Conference Transcript - MXL 2026-09-09

Kelsey, Analyst — U.S. Semiconductors

My name is Kelsey, one of the analysts here covering U.S. semis. So very pleased to have Steve Leachfield with us for MaxLinear CFO. Perhaps, Steve, how about we start with giving the audience an overview of the company's heritage, product portfolio, and also how MaxLinear is benefiting from the AI Compute Buildout.

Steve Litchfield, CFO

Great. Sounds good. Well, thanks for having us, Kelsey, and thanks for seeing everybody joining us today. A little bit of background on MaxLinear, companies really founded as a mixed signal semiconductor company, focused, I mean, we started an effort in infrastructure about five to six years ago, and that's been, you know, kind of a labor of love in the beginning, and we really started to get some solid traction here in the market over the last few years. This most recent quarter, it was over 50% of our revenues. That's been the focus of our data center business, as well as our storage accelerators and some of our wireless infrastructure. Also have several other in-markets, broadband connectivity and industrial markets. But over the last several years, as far as R&D dollars and product focus, it's been around the data center and the infrastructure business.

Kelsey, Analyst — U.S. Semiconductors

How should we think about the tailwinds within the infrastructure build out? Is it the 400 gate, 800 gate, 1.60 transition or scale up, scale out? How are you guys positioned within the networking transition? Sure.

Steve Litchfield, CFO

So, I mean, we're participating in all those scale up and scale out. Our 400, maybe step back a little bit and talk about where kind of revenue comes from today and then where it's going. So this year, mixed between 400 and 800 gig, primarily DSPs, that business is growing nicely this year. The midpoint of our guidance for the optical piece of it is $220 million. The mix of that business today is probably 70% 800 gig and probably 30% 400 gig. Kind of getting to the end of the life on the 400 gig. I think most of the market data says that will slow down next year. But 800 gig, I feel like, will grow nicely this year as well as next year. And then some debate on what happens in 2028. Our new product, Rushmore, is customers are qualifying that product, working with those solutions today, expected to go to market kind of mid-next year. And so we're working with tons of customers right now with that particular ramp. If it starts mid next year, it probably goes into, you know, kind of full scale production in the following year. So and I guess one thing I would add there is we also have our Washington TIA that sells alongside of that. So just from a pure ASP standpoint, you know, if you look at 800 gig, most of the market data will say ASPs are running, I don't know, $35 to $50 probably versus a 1.6T, which is probably 80 to 100 plus the cost of the TIA, which pushes it above 100. it. I mean, right now in the market environment is such that, you know, pricing is holding very good. I don't expect that to change, you know, right now, kind of given the constraints that we're seeing throughout next year. So I don't anticipate pricing coming down much between now and the end of next year anyway. So on the optical data center piece, I mean, you guys have raised guidance i think i believe the last three quarters um how should we think about that trajectory or you know what is what changed during this period that resulted in that consistently higher guidance over time right no it's it's a good question um yeah because going into the year i think we had said that we'd be north of 100 and then each quarter we've raised um so what's changed i mean i think it's a few things i mean the market continues to grow you guys have all probably seen the growth in transceivers this year versus the beginning of the year so that that's clearly one but i think our share that we were anticipating has gone up more than probably what we had expected uh we've seen new customers come on that were not planned for um and so i just think it's kind of a handful of things i don't think it's one in particular but several things we've also tried to be a little bit conserving conservative entering the year just from the standpoint that with supply constraints being what they are we don't want to over commit to investors nor do we want to over commit to customers so we i think we've tried to be just conservative on those expectations um how has backlog visibly improved in the last since earnings

Kelsey, Analyst — U.S. Semiconductors

for even the last two quarters?

Steve Litchfield, CFO

Sure. I mean, look, visibility is very good. I mean, again, kind of back to, I think there's a big gap between supply and demand here. Visibility is strong from the standpoint customers are coming in. We quote 26 to 28 weekly times for our optical products. That's fairly consistent, but I will say that customers have come in placing orders throughout all of next year, or at least at a minimum, giving us forecasts so that we can go out and plan, right? I mean, as all of you know, TSMC and all of the other folks in the supply chain need forecasts, need planning. So in order to secure that capacity for next year, we need to see those orders up front. And you're in an environment where you're getting those orders right now.

Kelsey, Analyst — U.S. Semiconductors

Got it. Could you talk a little bit about max linear differentiation? I mean, in the ESP market, it is dominated by a couple of players. How do you guys win? How do you see that competitive positioning change or evolve as the market transitions to 1.16?

Steve Litchfield, CFO

Yeah, look, I mean, there's two big players in this market that we've competed against for a long time. I started out talking about our mixed signal expertise, but that expertise is really what allows us to bring technical technically unique solutions that are very differentiated i mean our current 800 gig solution runs about 20 less power than a comparable module from one or the other of those two competitors and um so you have to start there right i mean we've always had that technical differentiation and we continue to have it i think a couple of things that have changed or that have allowed us to uh maybe further gain share further penetrate the market is look over the last couple of years we we've done a lot in broadening the portfolio itself so now we have our retimers we have our washington tias we have drivers so so we're broadening out the portfolio and and that makes a big difference to the customer base because they want to work with less suppliers at the end of the day so they want to see more capability out of us i mean uh i think the third thing was just simply that we've been in production for now 18 months mass production and i think that's you know it's always a bit of a challenge this chicken in the egg thing they don't want to design you in especially big customers you know without seeing you in production we've passed that hurdle and they're very comfortable with it i think as we and it makes a big difference especially as i look out into these 1.6T ramps and where we are with the ramp, the knowledge that we have, the visibility that we have, the customer comfort, I guess, if you'll call it that, that we have that we didn't have at 400 gig or even 800 to a certain degree. So I think that technical differentiation, I think it always starts with that. We've also bolstered up our systems expertise. I think that's something that's changed a little bit in the environment. when you're dealing with large data center customers or hyperscalers, they're not so much worried about component performance. They're worried about system performance. And so over the last 12 to 18 months, we've hired a number of system engineers, located them very close to the big hyperscalers, and made sure that we're able to bring systems expertise. And I think that's something else that's important going forward.

Kelsey, Analyst — U.S. Semiconductors

Got it. How would you describe your customer concentric within that?

Steve Litchfield, CFO

Sure. So it's fairly broad. I mean, I'm sure most of you guys know in the audience, you know, we have to think through all the data center customers as well as the module customers, right? And MaxLinear, we had always focused on the data center customers, and we probably paid a little less attention to the module guys. Now, that's flipped over the years. We've put a lot of effort into the module customers recently just because those are the guys that are working on qualifications, interop trials, firmware changes, things like that, solving customer problems. So those folks are really important. As far as concentration, I mean, we've had pretty broad adoption and we've got engagements across all the major data center guys as well as all of the module players. Um, we don't have any one customer that's dominating that. And as I look out into the, you know, naturally we'll see if market shares five to 7%, I think we have aspirations to get up to 20, 25%, uh, over the next couple of three years. And I think we have a great chance to do that. So, um, but I don't think it's necessarily dominated by one guy. I think there's three, four, five guys and many, I mean, you'll be familiar with all of them, of course. So I don't think it's dominated by one person, but I do expect to see more concentration next year and certainly into 2028.

Kelsey, Analyst — U.S. Semiconductors

Got it. What needs to happen, Rich, that market share aspirations from where we are today?

Steve Litchfield, CFO

Well, so first of all, it's happening. And when I say that, you know, I mean, that transition has kind of already happened. We're seeing those share gains. We've got these qualifications done. We've got to continue to support those customers. We've got to continue to ramp. We've got to continue to build out our own portfolio. We've got to continue to get supply, right? I think we've got to, I think we're competent on that. We've got to continue to bring some differentiation, whether it be on the technical side or even innovativeness on the supply chain. I mean, with our 1.6T, as many of you know, we moved to Samsung. So So the industry is somewhat constrained by TSMC, and so this move to Samsung has caught a lot of people's attention, and they're very interested in the fact that it gives them some diversity. And so most of your Mazel guys selling into the space, they're trying to kind of get some independent supply chains, which is not very easy to do, given some of the constraints on all of the components. And it's so I think we've got to continue to do innovative things like that, not just at the chip level, but even in the ecosystem we have to think through.

Kelsey, Analyst — U.S. Semiconductors

Could you walk us through how do you think about the manufacturing strategy, like I said, and things are getting tighter at the advanced notes? How do you go about securing that capacity?

Steve Litchfield, CFO

What negotiation you have to work with? yeah so i i mean how do we go about it maybe i'll follow through on the samsung if i i mean our strategy is always to have multiple foundries we've always had multiple foundries over the years we you know call it four or five years ago we would alternate between umc and tsmc and then umc kind of stopped investing on advanced nodes and then we were kind of stuck with tsm tsmc for a period of time. But we had been kind of talking to Samsung and they clearly have advanced node capability. And so we ultimately chose to move forward with that. It really wasn't done just for optical. I mean, it was done for the company and to keep some diversity. So you'll see other products and other product lines or business units that will be done on Samsung as well. So I think overall, it's a long-term strategy that we have as a company. It's not just for optical. As far as securing capacity and what we're doing, other than kind of keeping diverse supplier base, yeah, we're negotiating, you're putting in orders. You know, a lot of folks are talking about LTAs. I mean, we would try to avoid that for the most part. But, I mean, from time to time, we've done those just to make sure we secure supply. In some cases, we're prepaying or you put letters of credit. There's other ways that you can secure capacity as well. and so we have to use everything in the toolbox right now in order to make sure we get that.

Kelsey, Analyst — U.S. Semiconductors

Because you guys are fabulous and it seems like as demand continues to upside much better than our expectation, do you foresee any challenges or based on a relationship that you have had with the foundries that it's not so much a problem?

Steve Litchfield, CFO

So look, I think we've got a great relationship. I mean, it's been forged over many, many years. I think we've seen great response from them in tough times like this. So I'm confident that we will continue to get more supply. I mean, I think your question alludes to more. How much more can you get? I think we can get a lot more. But we do have to continue to keep a really close relationship. We have to give them visibility and help them. And we do that in a number of ways. I mean, not just giving them POs, but we also think through from a technical standpoint on how we can improve that throughput as well. I mean, whether it's IP or chip size, I mean, there's all kinds of ways that we can do this in order to increase output. They're not easy, and sometimes they take months and, you know, some R&D dollars, but often that will make sense for the long term. So we have a close partnership, and we'll keep that up for sure.

Kelsey, Analyst — U.S. Semiconductors

Got it. I'll open it up to the floor for any questions. One second.

Speaker 3

Thank you for sharing. I have a quick question regarding your products market share.

Steve Litchfield, CFO

So as the technology evolves, would you think, for example, like DSP, like your portion or like a dollar value, as the technology advance, would it be like higher or lower and how do you think about the product mix going forward yeah a good good question so certainly as we go you know just like we've seen from 400 to 800 asps have gone up same thing at 1.6 i mentioned there's a big jump at 1.6 i think as you go to 3.2 you're going to see another big jump uh and 6.4 naturally i mean these performance levels keep increasing talk about the component you know like what what exactly increases i mean i think of some of the simple pieces like a tia the driver the the dsp which includes the certes i mean those are kind of the three big pieces right as you advance and especially as you go to 3.2 um you know architectures are changing quite a bit and you're seeing the it uh some of those parts become a little disaggregated so now you've got a more than likely you're going to see a standalone tia you're going to see a standalone driver and and then you're going to see the the the certes itself which really is going to be incorporated differently uh maybe it's not in a dsp but it certainly exists and will very much be needed there's only a handful of guys out there that have their own certes at these at these performance levels and so that's something that is very unique to us and I think we can continue to increase our value proposition to the customer so I actually I absolutely think ASPs go up you know at each transition for max linear I can't give you an exact number of what that ASP is because we don't know what 3.2T or 6.4 is going to look like but each of the pieces may look a little different right I mean your TIAs and drivers at 1.6T, the ASPs are quite a bit higher than they were on 800 gig, quite a bit higher than they were on 400 gig, because those pieces end up becoming more valuable, as does the 30s.

Kelsey, Analyst — U.S. Semiconductors

What is the metric that drives that content increase?

Steve Litchfield, CFO

What do customers sort of look at before they're willing to pay a higher dollar for that uh well that's a tough question because i think if you if you think it from a customer's eyes i mean they're building entire systems right and they're trying to be more efficient effective i mean there's you know there's i started out talking about our differentiation being on power i mean their power cost are tremendous right and And so to the extent they can lower that, they lower the overall system cost. You know, you can simply put, I mean, even we're talking like the DSP portion, if you end up doing a half-free time solution, if the signal integrity is such that you can reduce one side, then you have to increase the other. So I could reduce some content here, but I've got to increase. So, like, for example, I could decrease the DSP over here, but I increased the TIA and the driver on the other side. Right. So I don't know that there's one perfect metric. I mean, because every one of these guys is, you know, their architecture is a little bit different. And I think what's important to us, and actually, I think it's a very unique value proposition that we have. And, you know, as you mentioned, the two other competitors in the space, there's not many people that have these IP blocks. that are able to address the problem statement here, if you will, right? I mean, you can't just come in and develop certes at these performance levels. It's just, I mean, right now the entire market is short on these resources today. And so I think that's something that really stands out and it's why customers come to us.

Kelsey, Analyst — U.S. Semiconductors

Got it. Anyone else?

Speaker 2

Just as you move to 1.6T and utilize Samsung more, I'm just curious what kind of market share opportunity you think that opens up, whether or not there's a significant slack capacity.

Steve Litchfield, CFO

Yeah, so, well, I guess I don't think of it, I think if your question is about market share as a whole at 1.6T, I mean, I think it's, whether we're on TSMC or Samsung, I mean, I think we have equal opportunity. That being said, with Samsung, given the constrained environment, I think, you know, we're seeing a lot of people kind of show up going, yeah, we would love this. It's something else that differentiates us. So, I mean, we've long held getting to that 20, 25%. I mean, I think we stand by that today. It's not going to happen overnight. um naturally you do see bigger jumps you know at at the different uh transitions so i do think that we can uh take us you know a sizable jump at 1.16 uh i think that's what we're counting on and and and looking towards with regard to getting um wafers uh we don't anticipate that being a problem. And I don't mean that they have infinite supply, but naturally we've worked with them on the forecast and potential ramps and we feel very comfortable that we can meet the demand of the customers.

Speaker 3

So I asked about your product mix going forward as a technology advantage. So eventually we're going to have NPO and then CPO, right? So you'd have your products to offset those potentially like dsp less risk right can you talk about that area and the plan oh i'm sorry offset what risk um if dsp will be less reliant uh you know given you know it's eventually when you say reliant you mean um currently it's plugable and in optics eventually we go to npo or like cpo if they use less dsp you know that's a lot of your products revenue and you you can use other products revenue to offset that right yeah so for that technology advancement and what is the strategy

Steve Litchfield, CFO

sure so this is a little bit of what i had shared a little bit earlier about the increased content right so in an npo or a cpo application that content would increase so what what increases The TIA increases, so ASPs increase, performance levels increase, drivers increase. In fact, today the driver is integrated into the DSP. Now you need a standalone driver. And then the CERTES ends up being in a chiplet. So you say you take all of those versus the DSP in a TIA today, I'm saying that the content is higher in a CPO or an NPO application.

Kelsey, Analyst — U.S. Semiconductors

Anyone else? So perhaps shifting gears a little bit, I believe the team has talked about a long-term growth of who acts the semiconductor industry rate. It's a fairly ambitious target given that this year, if you look at the semiconductor market, it's on track to double 100% year on year. So just want to get your views, like is that the right growth rate this year, next year, or like what is the normalized growth rate?

Steve Litchfield, CFO

So for better or worse, we're a smaller semiconductor than a lot of these other guys. So our infrastructure business, I think a lot of the analysts this year have it growing somewhere between 150 and 170 percent. So I think I think we're doing a pretty good job on that front as far as gaining more share. I think you'll likely see, you know, some of that continued growth in 27 and 28 based on, you know, some of the products and the share gains that we have. So, yeah, if we can continue to outpace this market, and yes, the market is very strong right now, I think we've got a lot of new products with our retimer, which we didn't talk so much about, but like the retimer, AC applications, our next generation, Big Sky, which addresses 3.2. I mean, we've got a number of products. We're a new kind of player. I mean, albeit we started this five or six years ago, now we're on a third generation product. So I think we're getting a lot of traction. Customers acknowledge that. Our Panther Accelerator is another big one. I mean, we have a lot of new products that just came to market this year that start to ramp in 27. So that's all going to be what gives us the fuel to grow and outpace the market.

Kelsey, Analyst — U.S. Semiconductors

So double the industry growth is still the expectation.

Steve Litchfield, CFO

And if you look at, I mean, you know, it's pretty amazing. I mean, we've all kind of talked about data center growth. It's been very substantial. But I think our content, our share gains, I think I get this question. I've been in meetings all day. So, you know, what's underappreciated? I think this is one of the things that's frankly underappreciated. And granted, you know, it's a little bit what's different. I mean, this is that third generation, that second generation, we got the traction, we proved ourselves. And so now they're comfortable moving forward with us where they had not been before they had not seen that and and i think also just simple fact that the market's gotten a whole lot bigger they want to see an alternative supplier you've also seen the two big guys kind of focus less on this right yeah and and i think that's an opportunity as well because and not to say that they don't have other big things to focus on but that opens up the door uh for max linear right especially improving the power performance yes yes got it

Kelsey, Analyst — U.S. Semiconductors

could you talk a little bit about your panther.

Kelsey, Analyst — U.S. Semiconductors

You mentioned that it's on track, it's doubling this year.

Steve Litchfield, CFO

Doubling this year.

Kelsey, Analyst — U.S. Semiconductors

And potentially double again next year. It's still pretty small, as it's said, with the entire portfolio. Talk about a growth rate, talk about a customer traction, and also what's your longer-term expectation?

Steve Litchfield, CFO

Sure. So, yeah, I mean, you're right. It's somewhat of a smaller product line. It only did 15 to 20 million last year, but do expect it to double this year. And I think we're on track to double again in 2027. It's a storage accelerator, which is an offload capability. So where CPU utilization is very high, the ability to offload with our solution, it's using a compression technology, enables them to use less CPUs.

Speaker 2

That was the original purpose.

Steve Litchfield, CFO

We focused on the enterprise storage market. We had done a lot of work with Dell and a number of other guys and had a lot of success continue to work with that entire community today but as cpu utilization continues to go up and get more expensive as nand and just memory prices and availability continue to go up customers have kind of come and said hey you know if we tweak the architecture change this firmware could could we do do some things differently the answer was yes, we've been working on that. That's part of what's going to drive growth next year. And I think you're going to see more out of us. One other thing that changed, they changed, but another engagement, we had a relationship with AMD, maybe a brief bit on the competitive landscape here. The other alternative to this accelerator technology is it's a product called QAT, and it's from Intel. And Intel has a software capability that compresses data on top of their CPU. Now, a lot of our customers, that compression capability is not sufficient, and they will use our Panther technology. But the other big CPU player, AMD, came to us and said, we don't have that capability, and customers would like to have your capability. So they did a reference design with us. We've done a couple of keynotes at FMS. And so we've seen a lot of progress as they have sent customers our way. And so some of those customers are going to be driving that growth next year. And then you'll also start to see the product portfolio evolve a bit. You've seen a few press releases on some of the newer products, but there'll be more coming on that front.

Kelsey, Analyst — U.S. Semiconductors

How should we think about that driver of that? Is it tied to CPU unit shipment?

Steve Litchfield, CFO

So I would say today, CPU utilization, okay? And then, you know, I think soon to be kind of memory and storage, you know, if we can reduce or offload that usage. It's not a controller. I've had this question a few times. It's not a controller, but it is a capability that we bring that is pretty unique.

Kelsey, Analyst — U.S. Semiconductors

Okay. Got it. But let's shift gear a little to gross margins. So the company's on track to achieve 60% gross margin and has a long-term target of 65. Could you walk us through the key drivers to get there and also could you stack rank the gross margin profile over different businesses?

Steve Litchfield, CFO

Yes, I'll give some color there. So gross margins, so this most recent quarter, So historically, max linear kind of run in the low to mid-60s last down cycle, kind of dropped down to 58. We've been kind of in the process of recovering, making good progress on that front. Most recent quarter, up the guide to 60%. So good traction. That's amidst some of the backdrop of the increasing wafer prices and the like. So making good progress. The big thing here is the mix, right? So our infrastructure business runs above the corporate average, and so we do expect gross margins to expand from here as our percentage of business on the infrastructure side continues to increase. Been a little cautious, frankly, just to up that guidance too aggressively because we're seeing big increases in whether it's wafer premiums or if it's just wafer prices in general. And so we don't want to get ahead of this, but I do see a general tailwind on the gross margin side because of the mix.

Kelsey, Analyst — U.S. Semiconductors

Got it. able to pass through majority of that?

Steve Litchfield, CFO

Yeah, so that's a good question. So look, pricing is very firm, no doubt. I mean, you've seen prices increase this year. And so for the most part, a lot of that pricing has been able to be passed on to the customer. I think that'll continue next year. I don't think I'm not worried about prices coming down next year, at least in some of these areas where there continue to be constraints. So I mean, the pricing environment is very good.

Kelsey, Analyst — U.S. Semiconductors

Okay. And in terms of pricing, do you price just to offset the input costs, or is it slightly higher than input costs?

Steve Litchfield, CFO

I don't know who's in the room. Just joking. Certainly, so look, I mean, at the end of the day, I mean, our job is to get the value for the products that we provide. I mean, in all seriousness, that's what we want to focus on. And so where we can bring down system costs, for example, we want to make sure that we're getting compensated for that. where we see input costs go up and it needs to be passed along. Unfortunately, from time to time, we do have to do that.

Kelsey, Analyst — U.S. Semiconductors

Got it. I know we're out of time, but one last question. So what is the key takeaway that investors need to know from this apparel site chat?

Steve Litchfield, CFO

Look, I think we have a tremendous opportunity with our data center business. I think you've seen us kind of ratchet up the guidance, but I think we're really kind of hitting our stride. I think this is just beginning. I think the share gains that we've seen are really early days. And so I think we've just got to continue to stay focused. And I think you're going to see that over the next couple of years as these newer products hit the market.

Kelsey, Analyst — U.S. Semiconductors

Got it. Thank you. Thank you very much, Steve.

Steve Litchfield, CFO

Thank you. Thank you for joining us.