Release Date: February 06, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Power Integrations Inc (NASDAQ:POWI) reported Q4 revenues of $105 million, up 18% year-over-year, aligning with guidance.
• The company expects significant growth in the industrial category in 2025, driven by infrastructure projects and high-power business opportunities.
• Power Integrations Inc (NASDAQ:POWI) is making substantial progress in GaN technology, expecting it to exceed 10% of sales in Q4 2025.
• The company is expanding its presence in India, winning significant shares in electric transportation, metering, and fixed wireless rollouts.
• Power Integrations Inc (NASDAQ:POWI) is building a strong customer base in the automotive industry, with expectations for rapid revenue growth starting in 2026.

Negative Points

• Revenues for the full year were down 6% from the prior year, primarily due to a 60% decline in the communications category.
• Consumer revenues were down mid-teens sequentially, reflecting continued softness in major appliances in the US, Europe, and China.
• Inventory days rose to 315 at quarter-end, indicating inventory levels remain well above target.
• The company faces uncertainties around trade policy and end-market demand, making forecasting beyond the current quarter challenging.
• The impact of consumer stimulus programs in China has been modest, with finished goods inventory at Chinese OEMs remaining elevated.

Q & A Highlights

• Warning! GuruFocus has detected 7 Warning Signs with POWI.

Q: Can you provide more details on the progress and confidence in the GaN technology, especially regarding high power applications and the potential for E-drive trains? A: Balu Balakrishnan, CEO: Over the last year, we've made significant strides in our technology, allowing us to address applications up to 50 kilowatts. Our acquisition of Odyssey Semiconductor will enable us to reach higher power levels, potentially hundreds of kilowatts, making us competitive with silicon carbide at a lower cost. We are optimistic about GaN's future, as it is being adopted across various markets, not just cell phones, but also notebooks, tablets, TVs, and industrial applications.

Q: Could you update us on the automotive sector, specifically regarding design wins and expected growth? A: Balu Balakrishnan, CEO: We have about 20 designs in production, primarily using silicon or silicon carbide. We've introduced a 900-volt GaN suitable for 400-volt battery systems and are getting design wins. We also have a 1,700-volt GaN device for 800-volt batteries. Our focus is on emergency power supplies and auxiliary power supplies, with plans to address onboard chargers and E-drive trains in the future.

Q: What are the biggest updates in the market environment compared to 30 days ago? A: Balu Balakrishnan, CEO: Not much has changed significantly. However, we expect strong growth in the industrial sector this year, driven by unique opportunities in infrastructure-related projects like renewables, high-voltage DC transmission, and electric locomotives. This growth is somewhat out of sync with the broader semiconductor market.

Q: Are all four segments expected to grow this year? A: Balu Balakrishnan, CEO: Yes, we expect all four segments to grow, with industrial leading in growth, followed by consumer. Communications and computer segments are also expected to see growth, driven by increased dollar content and networking products.

Q: How should we think about channel inventory in Q1, especially with the impact of Chinese New Year? A: Sandeep, CFO: We expect sell-in and sell-through to be similar, so channel inventory should hold steady. We are starting the year with normal inventory levels, which, combined with our growth drivers, positions us well for 2025.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.