Ladies and gentlemen, thank you for standing by. Welcome to the TowerJazz Third Quarter 2016 Results Conference Call. All participants are currently present in a listen-only mode. Following management’s prepared statements, instructions will be given for the question-and-answer session. [Operator Instructions] As a reminder, this conference is being recorded, November 15, 2016. Joining us today are Mr. Russell Ellwanger, TowerJazz’s CEO; and Mr. Oren Shirazi, CFO. I would now like to turn the call over to Ms. Noit Levi, Vice President of Investor Relations and Corporate Communications. Ms. Levi, please begin.

Thank you and welcome to TowerJazz financial results conference call for the third quarter of 2016. Before I begin, I would like to remind you that some statements made during this call may be forward-looking, and are subject to uncertainties and risk factors that could cause actual results to be different from those currently expected. These uncertainties and risk factors are fully disclosed in our Forms 20-F, F-4, F-3, and 6-K filed with the Securities and Exchange Commission, as well as filings with the Israeli securities authority. They are also available on our website. TowerJazz assumes no obligation to update any such forward-looking statements. Now, I’d like to turn the call to our CEO, Mr. Russell Ellwanger. Russell, please go ahead.

Thank you, Noit. I welcome all of you to our conference call discussing our third quarter 2016 results. Thank you for joining us as well as sincere thanks for your ongoing support of our company. As is clear, we're very pleased with the results of this quarter, a great credit to our employees worldwide, manufacturing, business unit, sales, logistics, were close to pristine execution. This was another record quarter for us of ongoing revenue growth and substantial improvements in our profitability. This is the 11th quarter of year-over-year revenue growth. Revenues being at all-time high combined with record growth in operating profit leading to record EBITDA of close to $400 million annualized run rate, a strong net profit of about $200 million annualized run rate with corresponding growth and free cash flow, demonstrating that our business model including acquisitions that provide immediate ROI with long-term guarantees and growth potential is working and is being well executed. We continue to see strong demand in our factories, which has driven high utilization in core fabs, which was foreseen and forecasted and the driving reason for the creation of TPSCo and buying the San Antonio facility from Maxim. Both Fab 2 in Migdal Haemek and Fab 3 in Newport Beach had increases in capacity over the quarter and both fabs are running at high utilization levels of above 90%. In addition, we're adding additional capacity of about 5% to Fab 2, which will be completed during the first quarter of 2017. Utilization in Fab 2 in Migdal Haemek remained at about 70% in quarter. At TowerJazz Panasonic Semiconductor, all 3 fabs are shipping increased diversified third party products as analog and analog power devices in addition to a strongly diversified set of applications to Panasonic itself. Specific to our third-party business, at Tonami,…

Thank you, Russell, and welcome everyone. Thank you for joining us today. We are very pleased with the outstanding results we released for the third quarter of 2016 achieving a record EBITDA of $97 million in the quarter, record cash from operations of $86 million, as well as $51 million in net profit, which resulted in $0.58 per share on a basic and $0.52 diluted earnings per share. All of this contributed to our very strong balance sheet with shareholders equity reaching a record level of $636 million. I will start by providing our high level P&L analysis for the third quarter and nine months of 2016 and then discuss our balance sheet and cash flow. The availability of our growth model demonstrates how a large portion of incremental revenue goes to the bottom line, I would like to present an analysis of the incremental EBITDA and net profit margin increase in the past quarters and years as resulted from the corresponding revenue increasing. Comparing our third quarter 2016 result to the same quarter in 2015, we see $34 million and $38 million of incremental EBITDA and net profit respectively as compared to $82 million incremental revenue reflecting a 41% and 46% incremental EBITDA and net profit margins respectively. Comparing our third quarter 2016 results to the third quarter in 2014, we see similar picture, $60 million and $71 million incremental EBTIDA and net profit respectively as compared to $100 million in incremental revenue reflecting 60% and 71% incremental EBITDA in net profit margins respectively. Comparing our year-to-date 2016 result to the same period in 2015, we see $89 million and $207 million incremental EBITDA and net profit respectively as compared to $203 million incremental revenue reflecting 44% and 102% incremental EBITDA and net profit margin respectively. And lastly comparing…

Thank you, Oren. Before we will open up the call to the Q&A session, I would like now to add a general and legal statement to our results in regards to statements made and to be made during this call. Please note that the second quarter of 2016 financial results have been prepared in accordance with U.S. GAAP and the financial tables in today’s earnings release includes financial information that may be considered adjusted financial measures and non-GAAP financial measures under Regulation G and related reporting requirements as established with the Securities and Exchange Commission, as they apply to our company. Namely, this release also presented financial data, which is reconciled as indicated in the table or in the call on an adjusted basis, after deducting, one, amortization of acquired intangible assets, two, compensation expenses in respect of equity grants to directors, officers and employees, three gain from acquisition, net, four non-cash financing expenses related to bank loans early repayment; and five, other non-recurring items such as income tax benefits. Adjusted financial measures, the non-GAAP financial measures should be evaluated in conjunction with, and are not a substitute for, GAAP financial measures. The tables and the earnings release also contained the comparable GAAP financial measures to the adjusted financial measures as well as the reconciliation between the adjusted financial measures and the most comparable GAAP financial measures. EBITDA is reconciled in the tables from GAAP operating profit. EBITDA is not a required GAAP financial measure and may not be comparable to a similarly entitled measures employed by other companies. EBITDA and the adjusted financial measure and the non-GAAP financial information presented herein should not be considered in isolation or as a substitute for operating income net, income or loss cash flows provided by operating, investing, and financing activities per share data or other income of cash flow statements that are prepared in accordance with GAAP and is not necessarily calculated or presented on a basis consistent with the same or similar data presented in previous communications. And now, we will open up the call for Q&A. Operator?

Thank you. Ladies and gentlemen, at this time, we will begin the question-and-answer session. [Operator Instructions] The first question is from Cody Acree of Drexel Hamilton. Please go ahead.

Hi, Cody.

Hi, Russell. Thanks for taking my questions and congratulations on the steady progress. May be Russell, if you could, could you just talk about your degree of visibility as we head into the December quarter and then maybe how that visibility extends into 2017?

December quarter, you mean the Q4?

Yeah.

So we guided, I think, a nice increase for the quarter, going up to $340 million, $136 million analyzed revenue. Our visibility there, I think, we’re very predictable at hitting our guidances. So we gave a, I think, nice growth guidance that we feel confident that we will be able to hit. We had presented, I think, last quarter the fact that we have at the 1.2 billion run rate that's about two thirds of that 1.2 billion was under special models be it the Panasonic or the San Antonio long-term contracts, be it prepayments from customer that is then amortized over time, be it the TOPS businesses that are multiple or take-or-pay arrangements. So I think our business models give us may be a bit better visibility of mid- and long-term than other foundries might, we really work off of quarter-by-quarter purchase orders only. So going into 2017, I did state that all that we see would indicate continued strength. We haven't given a target for 2017 and typically we wouldn’t refer to that until we release Q4. But from everything that we see right now, 2017 would look a continuation of strength for the company with multiple new activities coming into play that we have not discussed yet as well and continuation of the strong growth that we’ve had today. Our CAGR over the past years have been varying between 30% and 35%. So very, very strong growth rate and obviously that shows activities that if they continue, which we think that they should continue, feed stronger mid-term and long-term growth. So I think our visibility is good by virtue of our business models and what we hear from customers, we see continued strength. Hopefully that answered your question.

You did, thank you, Russell. Last year going to the March quarter, you were able to offset normal seasonality with the strength of your [indiscernible] share gains. Does your visibility end in the March period and I guess how are you thinking about normal seasonality in March or is there such a thing any longer?

We haven’t guided for Q1 and we won't guide Q1 until Q4. I did state that 2017 looks strong. You don't have the type of CAGR that we've been having without having growth in market share. The only thing that can stem seasonality is an increase in market share. So, obviously, our market share is growing and that is the only way you can stem seasonality providing that Q1 will be down in revenue, which it typically is versus Q4. But I think our market share growth would give us the drive and capabilities to stem seasonality should it be a seasonal quarter, but more than that we haven't guided yet and I don't want to speculate on Q1 at this point.

That’s great. Thank you. And then I guess maybe over the next couple of quarters or maybe even just into the December period, any delineation as to the driver of that $340 million or the growth that you are sequentially, if you can help us whether that’d be CIS or RF or power management?

So I stated in the script that year-to-date and nominally the numbers I gave would be our estimation of the year that every business unit that we have has seen at least a 15% year-over-year growth with some of the mix increasing up to 40%. Now you could even say higher than 40% is the business that we've grown through extending our relationship with Maxim, we include that really into our TOPS business, but I did not include that into the numbers of organic growth, a business unit at 40%. But the numbers I gave are – the 30% to 35% CAGR depending on where we wind up in the Q4 revenue, it’s pretty well distributed among all of our businesses. The biggest as far as the amount of dollars of growth was within the RF space on absolute dollars, probably the biggest as far as percentage growth was in CIS.

And then last for me, just from a capacity growth standpoint, as you look beyond your needs for 2017, do you believe that there will be sufficient opportunities for you to replicate the current model where your customers are covering fixed costs with these long-term supply agreements, do you believe that there are enough opportunities in the market for this to be a continuing ongoing business model?

If you're talking about operational acquisition where we would buy something with the idea of having free capacity on top of it – on top of the acquisition where the acquisition itself covers the fixed cost, I believe that those opportunities exist, definitely. There is additional model that we talked about separate from that, which is getting involved in enabling a greenfield site, for example, possibly in China to where we would be giving our operational capability towards the establishment of a facility, may be acting as general contractor facility, bring up technologies, operating that and hence being able to be part of greenfield that typically is billion plus investments to where from day one it would be accretive to us, not a downside on our cash, but giving us operational capability at cost, cost minus, or a slight cost plus, be it what it may. So I think that those opportunities exist as well. So there's two different models. One is again the ability to take on a going concern or maybe the customers utilization levels are going down over time and I think that they exist and – readily exist. For us, it was always a question not necessarily I can’t say always, but the past years, it's been a question more of digesting what we have and showing that the models work then taking advantage of all the opportunities that are on our plate. So I can say that over the past years, we had more opportunities in that regard that we wanted to absorb. Now I think we are very smart in what we did absorb. The Panasonic agreement was a very, very large agreement for us and without trying to sound too self aggrandizing, but within two quarters of that arrangement having occurred or three…

Very good. Thank you and congratulations.

Thank you.

The next question is from Rajvindra Gill of Needham & Company. Please go ahead.

Hi, Raj.

Hi, how you doing. Thanks and congratulations on the great metrics.

Thank you.

On the guidance for revenue and then also on the gross profit fall through, in the past you talked about kind of a 50% incremental gross profit fall through. Should we see that also in Q4 for the gross margins?

Yes, last time we talked about between 50% to 60%, so average of 55%, should continue to see that. Yeah, this is why I started my reading with explaining – showing how in the past we demonstrated – actually it was between 41% to 70% incremental margin, 2016 against 2015, 2016 against 2014, all those metrics were between 41% to 70%. So surely expect for the future 50% to 60%.

Okay. So then roughly that would imply that gross margins would improve maybe around 100 to 130 basis points quarter-over-quarter, it was something like 27%?

Whatever, you calculate it, based on the 50% to 60%.

Okay. So, in terms of the revenue growth that you are seeing, I think last time you kind of break out the percentage of sales by RF, power management, image sensor and other, I’m wondering if you have those metrics as well and if you could talk about specifically what you are seeing in the RF business, you mentioned the new products with a low noise amplifier and switch on a single die, but I was wondering if you could talk a little more about some of the secular trend you are seeing the RF business as well as maybe give those on a percentage basis if you have those available?

We certainly have them, but what we did stat is that each year that we would present on the Q4, the breakdown of revenue as a total of the business units and we plan on doing that in Q4. We’re not doing it on our quarterly basis nor is it necessarily as interesting on a quarterly basis. So with the Q4 release, as we did last year, we will give a breakdown of revenue for business units, what that business unit did in growth and what we expect we’d have in growth in the next year. As far as the specific trends within the RF, what is your question there?

So you are clearly gaining some share in the RF business with your new products, but beyond the market share gains, in terms of the market demand for higher frequency bands, for things like carrier aggregation that are pushing more – more frequency bands in the market, I was wondering if you could kind of characterize the demand landscape in the RF power management – power amplifier market?

So the front-end module market is made up of multiple chips, you have the switch, you have the power amplifiers, you have power amplifier control, you have the low noise amplifiers, et cetera. We've done very nicely this year with a silicon germanium based power amplifier specifically for Wi-Fi and that's been a very, very big growth engine for us. So that was a new application we entered into that I think we benefited from right now. The ability to work off of a silicate germanium RF CMOS platform and combine multiple functionalities into a single chip certainly has a fit for our customers as it reduces the packaging cost of the individual chips that otherwise have we put into a module. So I think that that trend continues. So we’re working very closely what we announced on the combined switch LNA is one such avenue that customers are pulling for strongly and again it reduces their ultimate cost. So in that area, we see great strength. Certainly, the amount of front end modules has grown very, very strongly with going from one or two to right now, I think, at present generation, we are at some nine front-end modules for mobile platform and may be growing beyond that, so that continues in that trend. I think that’s one of the beauties of that area right now is that even if the smartphone volumes would somewhat stabilize the content is continually going up.

Okay. Got it. And on the power management side, I wondering if you could maybe talk about what you are seeing on the market trends there specifically the automotive or the industrial end markets? Is that noteworthy…?

I’m sorry.

Anything that’s kind of noteworthy based on your customers and the business trend this quarter?

So overall power management has I think increased amount in interest from everyone. Every system that there is has power management chips. For IoT to really be facilitated, it definitely necessitates low power consumption either from the net or from batteries and we see that certainly in the area of light goods, the necessity to reduce – and as well put a sticker on every light that sold as far as the power consumption continues. So the combination of discreet and power ICs and the ability to make them with the Rds(on) figures continues. And we have roadmaps with all of our customers within the discreets that drive – most of our customers are in the areas that drives a continuation of the low Rds(on) discreet side and we drive ourselves the Rds(on) on the power IC. Having data that we have this one – Gen 4 flow of the 10 milliohms square millimeter and going to our Gen 5 of the 8.5 that I believe is seriously the very best figure of merit, not just of foundries, but of everybody in the industry, so that continues. If you ask about automotive, we have had very strong, unfortunately, the customer that we’re dealing with this on for a variety of reasons is not press releasing presently, but I believe that we will process with them and that's in the area of electric cars. So – and the ability for power management in electric cars is very substantial, so that's a big growth driver for us in the power management of very high-end capabilities. If you ask specific on automotive, that's where we see a big demand right now. Our larger automotive demand though right now that we know about into automotive – let me just add one other thing. We make a lot of power management devices in Panasonic itself that is sold very strongly into automotive. That is our capability what we are selling into Panasonic and Panasonic diversify end products and we don't give specific numbers of that is, but it’s really obvious that a lot of the power management that we do, there isn’t automotive. But from non-Panasonic, a lot of our automotive growth right now and demand is really in the area dealing driver notification and driving into autonomous vehicles and that deals with millimeter wave, so radar for collision avoidance and as well as cameras. So that's the – right now what we see very strong demand from high-end integrators or the end customer itself deals with the – at this time, driver notification, but really driving our – driving in automotive – but right now it's driver notification and then migrating into next generation autonomous vehicle. And that’s the area using sensors be it in the area of RF or be it in the area of cameras, but them really being sensors to driven an autonomous vehicle ecosystem.

And your manufacturing process can support all different types of sensors, whether it’s camera base, radar based or lidar based?

All three correct.

Okay, got it. And just last question from a follow-up. In terms of – now that the balance sheet is looking good and the business model has played out – is playing out well. Are there specific kind of end markets where you try to target and employ a similar business model that you did with Panasonic and Maxim where you are getting incremental capacity at a very limited CapEx basically buying underutilized fabs, is there a particular market or a part of the world where you would pursue that strategy going forward or do you think you have enough capacity right now?

I didn’t quite 100% understand the question. If you just reword it and I will…?

What I’m basically saying is the business that employed has been working with Panasonic and Maxim. And my question is now that the balance sheet is in a good condition, are there other end markets, are there other places in the world where you want to employ a similar business model where you get the capacity, incremental CapEx, very limited CapEx and you can grow your capacity and grow your revenue base? Is there other areas – other markets that you are going to pursue a similar strategy or are we just kind of – we have enough capacity at this point?

We have enough capacity at this point for this point be it through a greenfield type of capacity as I had mentioned or be it through another HDLS [ph] as we did with Maxim or with Panasonic, the 30% CAGR, $1.6 billion is what we said as our present pure operational capacity, that's not dealing with NRE, it’s not dealing with activities that we do in TOPS where we see capability elsewhere, but the $1.6 billion providing that we maintain present growth rates that’s good for 2018 possibly.

Right.

So, certainly, we’re looking and we are actively looking at pursuing other such deals for capacity expansion. Now if you ask about – and that’s just in general about capacity expansion. What are the areas that we’re very, very interested in? We are certainly, extremely interested the sensor area. And there is certain types of sensors, if you look for example at MEMS – to be a major player in MEMS, I’m not talking about having a contract with one person that you think will be bigger so – but really to be a major player, in MEMS, you have to bet multiple, multiple customers. Different with MEMS than with other specific flows, if you have a power management flow, we have PDKs, our RF flows have PDKs, process design kits, and our power management is modular platform. So it's – I’m not saying it's easy for the factory, but it's not difficult for the factory to run prototypes because there is not tremendous customization. MEMS is not that way. MEMS requires tremendous customization. So it's very possible that we would go after a partnership with somebody that may be already has a MEMS fab or to go after a possible acquisition in the MEMS area in order to vet many, many customers that allow us to take many, many good customers and those that then start growing as they get to 500 or more to transfer certain capabilities to higher volume factories that allows you then to benefit from the volume that you have without diverting the capability of the factories to the vetting of many customers that need extremely customized process flows. Hopefully, that answers your question. But very, very short answer, the specific area that we would focus on is the area of sensor and there’s all types of sensors that could be made. We are very, very strong right now in magnetic sensors, an activity that we had done with Crocus that's has been press released multiple times, but we have good capability in magnetic sensors, but there's a variety of other capabilities that we think are critical and very advanced that would require MEMS capabilities. And to really grow within the MEMS front as well as maybe some others sensors, you would need some very specific manufacturing capability to vet many customers.

Great. That’s very helpful. Thank you.

The next question is from Richard Shannon of Craig-Hallum. Please go ahead.

Hi, Richard.

Hi, Russ and Oren, how are you guys doing?

Very well.

Congratulations on the excellent execution here. Keep up the good work.

Thanks.

I apologize, I’m at an airport, so it might be little bit loud here and I didn’t – I might have missed a few comments here, I’ve approaching through the airport. But I will go ahead with the questions here. I want to follow-up on one of the last – most recent questions here. I think Russell you mentioned maximum revenue capability of $1.6 billion annually, did that include the capacity decisions you are making in San Antonio?

No, that would be no additions. San Antonio could increase in capacity, but we have not talked about that, we’ve not released that nor have we actually began to execute the capacity increase in San Antonio. I think what you are referring to, in San Antonio, there’s a separate building that now has a few implanters in it that could really be built out, it’s a separately clean room as well as in the main facility, it would not be difficult to extend present gray area in wide area, but that doesn’t not – that is not included in the – what we are talking about now. What I’m talking about now is the present not just facilitized, but equipped wide area capability.

Got it. Okay. That’s helpful. Thank you. Second question is, Russell, in response to one of the earlier questions, you made an interesting comment, I’d love you to expand on that across all of your relevant business areas. But you talked about your overall very strong growth, not only by market growth, but also market share gains. I’m wondering if you can go through major segments that you have [indiscernible] to the extent to which you believe you’ve gained share and how does the ability look forward to gaining more share? In some case you are getting to a higher share to maybe more difficult to gain even more, but I’d be great to hear about your thoughts going forward there on getting more clarity in your target markets.

Twofold, I had stated that we have announced on an annual basis, meaning, every fourth quarter that we will talk about the specific volumes and growth within each of our business units as a consolidated company, so we will get into that in Q4. But just in short to answer your question, I stated in the call, we had very big market share increase within CMOS image sensor, we stated $0.40, this is of the organic capabilities excluding the Panasonic and we expect to continue a very, very high market share growth in CMOS image sensor. The biggest dollar growth has been within the RF space. It’s not the highest percentage growth in market share, but it's nicely – a nice double-digit number. Will that continue in these rates? We would expect that we will continue to see very strong growth within the overall RF space. We have multiple very strong platforms within the infrastructure. I had mentioned this S4, working on S5, and now presently have a 60% market share. The amount of data traffic is increasing vastly if we just were able to maintain, not even grow market share, we will benefit from that very strongly, just as a function of data traffic. And then you have the whole area of being able to integrate more devices -- front end module devices onto single chips, which is moving into the SiGe type of a platform to have certain power amplifier capabilities, I think, that we have very nice opportunities to grow there as well. Within our TOPS business, I had mentioned very briefly and I think it’s the first time we’ve mentioned it that we’ve taken on a very big project with a partner with gallium nitride that has within its very, very novel construction that we think…

I think you’ve covered everything, at least that I can think of. So thanks for that great detail. My last quick question to follow-up on one of those comments on the GaN projects you are on. This sounds like that related to the power market and not the RF or wireless market, is that correct?

Presently, we are focused on the power market. It doesn’t mean that it couldn’t be brought into the RF market, but it’s not our present focus.

Okay, great. We will look forward to hearing about that more in the next few quarters. And that’s all my questions guys. Thank you.

Thank you, Richard.

The next question is from Lisa Thompson of Zacks Investment Research. Please go ahead.

Good morning. Just two quick things. One was on the gallium nitrate project, could you give us a hint as to what kind of end users might be interested in that sort of product?

All of the big power players could be interested in a project like that without overstating. You know who the power players are. Our customers that exist right now is a good base of power players. You have within that ON Semi, you Maxim, you have Vishay, you have Infineon, and et cetera, et cetera. Infineon itself has very good GaN flows and two different types of GaN flows. But the whole power area would be very interested as well as an enabler for fabless companies that they will be coming up and we would wish to have something that differentiates them as an entry itno the market. But I believe that entire power market is interested in gallium nitrate.

And is there any particular end user product that is going to be particularly useful for or better for?

It’s across the board. I mean GaN itself promises – it’s a much smaller devices as far as the capabilities it has to withstand higher heats and be able to produce the same output parameters.

Okay. And then just quickly on --?

I’m sorry. Hello.

Hello.

Lisa you got cut off – we couldn’t hear your question. Operator is everything okay?

The next question is from Cody Acree of Drexel Hamilton.

We are still on anyway Russell. Just a quick follow-up. On CapEx you mentioned 5% increase in Fab 2, was that correct in your comments?

I didn't say anything about CapEx, I talked about capacity.

Right. I guess, I’m just questioning how that would flow into your CapEx expectations for Q4 would that something – you had talked about previously kind of a base line in the $40-ish million per quarter, does that 5% bump that number up somewhat in Q4, what are your expectations I guess and then into 2017, how long before we get back to that $40-ish million baseline CapEx written number?

Yeah, there is no change in any of the forecast we gave. The capacity increase of 5% that Russell mentioned was already in the model. It was already in the CapEx number that we paid previously. So already, for example, Q2, Q3 we had payment towards that capacity increase until the tools are arrived and installed. Like Russell mentioned, Q1 2017, it takes time, but the payments are already in the model. So there is no any additional CapEx from this discussion. And you are correct that we forecasted that from Q4 and beyond that for the quarters 2017, we will go down from the current levels of $55 million to about $40-ish million like you mentioned, so $40 million to $45 million a quarter, certainly not more than that. Informed this quarter already, we will achieve it.

And then lastly, Russell, you alluded to this a couple times in some of your comments about kind of maximize – optimizing your manufacturing, balancing your loads, I guess, among your different facilities. With you just ramping into San Antonio, I think, you would expect the first revenue in Q4 freeing up maybe some of that, the capacity in Newport Beach maybe for silicon germanium and some of the CIS capacity in Israel. As we look at it, 2017, is it really when we start to see the impact financially of some of all of this transition work that you’ve done through 2016 or is that already starting to flow through the model?

I think that you’d see it 2017. It’s not that it wouldn’t have some small impact, but probably you will really not see in Q4, but 2017 should start to see the benefits of the increased usage of capacity at San Antonio and hence incremental growth in the company while using that capacity and being able to free up other capacities elsewhere for maybe things that are higher margin.

All right. Very good. Thanks, Russell.

Thank you, Cody. Very good question.

The next question is from Graham Tanaka of Tanaka Capital Management. Please go ahead.

Hi, guys. Congratulations. Nice quarter. Just wanted to understand if there is any change in average prices, I’m not sure how you price your – per wafer or whatever, but is there any kind of inflationary, deflationary trend? And is that going to change in the future? Thanks. Is it getting richer or not?

Yeah, basically, we see a very modest increase in average selling price, but it’s mainly not because of any market trends, it’s because of our business focus that we are – the cross qualification that we do. So we are – as we say cross qualified TPSCo fabs and also – mainly Tonami and also San Antonio is now in cross qualification and also Fab 2 was cross qualified to the Fab 3 Newport Beach product. So these resulting in effect that we are able to accept more higher margin business to a fab that was roughly over utilized and this is increasing the average selling price, of course improve the margin of the profitability, but it’s modest, not like 20% increase, it’s very modest, but it’s increasing, it’s not going down.

Certainly stems the tide of year-over-year ASP reduction and that’s one of the big areas and focuses that we had about being able to cross qualify in order to have – I think Cody referred to it, in order to really optimize the mix at any given factory. The worst thing that you can have is to gate the high-margin product because of a demand in a customer relationship at a lower margin product. So the manufacturing – world manufacturing flexibility becomes very critical in order to maximize at any given quarter our local mix.

Okay. Just wondering what the costs save is for some of your customers in that higher growth area where you are combining functionality onto one chip. What is their cost and how much of that are you – how much are you able to capture as a lift to ASPs [ph]?

I honestly think that’s a question that you should ask the specific end customers that we have, what they would be saving on it. I don't have a specific number to start with. And generally I don't, but I don't think it's really for me to talk about the consolidation of their cost and what it would mean as they put LNAs together with switches et cetera. So even if I did have the number, I’m not sure that it would be something I should talk to as to how they’d be benefiting. In our case, I can certainly say that as we increase functionality, we always reset the price point. So a new platform, there is – will always be a year-over-year price reduction and maybe not every year-over-year, but on average there will be. The way that we stem that is by putting out new platform with an either a better figure of merit or with greater functionality. And so that always for us resets the price point and brings us back to a price of where we had been or better from several years ago because there is going to be a price – year-over-year price reduction of an existing flow.

That’s terrific. Now on just the smaller markets, automobile market where EV, electric vehicles will become increasingly lager percent of the mix globally, just witnessed what Tesla is doing. What content in a car might Tower be addressing at the current tide? What is potential per car?

On as far as the amount of chips or what we are focused on?

Yeah.

The major focus is battery management. As far as how many chips per car that is, I would have to speculate. I mean it’s – very, very many. I don’t have for any given car a specific number for you. But it all really for the most part deals with battery management.

Thank you. Good luck. Great quarter. Thanks.

Thank you very much.

There are no further questions at this time. Mr. Ellwanger, would you like to make your concluding statements?

Certainly. Again, it was good quarter. It's been a good trajectory in the company. Many of you both analysts as well as investors have been long-term with the company and we really do appreciate your faith in us and the motivation that we have from those relationships. We are very excited. Tomorrow morning we ring the opening bell at NASDAQ, followed by an Analyst Day beginning at 10 AM at the NASDAQ building. Those of you who have registered for the day, we very much look forward to seeing you. For those of you, who did not register, the presentation will be available on our website before the event begins and we will have an on-demand webcast following the event. Again, we look very forward to those of you who have signed up and invite anyone who didn't sign up to after the event look at the webcast. I think there will be very exciting things discussed. It will be – our Chairman will give introductory remarks and I think that will be very interesting to hear his perspective and view on the industry and on us. It will be followed by myself. Then the President of the company will say some words. Each business unit GM will speak. And then we will actually get into a little bit some philosophy of the company and the Head of Human Resources Worldwide will talk about the employee base, what motivates them, how and why we been able to be successful with the acquisitions that we've done. And we will have a good summary of our operational capabilities. And the ending will be our Head of Worldwide Sales talking about the worldwide customer base. Why it’s so strong? And what enables the stickiness we have with our customers? And then I'll give a little closing remark about a recent epiphany that I had had. So, hopefully, it will be enjoyable for everyone uplifting and valuable. And, again, invite – we welcome everyone that had signed up and really invite everyone that didn't to view the webcast. With that, thank you very, very much.

Thank you. This concludes the TowerJazz third quarter 2016 results conference. Thank you for your participation. You may go ahead and disconnect.