Good day, everyone, and welcome to the Fairchild Semiconductor Second Quarter 2013 Earnings Conference Call. Just a reminder that today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Dan Janson. Please go ahead, sir.

Good morning, and thank you for dialing in for the Fairchild Semiconductor Second Quarter 2013 Financial Results Conference Call. With me today is Mark Thompson, Fairchild's Chairman and CEO; and Mark Frey, our Executive Vice President and CFO. Let me begin by mentioning that we'll be attending the Cannacord Genuity Global Growth Conference on August 15 in Boston, the Morgan Stanley Corporate Access Day in Boston on August 21, and the Citi Global Technology Conference in New York on September 2. We'll start today's call with Mark Frey, who will review our second quarter financial results and discuss the current status of third quarter business. Mark Thompson will then discuss our product line results, end markets and operational performance in more detail. Finally, we'll reserve time for questions and answers. This call is scheduled to last approximately 60 minutes and is being simultaneously webcast from the Investor Relations section of our website at fairchildsemi.com. A replay of this call will be publicly available for approximately 30 days. Fairchild management will be making forward-looking statements in this conference call. These statements, including all statements about future results and performance are made based on assumptions and estimates that involve risks and uncertainties. Many factors could cause actual results to differ materially from those expressed in forward-looking statements. A discussion of these risk factors is provided in the quarterly and annual reports we file with the SEC. In addition, during this call, we may refer to adjusted or other financial measures that are not prepared in accordance with Generally Accepted Accounting Principles. We use non-GAAP measures because we believe they provide useful information about the operating performance of our businesses that should be considered by investors in conjunction with GAAP measures that we also provide. You can find a reconciliation of non-GAAP to comparable GAAP measures at the Investor Relations section of our website at investor.fairchildsemi.com. This website also contains a variety of useful information for investors, including an extensive financial section to facilitate your investment analysis. Now I'll turn the discussion over to Mark Frey.

Thanks, Dan. Good morning, and thank you for joining us. I'm sure most of you have had a chance to review our earnings press release, so I'll focus on just the key points in my comments. We grew sales again in the second quarter while improving adjusted gross margin 2 percentage points. R&D and SG&A spending was at the low end of our guidance range and we're now working to reduce overhead cost in the second half. Let's review some of the details, starting with the income statement. For the second quarter of 2013, Fairchild reported sales of $357 million, up 4% sequentially and 1% lower than the second quarter of 2012. Sales were at the low end of our guidance range due to a well-documented demand reduction at a couple of our large mobile customers and incremental weakness in the notebook PC market. Adjusted gross margin was 30%, up 2 points from the prior quarter due to higher factory loadings and better mix, primarily in our high-voltage products, which was partially offset by higher asset impairment charges. We expect utilization and mix to drive further improvements in gross margin again in the third quarter. R&D and SG&A expenses came in at the low end of guidance at $98.2 million. The increase from the prior quarter was due primarily to the annual merit raise and higher variable compensation accruals. Second quarter adjusted net income was $2 million and adjusted EPS was $0.01. Adjusted tax expense was $4.7 million, primarily due to a noncash revaluation of our tax assets in Korea, which was caused by the weakening of the won. Now I'd like to review our second quarter sales and gross margin performance for our 2 major product groups. Sales were up 8% from the prior quarter for our PCIA business,…

Thank you, Mark, and good morning, everyone. We grew sales again in the second quarter and reported 7% revenue growth through the first half of the year. Most of our product lines experienced solid demand for the quarter, and I'll discuss in more detail in a moment. We saw some demand weakness from the notebook PC market at a couple of large mobile customers that impacted Q2 sales and our backlog heading into the third quarter. I want to review the current demand environment with you today and discuss in more detail how we're managing the company to support this expected business level. I will wrap up my prepared remarks with a review of some current quarter results and operational metrics. Sales of our products servicing the Industrial and Appliance end markets were up 15% sequentially in Q2. Sales of our highly integrated smart power modules that support the transition to variable speed motors in a wide range of home appliances and industrial fans and pumps were up 27% from the prior quarter. Our leading edge IGBT power products were up 27% sequentially due to robust demand from welding, inductive heating and solar inverter markets. We expect flat to slightly higher sales for this sector in Q3 due to solid industrial and solar inverter demand offset by typical seasonal weakness in air conditioners. Our automotive business posted record revenue again in the second quarter, driven by strong sales of our power module solutions for electronic power steering and our advance ignition control products. We expect solid sales growth in this business during 2013. Consumer demand remained muted, but we're ramping production to support some new game consoles in Q3. We expect modest sales growth for our products serving the consumer end market in the second half. Demand in the Mobile…

Thanks, Mark. We'll now open the call to questions. [Operator Instructions] Thanks, and let's take the first question.

Your first question will come from Ross Seymore.

Just a couple of questions. The first one on the revenue side. I think we're all very aware of what's happening at the biggest 2 OEMs in the world in mobile. But Fairchild has been -- it's supposed to be a share gainer in that space and it doesn't even look like your mobile revenues are really going to grow at all this year, given what you've just guided, or very little on a calendar-year basis as a whole. So can you just talk a little bit about what's happening and why some of the supposed share gains aren't happening even with the challenges of your customers?

So, Ross, a couple of things. So we do see steady opportunities and progress on share gains on a couple of key fronts. Those are, however, as is always the case, can be easily offset for a couple of quarters by big inventory moves. And the other aspect is that we have significantly haircut our OEM customer estimates for the second half of this year in our outlook. So we're really trying to factor in the last couple of quarters where the estimates that have been provided have been much lower than reality. And so we're using a variety of methods, including some very good analyst notes that are out there, to use volumes that are quite a bit below the official estimates. And that's what's reflected in our numbers.

I guess the follow-up question I have is, you alluded a little bit to trying to rightsize the OpEx. Any sort of color you can give us on the magnitude there? It seems like, earlier this year you upped the spending by roughly $10 million over how you ended last year, under the assumption that things would get better in the back half of the year. Now that the back half is once again looking challenged, is the kind of magnitude we're talking about to get us back $10 million below how we ended last year? And can that be a steady state for the company?

So Ross, there were no -- while the dollar amounts changed at the start of the year, those were due not to increased program or headcount. Those were due to sort of natural flows of things like variable comp and merit increases. So we've actually been pretty tight in terms of headcount and programs this year. Clearly, we need -- we want to do something that's pretty significant. We deliberately haven't quantified it because we neither want to over, nor underestimate the magnitude of what we'll choose to do. And obviously, we have to look very closely at potential customer impact. And the other thing is, is that we'd like to get a few -- at least another quarter under our belt to try to see where big mobile is going to stabilize in terms of real demand.

We'll move next to Terence Whalen from Citi.

Just as a quick update, I wanted to understand on the manufacturing side. You did, I believe, cap your CapEx. Can you just give us an understanding of, again, where you are in terms of manufacturing transition and in terms of gross margin improvements, specifically as we move through the remainder of this year?

So I'm not sure, Terence, what you asked about on the CapEx side of that question.

Could you give CapEx indication for the year and limit that?

Yes. We expect CapEx to be around $90 million, significantly lower than last year's $152 million. So the major capacity investments in Maine and in Bhushan are behind us. We expect to be able to continue capital investment in around these ranges, the low end of our 6% to 8% of revenue guide. And obviously, that gives us a tailwind from a cash flow generation standpoint. In terms of gross margin, we have had some favorable lead in mix as we've exited some of the lower-margin aspects of computing. And at least coming off of last year where we had significantly lower production and shipments, we're moving back to a production level that's closer to what we're actually shipping and that's moved gross margins up to about 30% for this quarter, and we expect another couple of points or so for next quarter. So at these revenue levels, that would be implied by the midpoint of our guidance, we see the gross margin in the 32% to 33% range going forward. Obviously, as we move that higher, then the gross margin would begin to get into the mid-30s.

I'm sorry, the one other thing that I would add to that is that the conversion -- the filling of BK8 and the opportunities to take -- to remove production from less cost-effective locations will take place over multiple quarters and will be muted in the second half of this year. It's just begun right now, but will take effect more in the first 2 quarters of next year based on our current outlook.

Okay, terrific. And then as a follow-up, I wanted to just understand, in terms of some of the larger mobile customers where you've had some difficulty with this quarter, do you attribute that to aggregate unit volume and reverberations through the supply chain, or could there perhaps be some issues in terms of allocation amongst several different suppliers in terms of unit volume? In other words, do you think this is a problem that suppliers, in aggregate, are going to see, or is this just perhaps tension across several different suppliers for similar products?

Yes, so I guess what I'd say is, first, I can't -- I think it is inappropriate for me to speculate about any other companies. But what I would say is that the backlog reductions we saw were identical in size to the volume reductions that were pretty well reported in the case of one very large non-American OEM. And so based on that, I don't believe that there's any meaningful share shift, either positive or negative, associated with that, and that it appeared almost entirely to be related to volume -- basically, volume reductions in the previous generation of phones, which we're not selling the way that they expected.

The question was on notebook, I think, though. Terence, your question was on notebooks, right? On PC?

It was actually on mobile, more broadly.

Did that answer your question, Terence?

Yes it did.

We'll move next to Chris Caso from Susquehanna.

I guess, on the topic of notebooks, I guess the weakness that you saw in that space, I guess I was a little surprised that to hear that side as a weakness given it had been reduced as a percentage of revenue. Is that more about your exit from that business and you're defocused on that and that business is sort of going away for you as opposed to what's going on in the market there? Obviously, we know that the market is weak, but perhaps, it's been a little bit magnified in your case because of your strategic moves?

Yes, it's absolutely a result of strategic moves. What happens in a multi-sourced stuff like is we have pricing floors, and when the purchase goes beneath the pricing floors, we don't even bid. And so, that's really -- what happened is, as often the case, is where there's oversupply in a segment and it's in decline, such as PC, pricing just turns very, very ugly very fast and that's really what's gating the decline of that business. As I said, I think, on its current trajectory, I think by the end of 2013, we won't have any. So we don't have to talk about it anymore.

Okay, great. And then with regard to handsets. I mean, it sounds like what you're saying is you saw some incremental weakness in Q2, and what you're guiding us to is actually below what your customers are telling you as you're trying to anticipate some further weakness there. I guess my question that, one of the areas of strength that you cited was the Chinese market, and I think that is probably the most challenging to predict going forward and it's been very strong. Have you taken a similar haircut to those customer forecast as you look into the second half as well and I guess, what's the impact of view to the Chinese market? Is it significant for marpia [ph] ?

So a couple of things. Yes, we have taken or given the OEM estimates a haircut, and in fact , I think we've keyed pretty heavily on what have turned out to be some very accurate models that have existed during out there in the analyst community that have been better than the OEMs' models. But the one thing I will say is that part of the reason that we took inventory up a little bit is in the event that the numbers are better than our models today -- in other words, that they're closer to the OEM estimates, we will be able to supply. So we're not -- we're deliberately not limiting our ability to supply. We're simply not reflecting those numbers in the estimates that we put out there because so far, they've been wrong more than they've been right, and we're simply trying to catch up with that dynamic. So before I move on to China, does this makes sense?

Yes, it does.

Okay. So as regards to China, China is still relatively small for us, relative to what I'll call big mobile. And so we haven't -- we don't have enough data to really haircut the numbers and frankly, they're small enough that it's kind of in the round-off era [ph] , anyway, in terms of doing that. We are concentrating on 1 or 2 that we expect to be the winners there. And we have decent content and a lot of design activity at those. But they're still heavily using solutions that are very similar to what's in the West. So the R&D expense associated with that is not that high, but that's one where we're still, I think, really developing a good model for.

[Operator Instructions] We'll move next to Christopher Rolland from Friedman, Billings and Ramsey. Christopher Rolland - FBR Capital Markets & Co., Research Division: So what percent of your sales now come from high-end flagship phones for a call to develop the world versus, call it, Chinese phones in the developing market? And how are you thinking about growth in those segments and your content there? And what are the margin structures like?

So the name -- big name brands from the West make up roughly 2/3 of our total revenue in mobile, and everything else makes up the rest. The margin profile for that business is substantially higher. We've -- I don't think we've ever put the absolute number out there, but it's substantially higher than the corporate average. Christopher Rolland - FBR Capital Markets & Co., Research Division: Okay. Switching gears on the Smart Power Module business. I guess you guys said that was up 27%. So what percentage of PCIA is that now and how do you think that that's going to shake out for the rest of the year given the Chinese subsidy losses? Do you guys have any thoughts there, I guess? And as we look forward here, I mean, should we expect that to be up? It sounds like it might be down sequentially next quarter. Any thoughts?

So right now, we're around 20% of our PCIA revenue is in modules. And so -- and that number has been steadily increasing, although we certainly never expect it to go 100%. But it is the place. It's such an attractive design solution that it is -- it does continue to take collective share -- both ours and others, from the discrete implementations. We don't -- we have not seen any evidence that suggests that the stimulus created much upside, nor that the cancellation of the stimulus has created much downside. So the way it was structured was different than the last one; it didn't really encourage people to buy. The last one encouraged people to buy. This one didn't encourage people to buy. It encouraged them to build -- manufacturers to build a more efficient version. But there's a number of other things in place that are driving that transformation, anyway. So we think that the change is -- will be muted to 0. Christopher Rolland - FBR Capital Markets & Co., Research Division: Were you sort of implying that the PCIA might be down sequentially next quarter?

No. That's not our expectation. If you look collectively at the elements of that, we think everything will be up with the exception of the air conditioning market, which is basically a Northern Hemisphere market. So as you head into winter, the volumes typically go down. Everything else will be up enough that it will offset that. So we expect it to be flat to up, and that's reflected in our estimates.

Your next question will come from Chris Danely from JPMorgan. Christopher B. Danely - JP Morgan Chase & Co, Research Division: Can you give us some color on the inventory situation out there in the channel. Maybe talk about your distis and your OEMs, it sounds like there was an inventory reduction in wireless, but your inventory went up in terms of distribution. Just give us a little confidence that we're not going to have another inventory correction?

Well, we're still below the midpoint that I see in peer groups. So we are up about a half a week from where we ended last quarter. But as we examined it, it was parts that were pulled by key distributors to get ahead of key programs like PlayStation, some mid-voltage wins that we've gotten, et cetera. So we're not concerned with what they did. And obviously, we'll track that sell-through in Q4, but we're not planning on major inventory corrections going forward.

So, I mean, normally, we can only control channel inventory to a couple of million dollars, plus or minus, because there's always pulls that happen at the end of the quarter that we don't control, nor do we have perfect visibility to. So if you look at the magnitude of the increase, it was slightly beyond what I would regard as normal noise, and our revenue estimates include fixing that piece that's above normal noise in what more we put out there. So we are very committed to not creating a channel inventory problem that we'll have to deal with. But this one was very minor and sort of in the normal process of things. Christopher B. Danely - JP Morgan Chase & Co, Research Division: Okay, great. That's really helpful. So my follow-up, just on bookings. I think last quarter, you guys said you were booking at a $400 million quarterly run rate. Given all the volatility in backlog we've had, can you maybe give us an update on that number? And then how would that translate into what we're thinking for normal seasonality, if you could call anything normal these days, for the December quarter?

So we're not -- we're still trying to figure the third quarter out. So we're not going to try to quantify the fourth quarter. But there was a big chunk of mobile backlog that disappeared in the last period of Q2 and that's fully reflected in the numbers that we put out there. So if you try to quantify that, it's in the $30 million to $50 million range for the second half, and that's, as I've said, has been reflected in the numbers already.

We've also lowered our lead times a couple of weeks across the board, and about 60% of our business is through distribution, and so they'll tend to order based on lead times as opposed to large OEMs who will always order for their 26 demand -- 26-week demand window. And so going forward, we're really now adopting to what the new patterns will be that we see from distribution.

Up next is Aashish Rao from Bank of America Merrill Lynch.

Just a follow-up on a couple of prior questions in mobile. Your mobile sales are trending to the lowest growth rates since '08. I mean, could you provide some relative exposure between high-end, mid-end and low-end smartphones? And what's the difference in the addressable dollar content for Fairchild in these phones?

So I guess it somewhat depends on where you draw your boundaries between low, mid and high. But what I would say is that we have little to no content in the low end. And if you look at it, the content then tends to rise as you go up. So for example, if you look at a lot of the work that we do on charge management, from adapter through charger IC and battery control, that becomes important as batteries get big. So it really correlates with how heavily the phone is used and data rates and so forth. So what we see is 0 at the low end and dollars of content at the high end.

Okay. But there's no way to quantify it in terms of what you can -- your addressable opportunity is, say, $5 in a high-end smartphone, versus something in like an entry-level smartphone that sells for $100 to $200, what your addressable content might be?

So again, the easiest one is the bottom end, which is 0 to a first order approximation. At the high end, you could use a number of $1 to $2 for addressable content. And depending on how it's been de-contented, it could be -- it's the same or somewhat less in the low-end phones -- or mid-range phones, I'm sorry.

Got it. Cool. And then for my follow-up, industrial, your largest end market, was very strong in 2Q and you're expected to hold up in 3Q. Normally, this is a quarter which sees some kind of typical seasonal weakening. So just wondering, do you think some of this strength is coming from lead time extensions in the first half, which might be causing higher sell-in revenue bookings?

So I don't see any evidence that it's caused by lead time extensions, for among other reasons because our lead times are not extending. Others may be, but that wouldn't -- that'd be a second order effect at most. I think what we're really seeing is that we're getting a broader and broader footprint in the kinds of industrial solutions that we do, right? So we originally were essentially a pure air conditioning play, which is a highly seasonal market -- air conditioning in the Northern Hemisphere I'll say, which is a highly seasonal market, of course. Nobody upgrades their air conditioner in the winter. And so on the other hand, what we've done is we've broadened that heavily into industrial pumps. There's a steady, growing business in solar inverters. Automotive electrification has become a significant part of our business. In fact, today, our largest module customer is in fact an automotive Tier 1. So if you look at that, that is really why much -- not all of the seasonality had not disappeared from the business, but it's been heavily mitigated.

John Pitzer from Credit Suisse. John W. Pitzer - Crédit Suisse AG, Research Division: Just quickly getting back on the handsets in June. I'm just kind of curious, the 2 large handset OEMs that disappointed, had they gone to forecast, what would the revenue had been? Would you'd been talking about closer to the higher end of your guided range for the June quarter? And I guess I'm curious, when you look at those 2 customers, what's the -- in your September guidance, do you expect that bucket to grow or not grow?

So the -- had the backlog that was present at the beginning of the quarter stayed and we shipped to it, which was the expectation at the beginning of the second quarter, we would have been at or above the top end of our revenue range. We have reflected what I would regard as realistic conservatism in the second half of the year. So it's consistent with the more cautious views that are out there on what volumes are likely to be for the 2 top makers of phones. And so if those turn out to be low, then there's upside opportunity. If the market continues to decline, then obviously -- or not decline, but the increases modulate, then obviously, it's the other way. But we really try to be consistent with -- we've created a scorecard on some of the predictors over the last couple of quarters. And as I commented earlier, there's been a couple of industry analyses from the analyst community that have been much closer to right than the OEMs' estimates. So we've used those for our revenue forecast and our revenue guidance. However, we are staging a bit more inventory than we would normally do to make sure that we can meet the actual estimates that the OEMs are. So those are the 2 boundary conditions that we're trying to take on here. Make sure that we can meet the high end if it comes to pass. So that's present as inventory dollars, however, it's not reflected in our revenue estimates. John W. Pitzer - Crédit Suisse AG, Research Division: That's helpful, Mark. And then maybe for Mark Frey, just on the gross margin side. I just want to make sure I understand the relationship between changes in utilization and gross margin. When you look at the gross margin guidance for the September quarter, to what extent is that reflecting an increase in utilization in the June quarter that just flows through the P&L in the September quarter? And I guess, to ask the question kind of more straightforward, what do you expect utilization rates to do June to September?

So we're holding our bill rates at roughly equivalent to the second quarter. And you're right, some of the favorability in the September quarter is the timing of the improvement in our variances that occurred in the second quarter. We are expecting that mix is modestly going to offset pricing in Q3, so there's a small tailwind based on the combination of mix and price. And then of course, we've targeted a number of cost reductions in the sites as well.

Steve Smigie from Raymond James has your next question. Jonathan Steven Smigie - Raymond James & Associates, Inc., Research Division: Just to touch on the industrial a little bit more. Just to clarify, did you indicate that you thought it would be strong throughout the balance of the year? And then just in general, can you talk about where you expect to see success, say, for the next couple of quarters. Is it continued module performance or there are also IGBTs, discrete parts or high-voltage FETs that would be doing well. Just if you'd address this, it would be appreciated.

So I guess one of the ways to look at the current actuals is that almost everything is growing a little bit, and that's a pattern that we expect to continue across the year. So if you take your glass half full view, that's not a bad life to live. The difference is that we had one segment, which was smart phones, that had the prospects to grow much faster than everything else, and that's what's been mitigated. But the balance of everything else, we are actually reasonably satisfied with the opportunities that exist for us. As I commented, there's a lot of content themes in Automotives and very broad deployment in industrial, in communications, base stations and so forth. So there's a lot of places where there is a steady couple of points a quarter growth opportunity. But as I said, it's slow and steady, as opposed to big incremental movements. Jonathan Steven Smigie - Raymond James & Associates, Inc., Research Division: Okay. And then Mark, can you just comment a little bit on product initiatives here? I see the R&D dollars have been ramping, or the percentage has been ramping quite a bit. What would be your involvement, say, in PMX and other higher-end handset ICs? And what other big strategic initiatives should we be thinking about over the next couple of years?

Well, the 2 big ones that are farthest along are advanced sensor solution and our very high-power silicon carbide solutions. And we expect those to start to become commercial realities at the end of this year or early next, and begin to become a commercial implementation. So it's very interesting. We've deliberately not talked about them very much because -- while we talk to customers about them a lot, we think we have some pretty significant competitive advantage in those places and want to wait until they actually turn into business before we try to quantify them. In terms of the sort of integration of power, it is not -- we think that the PMX world is pretty well covered. That would be our view. There's a couple of players who are very strong there. And it's also a place where some of the handset makers are growing their own, particularly offshore. There's some pretty aggressive movement to in-source PMX and I suspect some of the other -- at least one of the other big players is looking at that and may move in that direction as well just based on hiring activity and so forth. So we think the more interesting stuff is in more specialized kinds of things, such as charger ICs, for example. When you're talking about multiple voltage in current inputs and different levels of charging, depending on the state of the charge of the battery, some of those get pretty sophisticated and are much -- there are many fewer people who are positioned to do those. So the kinds of integration plays that we're looking at are the ones where we think we already bring some unique insight into either the architecture or have some compelling blocks to go after. But we aren't looking to do anything where's 2 or 3 well-established incumbents, to try to be a 4. That's a losing strategy as far as I am concerned. And so that's really the role that we're playing in smartphones as we go-forward.

Up next is Kevin Cassidy from Stifel. Kevin E. Cassidy - Stifel, Nicolaus & Co., Inc., Research Division: Just on ASPs, you say down 2% last quarter and expected to be down 2% again. Could you discuss -- it seems -- a little more about -- that seems higher than last year, and especially higher during some of the recession years. What's going on with -- pressure from your customer as they try to be more competitive at their end markets?

Well, yes. As we said it was slightly more that average. I don't think it was enough more than average that I could point to a particular market or trend in doing that. But yes, our customers are always expecting price reductions and they always expect that to contribute to their own margin profile going forward.

I wouldn't call it a trend at this point. I think it's a single data point. Obviously, we're paying attention to it, but we're not -- we're neither assuming that it will moderate nor do we see any evidence that it will increase. So it's a space that we watch like anything else.

Okay. Kevin, we typically talk about down 1 to 2 as normal, so it's still in normal range. The pressure was, as you would expect, mostly from mobile and PCs. Kevin E. Cassidy - Stifel, Nicolaus & Co., Inc., Research Division: And on the mobile market, it seems the high-end phones aren't selling. Is there a pipeline of designs for high-end phones that you think could rejuvenate the market?

There are a number of places where we see the opportunity to increase our content, absolutely.

Moving onto Shawn Harrison from Longbow Research.

Hopefully, 2 just brief follow-ups. Distribution x kind of what you build to support, mobile sees upside in the game console market. Correct me if I'm wrong, but it didn't sound as if they were adding any inventory, whatsoever. It's kind of just still pulling to end demand, is that correct?

There's always a build that takes place when a product is launched. So there's a bit of a bulge that occurs. And then people find out exactly how popular this thing is and then it moves to some kind of steady-state. So what we see is, what I'll call the build bulge, and then no different than what was going on, for example in high-end mobile. The difference, of course, is that there isn't -- they aren't depending on selling a lot of the old version, which often takes place in phones, for example. There's a lot of inventory out there in the carriers for the previous generation. That's where interest has heavily dried up. But in the place of gaming, this is the first build and we'll see where it goes from there.

Particularly -- I'm sorry, on your PCIA side of your business, so you're seeing, I guess, distribution build inventory beyond kind of what sell-through is currently?

No.

No, with the exception of our power conversion solution in the mobile space. Our inventories in PCIA were actually down at that.

Okay, helpful. And then just second, as a follow-up. The schedule in terms of -- I know at times you want to make it move a bit, but in terms of generalities, the cost coming off of the new fab in the kind of the savings building in the second half of the year, there's no change to that timetable?

No. We wouldn't expect to see a lot of impact in the second half of the year, but we would expect to start to see some impact in the first half of next.

And that would start be -- something with 100-plus basis points, correct?

It should be in that range.

Michael McConnell from Pacific Crest Securities.

Just on the China commentary. You had stated that you've obviously seen some of the macro indicators like all of us have, and taking a little bit more conservative view of the second half. What are your Asian distributors kind of -- what's their behavior? Are they starting to retrench as well and start to be a little bit more concerned with some of the indicators in China, or is it pretty steady-state right now, and everyone's just a little bit more cautious, but order patterns are pretty steady?

So we've been -- at the start of the year, we finished conversion of building to POS rather than backlog. So that's really what we've been doing is when we're out of the equilibrium, we work for the distributor to fix this equilibrium. But we aren't -- we haven't seen any pull back, for example, and point-of-sale has been steady. So while there are cautionary comments and we are watching this space very carefully, we actually haven't -- it's actually held up very well. But we have -- I think we have a good system in place that we've used on both sides of this to make sure that our total inventory between internal and the channel is appropriate to the true end demand.

And then my follow-up would just be on the standard product segment. Anderon [ph] saw some nice growth here in Q2 sequentially. And you said that pricing, overall, was down 2% within just that bucket, standard products? How's the pricing dynamics there? Are they -- was pricing up in Q2, and is it expected to be up again in Q3, just within that line item?

I didn't see anything. We don't focus on this. But I didn't see any pricing dynamics that were different than normal. And I certainly wouldn't expect that category to have any kind of robust pricing. And in our guidance is flat to slightly up for that business.

At this time we'll go back to a follow-up from Christopher Rolland from Friedman, Billings and Ramsey. Christopher Rolland - FBR Capital Markets & Co., Research Division: Last quarter, you guys talked about the sensor market and wearables, and I didn't really hear any sort of an update this quarter. So where are we there?

So nothing new to report. The place, the sensor market for us, as I commented earlier, is commercial reality late this year or early next, and we'll provide some more quantitative update on that, but it is heavily relevant to wearables, as well as to handsets and other kinds of implementation. Christopher Rolland - FBR Capital Markets & Co., Research Division: Do you guys see this as a 10% revenue adder for you guys or more? What sort of magnitude of a market are we talking about?

We think it will be very important. If you look at the role of sensing in any mobile device, it's huge. And if you look at the -- particularly, the power consumption -- the existing implementations are so high, you can't really believe -- they're basically just turned on periodically to update. So we think there's $0.50 to $1 of available content for an ultra-low power implementation in kind of every mobile device -- portable device, whether it's a tablet or a phone or a wearable or what have you. So depending on the rate of penetration, obviously, it could be a very big deal.

Moving on to another follow-up from Chris Caso from Susquehanna.

Just one quick clarification. In the last quarter, you talked about profit-sharing accruals being part of the Q2 OpEx. And at that point, you were booking revenue at kind of a $400 million a quarter revenue run rate. In your third quarter guidance, and I guess as you anticipate in the back half of the year, is the plan to suspend those accruals or to reverse those accruals based on the current outlook?

No. We had a modest accrual in Q2; we actually had a modest accrual in Q1 as well. And our plan was since our EBIT would be backloaded in the year, that we would increase those accruals in Q3 and Q4. That is still the plan that is still baked into our guidance. But obviously, it's been shaved down a bit from our early expectations.

It's driven purely by EBIT. And so as revenue would go down, EBIT would go down and the accrual would go down, but not disappear. At this point, we -- what would be reflected in the numbers is retaining some of it, but not reversing all of it. But obviously, if for example mobile is weaker than we think, it could wind up with a reversal of [indiscernible] with the usual negative spike in OpEx spend for the period that it occurred in. Not our current outlook, though.

And Mr. Janson, at this time, there are no further questions in the queue. I'd like to turn the conference back over to you.

Great. Well, thank you. With that, then that will conclude the call. Thank you for your interest in Fairchild.

And that does conclude today's teleconference. We thank you all for your participation.