I guess we'll get started. Good morning, everyone. Good morning. Thank you for coming. I'm Stacy Rasgon. I cover the U.S. Semiconductor sector here at Bernstein, and it's my honor today to introduce our guests, Rich Puccio, the CFO of Analog Devices, and Mike Lucarelli, Head of IR. Before I start, I wanna mention, if you have questions that you'd like to ask during the presentation, you should have a link to our Pigeonhole forum, where you can submit them. We will have time for Q&A at the end. Now, of all the companies that I cover, ADI, I think, is one of the most respected. It's got an extremely high-quality franchise in the analog space, particularly as it relates to signal conversion and processing. Now, over the last decade or so, they've embarked on a rationalization program, and they're sort of enjoying the fruits of that now. But they've rationalized their product portfolio, manufacturing footprints. They were smart enough, you know, years ago, to exit mobile early enough to actually get paid to do it. I think you were one of the only ones that ever, ever managed to do that. Increasingly focused product offerings on high-value applications, whatever the end market, and focus in new end markets: automotive, healthcare, and many, many others. They've not been shy to take advantage of inorganic opportunities to boost the franchising growth potential, and they've now embarked on a regime of significantly more aggressive capital return than what we saw in years past. To talk about all of this, it gives me great pleasure to welcome our guests today. Thank you so much for coming today, guys. Thanks for having us, Stacy. So this is Rich's first fireside, so I promise to go easy. So maybe just to start, like, you've been on the job three months, right? I guess— Actually, almost four. Almost four. Okay. I mean, I guess, what attracted you to it and at this point, and I guess, what has surprised you, I guess, either positively or negatively now that you've been in the role for a few months? Sure. So the attraction for me was an opportunity to join a global leader with an incredibly strong franchise that was making what I thought were really interesting strategic moves to move up the stack, and to take what is a very powerful analog franchise, add software and digital, and a very strong set of domain expertise to help customers solve their problems. Having come from a very customer-focused place, the opportunity to come to somewhere that will be just as customer-centric and have the customer intimacy that allows us to build ahead to what our customers are gonna need in the future and clearly, what they need are higher-level applications and domain expertise and our strong franchise.. That's what attracted me. What surprised me, positive surprises, Stacy, when I got to the company was how far the company had gotten in their resiliency plan. Right? If you look across the semi space, if you go back, I don't know, you can go back 5 years ago, most people didn't know what a semiconductor was, right? Until they couldn't get a car during the pandemic, and somebody said, "Well, you can't get a car 'cause of semiconductors." So now everybody knows what a semiconductor is. So as you think about the supply chain fracture that happened and the challenges, you know, ADI took a pretty aggressive approach. You've seen we've spent a substantially more capital in the last few years- Mm than we would've historically to build resilience, and so that resilience, you know, has done a couple of things for us. One, you know, it's... by the end of 2025, about 70% of our products will be qualified both for internal and external manufacturing. That was a surprise to me that we had gotten that far. 70%, you said? 70%. The other thing that we've, that we've done that is super powerful, obviously, is there's lots of geopolitical risk and concern about, you know, concentrations in Taiwan.. You know, we are on a path to have diversified. A substantial portion of our product will be available or able to manufacture outside of Taiwan. How much is in Taiwan now? So TSMC is our biggest foundry partner. Yeah. About half our business is done externally. I'll say over half of that relates to TSMC. Okay. One of the things, you know, that's gonna help even in that regard is, and we talked about this on the earnings call, is we are gonna have capacity in the new fab that TSMC is building in Japan. In Japan, okay. In Japan. So that is at the finer lithographies than we have, right? All of our internal capacity is 180 nm and above. So that was a positive surprise. The other thing that was positive is, you know, I've come from a place where you have to think really long term about what you spend your money on and when you're gonna see returns, and the company's discipline- Do you wanna remind our audience, by the way, where you— I should've- Sorry. I should have mentioned it. Yeah, I spent the prior three years as the CFO at AWS, so when you talk about all the abnormal and irrational purchasing behavior by companies, that was us. But when you hear from TSMC that it's two years to get a product, and you can't run a data center without it, even though you've already placed a year's worth of orders, you place another year's worth of orders. So I understand that dynamic from from the other side. But one of the things I liked here is the discipline and the ability to focus on a long-term development. So one of the things I really liked, and it's something we've been highlighting, is, you know, we just launched, or, you know, talked about in the earnings call, the Sensinel product, which is in our healthcare space, which is a very powerful, you know, innovative tool that opened completely new white space for us. That was, 6, 6-7 years, or 6-7 years in development. Not a lot of companies are that forward-thinking to make an investment that early. That's a very long answer of a bunch of good reasons why I came to ADI. Got it. Got it, got it. Maybe to, like, drill in a little bit to that resiliency point, so you talked about fungible capacity. Maybe not everyone in the audience may... and by the way, this is, these are not all semiconductor investors. They may not be, may not be aware of what that actually means. And just to level set you, ADI, in general, tends to have gross margins above 70%. They've been running a little lower than that, at 67%-ish. 67%. I mean, revenues have been cut by, I don't know, 40%- 34%- ... off the peak ... peak to trough. N ot bad, right? And to be able to hold 67% versus what we thought when we did our investor day in 2022, 70% would be the floor. We certainly did not contemplate the size of the inventory correction that could happen. But I think where you're going is— So when I talk about this, you know, qualifying inside and outside, and you'll hear us use the term, our ability to swing. The best way to describe that is, in times of increasing demand, you know, at a pace we weren't expecting, we have outside partners with qualified processes that can make our products in their fabs. The flip side, which is why we've been so resilient on a margin perspective, is when demand starts to shrink or go, you know, do what it's done for the last year, we're able to pull back those products and manufacture them in our fabs. Why that's important is, you know, keeping our utilization levels up in our factories is what allows us to keep the margins where they are. Absent that swing capacity, we'd have a lot of underutilized capacity. You know, not to bore you with accounting stuff, the underutilized capacity is a significant drain against your- Like, where would your gross margins be if you didn't have the swing capacity? They would probably be a couple points lower. I was gonna say three points lower. Probably three points lower, which would be way off the floor. So that resilience has been important for us, and qualifying the— y ou know, it also, you know, as you think about the cost environment, you know, we've incurred a fair amount of capital and expense to be able to build that resilience. But it's super important to our customers. because, you know, you don't wanna be the part that keeps somebody from shipping their million-dollar device or their car. Yeah. Yeah. I mean, maybe to touch on some of that, and again, in this forum, I don't like to spend lots of time on the near term, but I do wanna- I think you use this one. Oh, okay. Okay. I wanna talk a little bit about the short term and get through that. But maybe— So we talked about, like, Q2. You guys have sort of suggested Q2 as a bottom. And I know in general, in Analog, investors seem to be wanting to buy Analog stocks just in general on that bottoming theme. But maybe talk a little bit about how we got from where we were to where we seem to be in Q2. I guess, what do we see by end markets? 'Cause it's been sort of a weird asynchronous cycle, where different end markets have sort of been behaving at different points in their cycle, different timing. I guess, how do we think about the pace and trajectory of that recovery, hopefully off of Q2? And then how does that influence some of the decisions that you're making, I guess, as we're going forward from here? Sure. So do you want me to start with the... a little bit of the backdrop of what happened? Yeah, maybe. Yeah, maybe that'd be helpful. Okay. So if you think about the way the trough has happened, you know, obviously, significant decrease in our industrial business, right? And industrial for us is our largest franchise, it's also the most profitable franchise. So we've seen the steepest declines there, you know, for a very long period here. As the decline was happening, you know, automotive held up better than most of our other segments. Clearly, the wireless, you know, in our comms world, the wireless piece has been soft. You know, the 5G rollouts aren't happening at the pace- That is infrastructure. You guys don't really do a ton of, like, smartphones and stuff, right? Smartphones is in our consumer bucket. Yeah. Okay. It's not that big, though, right? Yeah. So this is right. Yeah. In our in that space, it's the wireline and wireless. And as it turns out, the wireline is doing a bit better, and part of that is where we're, you know, helping with the data center connectivity, et cetera. Consumer has been a challenge as well. So, but what we're starting to see is improvements, and we've had three consecutive quarters of increased bookings. Cancellations have declined. S o we're feeling much better about the trend, where we're headed. And in fact, you know, even if we look at Q2, and if you look at what happened geographically for us, you know, Asia Pac, you know, actually grew sequentially. You know, if you look at China in particular, China has been our weakest market for a number of years. . China actually grew sequentially. Based on the new wins, we've talked about some of the new wins on our earnings call. Based on the new wins, we feel like we're getting some pretty good traction, and we'll see growth, you know, continue to see growth in China, despite some of the macro headwinds and some of the indigenous China pressure. So we're seeing those signals. You know, if you think about the industrial piece, which is our biggest business, you know, our business is highly correlated with the PMI index. So PMIs have been above 50 for every month in 2024, so that gives us some comfort that we're starting to see the return. You know, what we've guided to at the midpoint is about 5% sequential. You know, we haven't did guide out to Q4. You know, there's still enough macro uncertainty, and if you think about geopolitical, interest rates, you know, any number of the factors that could cause, you know, a continued dampening. I'm not—I don't have enough—we don't have enough, and I don't have enough visibility to say that this is gonna be a steep V recovery. So I actually, you know, I think we're, we're reasonably comfortable that few, you know, 4 Q could be sort of low- to mid- single digits sequential coming off of Q3. I do think that we will see faster growth and acceleration into 2025 as we, you know, get fully past the inventory digestion issues. And look, the- if you look at the curve, and Mike, Mike's been using this as an easy way to explain this. If you, if you look at the historical growth curve for the company, you know, even if you take 5%, right? Because the historical business has been pretty close to a GDP growth kind of business. If you look at where we've been relative to that kind of growth rate, we've clearly at this point have undershipped pretty significantly in demand, both in our end customers and in the channel. Yeah. We think we've been undershipping for at least a year. So at this point, you know, we expect that we will start to see sequential growth, and then if we stay on this path in Q3, the signals we've started to see, you know, it's likely we will start to ship to end demand in the fourth quarter. Got it. So no refill, though, at that, at that point? Okay. So, yeah. Okay. And literally, you know, we've spent a substantial amount of time and effort getting our inventory back down to our target level. So- Yeah. You're back in the seven- to eight- week range now? Was the range we're today, probably at the top of the range basically, closer to the eight. but we will expect to take more inventory out of the channel in 3Q, to get us solidly in the middle of the seven to eight range, which is, which is where we'd like to be. Yeah. As I said, if we stay on that track and are seeing ourselves achieve that, then we'll be able to ship to end demand in the fourth quarter. Okay. Got it. That's all in the short term. I wanna talk more of the interest in the longer term. What are some of the broader, like... You know, I always say, like, for analog stocks, for me, it's sometimes I feel like it's hard to build a differentiated perspective on growth. 'Cause, I mean, it's you always think about it, if you sell 100,000 different things to 100,000 different customers, and how do you get a handle on that? I always feel like ADI, though, it's maybe a little more easier at least to articulate a growth narrative. And you do seem to be investing and involved in a lot of the other, like, higher growth areas. You mentioned some healthcare. Vince has talked about, aero and defense and space and, and now certainly EVs and, and, and AI, and I'd be remiss if we don't talk about AI. But I guess, what are some of the opportunities that, that you guys are, are most excited about, and where you're putting more of your investment dollars, these days? And then I think we can drill into some of them. Sure. Sure, I'll start, and then I'm sure Mike will add some details for me. You know, certainly the, one of the ones I'm super excited about is the healthcare opportunity because, you know, I think, you know, it's hard- You mentioned Sensinel, by the way. What is that for? Oh, so Sensinel is actually a wearable patch that monitors vital signs. Doctors will use it to help patients with congestive heart failure. So it's super powerful 'cause it's not a surgical implant, which most of the devices that do that, and it is tied to a monitoring solution. You put the patch on for, you know, some number of minutes every day to get measurements, and then the algorithms that we've worked with doctors and hospitals to build, you know, give feedback to the doctors. 'Cause ultimately, you know, congestive heart failure is the single most expensive chronic disease, particularly in the United States. The goal here is to keep patients out of the hospital, 'cause that's where the costs incurred, and to give better care, and this device helps do both. It is a great melding of the sensing, the software algorithms, and the scientific knowledge. That one is super powerful. It's a $5 billion TAM. So that's one I'm super excited about. Obviously, I like what we're doing in aerospace and defense. Clearly, with all of the things going on in the world, that's an area where, not just in the U.S., everywhere else in the world, they're bulking up their spending on military and aerospace, so that's a great opportunity. You mentioned AI, so I'll go there. You know, there's sort of we think about it in two phases, too, sort of two stages. This first stage is the infrastructure stage, which all of you are hearing about. Hyperscalers are spending hundreds of billions of dollars building data centers. There's huge opportunities there for us, and two big opportunities to highlight. You know, the first is, you know, if you talk to anybody in the space, one of the broader concerns for the hyperscalers, and probably for everybody at this point, is power. Mm. Power is gonna be a constraint, and so anything that can be done to help make the hyperscalers and their data centers more power efficient is a big win. So we've got a win in with one of the hyperscalers on a vertical power solution, and that vertical power solution can reduce up to 35% of the power loss in running those chips in the data center. So that's a super powerful win, and we're getting traction with all of the hyperscalers. That's one. The other thing is, all of these things are being built. The high-performance compute and the high-bandwidth memory require much more intense testing, and we are shipping, you know, high-value solutions into the tester you know, to allow them to test faster, test more channels. Mm. So two really powerful opportunities. Then, if you think out longer term, and this is where the compounding effect happens for us, is you think about AI at the edge. So getting compute and AI out into the physical edge is gonna be super powerful because, you know, I use an example. I like this one. I'm a simple guy; this is a simple example. You think about noise cancellation, and I don't just mean the Bose that you wear on your, you know, your headphones when you're on the plane. It could be hearing aids. Sound is very variable. We're shipping, Me're shipping product today and, and developing product that have neural nets built into the devices, that allows the algorithms to do the work, to sort the sound, to do the noise cancellation. Super powerful, super effective. Another good example I like is, you know, you think about, factory automation, which is one of the big trends. It's gonna be a big driver for us on the industrial side. And then you think about the robotics, the robotics that are in automated factories. Well, if you can get compute at the edge, and, you know, everybody today is talking about large language models, right? That's, you know, it's ChatGPT, it's Claude, it's all the large language models. Think more about it as small language models with compute at the edge. So you think about that robot arm that is sensing and, and actuating, that, that data has to go back and be computed to determine the next move, to follow its algorithm. Now, you can have that compute power in the device. Mm. So you think about the benefits: less latency, it's closer to the actual source of the data when you do the compute; less power consumption; and more secure, because you're not taking all of that data, physical data, converting it to digital, sending it to the cloud. You're doing that at the edge. So that, the mid- to long-term, is a huge opportunity for us, 'cause it builds on our analog expertise, our ability to convert the analog and then to do the compute. So that, 'cause I think that's one of the really long-term things that I'm excited about. Did I miss anything? Have you guys ever sized, like, put a number behind, like, the AI opportunities for you guys, or? The AI-exposed AI today for us is sort of, you know, low to mid-single digits, say, $400 million-ish of our revenue today that's growing double digits, and some of these things we've talked about as we get more design in, on the power side. The other piece, I did miss one, I apologize. The other thing, other piece that's exciting is, particularly when you think about the AI data center and the GPUs and the connectivity, the speed and so we have, you know, optical devices that are part of enhancing that speed. You know, everything's moving up, right? We're going from, you know, up to, like, 1.2 Tb speeds for communication, and we play a role there with our devices. So that's, that's another really strong area. And those could contribute another 5% or 10% growth to our, to our, comms business, right? Got it. Got it. Stacy, that was a great question on the earnings call, but you guys chose to focus on 2Q and revenue the whole time. Well, say that again? I'm just giving you a hard time. Just giving a dig at the sell side a little bit. We can take the chair away, actually. We could do that. I can stand. I wanna ask you about auto. This has been a pretty good—I remember, like, when I first started covering ADI, they still had auto, like, lumped into the industrial business 'cause it was still small. I helped her still in the industrial... I always ask, like, "When are you gonna break healthcare out? When's it gonna be big enough to break out? Wanna ask the question? Is that, is that- No, I'm just saying auto was in... So auto is not in there anymore. Auto is, I can't remember, 20% or 25% of revenues now, something like that? Closer to 30%. 30% almost. 30%? 30%, okay. So clearly, there's an EV portion in that. I... We tend to look at EV just as strictly as BMS, but I kind of maybe get the impression maybe it's broader than that. Yeah. Maybe you can talk a little bit about, I guess, the broader auto opportunity, and then as well as, like, what do EVs mean for you? Sure, I guess you can think about it across the three categories of vehicles, right? So you got your ICE vehicles, you got your hybrid vehicles and you have your fully electric. Yeah. Right? And if you think about what has happened in the car you drive, the in-cabin experience has changed dramatically. There are, there are more speakers, there's more microphones, there's more sensors, there's more compute, there's more screens. Inside, you have to transport all that data, right? The video to your screens. So in addition to the battery management which we'll get to, you know, we have our GMSL products, which, you know, are helping facilitate all that activity inside the cabin. And that is across all of the vehicles, right? Because you're gonna have the luxuries, whether it's in an ICE vehicle or a hybrid or an EV. You know, then we get an incremental step up in our concentration in the auto when you move to the EV and the hybrid. Obviously, there's more battery management in the full EV than there is in the hybrid. You get a little bit more concentration and a little bit more dollar value in each of those cars. You know, the things that have been happening for us that have been fantastic, you know, we talked about this in the call. We've gotten designs in, in two of, two more of the largest 20 OEMs. In addition, we've got design wins in one of the largest Chinese players. We feel really good about that opportunity, and the concentration continues to grow, right. As they add features and functions, and we start to think about more and more of the automated driving and ADAS and where it's gonna go. So that is a good opportunity for us. And actually, in the most recent period, you know, you know, auto continued to perform the best for us and we expect that it, you know, it has proven to be a shallower trough than we've seen in industrial, for instance. Got it. Now, look, are we certain, 100% certain it's the trough on the auto side? No. But do we see signs, given that we've got signals, that we're gonna see growth there that we're coming back out of it? Yes. Got it. I guess within the BMS business, you, you guys talk a lot about, like, wireless BMS versus wired. Can you talk a little bit, like, what that is, what the advantages are? And I'd love to get some feeling of, like, the actual, like, content that you guys are seeing in the cars right now. I'm gonna buddy pass the- Sure, yeah. So you're right. So our legacy has been wired BMS. Yeah. We're the leader in wired BMS. That's not gonn a go away. Yeah. BMS is battery management systems, by the way. Addressing the tech. Yeah. So basically, we manage the battery, and we manage it more accurate than our peers, so you get more miles per charge. We've moved to the next generation with wireless. Wireless basically is, it's all the features of wired we can do it wirelessly. Why does that matter? It's better R&D efficiency for the customer. They can design a few platforms that's modular across different vehicle models. They can manufacture that through a robotic versus human, faster, lower cost to manufacture batteries, which are very expensive. So those are two big features. Now, what do we get? We get two extra content. If you use a wireless system, you get the wired plus all the wireless connectivity in that. What we've seen is, we have four or five OEMs adopting it. Today, we're shipping one for revenue, two more in the next, call it six to 12 months and another couple beyond that. Mm. So you're seeing a proliferation of wireless, and really, the reason why they're doing it is, it is driving down the cost to develop these batteries, which is super expensive and hard to do. I think you'll see both over time. Wired won't go away, but wireless will increase in penetration over time. What kind of content are we talking about? Like, is it hundreds, thousands? Like what? I wish thousands. Yeah. Hundreds. Hundreds. Yeah. Multiple hundreds, Okay. Got it. And I wanna ask a little bit about industrial. So it is your, your biggest market. I always joke, like, it, it's not an end market, it's like hundreds of end markets, right? I mean, what are the biggest pieces of industrial for you? How are those growing? S o I'll, I'll break it down. You're right. Yeah. It's hundreds of markets, but there are a few big ones. Yeah. The biggest piece of industrial is instrumentation and test, close to 30% of sales. Right. Think of those like automated test equipment, electronic test and measurements, scientific instruments. That's a big part of our business, 30%. We're probably the most exposure than anyone in the analog industry to those markets. Number two is factory automation, close to 25%. That's been weaker recently. It was a little higher, now it's below 25% 'cause of just overall inventory digestion, but a very important market for us Those are the two biggest pieces that represent over 50% of our industrial. Then number two, sorry, three and four would be aerospace and defense, and healthcare. Both between 15% and 20% of sales. Sustainable energy is probably close to 10, maybe high- single digits. That's about 99.5% of industrial. Remaining is what we call other, it's a grab-all bucket. Got it. Got it. And back to the comment I made earlier, right. If you think about the industrial space, it's the testers for the high-bandwidth memory and the compute, you know, and then... Sorry. It's working. It's on, I think. Okay. So we're catching some really good secular tailwinds as you think about it. And that's where that's why we're optimistic. Got it. Yeah, yeah, that automated test business can be very. We had some quarters back in the days when it was like zero, I think so. Zero is, but you're not wrong. So inherently, ATE, automated test has been very lumpy. What you've seen is, these testers need more and more semiconductor content. It's much harder to test High Bandwidth Memory than NAND, general NAND. So we ship more content per tester than we used to ship, and there's more demand out there. Everything needs to be tested. Everything- every growth chart we talk about, whether it's EVs, AI, wireless systems, factory automation, I mean, go through the whole list. There is more growth drivers for our business, therefore, you need more test. We haven't seen these drastic lumps that we've seen in history just 'cause it's a more diverse business with more content per tester. That makes sense, that makes sense. I wanna shift gears to China. So you talked a little bit about, you said it looks like things are starting to improve somewhat. I guess maybe can you talk a little bit, like, which of your businesses have the most China exposure? Like, what, what are you seeing there? And in general, I would say your overall China exposure, just in terms of percentage of revenue, seems to be lower than many of your business. I don't know, it's 20%-ish? It's less. So- So I think in our 10-K, we had about 18% exposure in China. Today, it's about, it's about 15%. If you think about it, you know, 95% of that is B2B. It's, you know, 80-ish% is between industrial and auto, and there's 10% in comms, and roughly 5% in consumer. You know, what we started to see is order rates increasing. I mentioned we had the design win in at one of the larger Chinese automakers. And look, the factory automation tailwind is real and so we're starting to see that. Look, there is continuing pressure from the domestic, you know, made in China for China, you know, but one of our advantages is, you know, we're not playing in the low-end commodity space we're in the high-performance space. You know, and back to my prior comment, how much of the China business is industrial, you know makes it very hard to attack, because you have to have breadth, and depth, and performance in that space. Is your China business primarily, like you said, B2B, so it's for use in China? 'Cause like lots of companies, and most semiconductors have lots of China revenues, but it's mostly just because the electronics and everything are assembled there, and it's not for local consumption. But your overall revenue is much, much lower. Is it mostly for local consumption? Yes. Yes. Yeah. Okay. Our ship-to is a little higher than that, to your point. 15% basically is China, relates to China customers. Okay. Yeah. Okay. What's your ship to, just out of curiosity? Probably closer to 25%. It's still relatively low, though, right? It's still, yeah. Okay, got it. So you mentioned, like, local Chinese competition and made in China. What are your view - how big of a risk is that actually? Like, I... They're building clearly a lot of capacity. There's a lot of - you know, I just got out of - we did - Lam was here earlier, and there's a lot of question on, like, what are they gonna put in all these fabs? And like, where's it gonna go? Like, how worried are you about this? So, they do appear to be building capacity for the lagging-edge technologies. However, there is a stickiness to the product. Yeah. Right? Once you're designed in and up and running, and your product is effective, it is incredibly challenging. And we saw this even during the supply chain challenges, you know, customers wanting us to take out a potential competitor. But it's an arduous process, you've got to deal with, you know, redesigning the software, pin-to-pin compatibility compatibility, all those things. So that gives the product some stickiness. The other thing I think I mentioned is, you know, we ship a much higher value product. You know, we're about 4x ASPs to our competitors, and so we're delivering a high-performance product. I think that they're, you know, they're not there yet. I don't think anybody actually is there in most of our portfolio spots. Do I think long-term, they're gonna continue to invest and be a hard challenger? I do. I also would say that's where we see the most intense price pressure. You know, if you think about our pricing situation, China is probably the most acute price challenges. Is that because of local competitors, or is it because of multinational competitors in China? I think it's more because of the local competitors. Mm. Look, you know, some of our competitors have made it quite clear they're gonna compete on price. So there is both elements. But just given what I'm seeing from an investment perspective and I think out beyond this quarter, the pressure is gonna continue to come from the locals as well. Got it. I guess, what's your general philosophy on pricing? I guess, what are you seeing on pricing more broadly? Because I've been really surprised... I believe we're in an inflationary environment, right? And clearly. But like, unit growth in the industry hasn't been that great. Like, units in 2023 were broadly below where they were in 2019, which was the last downturn, and I think industry pricing was up 30%. I think ex memory was up, like, 45%. So, like, pricing's been. I mean, pricing saved the industry during COVID, like with- Like, was the growth. I agree, it was the growth thread. So, like, what are you seeing in pricing? And in general, like, when you mentioned you're seeing lots of price competition in China, what is your general philosophy in terms of responding to something like that? So obviously, we are competing on value in China, but I'll do the overall first. Yeah. We're certainly seeing price stability, right? If you... And if you look at it, you know, we don't have the, you know, go back a long time. You don't have that historical price down activity where we get more efficient and pass on prices. And so it's been stable. We expect it to remain stable, and that is a combination of ups and downs, right? Because, you know, our largest customers hit volume tiers, and they get some price reductions. However, you know, if you think about some of our much longer life products, you know, there's a cost to continuing to keep all the gear to build those products for a long period of time, and that's where we tend to see price increases that offset what we might be seeing in the volume decreases. But overall, pricing for 2024 has been stable, and we expect that to continue. You know, obviously, as you described, Stacy, it was a significant tailwind you know, in 2022, and a bit of a tailwind in 2023. Yeah. It's pretty neutral. Pricing's pretty neutral in 2024 and we expect pricing to be pretty neutral in 2025. I mean, Vince has talked about, like, being in a perpetually inflationary environment. Are we past that now? Like, I, I don't know. I don't know what Vince's current, current views are on this, like. I always agree with our CEO. If you were looking for me to contradict, I don't think so. No, I'm not. Okay, but it does sound like... I mean, clearly, you are adding more value. And maybe you could talk a little bit about, like, the kinds of value that you had. So my understanding is it's not just the performance of the silicon. And by the way, for those of you who don't know, like, ADI, like, they've developed both internally as well as buying very high-performance players. They bought Linear Tech, which I think was probably the highest quality and highest performance analog player in the space by a country mile. Maxim clearly has been good, and so... But there's also been a lot more talk around, like, software content and, like, I guess, maybe could you talk a little bit, like, that value add and how is that, how is that being monetized, like, as- Yeah. So I'll give you- Yeah ... sort of the two things that I think about. You know, one is, you know, ultimately, and I saw this even in my old world, customers want you to solve a problem. They want a solution, and our ability to bring a full solution you know, aggregating various elements of our product suite into a solution, is a very powerful thing for customers and also a value-add opportunity for us 'cause we can capture more value the further up we go. You know, part of that is having the software to help that, you know, to help them design on our, on our platforms and to help them be more efficient. So that, so that is a super powerful piece for this. And so those are the two, the two things I think about adding value, is our ability to bring together the underlying analog and components and add in that software intelligence on top and do it in an application-specific way. 'Cause one of the things that, you know, I think we do really well is take advantage of our domain expertise right, and build a targeted solution to solve customer problem, which is why we get a premium from an ASP perspective. Yeah. You mentioned you were 4x. Do you have what is your average ASP? Is that a meaningful number? I mean, you sell, like- 4X is put as the SA data says average ASP analog is, call it $0.40. Oh. So if you're good at math, I'd say it's probably, say, $1.50 ±, not too far off. Okay. I think there's two important points to make between ASPs and pricing. People could convolute the two. ASPs are the value delivered to the customer. Our ASPs, each generation of chip go up. Why? We put more value in each semiconductor chip we make. As Rich pointed out, once you get that design win, that pricing is very stable over time. So there's two dynamics going on. We wanna deliver more value, that means ASP continue to rise. Yeah. And then once you win that socket, and you have to fight for that socket, pricing is a dynamic at the onset, it's stable after that. Yeah. You can see that in our revenues and our gross margins. Deliver value, capture value, then stable pricing after that. Yeah. And like, how stable are the products themselves? Like, what's the average age of the product that you sell today? You used to show this chart. I don't know if you've showed it in a while, but it was... So the revenue of the company split up by these – the vintage – yeah, exactly. You always have this little strip at the bottom. Out of 10% of revenue, it was like 30 years old. True. So it depends on market. Yeah. The industrial market for us is half our revenue. The average life there is 15+ years. That's the average life. We do sell some products that are 20, 30 years old in that market. But all of our markets, I would say the other half, auto, is probably five to 10 comms is five to seven. I mean, these are all- when you get that win, it's in there for a long time. It's almost an annuity. Like, we're a hardware business, but we actually have software business, too, in a way, 'cause you get the win, and it ships for the next five, 10, 15, 30 years. . How are the dynamics in consumer different, by the way? So I know the consumer business is not that, not that big anymore. But I guess, where are the areas that you're focusing there? Part of me is always surprised that you do any consumer, consumer business at all, frankly. But, But, like, why, why is that a market that you're in, and, like, how do you differentiate there? Well, one, one of the examples where we differentiate is if you think about the noise cancellation technologies and their abilities there, you know, a lot, a lot of that goes into consumer products. Obviously, it's also a very, in my view, a very tough place to compete because the product life cycles are much shorter than you see in the industrial. You know, obviously, auto cycles are getting shorter but they're still significantly longer than the consumer. But you know, we're competing because we've got the best technology in that space. And you know, we're continuing to grow and expand our share, you know, at our largest consumer customers. I mean, you're right to say, it's a competitive market. All markets are competitive, but consumer is more competitive. So what do we do? We limit the R&D into that market such that consumer does not support the same growth margin as ADI. But you can have very good operating margin and free cash flow, as long as you constrain that R&D and don't overspend, and that's what we do. Solve the hard problems, knowing that it's gonna be a quick design cycle, but make sure you focus on operating margin and free cash flow when you go after those sockets. Got it. Got it. Where are you sort of deploying, like, incremental R&D now? Like, what are the opportunities that you're looking forward to that you think drive more of the business going forward? And I guess maybe even on top of that, what does that R&D investment cycle look like? Like, how far in advance of new products are you actually investing before you actually start to drive revenue with those? So I would say that the how far varies. As I talked about you know, we started six plus years in advance on the Sensinel product, but that was white space. I would say that the average, of average cycle is more like three to five years, Mike? Three. So three to five years, you know, and we've gotten to be very disciplined about which investments we make. H ow we measure them, how we track progress, you know, as we continue to get more efficient in using it. But we're gonna, you know, continue to be focused on some of the bigger bets. Look, you know, I hit them on them a little before, but clearly, we're gonna continue to work on our digital opportunities. We're also investing pretty heavily in AI and AI in our products. Right? Look, we've been embedding software and algorithms and intelligence in our products for a very long time. But this opportunity that I described to get out at the Intelligent Edge and have the AI play a big role there, so we'll continue to invest heavily there. Got it. You mentioned digital opportunities. Is that really processing? And I know you have a DSP business. You don't talk about it all that much anymore. Is there more you guys want to say about digital? I mean, it is more, yes and no. What is digital to ADI? Yeah. We embed digital into a lot of our chips. We talked about transceivers, BMS, Apollo, which goes to aerospace and defense. It's not like a separate digital chip. It's embedded digital into our analog-heavy chip. Why do we do that? To increase the performance of the chip or make it easier for the customer to design in. We want to do more of that. When we say digital, that's what we mean. We don't mean, like, have this embedded portfolio and sell that. Got it. It's about increasing the performance of our analog through digital. Got it. Got it. Do you do DSPs anymore? Hell, yeah, we do. We make good money. So we like to talk a lot about A 2 B. A2 B in the car connects microphones in the car. The core there is our DSP SHARC franchise. That was our first product there. Then we bridged from the DSP into A2B, which the connection around microphones and speakers in the car. So yes, we do, and we still invest in that. Got it. Got it. I want to shift to a few more financial questions. CHIPS Act. So where are you guys... I know you guys were, your CapEx had come up some. You were running, I don't know, mid-single digits. It came up to, I don't know, 9%-10% for a while. It's kind of going back down. I guess, where were those investments going, and, like, how do we think about the potential, like, opportunity from the CHIPS Act for you guys? I'm sorry. So, two things, right? We've already started to accrue benefits from the CHIPS Act. So we've, you know, we've got $several hundred million on the balance sheet- Is that from the tax credit, or? It's from the tax credit today. Okay. We, you know, we are not seeing any of that cash yet. And the actual offsets that we're seeing to depreciation at this point are pretty small. Okay. So they flow through gross margin, not through tax rate? Yeah. Okay. We are also have applications in on the grant side. You know, we're still working on that. We'll have more visibility as to the size of that in coming quarters. Hard, hard to predict, you know, where they'll settle. You know, we are, we are taking advantage, as best we can both domestically, CHIPS Act, as well as in Europe, given our significant presence in Ireland. In Ireland, okay. What, what - maybe I shouldn't ask this: What's taking so long with the grants? Oh, to be honest, it's a brutally detailed, comprehensive application process. And then they have a review cycle. So, you know, we're in the review cycle. Okay. So we've got- we've gotten our initial applications in, but they don't move it that fast. Okay, got it. So there's also been, I guess, a change in strategy. So clearly, you were one of the players that were pursuing an inorganic growth strategy. I think—I mean, the three biggies were what, Hittite, and then Linear, and then Maxim. And there's been a pivot since then. I mean, the general narrative is just you've now moved to cash return instead of M&A. I guess, why was the decision made, and you weren't there yet, but, I mean, in general, like, why is M&A no longer needed? Do you just have all the pieces that you ever- Is it no longer possible, or is it still on the table, or? I wouldn't say it's no longer needed and I would say it's not off the table. But the way I would characterize it now, and I'm gonna steal from Vince, 'cause he's been talking about it this way, is, you know, we feel like we have the digital franchise... Excuse me, digital franchise. We have the analog franchise. Wow! We have the analog franchise that we want and need, and so, it, you know, we're- we wouldn't be looking at acquisitions in that space. However, as I've described, our significant focus on software, digital, and AI means, you know, in addition to investing a bunch of our capital internally in that space we continue to look for opportunities there where we could accelerate and help solve a customer problem by bringing some inorganic technology inside. So we continue to look and to evaluate. But while we're doing that, you know, we are continuing on what we've told shareholdes, this post-Maxim is, you know, we will target long-term to return 100% of our free cash flow, and obviously, we've increased our dividend again this year. And then the balance will be, you know, buybacks. Yep, got it. But we do continue to look at opportunities, particularly as they might help us accelerate on the software, digital, and AI front. Got it. Got it. I guess, along those lines, you used to have a leverage target, which I think you've been - I can't remember. Was it 2x, or you've been running way below that? Is that even a target anymore? Doesn't feel like it. I would say in the current environment, you know, we've been hovering around 1x leverage, and given what we're doing today, I'm comfortable with, you know, with that range, right? Because we are continuing, you know, to continuing to give back cash to our shareholders. You know, earlier in the second quarter. We did go out into the market to, to raise, to essentially pre-fund the two upcoming maturities we have. Essentially, you know, net, net leverage neutral by the time we finish the process in April of 2025. Got it. Got it. What's the current buyback authorization outstanding now, by the way? I think it's just under $2 billion left $ 1.8 million, Jeff? Is that it? Got it. We've got about five or six minutes left. We've got a few questions here. By the way, if anybody else does have questions, please feel free to submit them. Should we go to the lightning round? Sure. In what market or product areas are you facing the most competition, or the least competition? I think the most competition near term and even medium term, I would say, is in the auto space, in the EV world. Yeah. I mean, it's always, there's competition in every market we play in. Right? So I mean, there's nothing new in the world today that was the one there before. We always sell value, which is a good, good spot to be in. I mean, everyone's going after AI. I mean, that's the thing about any, you see growth, you run after it. Now, our job is to continue to move up the value chain, sell more value. We talk about wireless BMS. Great example: if we were still shipping wired BMS, it would be a much more competitive market. Still competitive, but we know what we do, we add features, we added wireless, we added EIS. EIS allows you to charge the car faster. So we're always delivering more value, such that we stay ahead of our competition in any market we play in. Got it. Who do you view as your most significant competitor, though? And again, maybe that, maybe that varies by end market, but is there any one player that you see more often than others? I gotta imagine it's TI, but I don't know. Overall, clearly we compete heavily against TI. I mean, we run very different strategies from how we approach it, right? With us being much more focused on, you know, the high value sell. And they're certainly selling... You know, they got a lot of fabs to fill. So they're gonna sell line. And I think there's, you know, different competitors in different spaces, if you think about them, right? You know, MPS is an aggressive competitor in the power space. So I do think, as Mike said, the competition's pretty intense in all of our markets, but we continue to win. You know, our pipelines are very healthy. You know, our design wins are increasing, so all good signs. Got it. Got it. Over the longer term, which portions of industrial do you expect to grow the fastest? I think it's gonna be factory automation, right? The pressure on the industrials to get more efficient and more lean. You know, one of the things I got a greater appreciation for in my prior role is, believe it or not, there is a limit to the number of humans out there to do the work we need done. So driving that automation, you know, is gonna offset the inability to find people to do the work, and also you get, you know, much faster throughputs and cycle times and lower error rates. So I think that's gonna continue to be a tailwind. Got it. Maybe along those lines, question: Why is Edge AI critical for Factory Automation, and what other end markets is Edge AI a strategic focus for companies? I feel like that's a plan, like, why and how are your end customers adopting AI, is almost how I would read that question. So, I guess I'd go back to a little bit of what I said before is, you know, on the industrial, it's having the ability to do. You know, if you think about it, if you go in a factory and you, you'd see a lot of the things that are automated, and off to the side is the giant workstation, which is where, you know, signals go, get processed, and get put back into the machine. If we can get it so that that compute happens on the, the automated device, again, reduces power, reduces security risk, reduces latency. That's why, you know, that's why they want that. You know, and, and I, and I have a view, and I think as does Vince, is the closer you are to where the data comes from when you do the compute, the more efficient, the more effective it's gonna be, right? Now, look, there're still gonna be things that are gonna go back to a cloud for a deep analysis and things, but the more of the stuff you can do at the edge, the faster you can do it, the cheaper you can do it from a power perspective, too. Got it. Can you discuss differences in your CapEx strategy between you and TI? So, yeah, I can. You know, we've historically, and I'll do a little bit of history—we've historically spent in the low- to mid- single digits of our revenue on CapEx. We told everybody as a part of our resiliency program, we were gonna amp that up pretty significantly. So we did, right? Last year, you know, we spent $1.003 billion in CapEx, which was, you know, pretty significant for our company. That's gonna come down $600 million this year, and we fully expect to get back into our model next year, which is, you know, low- to mid- single digits on our CapEx. And part of that is we, as we talked about, we've qualified a ton of our product to be built externally. I'm happy to use TSMC's capital, you know to produce our product, especially in times when we're booming and need extra capacity. I don't have to spend capital. Now, look, we may spend some small piece of capital to have that run through the qualification process, but once we have that, we're just not as capital intense. You know, TI's gonna build a bunch of factories and I think they've said they're gonna have 80% of their, you know, product can be built in internal fabs. Yeah. That's just a very different strategy. Look, if I think about it, you have to think about that capital investment in two ways: It's what are you spending in R&D, and what are you spending in CapEx? We tend to be CapEx light and R&D heavy because, you know, one of the things we get, and we've talked about it a bit, is we get the higher ASPs because of the innovation premium we bring to the table. Got it. I guess I'd like to follow up on that. Maybe it's a... I don't know if you can answer or not, but, like, the cost to build externally versus internally, and maybe it's the same, because, like, when you're building externally, you're full internally anyways, and when you're building internally, it's because your utilizations would be down. So I don't exactly know how to, like, judge the cost difference, but is there... Like, what's more cost effective for you? Because presumably you're paying a margin, like, when you're outsourcing this stuff. I don't know how to think about that. Well, one cutoff is anything below 180 nm. So 90 nm, it's all external. We can't do it internal. So first off, that's the cutoff. And then the difference between internal, external, like, cost, it kind of depends. I mean, if you have fully depreciated equipment well, it's probably a little more cheaper internally. If you're building out new fabs, that cost versus external cost is very similar. So we look at it from the standpoint of what lithography this is. Can we do it internal? We'll do it internal. If we can't, we'll go external. That term, I mean, we have a hybrid model. A lot of industry has a hybrid model. Rich earlier talked about the swing capacity. That's unique to ADI doing stuff inside and outside the company. Same product, different manufacturing site either at ADI or at our foundry partner. Got it. Yeah, and if we were to build fabs for the lower lithographies and then you pick up the incremental cost of running, running those, you know, over the long term would create a significant cost disadvantage. Got it. We're out of time, actually, so I think we'll close it off there. Thank you. Thank you very much for coming. Thanks for having us. Thank you. Appreciate it very much.