Tower Semiconductor Ltd. Q4 FY2024 earnings call

Management Statement and Operational Highlights

• Financial Highlights 2024: Annual revenue was $1.44 billion, net profit $208 million. Fourth quarter revenue $387 million, 10% year-over-year growth. Q1 2025 guided at $358 million (+/-5%), ~10% year-over-year growth.
• Strategic Developments: Discussed growth in RF Infrastructure due to cloud computing and AI trends, partnerships in SATCOM and emerging markets with SiGe and SiPho. In RF Mobile, focus on higher-end 300-millimeter RF SOI. Power Management business unit transferred BCD platform to Albuquerque, with next-gen 300-millimeter platform announced. Sensor Display working on medical and OLED on silicon applications.
• Technology Advancements: RF Infrastructure demonstrated 400-gigabit per lane technology for 3.2T standard. SiPho in volume production at 1.6T and working on 3.2T. Power Management delivered prototypes to lead customers. Sensor Display working on 100 and 300-megapixel sensors.
• Fab Utilization: Fab 1 operated at 70% utilization, Fab 2 and 9 at ~55%, Fab 3 at 70%, Fab 5 at 60%, Fab 7 300-millimeter at 90%.

Segment Performance

• RF Infrastructure: In 2024, revenue was about $241 million, accounting for 17% of corporate revenue. It was the fastest-growing segment in 2024, riding on cloud computing and AI trends. Targets strong growth in 2025 with SiGe and SiPho platforms. SiPho was in volume production at 1.6T and targeting growth in new areas like automotive and LiDAR.
• RF Mobile: Generated approximately $418 million in 2024, 29% of corporate revenue. Anticipates a decrease in 2025, particularly for Android-based devices, but sees growth in higher-end 300-millimeter RF SOI technologies.
• Power Management and Discrete: Revenue was around $426 million in 2024, 36% of corporate revenue. Power Management business unit targets growth in 2025, especially for advanced 300-millimeter platforms. Discrete business expected to decrease in 2025 due to legacy 150-millimeter activities.
• Sensor Display: Had revenue of about $221 million in 2024, 15% of corporate revenue. Targets moderate growth in 2025.
• Mixed Signal and CMOS: Generated ~$105 million in 2024, 7% of corporate revenue. Targets moderate growth in 2025.

Guidance

• Q1 2025: Guided revenue of $358 million (+/-5%), representing ~10% year-over-year growth.
• 2025 Outlook: Targets year-over-year growth with sequential quarter-over-quarter revenue increases, especially in the second half as capacity investments progress through customer qualifications.
• Long-Term Target: Outlined a revenue target of $2.66 billion per annum, aiming for $560 million annual operating profit and $500 million annual net profit by fully loading facilities.

Risks

• Android Market Impact: Weak customer forecast for Android-based devices in 2025, leading to potential revenue decrease in RF Mobile segment.
• Inventory and Market Dynamics: Uncertainties related to inventory adjustments in the Android market and potential shifts in data center speeds affecting SiPho demand.
• Fab Utilization: Temporary lower overall utilization rate in the near term due to repurposing capacities for advanced process technologies.

Question and Answer

• Q: Cody Acree from Benchmark Company LLC asks about mobile market contraction and impact of Apple customers: A: Russell Ellwanger states no reduction in Apple supply, some reduction in Android, not overly substantial, likely upper teens reduction in RF Mobile.
• Q: Bastien Faucon-Morin from SIG asks about segment seasonality and SiPho revenue timing: A: Russell Ellwanger says SiGe, SiPho, mixed signal, and power segments stay steady, CIS stronger; SiPho already has revenue in Q4, but specific PO visibility limited.
• Q: Richard Shannon from Craig-Hallum Capital Group asks about RF Infrastructure growth and SiPho share gains: A: Russell Ellwanger explains SiPho started gaining market at 400G and 800G, has benefits at 100G too; RF Mobile 300-millimeter forecast for 2025 is more 300-millimeter than 200-millimeter.
• Q: Lisa Thompson from Zacks Investment Research asks about revenue growth expectations and capacity contribution: A: Oren Shirazi says target year-over-year growth, second half stronger; main capacity drivers are SiGe, SiPho, and Agrate, with 5G investment plan being key.
• Q: Matthew Bryson from Wedbush asks about SiPho run rate, Android impact, and 200-millimeter to 300-millimeter shift: A: Russell Ellwanger confirms hitting $150 million SiPho run rate in Q4, Android impact due to inventory rightsizing, 300-millimeter has higher revenue but similar margin impact.
• Q: Cody Acree asks about OpEx expectations: A: Oren Shirazi says OpEx baseline flat, fixed cost, no seasonal increases beyond baseline.