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Hello, and welcome to the Melexis Q1 2020 Results Call hosted by Françoise Chombar, CEO; and Karen Van Griensven, CFO. I will now hand you over to Françoise Chombar to begin.
Thank you, Rosie. So dear audience, both Karen Van Griensven, our CFO; and myself, we sincerely hope that you and your close ones are safe and you keep healthy in these unprecedented corona times. This being said, the show must go on. And so here we are with our usual earnings conference call for the first quarter 2020, and we are all doing that from home. As usual, we'll give a brief introduction on where the business and our financials stand. And as usual, we will be glad to reply to your questions the best we can. Melexis had a solid start of the year. Our sales grew 19% year-over-year and 9% sequentially. This is at the high end of the sales guidance we provided. The lockdowns in several countries at the end of the quarter led to OEM plants and dealership closures and also to many of our customers shutting down their operations out of health and safety considerations, mobility restrictions or plain lack of parts. If we would not have had this end of March corona impact, our sales were heading for more than EUR 140 million in Q1. Sales per geography was back to more historic levels for Asia Pacific. Clearly, with 51%, the region bounced back strongly versus the same quarter of last year. And that's despite the China lockdown situation in the first quarter. We saw indeed a pretty fast recovery to close to normal operations in China, both with our direct customers and through our distribution channel. Based on the latest data points, worldwide car sales dropped around 28% in the first quarter with all regions being hit, China the heaviest with over 40%, and Europe the least with around 7% in the minus. On the back of these figures, the significant and non-homogenous impact of COVID-19 across the world and different supply and demand disruptions, it is impossible for now to fabricate either a quarter 2 or a full year 2020 guidance. We reckon this uncertainty will continue for many weeks to come. Some positive notes, though, I wish to make for the short term are twofold. On the one hand, our inventories downstream and in our distribution channel are on the low side. And two, if you remember, our previous 10% growth guidance factored in another year of lukewarm end market demand already with worldwide sales below 2019 levels. Now long term, and as you can see from the Q1 results being a proof of that, the secular automotive semiconductor content growth trends remain intact. It's also noteworthy that our adjacent business outperformed. So the return back to growth in adjacent of the previous quarter is being sustained. All in all, the current slowdown does not change our view on the market and its growth potential. Going forward, the Melexis values are our best vaccine. We care. Our priority is, in the first place, the health and safety of our people. Most of our people worldwide have been working from their home office, and we did that pretty quickly and without any issues. And some of our test sites are now split up in 2 alternating teams to mitigate infection risk. We, of course, remain on the customers side. Our goal is to deliver on our commitments as best we can within the boundaries of what is or will be feasible. The supply chain upstream on the assembly side mostly is affected for now, and we always have a plan. Our focus continues to bring solutions through product innovation. Again, the current slowdown does not change our view on the market and its growth potential. Karen, I'm handing it over to you now for the financials.
Thank you, Françoise. Good morning, ladies and gentlemen. So for the first quarter, we had sales of EUR 138.2 million, an increase of 19% compared to the same quarter the previous year and 9% compared to the previous quarter. The gross result was EUR 56 million or 40.6% of sales, an increase of 20% compared to the same quarter of last year and an increase of 11% compared to the previous quarter. R&D expenses were 14.9% of sales. G&A was at 5.7% of sales, and selling was at 2.7% of the sales. Operating results was EUR 24 million or 17.4% of sales, an increase of 52% compared to the same quarter of last year and an increase of 31% compared to the previous quarter. The net result was EUR 20.7 million or EUR 0.51 per share, an increase of 48% compared to EUR 13.9 million or EUR 0.35 per share in the first quarter of 2019 and an increase of 35% compared to the previous quarter. So these are the financials for the first quarter. We would now actually like to open the question-and-answer session. Operator, please go ahead.
[Operator Instructions] Our first question comes from the line of Francois Bouvignies from UBS.
I have a couple of questions, if it's possible. The first one is on your visibility that remains low, and I understand it's a very challenging time. Could you maybe give us some trend that you see at least for what you know? For example, March and April, what is the trend that you see on your performance?
Okay. Well, indeed, the visibility is extremely low. At this moment, the lockdowns in several countries are in different modes, let's say. Some are done. Like in China, they are operating again. South Korea was very fast up. But then we have no -- we have little visibility on the demand side but also on the supply side. On the demand side as well, it came at a very -- yes, in the beginning -- really at the end of the quarter and the beginning of the next quarter. Many of the customers that are direct customers are now slowly resuming operations. And we believe that as they come back from their lockdown -- though some of the systems have continued rolling and they have adopted -- so we have seen many changes over the last 3 weeks, let's say, and the changes are continuing. So some are automatic changes from systems. But we also see that some of the plants, when they reopen, they check which lines can go up because, as you know, our supply chain -- the whole automotive supply chain is pretty complex with many, many tiers in the line over subcontractors that make printed circuit boards and populate them, et cetera. So all these parts need to come together at some moment in time. And if one part is missing, they just simply cannot start up the line, and then sometimes, they push out further until they know that they will have sufficient parts to start a line or several lines. That's why the visibility is extremely low at this moment in time. And we are always -- we always try to be as realistic as possible. And I know it's unprecedented that we don't have visibility, but then also, this situation is quite unprecedented. And I'm sure there will be lessons learned in the future when we look back in hindsight, and we will all be wiser after that. But today, I think it's -- even if I know that some peers are giving some visibility, I think it is too soon to be able to understand what the impact will be. Now what we do know is -- and that is short term. What we do know is that long term, though we do see some shifts but not many in the development projects, in the R&D projects that are going on, there might be some delay but not a lot of delay. So that's why we are confident that long-term trends, the secular trends that we have been seeing in the past, electrification, personalization and assisted drive, they continue to be important. And definitely, let's face it, climate change is -- has not receded. Even if we've given the earth a little bit of breath, let's say, due to no flying, et cetera, the climate change is still there. That means that what we believe and what we also observe from information that come from OEMs is that they -- even if they might have some short-term liking to shifting some of the measures from governments, some legislation, in the end, it will be there and it might come back much heavier than before. So maybe there is a slight delay, but then there could be breakthrough. And you will see -- if you look at our presentation that we published on the website, we've put in some assumptions there on car sales. But you will also see that from a powertrain or a body chassis safety perspective in cars, we see no big change or no big negative change. On the contrary, I think we see a continuation of those secular trends in the coming years. So I hope that answers your question, Francois.
Yes, yes, it does. I was just wondering, do you have the March and April at least visibility now that we are almost done. Or you don't have that either?
Well, of course, we have a view on April, but it's not something that we publish, of course, at this moment in time. And it's -- and let's state it, it's also not necessarily representative, what we see in March -- in April, sorry. So we did see end of March, and that's what we mentioned. We did see the first signs of push out the last 2 weeks of March. Otherwise, we would have gone over our guidance and we would have been above EUR 140 million. But nevertheless, April, you cannot see this as being representative for the rest of the quarter because it is extremely fluid at this moment. So we prefer to be realistic and say the truth, namely there is no visibility at this moment.
Okay. That's very clear. The second question I had is on your inventory comments. When you say that Melexis products is low -- and of course, it makes sense. I mean if you look at the performance of last year of Melexis versus the industry, you would think that you had some destocking. Now if I look at Q1, I mean, you have revenues above 19% year-over-year. And in your remarks, you said that the sales are down like 28% year-over-year. The production probably is better than that 28%, but still, nevertheless, probably negative. So we see a very significant outperformance of Melexis and even Melexis product, to some extent, because even versus your peers, you outperform from a longer -- from a big range. So my question is, even if we ended the year maybe '19 with low inventory, don't you think that Q1, Q2, you will have a significant buildup -- or an accelerated buildup, I should say, given the current environment of your products?
Could you repeat that last question, please? Whether we...
Whether you think -- yes. I was just wondering because Q1 is very strong from your sales, right?
Yes.
And the sales are down significantly in Q1, production probably down. So given this big outperformance, do you expect Q1 and Q2 basically to have a significant buildup of your products in the supply chain?
A buildup of Melexis products in the supply chain, and you mean that now in upstream or downstream?
Sorry, I mean downstream basically.
Downstream meaning towards our customers?
Yes.
Okay. Hard to say at this moment. It could be both ways. It could be that some customers build up safety stocks. That is possible. Not that we have a lot of indications that they're doing that, but I guess they wouldn't tell us if they would build up stock, not at this time, because that's the usual human reaction to it. It could be that they're building up stock. We rather -- but because also the inventory levels that they have -- or that they had, let's say, before the corona comma started were pretty low. They were not really high, which was very different at the end of '18, where we had this heavy bullwhip effect. We will have a bullwhip effect again probably, but it's -- it will be much more chaotic than before because this, of course, is different across the world. The countries are in different states of lockdown. Now if you look at what the expectations are on car sales, they are going to be significantly down. In our presentation, we said, okay, we were at around -- just a second here. Let me check that to make sure I use the right data. So we were at close to 90 million in '19, and that is car production, not sales, global vehicle production. We look rather or we assume -- and that's an assumption again because it's about the future. We assume that 2020 will be rather closer to 70 million, so from 90 million to 70 million in production. Production rates in Q1 were not down that much. They were, more or less, I think, 7% down, yes, in the first quarter. But we don't have a lot of data here yet on car production. But of course, if all the OEMs are closed for a couple of weeks in April, then yes, you lose already a month. It's not something that you compensate easy.
Okay, okay. That's very clear. Maybe just one quick question, Karen, on the cash flow. Given the significant impact that you mentioned in the release in Q2, how should we think about the cash flow? And how do you plan to manage that?
Yes. Cash flow for -- as we don't give any guidance, also the cash flow is difficult to guide on. Accounts receivable are quite well under control so far. So yes, we don't expect major fallouts in payments or whatever there. The inventory is a lot more difficult to -- I mean, in both cases, we are not sure how much sales we will do, so it's difficult also to predict our cash flow. Inventories will most likely go up rather than down. As beyond 2 months in the market is definitely going -- I mean the car sales are highly under pressure for the moment. So that -- I mean, for the moment, what we saw so far is that finished goods are reducing. But new material coming in is rather increasing the stock. So that's why in Q1, we had still a relative limited impact. However, in Q2, we will probably see more impact with increased inventories. How much? Again, that is very difficult to predict. All in all, obviously, Melexis has a very, very good -- I mean our cash position is quite high. We made cash in Q1. We also have more than sufficient unused debt capacity. So obviously, cash flow-wise, we are not worried no matter what the cash flow would do in Q2 and even Q3, the rest of the year. Does that answer your question?
That's very helpful. Yes, it's perfect. The last one, then I'll leave the floor to my peers, of course, is -- we talked a lot about short term because of my question, but I have more like, Françoise, maybe a question medium, long term. I mean do you think that it will impact -- you said that it's still the same. There is no change to fundamentals, but obviously, we are going through a significant crisis and uncertain time. Does it change at all, I mean, do you think, the perception of the auto, car industry in the medium term? I mean I'm not thinking like 5 years down the line, but at least in 1 to 2 years horizon, do you think this could impact significantly your industry?
Well, definitely, I think the industry will change significantly. Let's remind you, climate change is not going away or has not gone away. Also, the trade war is still very much there. So I believe that the trend that had been started with the trade tensions already for quite some time has led already to changes of -- so our customers down the line are rearranging their supply lines and building up as much as possible regional supply chain. So there is a trend towards deglobalization as such. Definitely for the semiconductor industry -- let's say that Melexis is still very lucky to be a European-based semiconductor company. And therefore, we can deliver ammunition to both parties, let's say. So that puts us in a bit more comfortable position. Nevertheless, it does impact, all the bureaucracy, et cetera, that we get. The change of the industry will probably also have to do with how consumers will react to this pandemic and to the consequences of the pandemic. In Europe where there's a good social security net, income will maybe not so heavily be impacted. In the U.S., it's very different. In China, we see that, yes, things are pretty much under control and in the rest of Asia, definitely South Korea, for example, and even Japan. But if you look at it, people will look at the car maybe in a different way. It's maybe one of the more safer ways to get from A to B. And people will choose their health ahead of taking care of the climate. So I think this might even lead to an overcompensation there. At the same time, in areas like the U.S. where people have no social or almost no social security safety net, it could be that car sales do get more down because people just don't have the financial clout to buy new cars. And then you have this oil situation, where, yes, fuel is cheap at this moment. And you have all digitalization. Many people working from home, reducing traffic, meaning, yes, it might also increase the likelihood of people going -- taking the car to drive to work. People also taking holidays more in the neighborhood, which makes them use cars more as well. In that sense, I think it really largely depends on how consumers will react to this, which there are some positive signs for the auto industry, there are also some more negative signs. All in all, again, midterm, this might all play out. Longer term, we still see the secular trends being much more -- being continued, let's say, from the past.
The next question comes from the line of Varun Rajwanshi from JPMorgan.
I have follow-up questions. Maybe I'll just go through the questions one by one. Now first question -- obviously, I appreciate that you have limited visibility at this time, but given what you're seeing in some of your Asian markets as most of your Asian customers are coming back online and they are resuming operations, you made a comment stating that you've seen a very fast recovery in Asia. So if we just sort of extrapolate that to Europe and the U.S., is it fair to assume that 2Q will be a tough quarter, followed by rapid recovery in 3Q and 4Q? Is that how you're looking at the quarterly sales evolution? On the sales itself, you had previously guided for roughly 10% sales growth, and that was based on an assumption of production decline -- slight production decline. Now given that production decline now looks to be somewhere around 25% year-on-year. And based on your expectation of milder inventory correction, is it fair to assume that Melexis sales will -- sales performance will be roughly 5% to 10% better than unit production decline for 2020?
Okay. If I understood you well, you're trying to find out if Q2 will be the bottom and if we'll see recovery in Q3, Q4, right?
Yes.
Yes. You make a lot of assumptions here, and it really depends on how these assumptions would play out. But I think the option that you mentioned is a possibility. Whether it's a highly likely possibility, I honestly don't want to make that statement at this time. It's possible, yes.
Okay. And then for the full year, do you see Melexis sales performance 5% to 10% better than the overall unit production decline based on the content growth and assuming milder inventory correction?
There is always -- there is not only the volume side of things. There is also the time delay side of it. And that's why it's very hard to make any -- even an educated guess about how the full year will play out. So I prefer not to answer this at this time. Maybe in a quarter, I can answer that one but not now. I hope you understand.
That's fair. I have a question on your margin. So obviously, there is some negative impact to your gross margin from underutilization of test capacity. And previously, you had indicated that this would have a negative impact of roughly 3 percentage points. Now given the kind of decline in sales that you are expecting, how should we think about gross margin evolution from here? And I ask this because there is a lot of dispersion even within sell-side estimates. So any color on gross margin would be very helpful.
Yes. Gross margin without guidance is very difficult, I would say. So I don't know what you want me to -- what are you expecting exactly in guidance?
I mean if you can just give us some sensitivity as to how much decline should we expect in gross margin for a given decline in sales level. Not looking for your guidance, but just in terms of a framework to understand how we should think about gross margin evolution.
Well, today, the fixed costs are around EUR 19 million. They might drop a bit because of temporary unemployment or other areas, I mean. But that gives you a bit of a guidance on how your gross margin -- how the gross margin could evolve over the next quarters. Is that sufficient answer?
Sorry, can you repeat that? I didn't really catch the first half.
So the fixed cost is around EUR 19 million in Q1 anyway, in -- the part of fixed cost in the gross cost. And this will reduce somewhat, maybe a few millions maximum because of temporary unemployment and so on. But we will stick to that. I mean that fixed cost will remain to a big extent. So from that, if you know that, then you can also -- depending on sales evolution, more or less, make an assumption on gross margin.
Understood, understood. That's very helpful. And finally, on OpEx, your quarterly run rate is currently around EUR 32 million. Is that the kind of run rate that we should assume through the year? Or is there any flex around your OpEx as well?
Excuse me? Sorry, I'm not sure I understood.
I just wanted to understand if -- your current quarterly operating expense run rate of EUR 32 million, is that -- should we assume that for the rest of the year? Or is there any flexibility in your operating expenses?
Yes. It's -- there will be some flexibility depending on unemployment, and also here and there are some other costs that are a bit related to sales. But I mean the overall operating cost, which -- yes, it's difficult to put an exact number on it, but minimum EUR 3 million, EUR 4 million, I think we can reduce it in the next quarter because we don't -- it's still not clear as to how much unemployment we will have in the quarter.
The next question comes from the line of Matthias Maenhaut from Kepler Cheuvreux.
First question is actually on CapEx. I can recall that originally, you saw CapEx up versus last year. Of course, a lot of disruption. So how should we think about CapEx? Will that be cut to the bare minimum? Or will you continue to invest for long-term production capacity to be flexible when the turn is there? That's my first.
Yes. The CapEx in Q1 is indeed quite low versus the guidance we gave of around EUR 40 million. However, half of the investment is in facilities, mainly the Bulgaria investment in a new facility. This is continuing. So yes, we intend to finalize most of that investment, and that is according to plan in 2020. On the CapEx for the equipment -- for the test equipment and so on, also there, what we have planned is mostly CapEx for new products or new lines. And also there, we plan to continue with these investments. Here and there, there might be a bit of delay but not substantial. Moreover, yes, we also have some opportunities, health care opportunities, so that might lead here and there to additional capacity expansion. So all in all, we still -- it might be a bit lower than the initial guidance, but we stick to investment case of, yes, close to EUR 40 million -- EUR 35 million, EUR 40 million still. Is that sufficiently clear?
No, this is clear. Could you maybe give the split between the CapEx for the buildings and the testing equipment?
So for the EUR 40 million, around EUR 20 million, around half is for expansion mostly in -- there is a few million that is in other sites, but almost the full EUR 20 million is going into the investments in Bulgaria.
Okay. Then my second question is actually on launch delays. I kind of understand it, but if you think about launching new products, is it something that you are postponing for the rest of the year? Or is it just a process that will continue to go? And what can we expect in terms of new launches versus last year? Is it going to be significantly higher? Is the innovation rate, I would say, slower now? More color on that, please.
No, the launches are going as planned, and there is no slowdown.
All right. And then maybe last question is on your customer concentration. Can you maybe give us a little bit of an idea what are the largest customers? Or how big is customer concentration? And how is that managed? Is there credit insurance in place? Or do you take just the risk on balance sheet?
Karen, could you take that one? I think -- or you can just comment.
Yes. I was on mute. I'm so sorry. No, there is indeed no credit insurance. It's the way we've worked for the last 30 years. But then I must also say, I mean, the concentration for one customer is not so high. We have, for instance, for one delivery -- company, we deliver -- because in many cases, we have, for instance, customers like Sensata. That is, yes, 16% of our sales. But we ship to, yes, I think, 6 or 7 -- I'm not sure how many, but they have many more...
Subcontractors.
Yes, so many, many subcontractors. So the risk per supplier -- per delivery or per customer we ship to is usually not more than EUR 5 million. That is already a lot in our collection. So the spread is quite -- it's quite spread over many, many different customers. And as I mentioned before, yes, the collection process is going quite well. So we don't have major delays in our collection process.
Exactly. I wanted to add that -- indeed that there is a very good credit control in Melexis. They are excellent in doing what they do. And customer concentration as a whole -- so of course, Karen mentioned different supply locations or delivery locations, but customer concentration and customer concentration from Melexis has not changed a lot versus the past. So the top 10 is still around half of our business.
The next question comes from the line of Marc Hesselink from ING.
I wanted to come back on that low inventory at your customers that you mentioned. Obviously, that's a good point. I'm wondering how is your visibility and how deep into the supply chain is that visibility. I think you mentioned earlier that you still expect a little bit of a bullwhip effect. Do you have any feel on how big inventories are further down the line next year to your direct clients?
Yes, yes. So we do follow now -- since a couple of years, we do follow the inventory levels of our customers overall. But of course, there is a time delay because you only see that officially as a whole when the quarterly results come. We do have some customers that we follow ourselves to understand exactly what inventory they have on Melexis products. So we've chosen some customers that we have learned are a bit of a barometer for the health of the inventories across the board. So meanwhile, we know which customers we can trust their information. As such, overall, we -- that -- so both the overall inventory levels that have a quarter -- so the delay with the quarterly results and the ones that we do in direct and, by the way, also our distribution channel, which, of course, they need to report on that very frequently, on all levels, we see more or less that they are, on the one hand, on the lower side. And on the other hand, they are stable. And on the OEM side, we see that it's rather going down so that there is a decline. For example, in Q4, there is -- there was a slight decline, and they came back to levels that are more, let's say, natural, more the 2018 levels, let's say. So it's a bit everywhere downstream in the supply chain that we see that inventories are healthy, at a relatively stable level. Was it that, that you were seeking for?
Yes, exactly, just a little bit extra color. And I think that's clear. The second one is on -- which you also mentioned in the press release and also during the call, maybe some opportunities with temperature sensors and health care in general. Could you elaborate a bit more on that, like what you're seeing and also maybe, yes, how big can that be for you?
Yes. Well, let me first say that temperature sensors are only a fraction of our business. But temperature sensing, the technology, we have been investing into for probably 20 years now. So we know it extremely well. And I've talked about that in previous earnings calls, that the -- one of the nice products that we had even 2 innovation awards for is a very accurate medical-grade, small factor, so small size, temperature sensor that can fit in a lot of, let's say, consumer health but also professional health applications. We have seen, since the beginning of the year already, a highly increased interest in not only that product but also the other products that we have been carrying already for a long time. And we've seen new applications coming onboard. For example, diagnostics. In diagnostics, you need to keep the temperature stable in order to have a good measurement. We have that, for example, already in diagnostics equipment that measure the level of cholera in -- bacteria in second -- in third world countries or after a disaster happened. These were smaller quantities. But what we now see is that diagnostics, for example, for COVID-19 are, yes, multiplying, and we need a lot of them. So we do see a surge of such applications in the past couple of months, which, in our view, are sustainable. So we are very careful not to, let's say, let us carried away -- let us be carried away by the hype of the moment. We really dig deep into, yes, what is it exactly and is that sustainable. And of course, there will be slight peak, but we also see that it is sustainable because more and more people want to monitor their health or companies want to install access control for their employees or governments want to install quite some checkpoints for all the citizens in their country or the ones that are entering the country. So we do look into every new customer that comes onboard. Many of the customers that have increased recently are customers that were already working with us. So we really look at the sustainability of this business as well. And today, it's not materially impacting our numbers -- our sales numbers because, okay, we have to also ramp up. We have to have time to ramp up the supply chain and the numbers. But mid to long term, yes, it can become an important growth driver and a good because, for example, on that very tiny device, we have no drop-in replacement anywhere because it's the smallest one and it's with the best accuracy fit for medical grade. Is that okay?
Yes, yes, it's good.
The next question comes from the line of Christophe Van der Kelen from Value Square.
I hope everybody is healthy as well at Melexis. Three -- 2 quick ones and one maybe longer one. I was wondering if you're monitoring the financial situation upstream and downstream, both at your -- while you already talked about downstream but also upstream, are there any risks there of your suppliers that would come into financial trouble? Or would you see a need to diversify your supply chains more than they are today?
Okay. Yes. Thank you. Everybody at Melexis is healthy. We've had very, very few cases and none -- as far as we could see, none that have contracted the virus at work. Health measures are in place, have been in place even a bit earlier than maybe many others because, of course, of our Chinese colleagues who gave us good inputs. For example, me personally, I'm not shaking hands anymore already since beginning of February, which, in some cases, was seen as ridiculous. I think nobody thinks that anymore. Now on the health upstream, our suppliers that we work with are all in financial good health. I don't have any indication that they wouldn't be. The problems that we have are the consequence of movement restriction orders like in Malaysia, for example, or in the Philippines or lockdown situations that we don't see necessarily because we have a good business continuity planning. And in fact, that BCP checks already started in January, where we make sure that also our suppliers had some visibility from us and some allowance from us to make sure that materials that they need in order to supply to us would be available. And the whole business continuity planning that we've done, I mean, that is in place already for quite some time. It sometimes needs to be boosted, like, for example, after an earthquake or like this year now, but the process is in place. So we can quickly run. Are we looking at second sourcing more? I think not necessarily more than in the past because our products and, for example, the packaging, the assembly that we need to do with our products is very specific. So it takes quite some time. It's not always standard packages that we're using. That means we need to make good choices at the start. So we do look at financial health, and we even are, yes, sometimes paying a bit more and not choosing the cheapest supplier just because we want to be sure of getting business continuity. By the way, this is also a requirement. As an automotive supplier, you have to. And once you have that, you can apply it to all of your products, including the adjacent ones, of course. So no, I don't see significant change there in our way of working because we already have that in place.
Okay. And the second one would be, since you are not facing a double whammy this time and your financial situation is a lot better than in 2009 -- 2008 to 2009, is there -- would you be looking at M&A or doing any deals or something else on organic growth?
We don't exclude it, but as you know, this has never been a big focus. But of course, if there -- a crisis like this indeed brings opportunities, and we're always on the lookout for that.
Okay. That was good. And then the last one, whether -- on health care. You mentioned the devices that you can use. I was wondering also X-FAB, which is one of your main suppliers, is working on a couple of health care, has this in the pipeline. And do you see chances for increasing collaboration with X-FAB in these fields? Or are they in very different applications than Melexis is?
They are in many different applications. And of course, some of them, we don't carry. But for example, with the temperature sensors, this is something that we developed in cooperation with X-FAB, yes.
The next question comes from the line of Michael Roeg from Degroof Petercam.
I have a question about Slide 13 from the presentation. There, it shows that car production is expected to have recovered by 2022, with about 90 million units, which would be the same as in 2019. However, the mix is much more in favor of electric vehicles and hybrids. So I was wondering if you could translate that 2022 number into semiconductor automotive market growth versus 2019?
Yes. Well, if you look at -- for the electrification, if you look at Slide 15 of the presentation, you will see that translation in 2024, not in 2022. I wouldn't say it is linear. I don't have the exact data in my head now. And there's always -- there could always be some time shifts. But I think that the 2024 figure gives you a pretty good view of how it already could play out in 2022.
Okay. Great. I'll study Slide 15.
The next question comes from the line of Janardan Menon from Liberum.
I'm sorry, I joined the call a bit late so I might have missed any comment on this previously. But I'm just looking at how you see a recovery in orders in the U.S. and European markets going forward. I think suppliers like yourselves have seen quite a reasonably strong recovery in China, once China came out of lockdown towards the end of February and through March and into April. And I understand that many factories -- car factories in the U.S. and Europe have started opening up and started limited production this week, last week, et cetera. Two questions really. One is, I know it's too early to extrapolate, but has visibility on these markets improved a little bit in the last 10 days or so, as you've seen some of these opening ups coming through? And secondly, what is your view on how the recovery will be in the U.S. and Europe over the next few months as these -- as and when these markets come out of lockdown -- or maybe not a few months, maybe it's going to take 6 months. But as they do come out of lockdown, would you think they will recover in a similar manner to China? Or do you think the nature of that recovery will be quite different?
Okay. Yes, I confirm what you're saying on China. We did see a fast recovery there. Did the visibility improve in the last 10 days? Not really, no. Otherwise, we could have said something about it in our press release. The view on the recovery in Europe and the U.S., I think, is probably -- and this is a personal assessment of mine. It's probably not going to be as fast as in China. But as I said before, and maybe you were indeed not in there as -- or not have been present yet, it will largely depend on how customers will react. And there is many different ways in which consumers could react. As far as buying a car, yes, it's one of the safest mobility solutions at this time, next to maybe bikes and motorcycles, which, by the way, is also a focus of Melexis and one of the reasons why the adjacent markets are -- have recovered in Q4 and Q1 or at least the adjacent market portion of the Melexis business has improved. But consumers probably see a car as a very safe way of getting from A to B, whether it's for work or for holidays. As they cannot fly now, they might want to go more on a holiday close by. And that means a car because public transport, trains, et cetera, they are not seen as so very safe for your health. It could also -- there is also the aspect of the U.S., for example, where there is not such a good social safety net as there is in Europe, which will probably also impact the willingness or even the ability of families to go and buy cars. So it can go in many, many different directions. That's why recovery will be a bit different, I guess, in Europe and the U.S. versus what we've seen in Asia.
We have no further questions in the queue. So I will now hand the call back to Françoise for any concluding remarks.
Okay. Thank you, Rosie. Dear audience, our next earnings conference is planned on July 29. And before that, on May 12, we will hold our Annual Shareholders Meeting, this time, in a virtual format. And for now, please do keep safe and stay healthy. Thank you, and goodbye.
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