Hello and welcome to the Melexis FY 2021 results call. For the duration of the call, your lines will be on listen only. However, later in the call you will have the opportunity to ask questions, and this is done by pressing star one on your telephone keypad. If at any point you need assistance, please press star zero and you'll be connected to the operator. I'd now like to hand over to our host, Marc Biron, CEO, to begin the call. Thank you. Hello everyone. It's a pleasure to welcome you again to our earnings call related to the Q4 and the full year result of 2021. Today we are two speakers, Karen Van Griensven, our CFO, and myself. Let's cover first some top line and financial background, after which Karen and myself will be happy to answer any question you may have. Q4 comes with a fourth sales record in a row of EUR 166.3 million, an increase of 13% year-on-year and 2% quarter-on-quarter. The full year result is EUR 643.8 million, an increase of 27% year-on-year. Those very good results leads to a 97% increase of our operating results if we compare 2021 with 2020. As a consequence of the sales increase, I am proud to announce that Melexis shipped on average 18 IC per car produced worldwide. In 2021, we have launched 16 new products. Melexis continues to launch new product following the strategy to focus on the electrification of the car as well as their increased comfort and safety levels. I will now highlight the four main products we have launched in Q4. We have launched a first position sensor using inductive technology. This product has been specifically developed for electrified application such as eMotor, E-Booster, and Electric Power Steering application. We have also launched a new LIN gate driver for mechatronic automotive application such as oil pump, water pump or coolant pumps. We have launched a third product, a LIN RGB LED controller to enhance flexibility to animate and personalize the interior light of the car. Last but not least, we have launched a new fan driver with an increased operating lifetime in order to meet the requirement of the battery cooling in electric vehicle. I'm now giving the hand to Karen for more financial result. Thank you, Marc. Good morning, or good afternoon maybe for some. Welcome to this call. I will indeed guide you a bit more on the financials for this quarter. Marc already mentioned it, so we came at EUR 643.8 million sales for the full year 2021, which is an increase of 27%. The growth results came out at EUR 273.6 million or a growth margin of 42.5% of sales, and which is an increase of 38% compared to 2020. R&D expenses were at 12.2% of sales, G&A at 5%, and selling was at 2.3% of sales. The operating result was EUR 148.4 million or 23.1% of sales, which is an increase of 97% compared to the EUR 75.5 million in 2020. The net result was EUR 131.1 million or EUR 3.25 per share, which is an increase of 89% compared to EUR 69.3 million or EUR 1.72 per share in 2020. If you look at the fourth quarter, we had sales of EUR 166.2 million, which is an increase of 13% compared to the same quarter of the previous year and an increase of 2% compared to the previous quarter. The growth result was EUR 70.6 million, again 42.5% growth margin versus sales, and an increase of 21% compared to the same quarter of last year, and flat compared to the previous quarter. R&D expenses were at 12% for the fourth quarter. G&A was at 5.3% of sales, and selling was at 2.4% of sales. The operating result was EUR 37.8 million or 22.8% of sales, which is an increase of 47% compared to the same quarter of last year, and a decrease of 5% compared to the previous quarter. The net result was EUR 33.3 million or EUR 0.82 per share, an increase of 39% compared to EUR 24 million or EUR 0.59 per share in the fourth quarter of 2020, and a decrease of 9% compared to the previous quarter. The board also decided on a final dividend. We had already paid out in October an interim dividend of EUR 1.3 per share. Now the final dividend was decided to be the same, so an additional EUR 1.3 per share. That means a total dividend of EUR 2.6 euro EUR per share, and that will be payable in May. For the outlook, we expect the sales in the first quarter of 2022 to be in the range of EUR 177 million-EUR 183 million. For the full year 2022, Melexis expects sales growth between 12% and 17% with a gross profit margin around 42% and an operating margin around 23% at the main point of the sales guidance. All taking into account a EUR-USD exchange rate of 1.13. For the full year 2022, Melexis also expects CapEx to be around EUR 45 million. I would like to close this session here and now open the Q&A session. Please, operator, go ahead. Thank you very much. If you would now like to ask a question on the call, please press star one on your telephone keypad and please ensure your line is unmuted locally. Our first question today comes from the line of Francois-Xavier Bouvignies from UBS. Please go ahead. Hi. Good morning. Thank you very much. I have a couple if I may. The first one, if we look at your guidance for 2022, the 12%-17% on the revenue side, and if we remove the currency benefit, I mean, if my math is correct, it's 10%-15%. How much of that growth is coming from pricing in 2022 and how much is volume in your view? You know, we have a lot of inflation going on in the industry at the moment, so I was just thinking how you think about the pricing dynamic for your products in 2022 versus volumes. That's my first question, if I may. I can ask you them all at the same time, or should we do one by one? Yeah. As you prefer. We can indeed answer the first one. Yeah. As we mentioned in the previous call, there is indeed some price increase. It's the first time, as you said, we try to transfer, let's say our cost increase to the price. We mentioned in the previous call that it was a single digit price increase, which is what we have indeed implemented to our customer. Okay. Out of those, 12%-17%, there is a single digit linked to price increase. Okay. If we do the 10%-15% on constant currency and remove some pricing benefit, single-digit, it means that you assume volumes like mid- to high-single-digit on the volume side when the production is, you know, around that basically. Can you explain maybe the delta between, you know, why wouldn't you have much more volume than the production of cars? Yeah, I think there is the supply chain which is still constrained. I think we could also refer to our historical growth, let's say. I think, yeah, the historical growth is probably still valid for 2022, but yeah, it's still a market which is constrained by the supply chain, and we are working with our different supplier in order to increase the supply chain capacity. Yeah, we mentioned also that we have. I think we have in 2021 we have been able to increase part of the supply chain, but for what concerns the wafer process, it takes time because this increase of wafer capacity takes time at our supplier. It's why it will gradually increase quarter after quarter. If you remember, IXYS has now a new site in Corbeil, and this the capacity increase of the Corbeil site is increased, yes, step by step, quarter after quarter, but it cannot. It will not turn off and turn on in one quarter, let's say. That's just the reason why indeed this 12%-17% volume increase or revenue increase, sorry. That's clear. Thank you, Marc. Maybe a follow-up is on the mix that you are seeing. First of all, I mean, in terms of product, you seem to say that magnetic sensors are the, you know, the highest growth or a big contribution in 2021. From what I understand, it's a higher gross margin product, above corporate average, but tell me if I'm wrong, of course. No, it's correct. How should we think about 2022 mix? Especially in the context where EV and hybrid seems to get some more traction, so it would be less magnetic sensors, I would say more, you know, current and temperature maybe driven that maybe have lower gross margin. Just trying to understand the moving parts around the product mix in 2022, if you see what I mean. Yes. I think we need to make the distinction between the absolute growth, let's say, and the percentage or the relative growth. Because in terms of absolute, the magnetic sensors are still very solid in terms of absolute number. In terms of relative number, indeed, for 2022, it will be current sensor, latch and switch, the LIN RGB for the interior lighting, and also the smart motor driver. Then those four product lines will grow, let's say, faster than the other one. Again, I repeat, in absolute growth, the position sensor is still dominant. Okay. We are seeing in the market the hybrid and EV, you know, it's always a discussion. Actually, if you look at last December in Europe, I mean, hybrid seems to lose some traction, even some negative growth rates when EV is really accelerating. Yeah. Now, if I take your Capital Markets Day, I mean, comments, hybrids have a significantly higher content than an EV, and an EV is closer to combustion engine. So how should we think about this turn in dynamics, you know, when maybe hybrid is not gonna be as big as people expected, you know, a few months ago, I would say, and EV is getting more traction. Is it something you share, or how is it impacting, you know, your revenue growth in your view, this mix? I think the plug-in has always been seen as a bridge between the ICE and the EV. No, you are right. It seems that the bridge will be short in reality. Again, nobody knows. What does it mean for Melexis? I would say that in Melexis, we have many products that fit, let's say, the electrification of the car. I think we just mentioned in the previous answer, I just mentioned the product line that contributes to the electrification. We realize that there is a lot of potential socket in the thermal management, which is coming with electrification of the car. The thermal management of the battery of the powertrain, those are the thermal management of the interior of the car. When we count the different socket achievable or available for Melexis, there is also a huge increase in the electrified car. On top of that, we mentioned also during the previous call, the electrified or the modern electrified car, they come with an electric engine, but also they come with a lot of new application in what we call body chassis safety for the comfort and for the safety of the car. This is also a lot of new application for Melexis. The fact that we moved to a much more electrified car is good for Melexis because we move also toward more safety and comfort application, which is a lot of electronic content. That's clear. Thank you very much, Marc. Thank you very much. Our next question comes from the line of Matthias Maenhaut from Kepler Cheuvreux. Please go ahead. Yes, good morning. Thanks for taking my questions. Maybe three from my end. Firstly, on the adjacent business. It's a business that has been stabilizing a bit around the 16-17 EUR million level of turnover in the last two quarters. How should we think about this business going into 2022? Is this, it's a business that had profited a lot from COVID-related demand. Do we anticipate that demand to completely fade, or are there like new initiatives that will drive this business back to growth in 2022? A second question was on the inventory levels in the automotive supply chain. I note that your automotive revenue stands substantially ahead of historical content growth, but also if you add up the light vehicle production, it stands substantially above. How are inventories evolving? Thirdly, a third question was on the 60 new products. Can you just elaborate maybe on if these are all new applications, fully new applications, or some of those products are actually replacing older versions? How we should think about new product launches going into 2022. Will you accelerate product launches, or will it rather remain at the same level? Thank you. Yes, Karen, I take the first question, and then you take the inventory. Okay. Karen, about the adjacent, indeed, you are right. Our goal is to move from 10% to 20% of revenue linked to adjacent. During the last two quarters, we were stable, let's say, around 10%. It's not really because of lack of demand. It's more of a consequence of the allocation in Melexis. Because indeed we had tendency, let's say, to privilege the automotive to avoid line stop and to avoid a high escalation at the OEM level. Meaning that when we have allocated the available material for Q3, Q4, we have done our utmost best to avoid line stop at the OEM, and I think we will succeed. As a consequence, we had to reduce a bit the allocation to the adjacent. That being said, it's not the reason why we don't want to reach 20% in the future. Our objective is still to reach 20% of revenue in adjacent. Let's say, this goal has been put a bit in a second priority given the market situation. For 2022, we hope that we will have a bit more headroom, and that we'll be able to increase this percentage. To answer your question, yes, we have indeed some new application that will start in 2022 for adjacent. It's a bit too early to give more detail, but I hope that in some months we'll be able to give a bit more detail. Yeah, on the inventory levels, were you speaking in general in order for Melexis or? Yeah, for both actually. I would- Both. Yeah. Specifically then Melexis, so. Indeed, Melexis managed. I mean, thanks to increased supply, certainly also in wafers over the last months, we managed to grow sales, but it also resulted in some inventory increase. This is obviously a timing effect as well. At year-end, certainly in the last days or the last week, there is not much shipment. The increase we see is really a temporary increase, which mostly are finished goods, which by now have probably all been shipped again. That is certainly here's the timing effect because it's certainly not, I mean, an indication that there is overstocking or whatever. It's rather the contrary. We are still in many calls discussing constraints in the market. As we mentioned in the press release, we see that lasting for the full year, it's also impacting our guidance, as Marc already explained. Yeah, supply constraint is there to stay. Inventories have been somewhat increased, but it is rather to prepare the step up to more output in cars than that there is than that we can talk in terms of overstocking, certainly not versus the current rate of also at this TBC, still low levels of inventory. Yeah, certainly no concern from that end. I don't know if that is a sufficient answer. Yeah, that's a sufficient answer. Inventories are still low in the supply chain. That was the last question on the 16 product. Yeah. Introduction. I suggest Marc takes that question. Yes. Indeed, Lap. I mean, the answer is yes and no. Part of the 16 products are, let's say, evolution of the previous one. I can take as an example the mid-range Triaxis. We have launched a mid-range Triaxis earlier in 2021, which is an evolution of the previous product, where we have improved, let's say, the technical feature. We have reduced the cost, and we have to bring some new packaging, new assembly technique, a new assembly form for the customer. That's a win-win-win, let's say. This is an example of a new product, a new generation of an existing product. We have also real new products bringing really new application. If we take what I've mentioned in the introduction for Q4. In those Q4, we have for example the smart driver, which is a real product to address a new application in the battery of the car. Then I think it's. There is a bit of both, let's say, in those 16 products. To answer your question, what about the future? Our target is to increase the number of launch year after year. I mean, 16 is more than what we have launched in the previous years. We plan to launch also between 16 and 20 in 2022. That will be the goal is to launch more than 16 next year. Yes. Again, between 16 and 20. Okay. Thank you. That's clear. Thank you very much. Our next question comes from the line of Varun Rajwanshi from JP Morgan. Please go ahead. Hi. Morning, Marc. I'm Varun. I have a couple of questions. Firstly, on gross margin. I just want to hone in on this point. You're not guiding for any improvement in gross margin year-over-year, despite the favorable pricing environment. Is this down to product mix, or is there any other headwind that we should take into consideration? And does this imply that gross margins will decline further in 2023 when pricing normalizes? That is my first question. The second is on your sales growth guidance of 12%-17%. Is this based on finalized capacity allocation from your suppliers, or is there any wiggle room to increase supply capacity as you move through the year? Lastly, Marc, back in October, you had indicated a mismatch between demand and supply in the 20%-30% range. Can you give us an indication of how the situation has evolved since? Thank you. I'll start with the first question. The gross margin leverage potential. Why did we guide for similar margins to what we saw in 2021? In the first place, we are in an area of inflation and price increases on the supplier side. Today, our aim is to balance out the supplier increases with customer increases, but not necessarily to improve our margins overall. It's always been I mean, that's what we always communicated, to balance out the two effects as much as possible. That isn't a given as such anyway. As we all know, we will probably throughout the year experience more price increases. That's why we have been quite conservative from that way. The product mix is, it's rather favorable, I would say, as Marc already mentioned, the magnetic sensors is growing at high rates. As they have high margins, it's rather favorable. The product mix is not, I mean, will not put margin pressure as far as we can see. On the other hand, what I mentioned already last year, we have our new infrastructure in Bulgaria, and that is since Q4 that is putting some pressure on our gross margin. We took it in use in Q4 and also moving in 2022. This is adding to our cost or our fixed cost base, which still is impacting 2022. Obviously, moving further into time, there will be leverage over this investment. In 2022, it is still a negative effect. Last but not least, our R&D as a percentage of sales is at historical low levels. We certainly don't want to decrease, so we... It's expected to grow more or less in line with sales growth in 2022. Also there, no leverage to be expected. On the other questions, I think the second question was related to The supply chain. The sales grow, yeah, the sales growth guidance. I don't know, Marc, if you wanna answer that question or. Yeah. I think the supply chain constraint will continue well into 2022. As far as we can see, we still have this mismatch, let's say, between the capacity and the expectation from the customer. Marc, if I may just follow up. Is the guidance of 12%-17% sales growth based on finalized capacity allocation from your suppliers, or is there room to increase that supply as you move through the year? I think it is based on a realistic assumption on what will be the capacity this year. As I mentioned, if we take the example of the wafer fab in Corbeil, the capacity is increasing quarter after quarter. We made our guidance with the assumption of this capacity increase. Yeah, if you ask, can it be better? Yeah, I think it's a realistic assumption. It's a technical challenge for X-Fab to increase the capacity in Corbeil. They really need to start new process and to ramp up the process. Then I think we need to take a realistic assumption. I believe this is realistic, yes. Understood. Just on the last point, so you had indicated 20%-30% supply mismatch. I guess my question was, has that come down over the past three-four months, or is that mismatch still at a similar level? Yeah, go ahead. Go ahead, Karen Van Griensven. Yeah, we are not in the same room because of Corona, so there might be a bit of mismatch in our reply. But indeed, I think it's still relatively stable. Forecasts are still much higher than supply. I think overall, yeah, we see more or less. No, it hasn't changed a lot over the last couple of months. Understood. Thank you for your answers. Thank you very much. We now have a question from the line of Sandeep Deshpande from Oddo BHF. Please go ahead. Yes, hello, good morning. Actually, I've got two questions. The first question is on the evolution of the order book during the quarter, and at the end of the quarter, if you consider that the order book or if you see that the order book has increased, and how much it does cover, you know, through the year or maybe further. Some of your competitors in the field are saying that they are fully booked for, let's say, 18 months. Is that the case for you? Also, I'm trying to, you know, to reassess my model or the story and looking at the level of sales that can be expected this year and maybe next year, you have never been so big. In the past, you were generating, you know, 25% EBIT margin, 45% gross margin. I understand the, you know, the price increases, cost inflation, et cetera. Hopefully inflation will not stay forever. Do you think that you can go higher than those levels of 45% and 25% when the situation will be, let's say, restored or a bit more quiet, let's say, on the inflation front? Thank you. Karen, you answered the EBIT and GPM target? Yeah. Well, on the margin and EBIT long term, it's what your- Yes. Today, 42, around 42. Moving forward, our internal aim is indeed to grow back to the 45% and the 25%. But we don't see that happening indeed in the short term, because it is quite dependent on the product mix. Longer term, there is room for further improvement. Certainly, if you look at the product lines that Marc mentioned, some of them have high margins, like current sensor, temperature sensor and so on. Also, the disti business, it can if that grows, it also helps the, I mean, the adjacent disti business. There is potential to grow it. The leverage also on our investment in Bulgaria is also a longer-term driver that can help. On the other hand, R&D is at very low levels, so we rather wanna bring it back to historical levels of around 13%. That is, yeah, that means we need to increase the gross margin at a higher pace in order to compensate for that. We are definitely working towards these margins, but it's not expected in the near term. Beyond that level it's gonna be, yeah, very tough, I would say. I mean, the 45% is what we aim. The 45% and 25% is what we aim at. Beyond that, it's gonna be difficult. Okay. Um. about the order book? I think the order book is still very high. Yeah. I think we can also confirm that we have, yeah, most of this year is booked, like all the other competitors are, because there is still the mismatch. Orders have come in faster than usual. Indeed, we also have more or less the order book full. It will depend on capacity, how much eventually we will deliver. Okay. Maybe Also more than 12 months. I mean, we have also orders that last in 2023. Okay. Sorry, I have a quick follow-up. Can you still hear me? Yes. Yes. Oh, sorry. I have a quick follow-up. You know, everybody is blocked by the capacity, but we see some, you know, significant investments happening in the market. The question would be, are you thinking about diversifying your sources of foundries in the future? Everybody is now investing in the kind of product that you could be interested in. Yeah. I think X-Fab is investing a lot. I mean, we mentioned Corbeil. Mm-hmm. As an example. I think the diversification from the foundries will come from the diversification at X-Fab level. For the other part of the supply chain, like the assembly house, for example, we are indeed exploring different solution in order to have, I mean, to ensure the business continuation. Okay. Thank you very much. Thank you. Our next question comes from the line of Ruben Devos from KBC Securities. Please go ahead. Yes, good morning. In the presentation, you provide updated figures on the total addressable market, which is always very interesting to read. Just looking back to 2021, eventually you reported growth in automotive of, let's say, 28%, while the slide indicates that your addressable market in terms of chip content per car grew by around 10%, and growth of the car park was nearly flat. I guess that suggests that you've far outperformed your addressable market. I was curious whether you could share your thoughts why that's been the case. Just, you know, to get a better understanding of underlying strength of your products, versus the market. That's my first question. Yeah, indeed, the content growth, let's say, in 2021 has been driven by some products, like the latch & switch, like the LIN RGB. As mentioned, in the future, it will be those two, but also the current sensor and the smart motor driver. I think we have indeed developed in the last years the right product to address the requirement of the market in terms of electrification. We mentioned in the past, thermal management is part of the electrification. It's why a lot of sensing and driving solution will be needed for the thermal management. We have the right products to answer those expectations from electrification current sensor, but also for the thermal management with our sense and drive solutions. Okay. Just to continue on that, on the total addressable market, also in 2021, especially the chip content for powertrain systems was the big driver, whereas, growing chip adoption in CBS systems was held back a bit. It doesn't sound like that's been the case for you, but, yeah, I was wondering whether you could help us understand why that has happened, you know, and maybe some thoughts on why the CBS segment could catch up in the following years according to your forecasts. Yeah. In the document that you refer, this is really the TAM. This is Yes. Yes ...what is addressable, let's say, by Melexis. Indeed, in the CBS, in the Chassis and Body, we believe that there is a lot of application that Melexis can address. Indeed, if you compare the absolute value, there are more TAM in the CBS than in the powertrain. I think it's a bit what we see in our total revenue. We see indeed more growth in the CBS than in the powertrain. I- With CBS, it's all the comfort, all the safety. As an example, the LIN RGB for interior lighting is part of the comfort. We see quickest growth, let's say, in Chassis and Body than in powertrain. Especially in the CBS market, you've actually gained a lot of market share, and that was sort of a big factor of your high performance this year. Is that a good assumption? Yeah, I think so too. Okay. All right. Thank you. Thank you. Our next question comes from the line of Michael Roeg from Degroof Petercam. Please go ahead. Yes, good morning. I also had a look in the presentation, and I noticed that global car production was up by about 2% last year, and your penetration was up by 38%, from 13 chips to 18 chips per car. If you combine the two, then your automotive volumes must have gone up by 41%, yet your automotive sales were up by only 28%. What explains that huge gap? Yeah. The main reason for that higher increase in volume versus sales increase is the fact that we grew more with embedded lighting and latch and switch chips. These are products that have lower average price than the average of Melexis. Smaller products with a lower price that grew more than the average. It's a product mix effect in the first place. Okay. I could calculate the ASP for the group as a whole, so also including the adjacent sales, and there was a negative price effect of about 3%, sort of like a crude estimate. So it was probably higher, much higher in automotive and maybe flattish in adjacent then, the price effect or the mix effect? It is indeed higher in automotive. Well, what do you mean? No, it's really the product mix here. It's more. It's not a pricing effect. It's product mix effect. Okay. more sales of products with a lower average selling price. Yes, based on the volumes that you provided in the presentation now and last year, I calculate an overall price mix effect of -3x Mm-hmm. For the year as a whole. Yeah. If it was -3% for the year as a whole, then my assumption is that the mix effect was much stronger in automotive than in adjacent. Is that correct? That is correct. Yeah. Okay. Is this something that will continue in 2023, or will it stabilize, that mix effect? That's very difficult to guide on. I mean, 2021 was influenced by the huge discrepancy between demand and supply in 2021, in automotive in the first place, and that impacted also adjacent moving forward in 2022. It's difficult. We continue with the supply constraint. How exactly it will work out in the product mix? It's difficult. And also the mix of cars is changing today, so that's why we don't wanna make a prediction on that. It's very difficult. A lot of moving parts, and next year we'll be able to make the calculation again. I also have a follow-up question on that, on the inventories, and it's something, a topic that comes back quite often. Is inventories actually the right word? Shouldn't it be simply wafers in progress or something like that? Because typically your, the wafer's coming from your supplier, testing, and then you ship them out again. So this is more work in progress than actually, you know- Of course. Yep. Yep. ... inventories on the shelf doing nothing. Just out of curiosity, yeah. After you receive a box of wafers, how long does it take from receiving and westing them and shipping them out to the end customer? Is that a matter of weeks or months? Months. Most between 6 and 10 months. Well, when it comes to Melexis, it's months. Yeah. It depends on the product. Some products it's maybe we can do it in a couple of months and others it will be more than 6 months. Depends on the complexity of the chip. From receiving a waiver from X-Fab. Mm-hmm or somebody else. Yep it can take up to six months before you ship its final chips to the customer? It can take quite a while, yeah. Yeah. Wow, that's. Yeah. On Yeah. On average, it's indeed more than three months, I would say. Yeah. That's much longer than I had imagined. Okay, good. That's very helpful. Thank you. Yeah, because after the wafer, we Yeah We test them at wafer level, and then we ship them to the assembly hall. Then there is the assembly process, then they came back to Melexis. We retest them at package level, and then we ship them. This is for the, let's say, the quick process and sometimes, as Karen mentioned, there is additional process at wafer level. It's why it's definitely- Yeah. more months than weeks. Yeah, it sounds almost as if the back end takes longer than the front end. I would say it's 50/50. Okay, good. Very insightful. Thank you. Thank you. Our next question comes from the line of Marc Hesselink from ING. Please go ahead. Hi there. Yeah, thanks. My first question is also on the increase to 18 ICs per car and your target of 20. Is there significant upside risk to that? Or, plus also maybe the 18, this was a year where the OEMs prioritized maybe the higher value car which typically have a bit more ICs. Can you talk about the dynamics underlying that? Second, the increase in R&D, what will be the result of that in a few years for Melexis? Is that simply required to get to your current plans? Or will you also therefore be able to increase your serviceable markets because of the incremental R&D? Thank you. The first question about the 18 chips per car, and indeed 18 means that we have shipped 1.4 billion pieces in one year, and 75 million cars have been produced. Meaning that if you make the division, we reach 18. I think why did we move from 13 to 18? It's indeed because there is more and more electronics in the car. Electrification, we mentioned. We mentioned also more comfort and more safety. You are right that in 2021, the OEM have given priority, let's say, to the high-end car. This has for sure played a role in the 18. On the other hand, we know from historical reason that the option from the high-end car always come down to the mid-range and later on to the low range car. I think this increase of safety and comfort will be cascaded down to the mid-range car and the low-range car. It's why we are confident that the future growth will be secured in this way. For the time being, as we mentioned in the PowerPoint that we have launched, we really see that from 2021 to 2026, in the next five years, there will be more and more addressable socket for Melexis that we discussed just before. For the powertrain, we believe that 50% more socket will be available, which will also indeed contribute to the growth and to move further after 18 IC per car. Does it answer the question? Yes. It makes the 20 target quite easily achievable, right? I mean, it's not wrong to look at it that way. Yes. I think the idea is to reach 20 and then indeed to continue to grow. Yes. Okay, thank you. Any other question? What? Did you have a second question? Can you repeat it? The increase in R&D. I would say that there are two aspects in the R&D. The complexity of the product is increasing. If we compare the complexity of the product that we developed ten years ago and the complexity of the products of today is really day and night, I would say. It's more complex, meaning that in order to launch the product, we need to make more effort. It's more expensive, let's say, to launch a product now than ten years ago. It's why we need to continue to scale, let's say, our development organization in order to be able to develop new product and address the new application. The second aspect is, I mentioned in the past that we want to increase the number of products that we launch every year. Some years ago, we have launched 12, 13, okay, now we launch 16, and we want to be able to launch 20 in the future. We need to scale up also the organization to launch more products. It's there are two reasons. First reason is to be able to cope with the increased complexity, and the second reason is to guarantee that we will be able to launch more product in the future. Okay. That's clear. clear. Thank you. Thank you. We now have a question from the line of Robert Sanders from Deutsche Bank. Please go ahead. Yeah, good morning. Thanks for taking my question. I guess my first question was just on the mid-single digit price increase. You know, some of your competitors are increasing pricing 20%, because foundries are increasing their wafer prices by up to 20% at mature nodes. I was just wondering why so timid? Why not increase pricing again? Or is that contractually difficult? I have a follow-up. Thanks. I think we cannot comment on what the others do. But for sure, in Melexis, we have decided to, let's say, transfer the cost increase to the price increase. The goal was not to, let's say, increase artificially our margin. It's why we have communicated this price increase to our customer, being fair and just transferring the cost increase. Got it. Just following up on the question about product mix. It looks like you've had quite a significant price mix negative impact on ASP in 2021. It looks like you're saying your growth opportunities are highest in CBS and in latch & switch, etc., current sensors. Is it fair then to assume that your historical ASP of 42-45 cents EUR could end up trending below that range just because the products where you see the highest growth have the lowest ASP? Yeah. I think the ASP is indeed has decreased a bit in 2021 as we mentioned. Karen has answered that for 2023, and later on, it's really difficult to assess because there are a lot of variable. I think it's a bit difficult to make prediction. But as a matter of fact, in 2021, latch and switch LIN RGB have contribute to the growth, and those are product with lower ASP than the average. But I think it's not structural. I don't see any sign that there is a structural trend for Melexis to be successful with more lower ASP products. Got it. Just last question would just be the ordering behavior of your tier ones and OEMs. I was just wondering whether you thought that, you know, ordering was now looking like it was more normalizing, and that those customers had sort of got to a new inventory level given that they're now comfortable with. Or do you think they're gonna continue to sort of stockpile because of the end of just in time? I was just wondering if you think we are now sort of stabilizing a bit after last year when there was obviously clear stockpiling. Thanks. I don't think that our customers are stockpiling. I don't see any sign of it, and I am in many calls, let's say, with Melexis customers or even with OEMs, and those calls do not give me the impression that they are stockpiling. I think we are really in just in time delivery. We are, let's say, adapting week after week our shipment schedule to be able to provide the minimum parts to the different customers. I don't really see any sign of stockpiling. I think we are still in a very tense and on the edge situation from a supply chain perspective toward our customers. No, I don't really have the impression. Thanks a lot. Thank you. We now have a question from the line of Johannes Ries from Apus Capital. Please go ahead. A follow-on to Rob's question. In former calls you mentioned that your automotive customers, given the experience they had made last year, intend maybe if enough maybe production is available from your side and other semi suppliers, maybe to build up even higher inventories compared to the levels they had before the crisis. Because they face these problems, they want to build up buffer inventories because they don't want to face such a situation again. Is that still the case? Could this extend maybe this cycle? And follow-on, you also mentioned there are some customers who even discussed with you, let's say, paying you maybe for reserved capacities. Also to secure maybe the delivery in the future. Is that all right? Yeah, I think it's a bit too early to see this, because, yeah, today as I just mentioned, I think we are not able to build up- Yeah. After this, maybe do you see such intentions? Yeah. that you want to build up more security levels in inventory not to face- I think it would be good indeed for the supply chain to have to move to a higher inventory level. Yes. For the time being, I mean, those discussions did not start with the OEM and with the customer because we are still in the fire, let's say. Okay. Fixing this or something. I agree with you, it would be good for the future. Yes. Okay. Second short follow-on question on the production. We hear in the high-end, in more consumer electronics, so the back end gets more important. So the topic is more and more so. Is it even in your case a topic, or is it definitely something more sort of in the high-end space where you put some chips together to make a System on Chip? Is it also a topic for you, or is it a totally different world? No, no, it's also a topic for us to bring, let's say, to bring more solution. We try indeed to not only provide a chip, but to provide a solution. Sometimes to provide a solution, indeed, we need to make a System on Chip. I can just give an example, the TPMS of Melexis. It's a three-chip in the same package. Yeah. Yeah, please go on. Yeah. We have also other products where we have what we call post-wafer processing, where we post-process the wafers with the MEMS process, or we add additional layer on the wafer in order to create this solution. This is also what you mentioned is not only for the high-end adjacent consumer market, but we have also in automotive such a process, yes. This trend will go on. You mentioned even that the things gets more complex. That's one part of this complexity. Exactly, yes. Okay. Yeah, I think if we want to create some differentiation, we need indeed to go to this kind of, let's say, complex system or more complex system than only one die. Thanks a lot. Thank you very much. Thank you everybody for all your questions. All questions have now been answered, so I'd like to hand back to you, Marc, for any closing remarks. Okay. Thank you everybody for the question. I think it was a good discussion. I think we remain available via mail or via phone if there is additional question. Valerie is there to answer the question. Thank you, everybody. Thank you very much everybody, for joining today's Melexis conference call. You may now disconnect your lines.