Tower Semiconductor(TSEM) - 2025 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q1 2025, Tower Semiconductor reported revenue of $358 million, a year-over-year increase of $31 million or 9% compared to Q1 2024 [17] - Net profit for Q1 2025 was $40 million, reflecting $0.36 basic and $0.35 diluted earnings per share, down from $45 million or $0.40 per share in Q1 2024 [18] - Gross profit and operating profit for Q1 2025 were $73 million and $33 million respectively, similar to the same quarter in 2024 [18] Business Line Data and Key Metrics Changes - RF Infrastructure revenue grew from 14% to 22% of total revenue, while Power increased from 10% to 18% of corporate revenue [8] - The silicon photonics segment is expected to double its revenue from approximately $105 million in 2024 within 2025 [27] - The power management segment is experiencing strong growth, particularly in the 300mm BCD platform, driven by new business in the handset market [12] Market Data and Key Metrics Changes - The overall market for silicon photonics is projected to grow at a CAGR of 49% over the next five years, driven by demand for 800G and 1.6T optical transceivers [9] - The handset market showed about 7% growth in 2024, but is forecasted to be flat in 2025, impacting RF SOI customers who are currently reducing inventories [11] Company Strategy and Development Direction - Tower Semiconductor aims for sequential revenue increases throughout 2025, with strong acceleration expected in the second half as multi-fab capacity investments complete customer qualifications [6] - The company is focusing on maintaining high market share in silicon photonics and silicon germanium technologies, while also investing in next-generation technologies [10] - Strategic investments include $300 million for equipment in the New Mexico fab and $500 million for the Italy fab, with additional investments planned for expanding capacity in Israel and Texas [19][20] Management's Comments on Operating Environment and Future Outlook - Management noted that while there is uncertainty in the market due to tariffs, they have not seen any pullback in orders and maintain flexibility in manufacturing across global locations [28][29] - The company is optimistic about the growth in RF infrastructure and power management, with expectations for a rebound in the machine vision sensor business in the second half of the year [13][15] Other Important Information - The balance sheet remains strong, with total assets of $3.1 billion and shareholders' equity reaching a record of $2.7 billion as of March 2025 [19] - The company has reaffirmed its target of $2.7 billion in annual revenue at full loading of existing fabs [21] Q&A Session Summary Question: Can you help us size the Envelope Tracking business revenue-wise today and expectations for the year? - Management indicated that the business has reached very high volumes, but specifics could not be disclosed due to customer confidentiality [24] Question: Can you talk about the tone of business from customers regarding tariffs? - Management noted that while there are discussions about tariffs, no impact has been seen on orders, and they have the ability to support customers from various global locations [28][29] Question: What are the expectations for the RF mobile business? - Management expects the RF mobile business to grow throughout the year, with Q1 being the lowest point [56] Question: When do you expect to see production shipments from the New Mexico fab? - Production shipments are expected to start in the third or fourth quarter of this year [86] Question: What is the outlook for silicon photonics and when will new platforms be in production? - New platforms are expected to see volume shipments in 2026, with a strong focus on maintaining market share [91]