Monolithic Power Systems Q3 2024 Earnings Call Transcript

Presentation

[Operator]

Welcome everyone to the MPS Third Quarter 2024 Earnings Webinar. My name is Genevieve Cunningham, and I will be the moderator for this webinar. Joining me today are Michael Hsing, CEO and Founder of MPS; Bernie Blegen, EVP and CFO; and Tony Balow, Vice President of Finance. Earlier today, along with our earnings announcement, MPS released a written commentary on the results of our operations. Both of these documents can be found on our website.

Before we begin, I would like to remind everyone that in the course of today's presentation, we may make forward-looking statements and projections within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risk and uncertainty. Risks, uncertainties, and other factors that could cause actual results to differ from these forward-looking statements are identified in the Safe Harbor statements contained in the Q2 earnings release, and in our SEC filings, including our Form 10-K, which can be found on our website. Our statements are made as of today, and we assume no obligation to update this information.

Now, I'd like to turn the call over to Bernie Blegen.

[Bernie Blegen, Executive Vice President and Chief Financial Officer at Monolithic Power Systems]

Thanks, Jen. Good afternoon and welcome to our Q3 2024 earnings call. MPS achieved record quarterly revenue of $620.1 million, 22% higher than revenue in the second quarter of 2024 and 30% higher than revenue in the third quarter of 2023. Our performance during the quarter reflected the strength of our diversified market strategy as we experienced improved ordering trends across most end markets and additionally benefited from initial revenue ramps associated with design wins secured in prior years.

Let me call out a few highlights. Q3 2024 automotive revenue was up 28% sequentially with improvements in infotainment, lighting, ADAS, and body controls. Communication revenue was up 65% from the prior quarter reflecting new product ramps for Wi-Fi, optical, networking, and router solutions. Storage and compute revenue was up 25% sequentially on the strength of demand for DDR5 and SSD memory and notebooks.

MPS continues to focus on innovation, solving our customers' most challenging problems, and maintaining the highest level of quality. In addition, we continue to expand and diversify our global supply chain, which will allow us to capture future growth, maintain supply chain stability, and swiftly adapt to market changes as they occur. Our proven long-term growth strategy remains intact as we continue our transformation from being a chip-only semiconductor supplier to a full-service silicon-based solutions provider.

I'll now open the webinar up for questions.

Questions and Answers

[Operator]

Thank you, Bernie. Analysts, I would now like to begin our Q&A session. [Operator Instructions] Our first question is from Rick Schafer of Oppenheimer. Rick, your line is now open.

[Rick Schafer, Analyst at Oppenheimer]

Thanks, and congrats, you guys. I guess I've got a two-part question, if I could. The first is on enterprise data. It looked like it was down about 15% sequentially. I didn't know if you could give some color on that. Is that one time in nature, or does that reflect a more sustained shift in that segment as we look into 4Q and then into 25?

Then my second part of my question, it looked like auto, and you listed a few of them, Bernie, automotive, industrial, comms, consumer, all look like they were up pretty materially sequentially. How would you characterize those segments, which have been lagging the last few quarters? Do you feel like those have made the turn?

[Bernie Blegen, Executive Vice President and Chief Financial Officer at Monolithic Power Systems]

Sure, Rick. This is Bernie. Let me start with the enterprise data. Sequentially, we were down about 1.5% from Q2. That -- a couple of things that we've talked about. One is that we don't control our customers' ordering patterns. As it relates to the current quarter, we did see a different ordering trend than we'd observed in each of the past six quarters. Then as far as looking ahead, we've been very open about the fact that as far as supply chain security for our customers, that that's going to require a second or third competitor to be introduced on the share. And so there's a lot of issues here that we've been talking about and that we're managing.

One very important point is that MPS's strength is in the diversity, and we don't try to call out a particular end market's results. We try to deliver the company in total. That's a short-term view, but Michael may have a couple of comments on a longer-term view.

[Michael Hsing, Chief Executive Officer and Founder at Monolithic Power Systems]

Probably everybody knows that if you look at the transcript from the last year, we talk about the market is big and the market is growing, or the AI requirement is growing. And so that customers initially will always take the best solutions to fulfill their needs. The best solutions and also the speed of the development service, as Bernie said earlier.

That's why we occupy the pretty large shares. Last year, we said, okay, this market is too big, and MPS will be always have the best solutions in this application. We also talk about the market is bigger, there will be a second or third or fourth supplier to join this segment. And when will that happen? We don't know. It happened in the last couple of quarters.

Next year, what we see, again, the market is growing very fast. We have other ones like the SOC side of the market segment hasn't really ramped up yet, or it starts ramping. And the other ones, like the hyperscales, computing companies and their own SOCs and their own TPUs, they call it the Tensor Process System. And those ones are still small. We're ramping in the next few quarters.

And as Bernie said, MPS, in the past, we always emphasize diversity and we will not be known to be an AI power supply company.

[Bernie Blegen, Executive Vice President and Chief Financial Officer at Monolithic Power Systems]

And then, Rick, I think you had a question as far as automotive, and whether or not the step-up that we observed from Q2 to Q3 was more of a broader trend line, or if it was a one-time event. This, we believe, is a step-up where a lot of design wins have been waiting in the pipeline for the right opportunity. And so we do believe that, specific to us, not a discussion about the broader market, but specific to us, that the number of product ramps are expected to come into the stream the next two or three quarters.

[Michael Hsing, Chief Executive Officer and Founder at Monolithic Power Systems]

Well, again, as we said many years ago, there's a lot of new design wins. And when the ramp will take off, we don't know. It will be plus or minus a year or so. Do we care? We don't, okay? And now, all these Greenfield products start to rejuvenate. And that's what you see in the revenue to date.

[Bernie Blegen, Executive Vice President and Chief Financial Officer at Monolithic Power Systems]

And maybe one more comment just for Rick is that, traditionally, we'd been talking about strength in ADAS, but what you heard Bernie talk about was we saw that strength in automotive across kind of all the segments, including infotainment, body controls, really a sign of those sockets that we had won previously now start generating revenue. So it's more broad-based within automotive than maybe we talked about previously.

[Rick Schafer, Analyst at Oppenheimer]

Thanks for all that color, you guys. And maybe right on that point, on auto specifically, I realize that this is a broad-based pickup, and it's basically design-win driven, as all things are with you guys. But I'm curious, specific.

I mean, NVIDIA did, I believe, did really well the last year or two with Drive Orin, and I know you guys do power there. So I didn't know if you could talk specifically about China Auto and what content trends look like for you guys there, and maybe give a sense of how big China Auto is now as sort of a portion of your overall auto segment. Thanks a lot.

[Michael Hsing, Chief Executive Officer and Founder at Monolithic Power Systems]

Well, China's, again, EV business is booming. And now they're papered off a little bit, and looks like we're booming again. And we're going the right direction again. And there's a lot of requirements, and the infotainment, the new type of infotainment, and also the ADAS. It's widely adopted in China. And so that's where we see a bigger portion of it, the renting from China. And also, other than the ADAS, we see a lot of other products and growth -- world growth in Germany and in the U.S.

[Rick Schafer, Analyst at Oppenheimer]

Thank you, guys.

[Operator]

Our next question is from Tore Svanberg of Stiefel. Tore, your line is now open.

[Tore Svanberg, Analyst at Stifel Nicolaus]

Thank you, and congratulations on the record revenue. I wanted to follow up on enterprise data. Obviously, had two very strong quarters first half of the year. It took a breather this quarter. But how should we think about that business into the December quarter? And Michael, I know you talked about many new product ramps in 2025, but just sort of specifically for Q4, how should we expect that business to perform?

[Michael Hsing, Chief Executive Officer and Founder at Monolithic Power Systems]

As far as I know, Q4, we don't lose any shares. And probably, it was the same as the forecast. Okay? We don't, we can't really tell. And this forecast was given to us a few quarters ago. And we just fulfilled that demand. So we'll have -- that's what we built for me in the last couple quarters.

[Bernie Blegen, Executive Vice President and Chief Financial Officer at Monolithic Power Systems]

Yeah. And I think as we look at the outlook and the guidance that we provided, really enterprise data was somewhere in the plus low single digits. So again, our customers' ordering patterns are really what drives the performance there.

[Tore Svanberg, Analyst at Stifel Nicolaus]

Now, that's very fair. And the one big surprise to me this quarter was communications. I think it was your strongest growth segment this quarter. You highlighted Wi-Fi optical networking. Could you maybe just give us a little bit more color what's going on there? I mean, it does sound like you have some new segments there that you are penetrating, especially on the optical side.

[Michael Hsing, Chief Executive Officer and Founder at Monolithic Power Systems]

Well, the optical is a data converter. Data communications within a data center, within a RAC. And that's a portion of it. But that's not all of them. The other one is the new Wi-Fi format and start to ramping up. Okay? That's the NPS will have a lot of reference designs. And that's what we see. It's across the continent. I mean, all these projects turn into a revenue now.

[Bernie Blegen, Executive Vice President and Chief Financial Officer at Monolithic Power Systems]

So I think the outlook for, again, NPS specifically remains very solid. Generally, after you have a big initial stocking in a quarter with a new revenue ramp, it tends to tail off for a quarter. But we see sustainable growth in communication through the first half of '25.

[Tore Svanberg, Analyst at Stifel Nicolaus]

Great. Thank you for the color. We'll go back in line.

[Operator]

Our next question is from Joshua of Cohen. Joshua, your line is now open.

[Joshua Buchalter, Analyst at Cowen]

Hey, guys. Thank you for taking my question. I think in response to Rick's question, you mentioned two factors that sort of drove the flattening out of enterprise data being order patterns and second sourcing. I guess, could you maybe rank order which one of those had a bigger impact in your term? And in particular, as we think about your customers diversifying their suppliers, are you seeing this more on AI accelerator platforms that are already in the market or is this tied to the newer platforms that are currently ramping? Thank you.

[Bernie Blegen, Executive Vice President and Chief Financial Officer at Monolithic Power Systems]

So I think Michael offered that in Q4, we're not expecting Q3 and Q4 to see share position change. So that was really just trying to acknowledge that that is a function of being the market leader in AI. And then over time, as we see a layering of all these new AI opportunities, Michael referred to the TPUs, which will probably begin to shift later on.

[Michael Hsing, Chief Executive Officer and Founder at Monolithic Power Systems]

I don't know if the TPU, what I remember the TPU, maybe Google's name -- trademarked the name. To me, it's a Tensor Processor.

[Bernie Blegen, Executive Vice President and Chief Financial Officer at Monolithic Power Systems]

Tensor Processor.

[Michael Hsing, Chief Executive Officer and Founder at Monolithic Power Systems]

Yeah, that's what we mean. And it's all related. Some of you refer to this as SOC. And we have many designs. We engaged with many of our customers many years ago. And those products, is actually we see start to ramp in the last quarter.

[Bernie Blegen, Executive Vice President and Chief Financial Officer at Monolithic Power Systems]

Yeah. Okay.

[Joshua Buchalter, Analyst at Cowen]

Thank you for the call there. And I realize you've got content in multiple different sockets on many of these accelerator cars. And so my question is going to try to oversimplify it.

But how should we think about, as we think about some of these new AI accelerator platforms, your content opportunity, maybe in relationship to power draw of the actual processors or any other helpful rules of thumb you can give us as we try to fine tune our model in the next year? Thank you.

[Michael Hsing, Chief Executive Officer and Founder at Monolithic Power Systems]

Well, if you believe, as we believe, our products, our solution is the best and the most power efficient. And the market is bigger. And that portion of our revenue will grow. The rest of the stuff, we don't care. Just let it happen. Let the numbers speak so.

[Joshua Buchalter, Analyst at Cowen]

Thank you, guys.

[Operator]

Our next question is from Chris Caso of Wolfe. Chris, your line is now open.

[Chris Caso, Analyst at Wolfe Research]

Yes, thank you. Good evening. I guess the first question, as we look at your guidance for the December quarter, not a lot changing on a sequential basis. I think you mentioned that the enterprise data will be up low single digits sequentially in December. Anything else that you would call out as growing or shrinking different from the average in December? And then following that, given that enterprise data has grown as a percentage of revenue, does that affect seasonality as you look into the March quarter? Is there anything we should be thinking about with respect to the different customer mix as we go into March?

[Bernie Blegen, Executive Vice President and Chief Financial Officer at Monolithic Power Systems]

Sure. If you're looking at Q4 by end market, it's interesting you have some seasonality. But currently, we don't believe that any of the end markets are going to change by more than plus or minus mid single digits. So there's a very, very narrow range that we're talking about there. And when we look out into the momentum carried into '25, obviously, we don't guide beyond Q4. But it has been seasonally down quarter for a lot of companies. But I don't have a view on what that's going to look like currently.

[Chris Caso, Analyst at Wolfe Research]

Okay, thank you.

[Michael Hsing, Chief Executive Officer and Founder at Monolithic Power Systems]

We don't -- essentially, we don't really care. As long as we have a design, we design and we're in the project with our customers. And when those ramps start to happen, our customers, they don't have a clear view. And let those products, let it take its own course, let the numbers speak for itself.

[Chris Caso, Analyst at Wolfe Research]

Okay. As a follow up, as you look into next year, the other part of your enterprise data business on traditional server, that's an area that you guys have been favorable on for a while, but I guess you've been waiting for the market to improve. We heard a little better news from at least one of the CPU vendors this week. Can you give some view of the share content, you know, what you're seeing in that part of the enterprise data business as you go into 2025?

[Michael Hsing, Chief Executive Officer and Founder at Monolithic Power Systems]

Yes, it's a good question. Okay. I mean, yes, we do see it. Okay. And the volume starts picking up. And as we said, many years ago, and this was a rapid supply or something. Okay. And the VR 14s, and okay, we will pick up a share. So that's VR 13.5 by serendipity of of shortages. Okay? And then we prove with significant supplies. Okay.? And the VR 14s, and what would be a significant, well, one of the big supply in this rapid supply.

[Chris Caso, Analyst at Wolfe Research]

And maybe just beyond just the enterprise data segment itself, as you see those ramp, right, they'll pull through other solutions like DDR5 memory and continue to be a tailwind in some of the other segments as well. Thank you.

[Operator]

Our next question is from William Stein of Truist. William, your line is now open.

[William Stein, Analyst at Truist Financial]

Great. Thanks for taking my question. Michael, I know you often are involved in some interesting sort of sometimes idiosyncratic growth drivers for the company. I know for some time you were famously tinkering in the automotive end market and sort of searching for more effective solutions than what was available in the market. And I understand your focus has been perhaps more in the home automation market more recently. And I wonder if you can talk to us about some things that might be on the come in the next couple of years from the company in that end market.

[Michael Hsing, Chief Executive Officer and Founder at Monolithic Power Systems]

Yes. Okay. As you know, MPS have a few thousands of products. So we're in lighting, we're in, okay, we are in a thermostat, and we are in shade controls, and we're in all these fan models and security, the window actuators, and the window and door opening actuators. And we're also making MCU now. And those MCU can be a brain of everything. Why we're putting the one box? And we're putting a one box with the software and we sell as a kit. Everything is there, everything, including the key is the ease of use. I think this will change the market segment for building automation..

[William Stein, Analyst at Truist Financial]

That's helpful. Maybe as a follow up, you mentioned your MCU's now, there's another category that you entered relatively recently. You're not really known for it as much, but data converters. I think you hired a team in that area and get some very good results for initial product, maybe in the medical end market. Can you talk about traction in that category, please?

[Michael Hsing, Chief Executive Officer and Founder at Monolithic Power Systems]

We are growing in that. In that segment, the revenue is still small. As you know, these design cycles are very long. Okay? And also the product life cycles, 10, 20 years, and it will last forever. And those segments, we're doing some industrial site as well as the medical site. Okay? And we have more product rolling out, as a matter of fact, in the next couple of quarters, some family of standard product. We will gain more market share in this segment.

[William Stein, Analyst at Truist Financial]

Great. Thank you.

[Michael Hsing, Chief Executive Officer and Founder at Monolithic Power Systems]

Okay.

[Operator]

Our next question is from Ross Seymore of Deutsche Bank. Ross, your line is now open.

[Ross Seymore, Analyst at Deutsche Bank Aktiengesellschaft]

Hi guys. Thanks for letting me ask a question. I want to go back to the non-enterprise data side. I think by my math, it was up about 35%, 36% sequentially. I know you guys have a ton of design wins and you're kind of just waiting for them to ramp, but the magnitude of that ramp, the diversity of it, and just the commentary that bookings are improving seems to be at odds with the very muted recovery that so many of the peers are seeing. So could you just explain, do you think cyclical conditions are getting better or is this a very monolithic power specific dynamic? Any sort of color on that?

[Bernie Blegen, Executive Vice President and Chief Financial Officer at Monolithic Power Systems]

[Technical Issues] So Ross, you're asking the difference between growth specific to us and what we're seeing in the market. And in the current quarter, or let me go back, the previous quarter, we actually saw improvements in our ordering patterns, but they're not a consistent trend.

But what we saw in the current quarter was a lot of new revenue opportunities that we received from design wins secured in previous years that were coming to market now, particularly in communications, particularly in automotive. And then also we saw an improvement in the overall profile of the memory market.

[Michael Hsing, Chief Executive Officer and Founder at Monolithic Power Systems]

Well, as a matter of fact, we see all across-the-board.

[Bernie Blegen, Executive Vice President and Chief Financial Officer at Monolithic Power Systems]

Yeah.

[Michael Hsing, Chief Executive Officer and Founder at Monolithic Power Systems]

Other than AI, other than AI powers and all across-the-board tonight.

[Ross Seymore, Analyst at Deutsche Bank Aktiengesellschaft]

And how are you, I guess as my follow-up, whether it's in the AI side or otherwise, a lot of supply has been added to the market over the last couple of years to address shortages, etc. And so a fear people have is that pricing pressure is going to ensue, whether it's more competition in AI power that you mentioned earlier, or just a more aggregate holistic increase in pricing pressure. Are you guys seeing any evidence of that?

[Michael Hsing, Chief Executive Officer and Founder at Monolithic Power Systems]

Well, our competitors also some of the Chinese suppliers and they always want to lower the price to get in the market to get in the socket. That's not the game what we played. And so a lot of the -- our customers they don't change those socket. They don't change the -- our products can swap in -- and quickly. And those kind of things is in a -- and also to the way we emphasize diversity. So not in one segment. It has a lot of shipments and a lot of volumes going into the one particular applications. And for example like AI and we will provide the value. Our value is the highest performance. And all the other products let our customers choose and so the history is telling us, our history short, and as we -- as long as we operate in the same principles and the revenue will keep growing and growing the same way. And we see the next couple of years, especially next year, we see and all these products will grow. And now this is -- which is to see the first sign of it, and all these design win turning into the revenue now.

[Ross Seymore, Analyst at Deutsche Bank Aktiengesellschaft]

Thank you.

[Operator]

Our next question is from Quinn Bolton of Needham. Quinn, your line is now open.

[Quinn Bolton, Analyst at Needham & Company LLC]

Hey, guys. Thanks for taking my question. I guess, first to start off, I think it was for the first time ever in your June 10-Q, you guys disclosed a 10% plus customer. And I'm wondering, I know you haven't filed the Q yet, but if that's going to be an ongoing disclosure, would you be able to provide us if you had any 10% customers in the June, sorry, September quarter? And if so, what percent of revenue was that customer?

[Bernie Blegen, Executive Vice President and Chief Financial Officer at Monolithic Power Systems]

So, Quinn, what you're referencing is basically revenue exposure by direct customer and indirect. And when the customer hits a certain threshold according to the SEC guidelines, we need to put a reference to that.

[Michael Hsing, Chief Executive Officer and Founder at Monolithic Power Systems]

But we're never putting a name out there.

[Bernie Blegen, Executive Vice President and Chief Financial Officer at Monolithic Power Systems]

No, no. We do not.

[Michael Hsing, Chief Executive Officer and Founder at Monolithic Power Systems]

Yes, this time, we have -- still have a one customer is bigger than 10%.

[Bernie Blegen, Executive Vice President and Chief Financial Officer at Monolithic Power Systems]

Yeah.

[Michael Hsing, Chief Executive Officer and Founder at Monolithic Power Systems]

Bernie, you can check that numbers. Is that right? Only two customers and above 10%.

[Quinn Bolton, Analyst at Needham & Company LLC]

Okay. And we'll get percentages in the Q.

[Bernie Blegen, Executive Vice President and Chief Financial Officer at Monolithic Power Systems]

It's one or two.

[Michael Hsing, Chief Executive Officer and Founder at Monolithic Power Systems]

Yeah, I think, it's one or two. You can check that. I believe it's one. Bernie, you can check that. No, it's only one. Two will be very big. I don't -- I don't believe the numbers.

[Bernie Blegen, Executive Vice President and Chief Financial Officer at Monolithic Power Systems]

We don't. We don't.

[Michael Hsing, Chief Executive Officer and Founder at Monolithic Power Systems]

Yeah.

[Quinn Bolton, Analyst at Needham & Company LLC]

Okay. The second question is, I know, you don't want to guide to 2025 yet.

[Michael Hsing, Chief Executive Officer and Founder at Monolithic Power Systems]

Hold on a second. Tony, could you --

[Bernie Blegen, Executive Vice President and Chief Financial Officer at Monolithic Power Systems]

Check that?

[Michael Hsing, Chief Executive Officer and Founder at Monolithic Power Systems]

Yeah, could you check that, is that one or two? I think the second one is less than 4%.

[Tony Balow, Vice President of Finance at Monolithic Power Systems]

Yes, I'll check it. Give me 10 seconds, so I'll get back to you.

[Michael Hsing, Chief Executive Officer and Founder at Monolithic Power Systems]

Yeah. Yeah. So we are, okay, this had to be on our record. And then let's make it clear. Go ahead.

[Tony Balow, Vice President of Finance at Monolithic Power Systems]

Okay.

[Quinn Bolton, Analyst at Needham & Company LLC]

Yes. Maybe while we're waiting for Tony, my second question was, I know you're not going to sort of give a specific guidance out to 2025, but The Street is looking for continued pretty strong growth in the enterprise data segment. I know you've talked about lots of crosscurrents in terms of expecting some additional competition to enter that market, some pricing pressure at existing customers, but you also have the ASIC designs that start to ramp next year. The Street is kind of looking for that business to hit almost $1.1 billion in revenue. And just wondering is that given your crystal ball, is that sort of a reasonable expectation? Do you think that we should be tempering expectations for that segment, given some of the cross-currents you've mentioned or do you want to just kind of keep it one quarter at a time?

[Michael Hsing, Chief Executive Officer and Founder at Monolithic Power Systems]

Yes, I can tell very confident, confidently we will be, okay, let's say that. And when this market -- when this AI market turn into like a regular server market, MPS will be a significant player in that. And now this is not -- became a, what do you call it, reach to an equilibrium yet.

[Bernie Blegen, Executive Vice President and Chief Financial Officer at Monolithic Power Systems]

Not a run rate.

[Michael Hsing, Chief Executive Officer and Founder at Monolithic Power Systems]

No, yeah, this is still ramping up. And when this segment is ramping -- when you start to ramping, it's kind of lumpy. You don't see this thing, okay, you don't see -- you can't keep going forever like the first two -- since last year and the first -- in the first couple of this quarters like our first couple of quarter in this year. And next -- and so to answer your question for next year, clearly, so we have a lot more customers as I said earlier, that will start to ramping those designs will turn into -- those design will turn into revenues.

[Tony Balow, Vice President of Finance at Monolithic Power Systems]

Michael, just to circle back relative to distie, we'll call out two, for direct, we'll call out one.

[Bernie Blegen, Executive Vice President and Chief Financial Officer at Monolithic Power Systems]

Okay. That's a direct customer, not a distie.

[Tony Balow, Vice President of Finance at Monolithic Power Systems]

So we'll call one direct. We'll call out multiple distie is higher than 10%.

[Michael Hsing, Chief Executive Officer and Founder at Monolithic Power Systems]

Yeah, well, distie will never come, and because all the reporting we -- that's in the reporting, all the design creation, all the exposures for the end customer is only one. The next one is, I believe, is a less than is about definitely is below 5%.

[Quinn Bolton, Analyst at Needham & Company LLC]

Got it. Thank you, Michael. Thank you, Bernie.

[Michael Hsing, Chief Executive Officer and Founder at Monolithic Power Systems]

Okay.

[Operator]

Our next question is from Tore Svanberg of Stifel. Tore, your line is now open.

[Tore Svanberg, Analyst at Stifel Nicolaus]

Yes. Thank you. I had a similar question to Quinn, but thinking more about vertical power. So enterprise data this year more than $700 million. I assume the contribution from vertical power is still quite low. And if that's the case, as the market does transition to vertical power, could we see this market base basically even accelerate over the next few years?

[Michael Hsing, Chief Executive Officer and Founder at Monolithic Power Systems]

Absolutely. Not in next few years, next few quarters. Yes. We -- as we said, look, we are playing the power module market segments in since 2017. And all these technology, all these manufacturing capabilities and that will really benefit for these vertical power. And as speaking, now we are shipping those products in good volumes.

[Tore Svanberg, Analyst at Stifel Nicolaus]

Sounds good. Thank you.

[Michael Hsing, Chief Executive Officer and Founder at Monolithic Power Systems]

Yep.

[Operator]

Our next question is from Ross Seymore of Deutsche Bank. Ross, your line is now open.

[Ross Seymore, Analyst at Deutsche Bank Aktiengesellschaft]

Hi, guys. Thanks for letting me get a little follow-up snuck in here. Inventory, I know Michael, you and I have laughed about that in many times like this in the past.

[Michael Hsing, Chief Executive Officer and Founder at Monolithic Power Systems]

That's my favorite topic.

[Ross Seymore, Analyst at Deutsche Bank Aktiengesellschaft]

There you go.

[Michael Hsing, Chief Executive Officer and Founder at Monolithic Power Systems]

Yeah.

[Ross Seymore, Analyst at Deutsche Bank Aktiengesellschaft]

In this instance, internal inventory came down by a lot days-wise. What did external channel inventory do? How are you looking at that? Was some of that 35% sequential growth that I referred to in my initial question a little bit ago, inventory fill, or has the channel stayed lean?

[Bernie Blegen, Executive Vice President and Chief Financial Officer at Monolithic Power Systems]

No, the channel stayed lean. In fact, our total days went down in the quarter.

[Michael Hsing, Chief Executive Officer and Founder at Monolithic Power Systems]

Well, we want to -- this is not good. We want to build up. And as always, we build the inventory in the -- it's not synced with the market demand. And you see our -- Ross, okay, you're the expert of MPS inventory. If you checked like our inventory levels, it's the opposite of the market demand. And now the market demand for MPS now is very high. So the inventory is low and we don't think that we're going to reign to a shortage issue, but it's at the inventory level is at the uncomfortable level.

[Ross Seymore, Analyst at Deutsche Bank Aktiengesellschaft]

Got you. And I guess just to clarify, Bernie, when you said total inventory actually went down, you mean just total channel inventory days fell.

[Bernie Blegen, Executive Vice President and Chief Financial Officer at Monolithic Power Systems]

Total channel inventory, yes.

[Michael Hsing, Chief Executive Officer and Founder at Monolithic Power Systems]

Channel inventory is also low.

[Bernie Blegen, Executive Vice President and Chief Financial Officer at Monolithic Power Systems]

Yeah.

[Ross Seymore, Analyst at Deutsche Bank Aktiengesellschaft]

Got it. Okay. That's it. Thanks guys.

[Operator]

Operator This now concludes our Q&A session. I would now like to turn the webinar back over to Bernie.

[Bernie Blegen, Executive Vice President and Chief Financial Officer at Monolithic Power Systems]

Thank you. I'd like to thank you all for joining us for this conference call and look forward to talking to you again in our fourth quarter conference call, which is likely to be in early February. Thank you. Have a nice day.

[Operator]

[Operator Closing Remarks]

Participants

Corporate Executives

• Bernie Blegen, Executive Vice President and Chief Financial Officer
• Michael Hsing, Chief Executive Officer and Founder
• Tony Balow, Vice President of Finance

Analysts

• Rick Schafer, Oppenheimer Holdings Inc.
• Tore Svanberg, Stifel Nicolaus
• Joshua Buchalter, Cowen Inc
• Chris Caso, Wolfe Research
• William Stein, Truist Financial Co.
• Ross Seymore, Deutsche Bank Aktiengesellschaft
• Quinn Bolton, Needham & Company LLC