Nordic Semiconductor ASA (OTCPK:NDCVF) Q2 2023 Results Conference Call July 11, 2023 2:00 AM ET
Company Participants
Stale Ytterdal – Senior Vice President, Investor Relations
Svenn-Tore Larsen – Chief Executive Officer and President
Pal Elstad – Chief Financial Officer and Executive Vice President, Finance
Conference Call Participants
Harry Blaiklock – UBS
Adam Angelov – Bank of America
Sebastien Sztabowicz – Kepler Cheuvreux
Operator
Good morning, everyone, and welcome to the Nordic Semiconductors Report for Q2. For the first part of this call, all participants are in listen-only mode, afterwards there’ll be a question-and-answer session, [Operator Instructions].
I’ll now hand it over to Steel. Please begin the presentation.
Stale Ytterdal
Thank you, Patrick, and good morning, everyone. We are recording this presentation, and it will be available on our website, IR section. On the IR web page, you will also find our earnings press release, quarterly report and the presentation.
Joining me today, we have CEO, Svenn-Tore Larsen; and CFO, Pal Elstad. They will be discussing our latest financial results, as well as they review recent business activities. After the presentation, as Patrick said, we are opening for Q&A, both as call-in and written questions via the webcast. We will start with the call-in questions and end up with questions from the webcast page.
As usual, the presentation contains forward-looking statements that involve risks and uncertainties. Actual results may differ materially from those expressed or implied in such statements. We encourage you to review our full Q2 quarterly report and annual report for 2023 — 2022, sorry, for more information on the risk and uncertainty that may affect our business.
Without further ado, I hand over to our CEO, Svenn-Tore Larsen.
Svenn-Tore Larsen
Thank you, Stale. Good morning, and welcome. My name is Svenn-Tore Larsen, and with me, I have our CFO, Pal Elstad, as Steel just said.
After several years of strong growth, we see a challenging market out there with worries about economy in general and consumer spending in particular. On that backdrop, I think we delivered solid revenue in the upper half of the guidance range, as we provided at Q1 presentation. Revenue was down 23% year-on-year, but up 6% from Q1. Proprietary and Cellular is showing the weakest development. And the important Bluetooth revenue declined by a modest 15% year-on-year, but most importantly, increased by 9% quarter-on-quarter.
We had gross margin of 53% and low cost in the quarter, we ended up at an EBITDA of $29 million for the quarter. That was up $50 million [ph] from Q1. As I said, this is a challenging market and looking ahead, we expect a more or less flat development from Q2 to Q3. We guided revenue in the range of $145 million to $166 million, and we maintained the gross margin guidance above 52%.
Nordic, see clear opportunity going forward, but we see that many customers remain cautious in the current economic climate and timing of market recovery is uncertain. The revenue visibility is hence low beyond the current quarter. And I will say the range of the outcome is wide. In reflection of the continued high uncertainty, the company is intentionally not providing any outlook on the fourth quarter of 2023. And this statement replaces any previous communication from the company on the 2023 outlook.
Our Tier-1 customers continue to make a bigger share of our market and also of our revenue. And our top 10 Bluetooth Low Energy customers have accounted for 50% of revenue over the past 12 months. Revenues to this customer segment is increasing also in absolute numbers and the revenue decline, hence, reflect the lower demand in the broad market.
On the chart, it might look like we are back at the levels we saw early days of Bluetooth in 2012 to 2015, but we are not talking about one major customer like we did back then. Currently, we have more than one of the Tier-1 customers. We have several accounts and behind all of our top 10 customers that is a great relationship that we have built up over many, many years. The success we have had with these customer is the main reason why we are able to grow, as strongly as we did over the past three years to four years, and we continue to penetrate these customers with new projects.
We still remain clear market leaders also in the terms of design win. And although, these numbers might be varying between individual quarters, we see a steady high level above 40% on a rolling 12-month basis. The total number of design win has declined over the past years, but this is not a very good value indicator, as we trend toward higher volume designs at Tier-1 customers over the last years.
As usual, we do some examples of new customer product launch and it varies across a wide range of user cases from digital knee support, sport watches, and we also see sensor and smart voice using our cellular IoT solution.
Moving on to cellular. We remain upbeat, although revenue in the quarter was on the low side. We see a solid and healthy inflow of projects into the pipeline, and there is no sign of slowdown in design activity. The conversion through the commercial product is good, and we now have a base around 370 commercial projects. And we also see that the lifetime value of these designs are higher than it used to be. We start over usually with smaller customers and obviously migrating into customers with higher volume. As I just said, revenue in Q2 was on the low side. At this stage, we must still expect revenue to vary across quarter depending on customer production and purchasing cycles.
In late June, we launched a significant uplift of our cellular IoT offering. By launching two new products in a full product and service solution from device to the cloud. The new 9161 and the mini-SiP in 9131 are the world’s first devices supporting both cellular and the new DECT NRE plus wireless standard. And I think the DECT NRF plus will be adopted for massive IoT. The comparability to our NRF cloud means that we can offer secure, reliable life cycle management of devices and the highest deployment and protocol layer flexibility for IoT. This is a move towards cellular IoT, which is a major step.
We have also now launched of a new nPM1300, is a power management chip, which can effectively replace up to eight other circuits and save energy, space and bill of material for our customers. The nPM1300 holds a unique power and system management features enable us to take care of customer energy needs all the way from battery to antenna. We see design wins already, and we will see products ramping towards the end of this year.
Rounding off, I’m glad to report that Financial Times and Statista have included us in the list of European Climate Leaders, ranking us as number 26 and highest ranked Norwegian company on the list of 500 names. We believe that IoT might hold the key to solve many of the world ESG and climate changes — challenges, and we are making strong progress to reduce our own impact on the environment.
So with that, I want to hand it over to Pal, to take you through the financials. Welcome, Pal?
Pal Elstad
Thank you, Svenn-Tore. I’ll go now to the Q2, 2023 financials. Revenue in the second quarter 2023 was up 6% compared to the previous quarter, but down 23% year-over-year. The company continues to see changes in the revenue composition with significantly diverging developments across different product technologies, customer end-use verticals and geographies.
Bluetooth Low Energy remains the far biggest technology with 93% of revenue, up from 90% last quarter. Although revenue for this technology market was up 9% from the previous quarter, revenue declined 15% year-over-year, due to weaker demand and inventory adjustments. Proprietary product revenue accounted for 4% of the total, having declined 75% year-over-year and 19% from the previous quarter. As described previously, this mainly reflects significantly lower demand for PC accessories after COVID, as well as technology migration to Bluetooth.
Cellular IoT remains lumpy and exposed to individual customer production and purchasing patterns, and revenue in the second quarter was half compared to the same period last year.
For our new technologies like PMIC and Wi-Fi, we are seeing increased design-in, and we’ll start reporting details, so we have meaningful revenue in these technologies.
A year ago, revenue per vertical was largely driven by allocations of finished goods to customers in that particular market. The pressure on the supply chain has eased this year. As noted in the interim report for the first quarter, Nordic expects the wafer supply to be sufficient to meet the requirements for the remainder of 2023 given current demand and supply forecasts.
In terms of customer verticals, the consumer markets saw revenue decline by 33% year-over-year, reflecting both inventory adjustments and — among equipment manufacturers. However, revenue increased by 21% from the previous quarter, which large — with large deliveries to some of the major customers. The customer segment accounted for — the customer market accounted for 55% of total revenues in this quarter, up from 48% last quarter.
Revenue in the industrial market declined by 38% year-over-year and 34% from the previous quarter, reflecting temporarily lower deliveries to some of the major industrial customers. In contrast, revenue in the healthcare market increased by 106% year-over-year and by 47% from the previous quarter. This reflects particularly high deliveries to the largest healthcare customer in this quarter, and the segment — market revenue must be expected to vary between quarters going forward.
Turning to the gross margin. We delivered a gross margin of 53% in Q2. This was lower than in Q2, 2022, but Q2, 2022 was special with price increases ahead of supplier pricing, which did not take effect until later in the year. We do not see the same effect this year. For the last three quarters, we’ve been able to deliver stable gross margins at around 53%. This comes despite the increase in material costs that we have experienced during 2023, showing that we have been able to pass on these price increases also in the current market environment. We do expect gross margins to be above 52% also for Q3, 2023, and we reiterate the long-term ambition to maintain gross margins above 50%.
As communicated earlier, our operating model is very sensitive to revenue. Last year, we saw EBITDA margins above 25%, driven by high revenue growth and un-normally strong gross margins. A combination of lower revenue and gross margin shows how sensitive the model is, and we, in Q2, report an EBITDA margin of 18.5%, although up from 10% last quarter. We have been in the period with high investments that we have not been able to capitalize, as the products have not yet been commercially ready.
During a difficult period, we have come out with several new products, including the all-new nRF54 Series. We have Wi-Fi products certified. We are — delivered new PMIC products, new front-end products, and as Svenn-Tore just mentioned, a new line up on cellular IoT. As such, we’re in a much stronger situation compared to a year ago.
Total R&D down from $40 million last year to $34 million this year, but from 19.9% to 23% of revenue. The reduction in OpEx is — and R&D spending is mainly driven by higher capitalization in this quarter due to the commercialization of new products that I just mentioned.
Selling, general and administrative costs down to $18.9 million from $19.1 million last year. Both R&D and SG&A have, however, been favorably impacted by a stronger U.S. dollar, as a significant part of these costs are in Norwegian kroner that has continued the weakening compared to levels last year. We continued to be very cautious. However, we have been able to keep stable gross margins and our operating margins with high investments with several new products in the pipeline.
I’ll turn to cash operating expenses. Total cash operating expenses amounted to $58 million in Q2, 2023, when adding back capitalized development expenses and deducting depreciation and equity-based compensation. This compares to $58 million in Q2, 2022 and $65 million last quarter. Compared to last year, cash OpEx is flat and compared to last quarter, it is down 11%.
Out of the total OpEx $38 million relates to payroll expenses, which is only slightly up or 2% up compared to $37 million a year ago. This comes despite the number of employees, up 17% year-over-year to 1,520 people today. We commented last quarter that we have adjusted the cost base, and we’re growing less than previously. The reason for the 17% growth in employees that we added significantly in the second half of 2022, and you first now see the effects of this. If you compare it to last quarter, number of employees are more or less stable.
The recent salaries are only slightly up compared to last year is due to continued payroll effects, which we saved $2 million compared to last year and less bonus accruals. The reduction in salaries from last quarter is driven by less bonus accrual, as well as the seasonal effect we always see on the cash and pay in Q2. So Q2 is always lower than the other quarters on salaries.
Other OpEx is stable versus last quarter and last year. We have high activity, but at the same time, monitoring expenses very closely. The company will continue to invest in future growth opportunities. However, in view of the challenging short-term revenue outlook, targeted cost initiatives are expected to impact financials from next half of the year.
Next page. CapEx was $4.8 million in Q2, with investments mainly related to equipment purchase in connection with new product introductions. CapEx intensity overall remains below the previously indicated level of around 4% of revenue.
Finally, I’ll turn to cash flow. We still have a strong cash position of just above $250 million on our balance sheet. During Q2, we added some $19 million of cash to our balance. Operating cash flow of $25 million adjusted for capitalized items, mainly driven by profits in the period. We saw stable net working capital with a slight increase to 29% of last 12 months’ revenue. This increase comes, as a result of higher inventory due to the end of the supply constraints that have kept inventory levels at very low during 2022. So Bluetooth inventories are now at a more normalized level, although inventory for proprietary and cellular is on the high side. In addition to cash on the balance sheet, we have an undrawn credit facility of $150 million.
Svenn-Tore, I’ll now turn to you, so you can go through outlook for Q3.
Svenn-Tore Larsen
Thank you, Pal. To sum up, I think we presented solid revenue and margins given the challenging market situation. What we see is that revenue from our top 10 customers continued to increase, and we remain a clear market leader with high and stable market share in terms of design wins. Looking forward, we expect to see more or less stable revenue from Q2 to Q3 and guide for a revenue range between $145 million to $165 million.
We see a clear growth opportunities with several customers in different verticals with how to acknowledge that our customers are cautious to commit in this current economic environment. Nordic see a clear growth opportunity going forward. Hence, the revenue visibility is low beyond the current quarter, and the range of outcome is fine. I mean, we don’t dare to say anything about the outcome for Q4.
In reflection of the continued uncertainty, we are not intentionally providing any outlook on the fourth quarter. This statement replaces any previous communication from the company on the ’23 outlook. As per normal, we will return to our guidance for Q4 on our Q3 presentation in October. So thanks everyone, for watching and listening in this morning. Now, we hand over to Steel and start the Q&A. Thank you all.
Stale Ytterdal
Thank you, Larsen. We will soon open for Q&A. To accommodate as many as possible before the market opens, I recommend that everyone only ask one question with one follow-up question. We will first start with the call-ins, and then do questions that has been asked via our webcast page.
I hand it over to Patrick to open up the Q&A.
Question-and-Answer Session
Operator
Thank you, Steel. [Operator Instructions] The first question will be from the line of Harry Blaiklock from UBS. Please go ahead, your line now be unmuted.
Harry Blaiklock
Hi, good morning. Thanks for taking my question. I was wondering whether you could provide a bit of color on the key thing that [indiscernible] compared to the last quarter that’s made you withdraw the Q4 guidance. Is it just the uncertainties continued longer than you expected? Or have you seen some cancellations of orders or a more cautious messaging from customers?
Svenn-Tore Larsen
It’s very much the same situation, as it had been throughout the year that we do have projects in pipeline, and we don’t know when they’re going to start or if it’s going to be in Q3 or Q4. So we have to be cautious. And that leave us with this low visibility, and with this wide range of outcome, I think, is right not to give any indication. And actually, we always have supported just guiding for the coming quarters.
Harry Blaiklock
Okay, thank you. And one quick follow-up. On industrial, it’s a segment that’s been really strong to you in recent quarters, but you’ve seen some weakness come through this quarter. I was wondering whether you could provide a bit more detail around that slowdown and what the key drivers are?
Svenn-Tore Larsen
We have seen quite lower performance from our module makers. And also during the shortage, we had strategically deprioritized some of these customers, and there were lower deliveries to some industrial customers. And now, we have customers that basically used to be doing millions of units that have got 100 case of units because we’ve been prioritized the larger Tier-1 customers. The cellular sales have been mainly to industrial customers, and this quarter, it was relatively slow.
Harry Blaiklock
Thank you.
Operator
Thank you, Harry. The next question will be from the line of Adam Angelov from Bank of America. Please go ahead, your line now be unmuted.
Adam Angelov
Yes. Thanks. Just wondered if you could touch on the larger sequential growth you saw to large customers in Q1, just thinking about that trajectory into H2? And is that sort of tied to new product ramps? That’s the first one.
Svenn-Tore Larsen
We see strengthening across some verticals, I would say, Tier-1 customer, hence, the growth. However, we see that still many of the customers are cautious to commit longer term. And the visibility beyond current quarter is low, and I’m not in a position to give a comment beyond Q3. But we saw that the uptick was end of the quarter at some major customers, but we are not in a position to give a comment beyond Q3, as I said.
Adam Angelov
Okay. Fair enough. And just thinking about OpEx into H2, obviously, you had two benefits from the higher capitalization on the FX in Q2. How should we think about that versus the — also your cost initiatives? Is that something that we could expect flat OpEx into H2? Are some of those benefits going to reverse? Just, yes, how should we think about that trajectory? Thanks.
Svenn-Tore Larsen
Yes. And I’d look at Q1 as really as the base and then add on increased capitalization because we are still in the commercialization pace during the second half of the year. So I’d suggest using Q1, as the base, and then adjusting for capitalization, which can be pretty close to the number.
Adam Angelov
Okay, thank you.
Svenn-Tore Larsen
Because remember, Q2 has the vacation pay effect. So please use Q1.
Operator
Thank you, Adam. The next question will be from the line of Sebastien from Kepler Cheuvreux. Please go ahead, your line now be unmuted.
Sebastien Sztabowicz
Yes. Hello everyone. Thanks for taking my question. Could you please elaborate a little bit on the level of inventories in the distribution channel, also at your last Tier-1 customers? Do you have any figures that you can share with us on the level of inventory right now in your business?
And the second one is on the extra savings that you expect in the back half of the year. Is it possible to quantify the level of savings you expect? Thank you.
Svenn-Tore Larsen
I think the inventory levels are a little bit down if you look at weeks of shipment, but basically, it’s not at the lower level, it’s at normalized level.
Pal Elstad
And then in OpEx, we — the main thing there is that we are keeping employees relatively flat throughout the year, and most of the OpEx is driven by employees. So we are saying employee numbers pretty flat versus what we had in Q1.
Operator
Thank you, Sebastien. It seems there are no more question in this call, and I will therefore hand it back to Steel for any written questions.
Stale Ytterdal
Thank you. Then we will go over to the questions that we have on the — we have gotten in. We have got first on guidance from Johannes Ries. How much do you still believe in your long-term ambitions?
Svenn-Tore Larsen
I mean, we still believe that IoT market and the segments we are in, and the customer we won will continue to grow when we get out of this recession. I mean ’23, I think, will be a disappointing year for Nordic. And Nordic see this opportunity as strong as before this economic setback. And we continue to invest in building a leadership position in market, and we’ve won some strategic right customers. So our ambitions, obviously, is still there. And don’t forget that we have been complementing our product portfolio with new and adjacent products. However, we see uncertainty in the short term during the current economic climate.
Stale Ytterdal
Thank you. Then we have some questions regarding verticals and end markets from Sebastian Henriot [ph]. Can you give some color on the drop in industrial sales from Q1?
Svenn-Tore Larsen
As we said earlier in the question is that we see a lower performance from module makers, and that’s also coupled with the fact that we did have lower sales in cellular, which is mainly into industrial segment.
Stale Ytterdal
Thank you. And we have a question from Markus Heiberg, SEB. Consumer application improved meaningfully in the quarter, while Industrial declined. How did this compare with your expectations?
Svenn-Tore Larsen
I think the quarter-on-quarter growth reflects a higher takeout from some of our main customers, and we have expected that for some time because we have new projects. So — we had hoped that it was even larger. And we see strengthening, as we say, across some verticals and especially Tier-1 customer.
Stale Ytterdal
Thank you. Then we have a question regarding technology revenue and revenues from Rob Sanders, Deutsche Bank. What is next in cellular IoT, given this market has not far been materialized in scale?
Svenn-Tore Larsen
We do have some exciting projects that basically is not that visible for analytics and also for our investors yet, and it’s a binary opportunity with some significant customers behind. So we just keep on grinding on these opportunities. And I think there is quite good reason to continue doing this due to the fact that there is a lot of money to save when these applications get up running. So it’s binary opportunities, and we don’t have only one, we have at least two major projects we’re working on.
Stale Ytterdal
Thank you. And we have a question from Oystein Lodgaard, ABG. Cellular was very low this quarter. What is the reason for this? And do you expect new product launches in the near term?
Svenn-Tore Larsen
It was low this quarter, we had to admit that, and it was some of our — we are very much driven by our top customers, and in this quarter, two of our top customers didn’t produce very much. If we see on the — in the near term, we have earlier said that we expect a significant uptake in second half, and we stand by that statement.
Stale Ytterdal
Thank you. Then we have a new question from Rob Sanders, Deutsche Bank. Can you please discuss the outlook for industry pricing in Bluetooth Low Energy?
Svenn-Tore Larsen
Industry pricing?
Stale Ytterdal
Price, I think it will be, if there any price increase or…
Svenn-Tore Larsen
What we see is that we can’t comment our costs going forward. But so far, we haven’t seen any initiative from our vendors to increase cost going forward, and hence, we don’t increase any cost, if this is going to happen. We rather want to ensure that we get volume, and that’s linked to cost. So we will work hard to try to normalize cost and push it down.
Stale Ytterdal
Thank you. Then we have a question from Sebastian Henriot. Can you please give some color on Wi-Fi design wins and volumes?
Svenn-Tore Larsen
It’s very early stage when it comes to Wi-Fi. We can talk about design-in activity, which we see is good at the moment, but we don’t have any meaningful revenue, I would say, before very late this year and in ’24.
Stale Ytterdal
Thank you. Then we go over to margins and profitability, Oliver Pisani from Carnegie. Any sign of price pressure and more supply in the market?
Svenn-Tore Larsen
Yes. We can see this market split into is the low-end market and the high-end market. Nordic, as you know, have been focusing on the high-value market. In the low-end market, there has been dramatic price pressure and mainly from Chinese players, and Nordic is not in that game. We are working on the high-value market. And obviously, there is always an ask for price also in this market, but we combat that with higher feature and more value to our customers.
Pal Elstad
And nRF54 will even strengthen us in these markets going forward.
Svenn-Tore Larsen
Absolutely. I think since we mentioned 54 polymer [ph], the value of 54 for our customers, I think that we mainly — even though it’s a more costly part, I think the total bill of material for our customers will remain at the same level or may be lower because we don’t need so many adjacent components.
Stale Ytterdal
Thank you. And we have another question regarding 54 from Sebastian Henriot. Can you give an update regarding status of the new nRF54H launch?
Svenn-Tore Larsen
Yes, we can. I mean, we did a first round of sampling to a handful of customers earlier this year, and now, we are actually opening for more sampling to more customers, and we are on track to realize some initial revenue for the second half of this year. While we should keep in mind that the design process takes usually 12 months to 18 months, but some of our customer has got parts at a very early stage.
Stale Ytterdal
Thank you. Then we have a question regarding TSMC, Johannes Ries. You now get all the wafers you need from TSMC or…
Svenn-Tore Larsen
No or. We are getting all the wafers at the market, with match the market demand at the moment. So yes, there is upside for us. I mean, we did a relatively weak Q1. We didn’t do extremely strong Q2 either. That means that we don’t — and we have got committed more wafers for ’23 than we got in ’22. So it means that we have the opportunity to ship more for the second half, if we get the orders. So that’s correct, Johannes.
Stale Ytterdal
Thank you. And we have a question from Peter Kongslie, SpareBank 1 Markets. Can you bridge the decline in OpEx from Q1 to Q2 from $63 million to $53 million? Some is higher capitalized R&D, but what explains the rest?
Pal Elstad
The rest is lower short-term incentive plan accruals, and some is also related to FX. And then, of course, as I mentioned, vacation pay is always lower in the second quarter of the year.
Stale Ytterdal
Thank you. Then we have Markus Heiberg, SEB. This is about inventory. Any risk to book value to — is there any risk to book value of the cellular and proprietary inventory?
Svenn-Tore Larsen
I think that when this market comes back, we know first, if we can build up some inventory now. So when markets recover, we know that TSMC don’t have any additional volume out of Fab 14. So for us, I think it’s a good thing to build up inventory, if possible.
Pal Elstad
But they’re related to the proprietary inventory and cellular inventory. The proprietary is mainly kept in wafer level. So that has a very long shelf life, and these are all products that we’ve been selling for a long time. For cellular inventory, we are, of course, monitoring it closely, but revenue in the second half and into next year should absorb that inventory.
Stale Ytterdal
Thank you. Then we have few questions from Olav Trent [ph], TDN Direct. In light of the recent decline in revenue and EBITDA in 2023 compared to previous years, how does Nordic Semiconductor view its current financial solidity?
Pal Elstad
I think we mentioned that in the presentation, we have $252 million in cash. We also have unused RCF of $150 million, so net $400 million in available cash. So we believe, we still have a strong financial position, and we are generating cash even though revenue is down. So we have positive cash flow also today.
Stale Ytterdal
Thank you. And Olav is continuing. Considering the company has experienced a decrease in income from proprietary products and cellular IoT, what measures have you implemented to strengthen these sectors?
Svenn-Tore Larsen
When it comes to proprietary, we have said the last four years, Pal?
Pal Elstad
Yes.
Svenn-Tore Larsen
That we expect that we fade out and basically see that the customer using proprietary is moving to Bluetooth. When it comes to cellular, we see that we are a little bit ahead of the market, and we are sure that the market will come, and we are working hard to accelerate the uptake.
Stale Ytterdal
Thank you. And the last question from Olav Trent. Could you provide insight into some of the innovative products or services under development and how they will contribute to the company’s financial performance in the future?
Svenn-Tore Larsen
Yes, we can. It’s a long story. But first of all, the seamless interface between our cellular modems and our Nordic cloud will basically result in that we have customers that will use our cloud and pay a fee for that. I think we already have more than 150 customers doing testing and also actually are paying customers of the Nordic nRF cloud service. We can maintain lifetime maintenance of the hardware by doing over there upgrades and support throughout our cloud. It’s exciting. It’s early, early days.
But if you look going forward, I mean, if you take an example, if our customers are paying approximately $1 per ship connected to our cloud, it could be significant revenue over years to come. And currently, I think that we shipped more than 700 million units in ’22. I don’t say that all of these parts will be connected, but part of this volume will be connected to our cloud. We can do that calculation, and you will see, it could bring significant revenue to Nordic the next coming years.
Stale Ytterdal
Thank you. Olav Trent, has one more question. We take that. Given that there have been several discussions regarding global supply chain issues in the semiconductor industry, how has Nordic Semiconductor addressed these challenges? And what strategies do you have in place for risk management in this context?
Pal Elstad
Okay. Yes. So of course, supply chain sourcing is very important. And as we announced last quarter, we implemented a new technology from nRF54 with supplies from a different vendor and a different region. So I think we are definitely working on diversifying our supplier base for the future.
Stale Ytterdal
Thank you. Then we have a question from Peter Steen, Sissener. You’re mentioning design wins and PMIC ramping up towards the end of 2023. What is the potential revenue contribution of PMICs, both in near and long term?
Svenn-Tore Larsen
If you look at near term, it’s very difficult. I mean, I don’t think this to be very strong because customers need to get into production, and we have to have multiple customers in production. But I would say at least 30% of our existing customers use a PMIC. And as we are doing more and more new designs, we expect that this customer will use the Nordic PMIC rather than our competitors PMIC. So over years, as we build up the significant customer base, which will contribute to revenue.
Stale Ytterdal
Thank you. Then we have a question from Robert [indiscernible]. In the original Q4 guidance is still — is stick original for Q4 guidance still within the realms of possibility, but just not visible or is it now clearly outside the possible range?
Svenn-Tore Larsen
I think due to the low visibility, and I would say, the wide range of outcome beyond the current quarter, we stick to that statement. It could go both ways. And it would be wrong for us to comment. We stick to the comment we have in the report.
So thank you all for all the questions. And as you know, we have meetings throughout the day, and we look forward to meet you all in person. And those, we are not able to meet today, I mean, we have calls, the rest of the week, so most probably, I’ll talk to you then. Thank you.
Pal Elstad
Thank you.
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