balakrishnan, CEO
Q: What is the current status of inventory across your end markets, and how did it affect your quarterly results?
A: Consumer inventory increased due to higher sell-in than sell-through, driven by Chinese inventory build-up. This resulted in consumer channel inventory slightly above normal levels, while other categories returned to normal. The build-up was due to anticipated demand from Chinese government incentives, which have not yet materialized as expected. - Sandeep Nayyar, CFO
Q: Can you provide guidance on the revenue contribution from GaN products in the coming years?
A: GaN is expected to replace silicon in high-voltage switches across our products. We anticipate GaN products could account for 20% of our revenue in the next 2 to 3 years, with potential to exceed $100 million by 2028. GaN growth is expected across all markets, despite challenges in the cell phone segment. - Balu Balakrishnan, CEO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
