Good day, everyone and welcome to the Vicor Earnings Results for the Fourth Quarter and Year Ended December 31, 2022 Conference Call hosted by Jim Schmidt, Chief Financial Officer. My name is Esther and I am your operator today. I would like to advise all parties that this call is being recorded. And with that, I would like to hand over to Jim. Please go ahead.

Thank you. Good afternoon and welcome to Vicor Corporation’s earnings call for the fourth quarter and year ended December 31, 2022. I am Jim Schmidt, Chief Financial Officer. And I am in Andover with Patrizio Vinciarelli, Chief Executive Officer and Phil Davies, Vice President, Global Sales and Marketing. After the markets closed today, we issued a press release summarizing our financial results for the three months and year ending December 31. This press release has been posted on the Investor Relations page of our website, www.vicorpower.com. We also filed a Form 8-K today relating to the issuance of this press release. I remind listeners this conference call is being recorded and is the copyrighted property of Vicor Corporation. I also remind you various remarks we make during this call may constitute forward-looking statements for purposes of the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995. Except for historical information contained in this call, the matters discussed on this call, including any statements regarding current and planned products, current and potential customers, potential market opportunities, expected events and announcements and our capacity expansion as well as management’s expectations for sales growth, spending and profitability are forward-looking statements involving risks and uncertainties. In light of these risks and uncertainties, we can offer no assurance that any forward-looking statement will, in fact, prove to be correct. Actual results may differ materially from those explicitly set forth in or implied by any of our remarks today. The risks and uncertainties we face are discussed in Item 1A of our 2021 Form 10-K which we filed with the SEC on March 1, 2022. This document is available via the EDGAR system on the SEC's website. Please note the information provided during this conference call is accurate only as of today, Thursday, February 23, 2023. Vicor undertakes no obligation to update any statements including forward-looking statements made during this call and you should not rely upon such statements after the conclusion of this call. A replay of today’s call will be available beginning at midnight tonight through March 10, 2023. The replay dial-in number is 888-286-8010 followed by the passcode 99813947. This dial-in and passcode also are set forth in today’s press release. In addition, a webcast replay of today’s call, along with a transcript, will be available shortly on the Investor Relations page of our website. I will now turn to a review of our Q4 and full year financial performance, after which Phil will review recent market developments and Patrizio, Phil and I will take your questions. In my remarks, I will focus mostly on the sequential quarterly change for P&L and balance sheet items as well as full year-on-year changes and refer you to our press release for our upcoming Form 10-K for additional information. As stated in today’s press release, Vicor recorded total revenue for the fourth quarter of $105.5 million, up 2.3% from the third quarter total of $103.1 million and up 16.8% from the fourth quarter 2021 total of $90.3 million. Revenues for the year ended December 31, 2022 increased 11.1% to $399.1 million from $359.4 million for the prior year. Advanced Product revenue rose 7.3% sequentially, while Brick Products revenue declined 4.4% from the third quarter. Revenues for Advanced Products for the year ending 2022 increased 42.9% to $243.3 million from $170.2 million the year before. Shipments to stocking distributors increased 16.4% sequentially and 3.4% year-over-year. Exports for the fourth quarter decreased sequentially as a percentage of total revenue to approximately 59.8% from the prior quarter’s 70.1%. On a year-over-year basis, exports increased as a percentage of total revenue to approximately 67.6% from the prior year’s 67%. For Q4, Advanced Products’ share of total revenue increased to 60.2% compared to 57.4% for the third quarter with Brick Products’ share correspondingly decreasing to 39.8% of total revenue. Turning to Q4 gross margin, we recorded a consolidated gross profit margin of 46.6%, which is approximately a 100 basis point increase from the prior quarter. For the full year 2022, gross margin declined to 45.2% from 49.6% in the prior year. A number of factors contributed to the year-on-year decline in gross margin percentage, including less factory utilization associated with lower Brick volume, increasing startup costs incurred as we equip our in-house vertically integrated manufacturing facility, higher outsourced manufacturing costs during the year, and higher freight and tariff costs. I will now turn to Q4 operating expenses. Total operating expenses decreased 6.7% from the third quarter. For the full year 2022, total operating expense as a percent of revenue increased to 38.4% from 34.1% in the prior year. The amounts of total equity-based compensation expense for Q4 included in cost of goods, SG&A and R&D was $486,000, $1,551,000, and $781,000 respectively, totaling approximately $2.8 million. For Q4, we recorded operating income of $8.1 million, representing an operating margin of 7.7%. For the full year 2022, operating income totaled $27.2 million or 6.8% of revenue compared to $55.6 million or 15.5% of revenue in the prior year. Turning to income taxes, we recorded a tax provision for Q4 of approximately $1.9 million, representing an effective tax rate for the quarter of 18.8%. The tax provision for the full year 2022 was approximately $3.3 million, representing an effective tax rate for the year of 11.4%. Net income for Q4 totaled $8.1 million. GAAP diluted earnings per share was $0.18 based on a fully diluted share count of $44,859,000. For the full year 2022, net income decreased to $25.5 million from $56.6 million in the prior year. In 2022, fully diluted earnings per share declined from the prior year decreasing to $0.57 from $1.26. Turning to our cash flow and balance sheet, cash and cash equivalents totaled $190.6 million in Q4. Accounts receivable, net of reserves, totaled $65.4 million at quarter end. With DSOs for trade receivables in 40 days, inventories net of reserves increased 7.5% sequentially to $101.4 million. Annualized inventory turns were approximately flat sequentially at 2.59x. Operating cash flow totaled $929,000 for the quarter. Capital expenditures for Q4 totaled $12.7 million. We ended the quarter with a construction in progress balance primarily for manufacturing equipment of approximately $60.4 million and with approximately $20.6 million remaining to be spent. I’ll now address bookings and backlog. Q4 book-to-bill came in far below 1 and with 1 year backlog decreasing 18.1% from the prior quarter and 11.9% from the same period last year, closing at $304 million at year end. Q4 bookings included cancellations, cancellations of orders as well as new orders for next generation programs in our high-performance compute business. The net effect was a reduction in backlog of $15 million, which contributed to the $18.1 million sequential decline in total backlog. Turning to our factory expansion, our manufacturing team is working diligently to bring our in-house vertically integrated advanced products factory fully online. While we have begun to benefit from the use of certain process steps in the fabrication of our advanced products, we are not yet self-sufficient in a key plating process operation. Installation and startup of this process equipment has been delayed due to resource and material constraints of the equipment manufacturer from the first quarter of this year to what is now expected to be the second quarter. As we near the completion of our vertically integrated U.S. based fab for advanced products, we are looking forward to the substantial reduction in cycle time, improved manufacturing efficiency, and full manufacturing control that this facility will allow. And we are anxious to leverage the imminent completion of our factory to provide shorter and more consistent lead times to our customers. Turning to the first quarter of 2023, we expect results to be approximately flat to Q4. We expect operating expenses to decline modestly sequentially and a tax rate on the order of 15% to 20% in 2023.

Thank you, Jim. Our low order rate for the second half of 2022 and specifically in Q4 continues to reflect the backlog that we have built in prior quarters and the transitions that are occurring to next generation processor platforms at hyperscaler and XPU customers. While a number of processor chip companies and hyperscalers with internal ASIC developments are about to launch 5-nanometer based products with FPA solutions and bus converters from Vicor, their next generation R&D is focused on 3-nanometer technology. This process node will drive chip current requirements even higher closer to 2,000 amps and at the same time reduce co-voltages down to 0.45 volts. Our prediction about the future of power delivery is playing out in real time. High-performance processes and clustered processor arrays will soon require vertical power delivery (VPD) and current multiplication, both proprietary Vicor Technologies. Instead of voltage averaging, Vicor chips uniquely enable processes to meet their performance requirements. In Q4, we initiated discussions with several major OEMs on how to best intersect their 3-nanometer products with our next generation 5G solutions. Our FPA solutions provide the highest performance in terms of current density, low noise, and overall power system efficiency and our Generation 5 technology will, as I have said in previous calls, be a game changer in cloud computing and machine learning with a 3x step up in current density. The journey to smaller geometries to support ever-expanding AI processor performance requirements fully aligns to Vicor’s proprietary technology. Our competitive position in HPC is growing stronger. And as a result, my confidence in our HPC market position and in the customers that we have worked hard to develop in recent years is increasing. Our industrial and defense and aerospace businesses remained stable in Q4 and POS and new orders with our global distributors remained strong. The addition of Avnet as a globally franchised distributor will add strength to our broad market efforts and support the identification and engagement with new customers developing advanced electrified systems across a broad set of applications. I expect the revenues from these two business units to grow in 2023 as a result of design wins in emerging high-growth markets that are being driven by electrification, automation and autonomy. These target markets represent over $2 billion in SAM for Vicor. One exciting new opportunity spans the entire battery ecosystem that includes forming and testing cells, testing packs, using packs in the electrified applications and battery recycling. We have important design wins with leading customers in all of these high growth markets for our high voltage modules with early revenues in 2023. Our progress in the automotive market remains very positive with three successful OEM audits in the past 6 months, resulting in approval of Vicor as an automotive supplier. We expect to be IATF certified in Q2 2023 and we will PPAP our top three flagship advanced products in Q2 with additional products to follow in Q3 and Q4. OEM and Tier 1 engagements are strong and we expect further NRE funded collaborations in 2023. As in our HPC market, automotive customers are valuing the modularity and power density that Vicor modules bring to their powertrain system designs and the competitive advantage that we enable for their vehicles. As our new factory comes online and we release our new 5G modules into production this year, our front-end team is laser-focused on our top 100 customers securing design and production wins that will put us on track to achieve our Northstar goal of $1 billion in revenues and 65% gross margins.

So operator, we are ready for questions now.

Thank you everyone. And the first one is coming from Jon Tanwanteng. Please go ahead. Your line is open.

Hi, good afternoon and thank you for taking my questions. My first one is Phil and Patrizio, could you give us any more color on the low orders in the quarter and the cancellations, maybe just a bit on both? First, are your clients simply digesting the long lead time orders they had already placed or is it more of a supply ramp concern with the new factory to support new product ramps just on the order rate number one? And number two, on the cancellations what’s going on there if you have any more color that would be great?

I think as Phil pointed out, we are seeing the effects of the long lead times and growth pace a year ago with some key customers being concerned with respect to being able to get enough product and ordering ahead to ensuing events involving a variety of factors from the exclusion of certain products from the Chinese market to the setbacks the industrial sector has suffered with respect to contraction in the general level of activity. So that coupled with our transitions with respect to all the products being phased out and new products being brought up in the right sequence has led to the changes that have taken place with respect to our backlog in the last quarter.

Okay, great. Thank you. And then you gave some interesting stats on 3-nanometer and the current requirements there. But I was wondering if you could give us some indication as to the level of participation you are having or perhaps the relative market share you are having at 5-nanometers today on AI GPU compute. We know that there is a lot of frenzy around things that have been attached to BT and similar AI models and just the general requirements to train such large language models and similar things. Are you – has that changed the discussion at all with your customers? And are you able to participate in that this year or is that something that’s going to have to wait for the next generation?

No, I think that what we have spoken about in the past is that the 5-nanometer nodes that have the significantly higher current. Our factorized power architecture has significant benefits. We have got about 5 or 6 companies ramping with 5-nanometer nodes in 2023. We have also got other customers that have started out with IBA architectures 48 volts down to 12 volts and then multi-phase. That – seeing that these architectures are actually not giving them the maximum amount of performance that they can get from their processes and are looking at even re-spins possibly of those boards to lower their PDN voltage drops and power losses and that’s also a factorized solution. So we are also engaged with two or three other customers on that sort of upgrades if you would like to get the best processor performance, Jon, out of their 5-nanometer nodes. So we see both of those going on. I think when you get to 3-nanometers that’s a completely different area for the high currents and low voltages and we feel very strongly that our 5G technology and vertical power delivery is going to do extremely well when that starts to happen. And the interest is very high in the market for vertical power delivery from Vicor. So that’s what we were talking about in the prepared remarks.

Just to quantify the value proposition now, looking at the test case for high current process, so with the target total current requirement in the 1,000 amp range depending on whether you look at it in terms of steady state or transient current requirements. The value proposition of our factorized power solution as a lateral vertical solution is a net reduction in just PDN loss, there is the power distribution network in the copper from about 120 watts down to pretty close to 50 watts. That reduction doesn’t account for other reductions in power loss taking place within the silicon itself due to major reduction in the voltage differentials within the pin field within the domains that are powered by each of the multiplicity of rails. And this is already a case in a 5-nanometer type application. To Phil’s earlier point, this kind of a challenge gets elevated to a new level of difficulty going down to 3-nanometer with lower voltages and even higher currents, where fundamentally, the duration of solutions, the multi-phase, multi-source solution is up against in terms of servicing these needs.

Got it. I have a lot more, but I will jump back in queue. Thank you.

Thank you. And the next question is coming from Quinn Bolton. Your line is open.

Hey, guys. I wanted to follow-up on the last question and Phil’s response to that, but perhaps try to be a little bit more direct. Your largest GPU customer last night announced the revenue for its next generation 5-nanometer GPU exceeded the revenue from its older generation GPU in just the second quarter of shipment. So it’s obviously a very fast ramp of the new generation 5-nanometer GPU. You have previously stated Vicor expects to have content on this 5-nanometer platform. Has anything changed recently on Vicor’s opportunity with this new 5-nanometer GPU? And if not, when would you expect to see meaningful revenue for this program ramping?

So, Quinn, we are not going to make customer-specific comments as you know, as a matter of general policy, we don’t get into that. I will answer your question in general terms and Phil may supplement what I have to say. With – sorry, this statement of what we just said, we believe that our competitive position is getting stronger, particularly with our 5G, particularly with respect to our unique PDN architectures and the demand for our solutions is rising. Now, I can’t comment with respect to specific applications at any one point in time, again, as a matter of general policy.

Yes. I mean, in terms of has anything changed? No, we are confident in the future like you said and we are going to go through the ramps this year with the lead customers and some new customers. And as I mentioned in my remarks, my confidence in our position in this market is growing, not reducing.

Okay. So it sounds like without speaking to specific customers, you feel good that you will participate in 5-nanometer ramps with multiple customers, as I think you have just mentioned, but it sounds like you feel even better positioned as we get to 3-nanometer next-generation architectures because the current requirements just move more into your sweet spot?

The answer is yes. And also, I think that there will be upgrades on 5-nanometer nodes too. They are not getting the performance out of the IBA architectures and there is more performance tends to be gained by reducing PDNs. I mean, PDNs are the significant drawback to the IBA architecture and so lateral vertical solutions and then 5G solutions from us, we can intersect in a number of places and improve the processor performance, sometimes to the levels that they are getting now. So, I expect some of that to play out this year as well.

Understood, Phil. And then the second question I have obviously understand you are going through the process of ramping the Andover facility, it sounds like if I listen to comments that you think you will be largely independent of the outsourced provider by the end of the second quarter, I just wanted to confirm that? And I guess, can you just comment on how your yields have progressed as you have started to ramp this internal capacity? Have you had any meaningful yield excursions or manufacturing issues that could delay manufacturing ramps of some of these next-generation processor designs or current programs?

Yields are getting better. So far high volume products typical yield of a chip is nowadays around 95%. We have chips where we are targeting raising the bar to the upper 90s. And we are pursuing the steps in a methodology to accomplish that. And these advances have taken place in spite of the challenges of outsourcing. They don’t yet reflect the benefits of vertical integration.

And just sorry the timing of 1 year old lead largely free of the dependency on the third-party electroplating partner is that sort of middle of ‘23 now?

No, I think it’s based on the current schedule within Q2, specifically, the last major piece of equipment due to be installed in the month of April and coming up shortly after that.

Excellent. Thank you for the detail. I will jump back in queue.

Thank you. The next question is coming from John Gruber. Please go ahead. Your line is open.

Good afternoon. In the last call, it was asked about when you are going have an analyst meeting and I was under the impression that you – we are talking about in this quarter? And I haven’t seen anything about that. And also, when will you resume analyst visits and communication with them being like a real public company and communicate with the analysts and the owners?

We had. So we participated in the Needham Conference, January 12. So that was one that we did. At this point, we haven’t decided about an Analyst Day, John. I think our perspective is we are going to talk again in another couple of months. So it’s fairly frequent in the short-term here. And then we are also talking about the shareholder meeting and how to handle that in June. So those are upcoming.

And what about analyst visits, investor visits to the company, which you are the only companies that want to talk to people?

Yes, I think we do that from time to time. It’s a process that we take very seriously. We want to make sure everybody is treated fairly. That’s kind of the focus we have and provide the same information to everyone at the same time is our objective.

Thank you.

Thank you. The next question is coming from John Dillon. Your line is open.

Hi, everyone. How are you doing?

Good, John.

So just had a question, Phil, we are pretty far into the quarter. I am just wondering how bookings are so far this quarter?

I don’t think we can get specific about that, right. We are talking about halfway through the quarter. Yes, but certainly the rates are…

So let’s not get into specifics, that’s the general policy we don’t get into. Again, I think both Phil and I have emphasized in the strongest terms that we believe we have the winning technology. Our technology gap to the competition is widening, not shrinking. And that’s something that applies to HPC. It applies to automotive as we heard earlier from Phil; it also applies to some of the industrial markets and other markets. So we feel very strongly that we are going to use up the capacity that we are putting in place, second little longer than anticipated, but it’s a major undertaking. And we see the returns on that investment taking place in years to come. So as to what is happening this month with respect to bookings or what is going to happen this quarter beyond the general guidance that Jim provided earlier, I don’t think we are going to get into any specifics.

Okay. Thanks for that explanation. It actually helps. And I am wondering if you can help me with my math a little bit here, if you still have $300 million in backlog, it would appear from even the outside and again, I don’t understand the inside, but it would appear, you would be able to ship more than $105 million a quarter, because you are going to book and ship something during the quarter, you can have additional bookings. So are you being super conservative with that saying that’s going to be revenue, revenue is going to be flat for the near-term?

I think it’s the guide that says over now, and I wouldn’t characterize it as being conservative, optimistic or anything else that is our best guidance as of now.

Okay, okay. And then one last question for Jim, you had mentioned that you expect incremental GM improvements as the factory starts coming online. So can we expect to see some GM improvements this quarter?

I would say, the guidance is approximately flat. It could be slightly better, but we will see. There are incremental improvements by way of less spending on the outsourced manufacturing side of things real time. So as we bring up the production line, that will increase. So there’s the opportunity for some improvement there. I think beyond that, we are looking for significant efficiency out of our own factory.

We have much shorter cycle times, much better efficiencies.

Great. Thank you guys very much. I will try and get back into the queue. Thank you.

Thank you. Our next question is from Jon Tanwanteng. Your line is open.

Hi, guys. Thanks for the follow-up. My question was around the returned inventory and product that you took back last quarter? Were you able to place that number one? And was it at a margin or is it at a price that was satisfactory to you guys or if it hasn’t happened yet or are you pretty close to doing so?

It’s been put back into inventory and some of it has been shipped out.

Okay, great. That’s good to hear. And then second, can you give us a layman’s commentary on just the current legal efforts, we have that the recent decisions that we have seen, just tell me where exactly you are and what we can expect next?

You are talking about legal activity?

Yes, correct.

There is no update there. We are going through the post-trial briefing nothing of significance.

Okay, great. And then finally, just the sales and R&D expense jumped up quite a bit in the quarter. Is that indicative of any new wins or projects that are getting close in the pipeline? And is that a run-rate that we should be using going forward? Jim, I think you said you expect a little bit. I am not sure exactly what magnitude?

So, you might be looking at it without including the litigation-related accrual in the third quarter. So the OpEx did come up from the third quarter when you exclude that and it was mostly associated actually with legal expense because of the trial and the activity was in the fourth quarter that caused a piece of the increase in spend. R&D expense did increase 9% sequentially in the fourth quarter. I think it’s important to note that Vicor is increasing the rate of R&D spend and it’s aimed at new products and it’s aimed at getting the factory online.

Got it. Thank you. Is there you mentioned NRE revenue coming in this year, just how much of our – how much do you expect that to fund just in terms of cost development?

Well, that’s a factor for again, it’s strategically the types of customers we engage with and want to engage with on the collaborative efforts of new product development or new systems development in automotive. So we’ve got a lot of opportunities to do that. So we really look to engage with leaders in the marketplace. And these engagements range from hundreds of thousands of dollars to sometimes millions of dollars, it’s difficult to put a number on a job.

Okay, great. Last one, just any thoughts on the Brick and legacy businesses and how you expect those to trend this year? I don’t think, did you give a split on advanced versus legacy? And it’ll catch-on your prepared remarks.

Yes, the sales of – on a go forward basis? Not on a forward basis. But last quarter, you did something…

Not on a forward basis. But the last quarter, you did something…

Yes, I gave the breakdown at the percentages. So that I guess business isn’t going away, but as we’ve been discussing for quite some time, it’s becoming over time to a greater degree irrelevant. So it wasn’t that long ago that it was the majority of revenues. It’s a reducing minority. But it is a business that has longevity; it isn’t going to go away next month or next year.

Okay, thank you.

Thank you. Our next question is from Richard Shannon. Richard, you are live now.

Great. Thanks, guys for taking my question. I think going back to the statement here in the press release about only supporting essentially flat quarterly revenues in the near-term, obviously refers to the March quarter, but would seem to suggest also beyond that, and in June or maybe longer. Maybe you can give some language to how long you expect that near-term flatness to occur or visibility into when that how long that’ll take?

Here again, I don’t think we want to stick our neck out beyond the level that is reflected in the press release. I think it’s near-term that could be this quarter. It could be also next quarter; obviously, visibility given a variety of factors at play, diminishes as we get further out. And that’s part of the rationale to provide guidance with the caveat. So we should all understand.

Is this the timeframe by which you hope to get better visibility contingent on new applications you’re hoping to win or when they get scheduled? Or is this just potentially contingent on standing up your manufacturing facility, which I think you said you’re hoping to get done sometime in the second quarter?

The former tool, not allow there, I think we have a high degree of visibility with respect to the completion of vertical integration, the capacity, availability that results from that we have, as you might imagine, less visibility with respect to the timing of new programs and the ramps. Frankly, given the challenges that Phil described earlier with these programs, and in the specific technical comments that I made with respect to the particular PDN losses getting in the way of being able to extract the anticipated level of performance out of even 5-nanometer silicon. There’s a lot of uncertainty with the customers themselves, so frankly, they don’t understand to a high degree what they got, and in the way of understanding what they can get. So that’s part of the source of uncertainty with respect to timing, programs, and revenues.

That uncertainty about PDN issues, here is a good one, notes here is that reflecting customers who haven’t yet adopted Vicor solutions are also ones who have done it in the past?

Well, all of the above and Vicor solutions have reached a deeper level of capability with respect to their design and performance. These advancements relate to the density of our modules and current density, which surpasses competitors by a certain percentage, and with 5G, this advantage has become three times greater. It's not solely about module density; it also involves the architectural aspects of our technology. Various factors limit the capabilities of competitive alternatives in power distribution networks. One significant opportunity, apart from the density and advantages of high-performance power, lies in our innovative methods to deliver power more efficiently, which include the copper layers within a bar and enhanced voltage control within the silicon itself. This is an issue that many customers do not yet fully recognize. They see their silicon running on Red Hat but struggle to achieve the anticipated live performance due to limitations in their power systems, particularly the power distribution network. This includes losses that occur in the copper and the silicon. There are challenges associated with bringing this process to completion, as the delivery may not meet the existing potential. It is essential for us to collaborate with our customers to unlock the full capabilities of their silicon.

Okay, thanks for that detail. I will left to review that a lot of stuff to unpack there, thanks for that. And a last question I’ll jump out of line here related to the automotive opportunity. I think early this year, you stated a bit of a delay from prior expectations and kind of ramping around the middle of next year. When do you expect to get the orders and maybe more detailed forecasts at that to help you understand what that could look like for next year?

That’s towards the end of this year, Richard. Really the ramps for that stuff is towards the middle of ‘24. I mentioned there’s been some delays because of the COVID issues that hit a lot of the R&D teams and different OEMs and Tier 1 so I would think this is probably more of end to ‘24, early ‘25 sort of the ramp for us.

That’s towards the end of this year, Richard. Really the ramps for that stuff is towards the middle of 2024. I mentioned there’s been some delays because of the COVID issues that hit a lot of the R&D teams and different OEMs and Tier 1, so I would think this is probably more of end of 2024, early 2025 sort of the ramp for us.

Yes. Hi, guys. Just if you could clarify looking back at my notes and my thoughts. It’s probably the end of Q2 last year, we talked about 80% to 90% fully integrated, vertically integrated at the new warehouse, the new manufacturing plant by the end of December of last year, it seems to continually get pushed out. And last week, there was some speculation that you guys had some contamination issues, if you could kind of clear that up. And then I’ll have follow-up with that. I mean, just, can you just be a little more specific about the delays in the fab, chip fab plans going up?

So suggestions by competitors or contamination are pure nonsense.

But still I wanted to hear.

Okay, well, that’s what it is. And with respect to the timing of bringing the vertically integrated facility to fruition, there have been some delays, we kept you apprised of what has been happening with respect to this complex endeavor, again, not to overstate the complexity but in one way of looking at this, what we’re bringing together is the first fab for chips, in converters as in package, a unique Vicor technology heavily protected. first of its kind. In the fab, to make these kinds of products with vertically integrated processes has got a number of novelties and complexities that we’re bringing together for the first time, I guess, in the United States. The fact that the delivery of some of this equipment got delayed by I think, 5 or 6 months also, given the cycle time for developing the equipment and manufacturing. It may not be all that surprising. The good news is that is earlier – in answer to an earlier question; we’re now in the hands of February, and we’re looking the last commute date from the vendor in Europe for the last major piece of equipment being a federal state in April, so that’s really only 2 months away.

And that’s going to be a wise guy. But we’ve kind of heard that before. So it’s getting a little unnerving as an investor, that there seems to be a delay, a delay, a delay, and like Wednesday, you won’t talk about in video, but in video seems to be working through their inventory, and ramping up in all areas. AI has been a real buzzword over the last couple of weeks, I know you guys are involved with AI. As an investor, I’m getting a little nervous that the race has started and you guys are falling behind, no matter how good your technology is. I mean, monolithic is an execution machine. And they keep talking all sorts of trash across the board, but they’re executing. So I’m just getting a little nervous that you guys are falling behind?

I understand why you might be feeling anxious. If I were in your position, I would probably feel the same way. We have experienced delays with the first chip fabrication plant, and I don’t want to make excuses for these delays. We’ve had multiple equipment vendors involved from Japan to Europe to the U.S., and some equipment has taken several months longer than anticipated to arrive. I should mention that we’re currently in February, and the last piece of equipment is expected to be delivered soon.

I hope that comes through; I hope that comes through. Well, because I also go back to so it’s purely equipment delivery that’s been delayed, because I remember you talking about the outsourcing process and the plating process, that your guys were at the outsourcers basically mastering the process that you planned on bringing efficiencies that you thought you could improve upon the process when you brought it in-house. So it’s not like a training issue. It’s strictly equipment not there.

That’s right. Yes, it’s equipment. A lot of equipment has been delivered, has been qualified, is up and running. And as Jim pointed out earlier, we’re already using it and it’s beginning to reflect itself in greater capacity and greater visibility with respect to cycle time and lead times. There are a few pieces of equipment that are still to be delivered, but we are very close to that being delivered, then we used to say, with that little time left, the degree of stability gets to be greater. So I would be very surprised if the work to be further delayed. I think we are in line of sight to being vertically integrated.

And I’ll finish with a positive I greatly appreciate that you guys attended the Needham Conference, because it’s sort of what we talked about last year. We want to hear the story. We think it’s a great story. We want to be in contact with you guys. And I hope that continues this year and I’ll get back in the queue.

Thank you. Our next questioner is Alan Hicks. Your line is open.

Thanks. Good afternoon. I want to approach that a little different way than the last question. Seems like the gauging factor in getting your revenues going again has been much own the trading than to the 5G technology products. Can we expect once the plating is done, can we expect step up in revenues? By the way, and then 5G is one of those coming out and what can we expect from that?

So, we expect – we have missed out with what has already been done, we have begun to expose our 5G capabilities to a very, very limited test case of customers. Very few instances, and in a very controlled way to, in effect, get market validation for being aligned with needs coming our way with further advances in lithography. And job market trends, and what I can tell you is that we’re getting great traction with respect to 5G, providing what customers and real-world applications need and are going to need over years to come. So I’m very, very careful with respect to the fact that – has happened before, we’ve had the vision to anticipate what the market is going and what is needed in order to enable the performance of critical applications. We have some 5G modules operating on the bench the full complement of capabilities is coming together with the availability of sound control silicon. They second place so the 12 a month. And we expect to be able to start something customers in Q4 of this year. As we get further along with the validation, we’re going to expose the capabilities to a growing list of customers, we have unique tools that are being developed, and to some degree have been developed already to enable customers to, in effect, get behind the driver’s seat with respect to controlling their destiny with system solutions and PDN methodologies that meet their real requirements. So we feel very good about this. And this is ‘23 development with respect to the 5G technology coming together. And I think what’s particularly noteworthy is that in terms of resetting the level that we’re setting the bar of expectations in terms of power density, current density and the critical needs in computing, automotive and other major applications, I think is well beyond the setback in performance that Vicor was able to achieve with prior generations of products. This can be to together of a lot of technologies, both with respect to unique components, the packaging technology, and the power distribution architectures, all playing together for the first time to deliver a major step up in performance. So we’re very excited about that.

Great. Do you think customers are perhaps delaying until they get their hands on 5G?

No, that's not how it operates. If trains leave the session at the best possible outcome that can be achieved, and if not all capabilities are ready, they still must leave the session. However, there are tendencies that follow previous trends, presenting an opportunity to integrate with 5G from a design perspective starting this year. We're currently involved with certain customers that we can work with at this early stage of 5G capability, which remains quite preliminary. Although we have target specifications for a broad product portfolio, the target pathways are not finalized yet as we are waiting for some final enabling elements to be established.

So, technology is ramping right now with 5-nanometer nodes, as we spoke earlier, more for factorized power architectures and bus converters. So the 4G is ramping through this year, it will hit some peaks next year, then we will move on 3-nanometer, but we’ve got good designs on the 4G stuff. And there’ll be opportunities to pick up other 5-nanometer nodes, as I’ve mentioned, to get the performance out of those services using we’re calling lateral vertical with our 4G technology. So that all happens before we transition happened in 5G.

Okay, do you think 5G will significantly expand your market?

Absolutely, yes. But both in terms of higher costs, and even lower costs, because again, I am going to get a lot finer. So we’re going to not only take the 1500 amp 2000 amp, but we’re also going to take the 100 amp.

Okay. And finally, back on the plating. Do you expect that step up revenue once you get that and completed? Did we unleash better logjam for more shipments using in-house trading?

Yes, so I suggested earlier, I suggested in the press release, as of this moment, we have no capacity constraint with respect to revenue, it’s, as of now limited by history of bookings and backlog for the near-term.

Okay, so basically flat next quarter, possibly saying second quarter? Thank you.

It’s your interpretation or near-term. I don’t mean to be a wise guy either, but we just want to be sure that we are very clear with respect to what this fact and not encourage any potentially misleading expectation.

Okay, thank you very much.

Thank you.

Thank you, everyone. And operator, I think, we could – I think we have time for maybe one more question.

Thank you. The last question is coming from Quinn Bolton. Your line is open.

Thanks for squeezing this last question. The filling it’s the lateral vertical ramping with your 4G technology. Does that start this year or is that more of a 2024 event based on sort of your current expectations?

Our goal is to have that ramping this year.

Okay, thank you, everyone. Operator, I think we’re ready to close the call now.

Thank you, everyone. That concludes your conference call for today. You may now disconnect. Thank you for joining and enjoy the rest of your day.