PC Sell-Through Surge ‘Quite Dramatic’ in June Quarter: Chipmaker AOS
“Sell-in” demand in the computing segment at Alpha and Omega Semiconductor (AOS) was “OK” for fiscal Q4 ended June 30, said Executive Vice President Stephen Chang on a Tuesday investor call. But the increased PC sell-through was “quite dramatic,” due to widespread COVID-19 work-from-home and remote-learning, he said. AOS supplies power semiconductors for laptops, LCD TVs, smartphones and other applications and can be a bellwether of consumer tech demand.
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Many AOS customers that paused production in calendar Q1 through the pandemic’s factory lockdowns “were catching up in the June quarter,” said Chang. “End demand” in computing remained strong through the quarter, “and we were able to meet it with ramping supply” from the fab in Chongqing, China, he said. The fab is from an AOS joint venture agreement signed four years ago with local Chinese municipalities. “With so many people around the world working, creating and learning from home, PCs have become even more indispensable” than before the pandemic, said Chang. “Because we did not shut down fully in the March quarter, we were able to meet this resurgence in demand.”
AOS expects to “continue to optimize our production mix to satisfy the anticipated high demand for PC-related products,” said Chang. It’s “especially excited about the ramp” of digital power solutions “in some key customers’ upcoming graphic card platforms,” he said. It expects strong computing revenue in fiscal Q1 ending Sept. 30, with sequential growth from Q4 in the mid-teens, he said. The stock closed 21.4% higher Wednesday at $13.88.
Revenue in the consumer segment increased 37.5% sequentially and 31.7% year over year, said Chang. “COVID-driven home-sheltering boosted sales of gaming, TVs and home appliances, enabling those segments to achieve healthy growth,” he said. “Gaming was up significantly sequentially and is expected to grow rapidly.” AOS landed “multiple sockets” wins in an “upcoming gaming system that is expected to launch in the second half of 2020,” he said, referencing the PlayStation 5, without naming it.
AOS expects double-digit growth in its consumer segment for the September quarter, “driven by home entertainment, gaming and TVs,” said Chang. Alpha & Omega is pleased its power ICs segment is “regaining traction” from a slump in the March quarter, he said. It chose strategically two years ago “to go after high-volume applications” in computing and consumer, he said. “Our multi-chip package products deliver the small size and high efficiency required in the latest gaming and graphic card platforms.”
Revenue in the power supply segment was up 24.2% sequentially from the March quarter and 3% year over year, said Chang. “After a pause in the March quarter, this segment rebounded in the June quarter, driven by higher demand for adapters used for PCs and gaming systems. Our AC-DC power supply business was up significantly versus the March quarter, tracking the surge in PC sales.”
Telecom drove the 16.1% revenue growth year over year in the communications segment, said Chang. “We expect unevenness as the 5G rollout advances,” he said. Smartphone demand was “subdued” in the quarter, he said. “One large customer slowed production in the June quarter, so our battery protection line was down slightly sequentially.” Communications revenue appears poised for growth in the September quarter “across all our core customers,” he said: “We expect the communications segment to be up single digits sequentially.”
AOS is “very excited about the gaming business that's ramping up now” for the unnamed PS5, said Chang. “This gaming console is not going to release” until late calendar Q3 or early Q4, but “obviously the production has already started for that,” he said. “I'm not quoting any specific numbers for these quarters, but it's very healthy, and we expect now another big jump going into the September quarter.”
COVID-19 robbed 2020 of much of its “normal seasonality,” said Chang. There’s “a lot more disruption because of how COVID has affected our customers” in their demand and their production, he said. The computing category typically peaks in the September quarter, he said. “This year, we basically saw that peak season pulled in from September into June.” That's partly because March was a “disaster quarter” for most AOS computing customers, he said. “Their factories were located in China and a lot of them were in the epicenter of where COVID was starting out from.”
Work-from-home and remote-learning mandates are putting the computing segment on a “very healthy” track for the September quarter, said Chang. “We don't know how this will play out over the longer time frame,” he said. “We really need to wait and see how demand changes, but right now, it still looks strong.”
Smartphone OEMs didn't “pull back production until the June quarter,” said Chang. “But then coming into the September quarter, they're actually starting up production pretty heavily again in anticipation of possibly another factory shutdown” for the next wave of COVID-19 cases in the fall, he said. “We're seeing a lot of disruption like that happening.”