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Tower Semiconductor Ltd (NASDAQ:TSEM)
Q4 2019 Earnings Call
Feb 18, 2020, 10:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the TowerJazz Fourth Quarter and Full-Year 2019 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 February 18, 2020. Joining us today are Mr. Russell Ellwanger, TowerJazz's CEO and Mr. Oren Shirazi, CFO. I would now like to turn the conference over to Ms. Noit Levy, Vice President of Investor Relations and Corporate Communications. Ms. Levy, please go ahead.

Noit Levy -- Vice President of Investor Relations and Corporate Communications

Thank you and welcome to TowerJazz financial results conference call for the fourth quarter and fiscal year of 2019. Before we 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.

Please note that the fourth quarter and fiscal year of 2019 financial results have been prepared in accordance with US GAAP.

The financial tables and data in today's earnings release and in this earnings call also include certain adjusted financial information that may be considered non-GAAP financial measures under Regulation G and related reporting requirements as established with the Securities and Exchange Commission. The financial tables include a full explanation of these measures and the reconciliations of these non-GAAP measures to the GAAP financial measures.

Now I'd like to turn the call to our CEO, Mr. Russell Ellwanger. Russell, please go ahead.

Russell Ellwanger -- Chief Executive Officer

Thank you, Noit, and thank you everyone for joining our call today discussing our fourth quarter and full-year 2019 business and financial results, as well as 2020 and beyond main growth drivers and supporting activities. Fourth quarter revenues were within our guidance at $306 million. We concluded 2019 with revenue at $1,234 million, generating a net profit of $90 million with free cash flow of $119 million. We continued to maintain a healthy balance sheet and our financial situation is strong.

We believe to be well positioned to participate and leverage the expected markets recovery and improving business trends.

Oren Shirazi, our CFO, will provide a more in-depth review of our fourth quarter and full-year 2019 financial results upon the conclusion of my remarks.

TowerJazz entered 2019 knowing Q2 within list of new phase of our contract with Panasonic, one which reduced circa $90 million annualized revenue against the Q1 2019 revenue run rate. Otherwise, the year began with a very positive outlook with good backlog at all major activities of all of our business units. This outlook soon dampened due to the trade war and various inventory correction implications. With no apparent market share losses, these corrections resulted in a 25%, 18% and 25% second half '19 versus second half '18 reduction of silicon germanium, mainly data center, discrete and industrial sensors revenue, respectively.

However, due to strong activities in other segments, we posted a year-over-year organic revenue growth of 5% due to strong long-term customer partnerships with a focus on growing analog and application markets. Customer forecasts and present orders indicate good overall 2020 growth ramping sequentially through the year, which should result in significant second half 2020 versus second half 2019 financial performance,

Accordingly, we expect year-over-year revenue growth in 2020 with low-double-digit organic growth achieved through high utilization levels in our factories, including the ramp of our newer 200 millimeter technology platforms and offerings, an increase in 300 millimeter customer demand supported by capacity increases organically for short to mid-term, and in addition, capacity growth through M&As for longer-term demand.

To summarize 2019, to the best granularity that we have, the breakdown of the $1.23 billion revenue per end market application was the following. Infrastructure revenue, which is predominantly RF optical, was at $136 million. Wireless, predominantly RF SOI, silicon germanium PAs, silicon germanium LNAs and RF CMOS controllers for mobile was at $263 million. Automotive was $129 million. Industrial, predominantly image sensors was $61 million. Aerospace and defense $51 million. High-end photography $50 million. Medical $47 million. Consumer, including computing, power management, room appliances and general accessories and security cameras $120 million. Additional power device revenues were $262 million of which we don't have exact end market application use, but serve multiple of the above-mentioned segments such as automotive, industrial, wireless and consumer. And other grouping of mixed signal devices totaled about $115 million, which serve consumer, automotive, wireless and a variety of IoT application.

Another view of our market is technology based for our three corporate focuses. Seamless connectivity, which relates to RF infrastructure and RF signal for mobile platforms, represented 31% of our corporate revenues. Green Everything energy efficiency, served by power management ICs and power discretes was 38% of our corporate revenues. Interactive smart systems which relates to our sensors offerings represented about 16% of our corporate revenues. The rest of our business, which was about 15% of corporate revenue, serve various mixed-signal applications.

The products within this group include MCUs, ASICs RFID tags, logic standard cells and certain special CMOS embedded memories. These products are computing, industrial, consumer, automotive end markets and aerospace and defense.

Looking into our analog IC business unit that includes both RF high-precision analog and power management. In 2019, we experienced strong growth in RF SOI for mobile of over 40% revenue growth year-over-year. This is a result of a strong and successful ramp of our 300 millimeter technology, which has allowed us to gain market share and high-end applications, for which more advanced digital integration may be required. Built on top of a strong and growing base of advanced 200 millimeter platform application use, for which 200 millimeter, we saw a 24% H219 versus H218 revenue growth.

During the year we made available to customers a new 300 millimeter RF SOI technology which we named QT9 that deliver strong performance in power handling for 5G applications. We won a large number our new product designs with this new technology that are now prototyping and beginning to wrap. We are investing $20 million of capability capex to enable volume production of the advanced features of this platform.

This 200 millimeter RF SOI new platform will further augment the growth from our 300 millimeter RF SOI platform which is enabled this year by $100 million 300 millimeter capacity investment that we previously announced. Our silicon germanium optical business experienced an inventory correction in the data center market. The effect was a decline of silicon germanium revenue of about 8% year-over-year. Due to lead time, orders were offset for revenue by roughly 1.5 quarters. So while orders slowed strongly in the first half due to the inventory correction, most of the revenue reduction was felt in the second half of the 2019 year. By the same lead time reasoning, while we are seeing recovery in orders now, particularly for 5G infrastructure, and as well as signs of depleting inventories in a 100 gigabit per second data center devices, according to forecasts, we expect to size revenue growth of more than 20% in the second half of the year of 2020 as compared to the first half.

In 2019, we won a new product design from all major optical 5G customers on our latest platform H5, targeting 200 gigabit per second and 400 gigabit per second standards and beyond. Several of these products have successfully prototyped in 2019 and several others are now on design positioning us well as these new standards come online over the next few years.

In the area of silicon photonics, in 2019, we announced that one of our customers in 5G had begun shipping production volumes for 100 key data center connectivity and announced that we are jointly developing technology for next-generation silicon photonics products. We anticipate additional announcements related to progress with silicon photonics customers in 2020, positioning us for strong growth in the years to come. The main growth driver for this platform are speeds transitioning from a 100 gigabit per second to 400 gigabit per second, for this technology is likely to be more widely adopted due to its power cost and performance benefits over traditional discrete optical assemblies.

We have over 30 active customers at different stages in our silicon photonics production funnel with more than 20 that have taped out for a variety of applications, some quite novel and market disruptive. We expect revenues become more significant by the end of 2020 and ramp substantially in 2021 and beyond. Our power IC business experienced strong organic growth of 19% in 2019 over 2018. This was primarily driven by automotive battery management at initial ramp of our highly differentiated 65 nanometer BCD platform on 300 millimeter. We announced 240 volt non-SOI devices at 180 nanometer for 200 millimeter BCD platform which to our knowledge supports the highest voltages within 180 nanometer standard for non-SOI BCD foundry processes. Providing these higher voltages without SOI results in a strong cost advantage, and these are increasingly important in many automotive and industrial applications, where we see strong market potential.

We have one initial customers, including two tier one customers better designing in the platform now. To summarize, the main growth drivers for analog IC business unit for 2020 and beyond, 5G is the most significant driver for RF business for this year and for the next few years. 5G impacts both our mobile business, with RF content is projected to be at 70% CAGR for the coming years according to Yole. And infrastructure, where we are already seeing silicon germanium orders increase for optical connections to serve 5G deployments around the world.

Recovery from the inventory correction on optical 5G data center market, driving shipments in the second half of 2020 will provide good opportunity for additional growth this year. Looking beyond this year, we expect our 5G data center to continue along the rate of data transmission growth to the Internet which most industry analysts assume will continue at approximately 15% CAGR. In addition, automotive is a strong growth driver. In RF today, we have deployed RF radar in several vehicle models and are working now with several customers on LIDAR techniques that make use both of our silicon germanium as well as our new silicon photonics platforms for the future increasing number and capabilities of our time in these vehicles.

And as mentioned, we are leading with our SiPho platform capabilities. In power ICs, our strong traction for the 65 nanometer 300 millimeter BCD platform in the market, provided us with a full funnel of opportunities that will wrap in 2020 and beyond and promise strong growth in power ICs for years to come, providing additional ROI for 300 millimeter capacity growth. We also see automotive as a main growth driver as previously discussed, the strong growth we experienced in 2019 from battery management electrical vehicles and we anticipate further growth as more of the automotive fleet moves to electric drive and as we deploy more advanced high voltage technologies such as the 140 volt non-SOI process.

Moving to our sensors business unit. Despite organic revenue decline of about 20% in the industrial sensor market, predominantly a consequence of the trade war, we were able to compensate to a great extent to have a decrease of 4% year-over-year organic revenues. The said compensation was via the growth of our actually medical sensors market and our high-end visible camera market. This growth should continue in 2020. And with an expected recovery in industrial sensor market, we target a double-digit organic growth in this business in 2020. 2019 was an exciting year for our future, both in state-of-the-art technology developments and in customer engagements. As announced, we have released our 300 millimeter backside illumination hybrid bonding stack wafer technology with copper-to-copper electrical contacts at a pitch smaller than 2.5 micron, the smallest in the world. This technology allows a connection of a BSI sensor to a CMOS logic and analog wafer at the pixel level.

We won two major customers that are using this technology for the mobile time-of-flight market, both for face recognition and front-looking 3D applications. These products will grow international volume production in 2022. The same technology will be used with our existing customers for high-end photography market both in high-end DSLR and mirror less cameras and in cinematography. In addition, we engage with large optical fingerprint sensor providers on the development of under OLED and under LCD sensors, utilizing our high-performing CIS technologies and 200 millimeter fabs at the 0.18 micron technology node. These products are expected to ramp in the second half of this year and to further grow to high volumes in 2021 and beyond.

Looking at our TOPS business unit, the core of our transfer flow activities in the TOPS unit are for the discrete market. This market was soft, especially in the second half of 2019. We are now beginning to see an increase in customer-forecasted demand. We have maintained and grown market share with our existing customers and have added new key customer engagements in 2019. We add value through, for example, if that's MOSFET co-developments and are currently focused on a few activities in this area, among which; one, releasing advanced new split-gates Super Junction and advanced trench MOSFET platforms to production, enabling our customers better position in the market, offering continually more competitive products; two, optimizing our automotive flows, hence enabling MOSFET automotive platforms in both Fab 2 in Migdal Haemek and Fab 9 in San Antonio in this high-growth segment; three, increasing engagements on MOSFETs with Japanese Tier 1 IDFs ramping to high volume production to fab while securing additional wins with target ramp through 2020. We won these results in Japan through demonstrating better performance in the incumbent and enabling features that our customers could not bring up in-house.

With those activities, we expect to see growth in this segment throughout 2020. On top of our transfer flow activities, we are targeting unique business models of differentiated technologies with high margins among which; one, development for advanced nanowire intrinsic RGB micro displays that should bring high margin differentiated business for both 200 millimeter and 300 millimeter substrate sizes; two, expanding our partnership with a leading TMR sensor provider by adding further differentiated capabilities in our factories; and lastly, additional MEMS high value-add programs in both our 8-inch and 6-inch factories, among which we expect ramp to high volumes during the second half of this year for a differentiated MEMS microphone activity.

Looking at utilizations, during the fourth quarter we saw the following rates. In Migdal Haemek fab 1, our 6-inch factory was at about 70%, an increase from the previous quarter. Fab 2 was at 70% having been the bottom quarter for discrete manufacturing. Newport Beach, California was at about 50% utilization, similar to last quarter, with an end of year begin of SiGe recovery ramp. Our San Antonio factory fab 9 was at 50% utilization similar to the previous quarter, but with a 10 point increase in foundry business utilization.

Looking at our TPSCo fabs in Japan, utilization for the 8-inch foundry as a percentage of a lot of allotted foundry capacity according to new manufacturing agreement was about 55%, an increase compared to the previous quarter. Our 12-inch foundry utilization 70%, an increase over the previous quarter and presently bottleneck constrained and should grow during the next month as new tools come online. I will state the present bottleneck constraint is not lithography constrained. So as these new tools come online, we will see substantial and quick move into manufacturing.

To summarize, we guide the first quarter of 2020 to be $300 million with an upward or downward range of 5%. As world citizens, we care deeply and are diligently tracking the coronavirus outbreak situation. We are in close contact with our exceptional Chinese sales force, and design and application support teams, as well as with our China-based customers. We are doing all within our power to help and to support. As far as business continuity, with a deep look, we currently see no impact in our supply chain. We have seen a small reduction in Q1 activities of about $3 million to $5 million revenue impact, which is already reflected in our Q1 guidance. We will update if there will be any material impacts on our business. As all human beings, we hope the coronavirus situation will be contained shortly and resolved as soon as possible with suffering minimized as much as possible.

To summarize, as demonstrated in present orders and in customer forecast, we believe to be well positioned to participate in and benefit from expected market recovery and the present upward business trends. We see this, meaning 2020 as an overall growth year, driven by double-digit organic growth. With that, I'd like to turn the call to our CFO, Mr. Oren Shirazi. Oren?

Oren Shirazi -- Chief Financial Officer, Senior Vice President of Finance

Thank you, Russell and welcome everyone. Thank you for joining us today. I will start by providing the P&L highlights for the year ended December 31, 2019 and for the fourth quarter of 2019 and then discuss our balance sheet. Revenues for 2019 were $1.23 billion as compared to $1.3 billion in 2018. Non-organic revenue were $111 million lower in 2019, of which $70 million are attributed to the March 2019 renewed Panasonic contract. This was offset by a $41 million increase year-over-year in organic revenue, reflecting 5% organic growth. We define organic revenue as total revenue excluding revenue from Panasonic, and revenue from Maxim in the San Antonio fab.

Gross, operating and net profits for 2019 were $230 million, $87 million and $90 million respectively compared to $293 million, $155 million and $136 million in 2018 respectively. EBITDA for 2019 was $299 million as compared to $362 million as of -- for 2018. Analyzing the underlying margins, we see that the revenue mix and the cost structure of the company improved and we had recorded significant savings which partially mitigated the March 2019 previously announced renewed Panasonic contract impact, and the non-organic revenue reduction. For example, we see that against the $111 million lower non-organic revenue, net margins was lower only by $46 million, reflecting $65 million betterment, resulting both from the higher $41 million organic revenue as well as from an improved revenue mix and cost structure.

Revenue for the fourth quarter of 2019 was $306 million as compared to $334 million in the fourth quarter of 2018. Non-organic revenues are $36 million lower in the fourth quarter of 2019, of which $23 million are attributed to the March 2019 renewed Panasonic contract and are offset by $8 million increase year-over-year in organic revenues, reflecting 4% growth.

Revenue for the third quarter of 2019 were $312 million. Gross, operating and net profit for the fourth quarter of 2019 were $55 million, $19 million and $21 million respectively, as compared to $58 million, $23 million and $22 million respectively in the prior quarter. For the fourth quarter of 2018, gross, operating and net profits were $76 million, $40 million and $38 million respectively. EBITDA for the fourth quarter of 2019 was $75 million, similar to the $75 million presented in prior quarter and as compared to $93 million in the fourth quarter of 2018. If you analyze the quarterly margin on a year-over-year basis, you'll see that the cost structure of the company improved as well and we had recorded significant savings which partially mitigated the March 2019 previously announced renewed Panasonic contract impact and non-organic revenue reduction. For example, we see that against the $36 million lower non-organic revenue, net margin is lower by $17 million only, reflecting the $19 million betterment resulting both from the higher $8 million organic revenue as well as from an improved revenue mix and cost structure.

I will now provide the cash flow highlights for 2019 and for the fourth quarter and our balance sheet analysis as of December 31, 2019. During 2019, the company generated $291 million of positive cash from operations and invested $172 million net in fixed assets, resulting in $119 million positive free cash flow for 2019. This is compared to $313 million cash flow operations for 2018 and $170 million investment in fixed asset in 2018, which resulted in $143 million of free cash flow for 2018. In the fourth quarter of 2019, cash generated from operations were $72 million as compared to $73 million in the prior quarter, and investments in property and equipment net was $44 million and $43 million in the fourth and third quarters of 2019 respectively.

Looking at the balance sheet. Total short-term and long-term debt presented in the balance sheet as of the September 31, 2019, as well as our long-term assets increased as compared to December 31, 2018, mainly due to the implementation of Accounting Standard Update ASU 2016-02 Leases, effective January 1, 2019, which was issued in relation to leases. Additional details regarding ASU 2016-02 are included in our annual financial statements.

In addition, as far as liabilities, the first two instalments under our 2016 series G bonds in the total amount of $38 million are scheduled to be paid during 2020. And as a result, are included short-term maturities and short-term liabilities as of December 31, 2019.

We significantly strengthened our balance sheet, including the following. Our shareholders' equity reached a record of $1.35 billion, a $111 million increase as compared to December 31, 2018, mostly due to 2019 net profit. Total balance sheet increased from $1.79 billion to $1.93 million in the end of the year. Our ratio of shareholders' equity to total assets being at 70% and our current assets ratio being 4.3 times. Moving on to elaborate on the tax line in the P&L. I would like to describe applicable and effective tax rate.

Our US affiliate Jazz Semiconductor and TowerJazz Texas which own our Newport Beach and San Antonio Fabs, respectively, are subject to a tax rate of 21%, effective from 2018, following the US tax reform.

TPSCo's profits from the Japanese operations are subject to an approximate 32% tax rate. Our profits in Israel from fab 1 and fab 2 operations were subject to a 7.5% tax rate, are not expected to result in any tax payments for the foreseeable future due to our approximate $1 billion historical NOLs, net losses carry forward that may be carried forward indefinitely under Israeli law.

Considering these, and certain tax exemptions, discounts and credits, our all-in worldwide weighted average effective tax rate this year was 3% for the year as compared to 4% for the year ended 2018. I would like to now to describe our currency hedging activities in relation to the Japanese yen, since the majority portion of TPSCo's revenue is denominated in yen and the vast majority of TPSCo's cost are in yen, we have a natural hedge over most of our Japanese business and operations. In order to mitigate part of the remaining yen exposure, we execute zero-cost cylinder hedging transactions.

This zero-cost cylinder transaction hedge currency fluctuations to be contained in a narrow range as compared to the spot exchange rate, hence while the yen rate against the dollar may fluctuate, the impact on our margins is limited. In addition, in relation to the Japanese yen impact on the balance sheet, we have a natural hedge on cash and loan balances since the loans and the cash are both yen denominated. This helps to protect us from potential impact on yen fluctuations.

And lastly, in relation to fluctuations of the Israeli currency, the shekel, we have no revenues in this currency, since approximately 10% of our cost are denominated in the Israeli currency, we also hedge a large portion of this currency risk using; a, zero-cost cylinder transactions; b, investing a portion of our cash in Israeli marketable securities denominated in the Israeli currency, thereby providing us a natural hedge. And the last note on our share count. As of December 31, 2019, we had 107 million outstanding ordinary shares. We no longer have any capital notes outstanding since all were converted into equity in the past. The fully diluted share count is 109 million. The difference between the outstanding and the diluted share count is comprised entirely of ESOP-related options and RSUs.

And now I wish to turn the call back to the operator.

Questions and Answers:

Operator

Thank you, ladies and gentlemen, at this time we will begin the question-and-answer session. [Operator Instructions] The first question is from Mark Lipacis of Jefferies. Please go ahead.

Russell Ellwanger -- Chief Executive Officer

Hi, Mark.

Mark Lipacis -- Jefferies -- Analyst

Hi. Thanks for taking my questions. I had a couple. The first one on the outlook for double-digit organic revenue growth, does that exclude Maxim and Panasonic, and can you give us a rough estimate of how big those were in 2019?

Oren Shirazi -- Chief Financial Officer, Senior Vice President of Finance

Yes, Mark, we said that the forecast for low-double-digit growth is for the organic revenue. And in addition, we said that we forecast overall growth for the entire revenue. About the size of it, you can take the $1.23 billion revenue that we have and you should deduct from it in order to reach the baseline of the organic revenues, what we said in the past as renewed in the March 2019 contract from Panasonic, it is between $70 million to $85 million a [Phonetic] quarter of revenues from Panasonic. So if you multiply by four, you'll know the annual number of the Panasonic.

And about Maxim, we didn't say in the past -- we did say in the past that when we acquired the San Antonio facility, its revenue was well at that point at a capacity of $150 million and we did say that Maxim at that point was about 45%, 50% of realization of the fab and we said that it's growing gradually down. So one may calculate that it's somewhere below $70 million in a number that, of course, we don't want to say because it's not public domain.

Mark Lipacis -- Jefferies -- Analyst

That's fair enough. Thank you very much. And maybe for Russell, can you give us a sense of where capacity utilization is at your customers or perhaps in the competitive -- in the competitive environment. Do you have a sense that there is a lot of excess capacity at the bottom of this downturn or is that -- would you characterize it differently? Thank you.

Russell Ellwanger -- Chief Executive Officer

At our customers other than the TOPS Group, most of our customers have no internal capacity for what we make for them. In the TOPS Group, we certainly -- the customers are IDMs that transfer flows to us where they're out on their utilizations are their overall capacity that's something that specifically track, but for the most part for the IDM customers that we serve, the flows that we serve for them are somewhat exclusive at our factories. So I don't think that their capacities have or utilization rates have too much to do with what we make for them or with demands. In the TOPS Group, there was an overall decrease in discrete demand last year. There was a very big inventory correction after multiple years of discrete growth.

But, -- so I don't think that has so much to say with it. I believe that in China right now, I think that there is a good amount of 200 millimeter capacity. I don't think that there is very much 300 millimeter capacity available.

Mark Lipacis -- Jefferies -- Analyst

Thank you.

Operator

The next question is from Cody Acree of Loop Capital. Please go ahead.

Cody Acree -- Loop Capital -- Analyst

Thank you and thanks guys for the questions. Could we just talk a little bit about your -- Russell you've made segment forecast and segment trends. But we, especially in comms infrastructure, this silicon germanium ramp, you've obviously installed significant amounts of capacity and yet it seems like the order flow from that -- for the Silicon Valley -- germanium customers just haven't -- either haven't had the end markets or is there something else going on. If you could speak to the disappointment -- I guess it's just a few million dollars, but still below expectations for both December and March?

Russell Ellwanger -- Chief Executive Officer

I'm sorry, please. What is below expectation for March?

Cody Acree -- Loop Capital -- Analyst

Just revenue guidance.

Russell Ellwanger -- Chief Executive Officer

I don't think that the Q1 guidance is well below expectation. The -- certainly Q4 was $306 million as we stated, the mid range that we had given was $312 million. So it came in at $306 million. But that's why we give a revenue range. The -- probably larger impact in Q4 wasn't an issue of silicon germanium as far as what was happening, why it was in the second quartile instead of being at the midpoint, but, and the discrete market discretes are [Phonetic] short flows, those are mainly to a great extent turn business within the quarter. And as I stated, the fourth quarter was our lowest quarter in multiple years in discrete market. If I look at the Q4 '19 and Q1 '20, so there is already quite a substantial increase in the TOPS business from Q4 '19 into Q1 '20. But the -- so I think that more deals with that and as stated by Oren just a few minutes ago multiple times, the revenues from the Panasonic contractor within a range. We don't control what that range will be to a great degree, so you have a top and a bottom, which is the reason that we ourselves give a guidance range. So I wouldn't say that Q4 in my mind is an expectation was in the second quartile, but it wasn't related to not understanding what the silicon germanium would be.

Silicon germanium is a very long flow. It's for a quarterly forecast -- it's very difficult to miss silicon germanium forecast. Now, the other question is silicon germanium as a whole, and that's a very, very different question, but related to Q1 being second quartile, I'm sorry, Q4 being second quartile rather than mid point, although again that's why one gets a range and it's not at all related to silicon germanium. For silicon germanium I stated, I believe, to some degree of clarity during my discussion that during the first half of 2019, we saw a decline in orders, which has an impact in the second half revenue because you're dealing with 40 to 43 layer [Phonetic] products and stating as well that we are now seeing a recovery of the silicon germanium. I believe I stated that we would see by customer forecast at this point a second half that would have a greater than 20% increase in silicon germanium revenue shipments as against the first half, which is pretty substantial.

So we do see the recovery of the SiGe and I think it's -- has been -- remains a very strong and very critical business. What we are seeing -- what's happening within the silicon germanium amid for us because of the parts themselves that are being ordered, we have a fairly good granularity of what they're going into. So if you have a 25-gigabit per second device, it's predominantly for 5G right now and four-channel 25-gigabit is predominantly for 400-gig data centers.

So we've seen a nice increase with the proliferation of 5G infrastructure, and we are seeing a pickup now in orders for 100G data centers. Does that answer your question Cody?

Cody Acree -- Loop Capital -- Analyst

Yes, it did. Thank you very much for your time. And then just for -- can you just talk me through the puts and takes -- you're keeping the BSI on for gross margin trends through 2020?

Russell Ellwanger -- Chief Executive Officer

BSI? What's BSI? What you mean by BSI?

Cody Acree -- Loop Capital -- Analyst

I'm sorry, I was just asking about the gross margin trends that you're expecting, and maybe some of the give and takes for 2020?

Oren Shirazi -- Chief Financial Officer, Senior Vice President of Finance

Yes. So, I believe, like I said in the script that we are in -- improved our cost structure and revenue mix as could started to be seen this year. And from this baseline of $1.23 billion revenue that resulted in a $230 million gross profit, I think for any additional incremental revenue that you should assume, and you should assume because of that we gave a forecast of growth we have specific low double-digit organic. So whatever you assume, I would think that it's a reasonable to 50% -- 50% to 55% [Phonetic] of the gross profit and then if you assume, of course, it is in Japan, it's lower net profit from that gross profit because of the tax that I explained and minority line. And if you believe it's from Israel, fab 2, fab 1, so of course it's -- everything goes directly to the bottom line and 92.5% of that and if you believe it's in the States, or 80% [Phonetic] from that extra gross profit.

Cody Acree -- Loop Capital -- Analyst

Okay, thank you very much.

Operator

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

Rajvindra Gill -- Needham & Company -- Analyst

Yes, thank you for taking my question. So -- just a follow-up on the organic growth rate of low-double-digits. So just to clarify, so on the, on the Panasonic business now that the agreement has been renegotiated last year. We should kind of be looking in the $70 million to $80 million range this year per quarter. And in terms of the Maxim revenue, are there any factors that would have that revenue be down this year, say versus last year based on the number you gave us, I'm just trying to get a sense of when you were talking about low-double-digit organic growth, if the inorganic -- pretty much going to be flat, if there are -- are there going to be other kind of risk there?

Oren Shirazi -- Chief Financial Officer, Senior Vice President of Finance

Okay. So on Panasonic, your correct, it's between $70 million to $85 million, but bear in mind that Q1 '19 was still under previous contract. So obviously if your talking about 2020 you have on the baseline $24 million, $22 million, whatever you assume, $20 million. We said between $20 million to $24 million reduction only in Q1 from Panasonic. And Maxim we said -- like Russell said, it's a 15-year contract gradually decreasing. You can assume a -- very few million dollars of reduction. But all that is just emphasizing the very good year that we see, because we said that even with those, you can call it $25 million to $30 million total reduction we expect growth. So, of course, we expect to overcome it. And if we follow up on Mark, previous question, and reduce from the $1.23 billion, the Panasonic and Maxim revenue that indicated approximately, you'll see that low double-digit, a significant amount of growth.

Rajvindra Gill -- Needham & Company -- Analyst

And then in the press release, Russell, and also in the prepared remarks, you had mentioned capacity expansions, and you've broken it out into kind of near-term and medium-term to long-term. You talked about M&A on the medium to long-term. Wondering at a high level, if you could maybe discuss what you're thinking about in terms of expanding capacity over the long-term acquisitions?

Oren Shirazi -- Chief Financial Officer, Senior Vice President of Finance

M&A -- what's the M&A.

Russell Ellwanger -- Chief Executive Officer

Our big focus there is 300-millimeter capacity growth. We have stated that, I believe, several times. We've talked in the past about the importance of increasing presence and capabilities in China, that has never changed. And other activities that one would have to move forward with 300-millimeter. I think we are making good progress across several fronts there, not to a point right now of needing to release. And -- but certainly, it remains in a strong direction of the Company, a strong direction of our Board of Directors, and with very substantial progress is being made.

Rajvindra Gill -- Needham & Company -- Analyst

And last question from me. In terms of -- and then, I know, it's hard to assess, but the growth in RF-SOI in mobile, last year was pretty strong. We obviously have 5G smartphone kind of ramp going on. Any kind of impact that you're seeing over the last few weeks from your customers related to the coronavirus? The indirect impact that you're seeing? Or just kind of what you see -- what you see might see in the next quarter or so? Maybe perhaps curtailing the 5G smartphone ramp, any thoughts there would be helpful. Thank you.

Russell Ellwanger -- Chief Executive Officer

As I stated, we stay very close with our customers. We have not yet seen any substantial reduction in forecasts or push out of orders. We did within Q1, as stated have $3 million to $5 million impact. It was coronavirus related. And that instance, it really dealt with some very specific back-end processing and packaging, that was impacted because of the reduction or not reduction due to the requirements that people would not come back to -- in certain regions -- to work and stay at home for longer than the Chinese New Year. And so that did have an impact. I don't know that that would continue. I -- it doesn't appear that it is. But that was a $3 million to $5 million impact, and it was from specific directions of people staying home to make sure that they stay safe, and that spread of the virus remains contained. That is no longer the case to my understanding for that specific area. But, no, we have really not seen it. I mean it's obvious that things can happen and things that we are not yet aware of, but we have not yet seen any reduction on and that's just the case.

Rajvindra Gill -- Needham & Company -- Analyst

Great. Thank you.

Operator

The next question is from Achal Sultania of Credit Suisse. Please go ahead.

Achal Sultania -- Credit Suisse -- Analyst

Hi, good afternoon. Just two questions. First on the RF mobile side. Obviously, my understanding is that you've got strong relationship with Skyworks and Qorvo on the RF side. Obviously, with all the US/China trade tensions, it seems like the Chinese companies are looking for alternative suppliers outside of the US in the RF space, specifically. So can you help us understand your exposure in that RF mobile space beyond some of the dominant US players. And then secondly on the silicon germanium side, can you give us some color around, my understanding is that your revenues in silicon germanium are trending around $30 million to $40 million a quarter. Is that the right number? And when you think -- when you talk about growth in 2020, is it fair to assume that first half run rate is similar to what we are seeing currently? And then we see 20% growth from that base as we go into second half of this year. Thank you.

Russell Ellwanger -- Chief Executive Officer

Okay. I'm sorry, could you tell me the number. I missed. And what was the number that you said?

Achal Sultania -- Credit Suisse -- Analyst

Around $30 million to $35 million per quarter in silicon germanium right now, in -- during 2019.

Russell Ellwanger -- Chief Executive Officer

Okay.

Achal Sultania -- Credit Suisse -- Analyst

And that going to, like, do we expect similar numbers in H1 of this year, and then we expect a 20% growth half over half as we go into H2 from that base?

Russell Ellwanger -- Chief Executive Officer

So on that, let's see. In that range, for the first half, correct. And, yeah, breaking that range in the second half, exactly correct.

Oren Shirazi -- Chief Financial Officer, Senior Vice President of Finance

Yeah. Yes. And by the way, Russell said, the $136 million in his script, that it was actual in 2019. Yeah.

Achal Sultania -- Credit Suisse -- Analyst

Okay. $136 million. Okay. So that would imply that a lot of that silicon germanium growth is going to be seen, not in 2020, but rather in 2021?

Oren Shirazi -- Chief Financial Officer, Senior Vice President of Finance

Right. The second half of 2020 will have a lot of more revenue in SiGe. And this is why we said that from now, we already see higher run rate of stock and orders.

Achal Sultania -- Credit Suisse -- Analyst

All right. Okay. Okay.

Russell Ellwanger -- Chief Executive Officer

But you are correct, as the ramp continues in the second half, you see -- the ramp is pushed out on the revenue side, on the order of 1.5 quarters to two quarters, depending on what the start Q is. So you're correct there. We expect that we will continue to see silicon germanium revenue increases in 2021. I did state that in the script, as well. But yes, the second half versus the first half, by forecast now, we see a 20% increase. And you know, what the run rate had been. So I think that, that's somewhat realistic.

Achal Sultania -- Credit Suisse -- Analyst

And the end applications for the silicon germanium, is it automotive radars and mobile order? Or is it something else as well beyond those two?

Russell Ellwanger -- Chief Executive Officer

It is automotive radar, it is mobile RF, as we stated. But the bigger portions of it are into optical connections for data center and for base station devices. So you're -- that's what we talked about with the 5G deployment. The 5G deployment for the SiGe comes into both on SiGe LNAs, but it's -- the bigger portion of it right now, the ramp that we're seeing is for 5G infrastructure, and the data center has been and remains a very big portion of that business.

Achal Sultania -- Credit Suisse -- Analyst

Okay. Thank you. And then coming back on that RF question, like the US exposure versus non-US exposure?

Russell Ellwanger -- Chief Executive Officer

I think we're very well diversified in the customers that we serve. I mean, certainly in the history there is press releases between us and Qorvo and us and Skyworks, also between us and Broadcom. We work hard to maintain strong customer relationships with all of our customers, but we also have multiple new friends that have come up. And a good portion of our big RF mobile growth, the RF-SOI specifically in 2019 was outside of the US as well as activities for customers inside of the US. So I think we're pretty well diversified. It's not that if any given end user in China wanted to move away from for whatever reason, from a big US supplier, it's not that we would necessarily lose that business, as being the foundry supplier.

Achal Sultania -- Credit Suisse -- Analyst

Okay. Thanks a lot Russell.

Russell Ellwanger -- Chief Executive Officer

Thank you for the questions.

Operator

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

Russell Ellwanger -- Chief Executive Officer

Hey, Richard.

Richard Shannon -- Craig-Hallum -- Analyst

Hi Russell, hi Oren, how are you doing?

Russell Ellwanger -- Chief Executive Officer

Good.

Oren Shirazi -- Chief Financial Officer, Senior Vice President of Finance

Good.

Richard Shannon -- Craig-Hallum -- Analyst

Let me just hop on a couple of silicon germanium questions they're just kind of big picture. You've talked in the past about having a strong market share with that technology, particularly in optical. I think, you've mentioned a number of 60% or so. How do you view your competitive position as you get into the higher speeds, above 100 gig. You've talked about 200-gig and 400-gig today, and even above. Where do you think your competitive position will be going forward?

Russell Ellwanger -- Chief Executive Officer

We think very strong, especially as we couple it into very interesting activities with silicon photonics. But yeah, the raw SiGe capability is extremely good. We've talked about the H5 platform and, of lead customers having taped out into that technology. So 200-gigabit per second, 400-gig per second capability, and to be able to as well to be supporting with photonics chips that have all of the benefits of the speed and power reduction, cost reduction by putting everything on to one platform versus a variety of discretes. So I think our competitive position remains very strong.

Richard Shannon -- Craig-Hallum -- Analyst

Okay. Good to hear. My follow-up quickly on your comment on silicon photonics. You mentioned -- I don't know, if you intended to make a direct high in there, but maybe you can give us a sense of where your competitive position looks there as well? I know there's been a couple of larger foundries or kind of hybrid companies who have historically maybe had more focus there. You announced a very nice customer in Inphi back in December. Where do you think you're positioned there as well? And -- actually, I'll just leave it there.

Russell Ellwanger -- Chief Executive Officer

I honestly think that we're at the top. I really do. I think programs we have going on there are amazing. So yeah, I think, we're in an extremely good position. Candidly, I don't want to say things are out of place, because there is activities that are not press released and customers that are not yet press released. But I stated that we have 30 active engagements with 20 customers that have taped out. I think that's in a pretty good spot to have 20 tape-outs at this point or 20 customers that have taped out on SiPho. I think we're -- we have a very good platform. And I think we are acknowledged very strongly in the industry for having -- from the foundry perspective, I think the best platform.

Richard Shannon -- Craig-Hallum -- Analyst

Okay. Excellent. Great to hear. We look forward to hearing more about the rest of the year. My last question is probably more for Oren. Maybe if you can just give us a sense of your capex outlook this year. In the past you've talked about it being kind of $40 million to $45 million per quarter with some added from 300-millimeter, and I think it was still within that range in the fourth quarter. So wondering if you can give us a sense of what you're looking for this year?

Oren Shirazi -- Chief Financial Officer, Senior Vice President of Finance

Yes. I think it's a consistent to previous, but so until this quarter I mean Q4 2019 we were very stable and always in line with the $170 million per year. So $42 million to $44 million a quarter. And what we set for 2020, in July, we published a press release that we will invest additional $100 million for Uozu to satisfy existing customer demand we have there increasing utilization. And so that's additional $100 million for 2020 that will be paid during the year, you may assume a little bit front and like Q1, Q2, Q3 aside of that every quarter. And in addition Russell updated on its script on $20 million for QT9, which also will be paid gradually I assume Q3, Q4 until the payments will happen, so $10 million each.

So overall for the year, we will have the regular $42 million to $44 million a quarter plus they took $200 million Russell spoke about today plus the $100 million that we announced in July.

Richard Shannon -- Craig-Hallum -- Analyst

Okay. That I think we can do that math. That's all my questions. Thanks guys.

Oren Shirazi -- Chief Financial Officer, Senior Vice President of Finance

Thank you.

Operator

We have a follow-up question from Mark Lipacis of Jefferies. Please go ahead.

Mark Lipacis -- Jefferies -- Analyst

Hi. Thanks for taking the follow-up. I don't believe you've mentioned this in the call, if you did, I apology, but could you give us an update on your joint venture in China?

Russell Ellwanger -- Chief Executive Officer

The joint venture in China. You're referring to the activities in Nanjing from a few years ago?

Mark Lipacis -- Jefferies -- Analyst

Yes.

Russell Ellwanger -- Chief Executive Officer

I see. No, so on that we went ahead. We did our parts. We -- technologies, project, the building was completed, we were never an investor in the project. And you talked about a joint venture, I don't know that it was a joint venture. But it was certainly an activity that we were involved in that we were going to get capacity out of, as well as net cash. We get involved, we did certain of our milestones. We were paid for our milestones. I believe that we had released that and the ultimately -- the group that was -- the going to be the owner of the factory, they did not provide their funding.

The Nanjing government came through on its side. So at this point, there's a building that exists. It hasn't been a government that wishes to move forward. There's still discussions going on with various investor groups. And we're involved as a technology provider for that that could go forward. But at this point, there's been no progress as far as a replacement of the previous company that was the owner company for the project. So...

Mark Lipacis -- Jefferies -- Analyst

Okay. Got you. So there's no for the foreseeable future, we shouldn't expect any capacity you guys have any excess capacity or extra capacity from that facility.

Russell Ellwanger -- Chief Executive Officer

No. But it's also at this point not a capacity that we needed. That deal was for us a very, very different type of a deal. We weren't involved in it necessarily for capacity. We were involved in it for capacity to enable a specific deal with a very, very good customer that we have that would have allowed an ability to transfer a technology that we wouldn't have put in others of our factories that could have gone in there under with wind circumstance for Tacoma, for ourselves, for the customer.

And as well we were involved in it from a technology licensing and advisory roles. But it wasn't because we needed raw 200 millimeter capacity out of that factory. It's a very different activity than something we would be going after in China in the 300 millimeter node to where in a 300 millimeter its capacity that we'd be very interested in. And we would not be getting involved as a technology provider. We'd be getting involved where we need to be moving forward in that type of an activity. We'd be getting involved as the company that would ultimately be the majority owner. Very helpful. Thank you.

Operator

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

Oren Shirazi -- Chief Financial Officer, Senior Vice President of Finance

Hi Lisa.

Lisa Thompson -- Zacks Investment Research -- Analyst

Hi. I just have one big picture question. So with the continuing like battle with Huawei and up it to the point of actually trying to get Taiwan Semiconductor to stop selling them chips. Is that changing anything in your planet or possibly affecting just the overall deployment of 5G?

Russell Ellwanger -- Chief Executive Officer

I don't -- well, we do not ship anything directly to Huawei. They're not a direct customer of ours. There are probably no restrictions for manufacturing certain parts outside of the US from customers of ours that are not US companies for them to ship to Huawei. And I think that that's perfectly fine. We do not have any adverse implications from anything happening with Huawei. But again we are -- we have manufacturing facilities throughout the world.

Lisa Thompson -- Zacks Investment Research -- Analyst

Okay. So you don't really think it's going to disrupt the entire deployment in the whole industry?

Russell Ellwanger -- Chief Executive Officer

No.

Lisa Thompson -- Zacks Investment Research -- Analyst

Okay great. Thank you. That's all my questions.

Operator

There are no further questions at this time. Mr. Ellwanger would you like to make a concluding statement?

Russell Ellwanger -- Chief Executive Officer

Yes. So again I thank everybody for their interest, I know that in light of some recent announcements that there's maybe a darkening looking at the industry at the moment. But we really are very optimistic going into the year. We see very good activities having occurred in 2019 against multiple headwinds that now seem to be dissipating themselves. And those activities are driving very good revenue projections for this year. We see it as a year we will have overall revenue growth and as stated double-digit organic revenue growth and a recovery in several of the high margin areas where Oren is very optimistic about, not just utilization numbers going up and what that means on margins. But as far as the richness of the mix going up.

So the year looks very, very positive for us. We look forward to meeting with investors and analysts face-to-face. We are scheduling an Investor and Analyst Day at the NASDAQ Building in New York on March 31st a.m. Signup will shortly be available on our website. But we do wish to note one thing this event although scheduled and although it will be signed up for, it may be postponed according to updated travel and/or health advisories. But par that, we really look forward to seeing everyone on the call and people that weren't able to make the call at the NASDAQ event on March 31. And look forward to the interactions. So thank you very, very much.

Operator

[Operator Closing Remarks]

Duration: 68 minutes

Call participants:

Noit Levy -- Vice President of Investor Relations and Corporate Communications

Russell Ellwanger -- Chief Executive Officer

Oren Shirazi -- Chief Financial Officer, Senior Vice President of Finance

Mark Lipacis -- Jefferies -- Analyst

Cody Acree -- Loop Capital -- Analyst

Rajvindra Gill -- Needham & Company -- Analyst

Achal Sultania -- Credit Suisse -- Analyst

Richard Shannon -- Craig-Hallum -- Analyst

Lisa Thompson -- Zacks Investment Research -- Analyst

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