Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from the line of Uche Orji - UBS
Uche Orji - UBS
Let me ask you with the comments you’re giving by how much do you think utilization rates will go up next quarter and when should we expect that to naturally start to impact gross margins, so if we look a little bit further down the line, am I’m not trying to ask you to give me a definite guidance because many things can effect the January quarter, but if utilization rate rises in the current quarter should we expect that impact gross margin in the following quarter.
David Zinsner
The utilization is going to go up by a couple of points next quarter and that will impact gross margins that’s one of the reasons why we’re guiding up about 90 basis points or so. Our expectation is that utilization start to pick up, it obviously depends on how the market performs over the next several quarters but if it continues to go up and to the right, our expectation is that we would start to bring utilization up during that time.
We’re now at a point in terms of inventory where we kind of like where the days of inventory are. We think inventory days will be down a few more days but we’re at a point now where I think we can start to tick up utilization. Now might be a good time to go into gross margins because that’s kind of the corollary with utilization.
Our expectation is given our mix profile on a long-term basis we really believe that we can get our gross margin into the low 60’s. We have obviously a number of tailwinds that are going to impact gross margins going forward as I talked about our limerick six inch line is for the most part now closed. That’s $25 million of annualized savings and that will start impacting the P&L in the first quarter of next year.
We have about $40 million of savings coming from the closure of Cambridge which will come to completion at the end of this fiscal year and once we get through the old inventory in the first half of the year by sometime in the second half of the year we’ll start to see the annualized benefit of that.
On top of that we have really have done an outstanding job on capital spending. Our capital spending this year will be $55 million. A couple of years ago I think it was running in the $150 million range. We really see now given our model what we think we’ll use internally versus externally that really somewhere in the $50 to $60 million of capital spending per year is really the go forward model for us.
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