Good day and thank you for standing by. Welcome to the NXP Third Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker Jeff Palmer, Senior Vice President, Investor Relations. Please go ahead.

Thank you, Shannon, and good morning, everyone. Welcome to the NXP Semiconductors third quarter earnings call. With me on the call today is Kurt Sievers, NXP's President and CEO; and Bill Betz, our CFO. The call today is being recorded and will be available for replay from our corporate website. Today's call will include forward-looking statements that involve risks and uncertainties that could cause NXP's results to differ materially from management's current expectations. These risks and uncertainties include, but are not limited to, statements regarding the macroeconomic impact on specific end markets in which we operate, the sale of new and existing products, and our expectations for financial results for the fourth quarter of 2023. Please be reminded that NXP undertakes no obligation to revise or update publicly any forward-looking statements. For a full disclosure on forward-looking statements, please refer to our press release. Additionally, we will refer to certain non-GAAP financial measures, which are driven primarily by discrete events that management does not consider to be directly related to NXP's underlying core operating performance. Pursuant to Regulation G, NXP has provided reconciliations of the non-GAAP financial measures to the most directly comparable GAAP measures in our third quarter 2023 earnings press release, which will be furnished to the SEC on Form 8-K and available on NXP's website in the Investor Relations section at nxp.com. Now I would like to turn the call over to Kurt.

Thank you very much, Jeff, and good morning, everyone. We appreciate you joining our call today. I will start with a review of our quarter three results, discuss our guidance for quarter four and provide our early views of 2024. Now let me begin with quarter three. NXP delivered quarterly revenue of $3.43 billion, $34 million above the midpoint of guidance and essentially flat year-on-year. Revenue trends in our Mobile, Industrial & IoT and Automotive end markets all performed in line or better than anticipated, while our communication Infrastructure & Other end market were slightly below our expectations. Our distribution channel inventory during the third quarter declined slightly to a 1.5 months level well below our long-term targets of 2.5 months. Non-GAAP operating margin in quarter three was 35%, 30 basis points below the midpoint of our guidance. This is primarily due to an unforecasted potential legal liability of approximately $14 million which is reflected in SG&A. Non-GAAP operating margin was down 190 basis points versus the year-ago periods, primarily as a result of higher R&D investments and the noted potential legal expense. Now let me turn to the specific trends in our focused end markets. In Automotive, quarter three revenue was $1.89 billion up 5% versus the year-ago periods and in line with the midpoint of our guidance. In Industrial & IoT, quarter three revenue was $607 million, down 15% versus the year-ago periods. So above the midpoint of our guidance. In Mobile, quarter three revenue was $377 million down 8% versus the year-ago periods and above the high end of our guidance. In Communication Infrastructure & Other, quarter three revenue was $559 million, up 8% year-on-year, so slightly below the midpoint of our guidance. During the third quarter from a geographic perspective, we experienced incremental improvement across most…

Well, thank you, Kurt, and good morning to everyone on today's call. As Kurt has already covered the drivers of the revenue during Q3 and provided the revenue outlook for Q4, I will move to the financial highlights. Overall, our Q3 financial performance was good. Revenue and non-GAAP gross profit were modestly above the midpoint of guidance with solid gross profit fall through. Now, moving to the details of Q3. Total revenue was $3.4 billion, $34 million above the midpoint of the guidance and essentially flat year-on-year. We generated $2.01 billion in non-GAAP gross profit and reported a non-GAAP gross margin of 58.5% up 50 basis points year-on-year and 10 basis points above the midpoint of the guidance range driven by the fall-through on higher revenues. Total non-GAAP operating expenses were $803 million or 23.4% of revenue, up $73 million year-on-year and up $32 million from Q2. When compared to the midpoint of guidance, this is a miss of $18 million, where $14 million is due to a potential unforecasted legal liability and the remainder from higher variable compensation. From a total operating profit perspective, non-GAAP operating profit was $1.2 billion and non-GAAP operating margin was 35%. This was down 190 basis points year-on-year and slightly below the midpoint of the guidance range due to the previously noted potential legal liability which created a 40 basis points headwind to non-GAAP operating margin. Non-GAAP interest expense was $65 million with non-GAAP income tax provision of 168 million reflecting a non-GAAP effective tax rate of 14.8% which is favorable versus our guidance range of 16% to 17%. Non-controlling interest was $5 million and stock-based compensation, which is not included in the non-GAAP earnings was $103 million. Taken together, this resulted in a non-GAAP earnings per share of $3.70, $0.10 above the midpoint…

Thank you. [Operator Instructions] Our first question comes from the line of Ross Seymore with Deutsche Bank. Your line is now open.

Hi, guys. Thanks for letting me ask a question. Congrats on navigating the choppy times. Kurt, for my first question, I just wanted to talk about the linearity of demand. It was very helpful that you gave the fourth quarter and so much details on the first quarter in 2024. But in general, it seems like you're refilling the channel a little bit in your outer quarter guide and the channel was a big driver sequentially in the third quarter. So how are we to think about the channel directionally from here? Appreciating, of course, that it's already at the end of the range. What are the puts and takes in your decisions to seemingly slowly refill that?

Hey, thanks, Ross. Let me indeed first of all say that these fluctuations between 1.5 and 1.6 are partially beyond our control, to be honest. I mean, you know, it just ticked down a little in the third quarter. We think we are anyway sitting at the absolute minimum where it should be, so we felt it is appropriate to move it back to the 1.6 level. What I think is more important in the bigger context of that channel management is that over 1.5 years now, I would say, we have kept it intentionally very, very lean, always around this 1.5 or 1.6 level in the dropping environment so in an environment where demand was weak and rather dropping. Going forward, as I said in my prepared remarks, we think the environment is more stable or up again, which is why we did say that at some point through next year, we will also start to refill the channel again. The speed of that and the magnitude will really depend on the environment. We will not go higher than the 2.4 or 2.5 level, which is our long-term target and which has been our long-term target in the past. If there was a sharp rebound in China and we set the same last quarter, then of course, we would probably go back relatively quickly. But in a more stable environment, as we anticipate into next year, we will start to refill next year, Ross. Because we think that is important to make sure we hold competitiveness in the channel for our long-tail customers. So there will be a moment where it will be just important in a stable environment to have enough product on the shelf to remain competitive.

Thanks for that color. I guess as my follow up one for Bill on the gross margin side, you guys have done a great job keeping it at the high end of the range despite all the puts and takes on the end markets and the weakness overall. What are the puts and takes for next year? And you said that you'd stay at the high end of the range plus or minus fill through that period, also impressive. Is that just the structural new base for the company? How are you able to keep it at the 58% range versus the 55% to 58% that you had given at your last analyst meeting?

Sure. So let me address the current -- the last couple of quarters. As mentioned, our internal utilizations are running, call it, low-to-mid 70s, and that headwind is being offset by our distribution mix. It's richer in margin, and that represented about 57% of our composition of revenue this quarter, which is up from 51%. So they're sort of offsetting each other in the short term and we see the same to occur in Q4. Now, if we look ahead, what are some of the levers that perhaps can drive gross margin higher over the long-term, and I think we've talked about these in the past, but again, higher revenues over our fixed cost structure is one, obviously, we're going to have continued productivity gains, clearly, you know, eventually we're going to [Technical Difficulty] demand from our internal factory standpoint. So think about higher utilizations. Kurt talked about, next year we're seeing neutral pricing. And then, you know, really, I think a focus more longer term is expanding our long-tail customers in the mass market. And then eventually what we've always talked about with where our R&D investments go is that ramp of our new product introduction. So some of those are the levels -- levers that we have that get us comfortable on continuing to bring gross margin above our current high end of our model. Again, 58% is not the end goal. It's not our final destination. We're going to continue to work on this from a company initiative.

Thank you.

Thank you. Our next question comes from the line of Vivek Arya with Bank of America Securities. Your line is now open.

Thanks for taking my question. Kurt, you mentioned you expect to grow through '24, but how do we square that with just, you know, 1% or so auto production growth that is lower than the mid-single-digit auto production growth that we saw in '23 when your overall sales were flat? So I guess the question is what content lift did you see in '23 and what are your assumptions for automotive content growth in '24?

Hey, thanks. Good morning, Vivek. Yeah, it's clearly that the revenue is driven and the demand is driven by content increase much more so than SAAR. At the same time, you are, of course, right, the latest SAAR update for this year, which I saw is actually almost 8% up over 2022, which is a, by the way, every quarter that was taken up further. So kind [Technical Difficulty] this year. And yes, indeed, also the forecast which we used from S&P for next year I think is just 1% up. So it's almost flat next year. Now, if you take NXP Automotive revenue, Vivek, if you take our Q4 guides, then this year's annual revenue growth of NXP will be like 9% or so. So 9% Automotive NXP in '23 over '22. With that number, I believe we are under-shipping demand and we are actually intentionally under-shipping demand because, as we've always said, we did not want to create this wave of inventory ahead of us, which will lead to a cliff to drop down from. That's why since early in the year we have tried to make sure to not enforce NCNRs to an extent that it would not build excess inventory. And as we discussed with Ross just a minute ago, we kept the channel very lean. And mind you, also in Automotive 40% of our revenue goes through the channel. So the channel is a pretty significant part also of the Automotive business. So what I mean to say here, Vivek, is that we think we are through this inventory digestion at some point next year, which means the revenue growth in our Automotive business will return more to levels which are reflecting the true end demand. I can't tell you when exactly that's going to be next year, but maybe it's safe to assume that through the first half. We are still a little bit working ourselves through this inventory digestion, but in the second half, we should be clean from that. Including then the replenishment of the channel and that's why I make that statement of growing year-on-year throughout the year, every quarter. By the way, that statement was relative to the whole company. It -- we discussed it now for Automotive. But in principle that whole pattern which I just explained is also true for entire NXP. And that's why we continue to be confident that we are properly managing that so-called soft landing. Since we have just anticipated this inventory issue relatively early, have proactively managed it, which means we do not run into this cliff and then resume into year-on-year growth as early as quarter one of next year.

Thank you, Kurt. For my follow-up, just on '24, thanks for giving us the high-level views. So Q1, you know, you mentioned normal seasonal. What is normal seasonal for your Automotive business sequentially in Q1? And if I kind of just expand that question overall to '24, in your presentation, you kept your '21 to '24 model, right? That suggests that even at the low end of that 8% to 12% CAGR. Your '24 sales should be in the neighborhood of 14 billion or so. Is that, you know, useful assumption as we think about overall '24? So just Q1 Autos and overall '24 sales. Thank you.

Yeah. Look, Vivek, I think we really went quite far in this call, given the turmoil around us and some of the uncertainty created by some of our peer companies. We went quite far here in order to give quite some color on next year. We really don't want to go down the path of providing that color by segment -- by revenue segment by quarter. That would be just one shock too far. So stay with me with what I said of a more seasonal pattern for Q1, for the whole company, which was a mid to upper single-digit sequential decline, which is, by the way, what we've always had pre-COVID. So there's nothing really strange about this. In a normal pricing environment, with normalized lead times, everything pretty much back to normal. The other half of your question was about the commitment which we had given in, I think, in November '21 in our investor day about the three-year growth, which indeed was an 8% to 12% corridor. And, yes, Vivek, we stand behind that corridor. We do stand behind hitting that corridor of 8% to 12%, like all the rest of the model by the way. I mean, Bill just talked about the gross margin being more at the high end of the model. On the revenue, we will also be in that corridor of 8% to 12%, there we will be in that corridor. Really depends on a couple of macroeconomic factors, including especially more of a return of China and the timing thereof, which is very hard to judge. So we can't -- we just can't go there. But that should not get us either way out of this -- out of that corridor. We should hit it.

Thank you, Kurt.

Thank you. Our next question comes from the line of William Stein with Truist Securities. Your line is now open.

Great. Thank you so much for taking my questions. First, Kurt, I think it was in your comments, I'm not sure if it was restricted to your outlook of EVs specifically, but maybe more this electrified drivetrain sort of hybrids, maybe is what you were talking about. But it still seemed like a big jump to me next year. And, you know, would we consider the overall EV market, there's one North American OEM that's been growing very quickly, and there's one Chinese or maybe many, but one really big Chinese OEM that's been doing very well. But among the sort of traditional multinational OEMs, their EV sales have been really weak. And I wonder if your outlook for next year embeds a view that the multinationals are going to do better in this category, or if the companies that have had success only get bigger. And then I have a follow-up. Thank you.

Thanks, Will. That -- I see where you are going and let me try to be as clear as possible. First, yes, I did talk about what the category is called xEVs. That is a combination of the hybrid electric and the fully battery electric vehicles. It's a category used by S&P. So it's not our invention, but it's basically every car which has either only an electric drivetrain or also an electric drivetrain next to a combustion engine drivetrain. That's what matters for us because that is the stuff which calls for more semiconductors. And yes, we do believe it continues to grow quite sharply. So this year the latest forecast is, and since we are in November, I guess it's quite accurate, 33% of the total car production, which is in the order of, I think, 89 million units this year. 33% of that 89 million cars produced this year are xEV and that number is forecast to grow to 41%, which is a 29% year-on-year growth. So if you go in absolute terms, then there will be 29% more of these xEVs next year than this year. Now, where does it come from? Look, well, I think it is a little misleading to look at this from a US perspective. The US car producers are actually, from a global perspective, relatively small. Europe is a little better, but where really the main volume is driven, that is China. And on top of that, China is the one which is also driving the dynamic now in the electric vehicle space. So I think if you just take some of the commentary and some of the adjustments in investment programs which were published of US companies, then that is not representative of what's -- what is going to happen on a global level. But long story short, yes, we do believe this xEV category is moving to a solid 41% of the global SAAR next year, which is obviously very supportive to our semiconductor content growth. By the way, beyond pure electrification systems, as we discussed earlier, those cars tend to be higher featured in electronics above everything. So also ADAS systems like our radar and the whole SDV, Software Defined Vehicle introduction happens faster with these cars, which is why it is so supportive to our revenue. We believe in that. We do not see a massive slowing in the electric vehicle penetration.

It's really helpful. Thank you. And you sort of led me into the follow up which is ultra-wideband. I think you were, you know, early to see this among other trends, but I'm hoping you can update us as to how you're seeing uptake in that product, both in automotive and handsets. Thanks so much.

On the handset side, nothing really new. We are still waiting for a bit more dynamic in the Android space, which has nothing to do with ultra-wideband, which is more a mobile-wide industry situation where you might have seen in our guide for mobile for the first -- fourth quarter, excuse me. We are again sequentially up a little in mobile, which is also driven by Android. So given our very lean inventory also in Android space, we think if there is now a bit more dynamic in the Android space, we're going to benefit from it and with that, ultra-wideband, because it's going to go proportional, then up. In the Auto space, we feel very good. So we are ahead of what we wanted to achieve in ultra-wideband. So we have, I think, something like seven platforms in production. So there is seven car platforms which are in production with our ultra-wideband automotive product. To my knowledge, something like 18 to 20 new platforms are awarded or 18 of 20 are awarded to NXP. So there is two small platforms which have not gone to NXP out of 20. Actually, we rejected them because they were under the security standards which we want to ship and would have been margin-dilutive. So that means, overall the momentum in ultra-wideband automotive is very, very good.

Thank you.

Thank you. And our next question comes from the line of Stacy Rasgon with Bernstein Research. Your line is now open.

Hi, guys. Thanks for taking my question. I wanted to go back to the channel inventory. Is the amount that you have to ship still $500 million? And would you still grow year-over-year in 2024 if you didn't decide to fill up the channel next year?

So the answer is yes and yes, Stacy. That delta between -- well, now it's actually even a little bit bigger because to be perfectly precise, the $500 million, I think, came from 1.6 months going to 2.4. Since now we are at 1.5, it's probably even a little more than the $500 million, but it's immaterial. So the answer here is yes. That is. Secondly, no, we do not need the $500 million to grow next year, because that whole channel replenishment next year is something we will do some time to some amount. So that cannot be the basis of a guide for next year.

Got it. Thank you. For my follow-up, I just wanted to ask about some of the geographical macro trends that you mentioned. I found them a little confusing. It sounded like you thought China was getting better, but then you said next year, like, where you land in, you know, in the guidance for the full year depends on China and getting better. We're not hearing from any of your competitors that, like, China or anything else is getting better. I'm just -- can you give us a little more color on what you're seeing by geography and maybe, like, what is -- what do you think the sources of the discrepancy? Why do you guys see things improving in an overall market where you still sound like fairly cautious and your competitors certainly all sound fairly cautious.

Okay. So let me peel the onions, Stacy. First of all, maybe rely on a company level. The reason why we do comparably better if you look at the quarter, to our peers is, again, a soft lending navigation, which we have entered into already early this year and when you think about the channel already middle of last year. We have certainly shipped less over that period, Stacy. And you find that if you compare our growth rates, say, a three-year CAGR over the last three years versus some competitors, especially in auto, and you see that even more sharply, if you look at this year's order growth, as I said earlier, which I think is 9%, we have undergrown competitors. And that undergrowth is still be that we ship less on inventory than we believe some of the peers have done. That, of course, also explains that going forward, we don't see this sharp decline. It's just a softer management through this cycle. Now we do it very, very intentionally because we believe this is very beneficial to our gross margin trajectory, which is not going to suffer that part from under loading factories too hard. So that's actually where the direction has been coming from. Now on the geographic side, Stacy, you have to ask this because I do know that what we just guided, especially in Industrial IoT, and that is largely relative to China is very different to what you heard from a lot of peers. So I just want to repeat, we have both sequentially and year-on-year, we just guided quarter four up by a high single-digit percentage which is in sharp contrast to what several of our competitors have said. We simply think this is because we saw and had our trough in Industrial IT already in quarter one of this calendar year. If you look at the numbers, we had a sharp drop there. We have made absolutely sure we would not increase inventories from there. So we are very close to the pile of the demand. Since then, since Q1, we have been readily going up. And that was long messaging, which might have been a bit confusing around China. What I meant to say is we keep moving up incrementally quarter-to-quarter-to-quarter, while it's still down from a year-on-year perspective. So we are still waiting, and we don't put this in any of our numbers on the big rebound in China. So that's not there. But incrementally, sequentially, it keeps improving. It has improved the past couple of quarters, and it does improve again now in Q1 into quarter four. So that was the commentary on China. So it's cautiously positive. But again, it is simply because we had our trough there already in quarter one, and it was a tough trough. I mean you just do the math. It was really deep. We just did it much earlier than many others.

Got it. That's clear. Thank you guys.

Thank you. Our next question comes from the line of Gary Mobley with Wells Fargo. Your line is now open.

Hey, guys. Thanks for taking my question. Clearly, China is a market -- the China automotive market is a market where you can be quite vertically integrated from a chip supply chain perspective. The market is large enough in terms of volumes, and there seems to be some ability to invest in that area by domestic China competitors. So my question for you is, how are you planning to retain your business with China automotive brands when you probably long term see increasing competition from the domestic players?

Yes, Gary. First of all, it's our business. It has been our business and will continue to be our business to be competitive. So I come back to your specific point, but I mean in itself, it's nothing new. Our whole game, our whole priority in life is to be competitive wherever we play. So in China, indeed, so far, the competitors, which we do see in the automotive space, which you focus on, have been largely our Western competitors plus relates from Japan. So we have hardly seen any local competition. So that's absolutely right. Now over the past, I'd say, couple of quarters, local competition in China came more up in low-end micro controllers. However, not in automotive. We haven't seen that entering into automotive at all. We also don't play that much in the low-end microcontroller space. So I mean, we've been seeing it, but it's not been a big event for us at all. Secondly, we do see a significant focus of local Chinese up-and-coming semiconductor companies on silicon carbide. I mean I just spent 1.5 weeks in China, and it was obvious that there was massive investment and a massive focus both in factory engineering and device engineering on silicon carbide in China. The good news, if you will, is that this doesn't really matter for us because that's one of the businesses we do not do. But I think it takes some of the focus away from the things we do. My personal take would be that probably going forward, we will see a start of more competition in the simpler analogic signal world in China, which would then probably also touch automotive. I don't say, Gary, we have it, yes, it's not like we are losing or being under pressure there today. But my take would be probably that's the one segment where local Chinese semiconductor competitors will also focus on going forward. But again, I mean we've seen this in Korea. We've seen this in Japan in the past. So it's not the first time that we are confronted with local competitors. Yes, we stay paralleled about it, and we'll make sure that we have made an long-term strategies, which are on top of that.

Thanks for that detail, Kurt. If I follow up, I wanted to ask about your purchase commitments. They've been running just below $4 billion for the past year, which is consistent with your flattish revenue, but it seems counterintuitive to the maybe the market dynamics that we're in where seemingly, you'd have to put less of a commitment with your foundry partners. So maybe if you can just speak to the trends that you expect in your purchase commitments given the industry dynamics through '24?

Well, those are multiyear commitments. So I guess you referred to, I think in the Q, we have something like a $3.9 billion commitment sitting, which is a multiyear commitment -- which is badly required and badly needed to support our growth over the next five-plus years, which is what this is referring to. So nothing unusual, nothing to worry about. It's just needed for those third-party foundry wafers, which continue to be very tight from a supply perspective and where we are glad we have these commitments to support actually the customer growth. This whole supply situation. Lead times have normalized. That does not mean, however, that we are in every place completely out of the woods. So there is still a couple of technology nodes where we are actually short, which are also leading to quite a few complications. And there is quite a few others, and that's actually quite a few where we are just fine, but where we have very stringent discussions with our customers that they need to make sure they give us mid- to long-term forecast because once the business comes back out of this inventory digestion cycle, we really have to make sure we don't enter into a similar period like we did in the second half of 2020, which is not -- that's not far away from a supplier capability versus demand perspective. So that's why those long-term agreements, which we have there are really needed in the mix of our future revenue growth.

Thanks again.

Thank you. Our next question comes from the line of Joshua Buchalter with TD Cowen. Your line is now open.

Hey, guys thanks for taking the question and good morning. So I wanted to ask about the Auto outlook for next year. If we sort of lay out the puts and takes, production growth will be lower, pricing neutral, it sounds like but you mentioned that 2023, there was some element of digestion. I mean as we stack up the content growth and sort of flat to up production and flat pricing, is there a reason, how should we think about 2024 Auto growth for your business compared to 2023? Is there a reason it should be less than '23? Thank you.

Hey, Josh, good trial. As I have to say to, I think, Vivek earlier, I will not guide now on the segment level 2024 but I can give you at least some of the dynamics at work here. Yes, the SAAR -- the underlying SAAR growth next year is going to be less than it was this year. I think the mix of the penetration to xEV vehicles is better, as we discussed earlier, so going to the 40-plus percent level. So that's supported relative to this year. So it drives further content from where we are. I agree with your statement about more neutral pricing. I think that's a fair assumption across the Board. And having said all of that, the only remaining piece next to our company-specific growth drivers, which are well in place. The only remaining piece is the cycle of inventory digestion and going back to normal end demand, which is kicking through to our revenue. Currently, I can only repeat it, we are undershipping demands. And again, we do this intentionally. We've done it for a few quarters already. It's going to be another couple of quarters, but maybe it's fair to assume by middle of next year that is behind us and then the revenue growth rates in automotive and everything else will go back much closer to what the real end demand is. Think about it this way. But so it is really misleading to just look at annual revenue growth in Automotive against SAAR because there is so many other things that work, especially this inventory cycle.

Understood. I can at least try. I guess I could ask it another way. You guys used to give a metric about I think it was 70% of your Auto business was tied to SAAR and the balance sort of to more content growth drivers. Maybe you can help quantify that mix or maybe give some directional drivers of things like radar, BMS, the S32 platform as you think for [indiscernible]. Thank you.

That's not our model, Josh. That might be a model you made, but we haven't really said that. So what we do say and what fits also to your earlier question, is that we do see a continued strong content increase, which is independent of SAAR. And I think that is something which is probably in the 5% to 8% bracket. And that keeps going. Again, there is no reason that would be slowing next year. But again, it is overlaid by the inventory cycle.

Got it. Thank you.

Thank you.

Thank you. Our next question comes from the line of Toshiya Hari with Goldman Sachs. Your line is now open.

Hi. Good morning. Thank you so much for taking the question. Kurt, I wanted to ask about the pricing environment in '24 you mentioned that you expect a relatively neutral environment. When we spoke at our conference a couple of months ago, I think at the time, you sort of hinted that expectation back then was for '24 pricing to be up a little bit more than what you saw in '21, but a little bit less than '22. So I guess there's been a slight change in how you think about pricing A) is that correct? And B) if so, is this more demand-driven? Or are you seeing lower input costs that's enabling you to keep pricing a little more flattish into '24?

Yes, Toshiya. It's indeed, it's slightly better. It depends on which perspective you want to take on this relative to the input cost. So what we are seeing now is a slight increase in input costs across everything. So it's really -- I mean, there is pieces which are going up, unfortunately, quite a bit. Others are starting to come down. So but in the mix, we have a slight increase, on top of that, we put our productivity efforts, and that is what we need to pass on to our customers in terms of -- well then you land in a pretty neutral area. And that indeed is a touch better than what we discussed when we recently met in your conference. And yes, it is just important to see this indeed in the context of what you mentioned over the past couple of years because in my view, in '21, we increased, I think, by 2% for the whole company in '22 by 14%. This year, we're going to tell you in the Q4 earnings, what it will be, but indeed, it's again a solid number. And that comes then down next year to a more neutral but I actually made the comment in my prepared remarks because I wanted to make sure there is no confusion about this possibly going back because we've had the question very often from analysts and investors. If not this whole pricing would be reverting back down all the way to the pre-COVID levels, it is not. I just want to be very clear. It's just neutral this coming year, which is fine from our perspective.

Great. That's very helpful. And then as my follow-up, you're guiding your comps and other business down, I guess, upper teens on a sequential basis in Q4. Is that primarily the base station business and the weakness in that market sort of catching up to you guys? Or is there something more to it? And is it fair to say that Q4 is the bottom for that market? Or could things stay relatively weak into the first half of next year? Thank you.

Yes. So into Q4, it is both. It is the weak base station demand, which you are also quoting. So it's -- I mean, all the hopes this year have been on India and as you hear left and right, it's just going as strong as people and as we had expected. But there is a second component in that weaker revenue for us in Q4 and that is the decline of the pent-up demand in secure cards. I think we spoke about this a couple of times through the year that by favouring Mobile demand in '21 and '22, we have brutally undershipped the secure car business and the solid part of the pent-up demand, we actually satisfied through this year, and that starts now to go away. And so that's plus the weak Mobile base station environment explains the downtime into the fourth quarter. How it all plays out next year? I mean, just to go back to my prepared remarks, clearly, that whole segment next year is not necessarily set up for a huge victory lab. Some of these trends, especially in the base station market will likely continue into next year. So staying relatively speaking weak.

So I'm looking at time now. I think we are nearing the end of the call. And I would like to summarize there. Bill and I really think the main theme of this quarter is especially that since there has been so much say, different messaging from our peers, we really think that the fundamental content growth drivers in our key businesses being Automotive and the Industrial IoT space are in place, but all of this has been massively overlaid by to what extent people have proactively or not proactively managed the inventory cycle. We have tried to do this as productively as we could most notably for all of you in the reported general inventory numbers, which for six quarters now. We have kept very lean. And also earlier this year, we started to try and do a similar thing on our direct customers by not enforcing NCNR, by being reasonable by finding alternative commercial solutions putting us actually in a situation where we think we have -- due to this somewhat undershipped the demand more than our competitors which leads us now going forward in a situation which is much less pronounced relative to the dip and much more realizing the intended and envisaged soft landing, which we wanted to have. That is the main point here. Other than that business really going back to a more normal pricing environment lead times being normalized, all reasons to believe that this growth quarter from a quarter year-over-year perspective throughout all of next year, resuming growth. You see this in Q4 already. We have year-on-year growth and that should continue throughout all of next year. With that, I thank you all for the attention today. Thank you very much. Bye-bye.

Thank you all. We'll call it here.

This concludes today's conference call. Thank you for participating. You may now disconnect.