NXP Semiconductors N.V. Technology Leadership Forum 2026

I am still here for a few more months, John.

Yeah. So, we reported earnings just a couple of weeks ago, so there's not a lot of new news. But what I would say is our view of the environment is considerably better now than it was 90 days ago and even 12 months ago, so things have clearly gotten better. Lead times are stretching out a little bit in certain areas. Book-to-bill is solidly above one across all end markets, which is good. I would say distribution is in great shape. We're running at 11 weeks, which is our target. We have been running under that for a couple of years during the downturn, but we're back to 11 weeks in the channel.

We are seeing escalations go up, so these are folks who come in late inside of lead time and place orders, and so we monitor those on a kind of event type of basis, and they're up. We have had to do a little bit of price increases as we are seeing some inflationary input costs come in. It's been kind of targeted here in the first half and immaterial to the overall financials, maybe a little bit more so in the second half. We'll know when the second half's all done. But all in all, I'd say we feel very good about where things are at. One of the questions you had earlier, John Vinh, I'll maybe circumvent it, is about restocking.

As you know, in our auto business, about 60% of our auto businesses we do direct with the big tier 1s in North America and in Europe, and then the other 40% we manage through the channel, and that's primarily in Asia, Korea, Japan, China, and Southeast Asia. I would say the challenge we still face is some of the large tier 1s are still holding very low levels of NXP inventory. Our ideal is for them to hold somewhere between 10 to 12 weeks, and there are a few who do that, and that's fine. We have great relationship with them, but there are quite a few of large tier 1s who are still between three and six weeks.

I just think the challenge is some of them don't have great working capital metrics and are going to just hope that we will manage the inventory for them.

Yes. But it's not broad based. It's very specific and targeted because the OEMs know fully that their tier one partners are challenged and don't want to bring in too much inventory. But it's not broad based. So what triggers it to change? Here's the calculus I think a tier one's going through. They look at NXP and they say, "Well, lead times are sort of reasonable." They look at our balance sheet and they say, "Oh, they've got 156 days of inventory, so things look good." That'll work fine if you come in and we have a product in finished goods. It'll even work fine if we have the die and we can put it through the back end within the quarter. But there's going to be a day where someone's going to come in with an order, and we're going to have to go to raw die. Right? Going to have to build the wafer, and that's 16 weeks minimum, and I think that will be the wake-up call.

Our target's 110 days. We're holding at 156 days today. Probably by the end of the year, about 15-20 days will be buffer stock for some of our fab rationalizations we're going through. We'd actually like to get inventory down a little bit. There's not a plan for us to hold inventory on behalf of tier ones. I think one of the fallacies that people don't realize is our business is fundamentally a build-to-order model. If you as a customer don't forecast your demands on us, we're not going to make a guess. We have just too many SKUs, too many performance targets to hit, and so we're just not going to do it.