Yageo Corp

TWSE:2327

Earnings Call Analysis

Yageo's Q3 Performance Shows Stability but Cautions for Q4.

In Q3, Yageo reported stable revenues of TWD 31.7 billion, just a 1% increase from Q2. Gross margins slightly improved to 35.2%, while net income increased to TWD 1.7 billion, up 18%. However, Q4 is projected to see a single-digit revenue decline, with lower gross and operating margins expected due to seasonal factors. The company remains optimistic about growth in computing and telecom sectors, as indicated by their sustained investments. While challenges in the industrial market persist, particularly in Europe, Yageo aims to maintain operational efficiency and prepare for upcoming demand shifts.

Financial Performance Overview

In the third quarter, Yageo reported a net income of TWD 1.7 billion, which is an 18% increase compared to the previous quarter, showcasing a stable growth trajectory. Earnings per share (EPS) improved slightly to TWD 11.01, up from TWD 10.85. Revenue reached TWD 31.7 billion, marking a 1% growth quarter-over-quarter and nearly 16% growth year-over-year, primarily driven by the acquisition of a sales business last year, and a stable order environment.

Operational Efficiency and Margins

The gross margin for the third quarter was stable at 35.2%, slightly higher than the prior quarter, indicating effective cost management strategies in place. Operating income was reported at TWD 6.6 billion, leading to an operating income margin of 30.9%. Year-to-date financials also show improvements with a gross margin increase from 33.1% to 34.7% compared to the same period last year, reflecting better operational control and efficiencies.

Future Guidance and Outlook

Looking ahead to the fourth quarter, Yageo anticipates a revenue decline of a low single-digit percentage due to traditional seasonality influences, specifically the Chinese New Year inventory adjustments. The company projects a slight drop in gross margin and operating income margins, also expected to be in the low single-digit declines. Despite this, management remains cautiously optimistic about long-term growth, especially in the computing and communication sectors.

Market Segment Insights

Sales across different market segments showed resilience, particularly in computing and enterprise systems, while industrial and automotive sectors remained sluggish. The company's emphasis on the computing segment reflects its growth potential, especially with advancements in AI technologies, as indicated by solid demand for components like MLCCs (multilayer ceramic capacitors) used in AI servers.

Inventory Management and Supply Chain

Yageo reported an inventory turnover period of around 120 days, indicating effective inventory management, which is crucial as the company prepares for potentially slower demand in Q4. The management highlighted the importance of maintaining stable production utilization rates to navigate inventory levels effectively and meet upcoming demand as the market transitions through seasonal fluctuations.

Geographical Performance and China Market Dynamics

Regional breakdown reveals a marginal 1% increase in revenues across Asia, particularly in countries like Taiwan and Vietnam, where supply chains are shifting away from China. Yageo's China operations have also shown double-digit growth year-over-year, supported by a well-established distribution network, thus enhancing the company’s overall market position despite external market challenges in Western regions.

Conclusion and Strategic Positioning

In summary, while Yageo is bracing for a softer quarter ahead, it remains strategically positioned for recovery in the medium to long term, especially in high-growth areas like computing and enterprise. Ongoing improvements in operational efficiency, management of inventory levels, and diversification in production sites are positive indicators for investors, especially given the cautious yet optimistic outlook for 2025.

Earnings Call Transcript 2024-Q3

[Howard Kao, analyst]

Hello. Good afternoon, everyone, and thank you for joining us today for Yageo's Third Quarter Result Webcast.

Yageo is the world's largest supplier of chip resistor and tantalum capacitors as well as a top 3 supplier for MLCCs and inductors. My name is Howard Kao, and I'm the coverage analyst here at Morgan Stanley.

We are very honored again to have Mr. David Wang, CEO; Mr. Eddie Chen, CFO; and Mr. Claudio Lollini, Head of Global Sales and Marketing of Yageo here with us today. And we look forward to their insights and comments on the company as well as the market.

The management team will first walk us through third quarter results and also provide some forward-looking commentary. [Operator Instructions]

And I would now like to turn it over to Yageo's, Eddie and David for opening remarks.

[Eddie Y.S. Chen, executive]

Good afternoon, investors. Thank you for joining our third quarter earnings conference.

As usual, I'll kick off with a quick update on the third quarter financials and then followed by David and questions.

Okay. So first, let's look at the third quarter financials. Basically, the third quarter has been a pretty stable quarter compared to the previous one. You see from the selected items here, we have a pretty flat sales in the third quarter coming in at $31.7 billion, about 1% growth from the previous quarter. Gross margin pretty stable as well at 35.2% versus 35.1% in the previous or TWD 11.1 billion. We're seeing very stable order in a very controlled fashion on the OpEx spending. So you see the OpEx dollar third quarter come in at about TWD 4.5 billion roughly on the same level as the previous one. So the operating profit at TWD 6.6 billion, [ 30.9%, ] slightly up from the previous quarter. On the non-op front, we're generating about [ TWD 506 billion ] in the third quarter largely due to the weakness in U.S. dollar. So we've seen that level of non-op benefits sort of than the previous quarter, but still maintained at over 1.8% of sales. Income before tax compared at TWD 7.2 billion or 22.7%, slightly less than the previous quarter because of the lower nonoperating performance, but then the income tax in the third quarter comes in at $1.5 billion versus $1.9 billion in the previous quarter, largely because we don't really have the retained earning tax impact in the third quarter. So net income for the third quarter comes in at $1.7 billion or close to 18%, slightly better than the previous one. And looking at the EPS in the third quarter is at $11.01 per share. And this is on the -- after the expanded [indiscernible] base due to the [indiscernible] dividend distribution as well as some of the ECB conversion. So we're talking about [ $5 billion ] capital base in third quarter. So that EPS $11, slightly better than previous one at $10.85. EBITDA TWD 8.8 billion or TWD 8.9 billion were close to 28%, also slightly better than the previous quarter as well. If we compare that to third quarter last year, you can see that the revenue is up almost 16%. This is largely because of the acquisition of the sales business that we completed October last year. So it was not included in the third quarter of last year's results. You see the gross margin percentage expanded a little bit as well due to the accretion of the of the acquisition, so 33.2% gross margin percentage last year. The OpEx was at 13.6% against 14.3% this quarter because the consolidation or the innovation to go on, we're seeing quarter-over-quarter improvement on the OpEx front. So we continue to have the OpEx in a very controlled manner. So going down to the EBITDA margin percentage last year 27.3% versus 27.9% this quarter and [indiscernible] the margin performance there as well.

Next page. Let's take a look at the year-to-date financials and compare that with last year, you can see the year-to-date, we generated [ TWD 91.7 billion ] or a 14.2% increase over same period last year. And gross margin overall improved from 33.1% to 34.7% year-to-date. OpEx 14% versus 15% this year. But again, I think we're continuing to doing our best efforts to integrate the acquired business here. The operating margin as well as the EBITDA margin were all showing some increments this year versus same period last year.

Next. Let me walk you through some of the sales breakdown by different aspects for the third quarter. You can see the quarter-over-quarter, I think the change is relatively marginal basically just plus minus 1 percentage across the board. So MLCC [indiscernible] is just our magnetic sensor maybe you are seeing a marginal shift from quarter-to-quarter in the products. Looking at the region, it's a pretty similar fashion as well. You can see Europe is showing a slight win mix there, so marginally down by 1%. But then that's met by the Brazil and the rest of the Asia by about 1 percentage growth. So the mix by region hasn't really shifted that much.

Next slide. By channel, you can see that there's a swap between the EMS and direct sales by about 3%. But all in all, the global distributors are still our main channel of recording ourselves at about 40% there. Segment-wise, again, we're seeing more weakness in industrial sector in general, but that was compensated by the resilience that we're seeing in computing and the enterprise systems there. So PC, smartphones are all showing some improvements there.

Next. And here's an overview on the balance sheet. So as of the end of the third quarter, you can see the cash balance for the company is at about TWD 94 billion, slightly up from the previous quarter. And the -- basically, the balance sheet is fairly flat quarter-over-quarter at about TWD 358 billion inventory in control as well. You can see that balance $26.8 billion versus the previous quarter, only showed about 1.3% increments there. And on the liability front, we're able to continue to deleverage a little bit with the total equity comes in at about TWD 203 billion and the net borrowing or the net financial debt of the company also came up a little bit slightly less than $23 billion versus $24.5 billion in the previous quarter.

So if you look at the ratio of the net financial date equity at 14.7%, it's down by about 2.1 percentage points than previous quarter. Although we are now really back to below 10% net debt to equity gearing level. Prior to the acquisitions last year, but then I think we're on the right track in terms of continuing to see this trend in the balance sheet. Similar passion in the net and debt per EBITDA as well, you can see the [indiscernible] at 0.7x versus 0.8x in the previous quarter. And the ROE is pretty stable. We're looking at annualized 14.5% versus the end of third quarter. That compares to 13.1% of same period last year, it is a mild increment there.

Next. So I'll leave David to comment on the outlook for the fourth quarter.

[Deng-Rue Wang, executive]

So as reported by Eddie. So we just saw the quarter 3 results in terms of revenue, gross margin and the operating income percentage. And they were pretty much always guided. So I have no particular comments to comment here. If we see the quarter 4, first, let's take a look at the revenue, we have a couple of highlights here. And from the market, we still see that computing, communication are still in a good shape. And we also see in the market, the pricing is pretty much stable. And internally, when we see the book-to-bill ratio, the last 3 months average is also close to 1. But usually, in the quarter 4, traditionally, this is loan season. This is why we give you the guidance that next quarter, the revenue would be a single-digit percentage decline quarter-on-quarter. And in terms of gross margin percentage and the operating income percentage, we take the low single-digit percentage decline quarter-on-quarter. This is mainly because of the lower revenue than we just guided in Q4. But internally, we will try to maintain the utilization, and this is mainly prepared for the Chinese New Year inventory operation. And we also have a number of costs and OpEx control programs. And this is why that we gave the low single-digit percentage decline quarter-on-quarter in gross margin and the operating income percentage.

Thank you, Howard.

[Howard Kao, analyst]

[Operator Instructions] So before we get to the questions online, and while we wait for more questions to come in, maybe I can ask the first question.

So maybe this is for Eddie. But can you just talk a little bit about your third quarter again I think when you guys were guiding for Q3, you guys were guiding for margins up low single digit quarter-on-quarter, but it seems like both gross margin and OP margin ended up being a little bit more flattish. So has there been any change maybe versus 3 months ago that caused margins to come in a little bit more flattish than up low single-digit Q-o-Q.

[Eddie Y.S. Chen, executive]

Yes, if I may. I think I can pretty much tell from the sales mix that we just demonstrated in the quarter, some decline in the industrial sector. Some of those declines are probably in better margin area. So I think it's really the product mix shift quarter-on-quarter. That's probably the [indiscernible] reason.

[Howard Kao, analyst]

Got it. And speaking of product mix, and there's a question here online as well. I remember 3 months ago, you guys mentioned industrial and automotive will continue to be weak until year-end. And maybe we will see automotive recover first before industrials will recover. And so I guess it seems like both of these segments, especially industrials have gone a little bit worse. So can you talk about the recovery in terms of timing for both of these 2 end segments? And when can we expect things to stabilize and maybe start to see some recovery?

[Eddie Y.S. Chen, executive]

We can touch base a little bit, and maybe let Claudio comment more on the marketplace. In terms of quarter-over-quarter shipment, I think we're seeing the auto actually increased a lot part by about 1 percentage. So just a mild growth there. But then I think the weakness in the industrial exposure is probably weaker than we had expected. This is why you're seeing in the guidance or not really live up to the guidance that we had in the previous quarter. So I think the direction in general, it's pretty much on quarters as we expected in the last session, but that met probably vary a little bit from second sector or maybe Claudio comment on that.

[Claudio Lollini, executive]

Yes, I will. So automotive, there is also a regional mix that plays an important role. What we observed is areas of weaknesses for the automotive industry, particularly the EV part for the Western brands. But actually, the the opposite is true in Asia, in China, and the EV market is still quite dynamic at least for us, we still record growth when it comes to EV presence in China for our product quarter-over-quarter and year-over-year. So when you -- and we do have a good engagement and good penetration in both markets. So when you combine both together, as Eddie said. The net result has been flattish, slightly up. Now moving forward, we don't expect next year to be a particularly exciting year at least for the traditional internal combustion engine number of units for EV, I think there will be growth, but maybe a little bit more slow than previously anticipated. Moving to industrial, it's true. Industrial is the segment that I think is the most challenging now. It's mostly in Europe. That is a little bit of North America and a little bit of Asia and Great China, but Europe is definitely the area where most of the industrial customers are. And they continue to have themselves lower bookings, a bit of inventory. There has not been a whole lot of CapEx investment yet, and you read the news of the German economy, in particular, in Europe and not particularly positive. So we expect another 6 months at least before we can see a significant recovery. So we are budgeting the first half of next year for our Industrial segment also cautiously.

[Howard Kao, analyst]

Got it. And in terms of outlook for Q4, there's a question if you're asking about the outlook by different end product segments. For example, MLCC resistors, tantalum capacitor or I guess by technology, I should say. Any color here?

[Claudio Lollini, executive]

Yes, I can give some color. In general, as Eddie and David already mentioned, Q4 is a seasonal softer quarter than Q3 for us. Asia is a big driver for that. There is a lot of build in Q3 in preparation for the end of the year. There are inventory correction dynamics. Europe and North America have long holidays in Q4. There is some holiday in Asia in Q4 as well in the month of October. So all of that said, within the product mix, we -- there are pockets of growth mostly for products that is involved in the AI server production. We had an AI summit a few weeks ago here in Taipei. We showcased our technology in our inductor space with our NanoMet technology, that product continue to have positive development. But in general, all the products are looking for a softer Q4 compared to Q3 and segments as well.

[Howard Kao, analyst]

Got it. And is there any preliminary comments that you can provide in terms of 2025, either first quarter or the full year now that we're getting closer to next year.

[Deng-Rue Wang, executive]

Well, very high level, as I mean as we're in the middle of third budget for next year, like Claudio just said. And basically, I think we're cautiously optimistic some sectors are -- have been experiencing certain weakness throughout several quarters. And we're seeing some support there. And if you take away the seasonality, I think from '25, we're still optimistic about the potential product. But again, I think the market is such that we were not being hopeful that we will be posting back a lot from what we have been experienced in the past several years. So we're cautiously, but then we are seeing signs of recovery in different elements or sectors to that part, I think we still [indiscernible] certain growth in '25.

[Howard Kao, analyst]

I see. If we can just drill down a little bit on specifics on the consumer electronics space. Going to next year, do you have any relative bullishness or cautiousness, if you compare like the PC market versus smartphone market? Is there any particular end segment where you're looking more optimistic going into 2025 versus the other?

[Deng-Rue Wang, executive]

Definitely, the computing and enterprise segment is the one that we believe will have the the highest growth rate compared to the other segments. Then we do have a positive expectation out of our defense, aerospace, medical although it's a small base, it's about 5% of what our business, but we think it will develop nicely as well. Automotive will continue to be mix, it would be important to see if there is somewhat a recovery from the Western branded carmakers and both EV and traditional. Industrial, I think, will be an area where we are mostly cautious at this moment. And then we have telecom, which impact also benefits from the introduction. So that will be positive, maybe not as much as the computing and enterprise and consumer, we think will be positive, driven by higher discretionary spending. My phones are hopefully are going to do a little bit better, that is introduction of new PCs, AIPC. So all of this, hopefully, will have to generate some revenue there. The most bullish one definitely computing an enterprise.

[Howard Kao, analyst]

Got it. And maybe just some question on Q1 specifically, I guess Q4 now, we're seeing top line momentum to be down seasonally, which is in line with historical, but looking to Q1, are you expecting first quarter to be similar with historical seasonality as well. So we're expecting Q1 to be up on a sequential basis? Is that a fair kind of statement?

[Claudio Lollini, executive]

I'll be cautious to this your first quarter guidance at this junction. But then I think we think it will more or less follow the seasonality pattern. Fourth quarter I think you're still seeing the balance here, so we're hoping there will be some balancing act in the first quarter.

[Howard Kao, analyst]

Got it. And in terms of utilization rate, can you please remind us what is your utilization rate in Q3 for both standard and premium? And what is the expectation for Q4?

[Claudio Lollini, executive]

In Q3, the utilization for standard was around 65% And premium product 75%. And basically, although the -- we expect a lower revenue in Q4, we will try to maintain the similar recognition in Q4. This is mainly because we want to prepare for the Chinese New Year, because Chinese New Year in January will be a very low month. So we need to prepare some inventory there. So the [indiscernible] is try to maintain the same utilization in Q4.

[Howard Kao, analyst]

Got it. And in terms of your inventory turnover days, I don't know if I missed this in your prepared remarks, but can you remind us what is your inventory turnover days for Q3?

[Deng-Rue Wang, executive]

Yes. We're sitting at around 120 days, slightly better than the previous quarter.

[Howard Kao, analyst]

And in terms of 120 days, is this a comfortable number for you guys? Or...

[Deng-Rue Wang, executive]

Yes. This is probably by far the lowest point in the year. So I think we do have a certain level of companies in that inventory control. And given the fact that the fourth quarter is going to be slightly slower and then we're maintaining the utilization rate. So maybe we're seeing strip uptick of the inventory, but there's nothing to shift [indiscernible]. I think the content of the inventory for the different components of the injury could be managed to weather through the inventory look. So yes, I think we're pretty comparable with that level.

[Howard Kao, analyst]

Got it. There's a question here that's a little bit more specific. But in terms of your revenue breakdown in the third quarter by geography, Asia revenues were up 1% sequentially. Is there any color on what specific country that this revenue was mainly coming from? Was it Taiwan, Japan?

[Claudio Lollini, executive]

Yes, rest of Asia, there's been a lot of movement of manufacturing footprint from Great China or mostly China out to Thailand, Vietnam, Southeast Asia in general also. There's a lot of EMS in particular, are doing the exact same program as before, but now they are shifting some of the assembly out of China. So there is a little bit of that. And that is particularly true in the computing and enterprise segment, where some of the programs, some of the largest programs that we participate in happen to be built there, and we drive that growth in Southeast Asia as opposed to China.

[Howard Kao, analyst]

Got it. And just to follow up on this slightly more positive outlook for computing and enterprise segment. Will that only be for MLCC capacitor and resistor, or will we see benefits on your tantalum business as well? Because if I remember correctly, tantalum is -- for you guys, is used quite a bit in PCs and maybe the networking segments.

[Claudio Lollini, executive]

Yes. Indeed, most of our tantalum product is in computing and enterprise. So the -- it's no coincidence that all the growth that we experienced most of the growth, I should say, that we experienced in tantalum this year has been directly linked to computing and enterprise. So we -- our polymer is utilized in laptop notebooks, server, AI servers. So there is a lot of benefits as those programs ramp up and continue to grow. Our inductor product from our token brand is largely used in some AI server program. And then, of course, MRCC resistors and capacitor in general. So a lot of products that are benefiting from this.

[Howard Kao, analyst]

In terms of your tantalum business, is there any comment on where utilization rate is right now? Because I remember you guys have expanded quite a lot of capacity in the past maybe 2 years in your -- for your tantalum business.

[Claudio Lollini, executive]

Yes, we have main sites, which is quite exciting actually because we have capability to produce large volumes in China, in Thailand and in Mexico. So that gives us a lot of a lot of options, a lot of proximity to customers and utilization rate has been running now between 70%, 75% of the polymer line. So we're in a good place. We like to have step up, and we are ready for some upside should upside come, so pretty content on that.

[Howard Kao, analyst]

Got it. And recently, there has been a lot of -- and thank you for mentioning the multiple production facilities that you guys have. Recently, there's been a lot of concerns on potential tariffs, and how that would impact, I guess, different businesses. How do you guys view this going forward? And do you guys think this will have an impact on your business if there is any potential tariffs that are implemented post the U.S. election.

[Deng-Rue Wang, executive]

Basically, I think for all the product lines we have there, we maintained multiple production lines over the world, like for the Claudio just mentioned at tantalum we have multiple factories like in China or in China or in Mexico. If you see MLCC, we have the similar things. We have the production in Mexico. We also have the production in Taiwan and China. So across all the product lines, we have multiple factories. So I think when we communicate with the customer, most of them almost them are very satisfied with this setup. So I think we can manage the situation [indiscernible] today.

[Howard Kao, analyst]

Got it. And just to follow up on that, do you think customers are more willing or more keen to do business with you because you guys have multiple production sites globally versus maybe some of your peers who isn't as well diversified in terms of their production footprint geographically?

[Deng-Rue Wang, executive]

Yes. We think so that we hope so.

[Howard Kao, analyst]

Got it. Got it. Okay. And maybe, Eddie, 1 question for you on FX. Can you remind us because right now, there's been a lot of volatility. But any color on FX sensitivity between the U.S. dollar and Taiwan dollar on margins?

[Eddie Y.S. Chen, executive]

Yes. You can see that impact in this quarter, in particular, honestly, what we have been doing in the past quarter or so is trying to to capitalize on the [indiscernible] that we had in early first 2 quarters of the year. So we actually realized some of the positions benefits, but they're continue build up exposures throughout the quarter. So it's kind of wish flash. So net-net, we're able to balancing that dollar weakness during that particular quarter. So I think year-to-date performance, I'm still pretty proud of that achievement by the team towards true volatility of the dollar throughout the year. So I think we're pretty lean right now in terms of the exposure, particularly with regards to TWD. I think we're management quite well. We're okay if the dollar continues to weaken from here, but I think we would get to much hit from that in that trend.

[Howard Kao, analyst]

Got it. And just staying on margins. Any impact because of higher utility costs that we're seeing maybe in Q3 or expected in Q4?

[Eddie Y.S. Chen, executive]

If you're referring to the electricity costs in Taiwan, yes, there will be some effect on some of our operations here in Taiwan. But then I think we have taken some internal review on that. And it's -- the impact is still marginal given the scale and the operational environment right now. But then I think the team is working on it to try to to withstand that increment of impetus cost. I think it's still manageable right now.

[Howard Kao, analyst]

Okay. Got it. And in terms of revenue mix for servers specifically, is there any update on what that is as a percentage of revenues at the end of Q3. I remember, I think maybe second quarter or first half server revenues were around 6% of total revenue. I just wondering if that has changed for the third quarter.

[Eddie Y.S. Chen, executive]

Yes, I have to say that it's kind of a high level. But then given the fact that we probably have no control whatsoever with regards to the front against applied in different devices or system. But then our best guess is -- we're still around that level, probably slightly higher than that given the momentum we're seeing from the customer activities. So probably the high single-digit percentage is still pretty much what we're exposed to right now.

[Howard Kao, analyst]

Okay. Got it. In terms of the China market, have you guys seen any significant pickup in terms of why good demand recently, like household electronics?

[Deng-Rue Wang, executive]

So thanks for the question. Actually, our China market, as you know, we have an extensive loan distribution network in China is one of our biggest strengths. We commend more than 60, 65 local distributors that can really help us to reach and penetrate a lot of customers in a lot of geographies and provinces in China. And last year was a challenging year. But this year, our China business is up year-over-year double digit, and it's been up since January, and we kept that momentum up until until now, slowing down only slightly really. So for us, that geography, which is in that distribution business, there is a lot of consumers. So what goods add in there, it's been pretty good so far this year.

[Howard Kao, analyst]

Okay. Got it. Maybe can we just come back to inventory. I remember 3 months ago on your third quarter -- sorry, second quarter earnings call, you mentioned your global distributor inventory is 7 to 8 months, a little bit higher than the average of 46%. Is there any updates here on where global distributor inventory is? And maybe some color on China distributor -- Greater China distributor inventory as well.

[Claudio Lollini, executive]

Yes, I can cover that. The global distribution inventory, we separate into 2 portions. One is the high service channel, which tends to run with a much larger inventory and that has been stable. And then the other portion is the volume, large global distributors. And that inventory came down steadily over the last year. Now it's still sitting probably a little bit higher for our liking maybe a month too much. It's about 5 months on hand based on their last 3-month average POS [ 5.5 times. ] We think that the right number there should be more like between 4% to 5%. So it's not too far. And if BOS where to pick up just in your [indiscernible] in terms of [indiscernible]. When it comes to China distribution, actually, they built a little bit of inventory. They were down to less than 3 months on hand a few months ago, and that was way too low. And as I said, that business in China has been growing double digits. So now they build a little bit of inventory and they are sitting on about 3, 3.5 months on hand, up about a month versus a couple of quarters ago.

[Howard Kao, analyst]

Got it. So with that inventory up to 3 to 3.5 months in China, I guess that's not something that you guys are too worried about given the strength of your China business that you've seen in the past couple of quarters?

[Claudio Lollini, executive]

No, no, no. It's very dynamic, and we respond very quickly there in either direction. So not a concern at all.

[Howard Kao, analyst]

Got it. In terms of your product portfolio, this is a question here on where you see higher growth seeing now that we have a larger inductor business post the consolidation of [indiscernible]. So I guess, in terms of just overall portfolio, again, by end segments, where do you see growth to be higher from here maybe in the next 1 to 2 years.

[Deng-Rue Wang, executive]

Going back to the principle of having a computing and enterprise segment that is going to lead the way, then you cascade down the main product in that segment combination of tantalum capacitor and inductors, yes. So there will be growth in inductors as well. And then other capacitor and resistor mostly MLCC directory are cheap and resistance. Now when it comes to products like our field and aluminum electrolytic capacitor as an example, or a portion of our conform in ceramic in particular, the KEMET brand, those products are also used in industrial and automotive as well as some of the legacy Par portfolio. And for those products, then growth will be delayed a little bit depending on the market.

[Howard Kao, analyst]

Got it. I guess I have to -- I've been asking every single quarter. So I'm going to stick to the tradition, but AI revenue mix. right? I know you guys don't really talk about this, but I think Pierre mentioned to maybe some reporter post your AI Summit that revenue is around 5%. So I won't specifically ask on this. But just wondering, within your product portfolio capacitors and MLCC tantalum resistant conductor, which segment is bigger geared towards maybe or just by ranking any color you could provide here?

[Deng-Rue Wang, executive]

Yes. Computing and enterprise has the biggest exposure towards AI. After that -- and we put a laptop and notebook within computing and enterprise. So you also have AI notebook would be in there. Then after that, I would say the 2 segments where you will see AI presence, the most after computing and enterprise will be telecom and then consumer, consumer products. Not necessarily this translate into the same growth of componentry that you might have in computing and enterprise, but you will have it there. And then eventually, you will have AI also in industrial and automotive, of course -- actually, automotive is the second segment where I think the AI play is the biggest, right, because of the autonomous vehicle and all the assistant driving elements that you have in a car these days. So it's really permeating across all segments. If you were to rank, I would put computing and automotive first, telecom and consumer second and then industrial being perhaps the last one to benefit from AI.

[Howard Kao, analyst]

Got it. Very helpful. But in terms of what product technology like capacitor versus resistor versus conductor, any comment on which one is bigger geared towards AI, would inductor be more geared towards...

[Deng-Rue Wang, executive]

But they all use in a lot of segments, but I'm sure you've seen the news. If you just zoom into the growth of the AI server, the growth in the bond around MLCC is significant, high capacitance componentry is, in particular, the one with the biggest growth. For us, the way we look at it, capacitors, tantalum polymer because we have that in our portfolio, high capacity and resistors and inductors will all benefit first. And then behind that, there will be film aluminum [indiscernible] other type of magnetic componentry maybe larger, most [indiscernible] and automotive. And then in general, is used in any application. So that will benefit every time there is increase of electronic content, you will see that benefit.

[Howard Kao, analyst]

Got it. And lastly, maybe just a quick follow-up and update on your progress regarding active components now that we've talked about passive components for the majority of this call. So any updates on active components, either in terms of synergies or any updated progress that you guys have for the next couple of quarters.

[Deng-Rue Wang, executive]

We continue to explore opportunities. In particular, we have been, as you know, co-working with APAC and UPI, we have been selectively approaching our distribution channel for some stocking packages, selected product. For example, we've been looking at MOSFET's product offering in various voltages, and we've been doing some crossing. So far, a lot of preliminary activity and market study, and then we'll have to -- it's mostly a plan for the following years, not something that we look for growth in this particular calendar year yet.

[Howard Kao, analyst]

Got it. So I think we are finished with the questions that we have online. Maybe I will hand it over back to Eddie or David to see if you guys have any closing remarks?

[Deng-Rue Wang, executive]

Yes. Thank you, Howard. So basically, we think Q4 is our low season. So that's why we give this guidance. But the -- actually, there's nothing to worry. And for the growth trend like computing or telecom segment, I think we are following this trend by the way. And maybe we need to be a little bit more patient in the industrial, so it's got to say that it might take another 3 to 6 months to come back. So I think we -- for the current situation, we still can maintain and deliver a relatively good stable performance and product and the capacity-wise, we are ready. We are ready to win the market and bounce back.

Thank you, Howard.

[Howard Kao, analyst]

Great. Thank you, David, for your closing remarks. This concludes our webcast today. Thank you, everyone, for joining us, and thank you, again, David, Eddie and Claudio for your time and sharing your thoughts with us. We will see you all next time.