Lattice (OTC:LTTC) Semiconductor Corp. (NASDAQ:LSCC) reported robust results for Q3 2023, with an 11% YoY revenue growth and record non-GAAP gross margins of 70.6%. The company, however, anticipates a softening demand in the industrial and automotive sectors, primarily in Asia and Europe, extending into Q4. Despite these predictions, Lattice remains optimistic about the launch of two new Avant mid-range FPGA families in December and the long-term growth potential of the industrial and automotive segment.
Key takeaways from the earnings call:
- Lattice reported a 6% sequential increase in revenue in the communications and computing segment, driven by data center servers. However, the industrial and automotive market saw a 5% sequential decline.
- The company expects a softening of demand in the industrial and automotive sectors, primarily in the Asia region, extending into Q4, with Europe also experiencing a similar trend.
- Lattice remains optimistic about the Avant platform, a mid-range FPGA platform that doubles its addressable market. The company expects a small amount of initial revenue from Avant in Q4, marking the beginning of a revenue ramp into 2024 and beyond.
- Two new device families, Avant-G and X, are planned to be launched at the Lattice Developers Conference in early December.
- The company plans to invest in its product portfolio, with a target of 30% of revenue for OpEx and 18% to 20% for R&D, aiming to drive long-term growth.
- Lattice expects continued growth in design wins, particularly with its software strategy, despite anticipating a softening in the automotive market due to higher interest rates and restocking of car lots.
- The company aims to maintain its strong free cash flow margin and gross margin, and it views its pricing as stable and durable.
- Lattice has good visibility on distributor inventory, which is within the normal range, and does not see excess inventory with large strategic customers.
In the earnings call, Lattice emphasized its focus on disciplined investments and product launches to drive long-term growth. The company is engaged with several client OEMs, including Lenovo, LG, and ASUS, for potential design wins, particularly in Edge AI applications. Lattice plans to share more about these engagements as they enter production. The company also mentioned its gross margin expansion strategy and its target for OpEx to be 30% of sales in the long term. The Avant pipeline is reportedly larger than the Nexus pipeline, which is viewed positively, although the revenue ramp will depend on customers' pace of bringing the product to market. Overall, Lattice Semiconductor expressed satisfaction with their Q3 results and looks forward to expanding their product portfolio.
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