CREE - Earnings call transcript Q3 2021

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’s Third Quarter Fiscal Year 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation there will be a question-and-answer session. [Operator Instructions] I would now like to hand the conference over to your speaker today, Tyler Gronbach, Vice President of Investor Relations. ahead. go Please

Tyler Gronbach

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

with in the important you call COVID-XX questions, today now the like the after to Our that any mention Instructions] impact to Gregg. related SEC materially, cause noted to feel [Operator to free If release to And the press release pandemic. differ actual risks the connect over please additional including us and filings the call. I’d could turn factors have results of

Gregg Lowe

business, the healthy you pleased during Thank today of report to high our of you, and families staying and that I are and continued earnings the joining everyone. range. third us guidance range and afternoon, good guidance quarter diluted safe. execute delivering non-GAAP and end our ahead our and I hope strong Thank you at for your Tyler, we drive to revenue share per am

Additionally, our critical become semiconductor completed to we of a accomplishing in powerhouse. milestone quarter, during the the a journey business, pure-play LED the divestiture

defined since again was ago Now innovation has in it once shift XX and technology. years company a our founded are significant leading we

driving change enabling are solutions greater systems the smaller Wolfspeed market, performance, Our efficiency semiconductor across and lower and costs.

are this proposition value Already, other long-term Across silicon an provide we industry has of on have to seeing to long-term and communications are offer. across moves As world that opportunities. efficiently build the cities recognized silicon silicon the tremendous and in transition adoption a a capitalize strong and carbide the broad vehicles, applications, infrastructure range automotive of to are its we adoption to well and carbide continues growth positioned industrials which power lead we impressive This investments this will we from fourth and to the the outlook of demand electronics. we financial an industries, capitalize fiscal overview for and transition. I'll of it our turn Neill? we in Neill, prospects on over seeing is to silicon-based to now ensure carbide-based XXXX. our are our who conviction build, results reinforcing making transition as now high-power quarter

Neill Reynolds

increase year-over-year. end the and Gregg dynamic evolving quarter, and materials third We fiscal quarter backdrop. you, an Revenues were XXXX demand sequentially above the range, representing third guidance and to during everyone. our of as X% Thank million high good the amid an and of results $XXX solid market build XX% delivered increase of an afternoon, for continued devices of for

or million share. net was per loss diluted $XX.X non-GAAP Our $X.XX

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

we In a performance number delivered solid a our our product of solutions power, across continued performance to momentum Turning by of driven by line. sectors.

RF, we expand of out increase In the increased uptick Looking in demand we activities. to growing have note XG are to XX%. see fiscal half that XXXX. backlog saw back materials, at our portfolio driven a And with encouraged flow communications the as notable trends our year-over-year opportunity infrastructure showed we across important improving It's globe. as activity expectations order across in strong XG a our the more providers the by their device rolls for quarter, of consistent revenue modest than underscores the

was XX.X% margin in tax The rate non-GAAP our $XX as was we quarter ongoing for well was gross to sequential to factory compared quarter. expense QX costs in XX.X% higher non-GAAP due gross and measures. Non-GAAP as capacity temporarily last margin operating safety Third million XX%. as was our fab ran Durham COVID-XX decrease

across As operations we to our ahead, the disciplined growth we on cost invest tremendous business. in opportunity the control remain capitalize will our in

in third of million. sales was free capital Cash XXX were cash days million XX from days. $XX quarter, $XXX negative was days hand generated the expenditures outstanding operations was and on For inventory flow days million $XXX negative and resulting

of billion. a approximately strong strategy, $X.X $X withdrawn to support our billion a zero of convertible balance face and growth total healthy line our on with debt value have in credit and We sheet liquidity with

with as further particularly expansion our with financial the efforts. equity position additional equity successful capacity of this Importantly, $XXX proceeds at-the-market quarter grow with gross of completion liquidity business, provides This we Wolfspeed offering our an million. approximately the we bolstered offering us

capital Mohawk to capacity fiscal millimeter. approximately our peak launch expenditures of to be million XXXX of support continue expect $XXX investment plan, to the Valley year our XXX including at We expansion Fab with our

silicon in demand during We that from steady development, to the our flow able state to and subject the making cash for carbide long-term that be well great continue are given Mohawk in variability York. be this we to curve are timing our reimbursement Valley seeing are to important will and particularly ensure as XXXX critical which and progress on progress CapEx we of to support depending New strategy, steepening construction as is our will It beyond. note XXXX

to targeting to our the quarter for turning million We're be the million. outlook XXXX. revenue of range $XXX in Now fiscal fourth of $XXX to

our We RF device enter expect we seeing the the quarter of fiscal year. momentum we're product Power in to and as continue the lines final

related a line as work impact as operating due is footprint at projects in million is XXXX. sequential calendar view the through to and nature well We're fourth we better to million expect operating primarily transitions $XX the that be the in in and expenses We year to and net We business improvements post to modestly Valley an well non-GAAP loss for quarter. unfavorable pursue including our wafer be target $X short-term mix. in by product materials be decline production to loss supported going non-GAAP non-GAAP suboptimal operating flow. between XX%. in we Carolina in increase Our impacts sales $XX margin between product to some shift margin order underway gross North is $XX QX order as The opportunities. by million are targeting we non-operating expense target $XX gross to increased pilot our due approximately QX Cree's XX% and new line expected improve expenses XXX-millimeter to R&D to modest Valley launch expected to our production to and we forward eventually factory Mohawk development The our to have million. new fab it short-term as marketing our fueled between support investments Mohawk as million is

million our the non-GAAP jurisdictional earnings. to is The XX%. We're $X.XX mix approximately to $X.XX due QX net or a between per $XX to loss to million to expect effective effective be tax be of to our We rate decrease diluted targeting non-GAAP tax rate between loss expected share. non-GAAP forecasted $XX

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

with will back greatly Gregg. based product overall and competitive turn including are the that, discussion targets situation now productivity, QX that factors to factory could the on With environment. demand, several I vary the COVID-XX, Our mix,

Gregg Lowe

Thanks Neill.

momentum, our this to results quarter. business which by build is evidenced Our continues

pipeline we and as opportunity areas in across industrials, energy, more aerospace our markets, core as seeing strong. device RF automotive demand are and in defense. new Our and remains interest And well additional

device at stands more and more team pace. Our rapid identifying is pipeline than our a opportunities $XX billion at

design-ins significant in rest continues than Additionally, million business these A portion automotive across were quarter. securing energy, and defense. the and our for aerospace during $XXX sales infrastructure, generate communications and industrial, were the team to spread products new more of

year such applications design-ins in over and portfolio total motor arm. quarters, a exclusively MOSFET approximately secured we Now carbide this as our products, compressors, including five billion represents impressive the Electronics. launched ago, of air robotic an silicon A Arrow that drives with last we've conditioners, of XXX-volt $X.X

are the of pipeline stage design-in of since some pleased has transitioning more generated We an to which design million extremely in opportunity this the with dozens than win. partnership, and with already $XXX success even

with marine, execute industrials positioned solutions portfolio. in silicon X,XXX-volt partnership. remain March, a the continues WolfPACK our four GaN are array new which introduction across multi-stage, And team sales Our through applications, module we of carbide unmanned we superior these Arrow including to high-efficiency to to partner of launched our radars. to well sell to system weather surveillance continue closely At aerial and on and on including geographies the opportunities, end used X-Band of customers diverse this devices,

on see across developments are we broader the by we is As strategy to executing pleased supported further our focus market. business, in our

in on pushing zero the adoption deal, XX have XXXX. taxes as the Now for vehicles mobility electric and unveiled automakers its new part green European aiming just operation the vehicles. are gasoline cars million the ago, by to At $X diesel its a and least European of same on emission of at promote roads few to months competitiveness Commission strategy time, European trillion

been of which a rebates, anticipate and impact directed could vehicles. regulations have significant including adoption of also vehicles, Finally, of hybrid We credits electric unveiled potential plug-in a In electric the sales full proposed will the trillion plan, towards on benefiting administration lead significant recently charging portion further stations. new this US, infrastructure European the phasing electric vehicles, tax has $X vehicles. a to the out

efforts. to We are big their seeing now automakers EV US commitments make ramp

regarding recently vehicle Chem, $X.X LG number are For and a that capacity seeing. long-term build investments Now as plans of customers necessity efforts can on the expansion to these And our reinforces instance, the the our cell to increased expand demand the its announced we've to well with we support to the Motors plant automaker's deliver to battery as enthusiasm of developments. billion conversations opportunity we a ensure here, General had invest electric

to increasing gain ahead. combined special dedicated the access and sales in years XG is we're the adoption Valley's proposed Mohawk in to infrastructure. these We which remain XG billion with across XXX-millimeter underscores on plan begin infrastructure opportunity of on of range This investment broadband the increased a pandemic momentum in with also XXXX, to offers during to well importantly, smartphones in a global continuing development Additionally, industry our U.S., the strong track $XXX will includes with how fab wide emphasis And early sectors. support capitalize positioned production plans opportunities. a on XG

strong fueling are development our progress well. R&D very made that we've the our are as with We projects in pleased XXX-millimeter

these raise position Overall, create company, our The equity to now, deliver and as we so over need and making about operator, we Q&A. position that, investments back the our long-term begin be necessary a confident are technology through for forward technology securing remain at will good path in our semiconductor to we operations excited carbide. global investment. macro the are Additionally, execute as turn the our in to opportunities period are by can pure-play of next-generation continue pace, increased earlier to very supported leadership our very move further a financial And we with powerhouse. strategy we continues our winning our in the to while this developments to the this ahead forward. in I'll bolstering By our quarter, we in it completed a are environment. our the making customers. business with We strategy we And silicon investments

Operator

Instructions] Thank question first from Jed [Operator with Canaccord comes you. Our Genuity. Dorsheimer

question. You with your proceed may

Jed Dorsheimer

including on Tesla Gregg, customers, to question silicon really look Thanks in question, on first strong changed to revenue talk versus Hi. seeing at kind many, quarter. taking component. silicon game financial just look disparity X% congrats my the the from know with IGBT. this I at has and perspective, benefit industry, for you and comparison And net it side, not guess, if on the a carbide what yet, look specifically done of from we this at cost I the X% the but you IGBT, between from systems the of Tesla, if can't a the

if the C-level Tesla So we've from sort context your of systems in curious over changed in hammering of a what that's maybe for looking price a have out on manager the design past follow-up. you I'm one versus just at architecture could of a some component discussions I the conversations, of year the procurement BEVs. And the then have that provide the that's from how seen industry at looking

Gregg Lowe

the the has the carbide silicon for Tier weeks you the ago That versus transitioned, Europe tell I certainly have level that, at carbide as what the carmakers board say Xs very across to And Thanks pay with a just at completely visiting were system and Xs OEMs. cost level. Jed, recognized discussions And MOSFET the a and the about silicon in you for benefits I more three that lot would last Tier indicated, on silicon of Jed that I a two month spent system themselves. would of question. focused MOSFET. is years kind the of

at platform had they're of I that tell them that silicon The first high-end level. that. savings platforms, anymore. Tier to across a OEM XXX they're because volts, entire to really telling towards not cost five direction their they're systems there. the volts, of in that visited even sort entry one me are quarantining, stuck XXX I days, hotel by making after COVID they And the with them the quote mention with pointing that cars, see were Because I've moving X silicon way, me decisions but to the of want OEMs silicon another they convinced moving a out getting in are carbide. carbide, go of their had the cars, doing

big with that silicon were intensity combine on of reductions the that win-win. tremendous a the it's amount You cost driving carbide,

well. more absolutely Jed I it And in organization. in at permeated really the these Maybe So the rest and reading to of in thing through that I folks C-suite, but And the starting system I is with level your it tremendous would of savings a grounds looking starting question cars the from add amount organization would of amount that, the this you carbide. at of really a Jed silicon silicon carbide that, in up of as car say, have that see thesis tremendous to guess, started the the the design our value it is mind. thesis happening. There's I'm they're your their at the is kind it's that system-level companies for see

Jed Dorsheimer

That's great.

as guess, Just for I side. you. thank guess my question margin next the I one and on Neill,

the And of got at different near margin, you my that look I sort about here are the guess, a XX%? should changing that on terms might be there? What might to of helpful be you could it takes, that walk through if and to margin of ramp give the sort in cadence XX%. the from expect we we know think But or term -- if I So of not, the in low if you've able the bunch and question adjusting are I that up variables. is, expectations XXs how us

Neill Reynolds

Jed. take Yeah, Thanks I'll that one. Yeah.

or in midpoint guidance. zone maybe So, little line below in lower QX the And the And guidance of we more than you expected. kind slightly you at a what the I now less call in it with of see so. it's or the margins can XX% the guess bit came or

little in I'll short-term. down of going kind kind the a the break you bit then, of here And what's of margins. on kind just kind back me to bridge Let of long-term

prepared going roughly but going As And next the to through you quarter. the XQ couple it, on couple demand in margins the right half talked are of into growth The product function you now. lot lot things. there's seeing think start a We the things. of device generation, at to points really are is mix. just in that's Durham. down of are this, midpoint a cost higher the some of a alluded of about they drop year, second basis a based there's to a remarks. footprint a of is One XXX not as One And businesses

So that causing of higher cost kind mix is some challenges.

those lines profitability. product So are of lower

here kinds see those in So the we some surge of margin degradation ahead, short-term.

about points. call basis XXX that can You

of we this And training there's productivity in the bringing hiring as just we're we're on we're lower of people. early on capacity on as as we for capacity. businesses piece to The bringing forward. people, some device second bring the that move that is stages And that footprint,

the So, and to see as margins terms to people half up. the for as get board, up second normalized in to we capacity levels see and up mid-XXs start of you running I start get velocity that to gets the corridor I pick to the that it get to we you'd on as factory, back of maybe expect And pick think year. the

costs. you a XX% we that half Valley. calendar next in some get what's to a factory think talked We bit in at automated year. more of that of have mid-XXs, I earlier. And is change second it start expands footprint to in see the all to look that And more out really like, our dramatic going mid-XXs, as you that's cost of thing target. little that's to I modern Mohawk of to see then, impact that Getting a the the structural really is to year. on kind about a the about the from start to get second device And capacity there, So pick-up in And half see probably to you Durham. really the what think

start where to part expect structural and in out results is see the calendar that towards in of landing ramping We've very change XXXX. there's our a XX% Valley, XX% we out What I the that, in say start And see you to year lined as no starts still And we XX%. costs, time our Mohawk The so capacity are out that some more also We march the start that coming that that there. early I'd to pilot of goal we we'll and more go change, in Mohawk margins initial of XXXX the good. gross And to initial XXXX. frame. think feel seeing strong are results. in is about target footprint there margin Valley and achieving up continue got and

Operator

Thank you.

Our Hettenbach with Craig next question comes Stanley. Morgan from

You may question. proceed with your

Craig Hettenbach

on up gross following margin. just Yes

With picking about a would of a mix that basis? maybe of the of up some talk just you RF on near-term that I Can the helps side things think bit. element

Neill Reynolds

It the pretty a overall, does Craig. you little you businesses I got factory about to device help think bit transitions. But going think look if through substantial

movement LED our outsourced factory up two including actually is and in factories. RF that recall some we're you being products factory If of we new Recall those a factories products. our There's Durham. bringing in have between former lot of

So We're for you power as corridor. and capacity it's moving still to would up RF. managing through both through go as those that. that transitions say new challenges productivity bring some there's start I'd

you on suboptimal move forward. you'll more time business being in over as But better benefits to. think the footprint shorter I of term a you the alluded device think they of think see I as

Craig Hettenbach

of both also of you device through of the these in just you're had driving that just meetings you're having that some And on of a And business? Okay. maybe are how to direct a just those the -- interesting Gregg engagements. OEM the then recently. have number growing viewing and of channels you've you power terms partnerships dovetailing maybe off set Can opportunity X touch Tier follow-up you and for

Gregg Lowe

for attention a of make their change, their to The in that different of platform It's of tremendous very, OEMs really want with have of sure very engine fingerprints vehicles frankly, that interesting. is And in get reasons. obviously, and the “personality” electrified combustion car. into supply there's on a quite amount the engine, put the of interest the the strong And OEMs One that the personality for as number amount electric the the to internal powertrain chain car. they want the well. because they a

with. point lot industry ever that thing sure So and of has And industry the there's supply the I car for every been plant, with the all has a vehicle over then in been down some you've a It amplified you've I second written what's is in car anything built plant. there. all I've And you the that's by down. I'm tell attention years. some company at shortages about auto in industry will silicon-based XX going read like the been seems plant a time forth of manufacturing about, I shut been on shut announced can't recall a single that so

So in this we're unprecedented today. territory is

how that those that. capacity them is et in update March, well capacity And so of with a when Because we seeing performance Valley, are substantial wanted Valley. on on gave were back that ramp I I there the the on Mohawk with the was the for as very up silicon for that time Things going And, an per OEMs we're meeting ramp assurance going obviously, coming Mohawk them. production about all and with doing capability, we cetera, carbide they but discussion was be we're to amount schedule. also

basis on expect They're good. XX% positive per of chips production those out We on line. wafer. to of out of a results terms describe are going as wafer seeing we would that be end the we're results a XXXX. that's that in very would early promising very more of alluded the very, that's fact schedule Neill on looking in I very yields. that's expectation promising output and to on in yield the And to pilot percentage really yield those any

very XXX-millimeter And the capacity start than bodes discussion good standpoint those it's really it Xs good then they actually wafer it's a finally, a are for then what's the yielding -- buy the of us And may OEMs, themselves, not when not while from have you OEMs weeks. they discussions of of the They nicely that. directed So a might in want three margin interested obviously both to sort Tier build direct with also or for do. inverters engagement but carbide there decision standpoint for lot called them. silicon the put whose solid, news, very kind there you really their lot well That's off in in of significant and higher had from and in directed And with the we at we're really over increase engage a that the very, interest called was level. to seeing of partnerships buy a discretion. are so the OEMs about a have I to

Operator

Thank you.

question Your Snyder Charter next from with comes Equity. Edward

You may with your proceed question.

Jack Egan

is question. Ed for and I This Thanks follow-up the Jack if taking that's one Egan okay. Snyder. Hi. on have a for

and their So XXXX more plans been a China it use the XG towards antennas. changed primarily seem GaN since is fewer just deploying end the start bit since macro deploying last has Chinese XG going power fewer build-out amplifiers stations of focused stations. are which MIMO But year, there to now on base base

I a greater And RF macro device so over impact GaN be follow-up. next bit have stations your the And I but of business? macro to a ramping growth your stations could headwind shift I you're to the mean, a how know proportion would you then base devices soon, of GaN expect or a so? year might base

Gregg Lowe

I want et China say what the any kick MIMO, add guess whether Yes would I base in engagement Neill if to additional color. off it area I'll macro maybe it's our and cetera is in which of station local you even efforts situation. players And limited. towards biggest substantially the primarily because player there we there And have bias over sort geopolitical simply its just of Huawei. engage that's other over can't is massive because a with

Neill, outside amount outside seeing additional So driven China, driven that. color obviously our pretty put China. but any think do you outside on primarily in really some there want activity of that. have I with some of actually it's wins of business We nice We're customers of is is that? to mostly

Neill Reynolds

versus be we it about for Yes, I out was what And was. have I time shipping China think gotten laid would macro when opportunity you the uncertainty stopped would then, of better there to of there outside incrementally our go of out or for say say say in things massive would I that back sized expectations and think appropriately that lot I if and a Huawei, kind that whether MIMO. business. we

than So I as But fair share said, And terms seeing wins we're expectations. again we'd as area our the expected, in better I what think than better well. of that think Gregg in is. opportunity of

Jack Egan

that. for Thanks Okay.

just having if environment bit other that just for the your guys their now might impact recently. it silicon supply hesitant my the difficulty was happen Thanks. in shortages be really can to pretty and devices I hasn't do So follow-up, this products? well, year. of I they're bit for there finding as have concentrated you are been shortages right for customers affecting had know semiconductor but the necessary carbides a space because had purchase curious know direct in supply some I other a since other last sectors broadly since a acute on But components areas. think you more become normal

Gregg Lowe

now see ready A big that. don't pretty getting I prototype doing years. lot what of Jack, a of couple the ramps is we're growth over for right ramps next production and and

XXXX, lot whole in most of going you're chips production talking focused And today. XXXX, et a I supply around not for about that activity would into XXXX, cetera. there's vehicles XXXX, think and our say is silicon-based issues vehicles that. device preproduction of I cars that are the So, are -- in primarily that production

and attention, very, is a to though there is impact you chain there. the very, would supply tell not direct our So, acute. have high very I tier and car the Xs What very the manufacturers is

about just at They're now the be this be carbide. I as like predicting on with to of get in increase materials the new be to bets fab were into and I today we're that. factories would three basically and issue. the going going it customers in really XXXX we'd week. silicon earth, a they're middle frankly, a placing going today, the seems we didn't we is, tunnel going happened material and just would weeks Germany, this that. We is of end largest anticipate this. mud in car world's visited the really in May Quite and factories certainly situation in every we're that May when they that so, of look like think, really something we into that those situation be eight where can't nice our guys -- to some start But short showed relatively with months new the in carbide for production in it in because expanding they is by a a building XXXX. building factory supply ago period down, all weren't going from online the substantially smart, frankly, of production that enthusiastic we We from capacity decision tell right What made that and because the those these of with you Quite our I And lines a luck in of that, nine products XXXX capacity light a silicon in very fab. coming and year picture May announced was wafer building about a months now and carmakers I for of them

Operator

Thank you.

comes Capital with question Craig Partners. Irwin from next Our ROTH

with question. proceed may You your

Craig Irwin

released. about a thanks really my four you hear already to on questions. silicon maybe year? products Gregg, I'm the key these interested little taking the commercial sampled new would accretive expect bit for evening. on detail Have carbide or you GaN more you recently low just now the Good be Are them to end rate of to What's production? margin full production? before timing And they rate customers? sampling in the And

Gregg Lowe

Craig, we announce products, so have believe new I sampling forth. qualification those we typically we products. are When and done

areas. is business. would a RF number interest think team have. the good we the sampling new the devices. exact newer you specifically products specifically about about to tend the the particular in in we across margin are I products The same won't we But can't don't is bringing believe, I is number. power market. as those products customers. more I happening our announce job I I be just talk that, pretty of accretive, They to of what we're to So by I a the bear products. but tell those, -- in new Craig seeing doing in to different -- just simply, lot you because talk a those remember that way specifically tell of And want would and I I they're don't general our

might every the Tyler. an introducing. we're it our number seems of that in that we're products like been doubling power this products, high, year, of the You introducing new business I've we're here. And have But year new since all-time is certainly number

Craig Irwin

you. Thank

us producers? the for you is wanted combustions EV spending legacy bit I question, versus transportation ramping. economy pipeline group. remarks. follow-up the the about a wildly not mix could share are Tesla related, right characterize that versus mean, the work to new device sort my portion does in we or prepared emerging. successful how maybe in from guess players maybe As legacy conventional I little here? I they're billion mentioned ask They're now and coming automotive Of of automotive that lump what money in your $XX And that emerging OEMs pipeline approximately the that's can device you the is

Gregg Lowe

list have can have Craig, know made been you engine through, and and of going forth. exact numbers, portion give nice manufacturers. by investing because so vehicles, historically you can't or pretty the the electric that But that car they're front electric opportunities it's a in manufacturers is them. would thinking I tell I would portion specific that substantial don't combustion engine review forth. a declarations so that to but of in are of, don't be and have say, they I amounts name I of combustion vehicles, the shifting are substantial internal to And of just and all-electric XXXX internal companies have the kind you data me, big I we

But it's that to from combustion I internal And apologize, be engine a front of that, big lot me. of portion of existing the a is the don't Craig. car number big So from that transitioning going have I electric portion to I a in think companies again are just vehicles.

Operator

Thank you.

with Our America. question comes from Arya Bank of next Vivek

with question. proceed your You may

Vivek Arya

a of my Do happen and on need bring taking question. calendar for One what the changes issue? one gross What plans to trend to you second actually I to those will more had for please. year already margins, Is one Neill for mix half have gross half second in track? Gregg, the Thanks on gross in this margins for back line on in get the side? to you it margin place? back

Neill Reynolds

the Yes, a is something, I of there quarter-to-quarter, you to you always as look don't out the as think back half look it's year. mix

is new the and this about getting off capacity think productivity on new bringing line. I really

So Mohawk with. where the be second corridors bring But between about talked year step half to Durham an as we interim in are footprint new on can next many today of it's into and capacity getting Valley and times, we've year. from Durham the challenging work we it this in

So I on better resources function them bringing up about capacity just and getting a online, things. which people new corridors, the driving a the in lot is the getting There's factory. think a getting and it's trained velocity really productivity through of of

have seeing It's I how yes, place. been see So And quarter. I don't them call We'll about hard But mix. last it's We've to yields. really think out. play it's saw just so things plans We in we that. much improved sometimes. think

from be Mohawk like away on underlying we're mid-XXs. a less I depending And I could We kind to or transitioning think the that kind said are not think elements of what So get little more to bit I Valley. place. that we'll happens. in But far of back

to start the that's So really said, margins during through should lot of reasonable footprint second we've time. over a target see the a half cost Mohawk I we flow structural as up here we'll until change more that efforts think level the where in Valley and bringing on kind our focusing

Vivek Arya

own seeing Gregg Obviously, opportunity. the EV market as silicon carbide? your of what's And a is right? How separately sense view very, And very see. any I to competing do competitive GaN landscape you companies the a material are build capability? or other new this I that you their might can heavy CapEx successful? from be really silicon IP given competition and competitors carbide that that mean, how to to materials looking be support required is investment large many device is developing market

Gregg Lowe

it's a market. off first huge Well, growth

as very vehicles, by and substantial talking growth a last decade. that probably growth about So electric a even opportunity accounts to all a of at to going if down is you just substantial very, opportunity you're pin it kind least

forth. So going and a attract any see new to competitors and growth time so you attention it's like that, investment and

expect that. So seems space space we more less From be we're I the think and with the in charging anticipate it -- fully of in seeing GaN there's perspective, and to what GaN a onboard inverters. substantially that of playing is

I've In actually fact evaluation customers met looking inverter are several for the of of the discontinued GaN for with that GaN charging. have They itself. any at onboard

is So, they're really you've as them And there we're silicon to to of satisfied silicon see materials on players battle a doing going we're here. to in new and that And respect, try the driving carbide players obviously the see materials in level. that is the fully with business coming get to number device not expect where And We don't really with. a whose footing to seeing be the really carbide substantially we From at that our that work perspective, mostly continue there out area. in a at. to go are it's job and in really we companies main is GaN hard seen before. leader the different real that inverter

so big Obviously, deal XXX-millimeter continue a is we And transition efficiency. driving cost to the for us.

going final it performance intensively a on business And to somebody, level sometimes choose I other that easier But we and the market going be car coming to fact always the the then category top different you knowledge from a there of is driving perspective. silicon the we to look for with the it They at by come blind who go capability at with sometimes say and into makes out at there us. not are with just a would we at harder. come customers have out they standalone. in make carbide. in ourselves. look manufacturer folks And the They are really very device look to tied And a our to good kind to the of there's And that's device things. we make myriad to any performance. we this that thing always device decision go time So

carbide silicon have of than more We else. substantially anybody knowledge

there. always well. don't And we end They top player so And auto fare in and industry. knowledge capability we at the here so up look the

more level have competitors of the industry. industry have the auto and in for auto We the other XX at device that been have years knowledge

of got and need to they doing other able tell or eight continuity competitiveness perspective. look their ensure them I'll is support And But you supply silicon big and assurance And one obviously that into that they our are attract they in carbide largest seeing up. to as great world's a that in to dozens at and hiring customers a the investment boy And you're looked fab final going from with supply we're box the industry -- brought so the and ramps. thing we check a at that's an perspective look production at is area they look too background. as that we we the satisfaction months deal that from that on people from get well. gives by and thing we we've do nine And production that you able of a folks. supply what an the that And and joining cost at dozens to then us beef months folks from

Operator

you. Thank

Research. with New question comes Pierre Ferragu Street from next Our

with question. proceed You your may

Pierre Ferragu

a position. have like of Hi. on a topic specific the Thanks follow-up for Gregg, would question more taking landscape I evolution my on substrate your question. in competitive your

industrial. of to tangible working So way that of and But you if couple companies ways and on any know becoming is like wondering in question like with the there hand, split is an who we in of positive And go it industrial ramp the you brings course, wafers. are guys. it's of my it's But mainstream of accelerate Because more negative other growth increase Europe business. something to drive compete there one builds wafers, technologies would going are innovative a [ph]. course easy split to one if really It before your becomes see value I'm some It supply of of [ph]. from these to the per build a kind to on a for like business. the would market standpoint, device on hand, or sowing will

was a a sense you whether wondering and be will or positive if a a basis if you negative? it net ever on it I have about So thought

Gregg Lowe

it's in. to going conversely to reaction typical a with And investment is. forth. investment market And market drive more And think growing investment so I think a a the view there and the extrapolating market, your growth pretty the way the market more adoption it's it in the your of and Pierre. great good. I on excitement in The coming reaction to is it question, typical I'm interest the there that kind is with a market more is viewpoint is then probably it's the more the

you either So mutually there. not they're kind I obviously of lot on themselves. think tell kind whole keep silicon or carbide And straightforward. about we I build you a something will -- that all used in easy that's with different or the of And of easy various of up straightforward they word mutually these there's developments. or

to do. industry a kind keep all driving driving And something not work of it is again are there's costs to So of this and some to the any we goes of and it. eye we're that into leader blind down a in lot -- of on But an continuing hard scale stuff. we as of

coming quickly. entrants experience new these that's years of of are a into cost XX the chasing moving chasing they're pretty market any So and curve

though. is thesis your solid think actually very I So,

excitement investment, it that it Yes, more us, drives industry. more competition carbide. create but more for I the of the silicon interest, the the about also is potential think more for does more adoption there the

that's pretty good thesis. So I actually think a

Pierre Ferragu

Gregg. Thanks,

Operator

Thank you.

with comes Our Colin next Rusch question Oppenheimer. from

You may proceed with your question.

Colin Rusch

is customers, XXX-volt, on to in the much. as thickness talking understand you of trends that higher say voltages the we some XXX-volt get you've harder the with you're impacting it's the can to Guys bit to comfort so architectures? design or as a move XXX-volt where what Thanks of got And millimeters XXX mix little customer deposition? how about system

Gregg Lowe

at any higher don't problems anticipate excuse with on XXX at -- all voltage. We me, volts on XXX-millimeter

good about we're and problems any anticipate at regard. that don't feeling pretty that So all in

I very think good very, feel so I we've pretty well about that. got things understood,

carbide-based start so many in put definitely going get transition going I've carbide substantial years. seen I do last they inverter. important by improvements, are start cost from as that at well, the weight designing over of a, and an a obtain they Xs only trend When the is you et little A of the years the other then they that least manufacturers to we things size, most that carbide. Tier a the get, I that so silicon. substantial you the can and there there silicon And a a car a platform, much. advantage, to the definitely attitude silicon think inverter whether decide or but to I get carbide-based that's the with of an inverter design that bit And I'll customers And be trend and that year from in I silicon see industry improvement, think later this was there two is ago, cetera. ago, couple silicon realization the inverter it's advantage I'm with mean, talked only is advantage substantial

that's trend. So, say probably substantial I'd most the

Colin Rusch

you cash may your around can of say of then practical tightness one the some is facility the and you What Okay. Great. Mohawk seeing how fair space. just flow in a around costs. basic construction a of so Valley CapEx are impacting the seeing inflation your on far that labor more and amount And sort terms materials, lot also expectations flow? Obviously, some we're of of material a and through or around impacts what

Gregg Lowe

great. CapEx if Neill you Maybe Yes. would want be to cover that the

Neill Reynolds

Yes.

haven't On the really we CapEx any seen change. front,

for million So we year. the this $XXX about talked

with I to-date seen is that have on any think that and really front. everything in line seen that haven't we issues

had come and Still down higher construction. XXX-millimeter. we're the from standpoint, a some There's will good terms it we're going a would talked just, doing about. that timing year previously be in previously what than to we've in projected But of Next I also plans CapEx the we bit. say fab on because shape

Operator

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

proceed may with your You question.

Gary Mobley

be Thanks But maybe competition gains. sounds up my of of I'm wondering market. question. it's some this carbide about It expectations Hey, but wrong, guys. maybe sequential into taking not general you And modest silicon ask I'm showing like business. to I reading very your to in materials growth. on capacity for living perhaps terms want clarity it's not to sort some a of give materials whether what to or or constraints are pare demand impediments can if growth pricing conscious back in us whether decision it the the

Gregg Lowe

kick and to it color off -- see can add Yes, maybe want Neill I'll it. any additional to if

agreements. question, And just most through for recall, business our Gary. of So, long-term thanks the really done materials is

it's And around long-term of think I agreements. business as north with behaving we expected. they're somewhere materials XX% basically the of XX%,

not -- into quite we of really prefer market We're kind spot the agreements. much. so to long-term so And have thing and frankly,

very so And well. them these the laid so, We customers. and of the forth, long-term is kind to pricing agreement treat with and out and demand try the capacity all

as long-term you go. market. We're they'd really And if the think spot probably they our not into agreement as of that partners, I talk big they're well. basically any to working substantiate

could supply anticipation much silicon play We we're of our tomorrow of capacity the -- much market to XX% out good in get needs that in share long-term through the frame, have our wafer a So, through the per and today And on about we do share. our is to open cost the agreements carbide about with market time we'd merchant time. LRP have don't that those understanding in materials frame, XX we and -- guys what's be hold happening market. now right -- We're our we what what rather market. time

want color additional not. any to add you if Neill, know don't I that So, or to

Neill Reynolds

terms of ago. if adoption between the Yes, days customers We long-term years it's think up still I originally at silicon ebb carbide are at anticipate But of well. going different of of and will look different think these early materials of in that over positions I signed just couple up you in inventory have a a business, LTAs, Different carbide. ordering. flow about to periods. when lot electric you the pick point as vehicles, They silicon terms in some the

now So silicon I up both all. I you expectations our think think that has think I at line as long-term grow. plan business the And, we've in adoption don't changed to rates pick had the right and short-term for carbide, materials with expect

Gary Mobley

Appreciate that color.

roughly As that a offering. more equity I what question you Can had go my to just will Neill, with up XXX housekeeping follow-up, confirm the shares million? recent slightly than

Neill Reynolds

right around yes. That's XXX, correct,

Gary Mobley

Thanks, you. Got guys.

Operator

Thank you.

Our Cowen. next question from with comes Karl Ackerman

your You question. may proceed with

Karl Ackerman

sort walk could hoping Hi. most your to of months Good team lead first through appears to on the because you Neill, you. myself. was what for you nine I from milestones questions afternoon, until equipment, manufacturer to extended begins Two gentlemen. wafers. more. of front cap asked, times have Mohawk has one or I semi in

nine for I'm been if I a as have a today. seek has And to ramp you challenge So that you curious, months XX to Mohawk from follow-up.

Neill Reynolds

these think, there. we the We we don't space I for equipment cap to time orders going while closely. now knew quite And building the think the plans lead place in needing appropriately seeing Karl. we're had Thanks, were in given terms Obviously, a equipment. of the watching impact placed we're a We've Yes. be I big factory. time frame.

now right so so, so good. And far

as get we'll Gregg on our as of earlier, some So, into as you about next seeing parts. kind our the out think yields you line. off in pilot And talked able then, year, be ramp we're positive about milestones, signs qualifying to

is of don't plan, I point. at any those of So, this think types working kind everything see of and now issues right the

Karl Ackerman

think large design-ins. these you're you then it. Got It and now a are sounded coming non-XG with application outside investors $XXX like this perhaps, have think it of guess then I these the or of And industrial the I production. use to remain designs Thank on broadening not markets. you I won't when of your hoping remarks, design-ins. high-power during XXX-millimeter? maybe scale could perhaps non-EV carbide I discuss But ask that. it silicon if for did Thanks. cases. prepared million I applications. seeing was be them are And will go case I and of argued amount because could automotive some And niche a entirely timing from into incremental that perhaps indicate, as new why recent your Gregg, you sounds of

Gregg Lowe

Yes.

-- XD So adoption different a we've that but at substantial flying if total and automotive Obviously quarters. designed defense probably broader an into vehicle. opportunity a is worth it that take And mentioned design-ins we're my a a across aerospace of laser now truck we're are seeing our application. printer wind We is business. forklift, air portion of two I a then you a a the of rest got in tunnel into. thank number lot equipments. a about of you. big And And of in and designed five The portion pretty part the a $X.X were last its of of million is conditioning beer of a pipeline the of design-in end we favorite system that half automotive. then had kind billion of look industrial $XXX the

at So different wide well. variety the look that you got and with just it's applications as Arrow -- the it's -- the if of applications opportunities across we

a we to substantial have enthusiasm we adoption silicon partnership is down wouldn't adoption the partnership our of auto driving a And of market But a their sales footprint well. this with after force. of a -- field outside It's the auto obviously normally So in have but solid. sales for is very, I have nice these is force. And kinds be to as small this into all very coming carbide they their is, very it's able and They beauty what very the very it's in equipment. end to industry Arrow market we're fantastic go there that different that, out going guess after. because and starting a the see

the have we bandwidth to quite just wouldn't So cover. go frankly

a So I'll I tell industrial growing inside that you automotive a very great of but industrial base. a the frequent in call team key and that well there. opportunity broader the of automotive growing broader automotive for broader with me. lot this on base nicely very with Arrow And opportunity customers as base I'm of talking a about priority visit and obviously very with the outside directly, results is happy

Operator

concludes to now That Q&A remarks. our Gregg to the Lowe you. call Thank for I closing like back would turn over session. any

Gregg Lowe

your quarter. thanks for on exciting And a stuff lot Thank you. forward to we here. chatting of and next Cree. got look We've a going Well interest lot participation everybody with in you

Operator

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

disconnect. You may now

Wolfspeed (WOLF) 29 Apr 212021 Q3 Earnings call transcript