Thank you, Michelle. Good morning and thank you for joining ON Semiconductor Corporation's fourth quarter 2020 quarterly results conference call. I'm joined today by Hassane El-Khoury, our President and CEO; and Bernard Gutmann, our CFO. This call is being webcast on the Investor Relations section of our website, at www.onsemi.com. A replay of this webcast, along with our 2020 fourth quarter earnings release, will be available on our website approximately one hour following this conference call, and a recorded webcast will be available for approximately 30 days following this conference call. Additional information related to our end-markets, business segments, geographies, channels, share count, and 2021 fiscal calendars are also posted on our website. Our earnings release and this presentation include certain non-GAAP financial measures. Reconciliations of these non-GAAP financial measures to the most directly comparable measures under GAAP are also included in our earnings release, which is posted separately on our website in the Investor Relations section. During the course of this conference call, we will make projections or other forward-looking statements regarding our future events or the future financial performance of the company. The words 'believe,' 'estimate,' 'project,' 'anticipate,' 'intend,' 'may,' 'expect,' 'will,' 'plan,' 'should,' or similar expressions are intended to identify forward-looking statements. We wish to caution that such statements are subject to risks and uncertainties that could cause actual events or results to differ materially from projections. Important factors which can affect our business, including factors that could cause actual results to differ from our forward-looking statements, are described in our Form 10-K, Form 10-Qs and other filings with the Securities and Exchange Commission. Additional factors are described in our earnings release for the fourth quarter of 2020. Our estimates or other forward-looking statements may change, and the company assumes no obligation to update forward-looking statements to reflect actual results, changed assumptions or other events that may occur except as required by law. We have changed the date for our Analyst Day. Now, we plan to host our Analyst Day on August 5, instead of on March 5. With the recent change in leadership of the company, we believe that we will be able to provide and form a completed view of our updated strategy and financial targets on August 5.

Thank you, Parag, and thank you everyone for joining us today. I want to start by expressing how excited I am to be a part of this company and its incredibly talented and motivated workforce. I will start by sharing with you the initial observations and updating you on the process we will use to evolve the future strategy and direction of the company. I will then address our fourth quarter 2020 results and turn the call over to Bernard to discuss financials and forward-looking guidance. I took the role as CEO because I could clearly see the tremendous potential we have, even as I looked at it from the outside. Having been in the role for a few months now, I can see a company with outstanding assets, including a highly talented and motivated workforce, intellectual property, sales channels, products, customer relationships, brand, and industry-leading operational prowess, to name a few. We are focused on the right markets which are the fastest growing semiconductor end markets with solid margin potential. I am excited about the opportunities we have in front of us to maximize the value for our shareholders, customers, and employees. As I dove deeper into the company during the last eight weeks, I have been positively surprised and have grown increasingly bullish about our prospects. The opportunities in front of us far exceed my initial expectations, and I am working with my team to turn these opportunities into a strategy with a credible execution plan. I'm very confident that we will be able to deliver the full potential of the company to our stakeholders. At this time, I don't have all the answers to what the future strategy and direction of the company will be; however, I will walk you through the process we will be following to get there and be able to share the details with you at our Analyst Day in August. It should come as no surprise that our primary value driver will come from our gross margin expansion initiative. At this time, we aim to maintain the over-market revenue growth in our strategic markets while being opportunistic in others. We will focus on maximizing free cash flow to de-lever our balance sheet and set us up to remain a consolidator. To achieve our objective of maximizing shareholder value, we are ready to make substantial changes in our strategy, business, and organization. We have begun the process of reevaluating our current product portfolio and our investments across the board. We will reallocate investments and resources to accelerate our growth in high-margin businesses, away from non-differentiated products and markets which have had a historically low margin profile.

Thank you, Hassane. During the fourth quarter of 2020, we saw continuing recovery in business conditions driven by robust growth in global economic activity. Order activity accelerated sharply across most end markets as customers are ramping production and replenishing inventory to meet the steep increase in end market demand. Along with the strong broad-based recovery in macroeconomic conditions, secular mega trends in automotive, industrial, and cloud power markets continue to drive our business. Gross margin improvement is the primary strategic priority for the company. As Hassane indicated in his remarks, we are going to do a detailed review of our product portfolio. The primary objective is to reallocate our capital to drive margin expansion and growth. Our revised product strategy will determine our capital expenditures and investments in other resources needed to support the business. We will update you with our progress as we go through the process. We are on track with our manufacturing consolidations and discussions are ongoing with various parties regarding the previously announced intended sales of our fabs in Belgium and Niigata, Japan. We have closed our operations and sold the fab in Rochester, New York, and we should begin to realize annual savings of $15 million starting in the first quarter of 2021. Now, let me provide you additional details on our results. Total revenue for the fourth quarter of 2020 was $1.45 billion, an increase of 3% as compared to revenue of $1.40 billion in the fourth quarter of 2019. The year-over-year increase in revenue was driven by growth in our key strategic end market. GAAP net income for the fourth quarter was $0.21 per diluted share, as compared to a net income of $0.14 per diluted share in the fourth quarter of 2019.

Hey, guys, thanks for letting me ask the questions. First, Bernard, it's great working with you all these years, congrats on the retirement. My first question is for Hassane. You mentioned a laundry list of actions you are going to take structurally for the company. I know you are not going into exceedingly detailed levels before the analyst meeting in August, but I wondered how you are balancing the gross margin side versus the OpEx and operating margin side. You mentioned about doubling down on R&D. How do you balance the gross margin versus the operating margin priority for the company?

Sure, Ross. Let me give you kind of how the approach has been because we started doing that work. At a high-level, you can think about it as self-funding, meaning, I don't like to dabble, whether we say we are working on it or not. If we are creating products in low margin businesses or markets that are not our strategic markets, those investments are going to stop. That's going to release capital for us to re-invest, and that's where the doubling down. And don't think about it as we are going to double down and OpEx is going to flip up beyond the levels. We are going to actually reallocate OpEx. And with the simplicity and removing complexity in the way we run our operations here, that's going to release a lot more capital for us to reinvest. So, I am not worried about having enough investments that we can reallocate, while maintaining at or below our OpEx, which obviously will drive our operating margin favorably.

Thanks for the details, Hassane. And I guess one for either you or Bernard, the guidance is better than seasonal. You said that's going to continue for a bit. Was the better-than-seasonal comment just about the first quarter, or was it longer than that? Any color between the different segments to get to your guidance for the first quarter?

Yes. This is Hassane again. Our focus right now is in the first quarter. Obviously, we are coming out of a very lean inventory, both our customers and the supply chain. So, that's a rebound we are seeing in Q1 better than seasonal. I remain cautiously optimistic for the rest of the year, but it's too soon to call the rest of the year at this point. In the prepared remarks, we talked about it may take a few quarters to stabilize the supply and demand situation, and that's when we'll get a little bit more clarity. Obviously, if you've seen the news, a lot of that strength is coming from automotive, and we see the same way, which is a big market and a focus market for us. So we're watching it closely, but I remain cautiously optimistic until we get out of the trend of supply-demand imbalance.

Thanks, everyone. First, congratulations Bernard, I'm envious. My first question is about operating expenses. What is the reasoning behind making an upfront payment to everyone before the upturn instead of afterward? Should we view this as the new standard for operating expenses, or is there a possibility it could decrease afterward?

So it is not an upfront payment, it is an accrual, an accounting accrual as we have an annual plan which actually books on a cash-wise basis next year, in February, if we achieve the numbers. So this is just an accounting accrual recognizing the liability we are creating with delivering results that lead to the new plan.

Yes, let me just put that stake in the ground. We are 100% focused on pay for performance. We have to accrue throughout the year. But pay will occur in 2022 in the first quarter, just like it did this time for the prior year, so it's after the fact. We don't do any advanced planning as far as payment in any form to employees until after the performance period is done and validated.

Great. And then …

To your question about the trend on OpEx, we believe we have the step function increase. And pretty much after that, it should be fairly steady.

Okay, great. Thanks, Bernard. And for my follow-up, hey, Hassane, you mentioned you're going to take a look at the product lines. I guess what sort of rough percentage of revenue are we talking about that's being targeted as far as these low-margin product lines? And can you shed any light on what are these low-margin product lines, is it some MOSFETs or IGBTs or is there some other sort of like passive types of products you guys have?

Sure. It's too soon to tell as far as to give you a percent, because literally I am looking at everything. But the way I look at it is strategic alignment to our end market, strategic alignment to our margin target, and really strategic alignment to the growth that we want to set for the company, both in gross margin expansion and revenue. So, to put a percent on how much is that, it's hard to tell. But it's not going to be like you were expecting or IGBT or effect of whatever kind, because we're not looking at it as just a product family. I'll give you an example. We have IGBTs that go into EVs; I love that. That's a growth market, it's good margin, and we have a very good position in that market. That's going to be obviously a growth product and market for us. But IGBT and a low margin consumer, that is not going to be an investment for us. So that's the surgical approach we are actually proceeding with in order to get the right balance we talked about already.

Got it, that makes sense. Thanks, guys.

Thank you.

Good morning. Thanks very much for taking the question. And Bernard, thank you for all the help. Hassane, you talked about you guys addressing demand, so far being pretty successful in addressing demand so far. But can you speak to where lead times are for your business today versus three months ago, six months ago? And sort of related to that, how is the pricing outlook for your business over the next six to four months in relation to what you guys have seen over the past few years?

And so let me address the lead times; they have been inching up. They are still in the mid-teens, but moving upwards in direction.

Yes, we are experiencing a positive pricing environment. We have faced some price increases from our supply chain, and we are collaborating with our customers to transmit those costs downstream. There is also the factor of supply and demand. We continuously assess our pricing strategy, and we are currently doing so. It's important to note that our high-value products require a higher margin, which is also a part of our pricing review. You can expect to see a significant change in our pricing discipline beyond just the supply and demand factors as we move forward. The tangible results and detailed updates will be discussed in the August meeting, as that will allow me enough time to implement the process and analyze its effects.

Great, thank you. And there is a quick follow-up, just on sort of the long-term model. Again, I appreciate you're not going to preview your August Analyst Day, but when you look at some of the numbers that Keith and Bernard put up during their last investor day, a mid single-digit revenue growth, 43% gross margin, 21% OpEx intensity. Given what you've seen so far, Hassane, where do your views differ the most, is it more on the growth side, is it more on the margin side, is it both? Any would be super helpful. Thank you.

It's not about the top line or gross margin; my focus is on the timing of it. That's where I'm directing my energy right now. Then we will discuss what that will mean for the top line and how quickly we can reach the target we've set, which we will refer to as 43, since that's the only publicly available number. Many people ask me what to expect from our financial model, and I want to emphasize that you should hold us accountable to whatever the company has already achieved, even if it wasn't my personal responsibility, until I present changes in front of all of you in August. For now, just hold us accountable to the targets and the financial model that we have already provided as a company.

Yes, thank you, and best of luck, Bernard, and congrats, Hassane, on the new role. Hassane, a question on the 300 millimeter, the transition that's been undergoing for a couple of years; any thoughts on how that progress is happening? And what are your thoughts on that transition to 300 millimeter? Are there steps that you want to try to accelerate that transition, and what would they be?

Certainly. The 300 millimeter transition is essential for our company, and we are progressing internally with plans to establish an insource fab for this purpose. We are assessing whether we need additional capacity, but this does not necessarily imply that we will have multiple 12-inch fabs. The decision will be primarily influenced by the product portfolio we intend to develop and invest in over the next five years, as part of our portfolio rationalization. I cannot make any commitments regarding our manufacturing footprint until we clearly identify our strategies, potential margins, and the necessary support for production, whether inside or outside the company. Currently, we are advancing with East Fishkill; we have been removing certain products while some are in the sampling phase. Technology development and product integration into that fab are ongoing, and I’m pleased with our progress. Any acceleration will depend on our focus on products and margins, which will be tied to the associated capital. This work is still in progress and not yet finalized. However, I anticipate having it ready by the time I present an updated financial model at the August meeting, which will outline our capital and manufacturing footprint targets.

For my follow-up, Hassane, you discussed product rationalization and mentioned possibly achieving that through mergers and acquisitions or divestments. Could you clarify your perspective on product rationalization in relation to those two strategies?

Sure, those aspects are part of our strategy, but they won’t yield the highest impact. The most significant impact will come from de-emphasizing products that do not contribute to top line growth or margin expansion. De-focusing can take various forms, such as harvesting or phasing out products based on customer engagement, which could range from six months to 18 months before we exit a business. We will notify customers and assist them in transitioning to our products that offer better margin structures, either by facilitating a conversion or exiting the business and the associated customers and top line revenue. We are evaluating everything equally in terms of potential divestiture. If we identify a business that holds value for external parties, we will pursue monetization through a divestiture rather than just phasing it out. This leads into our third focus, which is M&A. M&A will complement our portfolio rationalization. Once we establish a preferred portfolio in our target markets, M&A will serve as a means for inorganic growth in those areas. We will not use M&A to address internal issues as that would only lead to further chaos. We plan to rationalize our internal markets and portfolio first, then use M&A to enhance that position.

Thank you very much. Good morning. Thanks and congrats, Bernard. It's kind of an interesting call, right because you guys are clearly going to put out longer-term targets in August. But folks are poking and prodding you trying to get a little bit of a hint about where that's going. But I might just ask a couple of questions along those lines. One is you talked a little bit in your script about potentially taking the company a little bit more towards being fab light. And obviously, the product portfolio will, I would imagine mostly inform that decision. So, I wonder, I guess first question is how much is that going to inform your decision? And then the second piece is, around the channel, Texans are taking an interesting strategy of going more direct. You guys have a pretty broad distributor footprint. How are you thinking about that in terms of making your decisions going forward? Thank you.

Sure, let me tackle the fab light comment I made. So, fab light obviously is an analog range that goes between fabless and only internal manufacturing. So where we're a lighter fab, which means we're going to be shrinking our manufacturing footprint from where we're today. So that's a fab light comment. And that's going to be a result of what we need to manufacture internally versus what there are foundries that do a better job at the manufacturing that we do. And that's the balance we're going to be doing. And we started that effort. Obviously, there was a management change that did occur, to start looking at that in parallel with me looking at the portfolio rationalization. So that's ongoing, and the results and the reporting, I do real time. From the government side of it, listen, we're going to make the best decision for our company that drives shareholder value. That's the first and foremost decision-making. If at the end of that first tranche of decisions, there's alignment with where the administration is going or what state we're in, that's great. But we're not going to make a short-term decision based on the current politics that will hinder us from potentially achieving our maximum value creation that we could otherwise. So, our focus is on value creation, as we see it for the company, for our shareholders, customers and employees. And then we'll figure out how we land in the politics at that time. From the distribution and other work we've been doing is the channel rationalization just like the portfolio. Once you know where you want to grow and how aggressively you want to grow in which markets, you're going to partner with the distributors that are strong indeed in that same arena you want to play in. And that's going to be an outcome of the portfolio. And that's why I keep going back to the portfolio work; we're doing is going to drive a lot of those dependencies because it's all interlocked, but it definitely starts with a portfolio rationalization to market and a strategy. Everything else is really how do you execute the strategy to the best you can.

Yes, hi Hassane and Bernard, good quarter and guide here. Bernard congratulations on a great career. Just a couple of questions, just wondering: on the automotive side, you mentioned sensor module and some pickup on the electric vehicle side. Is your guide still for a longer-term 9% to 11% above what the automotive market growth is? Or do you see upside based on some of the wins that you have here and then I have a follow-up?

Yes, we basically think it's a high single-digit above the current level. And we actually confirmed that with our 2020 performance.

Yes, so Vijay, I can't give you a target right now. I'm looking at it, because not all businesses obviously we have here are created equal; some of them need more inventory than others. And there's going to be a lot of ins and outs to be fair. As we figure out, as I mentioned before, our EOL, some bridge build or some fab moves that we need to make, that's going to kind of put bumps in the road for our inventory, and we're going to manage it as such, but there are going to be a few ins and outs before we get to a model. So I'll be ready to give you a model where we want to end up in the August meeting. But between now and then, I'm really going to be opportunistic about what we need to do in order to quickly shift to where I want us to be as a company, whether it's portfolio or manufacturing footprint.

Yes, hey Bernard, first of all, thank you for all the help over the years, we've worked together, and we really appreciate it and enjoy your retirement. And then for my question, so everybody's talking about tightness in the auto industry. Hassane, you guys have plenty of capacity here, at least available to you. Is there any opportunity for you to be able to take some incremental share? Or is that just not how things work in automotive, given the long design cycles?

Sure, Harsh, so obviously for areas where we're double sourced, we're one of two suppliers. We have some of these in our product lines. If we're able to support it, we will. Of course, we're going to ship; we've already engaged with customers where we know we don't have 100% share in order for us to help if they need it. So that's ongoing. And that's the way we're running the business day-to-day. The challenge that we're looking at is okay, even if we do ship that product, is that customer getting the rest of the product from supplier number two, three and four. That's what I don't know. So, to be able to evaluate how much share is actually going to go into revenue, that's going to be, call it, towards the end of the quarter when the dust settles, we're ready to help. But the problem is our product line is not the bottleneck as far as creating the end product that makes sense. We're watching it; we're going to go after it, because like you said, if we have the capacity, we're going to sell it and we're going to give it to the end customer, not sit on distributor shelf or even on our shelves; it's going to go as quickly as we can see the demand for it.

Got it. And so my follow-up, Hassane, can you talk about the activity that ON Semi is seeing in the EV space in China specifically to charging and chargers? This has been an area, I think that ON has been very active in that particular geography. Could we just talk about, what you think is your position there?

Yes, we're still very active in that area; obviously, when you have the products that customers value as far as the technical prowess and the portfolio that we're able to manage, we're definitely always considered, and more often than not, we're the ones being selected. That does not change. And our posture in China EV specifically is strong. And we've had design wins actually in the second half of 2020 that support that view in the market.

Yes, thank you. Good morning and my congratulations to you, Bernard as well. It's been a pleasure working with you. Hassane, I just wanted to ask a follow-up question regarding some of the comments about refocusing the product line and potentially consolidating the manufacturing footprint. And I recognize that we asked you some unfair questions, because the plan isn't all together yet, but when I look at the gross margins for ON now versus the prior peak at similar revenue levels, the delta is about 300 basis points and most of that is due to depreciation. So I guess the question is, as you've done the initial review of manufacturing, is there enough flex in the system potentially, selling fabs or such that you would be able to make a meaningful dent in that depreciation, if your business review would warrant that's more of a footprint? Is there the ability to consolidate if that decision that you want to make?

The answer is yes, there's always opportunity. And we're looking at everything. And it's not just depreciation. I mean, when you start consolidating, there's obviously the utilization for the fab, the receiving fabs. And really, there's overhead simplification, when I say about rationalizing your portfolio and manufacturing the footprint. All of this is going to drive costs out of the company, it's not going to be sucked in anywhere else; it's not going to be reallocated; it's going to be managed out of the company. Of course, some timing is different depending on what category of spend, COGS versus OpEx and where OpEx and COGS, but we're tracking every dollar; that is the outcome of every decision we make in order to decide where it's going to end up. But to answer your question more generally, I'm optimistic about the levers that we have to drive gross margin expansion since I've been here in the conference.

That's great. Thank you. As a follow-up, if I could ask a near-term question regarding production, and if you could talk about where the utilization is now, as compared to where it was last year, and how does that track as you go into next year, as you try to address some of the bottlenecks, and then finally, maybe you could talk about where the bottlenecks are; are they more in the front end or the back end or perhaps at some of the outside suppliers?

So definitely, utilization in the last year in the fourth quarter was quite low, and we were also affected that time, especially towards the end, by the pandemic and the shelter-in-place closings that we had in several of our factories in China into Philippines and Malaysia. We did see a little bit of an increase in utilization towards the low 70s, 70 to 75, and we expect that as we ramp in 2021, in the first quarter anticipation of seasonal low in the second quarter. Finally, on the fab side, we should see helping a little bit of improved utilization in all times.

Yes, most of our constraints are primarily on the outside, not internally and front-end and the back end for us is call it balanced loading. There are givens and takes depending on the product line, but managing the supply constraint externally is really with the foundry at this time.

Thanks for taking my question, and congratulations and best wishes to both Hassane and Bernard. Hassane, for my first question, I'm curious as to your insights on the current demand environment. I think you mentioned all the units were down kind of in the mid-teens, but you say that only down 7.5% last year. And in fact, you had a record in Q4, and this Delta between auto units and auto semiconductor sales is perhaps one of the widest that we've seen. So my question is, how much are you shipping to real end demand versus customers stocking up when they just read about the shortages and the auto production shutdowns? How do we get the confidence that these above seasonal quarters that you're seeing in Q4 and Q1 will not be followed by some process of normalization later in the year? What is your level of insight into actual consumption of what you're shipping into the automotive supply chain?

Sure. So I'm going to answer directly as it relates to getting to our customer, which are the tier-1. I will skip any conversation about: does it go through this deal or not this deep, because for this deep, we ship it to this deep, if it shifts out right away to an end-customer. So that's kind of how we're dealing with the distributors. So, we don't have stranded inventory that could go to demand. So, then to answer your question directly, how do we deal with the tier-1, it's literally direct engagement. We know what the production rates are, and we know what we're shipping in. And we know which OEMs; we all know this side, as far as what OEM is not manufacturing which products. So we know where our product ends up, which OEM for which model year to call it 90th percentile. And that's how we manage it. If we know, for example, there is a shortage in an area, or a shutdown of the OEM plant, and we do have products that are targeted for that, we are going to redirect our products to somebody else. Sometimes that engagement is with the OEM. They say we're shutting down this factory, but we want our capacity to go to this other factory. We know it's going to call it a vehicle versus just a tier-1 making a box that may not end up in a vehicle. Obviously, you're not going to get it 100% right. But if we get 80% to 90% of it, I'll be very happy. And we monitor our inventory. There is a lot of demand, and like you said, we're rationalizing all of that demand to supply to match the demand. And I use the term cautiously optimistic because it will take a couple of quarters, which is call it a full manufacturing cycle time from start to finish goods to kind of get that through the system and see what the real demand is in that timeframe, but it's guerrilla warfare that we're doing every day, but I'm happy with what the team's insights are for us to make decisions.

Got it. Hassane, as a follow-up on the gross margins for Q1, you guided an increase of about 70 basis points, although you mentioned it’s somewhat flat. I also heard mention of the advantages from previous fab closure decisions. Could Bernard walk us through the gross margin improvement and help us understand Q1? Are we seeing all the benefits of pricing and fab closures, or is the Q1 gross margin the new baseline? Are there still headwinds from utilization and other factors? Alternatively, what incremental gross margin should we be projecting for Q2 and beyond? Thank you.

So definitely the Q1 number includes the benefit of numbers, and that is having an effect on, and we said before, it's $60 million a year. So that's having an effect on what our gross margin.

As far as moving forward and what you should expect, I will start with our Q1 guide and that's part of the regular updates I'll be giving you until I give you a trajectory for our gross margin and ended back what trajectory and how committed I am once I deploy a step function by quarters based on my prior life, that's the one we're building right now. Now how much of this is in Q1 for the Rochester closure or the pricing judgment that I've talked about or other levers we're doing? It's actually there is a lot of line items that we have been flowing on. I'm not waiting obviously till August or till Q2 to start to work. We've made tremendous progress. You're going to see a few weeks in Q1 on some items or a full month or two months in Q1 on others depending on when we pulled the trigger. My focus though is what I call structural gross margin improvement. And what I mean by structural is gross margin improvement that we drive, and it doesn't happen to us. I'll take the stuff the favorable things that happened to us, but there has to be a structural baseline that is up into the right gross margin baseline that you can hold us accountable to and that's the plan we're going to be deploying.

Thank you, and then good luck.

Thanks for the question, and Bernard I echo my congrats. Thank you for all the time we've spent together. It was great. There's no business like no business. Enjoy your retirement. All the good questions have been asked for the most part. Two quick ones, I guess first of all, disti revenue has traditionally been maybe in the 50s and we've had two strong quarters now in 63, 64. Maybe talk about what you're seeing on the disti side, or there are shortages direct and people are going disti at some of your competitors. For example, what is driving that disti number so much higher than typical?

We feel that have been pretty strong in the channel. We are managing our inventories to be within our normal levels, that way. So it's more just the overall strength.

Yes, I don't know the discrepancy that you're mentioning as far as I'm guessing the 60 and the 50 numbers are percent mixed from distribution. It's been very consistent at about the 60% range. So there hasn't been really a change in behavior because direct customers are not going to switch to disti because they can't get products from us. And that's what the comment I gave to earlier. We are driving the disti inventory to be able to be a straight shot through disti to our end customer. There is no point on building inventory on the shelf at disti. So, if the customer cannot get it direct from us, I can guarantee they're not going to be able to get it from the disti by bypassing; that's not a driver, but been consistent. I don't see any change in distribution percentage for the company.

Okay, understood. My second question on the com side, that was better than we had expected. Could you talk about the importance of maybe North America into this as you put handsets into comps, versus rest of the world China and others, just talk about maybe where we're seeing outside strength and how important that North American customer is in particular?

I mean, obviously, North American customer is important because the deployment and the capital expenditure is happening, and given our position with the 5G power side of the market, we are very well-positioned across the regions. There is a certain level of total market. And as things lose share regionally, we will gain it somewhere else. And that's the work we're really monitoring on a global basis regardless of where the design in happens.

Yes. Thanks for taking the question, and Bernard congrats. I wanted to start just by following up on compute sequential strength and dig into it the following by. One, can you help us understand just the distinction between what a server power might've done versus notebook given the strength to notebook units, and then as you looked at the things that distinguish where you'll want to allocate resources, any initial views on the ability to drive high gross margins and value out of those two different sides of the business going forward would be helpful?

Yes. So our focus in the computing space is more on the server and cloud. That's where we have opportunities for enhanced shareholder value in the future. In the meantime, we're taking opportunities of the fact that the client computing has been quite strong. And in that sense, though we believe some of it is work from home. Obviously we are taking advantage of that, but the focus in the long run where we see better margins also enhances globally.

Yes, and that fits kind of when you overlay our strategic markets, I talk about automotive and industrial. There are others, I would call it, submarkets that you're familiar with the server within the compute that is a focus market because I look as an adjacent technology market. If we are able to create high value products in auto and industrial, those are very valuable for these submarkets that I'm talking about. They will drive growth and margin accretion for the company. And those would be things you're not going to see us invest as a point product in them. But we're definitely going to be addressing them as part of the efficiency we drive. And that's effectively the OpEx efficiency metric.

Got it. And then for the follow-up, Hassane, you mentioned early in your script that since you've been onboard, you've had some notable positive surprises. I was just hoping you could list two or three of those and talk about them and their implications as you think about driving the business forward and creating additional shareholder value?

Sure. I don't want to reveal too much before the August meeting, but I will share that the mapping of our product portfolio in relation to our gross margin profile has yielded a distribution that I found to be more favorable than expected. We have some quite healthy gross margins, and my focus is on how we can further enhance these margins to shift our mix as we address the less profitable segments. There are more opportunities to improve this aspect of the business than I initially anticipated, which is exciting because it means we don't have to wait five years for a mix change. We can actively manage this shift ourselves.

Thank you for taking my question, and congratulations, Bernard. Regarding the foundry side, how many different foundries do you work with, and are they all increasing their prices? Is this what you mean when you say your supply chain is experiencing price increases?

So we use the same usual suspects that pretty much everybody else uses the big ones. It's more once we have a pretty long list of foundries and we are subject to the same pressures that all of our competitors are subject.

Yes, the comment I made about the supply chain isn't just about foundries versus internal. It should be viewed in terms of materials. It's not solely about the supply shortages that are widely reported. What stands out is the specific materials needed. There are certain requests from our suppliers, and if we can absorb those, we will. If not, we typically employ a dual source strategy and seek alternatives. Due to the supply constraints that are affecting everyone, we sometimes have to manage costs internally to support our customers. In those situations, we may pass some of the costs on, but the discussion isn't about foundry versus internal costs; it's more about raw materials for our supply chain.

Okay, understood. Thanks. And maybe just a quick follow-up, and maybe in part of your strategy in development, is there a consideration for consolidating foundries or trying to get prices down by putting more into one foundry?

Well, obviously if you are able to consolidate even your business on the foundry, you'll get the volume pricing benefit versus being able to be spread across multiple. We don't always have the choice because of the technology footprint that you need. Foundries just don't do a wide range of the technology we need. But that's part of how we are looking at it. So when I say manufacturing consolidation, it's both internal and external in order to get the best pricing and the best posture we can to service our end markets.

Great. Good morning, and thanks for taking my questions. Maybe one or two just follow-ups from my side, Hassane, you mentioned about being positively surprised when you came in and start to look at the business. Was there any negative surprises, Hassane, kind of stood for you? That's my first question. And then maybe as a follow-up, the industry has been positively surprised by this foundry environment. And how do you think that changes the relationship if at all with foundries in the kind of longer term? Is there anything in terms of securing that capacity that needs to change or just even in the relationship? Thank you.

Sure. It's hard for me to answer the negative surprises because I don't have any. My mind works differently. If I see something that is not what I expected, I look at it as a positive opportunity. So, it's always positive whether it's a surprise or an opportunity. Of course, there are a couple that I just didn't know. I didn't have an opinion one way or another because they are internal. I didn't have the privilege of getting in and looking at non-public information before I joined that I discovered. But I looked at it as, well, that's part of the reason I took the job, is in order to be able to identify all of these opportunities and turn them into positive surprises for us and our shareholders. But I will tell you in general the umbrella that I would answer is there has been a day in the last eight weeks when I woke up thinking what the heck did I just do. It's always been let's go at it. Let's write more things down and let's start executing. That's been kind of the mindset I have had. And really, the response from the team has been tremendous and that's why you see an energized workforce. But importantly, the results are going to start to show. So, how do we deal with the long term kind of the industry caught by surprise and so on? It's really once you have a strategy and a five-year outlook with a three-year credible window, then you start having those strategic conversations with your suppliers. And turning the conversation from a tactical to a strategic where if you are able to commit, this is your growth. And you are able to keep their factories from being lumpy; up and down. Then you have a much better relationship. I have a lot of these relationships personally. Wei-Chung, who we brought in the head of global manufacturing and operation, has a lot of these relationships. And we are going to strengthen those, but it's all going to start with we as a company what do we want to do strategically and how can they help. I appreciate it. And thank you everyone for joining this call today. We look forward to seeing you at various conferences and various events for the quarter. Thank you and goodbye.