Parag Agarwal Bernard Gutmann - Chief Financial Officer, Principal Accounting Officer, Executive Vice President, Treasurer, Chief Financial Officer of Semiconductor Components Industries LLC, Executive Vice President of Semiconductor Components Industries LLC and Treasurer of Semiconductor Components Industries LLC Keith D. Jackson - Chief Executive Officer, President, Director, Member of Executive Committee, Chief Executive Officer of Semiconductor Components Industries LLC and President of Semiconductor Components Industries LLC

Christopher B. Danely - JP Morgan Chase & Co, Research Division Christopher Caso - Susquehanna Financial Group, LLLP, Research Division James Schneider - Goldman Sachs Group Inc., Research Division Ross Seymore - Deutsche Bank AG, Research Division Tristan Gerra - Robert W. Baird & Co. Incorporated, Research Division John W. Pitzer - Crédit Suisse AG, Research Division Jonathan Steven Smigie - Raymond James & Associates, Inc., Research Division Kevin E. Cassidy - Stifel, Nicolaus & Co., Inc., Research Division Aashish Rao - BofA Merrill Lynch, Research Division Craig Hettenbach - Morgan Stanley, Research Division Ian Ing - Lazard Capital Markets LLC, Research Division Craig A. Ellis - B. Riley Caris, Research Division Vijay R. Rakesh - Sterne Agee & Leach Inc., Research Division Patrick Wang - Evercore Partners Inc., Research Division Christopher Rolland - FBR Capital Markets & Co., Research Division Betsy Van Hees - Wedbush Securities Inc., Research Division

Good afternoon. My name is Jamie, and I will be your conference operator today. At this time, I would like to welcome everyone to the ON Semiconductor's Third Quarter 2013 Financial Earnings Call. [Operator Instructions] Parag Agarwal, Senior Director of Investor Relations, you may begin your conference.

Thank you, Jamie. Good afternoon, and thank you for joining ON Semiconductor Corporation's third quarter 2013 quarterly results conference call. I am joined today by Keith Jackson, our President and CEO; and Bernard Gutmann, our CFO. This call is being webcast on the Investor Relation section of our website at www.onsemi.com. A replay will be available at our website approximately 1 hour following this live broadcast and will continue to be available for approximately 30 days following this conference call, along with our earnings release for the third quarter of 2013. The script for today's call is posted on our website. Additional information related to our end markets, business segments, geographies and channels is also posted on our website. Our earnings release and this presentation includes certain non-GAAP financial measures. Reconciliation of these non-GAAP financial measures to the most directly comparable measures under GAAP are in our earnings release, which is posted separately on our website in the Investor Relations section. During the course of this conference call, we will make projections or other forward-looking statements regarding future events or future financial performance of the company. The words believe, estimate, project, anticipate, intend, may, expect, will, plan, should or similar expressions are intended to identify forward-looking statements. We wish to caution that such statements are subject to risks and uncertainties that could cause actual events or results to differ materially. Important factors which can affect our business including factors that could cause actual results to differ from our forward-looking statements are described in our Form 10-Ks, Form 10-Qs and other filings with the Securities and Exchange Commission. Additional factors are described in our earnings release for the third quarter of 2013. Our estimates may change, and the company assumes no obligation to update forward-looking statements to reflect actual results, changed assumptions or other factors. Later this quarter, we will be attending the Crédit Suisse Technology Conference in Scottsdale, Arizona on December 4. Now, let me turn it over to Bernard Gutmann, who will provide an overview of the third quarter 2013 results. Bernard?

Thank you, Parag, and thank you, everyone, for joining us today. Let me begin by updating you on the progress on our key financial objectives. Let me start with our SANYO Semiconductor Products Group. We continue to make progress in our efforts to improve profitability of our SANYO Semiconductor operations. During the third quarter, we were able to reach breakeven on a non-GAAP EBITDA basis for SANYO Semiconductor on revenue of $157 million, but we still faced headwinds of $0.01 to our overall non-GAAP EPS as compared to a headwind of $0.05 in the second quarter and $0.07 in the first quarter. To further accelerate the progress towards an optimal cost structure for SANYO Semiconductor, we recently announced additional measures to further align SANYO Semiconductor's cost with its near-term -- near- to medium-term revenue outlook. These actions involve the closure of a test and assembly plant in Japan and the initiation of a voluntary retirement program for a significant number of employees. The primary goal of these measures is to achieve sustained profitability for SANYO Semiconductor in quarterly revenue range of approximately $150 million to $170 million. With these actions and additional efficiency measures, we are taking steps to further lower the break-even point on a non-GAAP net income basis for SANYO Semiconductor to quarterly revenue of approximately $150 million in the second half of 2014 and to approximately $140 million by mid-2015. The comparable break-even point in the third quarter of 2013 was approximately $170 million. We believe that in near- to medium-term, we can run SANYO Semiconductor business at quarterly revenue ranges of approximately $150 million to $170 million. With this revenue range and with the optimized cost structure, we expect SANYO Semiconductor to be accretive to our earnings for the full year 2014. Keith will provide additional…

Thanks, Bernard. Let me start with comments on SANYO Semiconductor and then I will address the overall business environment and various end markets. We are increasingly confident of attaining sustained profitability and stable revenue within 2014 for SANYO Semiconductor. As we stated earlier, we intend to run this business at an acceptable level of profitability, and we are aggressively taking steps to achieve our profitability goals for SANYO Semiconductor. With the measures we announced recently, we are realigning SANYO Semiconductor's cost structure to attain sustained profitability in quarterly revenue range of approximately $150 million to $170 million. As Bernard indicated in his earlier remarks, we are targeting a breakeven on non-GAAP net income basis at a quarterly revenue of approximately $150 million in the second half of 2014 and then approximately $140 million by 2015. We believe that our target revenue range is well within our reach. Along with improvements in cost structure, we are making progress in stabilizing the revenue for SANYO Semiconductor. We've had success in growing SANYO Semiconductor's revenue outside of Japan, as we have leveraged our relationship with our existing customer base to sell SANYO Semiconductor's products. From first quarter to the third quarter this year, SANYO Semiconductor's revenue to customers located outside of Japan has increased by approximately 11% as opposed to an increase of approximately 4% for SANYO Semiconductor's total revenue. As a result of changes we implemented over the last 2 years, SANYO Semiconductor's product pipeline has significantly improved, and we expect to see increasing revenue from new products starting in 2014. We have identified key technologies within the SANYO Semiconductor Group, and we are leveraging these technologies to target a broad set of markets. We have realigned SANYO Semiconductor's R&D efforts and product lines to target applications in the areas of handsets,…

Thank you, Keith. Now for fourth quarter 2013 outlook. While booking trends and end-market demand outlook remains healthy thus far in the quarter, we're being cognizant of a rather soft macroeconomic outlook in our fourth quarter guidance. Based upon product bookings, booking trends, backlog levels and estimated turn levels, we anticipate that total ON Semiconductor revenues will be approximately $675 million to $705 million in the fourth quarter of 2013. Backlog levels for the fourth quarter of 2013 represent approximately 80% to 85% of our anticipated fourth quarter 2013 revenues. We expect that average selling prices in the fourth quarter of 2013 will be down by approximately 1% sequentially. We expect inventory at distributors to rise on a dollar basis. We expect total capital expenditures of approximately $30 million to $40 million in the fourth quarter of 2013, bringing the total capital expenditures to approximately $170 million for 2013. For the fourth quarter of 2013, we expect GAAP and non-GAAP gross margins of approximately 33.8% to 34.8%. We also expect total GAAP operating expenses of approximately $198 million to $218 million. Our GAAP operating expenses include the amortization of intangibles, restructuring, asset impairments and other charges, which are expected to be approximately $40 million to $50 million. We expect total non-GAAP operating expenses of approximately $158 million to $168 million. We anticipate GAAP net interest expense and other expenses will be approximately $10 million to $12 million in the fourth quarter of 2013, which includes noncash interest expense of approximately $3 million. We anticipate our non-GAAP net interest expense and other expenses will be approximately $7 million to $9 million. GAAP taxes are expected to be approximately $6 million to $8 million, and cash taxes are expected to be approximately $2 million to $4 million. We also expect share-based compensation…

[Operator Instructions] Your first question comes from Christopher Danely from JPMorgan. Christopher B. Danely - JP Morgan Chase & Co, Research Division: On the SANYO restructuring, can you just give us a sense of how much cost is going to come out of OpEx and/or gross margin and what sort of a pace that will be over the next 4 quarters or so?

So I need to break it down into 2 things. First one is the back-end closure of our back-end factory in Japan. That should generate approximately $16 million in annual savings or $4 million per quarter, primarily in COGS or pretty much all in COGS. But -- and that is scheduled to be completed by the second quarter of 2014. With inventory bridge builds that we're doing, we will not see the full benefit of that until 2015. The second portion is a little bit more variable because it's a voluntary program that we have in place with -- we are targeting 600 to 700 people, and that should yield savings of approximately $36 million to $45 million, probably 75% of that in OpEx -- 70% to 75% of that in OpEx and the remainder in COGS. We don't have a precise timing because these discussions take time with -- in the Japan culture. But we expected to see some of the benefits in the first quarter and fully then in the second half of the year. Christopher B. Danely - JP Morgan Chase & Co, Research Division: Understood. And for my follow-up, maybe you guys could address why sort of the SANYO revenue has not recovered and just continues to bleed? And then maybe give us a few reasons why you're confident you can stabilize it now.

Yes, I will comment on that one, Chris. This'll be our third quarter above the $150-million mark. We think we've got the floor. Predominantly, that decline was driven by the Thailand floods and all of the customer reactions that happened as a result of that, plus the decline in the Japan consumer suppliers. So our customers losing market share dramatically. And I think to the first one, the flood stuff's now completely gone. We don't have to worry about anymore leakage. And on the second one, our exposure to those customers is now very minimal. Most of the products we're selling in Japan is in other markets, other than the consumer goods. So that combination gives us comfort in a floor. And then the pipeline we've got for smartphones, automotive and motor control gives us a strong indication that we should be able to grow it back from these levels.

The next question comes from Chris Caso from Susquehanna Financial Group.

For the first question, I guess I ask a little bit of the bigger-picture question with regard to demand. And I'm sure you guys have had the opportunity here, what some of your peers had said -- have said about what's going on now. And I think the commentary kind of ranges from demand being seasonal to, perhaps, a muted recovery. And again, I guess there's always the fear of a cyclical correction -- could be starting. What's your view of what's going on here with regard to the market?

Clearly, our view is that there is not a cyclical downturn in the making. The inventory levels in the channel and at our customers are near all-time lows. So there's really no -- nothing that would cause a cyclical downturn or frankly, much room to fall. So we think most of the impact here is seasonal. It certainly has some choppiness in the market recoveries, particularly in the China consumers, which I think is showing up as a little bit of an inventory correction. So overall, what we would call Q4 in the broader market is a slightly more seasonality in Q4 than we have seen in the past, but not anything significant.

Okay. And as a follow-up, maybe you could expand on the weakness that you're seeing in China right now, and I guess the magnitude of the weakness, where it is and how long do you think that lasts.

So we're seeing a little bit more, a point or 2 of weakness in China over what we have seen normally as seasonality. Again, I think it is based on the consumption in China being a little bit off the expectations. So people kind of overbuilt a little bit in Q3, and they are correcting it in Q4. We don't see that sustainably going down. We think Q1 should see the consumers behaving, again, fairly normally around Chinese New Year, and there's no indications that this will bleed over into 2014.

The next question comes from Jim Schneider from Goldman Sachs.

I was wondering if you can maybe talk about the March quarter seasonality, Keith. Maybe remind us of what it typically is. And then given the muted seasonality commentary you provided earlier, maybe talk about whether you think that this March quarter will be better or worse than seasonal, given all the things you're seeing right now.

Our typical seasonality has been in the minus 2% to 3% range. And again, at this stage, we're seeing pretty good fill into the quarter and nothing that would indicate that it would be substantially different than normal.

That's helpful. And then as a follow-up on gross margins, you talked about the fact that industrial and automotive, you're expecting to be up in the fourth quarter. And you talked about the fact that your factory utilization is also up in the third quarter. So I would've expected gross margins to be better than the down 50 basis points sequentially that you guided to. So can you help us understand what's going on there with the gross margin?

Well, there may be some opportunity, Jim. But frankly, you're getting about a 50% fall-through on the revenues that are down sequentially quarter-on-quarter in our guidance. So it's pretty much in line with the operational metrics that we've had and talked about in the past.

Our next question comes from Ross Seymore from Deutsche Bank.

When we think about the OpEx side of the equation, I realize, Bernard, you don't know exactly how the retirement is going to flow in. But from the $163 million mark you're guiding to in the fourth quarter, should we assume that, that number should bleed down through the course of the year, starting in the first quarter?

From the SANYO point of view, yes, it should be coming down. And it will be partially offset by variable comp expenses throughout the year, but not to a significant extent.

Great. And then as we look into the 3 segments, could you tell us -- and forgive me if this is in the 10-Q already, but can you tell us what the gross margin is by the 3 product segments that you break out, please?

Yes, hold on one second. So in the -- I'll see if I can pull it up. The Application Product Group for third quarter is 44.2%; Standard Product Group, 33%; and SANYO, 21.9%.

And do you expect the SANYO to go down because of seasonality? Or does some of the cost saving actions and efficiencies you put in allow that to continue to rise in the fourth quarter?

Well, for the short term, we have a small reduction in -- expected in revenues similar to the overall guidance, maybe even a little bit less. And so gross margin, I expect them to be flattish to what we have right now.

The next question comes from Tristan Gerra from Baird. Tristan Gerra - Robert W. Baird & Co. Incorporated, Research Division: Last quarter, you expected a greater than 1/3 Haswell mix hitting in Q3 and over 1/2 before Q1. Is this still in line -- the trends that you're seeing now, are they still in line with your expectation from last quarter?

I think it may be slightly less than that ramp-wise, so not quite as quick but the ramps did start. I don't have precise numbers for that. The ramps did start and will continue into Q1. Tristan Gerra - Robert W. Baird & Co. Incorporated, Research Division: Okay. And then if we look at your core business, what are the opportunities for gross margin expansion outside of rising utilization rates into next year?

So yes, the big few I guess that we've got, one is mix. As we, again, grow our target markets a little faster than the overall numbers, we've talked about that, we get great ASPs from the industrial side, the automotive and the handsets, which will be the quickest growing. So the mix is a big piece of that equation. You've heard about some of the closures that we're making there on the SANYO side. So you should expect some more expansion there as we close factories and again, ramp automotive and smartphones for those guys. And beyond that, it's really the next-generation platforms. As our new products become a larger percentage of the total, you get better margins on those.

The next question comes from John Pitzer from Credit Suisse. John W. Pitzer - Crédit Suisse AG, Research Division: Keith, in your prepared comments, you talked about the non-Japanese SANYO business being up, I believe, 11% sequentially. Kind of curious what percent...

Go ahead. First 3 quarters of the year. John W. Pitzer - Crédit Suisse AG, Research Division: First 3 quarters. So I'm kind of curious, how much revenue is coming outside of Japan today? And kind of given the SANYO pipeline that you see, how much would you expect it to be a year from now?

Yes. I believe the numbers are approximately 65% outside of Japan today, and I would expect that number to move up to the 75% range as you exit next year. John W. Pitzer - Crédit Suisse AG, Research Division: And then specific to Tristan's question about gross margins, I'm just kind of curious, as you look at the pipeline for SANYO, how we should think about gross margins progressing there, both with the product mix and what you're doing on the cost side.

There will be a good progression there, faster than for the overall business because there are still a lot of operational inefficiencies that are being worked on through 2014. Plus as we mentioned, the new product pipeline is in more favorable areas than the traditional consumer background. So I actually don't have it in front of me nor do we project more than one quarter at a time. But I would expect a significantly steeper ramp on that than the total business. John W. Pitzer - Crédit Suisse AG, Research Division: Do you think -- is there a target level we should be thinking about just for the SANYO business?

Well, what we said in the Analyst Day, and I think that still holds true in terms of gross margin for SANYO, is just in the low to middle 30s as a medium-term goal. John W. Pitzer - Crédit Suisse AG, Research Division: And then, guys, quick on my last question. You guys recently did an $800 million revolver. I'm just kind of curious, Keith, is that -- the use of proceeds there, are you comfortable now that SANYO's behind you? You've always been somewhat of a growth-by-acquisition story. What's the view on acquisitions in the current environment?

Certainly, we are feeling that we've got the SANYO problems behind us. That has been keeping us from doing anything. We're not necessarily anxious to get back into the marketplace, but certainly open.

The next question comes from Steve Smigie from Raymond James. Jonathan Steven Smigie - Raymond James & Associates, Inc., Research Division: I was just hoping you could comment a little bit on your business from -- more strategic on the applications products versus the standard products, in terms of is there a particularly one of those that you're putting more emphasis on going into the future? So if I look at the standard products, for example, it has really great EBIT margins, so would you harvest there though to put R&D into applications? Or given the strong margins, would you keep ramping up, say, standard products? So that's both organic. And then if -- as you consider an acquisition, which side would you prefer to add from an acquisition perspective?

Okay. So I guess I'll give you a slightly different look at the strategic thought pattern on that. Clearly, our standard product's getting much lower level of investment, which is one of the reasons they generate some outstanding cash for us. That will continue. However, when you're talking about growing the businesses, every time we've taken apart applications, you find the kind of ASIC or application-specific piece surrounded by an almost equal number of dollars of standard products. So we're actually not looking to change our course and we're looking to use the kit approach, if you will, of influence with our customers to increase sales in both categories around the key applications we're going after. But the good news is it doesn't take more R&D to do that with the standard products. Jonathan Steven Smigie - Raymond James & Associates, Inc., Research Division: Okay, great. And then just looking at your auto business, it's, I think, your largest category. You guys have been fairly successful there. You seem to be kind of across the board. You talked about auto infotainment products, but also doing in-body products like FlexRay. Could you talk a little bit about -- even if you don't know the exact percentages, generally, do you see yourselves more focusing on sort of infotainment or more on the body engine and power steering-type applications?

Yes. The infotainment actually will be the smaller portion for a long time. The applications in the body and engine are going to be much better dollars, and so that's where the bulk of the work will be.

The next question comes from Kevin Cassidy from Stifel. Kevin E. Cassidy - Stifel, Nicolaus & Co., Inc., Research Division: Your capital expenditures, you're saying that you expect those to be $170 million. Can you say what -- where that capital expense is being used? And then do you have a view into what 2014 would be?

So 2014, in general, our philosophy is to spend 6% to 7% of our revenue on capital expenditures, and we are not changing that approach. For the most part, the expenditures we are incurring in 2013 are capacity related, with some more minor portion in cost reduction and just legal and environmental.

The next question comes from Aashish Rao from Bank of America.

Keith, the auto sales have been flat for 2 years in a row now, flat or slightly up, while most of your competition has been faring better. Production is still robust, and there's chip content growth. And you highlighted exit from audio products as being one of the headwinds. So just wondering are most of these headwinds out now? Or do you still see some legacy business that could decline next year that could help prevent a return to the double-digit growth targets that you have?

Yes. No, I think all of those events are behind us now. We had a number of flood-related impacts that are now out of the system, along with the obsolescence in the radio business. So Q3 really marked the end of the declines and you should see us at or above market rates going forward.

Got it. Okay. Bernard, another question. Just looking ahead, you're shaping up to achieve kind of like a net cash positive milestone sometime in the next year or so. You still have a little bit of debt coming due in 2014. Now could you just provide some color on minimum cash level you're comfortable with and uses of cash for paying down further debt versus buybacks?

Well, right now, we intend to pay back our debt as it matures for the next year. We do have a share buyback program in place, which we have $202 million at the end of the third quarter still available, and we have been active on that and we will continue on that front. We can operate the company with the cash levels substantially below where they are right now. Obviously, we don't want to go to levels that are too low. But we are quite comfortable where we are right now.

Your next question comes from Craig Hettenbach from Morgan Stanley.

Keith, can you talk about opportunities in the industrial market? You said you're looking to be -- some selective growth there. If you can just highlight where you see the best opportunity, and also comment on just how design activity is there.

So I think the fastest-growing market in our industrial segment is LED general lighting. So you should be seeing the most rapid growth, revenue-wise, in that segment from that. But we're also seeing some good growth from design-ins in basically energy-efficient building controls, which will accelerate as industrial buildings pick up with the global market.

Okay. And as a follow-up, the end-market commentary for Q4, can you rank them in terms of the markets? Are they going to be down, some that might be down moderately versus more? And then more specifically, to the consumer market, the builds for video games, does that take a little bit of a pause here? What's your outlook there?

Okay. So actually, the consumer builds do slow down and we would expect that toward the higher end, if you will, of the declines. Computing also traditionally will come down as well. And then on the better side, cellphones or communications won't come off as much, and we're expecting flat to up in industrial and automotive.

Your next question comes from Ian Ing from Lazard Capital Markets.

First of all, some of these temporary headwinds in automotive, how much car audio applications are left that you plan on exiting? And have you fully lifted the capacity constraints in some of the new applications?

Yes. Capacity constraints are all behind us. And from an audio perspective and the radio, that's down to $1 million or $2 million a quarter, revenue-wise.

$1 million or $2 million. Okay, great. And then sort of a larger question here, I mean, absent an immediate end-market recovery, what do you feel is going to drive the top line here? Is it really the design win pipeline or some of the exposure to the better end markets or some share of content gains?

It -- continued share gains on the computing side certainly will provide some growth as that Haswell platform ramps next year. But in the handsets, it's continued content increases, which we think will have a significant impact as you go into early 2014.

In terms of Bay Trail for Intel, that push out, is there any -- is it too early to call any impact for that? They talked about more second half 2014.

Too easy -- too early, but there shouldn't be a significant change there from -- at least positioning-wise from the Haswell, so probably not a major event.

The next question comes from Craig Ellis from B. Riley.

Keith and Bernard, as we looked at the ASP trends in the business year-to-date, they have moderated a bit. And my question is as you look out to next year, given how lean the channel inventory backdrop and given where your utilization is, do you see an environment where those 1% headwinds that are impacting the business in the first quarter could actually neutralize? And if so, what do you think the drivers are to get pricing to be more of a neutral factor?

So pricing is definitely improving. You saw that in our Q3 numbers and in our Q4 guidance. We still expect Q1 to be down more than any other quarter because of our annual contract performance. But right now, I would say because of the leanness in the inventories, we are actually expecting a better-than-normal year next year on ASPs.

Okay. And then there was a comment on MOSFETs, and I wasn't sure if that was on PC MOSFETs or more broadly. But there has been some discussion of a key manufacturer moving out of the PC MOSFET business. Is there an opportunity for ON in that regard. And if so, how significant would it be?

We limit our performance in that market, frankly, based on margins. And so we just manage the business that way. If there is more demand and the price is firm, then we certainly are able to participate in that.

The next question comes from Vijay Rakesh from Stern Agee. Vijay R. Rakesh - Sterne Agee & Leach Inc., Research Division: Yes. When you look at your 2013 OpEx you're running at a 22% range. As you look at 2014 with all the tweaks that you're doing at SANYO, do you expect to get the OpEx down, back to the 18% to 20% level as you exit 2014?

What we have said is that our long-term model is to operate in that 21% to 23%. So I'm not expecting that to go down to 18% next year. Vijay R. Rakesh - Sterne Agee & Leach Inc., Research Division: Got it. And on the SANYO side, I know you said gross margins are running at 21%, 22% -- 21.9% level and you expect it to go up to mid- to low-30s in the midterm. That's about a 1,000-basis-point improvement. How does that -- when you put that into the equation, how does your overall gross margin look for next year? How should that look for next year?

Well, again, we don't guide out more than 1 quarter. Again, what I would say is the main drivers for gross margin will be threefold next year. One, as we said, is the closure of some factories including KSS on the SANYO front. The second one is the normal fall-through on incremental revenue at about a 50% rate. And the third one is the mix effect that Keith referred to as we focus and outgrow selected markets, including smartphones and automotive, and that's the way I would look at it.

The next question comes from Patrick Wang from Evercore.

First question is a clarification for Bernard. I think earlier when you were talking about OpEx, I wasn't quite sure if you were implying that OpEx would be up or down on an absolute basis when we take a look at Q4, the Q4 run rate.

You mean compared to Q4?

That's right. You'd said that you've got some cost savings going on at SANYO, partially being offset by increases with core ON, which would imply that, I think, OpEx should be at a lower rate next year.

So first, OpEx for the third quarter pretty much, our -- the guidance is sequentially flat, the midpoint of the guidance. And then as we get the benefits of the voluntary headcount reductions at SANYO, we should see some benefit, and it will be partially offset. Depending on business performance and revenue, based on this variable comp, net-net, I expect them to be flattish in absolute dollars.

Okay, perfect. And for my follow-up, Keith, I was hoping you could talk a little bit more about China. It sounds like China has been a little bit disappointing for just about everyone. You talked about some handset problems out there. Can you go to a little bit more color with what you think is going on, when you think that handset correction is going to complete, and then also when you think that, generally, that demand environment's going to improve, whether it's ahead of Chinese New Year or kind of your thoughts there?

Okay. So overall, I think there's a couple of things going on in China. Clearly, they, on a broad basis, continue to lean out their inventories. So there is a cash preservation behavior going on pretty much everywhere in China, and that is a negative drag, if you will, on any component sales. From a handset perspective, generally, we have not seen these things take more than a quarter or maybe a little bit longer, 4 months or so, to correct. And the Chinese New Year typically is a great time to increase the demand on the handsets. So my guess is you'll be through the inventory-correction piece in the handsets in -- sometime in Q1.

The next question comes from Chris Rolland from FBR. Christopher Rolland - FBR Capital Markets & Co., Research Division: So despite an uptick in revenues this quarter, inventories were still up in dollars and days. And I know you guys mentioned auto supply as a reason there, but perhaps you can talk about inventory levels, sort of long-term, days you guys are targeting. And if you could, remind us on fab utilizations now and where we might be for next quarter.

I'll make a comment then I'll let Bernard take over. In general, you've been seeing our days of supply and distribution drop precipitously. They are, I think, at dangerously low levels. And so we have certainly looked to see how we can offset some of that and held a little bit more internally than we have in the past models. So frankly, if something doesn't turn around, I would say we're in about the right range. But it is a much higher level than we used to run strategically.

Yes. I would say that if you look at the trend over the last decade or so, inventories in the semiconductor -- at our competitors and us, have risen as more of the inventory has been pushed back to the semi manufacturers. At 115, we are a little bit on the high side, particularly still on the SANYO, where we are higher than the average. I would think that in the long run, a goal of 100 to 110 is an adequate place as opposed to, in the past, under 100. Christopher Rolland - FBR Capital Markets & Co., Research Division: And utilizations, any color there?

Oh, sorry.

Wafer fabs are kind of in the high 80s in Q3, which was up from Q2, kind of the low- to mid-80s. Christopher Rolland - FBR Capital Markets & Co., Research Division: Okay, great. And also on your clear line of sight to profitability for SANYO, I mean, can you guys talk about what sort of macro assumptions you guys have built into that sustained profitability? Is it -- I mean, can we sustain levels here? Or do we still need a modest uptick in the cycle to get you guys there? What's your thinking?

Yes. There's nothing cyclical we put into that. It's all quite tactical, all quite short term. And I would say as long as we have something that is somewhat similar to normal seasonality, we should be operating in that $150 million to $170 million range...

And from the exchange rate point of view, we didn't do anything different from where we are today. We assume no major change.

[Operator Instructions] And you have a question from the line of Betsy Van Hees from Wedbush Securities.

Keith, you mentioned about -- or Bernard, I think it was you that talked about the distributors sort of pushing back, as well as the customers, and about you guys holding more inventory for them. So it seems as if the overall semi industry has been at historically low inventory levels, historically low lead times for about the past year. As you look forward and we move into 2014, is this going to be the new norm now for the industry, is that the -- the onus is on the suppliers rather than the distributors and the customers to hold inventory?

Certainly, that is -- I think it's more norm than not. And what's happened over time is the customer base has consolidated and they have been pushing back, and the semiconductor industry has not consolidated and hasn't had quite the power to offset that. So I think, in general, Bernard's comments earlier that the ideal days now has probably gone up 10 days of inventory for the semi suppliers versus what the models were 5, 6 years ago.

The next question comes from Steve Smigie from Raymond James. Jonathan Steven Smigie - Raymond James & Associates, Inc., Research Division: Just a follow-up on the voluntary workforce reduction for SANYO. Is that something that's -- I know you'd announced it a while ago, but has that gone out to the employees? Have they had an opportunity to step up yet? And is that sort of running as you would've expected at this point? And you touched on Japanese culture. So I'm just wondering is this sort of voluntary reduction typical in Japan, such that you would sort of have some sense what it might typically yield, if you will?

Okay. So the one we announced here in October is going on schedule. The employees have been notified, the unions over there. The discussions have already taken place, and it is moving forward at the expected pace. So really, nothing unusual. The voluntary reduction is the way that they work over there. Without getting into lots of details, this is the same process and method that we used in the previous reductions in force during 2013. Jonathan Steven Smigie - Raymond James & Associates, Inc., Research Division: Okay, great. And just one follow-up on computing. Your business was up there. I think a lot of folks are down. You guys are obviously gaining quite a bit of share there. And I was just wondering if you could talk a little bit about how you see that over the next year, roughly. You've obviously won on Haswell. And do you continue to expect to sort of see growth there despite, say, notebook challenges, because you are gaining share? And do you continue to also see growth maybe in desktop, because you guys are very strong there and that doesn't seem to be as bad as notebooks, short term?

Yes. The desktop side, we're pretty much at shares near 50%. I don't think there's room for growth there. So we'll follow the units fairly closely. In the notebook side, we're still in the 30 percentages, the 30s, and so there is room for growth there. And as Haswell ramps, we expect that will increase. So there's probably no plateauing on the share gains in notebooks until the Haswell is the dominant platform.

There are no further questions at this time. Thank you for your participation in today's call, ladies and gentlemen. This concludes the conference call. You may now disconnect.