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    TSEM
    Earnings call· Dec 2024(Q4 FY24)

    TOWER SEMICONDUCTOR Q4 FY24 earnings call TSEM

    Feb 10, 2025 Source

    Executive summary

    Tower Semiconductor Q4 FY24 — Strong AI/Data Center Growth & Strategic Capacity Expansion

    Tower Semiconductor concluded FY24 with strong Q4 revenue growth driven by significant expansion in RF infrastructure, particularly Silicon Photonics. The company is strategically investing $1.15 billion in capacity expansion across multiple fabs for SiGe, SiPho, and power management, positioning for accelerated growth in the second half of 2025 despite near-term headwinds in RF Mobile and discrete segments. Management anticipates year-over-year revenue growth for FY25 with sequential quarterly increases.

    Highlights

    5

    • Achieved annual revenue of $1.44 billion in FY24, with Q4 revenue up 10% YoY to $387 million.

    • RF infrastructure revenue grew significantly in 2024, with SiPho revenue more than tripling to $105 million.

    • Successfully transferred 65nm BCD platform to Albuquerque, delivering prototypes and receiving first production PO ahead of plan.

    • Shareholders' equity reached a record $2.64 billion at the end of December 2024.

    • Targeting year-over-year growth for 2025 with sequential quarter-over-quarter revenue increases, accelerating in H2.

    Concerns

    4

    • Anticipated decrease in RF Mobile revenue in 2025 due to the Android market forecast, with a potential reduction in the "upper teens".

    • Discrete business expected to decrease in 2025 due to discontinuation of lower-margin legacy 150mm activities in Fab 1.

    • Near-term lower overall utilization rates in some fabs (e.g., Fab 2 and Fab 9 at 55%) due to strategic repurposing for SiGe and SiPho capabilities.

    • Gross profit in Q4 '24 was impacted by headwinds from added fixed cost and depreciation from the Agrate 12-inch fab facility.

    Guidance & targets

    8
    CategoryTargetConfidence
    Revenue
    $358 million, plus/minus 5%
    high materiality
    High
    Annual Revenue Growth
    year-over-year growth
    high materiality
    High
    Quarterly Revenue Trend
    sequential quarter-over-quarter revenue increases
    medium materiality
    High
    Revenue Acceleration
    acceleration in the second half of the year
    high materiality
    High
    Long-term Annual Revenue
    $2.66 billion per annum
    high materiality
    High
    Long-term Annual Operating Profit
    $560 million of annual operating profit
    high materiality
    High
    Long-term Annual Net Profit
    $500 million of annual net profit
    high materiality
    High
    Long-term Effective Tax Rate
    15%
    medium materiality
    High

    Segment performance

    5
    SegmentRevenueYoYQoQMargin
    RF infrastructure
    Represented 17% of corporate revenue in 2024. Was the fastest-growing segment in 2024, targeting strong growth in 2025. Driven by megatrends in cloud computing and AI clusters. SiGe and SiPho platforms seeing rapid growth.
    SiPho revenue: $105 million (more than tripling in 2024)
    		$241 millionnear doubling in 2024 over 2023——
    RF Mobile
    Represented 29% of corporate revenue in 2024. Anticipate some decrease in 2025, mainly due to the Android market forecast. Target growth in more advanced 300-millimeter platforms, signifying market share wins.
    		$418 millionstrong growth in 2024 over 2023——
    Power management and discrete
    Represented 36% of corporate revenue in 2024, broken down evenly between IC and Discrete driven. Target growth for the Power Management business unit in 2025, with highest growth for advanced 300-millimeter platforms. Discrete business expected to decrease in 2025 versus 2024 due to discontinuation of Fab 1 lower margin, legacy 150-millimeter activities.
    		$426 million———
    Sensor display
    Represented 15% of corporate revenue in 2024. Target moderate growth in 2025. Industrial Sensors are transitioning to 300-millimeter platforms. Medical and dental sensors are shifting to lower-cost SiPho or driving demand for 200- and 300-millimeter stitch CMOS. OLED on silicon is a significant large incremental business growth opportunity.
    		$221 million———
    Mixed signal and CMOS
    Represented 7% of corporate revenue in 2024. Targeted with moderate growth in 2025.
    		$105 million———

    Operational metrics

    33
    Annual Revenue
    $1.44 billionup 18% from Q1 '24 to Q4 '24
    FY24
    Q4 Revenue
    $387 million10% year-over-year growth
    Q4 FY24
    Annual Revenue
    $1.42 billion
    FY23

    explicitly requested by user

    Annual Net Profit
    $208 million
    FY24
    Q4 Net Profit
    $55 millionvs $54 million in Q4 FY23
    Q4 FY24
    Annual Net Profit
    $518 million
    FY23

    Included $290 million net income from Intel due to merger contract termination and $11 million net of restructuring income.

    Basic and Diluted EPS
    $0.49
    Q4 FY24
    Basic EPS
    $0.49
    Q4 FY23
    Diluted EPS
    $0.48
    Q4 FY23
    Basic EPS
    $1.87
    FY24
    Diluted EPS
    $1.85
    FY24
    Basic EPS
    $4.70
    FY23

    Included $290 million net income from Intel due to merger contract termination and $11 million net of restructuring income.

    Diluted EPS
    $4.66
    FY23

    Included $290 million net income from Intel due to merger contract termination and $11 million net of restructuring income.

    Q4 Gross Profit
    $87 millionvs $84 million in Q4 FY23
    Q4 FY24

    Impacted by headwinds from added fixed cost and depreciation from Agrate 12-inch fab facility.

    Annual Gross Profit
    $339 million
    FY24

    explicitly requested by user

    Annual Gross Profit
    $354 million
    FY23

    explicitly requested by user

    Q4 Operating Profit
    $46 millionvs $45 million in Q4 FY23
    Q4 FY24
    Annual Operating Profit
    $191 million
    FY24
    Annual Operating Profit
    $547 million
    FY23

    Included $314 million net from Intel merger contract termination and $33 million of net restructuring income from Japan operations. explicitly requested by user

    All-in Tax Rate
    5%
    FY24

    Lower than long-term model due to tax benefits from statute of limitations expiration and other tax-related benefits.

    All-in Tax Rate
    4%
    Q4 FY24

    Lower than long-term model due to tax benefits from statute of limitations expiration and other tax-related benefits.

    Total Assets
    $3.1 billionvs $2.9 billion at end of 2023
    end of September 2024

    explicitly requested by user

    Total Assets
    $2.9 billion
    end of 2023

    explicitly requested by user

    Fixed Assets (net of depreciation)
    $1.3 billion
    end of September 2024

    explicitly requested by user

    Current Asset Ratio
    6x
    end of December 2024

    Reflecting the multiple by which current assets are larger than the short-term liabilities.

    Shareholders' Equity
    $2.64 billion
    end of December 2024

    Reached a record high.

    Intel Merger Contract Termination Income
    $314 million
    FY23

    Net income included in FY23 operating profit. explicitly requested by user

    Net Restructuring Income (Japan operations)
    $33 million
    FY23

    Included in FY23 operating profit. explicitly requested by user

    Intel Merger Contract Termination Net Income
    $290 million
    FY23

    Net income included in FY23 net profit.

    Net Restructuring Income (FY23)
    $11 million
    FY23

    Net income included in FY23 net profit.

    Total Depreciation (including RSU amortization)
    $65 million
    Q4 FY24

    Quarterly run rate expected to continue, already baked into Q4 numbers.

    RF SOI Revenue Mix (200mm vs 300mm)
    2/5 200mm, 3/5 300mm
    FY24
    RF SOI Revenue Mix (200mm vs 300mm)
    1/5 200mm, 4/5 300mm
    FY25 forecast

    Industry KPIs

    5
    MetricValueDetails
    Ai data center revenue$105 millionUSD
    Fab capacity utilizationFab 1: 70%; Fab 2 & Fab 9: 55%; Fab 3: 70%; Fab 5: 60%; Fab 7 (300mm): 90%%
    Design wins socket pipelineFirst production PO receivedcount
    Node platform ramp schedule65-nanometer BCD platform; Next-generation 300-millimeter power management platform; 300-millimeter silicon germanium PDKs; SiPho platformplatform
    End market segment revenue mixRF infrastructure: $241M (17%); RF Mobile: $418M (29%); Power management and discrete: $426M (36%); Sensor display: $221M (15%); Mixed signal and CMOS: $105M (7%)USD; %

    Product announcements

    3
    ProductTypeDetails
    Next-generation 300-millimeter power management platformlaunch
    OLED on silicon prototypesmilestone
    Triple play process for WiFi 7launch

    Deals & partnerships

    5
    IntelMerger contract termination$314 million (operating profit impact), $290 million (net income impact)

    Net income received from the termination of the merger contract with Intel.

    STMicroPartnership for 12-inch fab in Agrate, Italy

    Collaboration for the 12-inch fab facility in Agrate, Italy, involving significant equipment investments by Tower.

    RenaissancePartnership in emerging SATCOM market

    Partnership for phased array ICs for terrestrial [indiscernible] antennas built using SiGe technology for the SATCOM market.

    InnoLight and CoherentMulti-generation co-development partnerships for SiPho

    Working closely with 6 out of top 10 leading optical transceiver module makers, including InnoLight and Coherent, on multi-generation co-development for SiPho.

    BroadcomTriple play process for WiFi 7

    Collaboration on a new process for WiFi 7, offering industry-leading integration of power amplifier, low-noise amplifier, and switch on a single die.

    Capital programs

    3
    Equipment acquisition in Intel's New Mexico fab facilitycommitted$300 million
    Spent to date: About 15% of this amount has already been paid

    Benefit: enabling us to ramp up fab capacity and capabilities for our customers

    Committed to invest up to $300 million to acquire equipment and other CapEx that Tower will own in Intel's new Mexico fab facility.

    Investments in equipment for 12-inch fab in Agrate, Italyunderway$500 million
    Spent to date: 80% of this amount already invested, purchase orders placed for all equipment

    Benefit: following the previously announced STMicro partnership

    Total cash of $500 million has been allocated to make investments in equipment that Tower is to own in the 12-inch fab in Agrate, Italy.

    SiPho and 5G capacity expansionexecuting$350 million

    Benefit: expand SiPho and 5G capacity and capabilities for the qualification and ramp up of those technologies in our 8-inch and 12-inch facilities in Israel, Texas and Japan to serve our growing customer demand

    Executing a $350 million investment plan to expand SiPho and 5G capacity and capabilities.

    Risks & headwinds

    4
    RF Mobile revenue decrease2025

    upper teens reduction in overall RF Mobile business

    Mitigation: Target growth in more advanced 300-millimeter platform, signifying market share wins for us and our customers.

    Discrete business decrease2025

    expected to decrease in 2025 versus 2024

    Mitigation: Due to the impact of having discontinued Fab 1 lower margin, legacy 150-millimeter activities.

    Lower overall utilization rates in the near termnear term

    Fab 1 operated at 70% (now consolidated); Fab 2 and Fab 9 at approximately 55% utilization; Fab 3 at 70%; Fab 5 at 60%; Fab 7 (300mm) at 90% foundry utilization.

    Mitigation: Strategic repurposing of certain capacities across multiple fabs to further enhance SiGe and SiPho capabilities, aligning production with evolving customer needs for sustainable long-term growth.

    Headwinds from added fixed cost and depreciationQ4 FY24

    impacted Q4 gross profit (Q4 gross profit $87M vs $84M prior year, with $16M revenue increase that should have yielded $8M more gross profit, but instead was $6M less, implying $14M impact from Agrate).

    Mitigation: All headwinds were already included in this report. Expect 50% incremental margin from this new baseline for the rest of the year.

    What to watch in Q1 FY25

    5

    Sequential revenue growth

    Q2 FY25
    CurrentQ1 FY25 guided at $358M midpoint
    TargetQuarter-over-quarter growth in Q2 FY25

    Why it matters

    Demonstrates the company's ability to execute on its stated growth trajectory for the year, especially after Q1 guidance.

    We target year-over-year growth for '25 with sequential quarter-over-quarter revenue increases within the year, with an acceleration in the second half of the year

    Q&A highlights

    6

    Seeking quantification of expected contraction in RF Mobile, especially regarding Android, and any impact from Apple customers.

    Russell stated no reduction from Apple, but Android forecasts are down, leading to an "upper teens" reduction in the overall RF Mobile business. He attributed this to weakness in Android in Asia, particularly China, and customer inventory adjustments, with an expectation of recovery within the year.

    “No, specifically, for what we believe that we're supplying into Apple, we don't see any reduction. As far as serving into Android, predominantly, we have customers that are serving multiple markets within Asia and their forecasts are down. It's not wildly down. And as stated, we have within a 300-millimeter portion of it, we do see growth this year to high-end activities, what we see is some of the 200-millimeter having been reduced. If you're asking for to what degree it would be reduced, I don't like giving a yearly guidance, but it's not overly substantial. It would be somewhere probably in the other teens that I would say we would have a reduction in the RF mobile business.”

    asked by Cody Grant Acree · answered by Russell Ellwanger

    2 min read6 chapters

    Detailed Narrative

    01

    Strategic Capacity Expansion for AI/Data Center

    Tower is making significant capital investments to expand its manufacturing capabilities, committing up to $300 million for equipment in Intel's New Mexico fab and allocating $500 million for the Agrate 12-inch fab in partnership with STMicro. Additionally, a $350 million plan is underway to expand SiPho and 5G capacity in Israel, Texas, and Japan. These investments are critical for meeting the strong demand in AI and cloud computing, particularly for advanced SiGe and SiPho technologies, with expected high-value incremental revenues in Q3 and Q4 2025.

    02

    Silicon Photonics and Silicon Germanium Advancements

    The company is driving innovation in optical technologies, achieving volume production for 1.6T SiPho and co-developing 400-gigabit per lane technology for the upcoming 3.2T standard. SiGe platforms are being ramped up in San Antonio and Migdal Haemek, and 300mm SiGe PDKs have been released in Uozu, Japan, with a lead customer already in product design. These leading SiGe and SiPho technologies are also finding new applications in emerging markets such as SATCOM, automotive LiDAR, and photonic quantum computing.

    03

    Power Management and 300mm Transition

    Tower successfully transferred its flagship 65nm BCD platform to Albuquerque, delivering prototypes and securing its first production purchase order ahead of schedule. A new 300mm power management platform was released in Q4, promising 60% lower conduction losses, specifically targeting the growing $6 billion market for lithium-ion battery-operated products like smartphones and wearables. This strategic shift to 300mm platforms is also observed in industrial sensors, enabling denser logic and higher resolution.

    04

    RF Mobile Market Dynamics and Technology

    While the RF Mobile segment is projected to decrease in 2025, primarily due to weaker forecasts in the Android market, Tower is focusing on growth in advanced 300mm RF SOI technologies. These advanced platforms offer improved performance and die shrinkage, leading to better margins. The company is also investing in new technologies, such as a triple play process for WiFi 7 developed with Broadcom, which integrates power amplifier, low-noise amplifier, and switch onto a single die for a smaller footprint.

    05

    Sensor and Display Innovations

    Development efforts in sensors and displays are concentrated on next-generation CT detectors, 200mm extra-oral X-ray, and 300mm X-ray, including a new cost-effective layer-reduced lead flow PDK. A significant growth opportunity lies in OLED on silicon for AR, VR, and XR applications, with the first prototypes featuring unique ultra-low leakage transistors and high K capacitors targeted for the second half of 2025.

    06

    Financial Outlook and Long-term Model

    The company's long-term financial model projects $2.66 billion in annual revenue, $560 million in operating profit, and $500 million in net profit by fully utilizing its expanded capacity. Management expects sequential quarter-over-quarter revenue growth throughout 2025, with a strong acceleration in the second half, leading to overall year-over-year growth for the full fiscal year.

    AI-generated summary of the company’s earnings call. Not investment advice.