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Melexis NV
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Hello, and welcome to the Melexis FY 2021 Results Call. [Operator Instructions] I'd now like to hand over to our host, Mark Biron, CEO, to begin the call. Thank you.
Hello, everyone. It's a pleasure to welcome you again to our earnings call related to the Q4 and the full year results of 2021. Today, we are 2 speakers. Karen Van Griensven, our CFO; and myself. Let's cover first on top line and financial background, after which Karen and myself will be happy to answer any questions you may have. Q4 comes with a fourth sales record in a row of EUR 166.3 million, an increase of 13% year-on-year and 2% quarter-on-quarter. The full year result is EUR 643.8 million, an increase of 27% year-on-year. Those very good results leads to a 97% increase of our operating result if we compare 2021 with 2020. As a consequence of the sales increase, I am proud to announce that Melexis shipped on average 18 IC per car produced worldwide. In 2021, we have launched 16 new products. Melexis continues to launch new products following the strategy to focus on the electrification of the car as well as the increased comfort and safety levels. I will now highlight the 4 main products we have launched in Q4, and we have launched a first position sensor using inductive technology. This product has been specifically developed for electrified application, such as e-motors, e-break booster and e-power steering application. We have launched also a new LIN system driver for mechatronic automotive application, such as oil pump, water pumps or coolant pumps. We have launched a third product, a LIN RGB for let controllers to enhance flexibility to animate and personalize the interior light of the car. And last but not least, we have launched a new fund driver in with an increased operating lifetime in order to meet the requirement of the battery cooling in electrical vehicle. I'm now giving the hand to Karen for more financial results.
Thank you, Mark. So good morning or good afternoon, maybe for some. So welcome to this call. I will indeed guide you a bit more on the financials for this quarter. Mark already mentioned it. So we came at EUR 643.8 million sales for the full year 2021, which is an increase of 27%. And the growth results came out at EUR 273.6 million or a gross margin of 42.5% of sales. And which is an increase of 38% compared to 2020 So R&D expenses were at 12.2% of sales. G&A at 5% and selling was at 2.3% of sales. The operating result was EUR 148.4 million or 23.1% of sales, which is an increase of 97% compared to the EUR 75.5 million in 2020. The net result was EUR 131.1 million or EUR 3.25 per share, which is an increase of 89% compared to EUR 69.3 million or EUR 1.72 per share in 2020. If you look at the fourth quarter. We had sales of EUR 166.2 million, which is an increase of 13% compared to the same quarter of the previous year and an increase of 2% compared to the previous quarter. The gross result was EUR 70.6 million, again 42.5% gross margin versus sales and an increase of 21% compared to the same quarter of last year and flat compared to the previous quarter. R&D expenses were at 12% for the fourth quarter. G&A was at 5.3% of sales and selling was at 2.4% of sales. The operating result was EUR 37.8 million or 22.8% of sales, which is an increase of 47% compared to the same quarter of last year and a decrease of 5% compared to the previous quarter. The net result was EUR 33.3 million or EUR 0.82 per share, an increase of 39% compared to EUR 24 million or EUR 0.59 per share in the fourth quarter of 2020 and a decrease of 9% compared to the previous quarter. The Board also decided to -- on a final dividend. So we had already paid out in October, an interim dividend of EUR 1.3 per share. Now the final dividend was decided to be the same, so an additional EUR 1.3 per share. So that means a total dividend of EUR 2.6 per share and that will be payable in May.So for the outlook, we expect the sales in the first quarter of 2022 to be in the range of EUR 177 million to EUR 183 million. Now for the full year 2022, Melexis expects sales growth between 12% and 17% with a gross profit margin around 42% and an operating margin around 23% at the mid point of the sales guidance. So all taking into account a euro-U.S. dollar exchange rate of 1.13. And for the full year 2022, Melexis also expects CapEx to be around EUR 45 million. So I would like to close this session here and now open the Q&A session. So please, operator, go ahead.
[Operator Instructions] Our first question today comes from the line of Francois Xavier Bovine from UBS.
I have a couple, if I may. So the first one, if we look at your guidance for 2022, to the 12% to 17% on the revenue side. And if we remove the currency benefit, I mean, if my math's correct, it's 10% to 15%. How much of that growth is coming from pricing in 2022? And how much is volume in your view? We have a lot of inflation going on in the industry at the moment. So I was just thinking how you think about the pricing that I made for your products in 2022 versus volumes? That's my first question, if I may. And then I can ask you the all at the same time or should we do one by one?
Yes. As you prefer, again, we can indeed answer the first one. Yes, as we mentioned in the previous call, the there is indeed some price increase. It's the first time -- as you say, we try to transfer, let's say, our cost increase to the price. And we mentioned in the previous call that it was single-digit price increase, which is what we have indeed implemented to our customers. And 12% to 17%, there is a single-digit linked to price increase.
Okay. So if we do the 10% to 15% on constant currency and we move some pricing, benefit single digit. It means that you assume volumes like mid- to high single digits on the volume side, when the production is around that basically. So can you explain maybe the delta between the -- why wouldn't you have much more volume than the production of cars?
Yes, I think there is the supply chain, which is still constrained. I think we could also refer to our historical growth, let's say, and I think, yes, the historical growth is probably still valid for '22. But yes, it's still a market which is constrained by the supply chain, and we are working with our different suppliers in order to increase the supply chain capacity. But yes, we mentioned also that we have I think we have -- in 2021, we have been able to increase part of the supply chain. But for what concern the wafer process, it takes time because in this increase of wafer capacity takes time at our suppliers. And it's why, yes, it will gradually increase quarter after quarter. if you remember, X-FAB has now a new site in Corbeil is the capacity increase of the core base side is increased, yes, step-by-step quarter after quarter, but it cannot yes, it will not turn off and turn on in 1 quarter, let's say. It's the reason why indeed this 12% to 17% volume increase or revenue increase, sorry.
That's a -- and maybe a follow-up is on the mix that you are seeing. So first of all, I mean, in terms of product, you seem that to say that magnetic centers had the highest growth or a big contribution in 2021. And from what I understand, it's a higher gross margin product above corporate average, if -- but tell me if I'm wrong, of course. How should we think about 2022 mix? And especially in the context where EV and hybrid seems to get some more traction. So it would be less magnetic sensors, I would say, more current and temperature may be driven that maybe have lower gross margin. So just trying to understand the moving parts around the product mix in 2022 is what I mean?
Yes. I think we needed to make the distinction between the absolute growth, let's say, and the percentage of the relative growth because in terms of absolute, the magnetic sensor are still very, very solid in terms of absolute number. In terms of relative numbers, indeed, for 2022, it will be current sensor, latch and switch the lean LGB for the entire lighting and also the smart motor drivers. And then those 4 product line will grow, let's say, faster than the other one. Again, I repeat, in absolute growth, the position sensor is still dominant.
Okay. And we are seeing in the market, the hybrid and EV, it's always a discussion. And actually, if you look at last December in Europe, I mean, hybrid seems to lose some traction, even some negative growth rates when EV is really accelerating. Now if I take your Capital Markets Day, I mean, comments you are hybrid has a significantly higher content than an EV and an EV is closer to combustion engine. So how should we think about this turn of dynamic when maybe hybrid maybe is not going to be as big as people expected a few months ago, I would -- and EV is getting more traction. Is it something you share? Or how is it impacting your revenue growth in your view, this mix?
Yes. I think
The plug-in as always be seen as a bridge between the ICE and the EV. Now you are right. It seems that the bridge will be short in reality, but again, nobody knows. And yes, what does it mean for Melexis? I would say that in Melexis, we have -- we have many products that fit, let's say, the electrification of the car. I think we just mentioned in your previous -- in the previous answer, I just mentioned the product line that contributes to the electrification. We realized that -- there is a lot of potential sockets in the thermal management, which is coming with the electrification of the car, the thermal management of the battery, of the powertrain, both the thermal management of the interior of the car. And yes, when we count the different sockets achievable or available for Melexis there is also a huge increase in the electrified car. And on top of that, we mentioned also during the previous call, the electrified -- or the model on electrified car they come with an electric engine, but also they come with a lot of new applications in what we call body chassis safety than for the comfort and for the safety of of the car. And this is also a lot of new application for Melexis. And the fact that we move to much more electrified car, is good for Melexis because we move also towards more safety and comfort application, which is a lot of electronic content.
Our next question comes from the line of Matthias Maenhaut from Kepler Setra.
Maybe 3 from my end. Firstly, on the adjacent business. It's a business that has been stabilizing a bit around EUR 16 million, EUR 17 million level of turnover in the last 2 quarters. How should we think about this business going into 2022? Is this it's a business that's had profited a lot from COVID-related demand. Do we anticipate that demand to completely fade? Or are there like new initiatives that will drive this business back to growth in 2022? Then a second question was on the inventory levels in the automotive supply chain. I note that your automotive revenue is substantially ahead of historical content growth, but also if you add up the light vehicle production, it substantially above. So how are inventories evolving? And then thirdly, a third question was on the 60 new products. Can you just elaborate maybe on if these are all new applications, fully new applications or some of those products are actually replacing older versions? And how we should think about new product launches going into 2022? Will you accelerate product launches? Or will it rather remain at the same level?
Karen, I take the first question and then you take the inventory.
Okay
Yes, about the adjacent indeed, you are right. Our goal is to move from 10% to 20% of revenue linked to adjacent. And during the last 2 quarters, we were stable, let's say, around 10% -- and it's not really because of lack of demand. It's more a consequence of the allocation in Melexis because indeed, we had tendency, let's say, to privilege the automotive to avoid line stop and to avoid the high escalation at the OEM level meaning that when we have allocated the available material for Q3, Q4, we have our -- we have done our utmost best to avoid the line stop at the OEM. And I think we succeed -- but as a consequence, we had to reduce a bit the allocation to the adjacent -- and that being said, it's not the reason why we don't want to reach 20% in the future. Our objective is still to reach 20% of revenue in adjacent. This goal has been put a bit in a second priority given the market situation. But for '22, we hope that we will have a bit more headroom and that we'll be able to increase this percentage. And to answer your question, yes, we have indeed some new applications that will start in 2022 for adjacent. It's a bit too early to give more detail, but I hope that in some months, we'll be able to give a bit more detail.
Yes, on the inventory levels, were you speaking in general in order for Melexis or...
Both actually, I would but specifically the Melexis.
Yes. So yes, indeed, Melexis managed -- I mean, thanks to increased supply certainly offers over the last months, we managed to grow sales, but it also resulted in some inventory increase. But this is obviously a timing effect as well at year-end, certainly in the last days of the last week, there is not much shipment. So the increase we see is really a temporary increase, which mostly are finished goods, which by now have probably all been shipped again. So that is certainly here the timing effect because it's certainly not an indication that there is overstocking or whatever rather the contrary, we are still in many growth discussing constraints in the market. And as we mentioned in the press release, we see that lasting for the full year. It's also impacting our guidance, as Marc already explained. So yes, supply constraint is there to stay. And inventories have been somewhat increased, but it is rather to prepare the step-up to more output in cars. Then that is -- that we can talk in terms of overstocking certainly not versus the current rate of also at [indiscernible], we see still low levels of inventory. So yes, certainly, no concern from that end. I don't know if it's a sufficient answer.
Yes, that's a sufficient answer. So inventories are still low in the supply chain. That was the last question on the 16 product reduction.
That I suggest Marc take that question.
Yes. Indeed, part of the 16 -- I mean the answer is yes and no. Part of the 16 products are, let's say, evolution of the of the previous one. I can take as an example, the midrange Triaxis. We have launched mid-range Triaxis earlier in 2021 which is an evolution of the previous product where we want -- we have increased the -- we have improved, let's say, the technical feature. We have reduced the costs and we are to bring some new packaging, new assembly technique, a new assembly form for the customer. It's a win-win-win, let's say. This is an example of a new product, a new generation of an existing project. But we have also real new products bringing really new application if we take what I've mentioned in the introduction for the Q4. In those Q4, we have, for example, the smart driver, which is a real product progress a new application in the battery of the car. Then I think there is a bit of both, let's say, in those 16 products. And to answer your question, what about the future? Our target is to increase the number of launch year-after-year. I mean, 16 is more than what we have launched in the previous years. And we plan to launch also between 16 and 20 in 2022. And it will be -- the goal is to launch more than 16 next year, yes. And again, between 16 and 20.
Our next question comes from the line of Varun Rajwanshi from JPMorgan.
Marc, Karen. I have a couple of questions. Firstly, on gross margin. I just want to [indiscernible]. You're not guiding for any improvement in gross margin year-on-year. Despite the favorable pricing environment, is this down to product mix? Or is there any other headwind that we should take into consideration? And does this imply that gross margins will decline further in 2023 when pricing normalizes -- so that is my first question. The second is on your sales growth guidance of 12% to 17%. Is this based on finalized capacity allocation from your suppliers? Or is there any wiggle room to increase supply capacity as we move through the year? And then lastly, Marc, back in October, you had indicated a mismatch between demand and supply in the 20% to 30% range. Can you give us an indication of how the situation has evolved since?
So I'll start with the first question. So the gross margin leverage potential. So yes, why did we guide for similar margins than what we saw in 2021. In the first place, we are in an area of inflation and price increases on the supplier side. Today, our aim is to balance out the supply increases with customer increases but not necessarily to improve our margins overall. So it's always been -- I mean that's what we always communicated to balance out the 2 effects as much as possible, but that isn't a given as such anyway. And as we all know, we will probably throughout the year, experience more price increases -- so that's why we have been quite conservative from that way. The product mix is rather favorable, I would say. As Marc already mentioned, the magnetic sensors is growing at high rates. And as they have high margins, it's rather favorable. So the product mix is not -- I mean, we will not put margin pressure as far as we can see. But on the other hand, we -- what I mentioned already last year, we have our new infrastructure in Bulgaria. And that is -- yes, since Q4, that is putting some pressure on our gross margin. we took it in use in Q4 and also moving in 2022. This is adding to our cost -- our fixed cost base, which still is impacting 2022 -- and obviously moving further into time, there will be leveraged over this investment. But in '22, it is still a negative effect. And then, yes, last but not least, our R&D as a percentage of sales is at historical low levels. We certainly don't want to decrease. So it's expected to grow more or less in line with sales growth in 2022. So also there, no leverage to be expected. Yes, on the other questions, I think the second question was related to supply chain...
The sales growth.
Yes, the sales growth guidance.
I don't know, Marc, if you want to answer that question or...
Yes. I think the supply chain will continue well in 2022. As far as we can see, we still have this mismatch, let's say, between the capacity and between the expectation from the customer.
And Marc, if I may just follow up. So the guidance of 12% to 17% sales growth, is that based on finalized capacity allocation from your suppliers? Or is there room to incur supply as you move through the year?
I think it is based on a realistic assumption on what will be the capacity this year. As I mentioned, if we take the example of the wafer fab in Corbeil, the capacity is increasing quarter-after-quarter, and we made our guidance with the assumption of this capacity increase. Yes, if you ask, can it be better? I think it's a realistic assumption. It's a technically -- it's a very -- it's a technical challenge for X-FAB to increase the capacity in Corbeil. They really need to start new process and to ramp up the process, then I think we need to take a realistic assumption. I believe this is realistic, yes.
Understood. And just on the last point, so you had indicated 20% to 30% supply mismatch. I guess my question was, has that come down over the past 3 to 4 months? Or is that mismatch still at a similar level?
I would say.
Yes, go ahead.
Yes, we are not in the same room because of corona. So there might be a bit of mismatch in our reply. But indeed, I think it's still relatively stable. Forecasts are still much higher than supply. I think overall, we yes, we see more or less -- it hasn't changed a lot over the last couple of months.
We now have a question from the line of Stephane Houri from ODDO BHF.
Actually, I've got 2 questions. The first question is on the evolution of the order book during the quarter. And at the end of the quarter, if you consider that the order book or if you see that the order book has increased and how much it does cover through the year or maybe further some of your competitors in the field are saying that they are fully booked for let's say, 18 months? Is that the case for you? And also, I'm trying to reassess the -- my model or the story. And looking at the level of sales that can be expected this year and maybe next year, you have never been so big. And in the past, you were generating 25% EBIT margin, 45% gross margin. So I understand the price increases, cost inflation, et cetera. But hopefully, inflation will not stay forever. So do you think that you can go higher than those level of 45% and 25% when the situation will be, let's say, restored or a bit more quite, let's say, on the inflation front? Suggest, Karen, you answered the EBIT and GPM target
Yes. Yes. Well, on the margin and EBIT long term, is what your question is. So today, 42, around 42 moving forward. Our internal aim is indeed to grow back to the 45% and 25%, but we don't see that happening indeed in the short term because it is quite dependent on the product mix. And longer term, there is room for further improvement, certainly, if you look at the product lines that Marc mentioned, some of them have high margins like current sensor, temperature sensor and so on. Also the [indiscernible] business, it's -- can -- if that grows, it also helps -- I mean, the adjacent [indiscernible] business. So there is a potential to grow it. The leverage on also on our investment in Bulgaria is also on a longer-term driver that can help -- but on the other hand, R&D is at very low levels. So we rather want to bring it back to historical levels of around 13%. So that is -- yes, that means we need to increase the gross margin at a higher pace in order to compensate for that. So we are definitely working towards these margins, but it's not expected in the near term. And beyond that level is going to be very tough. I would say, I wouldn't -- I mean the 45% is what we again -- the 45% and 25% is what we at beyond that, it's going to be difficult.
And about the order book?
Yes, I think the order book is still very high.
Yes. We can also confirm that we have -- yes, most of this year is booked like all the other competitors because that is still the mismatch orders have come in faster than usual. So indeed, we also have more or less the order book. It will depend on capacity, how much eventually, we will deliver
And it's also more than 12 months. I mean we have also ordered that last in '23
Okay. And sorry to -- I have a quick follow-up. Can you still hear me?
Yes. Yes.
Sorry. I have a quick follow-up. Everybody is blocked by the capacity, but we see some significant investments happening in the market. So the question would be, are you thinking about diversifying your sources of foundries in the future. Everybody is now investing in the kind of products that you could be interested in?
Yes. We -- I think X[indiscernible] A is investing a lot. I mean we mentioned Corbeil as an example, then I think diversification from the foundries will come from the diversification at X-FAB level. And for the other part of the supply chain, like the assembly house, for example. We are indeed exploring different solutions in order to have -- I mean, to ensure the business continuation.
Our next question comes from the line of Ruben Devos from KBC Securities.
In the presentation, you provide updated figures on the total addressable market, which is always very interesting to read. But just looking back to 2021 Eventually, you reported growth in automotive of, let's say, 28%, while the slide indicated our addressable market in terms of chip content per car grew by around 10% and growth of the car park was nearly flat. So I guess that suggests that you've far outperformed your addressable market. And I was curious whether you could share your thoughts why that's been the case, just to get a better understanding of underlying strength of your products versus the market. That's my first question.
Yes. Indeed. The content growth, let's say, in '21 has been driven by some product like the latch and switch, like the lean LGB. And as I mentioned, in the future, it will be those 2 also the current sensors and the smart driver. And I think we have indeed developed in the last years the right product to address the requirement of the market in terms of electrification. We mentioned in the past, thermal management is part of the electrification. It's why a lot of sensing and driving solution will be needed for the thermal management, and we have the right product to answer those expectations for electrification of current sensors, but also for the terminal management with our sensor high solutions.
Okay. And just to continue on that, on the total addressable market. Also in 2021, especially the chip content for Powertrain Systems was the big driver, whereas growing chip adoption in CBS systems was held back a bit. It doesn't sound like that's been the case for you, but yes, I was wondering whether you could help us understand why that has happened and maybe some thoughts on why the CBS segment could catch up in the following years according to your forecasts?
Yes. In the document that you referred, this is really the time that this is...
Yes, yes.
What is addressable, let's say, by Melexis and indeed, in the CBS in the chassis body safety, we believe that there is a lot of applications that Melexis can address. And indeed, if you compare the absolute value they are more time in the CBS than in the powertrain. And I think it's a bit what we see in our total revenue. We see indeed more growth in the CBS than in the powertrain. In CBS, it's all the comfort, all the safety -- and as an example, the lean LGB for nuclear lighting is part of the comfort, and we see a quickest growth, let's say, in Chassis, Body, Safety.
Okay. Okay. So especially in the CBS market, you've actually gained a lot of market share, and there was sort of a big factor of your outperformance this year. Is that a good assumption?
Yes.
Our next question comes from the line of Michael Roeg from the Degroof Petercam .
I also had a look in the presentation, and I noticed that global car production was up by about 2% last year. And your penetration was up by 38% from 13 chips to 18 chips per car. And if you combine it to, then your automotive volumes must have gone up by 41%, as your automotive sales were up by only 28%. What explains that huge gap?
Yes, the main reason for that higher increase in volume versus sales increases is the fact that we grew more with embedded lighting and legal switch chips and these are products that have lower average price than the average of Melexis. So small products with a lower price that grew more than -- so it's a product mix effect in the first place.
Okay. I could calculate the ASP for the group as a whole, so also including the adjacent sales, and there was a negative price effect of about 3%, sort of like a crude estimate. So it was probably higher -- much higher in automotive and maybe flattish in adjacent and the price effect or mix effect?
It is a need higher in automotive. Well, what do you mean? No, it's really the product mix here. It's more -- it's -- it's not a pricing effect. It's a product mix effect, so more sales of products with a lower average selling price.
Yes. But based on the volumes that you provided in the presentation now and last year, then I calculate an overall price mix effect of minus 3% for the year as a whole. So it was minus 3% for the year as a whole, then my assumption is that the mix effect was much strong in automotive than in adjacent. Is that correct? It's correct.
That is correct.
Okay. Is this something that will continue in 2023? Or will it stabilize? That mix effect?
That's very difficult to guide on. I mean, 2021 was influenced by -- I mean the huge discrepancy between demand and supply in 2000 -- in automotive in the first place, and that impacted also adjacent moving forward in 2022. Yes, it's difficult. We continue with the supply constraints how exactly it will work out in the product mix? Yes, it's difficult. And also the mix of cards is changing today. So that's why we don't want to make a prediction on that. It's very difficult.
A lot of moving parts. And next year, we'll be able to make the calculation again. Then I also have a follow-up question on the inventories, and it's something, a topic that comes back quite often. Is inventory is actually the right word should indeed be simply wafers in progress or something like that? Because typically, the wafers coming from your supplier testing and then you ship them out again. So this is more work in progress than actually core on the shelf, doing nothing. Just out of curiosity, after you receive a box of waivers. How long does it take from receiving and testing them and shipping them out to the end customer. It's at a matter of weeks or months?
Months. Most between 6 and 10 months Well, since it comes to Melexis, it's months, but yes, but it depends on the product. Some products it's maybe we can do it in a couple of months and others, it will be more than 6 months, depends on the complexity of the chip.
So from receiving a wafer from somebody else. Yes. It can take up to 6 months before you ship the final chips to the customer.
It can take quite a while, yes.
In average, it's indeed. more than 3 months, I would say Yes.
That's much lower than I had imagined. Okay. Good. That's very helpful.
And it was after the wafer. We test them at wafer level and then we ship them to the assembly house, then there is the assembly process, and they came back to Melexis. We retailed them a package level and then we ship them. This is for the, let's say, the quick process. And sometimes, as Karen mentioned, there is additional process at wafer level. It's why -- yes, it's more months than weeks.
Yes. That sounds almost as if the back end takes longer than the front end.
I would say it's half-half.
Our next question comes from the line of Marc Heeselink from ING.
My first question sort of on the increase to '18 as per card in your target of 20. Looking at what -- is there a significant upside risk to that? Or was also maybe the 18 -- this was a year where the OEMs prioritize maybe the higher value cost, which typically have a bit more is -- can you talk about the dynamics underlying that? And second, the increase in R&D. What will be the result of that in a few years for Melexis. Is that simply required to get to your current plans? Or will you also, therefore, be able to increase your serviceable market because of the incremental R&D?
Yes. The first question about the 18 chip card and indeed, 18 means that we have shipped 1.4 billion pieces in 1 year and 75 million car has been produced, meaning that if you make the division we reach '18, yes, I think, why did we move from 13 to 18. It's indeed because there is more and more electronic in the car, electrification we mentioned. We mentioned also more comfort and more safety. And you are right that in 2021, the OEM has given priority, let's say, to the to the high-end car, this has, for sure, play a role in the 18. But on the other hand, we know from historical reason that the option from the high-end car always come down to the midrange and later on to the low range car. Then I think this increase of safety and comfort will be will be cascaded down to the midrange cars and the low-hang car. It's why yes, we are confident that the future growth will be secured in this way. And for the time being, as we mentioned in the working that we have that we have launched. We really see that from 2021 to 2026 in the next 5 years, there will be more and more addressable sockets for Melexis, we discussed just before for the powertrain. We believe that 50% more socket will be available, which will also indeed contribute to the growth and to move further after 18 IC per car. Does it answer the question?
Yes, it makes the 20 target quite easily achieved more, right? I mean it's not wrong to look at it that way?
Yes. I think the idea is to reach 20% and then indeed to continue to grow. Yes.
Okay. The other question?
Well, did you have a second question? Can you repeat
So the increase in R&D.
Yes. Sorry. I would say there are 2 aspects in the -- the complexity of the product is increasing. If we compare the complexity of the product that we developed 10 years ago and the complexity of the product of today, is really the light, I would say, and it's more complex, meaning that in order to launch the product, we need to make more effort. It's more expensive, let's say, to launch a product now than 10 years ago. It's why we need to continue to scale, let's say, our development organization in order to be able to develop new products and address the new application. And the second aspect is, I mentioned in the past that we want to increase the number of products that we launch every year. some years ago, we have launched 12, 13 now we launched 16 and we want to be able to launch 20 in the future, then we need to scale up also the organization to launch more products. And it's -- there are 2 reasons. First reason is to be able to cope with the increased complexity. And the second reason is to guarantee that we will be able to launch more products in the future.
We now have a question from the line of Robert Sanders from Deutsche Bank.
I guess my first question was just on the mid-single-digit price increase. Some of your competitors are increasing pricing 20%. And because foundries are increasing their wafer prices by up to 20% in mature nodes. So I was just wondering why so timed, why not increase pricing again? Or is that contractually difficult? And then I have a follow-up.
Yes. I think we cannot comment on what the others do. But for sure, in Melexis, we have decided to, let's say, to transfer the cost increase to the price increase. The goal was not to, let's say, increase artificially our margin. And it's why, yes, we have communicated this price increase to our customers, being fair and just transferring the cost increase.
Got it. And just following up on the question about product mix. It looks like you've had quite a significant price mix negative impact on ASP in 2021. I was just -- it looks like you're saying your growth opportunities are highest in CBS and latch and switch,, et cetera, current sensors. So is it fair then to assume that the -- your historical ASP of 42 to 45 you could end up trending below that range just because the products where you see the highest growth have the lowest ASP?
Yes. I think the ASPs indeed has decreased a bit in 2021, as we mentioned. And Karen has answered that for 2023 and later on, it's really difficult to assess because there are a lot of variables. I think it's a bit difficult to make addiction. But as a matter of fact in 2021, latch and switch, LGB have contributed to the growth, and those are products with lower speed than the average. But I think it's not structural. I don't see any sign that there is a structural trend for Melexis to be successful with more lower ASP products.
Got it. And then just last question would just be the baby of the ordering behavior of your Tier 1s and OEMs. I was just wondering whether you thought that ordering was now looking like it was more normalizing and that those customers had sort of got to a new inventory level given that they're now comfortable with? Or do you think they're going to continue to sort of stockpile because at the end of just in time. I was just wondering if you think we are now sort of stabilizing a bit after last year when there was obviously clear stockpiling?
I don't think that our customers are stockpiling. I don't see any sign of it. And I am in many calls, let's say, with Melexis customers even with OEM and those calls do not give me the impression that they are stockpiling. I think we are really in just-in-time delivery. We are, let's say, adapting week after week, our shipment schedule to be able to provide the minimum power to the different customers. I don't really see any sign of stockpiling. I think we are still in a very, very tens and on the hedge situation from a supply chain perspective towards our customers. No, I don't have really the impression
We now have a question from the line of Johannes Ries from Apus Capital.
A follow-on to Rob's question. In pharma calls, you mentioned that your automotive customers given the experience you had made last year, intend maybe if enough maybe production is available from our side and other semi suppliers, maybe to build up even higher inventories compared to the levels they had before the crisis because they face these problems they want to build up buffer inventories because they don't want to face such a situation again. Is that still the case? And could this extend maybe the cycle and follow-on there also you mentioned also there are some customers who even discussed with you let's say, pay for you, maybe for reserve capacities also to secure maybe the delivery in the future. Is that all right?
Yes, I think it's a bit too early to see this because -- yes, today, as I just mentioned, I think we are not able to build the..
Yes. But after this, maybe do you see such intentions and up more security levels in inventory, not to face?
I think it would be good indeed for the supply chain to have to move to a higher inventory level, yes. But for the time being, we are -- I mean those discussions did not start with the OEM and with the customer because we are still in the fire, let's say. But I agree with you It would be good for the future, yes.
Okay. And second, a short follow-on question on the production. We here in the high end more consumer electronics. And so said back-end gets more important. The topic is more and more slower. Is it even in your case, a topic? Or is it definitely something more sort of in the high-end space where put some ships together to make a system on chips. So -- but is it also a topic for you? Or is it a totally different world.
No, no, it's also a topic for us to bring, let's say, to bring more solution, we try indeed to not only provide a chip, but to provide a solution and sometimes to provide the solution. Indeed, we need to make a system on chip. I can just give an example, the TPMS of Melexis. It's a 3 chip in the same package. Yes. And we have also other products where we have what we call post wafer processing, where we process the wafer for -- with the MEMS process or we add additional layers on the wafer in order to create this solution. But this is also what you mentioned is not only for the high-end adjacent consumer market, but we have also in automotive, such a process, yes.
And this trend will go on, you mentioned even that the thing gets more complex. That's one part of this complexity. Exactly yes. if we want to different if we want to create some differentiation we need indeed to go to this kind of, let's say, complex system. -- more complex system than only one dinar.
Thank you very much. Thank you, everybody, for all your questions. All questions have now been answered. So I'd like to hand back to yourself, Mark, for any closing remarks.
Okay. Thank you, everybody, for the question. I think it was a good discussion. And I think we remain available, we [indiscernible] phoneif there is additional question [indiscernible] is too there to answer the question. Thank you
Thank you very much, everybody, for joining today's Melexis conference call. You may now disconnect your lines. Speakers, please stay connected.