Thank you, Kevin. Good morning, and thank you for joining onsemi's second quarter 2024 quarterly results conference call. I'm joined today by Hassane El-Khoury, our President and CEO; and Thad Trent, 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 2024 second quarter earnings release will be available on our website approximately one hour following this conference call and the recorded webcast will be available for approximately 30 days following this conference call. Additional information is posted on the Investor Relations section of our website. Our earnings release and this presentation includes certain non-GAAP financial measures. Reconciliation of these non-GAAP financial measures to most directly comparable GAAP financial measures and a discussion of certain limitations when using non-GAAP financial measures are 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 future events or the future financial performance of the company. 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 that can affect our business, including factors that could cause actual results to differ materially from our forward-looking statements are described in our most recent Form 10-K, Form 10-Qs, and other filings with the Securities and Exchange Commission and in our earnings release for the second quarter of 2024. Our estimates or other forward-looking statements might change and the company assumes no obligation to update forward-looking statements to reflect the actual results, change assumptions, or other events that may occur, except as required by law. Now, let me turn it over to Hassane. Hassane?

Thank you, Parag. Good morning, and thanks to everyone for joining us on the call. In the second quarter, we exceeded the midpoint of our guidance for revenue, non-GAAP gross margin, and non-GAAP earnings per share as our global teams continue to execute on all fronts. As we indicated in our Q1 call, we are seeing some stabilization in demand in our core markets. Inventory digestion persists with some pockets improving as customers maintain a cautious stance in 2024. We don't see a change to the L-shaped curve I talked about in Q1, but we expect parts of industrial, such as Energy Infrastructure to recover in the second half. Among the regions, Asia-Pacific, namely China is recovering, driven by both automotive and industrial. During this time of market uncertainty, we have not taken our foot off the pedal and remain focused on what we can control: our execution. We have doubled down on our investments to build out our strategic portfolio of Analog and Mixed-Signal and Power Solutions. We have been gaining share by securing significant design wins in power, and we have continued to improve our cost structure through ongoing structural changes. All these efforts position us very well in a recovery with top-line growth and gross margin expansion. Our advantage remains in our comprehensive and innovative product portfolio to capture market opportunities. onsemi's intelligent power and sensing solutions have become synonymous with high efficiency and performance, which are critical to solving customer problems and the high-growth megatrends in automotive, industrial, and AI data centers. In Intelligent Sensing, we continue to invest to sustain our technology and market leadership. We announced the acquisition of SWIR Vision Systems to add disruptive, colloidal quantum-based dot-based short wavelength infrared technology to our portfolio to further strengthen our industrial and defense product offering. We will leverage our manufacturing and R&D expertise to accelerate the commercialization of this technology with cost-effective and differentiated products for industrial and defense applications. On the Analog and Mixed-Signal product development, in addition to sampling our first products, we are now proliferating a broader range of product families from high-performance analog with integrated power and automotive to a low-power sensing interface in medical. This broad range of applications and products we can already offer to our lead customers highlight the competitiveness of this new technology platform. We are excited to share more detail about our Analog and Mixed-Signal product and technology roadmap later this year. We continue building on our design-win momentum and last week, we announced that Volkswagen Group has selected onsemi to be the primary supplier of a complete powerbox solution as part of its next-generation traction inverter for its Scalable System Platform, SSP. The first-of-a-kind solution features silicon carbide-based technologies in an integrated module that can scale across all power levels from high-power to low-power traction inverters to be compatible with all vehicle categories. VW Group is the second-largest automotive OEM in the world and we expect that all VW brands, including Volkswagen, Audi, Porsche, and Skoda will be powered by onsemi's silicon carbide in their next-generation platforms. To best support VW Group and our global customer base, we have also announced a multi-year investment in the Czech Republic for a vertically integrated silicon carbide manufacturing facility. This strategic expansion, provided the European Commission approves the incentive measure, would enable us to meet the rising demand for our silicon carbide modules and other power semiconductors by bringing front-end manufacturing and advanced packaging capabilities to Europe. As customers place an increasing importance on geopolitical risks to their supply chain, they value the resilience we have built into our manufacturing footprint through our Fab Right strategy. Our collaboration with the Czech government on this state-of-the-art facility aims not only to support our European customers, but also positions onsemi as a central piece of the European power ecosystem, further enhancing our supply resilient strategy. Additionally, onsemi is a silicon carbide market-share leader in China and we are designed into nearly 60% of the BEV models from OEMs who are primarily introducing their 800-volt platforms at the Beijing International Auto Exhibition last quarter. China is the largest and fastest-growing BEV market in the world and Chinese OEMs are adopting onsemi silicon carbide solutions based on the market-leading efficiency of our modules and devices like the M3e we've just announced. In automotive, silicon carbide will continue to outgrow the industry for many years as EVs are adopted, but also as the penetration rate in EVs increases. The latest research reports show that 22% of EVs in production are enabled with SiC; excluding the market leader, only 6% of the EVs worldwide include SiC, but all OEMs are driving adoption to improve range and cost of the vehicles. Our success with SiC in automotive extends to the industrial market with demand expanding beyond energy infrastructure with emerging mass market applications, such as commercial heating, ventilation, and air-conditioning. The use of 1,200-volt silicon carbide in HVAC applications leads to more efficient, reliable, and compact systems, ultimately reducing energy consumption, improving electromagnetic interference and operational costs. We are already working with customers looking to integrate silicon carbide into their next-generation designs with revenue over the next three to five years. We remain on track to outgrow the silicon carbide market growth by 2x in 2024 through share gain and our geographical and market diversification strategy. Specifically on the share gains and supporting our revenue growth, our bottoms-up assessment has our growth in units outgrowing the BEV unit growth by 2x, further supporting our outlook. We also have a significant opportunity in the data center and AI market where our focus is on leveraging our silicon and silicon carbide portfolio to address the entire Power Tree. In Q2, we released our latest generation of T10 PowerTrench family and EliteSiC 650-volt MOSFET that are being designed into various subsystems of the AI data center, including power supply units, battery backup units, and intermediate bus converters. These solutions offer superior efficiency, high thermal performance, and reduce power losses, making them ideal for data centers and energy storage systems. They can reduce energy consumption by 10 terawatt hours annually as compared to our previous generation, equivalent to powering nearly 1 million homes per year. We continue to invest in multi-phase controllers to pair with our industry-leading smart power stages, which enable highly efficient power delivery to the CPUs and GPUs. As power consumed by AI data center racks increases from 40 kilowatts today to 120 kilowatts in 2025, our addressable content is expected to increase from $2,500 to $9,500. Our strategy to focus on the high-growth megatrends of automotive and industrial by partnering and innovating with the market leaders and disruptors has proven successful. We have been investing in power and sensing technologies to further our leadership position, and we will continue to leverage our portfolio to address adjacent market opportunities such as AI and data centers. Let me now turn it over to Thad to give you more details on our results.

Thanks, Hassane. In the second quarter, our teams once again demonstrated remarkable resilience and adaptability in navigating a challenging market environment. Our Q2 results exceeded the midpoint of our guidance with revenue of $1.74 billion, non-GAAP gross margin of 45.3%, non-GAAP operating margin of 27.5%, and 12% free cash flow margin. We continue to deliver consistent gross margin performance against a challenging market and underutilization, once again demonstrating the structural improvements in our business model. Q2 revenue declined 7% sequentially and 17% from Q2 of 2023. This decline was driven by an ongoing inventory correction in the automotive and industrial end markets, which together contributed 79% of our revenue. While we are facing short-term demand uncertainty, our long-term outlook remains unchanged. We are at the forefront of the fastest-growing segments of the automotive, industrial, and AI data center markets, and we expect to resume our growth trajectory as end-customer inventory levels normalize. In line with our expectations, automotive revenue declined 11% quarter-over-quarter to $907 million, a decline of 15% over the same quarter last year. From the time we embarked on our transformation in Q4 2020, which included a strategic shift to focus on automotive, our automotive revenue has nearly doubled, largely driven by increasing content for vehicle electrification and ADAS. Our industrial revenue was $468 million, down 2% sequentially and 23% versus the second quarter of 2023. As we noted in our Q1 call, we are seeing pockets of stabilization in this market. Looking at the split between the business units, revenue for the Power Solutions Group, or PSG was $835 million, a decrease of 15% year-over-year. Revenue for the Analog and Mixed-Signal Group or AMG was $648 million, a decrease of 18% year-over-year. And revenue for the Intelligent Sensing Group or ISG was $252 million, a 22% decrease year-over-year. The revenue drop for all business groups was driven by ongoing inventory burn in the Automotive and Industrial market. GAAP gross margin was 45.2%, and non-GAAP gross margin was 45.3% compared to 45.9% in Q1 and 47.4% in the quarter a year ago. We continue to maintain gross margins above 45% through this downturn, even as our utilization has reached a historical trough of 65%, which positions us well for a market recovery. For reference in previous downturns, our gross margin was approximately 30% at these utilization levels. We continue to deliver on our Fab Right strategy of driving efficiency across our global operations. In Q2, we executed additional restructuring actions to improve the cost structure of our manufacturing network to support our gross margin expansion plans. We expect our gross margins to benefit once demand begins to recover and we increase utilization back to normalized levels. This coupled with ramping of new products at accretive margins will allow us to achieve our long-term target of 53%. Now let me give you some additional numbers for your models. GAAP operating expenses for the second quarter were $396 million as compared to $319 million in the second quarter of 2023. Non-GAAP operating expenses were $308 million as compared to $306 million in the quarter a year ago. Non-GAAP operating expenses were lower than our guidance due to active cost control and lower variable compensation. GAAP operating margin for the quarter was 22.4% and non-GAAP operating margin was 27.5%. Our GAAP tax rate was 15.8% and non-GAAP tax rate was 16%. Diluted GAAP earnings per share for the second quarter was $0.78 as compared to $1.29 in the quarter a year ago. Non-GAAP earnings per share was $0.96 as compared to $1.33 in Q2 of 2023. GAAP-diluted share count was 433 million shares and our non-GAAP diluted share count was 429.5 million shares. In Q2, we deployed $150 million, or 72% of our free cash flow for share repurchases. Turning to the balance sheet. Cash and short-term investments was $2.7 billion and we had $1.1 billion undrawn on our revolver. Cash from operations was $362 million and free cash flow was $208 million, representing 12% of revenue. Capital expenditures during Q2 was $154 million, which equates to a capital intensity of 9%. We achieved our long-term target ahead of schedule due to higher efficiency resulting from the structural changes in our manufacturing footprint. We expect to remain at or below our long-term target of 11%, including the investments needed for the silicon carbide expansion in the Czech Republic. Inventory increased by $78 million sequentially and increased by 20 days to 214 days. This includes 97 days of bridge inventory to support fab transitions in the silicon carbide ramp. Excluding these strategic builds, our base inventory increased $6 million sequentially to 117 days, which is within our target range of 100 to 120 days. Distribution inventory increased as expected to 8.9 weeks versus 8 weeks in Q1 to support the mass market, which we have underserved for the last two years. Let me now provide you the key elements of our non-GAAP guidance for the third quarter. Today's press release contains a table detailing our GAAP and non-GAAP guidance. Given the current macro-environment and our demand visibility, we anticipate Q3 revenue will be in the range of $1.7 billion to $1.8 billion. We expect non-GAAP gross margin to be between 44.4% and 46.4% with utilization in the mid-60% range. This includes estimated share-based compensation of $7 million. We expect non-GAAP operating expenses of $305 million to $320 million, including estimated share-based compensation of $31 million. We anticipate our non-GAAP other income to be a net benefit of $12 million with our interest income exceeding interest expense. We expect our non-GAAP tax rate to be approximately 16% and our non-GAAP diluted share count is expected to be approximately 429 million shares. This results in non-GAAP earnings per share to be in the range of $0.91 to $1.03. We expect capital expenditures in the range of $130 million to $170 million. And as we've previously highlighted, the acquisition of SWIR Vision Systems is not expected to have any meaningful impact on our near or mid-term financial outlook. Through this downturn, we have remained committed to our long-term financial model. We are allocating resources for future growth while continuing to execute on our strategies to enhance operational effectiveness throughout the company. During the second quarter, we announced the consolidation of many of our facilities to improve efficiencies and accelerate time-to-market by centralizing our efforts into fewer centers of excellence. We have continued to invest in R&D to drive long-term growth and capitalize on opportunities in Intelligent Power and Sensing despite the market downturn. We also remain committed to our capital allocation strategy. Over the last 12 months, we have deployed 78% of our free cash flow for share repurchases, significantly higher than our stated long-term target of returning 50%. Since initiating our $3 billion share repurchase program in February 2023, we have returned $814 million to our shareholders. Finally, at onsemi we are driven to excellence. Guided by this principle, we hold ourselves accountable not only to our financial commitment but also to our environmental initiatives. This past quarter, we published our 2023 Sustainability Report, marking another pivotal step in our ongoing commitment to sustainability and highlighting the progress we have made in the past year. Wrapping up, I'd like to thank our employees for their dedication to excellence. Our strategy is working and we remain committed to unlocking shareholder value. We are a more resilient company with steady growth drivers, an innovation pipeline, and trusted relationships with our customers and suppliers around the world. With that, I'll turn the call back over to Kevin to open it up for Q&A.

Hi, guys. Thanks for letting me ask a question. I guess for my first question, kind of two sneaky parts to it. But any pluses or minuses by your three segments for the third quarter guide? And then the bigger part is, Hassane, you talked about some stabilization on the Industrial side and even Energy Infrastructure potentially rising in the back half. Any sort of similar color on your Automotive business that dropped pretty significantly sequentially? You talked about some design wins in EVs, etc. How are you looking at that for the back half of the year?

Yeah, Ross, it's Thad. To answer your first part of the question, you broke up a little bit, but I think I got it. The end markets played out pretty consistent with what we expected going into the quarter. We are expecting both automotive and industrial to be down. It played out that way. If we saw any signs of improvement, it was really in that industrial; we continue to see some stabilization there. So really played out as we expected during our guide for the quarter.

Yeah. And I guess for my follow-up question, then moving on to the gross margin side of things, Thad. You talked about some of the idiosyncratic drivers, the East Fishkill side of things as well as the fab divestitures in the past. Can you just walk us through any evolution of those? We get the utilization rate when that goes up, that's going to be beneficial. You laid that out clearly. But the 100 basis points from East Fishkill, that's a headwind this year, and then the fab divestitures, which I think is about a two-point tailwind when those kick in. Can you just walk us through how those unfold over the next kind of 6 months to 12 months?

Sure, sure. So starting with utilization, which is the key driver here in the short-term, just to reiterate what we've said in the past, every point of utilization is 15 basis points to 20 basis points of gross margin improvement. So as you think about us coming off of a low of 65% going back into normalized levels, you can do the math on the gross margin expansion on that. And you're right, East Fishkill with the global foundry business that we're running in there is about 100 basis points dilutive. We'll continue that through the rest of this year. And then we'll start to see that start to moderate in 2025. And then the other piece is the fab divestitures. We divested four fabs a couple of years ago, and it's $160 million of fixed-cost that we'll start to recognize as demand picks up and we start manufacturing those products within our existing network. So we've got to bleed through that inventory that we've been building for those fab transitions. And as we move that into our network, we start to see that benefit. And then the last thing is, and I noted it in my prepared remarks, is the ramping of new products that have accretive gross margins. And I think if you start to do that math, you can start to get pretty close into our gross margin target. The long-term target means 53%. So we feel good. We just need a market recovery here, and we have some nice tailwinds.

Thank you.

Thanks for taking my question. I wanted to revisit the Q3 outlook question. I think at the midpoint, your guiding is up a bit sequentially and I was hoping you could, Hassane maybe give us a sense of how you see your different end markets, especially automotive, do you expect that to be up, down, flat sequentially? Thank you.

Yes. I mean, Vivek, if you look at our biggest market 79% of revenue this quarter to auto and industrial, we expect those in the third quarter to be flat-to-up slightly.

Okay. As a follow-up, over the past few months, we've observed a slowdown in demand for battery-powered EVs. I'm interested in how you assess your silicon carbide outlook for this year in terms of absolute dollars or compared to the market. Has it performed as you expected? Are you still on track for your initial projections, or has that perspective shifted? Additionally, I believe you expressed more optimism about the China EV market. Is your market share in China above or below the 35% to 40% share you anticipate globally for this year?

Let me clarify. Regarding the silicon carbide market, the BEV market varies significantly by region. The observations and reports are more focused on Western markets than on China. Overall, we anticipate a healthy BEV market, though there may be some fluctuations in the short term. However, we remain optimistic about long-term growth, as the penetration of BEVs and silicon carbide within them is still in the mid-single digits, excluding the market leader. With that said, I expect our growth in 2024 to be double the market rate, although I won't disclose specific dollar amounts since we are targeting certain figures internally. Referring to China, our penetration there exceeds 60%, which is ahead of our global standings. This timing is significant since we began operations in China earlier, given its size as a market. At the end of last year, I indicated that we expect to see growth ramping up in Europe starting in 2024. As that growth starts in Europe, the geographical distribution of our silicon carbide revenue will shift in the latter half of the year. Nevertheless, China continues to lead globally in terms of our market share due to its status as the largest market and our early investments there.

Hi, good morning. Thank you for taking the question. I wanted to follow up on the SiC business as well. To the extent you're willing to share, Hassane, curious how that business trended in Q2, whether it be on a sequential basis or a year-over-year basis? And what your expectations are for Q3? And then I guess for the full year, I'm guessing that the mix of your business, whether it be by application or customer has evolved over the past 90 days. What's your outlook there by geo and application today versus 90 days ago?

I won’t provide a quarterly breakdown of our silicon carbide performance due to the variability in revenue and the timing of customer ramp-ups. We will only report silicon carbide revenue on an annual basis and discuss it at the end of the year. Externally, I have indicated that we are targeting a 2x market and we are currently trending in that direction. Additionally, our unit growth, largely driven by socket design and market share, is also aligning with the 2x target, which reinforces our silicon carbide growth. Regionally, we noted strong performance in China, and we anticipate some growth in Europe during the second half of the year, which aligns with our expectations from the end of last year. Everything is proceeding as planned, and we continue to diversify our design locations, including our recent announcement with the VW Group, which will expand our geographical revenue distribution over time.

Got it. Thank you. And then as a quick follow-up, just on distribution inventory, it went up a little bit sequentially at the end of June. Curious what's embedded or what's assumed in your Q3 guidance? And as you think about the next couple of quarters, several quarters, what's your plan in terms of managing that inventory? You sound relatively still muted as it pertains to the cycle. You know, should we expect weeks to stay generally flat, or do you feel like that can go up just given how much you had underserved that business over the past couple of years? Thank you.

Yes, Toshiya, it's Thad. So we exited the quarter at 8.9 weeks, just where we expected. We talked about that mass market you referred to that we need to put inventory into the channel. So we're achieving that well. We're managing it tight still given the market uncertainty. But for Q3, I think it's going to be right in this range, let's call it, 9 weeks. And I really think through the remainder of this year and probably into next year, you're kind of looking at that type of range, 9 weeks plus or minus. We'll see how the market recovers and the adoption of the mass market. But that's our plan for the short term here.

Yes, hi. I have a quick question regarding the backlog you mentioned in prior quarters. Could you share some insights on the current situation with the semiconductor silicon carbide backlog? Thank you.

The silicon carbide backlog, you know, look, we announced a few things here over the last few quarters, right. I mean that backlog is healthy, right. There's some short-term softness as it's well-known in the EV market, but I would say the backlog is still very healthy.

Yes, if you look at design-in activity, whatever we feel in the market in the short term, and I call it short-term, given the trend for silicon carbide, not just in BEV, by the way, we talk about silicon carbide in industrial, proliferating further because of the benefit that it brings and even silicon carbide making its way into the power stages of the AI data center. So when we talk about silicon carbide, we're talking about a long-term multi-year megatrend. That's why we're participating in it. So in the short term, of course, we all see what the market shows. But nevertheless, customers are still investing in silicon carbide for their platforms, whether it be a car, industrial, or AI data center, as I mentioned. This is what we can control is our design and capability on our new products, which means that as the market starts to go uptick the other way and BEV starts to proliferate further, we are in a much better position than otherwise we would be if we weren't winning today. The VW Group announcement is an example of such a large deployment of silicon carbide in an electrification platform. So if you talk about backlog as that, that's exactly what we can't control and we're working on. That same story happens in industrial, that same story happens in the AI. We're designed in. Now the ramps will support our growth.

Got it. And one quick question. On the 200-millimeter side, any thoughts on how you're looking at that ramp on silicon carbide?

Yes, we are still on schedule to qualify 8-inch this year, which includes substrates through to fabs. We expect to start generating revenue from it next year, in accordance with the expectations I shared last year. There are no changes to that plan. We view 8-inch as a capacity expansion, so once it's qualified, we will begin sampling and seeing revenue. We will increase the proportion of 8-inch production internally compared to 6-inch as we convert our furnaces to support this ramp. I’m very satisfied with the progress of 8-inch, and we are right on track.

Hey, good morning, guys. Thanks for letting me ask the question. I just want to ask that you talked about only really the energy business inflecting in the second half. So just kind of curious, I mean, obviously, the auto market has come in a little bit weaker. I'm just kind of curious, you said you're sticking with that L-shaped recovery. Is it right to think though that as you look through the rest of the calendar year that you're looking kind of flat? Just wanted to understand the comment of just highlighting that one bar.

Yes, I would say it's flat. I don't have any reason to indicate a recovery. There may be some areas within our automotive and industrial sectors that perform better than others, but I can't predict that. I can only manage based on what we can currently see. It's important to note that we are not anticipating a recovery that significantly differs from flat performance. While there may be some improvement in specific areas, we don't provide guidance for the upcoming quarters. That reflects my current perspective on the market.

Thanks. And I just want to ask a lot of comments or questions on silicon carbide. I want to ask on Intelligent Sensing Group. So that business is down quite a bit. I mean, you have a driver with 8 megapixels in terms of ASPs. I'm sure you're working through some inventory there as well. Just kind of outlook in terms of that content driver, where that is today? And where you see that could go? And then kind of just should that follow the same trajectory of recovery?

We have a significant market share in the image sensing sector, particularly within the ADAS automotive market. The market itself is recovering, and as you noted, there's an uplift in average selling prices that will drive our revenue growth beyond just the increase in units sold. Additionally, as ADAS advances to more level 2+ systems, we'll see more units becoming part of our target market. You can view this in terms of the combined growth in both the market share and content uplift. On the industrial side, we don't have the same level of market share as we do in automotive, which provides us with further expansion opportunities. We have launched several new products in the industrial market. Our recent SWIR acquisition enhances our differentiation and technological leadership in image sensing, particularly for industrial and defense applications. We're following a similar strategy of regional and application expansion in the sensing and imaging business as we are in the power sector.

Thank you for taking my question and good morning. I understand that your auto performance was in line with expectations, but I was slightly surprised by the 11% sequential change, which seems lower than anticipated compared to some of your peers this quarter. Was this a deliberate choice by onsemi to ship more conservatively, or have there been any shifts in your customers' behavior recently due to some weaker auto production? Additionally, does the slight growth you are forecasting for the third quarter indicate that you are shipping in accordance with end demand, or is there still some adjustment happening? Thank you.

Let me address the last part first. We believe that current demand is below expectations, particularly when considering inventory reduction. However, it's challenging to provide a quarter-on-quarter outlook as comparisons to peers can be difficult due to timing issues. In the short term, specifically within a span of about 90 days, the situation revolves around inventory levels and how they align with demand. Ultimately, we need to focus on end demand, which has not shown signs of recovery yet but appears to be stabilizing. Over multiple quarters, we expect the situation to stabilize and companies shipping to the automotive sector will align with industry demand, along with their specific content. Therefore, I don’t see it as a comparison to peers or our customers, but rather as an assessment of where we think the automotive market stands. Some of our Tier-1 customers have higher inventory levels, leading to longer adjustment times. Inventory reduction is closely tied to demand; as demand increases, inventory decreases more quickly, and if demand remains stagnant, inventory reduction will take longer. Hence, I consider this a timing issue, with no deliberate strategy being employed to target specific numbers.

Thank you. I appreciate that color, Hassane. And then thanks for the data point on the ex-market leader silicon carbide attach rate being in the 6% range. I mean, you're speaking with customers and have great insight into obviously ongoing design-wins in their product ramps. Any intermediate milestones you could give us on where you expect the attach rate to be maybe in 2025 or over the next few years? Thank you.

Yes, look, I mean we still see a growth in silicon carbide as a market driven, of course, by the auto, industrial and AI that I talked about. So it's a broad proliferation. I think it's too early to talk about 2025. We'll have to see how 2024 exit rate is and really what the market does in 2025. If you look at a lot of the reports that are out there and talked to a lot of the customers that have reported already, it's a very broad range of what 2025 is going to look like. So it's too early to talk about 2025. What I can talk about is the rate of design-wins that we have, because that I can't measure, that I can't control and that I can provide where we are. I'm very happy with that progress. We talked about China, and we talked about the Beijing Auto Show where literally we went through every car that got announced in the show and I can tell you exactly that we are designed into it. As those cars ramp and as those cars become successful and the market recovers for, both in China beyond what it is and outside of China, those are the design-wins that are going to ramp for us and dictate what 2025, 2026 and beyond are going to be. So I will tell you, from a design-win perspective and a market relation perspective, we are firing on all cylinders here, or I guess I shouldn't say cylinders. We're firing on all motors today.

Hey, Hassane, I'm just wondering if you might be able to give us any sense of sort of timing of the VW ramp. You mentioned you thought you'd be across pretty much all of the VW models over time. Are they staged, or do they sort of all ramp in the same general time period? And then I've got a follow-up.

Typically, well, that's a question for them really. I can't disclose their plan for a ramp. But it's not an on-off switch. I guess, I can say that.

Got it. And then just looking at the second half, it's pretty clear your message is that end-demand hasn't really started to recover yet, maybe it's stabilizing. So as you look at your L-shaped recovery comments, I guess I'm just trying to reconcile, you guys are shipping below end consumption right now as inventory is being digested. Is your L-shaped commentary really more a reflection of end demand, or of your revenue because I would think at some point as the inventory digestion process ends, you would snap back to consumption. And I would think that would put some growth into your numbers if you're currently shipping below consumption levels. So, any thoughts on that reconciliation would be helpful. Thank you.

Yes, this is Thad. You nailed it, right. When we talk about the L-shaped recovery, it's really our revenue, right. We believe right now, we're still under shipping natural demand as there is an inventory digestion going on. As that inventory is got off, we think our revenue over time will increase again. But yeah, the L-shape is not demand, it's more of our revenue just given the inventory out in the channel.

So it sounds like we've got a couple more quarters of that inventory digestion from your vantage point.

Hey, thanks, guys. Just a quick question on the inventory going back up. It sounds like there's still plenty of inventory out there amongst certain OEM customers. So given the L-shaped recovery, why would the disti want to take up their inventory and not keep it flat?

Yes, of course. This is Hassane. During our last call, we discussed the mass market. It’s not primarily about our top customers or named accounts, but rather the broader base of customers that we have not adequately served. I've mentioned several times during the pandemic that we faced supply constraints and prioritized our leading customers, which affected our ability to address the broader or mass market. Currently, we are beginning to replenish and focus on the mass market, and we initiated this effort last quarter, leading to a slight increase. This approach is strategically driven by us. To provide some insight into how I assess it and its significance, I focus on the new customer counts we are acquiring in the mass market, which amounts to thousands of customers. As this metric continues to rise, we will keep replenishing the mass market. Strategically, I view this as a closed-loop process for operational management.

Yes. And Chris, if you look at that 8.9 weeks, there's actually a mix-shift within that 8.9 weeks, right. So more going to the mass market and less going into specifics for customers as we continue to bleed through that inventory. So we're managing that inventory extremely tight in the channel. And just keep in mind, historical levels of inventory in the channel was 11 weeks to 13 weeks. So we're significantly below where the company had been historically.

Yes. Good morning. Thanks for taking my question. Your direct customer business was down about 18% sequentially in the June quarter versus your disti business, which was up 5%. So it seems that most of the inventory-related issues are with your direct customers. And given that orders are probably the best indicator of inventory dynamics at your direct customers since you don't monitor the sell-through. Did the order trends in direct start to stabilize in Q2? And has that stabilization continued so far quarter-to-date?

Yes. First of all, regarding the shift between distribution and direct sales, it's important to remember that a significant portion of our industrial business goes through distribution, which accounts for the long tail of customers. This is why you're noticing an increase in distribution and a decrease in direct sales, particularly since the larger automotive clients usually engage directly. As industrial sectors show signs of recovery, there is a slight shift toward distribution and less reliance on direct sales. I believe this is a temporary phase as we navigate through this adjustment period. Looking ahead, I would say that the situation is stabilizing.

Great. Thanks for that. And then other of your peers in the analog and power markets have seen a pickup in China. I know in the first quarter, you had not seen the seasonal pickup post-Chinese New Year as you move through the second quarter. It looks like Asia, which includes China, you did see slight sequential revenue growth. So have the order trends also started to stabilize and improve in this region? And is it broad-based or biased more towards industrial and/or automotive?

Yes. So we said in our prepared remarks, we're seeing China stabilizing. We're seeing growth there. It's both automotive and industrial. We talked about energy infrastructure as well as the second half recovery. So that would be a lot of that goes through China. But yeah, I would say it's the broader market of auto and industrial in China, and that's definitely leading the recovery right now.

Hi, good morning. Thanks for letting me in. Just a follow-up on China. How sustainable do you believe this is? How would you categorize inventories in China specifically? Are you seeing any type of government incentives? Or is it just that there's a rebound after several quarters of weakness?

I guess that's a tough question to posture. But that the market pickup in China, I think the demand is coming back. We've had a pretty big trough what we talked about in the prior question, there was no recovery after the Chinese New Year. We've been talking about potential regard. So I look at it as driven by end-market demand, not necessarily a specific government incentives or any of that because I haven't really seen any major announcements in China to drive their economy. So, therefore, I would call it as a broad-based demand stabilization towards a recovery. For us with our penetration in China on silicon carbide and really on the silicon across the board, we will just benefit and we will see it. And given that we are very tight on the inventory in the channel, we will see the sell-through much quicker than having to wait to drain through large channel inventory like potentially some of our peers. So from our view, we've established ourselves in a very good position to see the uptick really quick. We started to see it in Asia, specifically in China like we talked about. But I wouldn't call it any specific incentives that may or may not be sustainable. So, therefore, as long as the market stays the way it is, I would call that sustainable.

Hi, good morning. Thank you for taking the question. I wanted to follow up on the SiC business as well. To the extent you're willing to share, Hassane, curious how that business trended in Q2, whether it be on a sequential basis or a year-over-year basis? And what your expectations are for Q3? And then I guess for the full year, I'm guessing that the mix of your business, whether it be by application or customer has evolved over the past 90 days. What's your outlook there by geo and application today versus 90 days ago?

Yes, thanks, Toshiya. We touched on this earlier, but overall, the design wins are looking good in the marketplace and we're seeing a lot of excitement in the silicon carbide space for the future. As our production ramp up, we do expect to capture more of that market share as we go forward.

Yes. And if you look at design-in activity, whatever we feel in the market in the short term, and I call it short-term, given the trend for silicon carbide, not just in BEV, by the way, we talk about silicon carbide in industrial, proliferating further because of the benefit that it brings and even silicon carbide making its way into the power stages of the AI data center. So when we talk about silicon carbide, we're talking about a long-term multi-year megatrend.

Got it. Thank you. And then as a quick follow-up, just on distribution inventory, it went up a little bit sequentially at the end of June. Curious what's embedded or what's assumed in your Q3 guidance? And as you think about the next couple of quarters, several quarters, what's your plan in terms of managing that inventory?

Yes, Toshiya, it's Thad. So we exited the quarter at 8.9 weeks, just where we expected. We talked about that mass market you referred to that we need to put inventory into the channel. So we're achieving that well. We're managing it tight still given the market uncertainty. But for Q3, I think it's going to be right in this range, let's call it, 9 weeks.

Thank you. Our first question comes from Ross Seymore with Deutsche Bank. Your line is open.

We continue to prioritize operational excellence through the market correction and demonstrate the resilience of our business. We're very proud of our global teams for executing through the current demand environment with prudent financial management. We are a better-structured company because of the work we put in during the downturn. Thank you all for joining us today.

Ladies and gentlemen, this does conclude today's presentation. You may now disconnect and have a wonderful day.