Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from the line of Glen Yeung - Citigroup
Glen Yeung - Citigroup
Nice job on the quarter, maybe just a first question on gross margin, your guiding it to be pretty healthy in the third quarter and then making the point that it sounds like you could be at that level in the fourth quarter. I know you’ve talked about getting better wafer pricing in the second half and I wonder if you can maybe elaborate on that issue and whether or not that’s contributing to your gross margin confidence.
John Daane
As James mentioned we have achieved price reductions across our supply base which includes both on the wafer and packaging front and so that is part of the mix going forward. If you look in the Q2 numbers specifically that was more due to yields as well as some decreases in package assembly and other areas, cost improvements that we made.
So looking forward we certainly have been able to achieve price reductions.
Glen Yeung - Citigroup
And then as the follow-up recognizing that wireless infrastructure in China is slowing down in Q3, there are some projects that are kind of out on the near-term horizon and I wonder if you have any sense as to when you think that business in China might start to resume again.
John Daane
So China is not going to zero, its continuing at a very healthy rate. As you know there is a very strong multiyear spend going in to China specifically to improve the infrastructure equipment. We also obviously have an Asia, very strong Indian 2G build and in the near future hopefully late this year, maybe next year we’ll also see a 3G spend there.
Communications deployment in China has been and will remain fluid. We’ve had some customers who order product for immediate delivery who expedite us who then cancel the product and then rebook it all in a very short period of time.
And as an example just to talk about the fluid nature of what we see, one of the three operators in China towards the tail end of the quarter slowed their telecom and 2G wireless deployment to solely focus on 3G network performance and in particular improving that.
As I mentioned we’re in a very early stage of a massive three year communication spend. There are naturally going to be periods where some, we see some acceleration. We’ll see some periods perhaps of some deceleration. Overall I would expect over the next several years for that spend to be healthy. It is as I mentioned fluid, very difficult to forecast.
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