CREE - Earnings call transcript Q2 2020

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Ladies and gentlemen, thank you for standing by and welcome to the Cree Incorporated Second Quarter Fiscal Year 2020 Earnings Conference Call. At this time, all participants lines are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference may be recorded. [Operator Instructions]

to conference like speaker to now Mr. today, would hand over the your I of Investor VP Gronbach, Tyler Relations. you. Thank go Please ahead, sir.

Tyler Gronbach

Gregg call. Thank you, second Cree's Neill conference Cree's quarter report the on fiscal Welcome everyone. Cree's the CEO, Reynolds Today, results will Daniel, and quarter year good fiscal XXXX. afternoon Lowe; CFO, and second for to of XXXX

GAAP Non-GAAP in how Please call, which today's with financial not results metrics. management Cree's GAAP. may comparable note along our measures during press not measures that not a considered and a companies. key supplement we the provided with for to release and in will A be information results posted financial to Relations website results the statements and GAAP non-GAAP internally. our of consistent should in section be accordance by presenting with to of summary are other accordance comparable is prepared reconciliation Non-GAAP non-GAAP be Investor is other information with in substitute directly historical a most

discussion our to and risks other uncertainties. may make are the business statements forward-looking numerous forward-looking about during Today's we forward-looking subject call. and outlook Such statements includes statements

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

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

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

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

Gregg Lowe

Commerce the our not end of to were range. we granted. In license fiscal Huawei quarter, upper to revenue good that recently Department delivered ship at We everyone. and the guidance afternoon of the Tyler notified by be would Thanks our second

an such, inventory Huawei-related have we taken reserve products. As on

we midpoint of reserve on EPS. percentage you some the adjust the of a will revenue, for couple margin minutes. Neill in the context the exceeded of inventory and guidance gross the reserve, provide for impact If additional

to position transformation growth our ahead continued of the tremendous opportunities Cree We for us.

our Day, confidence Those who hear we're growth investing short to growing Investor momentum And numerous opportunities. silicon the are then, prospects. business We joined these our see support our you we've since in multiple of underscoring continued carbide us November in at able to time for and industries, some about its opportunities to adoption. across of

and Despite unchanged. at denial outlet outlined the we short-term Huawei long-term license the the the related macroeconomic Day Investor long-term geopolitical the headwinds November to -- environment, that and remains outlook that we our

customers are receive from carbide transition We and silicon industries. who continue for Cree's to leadership respective validation carbide. to to expertise silicon their leaders on technology in in strong we're the significant many silicon accelerate by our unmatched this building is

Neill provide quarter. outlook and now some next to it financial I'll turn for over on quarter the additional results second our to color

Neill Reynolds

Thank you, Gregg.

XX% revenue power For Wolfspeed in to revenue ongoing million quarter the conditions decreased issues. $XXX of declined due soft tariff device second to LED segment XXXX, ongoing sales. due year-over-year RF to and amid fiscal trade XX% and year-over-year weakness and Chinese XX% revenue market lower

XXX XX.X%, million of was inventory the margin which $X.X consolidated reserve gross a On includes of basis impact. non-GAAP margin approximately or basis, Huawei gross points

Huawei the Let resume shipment to in granted. to we product application me would of decided will where it ban reserve to product and the moment license be months we into fact eight the at this the U.S. we to since currently resume our see on quarter. notice has that customer. time we been we don't the why not that take take received development a has have any shipping any opportunity gone hand this effect, Recently, Commerce from Considering of explain, to the Department

was As write-down. the to record it felt best such, we

to record revenue to relates to fiscal ban currently for expect customer the XXXX. with this Huawei do We any comply it RF as will not continue during and

non-GAAP Our diluted range $X.XX reserve, midpoint target to diluted per of $XX.X which below inventory the $X.XX share. was million our approximately negative impact due per of share, or had net loss a negative

impact the Excluding midpoint was of EPS $X.XX per diluted reserve, share. minus above the at our the

million factory second acquired Our non-GAAP expense, amortization, release. earnings of non-cash of and our in today's for items diluted on costs transformation accretion $X.XX quarter and restructuring notes, per net or stock-based earnings transaction-related exclude $XX.X share compensation outlined other tax intangibles, convertible costs, optimization

and million, target. year-over-year By midpoint segment, slightly Wolfspeed the as revenue our were $XXX below quarterly of results follows. sequentially our declined to

in with be subsidies. to While second to vehicle XXXX, continue sharp in power of of China, by half sales seen growth softness electric in withdrawal EV see the calendar decline materials following impacted a our business government continues we the business, our in

our million impact, purchasing due to Wolfspeed business, XG margin continued we the experiencing delays In of inventory reserve Huawei. it $X.X in which as to relates rollout gross XX.X% activity, to RF are previously includes was networks. an related discussed the

Wolfspeed margin XX% within approximately our our targeted range. gross Excluding the was reserve, Huawei

second lower margin Wolfspeed's also impacted materials quarter addition, MOSFET of the factory gross product. related our by yields lower And XXX-millimeter In utilization. ramp was to

target product product LED XX.X%, basis points XXX was and to cost at above lower factory up utilization, primarily improved sequentially, our million from tariffs, mix margin revenue range $XXX gross measures. LED was and impact due improved sequentially. grew ongoing X%

non-GAAP to for that $XX overall margin gross cost the million are reconcile $X.X company. our and profit of second XXXX totaled quarter included in XX.X% fiscal million gross for to our total the costs Unallocated

$XX $XX and QX was our our for operating the Non-GAAP the non-GAAP operating consistent impact expenses loss with reserve. which target includes of inventory million million, were

tax non-GAAP Our rate was XX%.

in expenditures a million. free million, as in of flow for $XX from generated resulting capacity cash second negative invest we operations continue to growth our to were expand the $X During quarter capital was business. And million, $XX Wolfspeed cash

million short-term line of $XXX We ended debt in million. face a with credit. zero value with the $XXX quarter on balance our And investments, and convertible cash of

driven quarter. XX the write-off quarter the XX last to days. at XX compared outstanding sales inventory hand days For by days on days to inventory improved in came And days

originally approximately more are million. we $XXX we will of earlier may anticipated, which now capacity indicated, investments have $XXX than For manufacturing that capital current schedules from up production device million, our plan. require fiscal than their Power in have recently customers be targeting XXXX,

time the flexibility, these we we in tools, invest to Given to need and production us event to required decided ensure the ramp customers our have sooner. have now maximum qualify install to our

These buffer were some XXXX, to purchase decided to planned so we planning ramp. for tools were we have have in but invest fiscal additional now our

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

down third are is expected based the $XXX to now Wolfspeed on to outlook for Turning range $XXX segment vehicle to trends: face sequential we spending approximately a of external in basis, million $XXX to in $XXX lower revenue electric million, flat the on of softness slightly we as and quarter million China. million, the sales network be a XXXX, headwinds, XG in to revenue targeting continue following to

end seasonality extend LED, basis, Chinese by revenue Year typical due at In and lower Lunar the $XXX holiday, the of a outbreak. XX QX range a Coronavirus expect to we announcement government $XXX January million million. This between the New to sequential on reflects the the

the could to the We gross at response health between margins XX%. returning operating gross government, for a The segment from margin to in XX% on delay target based any outlook that schedule. further does target not future measures normal Wolfspeed to Chinese business approximately XX%, crisis to be QX the following taken Cree's trends. account non-GAAP by We

working lower-than-expected on line. product XXX-millimeter previously As we yields temporarily communicated, our are MOSFET through

While the fully not quarter returned we previous yields to saw levels. improvements during have expected yet

gross lower our gross given utilization percentage margin addition margin. expect roughly versus in lowered remain have In further business XG Therefore, we the flat we period. impacting demand, our our prior RF to

improvements these we increase. to margin It the temporary cycle nature gross statements manufacturing are see full may previously, return hold. take higher once As we and see implemented we results once in issues however levels take volumes said financial our these to have improvements as in yield to of and the a expect the

to are execution. XX% volumes to LED approximately improved gross lower cost to margin XX% down We due offset quarter-over-quarter and lower licensing modestly by targeting revenue partially be

including million prepare grow from ramp an expenses XXXX. invest Valley are targeting $XX for in non-GAAP operating to fab, business investment plan increased we to our continue products Mohawk in we to million We our to which to production $XX Wolfspeed in as

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

to rate We approximately expect effective be tax non-GAAP XX%. our

net a between loss We $X.XX loss diluted million $XX to $X.XX per QX $XX or non-GAAP are to to million between minus targeting minus share. be

tariffs. ongoing lower by approximately is due target of EPS non-GAAP impact the to Our the $X.XX

transformation notes, and costs, and target our non-cash EPS stock-based optimization amortization, non-GAAP on excludes restructuring Our other accretion convertible compensation, intangibles factory acquired items. costs transaction-related

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

on based could are factory that targets QX mix, several demand, overall the environment. execution competitive Our and product vary factors including

the I will now Gregg. to back discussion turn

Gregg Lowe

before Neill. want update that on some provide Thanks, made of to I I has strategic the touch Neill an comments our on transformation.

challenging environment operating First, the in the remains near term.

didn't in us deal cautious trade a further development and -- are really to with of XG the awaiting sales do for customers visibility the in This with softer lack the future side recent positive coupled impact continues as much short-term. in sector. Our while EV our and on policy trade delays clarity to respect China

have Neill mentioned earlier is originally in we power result manufacturing of earlier manufacturing device may their they would capacity require of than that Now our we more than currently be production a the -- acceleration plan. customers which schedules ramp CapEx more currently some indicating the have than the in anticipated,

customers remains now. In speaks production on development we've which is a to the met their these has growing to for firmly the lines, track. demand silicon last make several additional us led and important days, positive carbide. investments transformation Cree of discussed with The time XX This and

a place to we position us. ourselves multi-decade our drive We team before as the for opportunities have forward company growth strong in

critical investing are future we by returns with announced these We wins leaders. on growth demonstrated as industry seeing the design recently for early investments and

are device to billion convert robust. $X wins. opportunities And large these and Our pipeline we hard is into working

new we further of Wolfspeed and our design-ins marketplace. demonstrating for compete totaling millions quarter, hundreds in were ability win dollars products Last awarded the of to

XX over months. customers to on our decisions to half make tell $X next us we've X expect previously, they As that pipeline about mentioned billion months device the of

ramp highly will the investments tremendous demand making necessary underway selected silicon This company. we scale. and and the initial is a capacity fab. meet for This Valley to in carbide efficiency the XXXX. is our to production a with and calendar the expand our at Mohawk improved allow expect site technologies with Work opportunity We construction to us we're growing year begin automated facility

customers carbide. silicon In industry to the beginning days I electric driven the few is and automotive, of electronics silicon significant clear at the transforming, for January, by the with engines a benefits The show, In carbide of combustion automotive and internal vehicles customers. to of OEM several value spent meeting automakers create from from and consumer transition alike. one our and are Tier silicon

us Our position our opportunity. on leadership and commitment to coupled well carbide, capacity, silicon to expanding capitalize in with expertise this

Additionally, applications underscoring are increasing the near-term the in while data we've for some and the required need in speeds that every XG substantial day, growth market rollout, these delays is the are XG. seen mobile for

strong the as continue high look right this Beyond silicon the of Cree silicon we carbide market-leading from solar, strong and transition to to world's defense broad have position with There our our we drive our drive these to engagement is markets, a across and expanding -- customers forward with carbide. applications a to optimism level product for and the aerospace transition. are silicon set, industrials and at engagement we that

the and With that, I'll turn Q&A section. to our begin over operator we'll it back

Operator

[Operator Our comes question Lee Goldman with from Brian Instructions] first Sachs.

Your now open. is line

Brian Lee

taking Hey guys. to for off. just Maybe simple a the Thanks start one questions.

the It guidance Lunar I Neill was extended days three holiday. the for fiscal by For mentioning you're believe. Year QX, New

to revenue. or So, to more it? that fair guide think would way so days something of reflect XXX the assume the like Is three lost about to have to been XXX about

Neill Reynolds

kind there. the kind the on of let that just Brian hitting Yes, me right you're of that on point hit

LED midpoint XQ guide approximately down is XX% for the revenue the So, quarter-over-quarter. at of the

Year If holiday. runs down look our historically, to you about XX% LED due X% at to Chinese New business seasonality the

fab not So, is our and the we've is, notification what China the in extend February our Chinese factory seeing that reopen we're until XX. to to got from we're going holiday going here -- LED government

down up. So, to is, what low we've there guidance that's done seasonality. end normal the the And taken we've kind where of of we've kind of ended

and but if were So accordingly. we'll respond continue taken, the fluid. what the It's to actions to situation monitor there hard situation say would remains happen additional

Brian Lee

time Okay. take that to to you the about know talked I a about. on mean, us that quantify quarters that Fair any the enough. That's sense few helpful. you And past cycle into or Wolfspeed I the give some -- Can then just most would side, you're manufacturing this. degree? this mean people few quarters line

are real And range XXs kind so, margins gross the margin improvement XXXX are thinking remainder we of Or in for to we'll line time the cycle? one the is and guess we how be manufacturing this year before speed a high I on -- about to doing low for start this XXs some see should if we fiscal here side? of

Neill Reynolds

MOSFET on the depends on the really It product line. XXX-millimeter how yields improve

since had a resolved there to you scrap if that event product we've think issue. that line. same I So, go back And quarter, on mentioned we last we

that and heading in direction. -- is right fixed we're that that we the has -- So

is, those up. about yields back improvement talking we in we're yield. And what driving the seen Now, have

the that and improved a of But we number place, fixes in the saw up to didn't expected. had way we the the it that. all quarter, level throughout the back result the put we of yields So, get

We a of have right number So, do than working now through had that. place we're we in and it's lower expected. fixes

I two gets it as of cycle mentioned results. we it a you it then or -- see think, before, financial kind in you fix takes the put And the manufacturing in and before

kind those will cycle timing move when of hit we it and function So, get of a of two forward. financials manufacturing the applied begins to be as when the or that fixes

expect of for forward. we around kind move little bump So, a to I as us bit would

also Now, we the about some talked second thing that utilization is, on challenges.

of down situation as RF XG look that. lower If as to some Huawei the rollout networks the well the at you as well we've utilization manage in and taken

way opportunities XX% -- for this as low expect which range. come the And the is in Wolfspeed of our and the the that longer-term to laid margins. we with So, to no view Day, the we'd back Investor the the yields margin reflects on up, get in volumes improve out improve in was kind gross

Operator

our Thank you. Dorsheimer next Genuity. And with question from comes Jed Canaccord

is now line Your open.

Jed Dorsheimer

a China, given guess, through is open-ended, over just question think Hi. exposure of perspective over customers terms terms one probably the supply of that aren't if Chinese of New Year but of Thanks. -- announced what's not help fluid able Chinese in we procurement the could or of customers, extension from implications dynamic is in in situation should overall first beyond think go and the How I of cap? U.S.-based been chain there? an managing you but to us terms in the sub

Neill Reynolds

Yeah, Jed.

So bit and bit a lay we this scope can with little give you a a on in that maybe let of me color. little of then

than It's in you the of think about higher in China, amount think forecast. bit LED of we've more that, but it of latest kind revenue down you have business XX% we like the range. If obviously in the that a the taken little been

roughly XX% than less amount small is a revenue of XX% is the China the based. business Wolfspeed of The revenue or

what is here for in the what largely know the impact we that was we're China. we factory with the of that's So, in laid today. seeing is have LED what And business LED -- today and

say do fluidity some to situation how to to that things Wolfspeed. just right the now get in of suppliers We forward. you related would as working, stand given have China going okay. mentioned hard be the today managed It's But as seems that

Jed Dorsheimer

me you ramping helpful. get the what just That's of framing expect time ability than is the have of guess device -- inventory coming with terms that or in market business? to your Or carbide. wins, lead I in of to their Thanks. out could one wondering one some that's see it's new product ramp customer was to see in that build we in that once that. your a the the launch if appreciate or -- their if bit you you really I longer should a your into once win little I Is is Sure. a we Gregg going terms quarter? over side product? moving silicon a of are just terms of example that a to the help for

Gregg Lowe

the definitely and Delphi or won. a with those as ramp both And were dependent design an ago. it's those quarter XXXX. where announced their on announcements and announcements industry companies we've wins But with ZF. Well, we of so And talked a about example, in

kind possibly talked bit be well, in we years earlier, So we prepared XXXX you as in it little getting steeper of anticipated. begin we're a little originally indications the can remarks, talked going think as a that as of initial ramp. the we two ramp about to is And about than over now to

we're on board. capacity so this And adding therefore,

that's ramping. a awarded over little good a example to -- bit two-year the very a type I So program of think being that's -- from window that's

Some faster customers than are that.

frankly Some can longer than on bit are -- industries their them some the of little are are. that quite what traditional auto procedures qualification depending be a

Operator

you. from Irwin with ROTH our Thank Craig next Partners. Capital question And comes

is open. line Your now

Craig Irwin

thanks and Hi. questions. my taking Good for evening

all are visibility you career over years been Gregg, is So question. customers you've really with of tempo of of automotive better. some X that prime automotive never the OEMs another picture heard Tier these the a few couple your activity the that the big We've C-Suite you're times last and suppliers that say highest that has seen their the throughout big and into seeing

us Can learning And level anything customers seem attention? level you going maybe the adoption? that's interest of you're if the commitment shape to of and of future is on part carbide seeing the be changing they about silicon that describe what there for the of to

Gregg Lowe

I room big guess folks we in type kind little fact, Craig and I -- that CES one Xs now super meeting. the big probably yesterday remains in and on our based tempo a C-suite strategic had we just that -- think right was that And of today, CEOs customers over and I the at Tier dozen I'm alignment with met. going folks from town half of a a in had having a of to high

high. and vehicle. tremendous of career, the the throughout what basically, combustion still they're Tier is many electric internal moving the their see very what is very, haven't the them had that see to And So a car manufacturers something transition tempo and Xs is facing

battery. cost And lowers range about customers care range is and silicon requiring by number less that thing carbide the improves end the the one and effectively

the carbide So, allow I battery see range think extend same costs the the the the that's for battery amount really electric same that pretty silicon of or They most vehicle, with thing. batteries amount to amount battery the lower them for of range -- very in or will expensive lower equation. a simple being thing it's same a for range. this is the key And of

would procurement, I high, and couple of a for that the I half and still of engaged highly kind a of remains have tempo from over engineering, dozen little engagement. super day us So, of example think high we're good visit another come forth so is a folks R&D tempo say bit to workshop,

Craig Irwin

Great. sort again really of question. a is related longer-term And question then my second

need electric are their some emerge there I the side. of some or we applications division And volts seeing day cars lot days. from Anything very, carbide. high-voltage these spend of Boeing systems. that just key electric So, from had telling are starting edges But they evidence opportunity the of near-term to silicon with me the electric application, plane is XXX basically of and to and very CEO north flight they're around Airbus' the we're the a people adoption. Acubed, know

military uniquely the MOSFET X-kilowatt and huge credibility motors outside away. applications kind model producing of volt these the some us longer-term a years? the actually XX see systems. for Can and some work military EVs? X-kilowatt you these over the work these that partners. years that you potential X,XXX Cree's done to estimate of higher means But, XX probably maybe emerging five next They are I you've you the history of of your of MOSFETs and driving with positions but describe for coming to in applications do that know minimum developed volt experience the you've of some providing

Gregg Lowe

Craig. we For different number One at talked November. our of about applications They sure. grid-type things. including Absolutely connection. ABB a I'd couple of Day a say is had Investor in

are the We developing have to circuit customers we're utilizing high-voltage of solid-state breakers, capability able sort that have. that

have exactly capability. to type delivered You're multi-thousand we've volt the with right, that product market and demonstrated and

And the the up, drive And activities our the down, of cost us so opportunities. enabling scale and drive more as it's carbide it's of overall we drive silicon these down. helping we more as cost

of is small but quarter. in were mentioned Many worth million this happened design-ins we which type high in of I dollars' of good. relatively hundred they couple industrial number, that a had applications size, in those where that were design-ins really

certainly it's sign paving for And good think so, more enabling lot but way EVs carbide, of the I it's another a -- of the also silicon are industries. adoption

But gotten bus a that of number as the still thing XXX-volt that gives away the from viability final automotive is technology to bus. feedback moved deciding in lot say in certainly I to put have it. move The it from now a They're on would we've world, story. automotive to more firmly to XXX-volt an silicon now bus an customers XXX-volt customers carbide a our what

Operator

our Gary Fargo next Thank question Mobley Securities. from with Wells And you. comes

open. now is line Your

Gary Mobley

or some the pipeline go Thanks of want spending capital to fruition Hey, I ZF. to the to taking – bringing guys. some about your my presumably some question. of in back with of earlier support for Delphi device the question an wind of power

CapEx prior not XX% I'm for if went above year, roughly you're intending so And obviously years the prior those your mistaken up your that fiscal over expectations.

sales? sort curious in know revenue to to what additional have capacity you with mind Wolfspeed power support of to I'm this specific the So device

Neill Reynolds

question. the for thanks Gary Hey,

the of second. kind for here a me Let frame CapEx just up

and about things. kind on those me talk of timing Let revenue

needs kind that the overall change meet feedback they've capacity to given is there's CapEx us. we're just So in no clear be expansion we're to on buffer to flexibility What doing and plans. of enough customers' we really there's pulling our ensure based here – to our have

take spend if said go to you this $XXX after we Day And what CapEx $XXX we million north for going of this of the back next couple this Investor up to spend is, the But spend million. year. year. we're we'd years So

partnership And we're as to the down go of actually to out Mohawk we that build we over going free investment with York. XXXX the in have that period will of the as And based advance incentives benefits the State from see that starts flow ramp negative and on the New are timeframe and much XXXX of the drive And very CapEx factory Valley kind cash some get years. time during that of we those fab program, that ramps.

a CapEx So capacity same some we're these of support to of going that just from plan, standpoint buffers. to move some in

for to the we'll ramp start you of revenue see in XXXX other years, the about XXXX kind business Wolfspeed, we about kind substantially the thing and of Now talked where then XXXX, gets when think business investment more full.

I about Wolfspeed timeframe. in XXXX opportunity the think we a out talked and $X.X billion

might a is here being ramp for that what steeper XXXX, and that anticipated. had than be about initially of kind ramp in talking think little ready potentially we're I we

Gary Mobley

Okay. decoupling to give LED on the where much model an the Wolfspeed over switch I'm I us fab-lite stand sort hoping with talk want attention, a and bit about a the get let's LED doesn't you other you from business of can business? but to It it business. to update the business. moving little

Gregg Lowe

making think there. I – We're good we're Yeah. making progress

is to can where same. being in areas, But going the obviously right So, impacted now value. drive have on focus look think We're I China. we we LED our is the the customers business plan think

we're in of outsourcing terms track two on In and the really that stages. happens plan model,

be year so – even the The first more And is wafers. to from we of silicon to by this probably end fiscal XXXX. the fiscal towards of done to move towards expect carbide largely beginning and sapphire-type

the have after part with we'll and that the – partially will then be but partially that line And being that, substrate outsourcing. in fab would kind in of worked process outsourcing of line

plays expansion So line we we're Wolfspeed. making the about are that it. role progress. to capacity for what teams on more just talked at And capacity with a working create big good The in

So, we're working We're it. progress. good on making

Operator

from our And Equity. Edward Snyder comes you. Thank Charter next with question

line now Your is open.

Unidentified Analyst

Egan Ed is taking Snyder. Jack This for Hi. Thanks question. on for [ph] my

So the extension silicon doubled wafer the demand include like near-term payment it the to supply with carbide require another back contract? upfront original when Did wafers? extend existing you more agreement? November, the of affect the timeframe cash And how ST did contract? STMicro, also in the significantly Or Thanks. purchase it does did agreement

Gregg Lowe

Yeah.

would the in as and what was we they on as of and more I little the an we of and in so would this amount would describe describe increase I of basis announced So, annual the take out when an it an than this was described part latter that extension two. the it expand it it extending part terms a bit. former

that. want as So think further I don't into don't that. I of the beyond it a details any doubling to of get timeframe or anything like

Unidentified Analyst

Okay. quarterly that. being device last the EV also cuts call China And Huawei in Thanks causing last year and headwinds subsidy the the ban in businesses about your comments wafers your between No for problem. and epi capacity constrained. in

Wolfspeed why Thanks. revenue? whether epi the majority we shouldn't assume bear of guess I for accounts wafers,

Neill Reynolds

Yeah.

Wolfspeed, business the for ago, in go pieces being for you you if the kind think -- one-third, in one-third, rough revenue from talked about back kind we think, had So Wolfspeed. several years order of one-third if three of I magnitude, of

over Obviously, period. has faster the grown the that than materials business

EV your So, a think and challenges the for rollout the and materials business power. Wolfspeed some portion right about with we bigger of the I probably XG have now that considering subsidies RF business being

probably to see wins beyond current that the opportunities as substantial over that we've a So, the talked the I pipeline longer right to that's out now. these And having should about think we had we've about think ramp, way device businesses see some to business of of longer-term grow, the as some term, pretty we those opportunity period. these start

capacity on capacity making As progress But question, side. still there to we've epi. of epi, the I'd lead the productivity. materials it there to invest times made continued kind in the we good are and relates on And say extended. progress we're on good

Operator

And our from Osha with you. Securities. Joseph Thank question next JMP comes

open. now is line Your

Joseph Osha

Hello, everybody.

Gregg Lowe

Hi Joe.

Neill Reynolds

Hi, Joe.

Joseph Osha

was ST I struck alternative Two supply. questions, time of And you longer-term first, talking I were I'd to they of the listening material how to if off. sources by other day, about developing much Hi. kind be able put spent

power your So is plan perhaps some intention to follow-up. competing the there in ST, then, listening at MOSFET device I'm with business? a point start wondering, in business, of the kind I to have And the in business that

Gregg Lowe

awarded against that companies device wins absolutely And perspective. device power the -- a different about MOSFET be business. number we been of talk we our from materials Well, customers that happen we've we're in wins, those compete been when a we've also to If awarded.

So, that's absolutely the part equation. of Joe,

Our power to industry silicon the vision convert silicon to carbide. from electronics is

amount that I think the have right there's as in talked well we of XG a And activity. EVs. the tremendous the as about with markets that now, industrial tailwind

perspective. competitors is the our think, And the that in I we a think And growth ourselves So, materials device customers who that from of going I to well. we're front so couldn't view that handle are we've that a as device to see strong, anticipating going our are got us. is our opportunity that tremendous we see be opportunity basically

Joseph Osha

And startups I of and these was I Byton. some next? return in in if the by this seeing market then wondering OEM to you particular ramps And non-large planned can comment on, offerings or year second you're anything Thanks. from to what other the to or question. just the of some and At preparing inquiry of pretty say, Okay. Rivian have impressed CES, I'm terms

Gregg Lowe

well tell decline car of anybody is specifically. I'll manufacturers. OEM talk I as customers Tier would we've about But to and Xs met Well, dozens as you dozens the what

they And carbide drivetrains, ramifications they they're to voltage, engaged to of need the into a with as over move dive see customers that that, to those as their dramatically silicon go of higher see really and and going us. improve deeper XXX-to-XXX-volt highly electrification from are the companies the advantages silicon they

was device a a over we've of related. opportunity short obviously, automotive a period half little pipeline generated over that And developed And of nine $X pipeline is -- time. about relatively of billion that

that car is -- ago it opportunities well. opportunity start-up company huge. opportunity is very the say those very, are companies So, are I would too traditional long excitement Tesla a Companies around and start-up seeing Joe what not think I is And and the manufacturers was as strong. seeing the relatively

So engaged across there. the pretty board much we're

are mentioned be around prepared on going XX And I several now. our that perspective And final months. times, going right go to a to customers making there's with anticipating remarks they're as to my MOSFET decisions of they're next intensity I've six the lot about who and in over a that talked from

Operator

question JPMorgan. [Operator you. from Thank next Coster Our Instructions] comes Paul with

line open. is now Your

Paul Coster

for thanks questions. Yes, the taking

through response forward to to So you the time come that you Are you incentives any a the penalties customer demand in in little line customers attached demand some doesn't or anticipate. event the bit in their that those there brought anticipate? CapEx the business and that

Neill Reynolds

indications we in the requests them we're have in contact than those very I that's from something like these the we no, along that closely had something with not would getting there. getting these don't lines. where earlier for think some them them we the anything do customers. we're But Paul, business of be work close and But anticipated. typically device And with have to We've we from recently. ramping prepared products is been in very

to very manage that. So with closely working them we're

Paul Coster

follow-up is space the Can pretty my then long-term that decent between opportunities And Okay. characterize split into that visibility? the revenue of obviously, visibility got the regions you've, can guess question now. trying EV And fairly in you be I across helpful to there. mean, I'm get Or that balanced provide is primarily any to I is, it the it is regions? what would Europe? numbers you

Gregg Lowe

activity very, Volkswagen would in electric ambitions car vehicles. has There's I its been now public right is -- the of very European very, good very from manufacturers. most say about there

daunting. inside change all moving various You're and recently has the very, different brands terms of that's think BMW the oncoming rapidly. Volkswagen And by are in on requirements that. made significant of I pretty those forth, across standards and primarily Europeans driven and seeing announcements clearly are pretty so them a emission some of very for so

Tesla led vehicle a really story. the obviously real and making electric are very U.S. it taking The by and viable

as electrification seeing automakers as was line with the mentioned powertrain. the And you're jumping getting this as now of into more start-ups so business, the U.S. other earlier well in traditional

quite time. EVs China now been for some has pushing

longer-range in of have in adoption China has been I think that electric -- pause caused the happened in But in vehicles. incentivizes that a place the put incentives change the in vehicles. change that's

the a then longer to the as car And go to longer-range actually to battery. be allow We that's of begin so going same vehicles, amount manufacturers develop market it's release and because us for the Chinese think to with I car good we opportunity the what do.

balanced. around in of -- most of I probably there's say amount not the So they're say a all the would of lot electrification Europe. necessarily I'd -- there's intensity those powertrain

tremendous there the U.S. in think well. amount a of as and is activity China I

Operator

you. Thank

comes with from Our Oppenheimer. next question Colin Rusch

now Your line is open.

Colin Rusch

so much. Thanks

of guys current So, for merger obviously, by being standpoint. And important we BorgWarner a driven the at Delphi customer market. dissatisfaction you part solutions understand technology the the is an with customer least from with on is

a bit like what pressing you dynamics into in Delphi to getting along Just comments merger, hard really going for level? can want of of talk point those they and energy the about with customer suppliers going substantial the on So but preparedness lot not production pretty dynamics from a a with this which consume that. at little terms a is of time a initial customers

Gregg Lowe

we've Delphi. and would for probably What We're very, we've customers of seen better a initial about. this positive. is that's Well, them. early met -- the question that to really a talking The view say from module a talk with the partnership we're with Viper actually Delphi lot quite in customers I actually good. We've different is feedback very to got is of in great

capability this of view they strong. as we that that BorgWarner believe the say Delphi would inside I saying So is

Colin Rusch

the XXX-millimeter. the just on Okay. mentioned that talking And then about yields you've

about As full what And get talk along into terms looking are qualification yields progress in of going way be benchmarks point automotive-grade qualification, in to progressing meaningful can can the you towards powertrains? of you you sort as we that to for for? automotive-grade terms that of

Gregg Lowe

little first can I'll well. about as talk take a Neill bit and stab a it at it Maybe

So automotive customers of care that. about a lot of different things and quality aspect is super important

delivering And of of product and customers, if so in their progressing products in well point, really that along testing and fail is systems is terms their they're getting will. high-quality you to products At things a important our initial supply are in yield terms that's doing aspect. the plan. to of that them in this really receiving the our internal The are impacting doesn't

customers, the good And done analysis have on so sight we've say is got thing actions improving And the in going transition. place yield to about pretty to that. to the anytime is feel traditional yields. improve in type we is transition opening most introduced to automation. stuff. of error And that's ramps well with fab, going as as with And would I pretty that line that that's as good of XXXX going a factory to human interact we've how Mohawk of automotive aspects highly important automated We begin initial to which as production eliminate additional Valley then that the one we we're humans the those things are of have the these

quality things put and customers to we're that and audits we've place so head ran in really well. hired We've of at come automotive understand folks expectations. to on quality bang-up had help company forth. our done sight come in meet of she's be a another us organization doing. line those our that. in of journey The good what automotive of job have doing able We've and They have got So semiconductor as along many to this

Operator

BNP comes Thank from you. And Paribas. David question our with next O'Connor Exane

is now line open. Your

David O'Connor

Thanks. Norstel. back Maybe just than silicon Is earlier supply going the comes see there you my tensions the in their how develop to trade acquisition landscape wafer pushing thoughts Maybe And Great. it a one wafer that around base guys the that geographical their I supply follow-up was scenes chip a suppliers? on agreement top Gregg Earlier taking you I'm from carbide more as would think wafer be And agreement of behind to wafer pull from Joe's supply I for term? a have it's supplier wondering helpful? Huawei. bring well question be much which smaller of kind silicon from rethink with OEMs makers this on could of announced ST. SiCrystal, two on deal the longer have. on another But month side. Or firstly, just Thanks Any to they my carbide perspective? question.

Gregg Lowe

going to I'm ensure silicon I to get the transition is probably be more what's industry that former theme what everybody going is the to need. and Well I how is carbide really which to security my prevalent supply going I begins the to able be as at think looking to am

that expanding in announced like things are ST so we've Things we've done agreements in And are that helpful long-term like like helpful with super that capacity regard. regard.

lot customers. that silicon to expanding entrants silicon folks We that going speed silicon we of carbide expanding carbide the that's carbide to know of and our an see industry are be business try there's that wafer some at it's the going attract new currently to get going into a to including

the not get -- into. easy an industry to I this is think what industry

In of amount fact, barriers there entry. tremendous are to

then intellectual And of is related. property that some just

secretly and hand use To crystals to you The that built related. trade a to Some of is be so it grow grow forth. very, difficult. machines crystal is very tend

just quality amount of you down short So and it's buy operation a any up of have it in crystals run and set like the can frame. and kind street producing time not machine

is is to because To cut the difficult hard. put wafers the extremely difficult. To it epi is material and slice on

associated have the various degrees just side So of the material business. difficulty you with of

know that. we Now

resting. I think but we knows that the not are industry

we're And being to so what we're materials decreasing business doing our increasing improvements increasing more. are do in scale able which yields, is costs, driving and

folks us relatively a of business, chasing as so side steep down this be they're material enter the And curve. to cost going try to

alternative industry that that's say it's assurance And And of so in that's natural some to an very would one you have growing that this way get – to to would sources. want like I is supply. do

are down faster it into to running be to folks is as trying who ramp objective Our cost curve get that can then well.

so way. that out very well it's playing of far kind And

David O'Connor

all engagement guide Huawei. has future on That's Gregg road going Huawei stalled follow-up or I Or discussion very and Huawei there with you've projects a Huawei wondering for as with any Is on from But removed the maybe engagement about now? helpful. understand Huawei, maps? for design forward. the future products just with

Gregg Lowe

No.

We obviously with them. have discussions

met In I late December. in fact with them

have. got requirements. So technology very we and products We've the that in their meet interested they are our capability

that them. from solutions selling just meet prohibited requirements. their again So from We're

Huawei, the will Maybe. And to if equation. that change Will the non-granting future? of term the says license near in that it for of you they're out the the

get counting think But systems. if I purposes we're again right relations things normalize countries they're not into between for all on into that trade their intents that very we and better have putting interested that. situation technology now the in a and

Neill Reynolds

let And me that. just add to

you go as well. But if of them I'd consider is also it as the reason of to said Huawei stated And mentioned. we think our correctly, for So think if of And our would you represented short XX% to that XX% back plan China the that is roughly little long-term $X.X bit below out plan Wolfspeed you you we grow out or Investor term billion. about Day, I it revenue revenue. a

was really in included not So just you read China can as business that that plan.

believe it's the the under and that can achieve laid out we're scenario. goals a perspective customer. And as at If Day I still we longer-term a and think on operating Huawei changes that's perspective short-term having something Investor plan. that a from we But in both right now not planning So great. we not

Operator

Thank next you. our question from Jeff Cowen. comes Osborne And with

Your line is now open.

Jeff Osborne

of the doubled line I I materials questioning. wondering I on there the way in years? over maybe what capacity can you Hi, good cost quantify actually put future and around there out? to Any again Is a on can seen few is think parameters or reference or doubled years some what any take frame materials you next as that had targets past over the you historical afternoon. a think do reduction? follow-up as cost to was Gregg you few you've

Gregg Lowe

relatively customers got relatively on and we've at relatively a executed that pricing around good to to and you steep give and curve detail there's a so we've sensitivity and a I would already curve materials high continued and don't We is, that because of sell it's steep What a sight ramp. curve pretty improvement at forth. we line steep primarily tell

see silicon is And get don't decreasing. the a get out carbide but between wafer of silicon is you'd power silicon the silicon power to perspective power what carbide carbide lot you to you wafer point to of for then be And a because -- out sight of get a line the definitely a get the and of amount what close that's more same a cost I higher going We of driving of wafer, anticipate the of that ever the pretty density. getting could delta silicon. have to silicon is cost this cost where primarily from is you we'll cost that way

actually generate more smaller a so, power. chip And can

curve as from So our all this steep because, describe relatively increasing on a is adoption a as it materials well. lot and good really generates think just based of what news. I excitement silicon I that's carbide of the would they that customers see

Jeff Osborne

that customers and York then I of gives facility to the the comfort What New just if having overcome get that opportunities was up and think half over running. XXX-millimeter you'll challenges few challenges reconciling $X a months months. with the the question out billion the That's in had trying on some putting past in you because manufacturing be And missed hear. good are challenge? of you the just sense timely potential next said this have box not I'm to the -- a that awards these to this six I manner? coupled over your that Or didn't level? able timing your of sense around of you I the with know or to lingering just penalty XX the last

Gregg Lowe

be know pretty what they before, said seeing going wafer throw more we've needing we is, what their I to results. fashion. as we're to overcome do and can get what need good systems, able our fab, material at that into in I I And would customers they've to put And this. timely we're now say far the a what think so them is, they so gotten they're

pretty feeling about we're So, that. good

of beginning ramp revenue real up Mohawk Valley. through lines pretty XXXX the And XXXX nicely and with ramp finally, the accelerating in then in our factory

some fixed. factory. last talked a material-like we things and more through up them we'll we the be. yield with transparent yield But pretty scrap already we'll of the more issues. We're on the internally. is now obviously, just about those through stresses matter to issue, quarter throw where our issue the seeing it's yields get challenges we in back now stuff. improvement what that And our to So, think get customers want have that We're where that, but I is And getting issue The them to issues. are, increasing

Operator

this over to remarks. gentlemen, for and Ladies call our Lowe concludes Gregg any the turn session. like further question-and-answer to would I you. now Thank back

Gregg Lowe

forward and for participation your Well, you. you updating call. interest our and to Thank your thanks at in everybody next look today's call we

Operator

Ladies and conference call. gentlemen, for participating. this Thank today's concludes you

disconnect. now may You

Wolfspeed (WOLF) 29 Jan 202020 Q2 Earnings call transcript