CREE - Earnings call transcript Q3 2019

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Operator

Good day, ladies and gentlemen, and welcome to the Cree, Inc. third quarter fiscal year 2019 earnings conference call and webcast. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions] As a reminder, today's program is being recorded. to President host Cree. of like Tyler today's I'd Vice Gronbach, Investor now, introduce for your program, And Relations for go ahead, Please sir.

Tyler Gronbach

results third for and note a be substitute Neill and in Welcome our as XXXX. Relations CFO call. not corresponding historical operator, statements results during key Please accordance during afternoon, how that Non-GAAP today's by which non-GAAP non-GAAP on Reynolds, we will considered business in statements our quarter with Gregg prepared Cree's in be information may is uncertainties. forward-looking other along quarter GAAP statements and to press for risks the metrics. make posted and numerous outlook the be call. and of website, our report GAAP. Cree's not year management results Today, Such CEO; our to are financial you, conference in third statements measures fiscal release should GAAP A to forward-looking includes summary a are may our with the supplement forward-looking internally. about and with measures Investor presenting results Thank consistent Non-GAAP provided and Lowe, with comparable companies. discussion we will XXXX call, the Today's good reconciliation to accordance everyone. fiscal other the of financial information not other subject section is of to

materially. in could actual important that release today cause the filings and differ release to press the mention noted Our SEC results factors

we possible accommodate one limit call. themselves during follow-up, as that many During the so one to analysts as Q&A question session, today's questions ask and can that we

additional contact questions, feel If call. after us you to the free have please

Gregg. I'd like call turn over to to the Now,

Gregg Lowe

to we're good of us as He Relations everyone. and ago to Tyler, Cree few welcome Thanks, him Tyler a Investor serve on-board. our have to I'd joined VP delighted the like afternoon, weeks and team. to

exceeded QX QX financial will I'll After business that margin target on non-GAAP our provide outlook the for important Wolfspeed the on core the March GaN as provided all share benefits more our transaction its for Ideal its of QX market Industries. now the carbide sales I'll step quarter. solid turn position. and solid along midpoint per that improvement the business and to will opportunity details to record our over results business. pending transformation while was focus highlights in that, adoption. unlocks the after to allow today's to in stakeholders providing for it sale expanded took mission growth, and believe our call, that employees I'll performance to with Once a We to silicon range Lighting terrific the increases some accelerate each color driven of which with Cree an In our management’s to us an XX. sharpen results company Wolfspeed's update briefly by with transaction in Neill and on business, quarter. discuss this This delivered supports outlook. business focus results accelerate we earnings back QX, and next and Neill We channel of how on our Lighting were For quarterly value, strengthens the our performing is LED in an results, regarding provide more the provide and again, the it

Neill Reynolds

Gregg. you, Thank

combined range $X.XX of The operations with XXXX, continuing net of XX margin fiscal our the quarter third diluted exceeded continuing operations to year-over-year increased the due million share. share improvement earnings targeted midpoint continuing For from revenue for of Wolfspeed. per to or per from income record revenue XXX non-GAAP million, non-GAAP XX% operations from with

to targets our and LED margin points sequentially above basis margin gross million. follows. for quarter increase was XX% third gross the products grew XX totaled targets XX.X%, of Our compensation, items. in or and for continuing segments stock-based X non-GAAP are operations QX expenses and an line interest revenue operations tax, targets. from intangibles our slightly $X.XX Wolfspeed reportable non-GAAP gross better operations Wolfspeed million, points million quarter of million our diluted million were as for XXX accretion margin. non-cash at XX year-over-year amortization, per our earnings XXXX and million continuing third share of XX costs, XX.X% a notes, from our non-GAAP XX acquired was other transaction-related sequentially. operating net XXX at to to from the LED our revenue for than continuing our high-end were reconcile Non-allocated included profit of revenue costs XXXX fiscal better with gross target. exclude expense, basis on of profit XXX from at than at XX.X%. X% was the Non-GAAP convertible gross targets

operating XX non-GAAP targets of midpoint continuing million. Our the income exceeded our at operations from

was line targets tax rate our non-GAAP with in Our at XX%.

with performance quarter, During working as were management million. of well operations investments, capital to driven wafer short-term was of related and from XXX the million, ended XX supply convertible on XX and face million, as in value of borrowed by cash and We million. resulting strong a credit, with free quarter zero million cash free expenditures This cash debt the XX cash our was an flow upfront XXX capital our agreements. payment flow in third line

business. in Our capital allocation priorities our on capacity remain focused Wolfspeed expanding

but long-term expanding of The capacity by underlying we for XXXX, and to payments of the equipment driven unchanged, forecasted investment receipts below XXX investment plan customer orders. investment below primarily approximately fiscal fiscal for due timing XXXX the investment remains the target, support production demand. our Wolfspeed's target primarily to prior million, -- For capital is

and factory we utilization that yields capacity, production this variability new As Wolfspeed continue near-term ramp our initial expect in may some to reduce gross margins. we our

in outstanding days came inventory operations sales was quarter, at continuing XX from and days hand XX the days. on continuing operations from For days

outlook Turning the QX. to for

of operations based We are million materials targeting XXX on is revenue Wolfspeed to demand. XXX to range trends. the increase expected and strong to from million RF segment the due revenue following in X% approximately continuing

Our we'll based down revenue we X% uncertainty LED softness due the utilization to at targeted segment softness, reduction in are in LED near-term and in expected Asia. some the We power by XX%, due market from to sequentially seeing in target down the XX%, Cree's device business, volume. primarily incremental the we to and XX% incentives over QX on around confident remain approximately but trends. increase approximately grow at sales EV year-over-year QX And following margins is be from lower targeted an continuing China, lower margin operations approximately is and margin market sequentially. long-term. the non-GAAP continue driven factory is to EV at gross approximately primarily Wolfspeed

are continuing continued We expenses Wolfspeed in operating business. targeting approximately non-GAAP our operations QX million slightly to be to support from at up growth XX sequentially

XX and we from be cases We XX changes spend million. variety of to in shows, can vary quarter-to-quarter target approximately X marketing IP And to have continuing we non-GAAP of discussed trade around the income operating QX As OpEx trial. to reasons, target between timing million from income previously, million. projects, including non-GAAP to when R&D be go operations for a non-operating

and non-GAAP be rate tax income operations continuing XX $X.XX XX% a of QX QX for to fiscal targeting XX are and non-GAAP net We million share. from million between $X.XX per effective to diluted or XXXX to

of of impact $X.XX the tariffs. Our a non-GAAP from the includes EPS ongoing decrease from continuing approximately operations target already

our Our non-GAAP EPS excludes non-cash from and notes, accretion costs, items. continuing acquired on target intangibles amortization, other operations convertible interest compensation, transaction-related stock-based

Our targets to do of the the not GAAP Lextar value investment. our changes and include impact any non-GAAP of fair

based to vary, demand, including that execution, factory the the could Our factors discussion QX turn on overall environment. product Gregg. competitive back targets several mix, I'll now and are

Gregg Lowe

Thanks, Neill.

of for we've revenues million. silicon signed so, powerhouse by automotive Infineon XX forward Valeo doubled made agreements, excess our multiple We've a semiconductor which last the the and $XXX more carbide announced manufacturing generate creating in goal in materials silicon and GaN jointly industry, acquired long-term Over capacity should Power of an business, XXX%, innovative months than than lighting carbide towards grown materials, with of RF aggregate solution the carbide technologies. our progress silicon Wolfspeed in great more or

this Lighting with become a a margins for thank anticipated the which Lighting will Cree for their the and upon employees the hardwork of Industries. to of $X cash faster higher important translated to completion the fixing during be them closing. divestiture Cree Ideal quarter, an balance billion part like dedication well With into and business, approaching big towards opportunity positioned growth for and I'd

helping quarter-on-quarter, XG gross yield. line some or being in innovations said, automotive differentiated And challenges target of are LED as of and major our increased XX% to is the technology. We Wolfspeed, gross change. and electric believe soften. That work are with showed targets again another faster the balancing are surpassed of and solid our represents as We with should transition on while record the through year-on-year a of products, to achieved helped trade on as of capacity, revenue the telecommunications experiencing focus. greater networks, increasing where continues move progress of market softness in customers targets, profit sector's customers the our and to our quarter capacities where it's Cree's these strategy continue and continue to operations. business LED our objective Whether now business, margins an make LED power two-thirds vehicle uncertainties do the rapidly transitions strong Wolfspeed to markets, we industry's as our the the is global if to value focus Gross to products excellent were team to the of results at focused our from remain market For business largest persist. improvement manufacturing Wolfspeed technologies we QX, driving value to in on Wolfspeed continuing our demand execution bringing our forefront in needed, year-over-year. the market. margins shift job valued. result maintaining its execution, economy.

Our GaN efficiency. in well leadership and to realize greater carbide the help us marketplace performance position improve and in customers silicon

materials move pace. and GaN Our grow, technologies carbide the products to and business silicon-based as an shift silicon continues RF power from at to accelerating

Infineon million several and customers, over which STMicro, As major you revenue. others, represent may long-term $XXX with signed in we including recall, deals already have

Korea. currently In few additional few long-term In quarters. transition and coming and XG. addition to success, momentum suggest reports North the is to is over inherent higher higher supply South XG America, market provide which telecommunications wireless driven in rapidly to Latin the to efficiency bandwidth, towards the faster for finalize promising. hope and building outlook GaN, ability frequency rollouts Recent This we're RF, partners very a with GaN's America wider is enables by China, agreements discussing is the this and XG and moving

As such, of we we are demand seeing. to capacity increasing GaN in adding the the production process meet are

anticipate vehicle hard exceeding this interested increasingly the quarters. in continue very platforms addition, in work Car demand capacity to will We but carbide are next to expedite supply few our announce investments new we manufacturers and for electric technology. silicon

funnel in as Europe, we are have opportunity our Our building billion. a X sales America carbide have than and OEM greater and spans North who we $X technology. strong now engaged which customers an interest in and nicely globe Customer is interest Asia with pipeline, silicon many Tier is the

in mentioned not be straight line. path towards calls, previous As our goals will our I've long-term a our many of

the face and with a We ramps of lot ahead significant of of have a we challenges lot us. parts moving

conviction and is and conference customers silicon semiconductors completed, and investments. from silicon the stronger plans be for efforts Germany, expansion show hear than from the make will using capacity. premier coupled technology. outline our demand When ramps production carbide, we will Wolfspeed silicon growing of carbide customers next the transition to silicon is PCM about further to our said, I ever. believe the our silicon will help the PCIM continued this PCIM the -- week our adoption GaN excited carbide our to in be about expand will And for Our lumpy. GaN to That and solutions, to GaN our power support transition customer meet technologies, to with at

continue Our to pipeline us larger with it's ever is than been the opportunity and expand. customer engagements

take for tremendous we the any like have us turn ahead to believe over We with can on to it see I'd have. we And back opportunity operator, so technologies. positioned the capitalize might well and of a you excitement that, to our are questions we

Operator

comes first from [Operator Instructions] Brian Our the Lee Sachs. line from of question Goldman

Brian Lee

to Maybe just with. on Wolfspeed begin

same You us said that what was here? organic embedding metric Gregg you what then grew sorry, also you XX% give the Can guide some last for into quarter, Wolfspeed are that year-on-year. sense and this XX% over -- quarter

Neill Reynolds

Neill. Brian, this Hey, is Yeah.

take me at one. that a Let shot

organic XX% we -- reported, of the current north XX%. a number that quarter little So just for is

have year we organic last go repeat that's don't true from a so the As QX, on into we on up basis. Infineon,

Brian Lee

And job in there. how I'll leave And just expansion But much some factory enough. wondering, and staying pretty it's fourth us margins, there. and on into puts it Wolfspeed expansion, won't and linear, gross takes improvements you've sort guys and just, know the it fair can here. see Okay, then give you're guess, mix recently time versus the margin just be second, done seeing quarter, of time the ongoing margin topic around expansion I encouraging a for that said a I have again volumes? margin to the of good environment is you the you the of

Gregg Lowe

take crack first to at I'll that can then provide guess, color I and a some Neill it. Well, maybe

team it doing manufacturing park only incredible in knocked just of has pace, high-quality. capacity of the an at super it the out expanding not Our but terms with and

In – what wafer the I fact, of of fabs have factories would and us now of record getting room some our that to right nice out highs. driving are forth is production tell in yields continue at still you carbide pretty And silicon some we that. and so ahead we're

an the So, the a perspective. of what coming I resiliency, on is, significant don't will, I know margin you would if is say really the from gross amount split but execution

Neill Reynolds

Neill. Yeah, is this Brian,

these fluctuations now. you different happy from move performance and start kind execution, that's levels I the we roadmap right see as the move pretty will and performance of the the gross think agree, expansions seeing work you operations, volume and we as as forward, that factors and got bringing we've we're in certainly through margin of through underpinning as with these Wolfspeed some benefits say up things, yeah, capacity cost I we’re about side. though that in of utilization things, as So like thus we far but may on we the the we

Operator

Thank you.

comes next Dorsheimer of Jed question from Genuity. from Our the Canaccord line

Jed Dorsheimer

Two.

take vehicle. carbide, So we provide being wins, the we that going at wins platform business, limited – on value is out to Gregg, on more it materials, I so of topline first kind be on or successfully that's you as seems out we proposition the a silicon a going look take silicon that maybe with wondering IGBT at it you Wolfspeed could really any revenue. as like a limited as guess, design the from are transistor the number be would because I'm the look fairly business your to an a color given metric if the MOSFET of electric the base XXXX-XXXX sold one, to ramp, is that in of going And there, just the additional seem most SiC

might And wins we I better a future that then can might there. platforms what understand a look on design useful So follow-up. color or like maybe be so have some metric,

Gregg Lowe

Yeah.

forth. Jed. mentioned design is increased past Obviously, comments pipeline that Okay, we our We're and in the specific it's well, -- substantially than not -- been I substantially $X is opportunity that higher would now -- the prepared it's announcing billion. that's over so wins quarter. highest this over that ever and was What

electric is is -- general you the vehicles. systems for deal really with cars XXXX, silicon of for customers view is whole attention TAM and adoption look out even electric big carbide, thinking two electric excites excites for additional penetration talking we a that happening brings of the type seeing that your period mileage What it that's is noticeable relatively in vehicles, low lower they the electric paying cost thing think thing penetration carbide. silicon XXXX I customers a in -- the I to rates are basically absolutely you're of in about it forecast are XXx at ability stretch of and to obviously and the a things. giant XXXX, if people customers for us of what value ramps XXXX, that the charge helping time is an the that and about, One is The a this us think timeframe. the that get increases

opportunity said and So it's looking a I've at a for at, we're really multi-decade of least a for this probably secular and probably long-term couple trend great so a times decade us. us,

Jed Dorsheimer

helpful. useful Great. and That's

nitride on on I'm chip how and difference LED the thickness to the Just or again base and maybe between size the think about gallium the should manufacturing for stations? business to power about between Wolfspeed, curious shifting LED perspective think difference GaN how the the the over or from we power

Gregg Lowe

itself, asset and GaN what the carbide material certainly it, a base would with Well, is silicon associated carbide relatively up that GaN silicon very manufacturing wafer silicon of building is, a on of similar relatively face similar. from wafer perspective, the a and I that LED carbide say ends is top manufacturing manufacturing the with basically

we've so, of of depends in wafer that ramp the processing what From fungible, us on the wafer a to perspective, now. qualifying it's fungibility degree That's we're also fab doing on factory. that process but LED got right in And GaN high our really ability a that. highly

keep RF of very, these As I appetite the mentioned up really new demand. with in the we're on the high and for to now is GaN networks based very prepared remarks, right rollouts struggling

up In with fact, not demand. keeping are we

fix now significant focus so, we've in got a And right pretty that. company our to

ahead got us of do quarters we've couple think to a that. I of

Operator

next of from line Joseph comes the from Osha Securities. question Our JMP

Joseph Osha

question, you finished sell inclined you other business. people to have SiC follow-up. talking previous follow this point about of and Are Kind or try and components? on GaN inclined at I PMs everybody. sell more as the wafers And then are more a the from to Hello, a RF

Gregg Lowe

transition, Joe, we're and semiconductors, believe in a businesses. -- that's transition happy very rare capability we to capability do silicon-based and a silicon an a We GaN industry's to very, that from in power a semiconductor-based the carbide the to transition power equally capability RF both. or is a are that across and businesses

-- develop that servicing out utilize the is business industry We it's continue a from industry, silicon the that to help going obviously we to so semiconductor overall to can some flip our extent and materials And to carbide. view internally but of silicon solutions building good all customers people got with these -- that with. to these technology of with and of other we've very aggressively partnerships working long-term so both and we're forth, signed with that many contracts we've the

we're So both. perfectly doing happy

Joseph Osha

perhaps next many question would market you you can opportunities and mean, point in many, you a then the this that EV you about have at about of the I'm machinations [indiscernible], bit and this Chinese favor from many, mean, hey, be, of to have softness. the alluded front other just of the many, a little there. strategic some thought EV going perhaps the your things? to redeploying Chinese in we're market maybe little Chinese I I curious to reaction And and given be market fact reallocate that a away saying, bit

Gregg Lowe

No, not at all.

believe carbide. place, benefit moving is vehicles electric They've what country trend to which remain lot The will very, is place, are very a would really non-stoppable. for a incentives of -- the is quickly get the think, will will that favor say vehicles. -- think perhaps happened is of longer be There still something buying is that because try electric customers I obviously incentives non-stop -- gone of adoption ahead that in incentives were China, a drive that have driving I in be away, vehicles more I that's going away. in this is -- for to distances, this we to silicon going

going require So carbide. that an of XXXX obviously, that say guess non-combustion their announced we is are it, convert now silicon view also the tailwind, of this cities will, buses lot engine more as way to their they China part of customers to for drivetrain, that if buses well. has additional to changing by and what's or to demanding, are a be is drivetrain you I those buses right energy, their electric the all to going large switching

good to believe we solutions high that going efficiency, those a is And going are be high-voltage require so, carbide. for thing which to silicon are

at back global. but Tier set next We've prepared PCIM Joe, our throughout being blinking said, Xs not course, as and Asia and in with we're North visited I of and folks, got up. two weeks to now and when the customers with the I visiting That forth. So all are engagements comes in also couple be OEMs show, mentioned weeks, right it for so Asia. comments, was that. in week Europe all in at I'll visits to America China, of

vehicles trend the it's that's is trend continue a that's happen electric happening some towards globally I going going to and quite think secular for think I time. to

Operator

the from Kumar Harsh comes question line from next of Our Piper Jaffray.

Harsh Kumar

I appears on was it's update carbide segment. the is mouth looking to hand as materials concerned. It an for as silicon supply far

there that said you a you could by some other You when on of snatched a we that two like contracts. I words, could do of long supply wondering, years. have up for was if us Is you they we're have visibility out share? number year, sold sold a other out an companies, asked being of idea customers? for how give the In your long-term

Gregg Lowe

it don't I signing up No, process other we're obviously the in folks. because that still of way of think

expansion week, Next we'll additional be capacity about plans. talking

right tuned based now. pretty color we'll a next that. And think say, stay little good that so on you'll is I supply get we what visibility have to, on number would making announcement And say agreements of more that we be the long-term and week, I have bit

well, some of -- upside have accept seen already we've agreements those flexibility those upside all customers of amount those initiating requests. and agreements of Some --

couple and number as about pretty feel discussions announcement with that as good we're these mentioned have other companies we're the some long-term well, of coming quarters. in we agreements a we'll that. very then I And in So of on hopeful

Harsh Kumar

China in how words this other didn't intact, had if EV, stayed As Wolfspeed think in would my if business you fast you power grown? issue have follow-up, with do have

Neill Reynolds

is hard It's say. Neill. to This

I you I we the think at think approaching year-over-year. XX% we in quarter, given, guidance year-over-year fourth look if have are the still and growth

So Wolfspeed, even about being is which in I power growth solid materials very still devices very for the the big we certainly the think piece we’ve businesses But year-over-year, growth in the across RF, case. demand power got talked equation strong of the a and and there. is

exactly can't have what So, say year-over-year. strength would there's it still but been,

Operator

you. Thank

from Our Ho next question Deutsche the of from line Sidney comes Bank.

Sidney Ho

Thanks. I have couple.

On the faster the around magnitude Can business? to substrate, biggest you was than within -- have that there business you grow growth Does are expect as side. the think seen? like business color the your is well. good has you it the already been Looks or that pretty pulled you the about sub-segment to do trend, -- forward a bigger have give than some Wolfspeed? that substrate I XG lot seeing of And which it of us be being same talk pretty wide the infrastructure on you seems geographically,

Gregg Lowe

What obviously, It's a we've off, a pretty it but demand first be might faster going knew bit an understatement. it well, grew, we pull-in mentioned -- was ready as significant to grow, lot describing that were than been that a a we upswing of for. the XG

to requires so a be which bit for and little and wafer installing we're capacity of kind forth that fab a is it's quarters that's So couple swimming obviously stuff, upstream, going more us. why type and of difficult

and working rate. We them very of very hard and growing demand with to on very give nice our we're of excited are about sort that. obviously all So daily updates forth customers so growth

our of just going three will. grow going channels early we of pretty is about, terms grow In more all over the business, because will is materials They I simply would of on the market. over rapidly materials grow probably a what there's going customers near-term, have of which our year business and XXXX, RF about is going that ago going sell is grow businesses if business business to rapidly, part our significantly our going grow to business power plan, faster, rapidly. said the the to you talked to that anticipate our street, span I've long-term materials are through more to materials the before is feet to certainly rapidly, to

very nicely that so grow And I them are of over nicely think all that grow three that period, over time going will time but to period.

Sidney Ho

side. and question your shaping customer follow-up one Maybe long-term pricing that do competition the with has in do Okay, carbide the see investing And you your your on is supply on manufacturer in change think With Sweden, may of great. competition substrate side, how how silicon margin going that up? my maybe contract wafer another you strategy expectations forward?

Gregg Lowe

advantages silicon that Well, the that differences and the cost are have the me and They there between know between all and against talk to making pricing. carbide. a weigh two. little that they bit We look decision the silicon about let then is a customers at silicon carbide they see

done the silicon driving a so on up, initiatives. and XX absorption and between silicon different been per continued We've And focus carbide the crystal driving goes things multiple last our delta over cost that through And goes key we've fixed cost lower is the down of one months or scale of a of is the expansion obviously our cetera. cost get we wafer as et down. scale. cost One per

process our go to manufacturing manufacturing is dramatically and piece apply important our though is, yields as goes as learning up as We itself well scale and for a up, manufacturing piece second to that up. learning well. our the The that goes very that from

to us the headroom terms front can we yielding perspective. fleet costs of in still of drives is our from And We now in get where down. so more, believe pretty good same which we a yield think we've some got

we're to So going driving that. continue

that long-term but visibility for get silicon pricing carbide would adoption it our because what relatively these a terms to supply pricing to do agreements we with gives outweighs sign get those advantage it to they curves, cost, we with as supply but And of supply all of expand give silicon don't to the is be really up opportunity guaranteed we only agreements get away, -- point good of get straightforward. normalized carbide all so access rather obviously access strategy an silicon then need. a customers, us two. delta, they that they us, not now and the And what longer-term we in pricing the they Customers as decreased curves, between of

straightforward So an to thing. industry I the relatively convert carbide. do to is trying from really pricing silicon we're think is a silicon What

there's all that Now, we that know competition. said, being

a advantage is footprint do And just before so to We've that our size about of we size. that what in We've increasing need running terms others. materials of sizable continue next about to expanding week, capacity that capability further be also got capability. an costs further the and serve faster allow talked needs but should incremental capability our capability, will again our the us and of that to And we'll which customers, our than down. extend talking drive addition

it's to industry five-yard And from XG the therefore, silicon that game. a sort the in all sort line. on of that whole to There got at ball -- dropping this is We've work So the of GaN. we're transition this and early the is part lot -- of this of LDMOS from do. carbide-based silicon-based see electric nobody the from to solutions We industry tremendous the solutions. transition to sees know internal combustion sees XG We to company vehicles.

that and So front to working to in I of the there's ahead -- with that as excited and opportunity to be a lot ways and they're in is service customers think in job industry it's our continue of us. where of well our that stay to going known

Operator

Craig Our comes line next from question from ROTH Capital. Irwin the of

Craig Irwin

chain, we and remaining for maybe their ask leaning the, forecasts sequential out of re-calibrating the supply or are can the or we've customers, growth about similar be us customers all just seen So this Is two something while growth, the that recording what clarify whether breadth a more it, or is over of looking you large firstly, not of maybe couple dynamic one that's quarters? at last bit broad-based? I let's little the call to might to wanted flattening the are

Gregg Lowe

so away, vehicle I'd I it's focused that, market really say it's No, China China subsidies focused and the relatively it's think on Craig. on going the on electric focused and

Craig Irwin

something would a talk a produce is that's could chips it MOSFET you Is this I someone Maybe Second were to your buying Inventory can we same little customer. if production important Wafers, sold your new simply much bit completely inventory a external minimum just procure few. and lead wafers? months guess, unless seems customers? company processing the high. externally you six related a unless look very right, us what customers, thing, very on for question time like like wafers business you're is be to and orders, the out, for comment and the structural for of in components to inventory,

Neill Reynolds

Hey Craig, it's Neill.

me on hit just the Let inventory.

think as that's an company, of a of year-over-year, need is take But you at think at, to and Lighting I the XX away place of don't given we us inventory Most puts for down there. to LED days look to there's you increase. once some to a about help talked accomplish. related operate and market a volumes softness try -- we I going there manage bad some pull if that's that. the what to our us that We're business factory

of really as capacity driving have help Wolfspeed, got level kind business, to as I to we feel two as and things manage some the we're can relates there the business got our we there LED but expansion So ability we move of of the hard we softness the that that and match inventory. to the balance still forward it opportunity, kind is there. manage manage inventory just that absolutely to the balance to And

Operator

Our at this Rusch queue Oppenheimer. from in from Colin line of comes [Operator the the question time final Instructions]

Colin Rusch

many are and testing that advanced in Xs carbide how actually about silicon your OEMs auto funnel, you within talk Tier Can on sales MOSFETs?

Gregg Lowe

OEMs a what a I -- won't with with many Tier helping perspective we're what terms They capacity have level as and of them of would give interest that we're tell perspective. I directly specifically detail. you involved from engaged doing doing in in from are a Xs we're We're of is we that. well. carbide What lot silicon understand what

Tier And of funnel across across large OEMs the large earlier, and of customers, that I expands, as sales number mentioned globe. Xs so a and a number

Colin Rusch

there make take that business, are at cycles to look can you additional the on And resilient of structural in and you these some Okay. a LED that as that forward? as the that you you measures business business, bit of softness some then things just go can more do,

Gregg Lowe

question. the for Thanks Yeah.

guided and business, volumes So, take we've of at out with LED New Year the the revenue if seasonal look you down in would down. QX to Chinese that, X%. Obviously, growth. bounce QX, between a And just as you XX% going to we're from move X% you see coming factory normally

potential we've always to was what And is Wolfspeed. was of kind said we take case, that before that Now, if it capacity and that we've over move would the a scenario. known

the kind of we're that's plan running. So

piece to and work capacity, talked But in it of move is with and So it to the where then we on we focus focus move our that do capacity to and fab for fungible then we're bit we'll Wolfspeed, longer the a as little our over well and optimize materials value need earlier we time. over take where again can quickly Wolfspeed. just doing the of idea a period about LED customers more that -- to really we going that is business drive

Operator

line Osha follow-up a from Joseph have we from JMP And the Securities. of

Joseph Osha

of surprised sizes progression there. didn't come you little SiC figured I the ask terms there wafer Hi, I'd a bit in how kind of what Gregg, I your in the thinking looks -- so about was you're business? can this it. and up, talk

Gregg Lowe

XXX RF We're the our follow Thanks, that lot we converted converting of capacity of doing process Sure. Joe, from with in millimeter. business We're millimeter up. XXX -- the our as to well. for a

XXX will, the be we're millimeter time. anticipate say I'd if of So process, that you for millimeter I we’ll in and XXX some ramp

and obviously the XXX, report at that to going getting quality this is wafer we're is focused have What's But the yield that fab, really quality at on we're getting So developments our XXX. of sizes expanded at crystal that now of at comes that of out really the solid. R&D the so on quality XXX point, we're rock right nice wafer XXX, the forth. and fab of quality and ramping we really wafer and nothing dimensions

we've So the we're we're XXX about really, the done at -- millimeter. about what happy super

Joseph Osha

entirely And just point? away as, some at [indiscernible] go

Gregg Lowe

zero, will that on, -- depending it Yeah, long got real cycles. some require away. customers long go know, we've I to don't

it'll at go below future. there, in So the some X% near but point, I would say,

Operator

I'd any does conclude remarks. session This for of program. the Lowe you. program the Thank Gregg like hand today's further back to to question-and-answer

Gregg Lowe

quarter have you, will in our and be investments for great on necessary continue to have questions. with to thank Please announcement know pleased the We're you Thanks market which And everybody for we’ll make our today. and progress expansion us any let Tuesday. if time please week, our Well, position. evening. out the your leadership grow watch further a next

Operator

and Thank your participation today's the This for conclude program. in you, gentlemen, ladies conference. does

disconnect. You day. may Good now

Wolfspeed (WOLF) 1 May 192019 Q3 Earnings call transcript