Release Date: November 13, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Tower Semiconductor Ltd (TSEM, Financial) reported a strong financial performance for Q3 2024, with revenue reaching $371 million, marking a 6% quarter-over-quarter and 3.5% year-over-year growth.
- The company achieved a net profit of approximately $55 million, representing a net margin of about 15%.
- Tower Semiconductor Ltd (TSEM) continues to experience strong growth in its RF infrastructure business, which represented approximately 18% of corporate revenues in Q3 2024.
- The company is leading in the silicon photonics market, with expected revenue of approximately $100 million for 2024 and a forecasted annualized Q4 2024 run rate of over $150 million.
- Tower Semiconductor Ltd (TSEM) is expanding its production capabilities, including a production ramp of 1.6-terabit products and investments in new capacity and technology, such as the 300-millimeter PDKs using a 65-nanometer CMOS.
Negative Points
- The imaging business remained stable rather than growing as expected, particularly in the machine vision sector.
- Fab utilization rates for some facilities were below optimal levels, with Fab 2 and Fab 9 at about 60% each.
- The RF mobile market, although representing 26% of corporate revenues, is not overly strong, with demand outpacing capacity in some areas.
- There are no long-term take-or-pay agreements in place for RFSOI capacity, which could pose a risk if customer demand fluctuates.
- The company faces potential challenges in the mobile market, with some major players not optimistic about 2025, which could impact growth in the RF mobile segment.
Q & A Highlights
Q: Can you clarify the revenue and gross profit opportunities for applications above 400 gigabit, especially regarding ASP premiums?
A: Russell Ellwanger, CEO: Yes, the ASP is higher for applications above 400 gigabit, particularly for active copper cables. Most of our sales are already for 800G, which commands a good ASP due to the advanced platform used.
Q: Are you tracking above your previous silicon photonics revenue targets for 2024 and 2025?
A: Russell Ellwanger, CEO: Yes, we expect to hit about $100 million in silicon photonics revenue this year, with a Q4 run rate of $150 million, indicating we are tracking above our previous forecasts.
Q: Can you explain the $350 million investment plan and its impact on your revenue model?
A: Oren Shirazi, CFO: The $350 million investment is included in our long-term model to achieve $2.66 billion in annual revenue. It's necessary for expanding SiPho and SiGe capacity and capabilities.
Q: What kind of customer agreements do you have to support your SOI capacity ramp?
A: Russell Ellwanger, CEO: We don't have take-or-pay agreements but rely on strong relationships and track records with customers. Our assurance comes from multi-generation roadmaps and serving customers well.
Q: Are you seeing any volatility in wafer activity due to changes in NVIDIA's platform?
A: Russell Ellwanger, CEO: Yes, some wafers have been put on hold for a mask change, but it won't significantly impact our volume output.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
