Navitas Semiconductor Corporation (NVTS) Earnings Call Transcript & Summary

Good morning, everybody. Why don't we get started with the next presentation and fireside chat. We're pleased to have management from Navitas Semiconductor here. Gene Sheridan, who's the Co-Founder and CEO; and Ron Shelton, who is the relatively new CFO to the company. So thank you, gentlemen, for coming in and joining us in Las Vegas. So why don't we start at a high level, Gene? And just talk a little bit about who Navitas is because there's a lot of people that it's a relatively new company, came public within the last couple of years, that aren't really sure what you do. And I know it's changed, a couple will get on to the acquisition of what you just announced a couple of weeks ago. But just talk about the founding principles of the company, what's the technology differentiation that you have and then we can pivot from there.

We started the company -- thanks, Ross. We started with the company with the vision of being the next-generation power semiconductor company. And we did it first around a key technology called gallium nitride, which is well recognized as a next-gen material to display silicon in a lot of power systems around the world. We went on to invent the world's first GaN power integrated circuit. While others make GaN power transistors, we've taken it to a whole another level with integration of drive, control, sensing and protection and other analog circuits that ultimately deliver a higher GaN-based power system in terms of efficiency, power density, size, weight cost and reliability. It's built us a very strong position in this early new market. We have over 150 patents that protect that GaN IC technology portfolio, and the market has been growing very quickly, starting first with mobile chargers. So gallium nitride is the key technology and starting point for a company, gallium nitride power ICs is our key advantage compared to others. And now we've expanded beyond that into silicon carbide, which I'm sure we'll talk more about with our recent acquisition.

So talk a little bit about the GaN side of the equation. Just to remind people, what's the core advantage that, that more exotic material brings relative to pure, more traditional silicon solutions?

Definitely, gallium nitride is 10x stronger electric fields and 2x higher electronic mobility. Now what does all that mean? Ultimately, it means you can make power systems that are far more energy efficient, faster charging, smaller size, lighter weight, lower cost, and we believe ultimately even better reliability. So a lot of good things come to an otherwise conservative industry based on silicon that really had not seen this kind of change, dramatic change in, frankly, 2 or 3 decades. So it's a very disruptive force in a very large market. Power semiconductors is over $20 billion around the world. That's a lot of opportunity to displace silicon and move in to gallium nitride.

So when you talk about the performance superiority, if you put that into terms that kind of a real-world terms for investors, if you -- a phone, a tablet, what have you.

Exactly. Yes. In fact, power is everywhere. So it's overwhelming. The opportunities are extraordinary. But you got to -- we believe you should attack these markets one at a time. So we take mobile charging as a great early adopter market and it's proven to be a perfect plan. In that case, it's something everybody can relate to its consumer fast charging, smaller size and lighter weight. If you want to fast charge your phone, your tablet or a laptop, we can do it up to 3x faster with a wall adapter that's half the size and weight compared to silicon chargers. That's something everybody can understand, everybody can appreciate and it's a fast-moving market, and it's quickly gone from 0 adoption now to $24 million that we did last year, all in mobile chargers.

What was the reason GaN wasn't adopted earlier? If it has all these great merits to it, what took till now? Was it the end market that all of a sudden desired it? And so it was appealing finally? Or was there some technological breakthrough that occurs?

Yes, great question. Cost has to get to a certain point to make sense. Reliability needs to be proven out. This is a very reliability sensitive market because you're dealing with high voltage, high power and high current, but in particular, GaN's got an Achilles heel. They are very fragile inputs or gates, very difficult to drive them fast. And for a decade before Navitas, people struggled with how to add external silicon circuits to drive these things. And it really didn't work, it added costs, it added complexity, it undermined all those benefits that I just talked about. So when we started the company 8 years ago, we knew we had to solve that problem. And ultimately, through many rounds of innovation and trial and error, we came up with a GaN power integrated circuit, which integrates that drive challenge right into the GaN chip. But not only do we solve that problem in integrating drive, we went out further and added even more value, integrating drive, control, sensing and protection that added even more system value. So that Achilles heel has been a real problem holding back the industry for last decade until Navitas came on with the GaN power IC, and now we see this market really taking off.

And is the market also more in need of that sort of power capability because the charging -- the faster charging that people want, the higher power chargers, et cetera.

Yes, that's right. It's probably a combination of both. You have kind of the perfect storm. We saw these inherent challenges with the GaN, how to drive them, getting the cost right and the reliability right. At the same time, mobile devices are exploding. Processors are bigger, batteries are bigger, displays are bigger, all great experiences, except they're power hogs. They need a lot of power, and they burn up that charge very quickly. So this is sort of the perfect storm. It used to be -- everybody was charged by 5-watt chargers and that was plenty for these phones. Now we're going to 50 watt chargers, 10x more power. We've just launched a whole lineup of what we call ultrafast chargers, which are now pumping 150 to 200 watts into a phone, which is extraordinary and unheard of even a few years ago, but this is an amazing consumer experience, 0% to 100% charge in under 10 minutes. That's pretty exciting stuff. And we're doing that for mobile now. Now we're going to bring that to electric vehicles and a whole lot of other applications for some super-fast charging consumer experiences and a whole lot of other benefits of these new markets.

So -- for people to understand, that's kind of like drinking from a fire hose literally. What's the sort of limitations that the solutions technologically that you bring to allow that are one side, you're on the charger side. What has to change on the phone side to handle that much input?

Yes, great question. And again, perfect storm, we're lucky, battery technologies keep getting better. It used to be they are all limited to let's call it 1C, which is literally means 0% to 100% charge in about 1 hour. But luckily, the batteries keep getting better. Just as they're getting better in EVs, they're getting better in phones. Now we have 2C, 3C, 4C, 5C. So the batteries are allowed to safely accept a lot more charge, which allows us to deliver that power energy efficiently in a very small adapter to make that kind of 0% to 100% charging that I talked about earlier.

So beyond the GaN side of things, in and of itself, you talked about the integration of different features. And the definition of integration across the semiconductor space is kind of very broadly applied. Some people stretch it more than others. Talk a little bit about what properly you integrate and how that differs from, without naming names, some of what your competition might do on their version of integration?

Yes, it can be a little confusing. And we think what's important is to integrate the critical circuits that will allow the GaN chip and the GaN-based power system to switch at its fastest speed, its highest efficiency and also its highest reliability and ultimately lower system costs. Every other GaN company out there is doing what we call GaN discrete, just a single transistor leaving that additional circuitry to be done in silicon. In some cases, they're even using older generation GaN called [ demo ] where you actually need an extra silicon MOSFET on top of that circuitry just to get it to function in this circuit. So once you integrate all of those critical functions that I mentioned, not only do we solve that Achilles heel driving problem that I talked about, you get this inherent robustness, inherent system cost reduction and you get the highest speed and highest efficiency, which is ultimately the key for power systems, whether it's a fast-charging phone, fast-charging EV or lots of other power applications, I'm sure we'll talk about.

So to the extent you guys do more of that integration, one of the areas you don't integrate and you had some supply shortage issues with the analog controller side of the equation.

Yes.

Talk a little bit about your choice not to integrate that. And is there a road map where even if it's within the package and not necessarily in the chip, are you guys -- how are you technologically thinking about addressing that?

Yes, exactly. So you can -- there's -- you can look at every power system as there's a brain and there's the muscle or the brawn. The brain is like the microprocessor or power supply, typically called a controller -- microcontroller. This is best done in low-voltage silicon. As low-voltage silicon is still the workhorse whether it's Intel making microprocessors or NVIDIA, silicon is still the answer. It's when you go to the muscle, the power, high voltage, high current, high temperature, this is where GaN is exceptional. And this is where we're integrating all of those critical circuits at high voltage, high temperature, high current to make that GaN device, again, robust, very fast, very efficient. So you can integrate the low-voltage silicon controller if you want. It creates some design simplicity, maybe a little bit of footprint savings but it's not going to drive the performance, reliability and system efficiency that's really going to make the difference. So we do think low voltage silicon controllers are an interesting dimension of our future road map, something we'll look at, might make sense to integrate them someday, but they're not critical to enabling all the kind of system benefits that I talked about earlier.

So sticking on the GaN side, and we'll get to the GeneSiC acquisition and the silicon carbide here separately. But talk about the markets that you're addressing with the GaN side, and you could put it in the framework of the power envelopes as you move up higher in power and what the advantages or challenges would be for you to kind of evolve the application of your technology.

Definitely. So we started with this mobile charger space. There's about 2 billion mobile chargers or wall adapters shipping every year. It's about $1 a GaN content. So that's a multibillion-dollar opportunity all in its own right. We're definitely working through that. We're only at 1% or 2% adoption. So there's a lot of upside still to go in mobile chargers. Related to that is consumer adapters. In all of your homes, you probably have 20 or 30 wall adapters charging everything. It doesn't have to be battery operated. It doesn't have to be something you carry around. It could be your TV, your set-top box, everything in the phone, thermostats, IoT devices, home speaker and audio devices. They're everywhere. That's a natural target to deliver more power efficiently and smaller size and lighter weight. That's another $1 billion or $2 billion consumer adapters, as we call them. Similar kind of ASP, about $1 of content. That's just to start, we call that kind of the low power GaN segment where we're beginning today. We've got products that deliver that power from 20 watts to a few hundred watts to cover mobile chargers, consumer adapters. We did our IPO about a year ago, we raised $300 million, with the intent of scaling that technology in a higher power, bigger infrastructure systems, namely 3 data center, solar and EV. We've now taken that -- scaled up these chips, integrating the same drive control, sensing, even adding other layers of protection and higher reliability because now we're going into a 10-year, 20-year life in systems and those chips are now sampling today, and we're doing the production in the next few quarters.

So what is the -- and this will be the transition over to the silicon carbide discussion. What's the power level up to which GaN works and then the bridge to why you want to have the silicon carbide side to be able to talk about being the kind of most unique power supply or power delivery company in the semiconductor space?

And the easiest way to look at that is there's another material called silicon carbide, actually very similar qualities as gallium nitride. They're both faster and more efficient than silicon but there's a difference. The fundamental difference between the two, silicon carbide is a vertical structure that allows us to handle higher voltages and higher powers. In fact, far beyond what you can do today in GaN. So actually largely complementary. If you think about really high voltage, really high power systems, like solar farm implementations, wind power, grid power, really high-performance electric vehicles, these all push power voltage up beyond the natural fit of GaN, but a perfect fit for the silicon carbide technology, which is why we love the idea of eventually investing in silicon carbide as the next complement to gallium nitride because together, now we can cover the entire portfolio of power applications, some sort of low power, low voltage, all the way up to super high-voltage, super high power, very complementary technology.

So your entry into this was something you guys just announced last week, I believe with GeneSiC.

GeneSiC. I prefer Gene's IC company.

I was going to say, I'm missing the apostrophe is there, right? Can't wait to you guys buy Ron's company.

It's what I was waiting for, but we passed on that one.

Now you know our M&A strategy. If my name is in it, I'm interested in it.

Exactly. Exactly. So talk a little bit about what drew you guys to that asset. Silicon carbide is obviously a very, very hot topic across semiconductors and EVs and everything these days but you managed to find one that was a little bit off the radar for most people. So talk a little bit about what was appealing about GeneSiC.

GeneSiC.

Dang it.

Just say your IC company.

There you go. Exactly. I'll shut up and you can answer that question.

So we have been talking since the IPO about what are you going to do with your money? You don't need $300 million to get to profitability with our GaN business growing as fast as it was. And we're very open that silicon carbide is a very interesting complementary technology. So we've been looking at it. But this stuff is not easy. Most companies worked on it for 10 or 20 years. That GeneSiC worked for 20 years before they ultimately nailed an amazing and impressive platform in their generation 3 technology, just launched in the last 2 or 3 years. And they did it very much off the radar screen as you said, no sales, no marketing, no branding. It's a real hidden gem, but we found it. And there's not many of these companies left. And we're lucky that we found it, we did 6 months of due diligence. We tested their devices, their Gen 3 against the best out there, all the big guys that you know well, and it outperforms all the big guys in circuit testing but nobody knew about it, but we knew about it. And now we have it. It's a very exciting technology for us. They're growing 60% a year. The market overall, I think, is 30%, 40%. So they're gaining share with virtually no sales, marketing or branding. Of course, we built the whole infrastructure, global sales force, technical sales, great marketing program. I believe a great vision and a great plan. So when you put it all together, it's a perfect complement on top of that, financially, it's immediately accretive in every way. So it worked out beautifully for us. We're super excited about it. And it now positions our company as the only pure play next-generation power semiconductor company. By that, I mean we have leading-edge GaN, leading-edge silicon carbide, well recognized to be the 2 technologies that will display virtually all silicon in power electronics over the coming decade. And we do it without any distraction or dilution of legacy silicon power devices, which is what some of the big guys also have.

So what's driving the 60% growth? I think that's about what $25 million or so of revenue is what GeneSiC is doing? Did I get the name right that time?

No. Still wrong.

Still wrong? Dang it. Yes, exactly. Your deal. I'll call it your deal. 0 for 5. So I shouldn't go to the table down the hall, bad luck. So what's driving the $25 million in revenues this year? And is that 60% number that you talked about a backward-looking figure or a forward-looking figure or both?

Yes. The 60% is backwards looking. We see no reason it won't continue. The backlog is very strong. We're talking to all the customers they want to buy as much as we can build. So you know the industry is constrained right now, a lot of interest. What we love about it, it's twofold. It's both synergistic and creates great diversity. And diversity is over 500 paying customers today. So there's quite a long tail, which creates wonderful diversity to our business since we're heavily concentrated short term in the mobile charger business with GaN. But the synergy is they're already shipping in solar, in EV and in energy storage markets, exactly the markets we're bringing our new GaN chips to. But GaN makes the start at the beginning of the design cycle. So that could be 1, 2, 3 years before you're shipping GaN into those markets. Well, now we're shipping immediately. We're approved by top companies like BYD, now the largest EV company in the world. So that's really accelerated our company's transition to these higher power markets, creating a really nice diversity in a multimarket play. But again, just, if you were to play one with only GaN and silicon carbide in our portfolio.

And I would assume the synergies in this are going to be much more revenue synergies than there will be cost synergies. There might be a little bit on the cost side, but it's not like deal company who I butcher their name repeatedly.

The silicon carbide company.

I think you said they had a like 20 employees in total, roughly.

Maybe Ron, we talk about the financial benefits because not only is the technology a sweet deal, financially it's a...

Yes. It's a good question, Ross. From a synergistic aspect, it's not an acquisition where -- and you've seen it, it will be accretive in a year, you have all these cost synergies and things like that. It is immediately accretive. I mean -- and we've talked about, It's got, today, it's very profitable. It's got EBITDA margins north of 25%. It's growing 60% a year. It's got really good margins higher than our corporate average right now. And so from a synergy standpoint, there's only 19 people. And as Gene touched about -- touched on, it's primarily R&D product development, and they've grown the business to $25 million without all the other infrastructure that we have in place today. So our view is with very little in terms of incremental cost, we can roll it under the umbrella operations and sales and marketing, finance advent. And so every incremental dollar, a significant piece of that will drop to the bottom line. So we -- it's one of those things and sometimes people get skeptical when you talk about revenue synergies. But this is legitimately from a synergy standpoint on the revenue side, it's legitimately synergistic.

Yes. I'm typically one of the cynics but...

I think I missed it.

It actually makes a ton of sense on both sides and it can just kind of be the pipe cleaner to bring you guys in with the GaN technology and the customers.

For sure.

They'd be very helpful.

And they're really -- that is a key point, too, because they're certainly part of the market where it's not clear. Do you go with gallium nitride? Do you go with silicon carbide? So what we love is showing up with those customers in a very objective science fact-based approach and figure out the best technology that meets their needs. What's the system goals? Is it a combination of GaN silicon carbide? Is it only silicon carbide or only GaN? We can figure out whichever way they go, we're going to win with the best of both.

And what about the supply side of the equation for those guys? There's a lot of discussion about supply limitations, how much CapEx people are putting in. I believe they're a pure fabless model, so they don't have to worry about it. But how are they locking in supply on the silicon carbide side?

There's another big benefit we love about the technology, not just the great in-circuit performance that I described, and we benchmark, but they actually have a design that is very robust and allows for mixing and matching of different supply chain partners. And it's true, silicon carbide supply chain is a bit complicated. You need silicon carbide substrates, you need silicon carbide epi. You put those 2 together and run them through a fab that is silicon carbide capable. GeneSiC has actually qualified over a dozen combinations of substrate epi combinations to go into X-FAB, their foundry partner, that creates a lot of supply chain flexibility. It allows us to mix and match to who's got the best availability, the shortest lead time, the upside of capacity. But it also creates price competition, which is very important. We can drive competition among the substrate vendors, the epi vendors ultimately getting us a great cost structure, with a great gross margin that Ron talked about, but also the great availability. We're offering 16- to 26-week lead times when competitors are on allocation of, I think, 50, 60, 70 weekly. That's how -- that's part of the reason becomes the great device is great availability. We're growing double the rate of the market at 60% growth rates. So I know everybody thinks you've got to be in-house, you're going to build all these factories. Actually, I think the market is changing very quickly in terms of the availability of very competitive attractive substrates at the integrated supply chain partner like X-FAB to make it happen.

And what about the go-to-market for them? Some of these customers, especially in things like automotive or even alternative energy tend to be very, very large OEMs, but yet, GeneSiC?

Nope.

Dang it. I'm just going to take it down. Yes. They are heavily -- they don't have much of a sales and distribution network. So they go through disti more properly. Is that another area where you guys can add the revenue synergy side of the equation by getting together and addressing those big OEMs directly?

No, we're certainly bringing the scale. Obviously, we have the financial stability even after the deal, $140 million of cash in the bank. Significant scale between GaN and silicon carbide. Significant credibility, X-FAB's already automotive qualified, TSMC is already automotive qualified. So these are top supply chain partners with the financial strength and stability that gives our automotive customers and every other customer the confidence to design it in. And the fact -- the proof is in the pudding. We're already shipping to dozens of automotive customers today with the GeneSiC technology.

So let's go back to your core business as it stands today, the GaN side of things. Everybody knows that the handset market is rough right now going through an inventory correction, the demand was weaker, et cetera. It's nothing specific to Navitas in any way, shape or form. But talk about how you're viewing the inventory in that channel, when you think that will normalize and when that market can return to growth for you?

Ron, you want to take that one?

Yes, sure. Sure. So -- and Ross, you're exactly right. We're not immune to the same pressure as everyone else is seeing. In our call, we referenced that we think it's a 2- to 3-quarter correction. And we'll know a lot more in a month than we do today, but that's what it seems like. When we talk to distributors, we talk to the end customer, and we're very close to them. I mean there's just inventory in the channel they have to work through right now. So what they've done is -- and we've executed really, really well on customer engagement, customer acquisition, that activity has not stopped and we announced design wins consistently. And those will eventually go into production. But again, I think if you go to those end customers, they're saying, look, we just have to work through the inventory. And so my view and our view is as the market works through that, it's all these design wins that we've been talking about in the last quarter or 2, will then start to kick in.

When you guys have gone from, if I remember right, it was either 5 or 6 of the top 10 handset OEMs or customers to now, I think, as of this last quarter, it was 9 are shipping and 10 are engaged.

Exactly. 9 out of the 10 of the top smartphone and laptop guys are already shipping production with our GaN chargers, 10 of the 10 are in development, all of them really driving their next-gen fast chargers using our GaN.

And that seems like the market share gains that you would have would be a strong offset against the general market weakness. But you guys have seen some choppiness still. Is it just the market is just weak enough right now with that inventory correction that your share gains can only partially up that?

Yes. I think nobody is immune to it. You're going to feel that. If anything, we're in all the new models, we're dominating the new models. Well, the new models, they're holding back while they ship through -- move in [ over ] all the older ones. So if anything, were hit a little bit harder by that, but that ultimately expels a good outlook. We have 225 GaN chargers in production, 290 in customer development, 20 announced last quarter, as Ron said, they're on the shelf ready to go, delivering those great consumer experiences that we talk about.

And I know as a new CFO, you want to keep expectations under control, Ron. But that sounds like if you're moving up the number of customers you have and it's in the leading new products that they're waiting to ship, it seems like you're kind of coiling that spring tighter and tighter and then when some of that pressure gets released, whenever that happens next year, let's say, that seems like it's set up for a nice snapback. Is there anything that would be an offset against that other than kind of macro?

Yes. I mean, I don't know if it's a snapback like from 1 quarter to the next. I mean, I think you'll see a gradual comeback from -- as the industry works through the transition. So I think that's there. And look, our view is the thesis hasn't changed in terms of growth opportunity over the long term. I think what we look at here is in the near term, you're hitting some choppiness and you just got to work through it. But fundamentally, it doesn't change the long-term outlook. And that's -- and rightly so, there's a lot of discussion about China and that market. We talked about last quarter, and I think for the first time ever in the company's history, we've been diversifying the business away from mobile. I mean, mobile is a big part of the business, will always be a big part, but we're looking to diversify into other areas. And last quarter was the first quarter where you saw home appliance become like a much, much bigger part of the business. And so it's a little choppy on the mobile side. But I think overall, the business is actually pretty strong, and we're seeing a lot of progress and momentum in other areas.

That's a perfect segue to my next question. If we go back to the IPO, you guys talked about starting in mobile, consumer would be next, and then you go into some of the higher power applications that Gene, you talked about earlier. That middle step of the consumer side of things, looks like it's finally starting. While it might be a little detrimental to gross margins in the near term before you go from Gen 3 to Gen 4 and those sorts of things, talk a little bit about -- I know you haven't named the customer, but the type of applications in home appliances that you guys can address?

Yes. It's pretty exciting because everything we've talked about so far is related to GaN in power supplies, whether it's these wall adapters, fast charging your phone or it's a power supply to power data center or even your electric vehicle. But 40% of the world's electricity goes through motors. Today, very inefficient motor, sometimes only 50%, 60% efficiency. Motors are everywhere. Home appliances is just one example of where motors or compressors are being used. GaN can bring a lot of value into that space. We can dramatically upgrade the energy efficiency of these home appliances and your home was filled, not only with the tech gadgets that I mentioned, for charging and power adapters is filled with motors and compressors from refrigerators, washers, dryers, dishwashers, hair dryers, everything, their everywhere. So this is pretty exciting. It's a leading edge home appliance company out of Europe that doesn't want their names disclosed just yet, so we can't talk a lot of detail but it's a great first example, just like we had the first beachhead customer in mobile charging, we now have the first beachhead customer in home appliances in a much broader motor control market, which opens up, as I said, sort of 40% additional power opportunities for GaN and that motor space.

And in that motor space is the value proposition that's allowing you to get the design wins, the exact same as it was in the mobile side of things? Or are there some more unique aspects that you guys highlighted in the appliance?

Yes, there's a lot of subtleties to how you drive a motor, and I won't get into the -- too much of the technical details. At a high level, the value product is actually very similar. More energy efficiency, and we all are moving towards more energy-efficient appliances, reduce your cost of electricity, your utility bill, but also delivering higher performance motors for better cleaning, cooking, heating and cooling, lowering the cost, improving the reliability, shrinking size and form factor, fundamentally, those same values are shining through for this all-new motor-based market.

And talk about how moving from your Gen 3 product to your Gen 4 product plays into that, whether it's the mobile side or consumer side of the equation. I know it will be better cost down for the benefit to the gross margin. But from a technology perspective, what is Gen 4 bring versus Gen 3?

We've been moving at a very fast pace. It's still early days in the invention of our GaN ICs. We're introducing a new generation every year. So last year, we started the year shipping Gen 2. We ended the year transitioning everybody to Gen 3 pretty fast and exciting transition. This year, we're launching Gen 4. We started sampling last quarter. First customers going to production later this quarter into Q4. That includes that home appliance company. Generally, each generation is about a 20% cost performance improvement. Doing that annually, of course, is a very big deal. Some generations offer higher levels of integration, higher new protection and features, Gen 3 added the sensing function that we talked about. Gen 4, in addition to that cost performance, is actually enabling even higher frequency. Higher frequency means you shrink the passive components in the power supply at an even greater rate when you can switch faster. So we continue this trajectory of going to higher integration, higher frequency, higher efficiency and ultimately translates to higher density and a lot of this cost benefit that we talked about hitting system cost parity for next year.

So why don't we get into the financial side a little bit in the last 5 minutes that we have. Just starting on the gross margin side of the equation, there's always a bunch of puts and takes, new generation, old generation of products and market mix, getting into new end markets that you had to price aggressively, a lot of the dynamics that we've already discussed. At the time of your IPO, you had a bit of a waterfall to talk to, I think a 50% to 55% gross margin. Talk about where you are today and what it's going to take to get up to that gross margin.

Yes, sure. So today, I think -- and Ross, we talked about Q4. So I'll roll into Q4. The margins right now are in the low 40s on a combined basis with the GeneSiC acquisition. I got it right by the way.

Better than me. You bought it so maybe you should be right, right?

And we think Gen 4, I mean, in terms of specific drivers, Gen 4 would be one. And so that will help drive margins up. Over time, GeneSiC is higher than the GaN side today. But over time, I think the targets that you talked about in gross margin, 50% to 55%. We think the business will support that kind of margin profile of 50%. We haven't updated a long-term model right now. After the acquisition, and we'll do that over the next few months. But we think longer term, that gross margin profile still holds.

And are there any key steps from getting from here to there? I think in your original waterfall, you had a couple 2, 3 points of benefit annually this year, next year, the year after that sort of range. We might be starting from a lower base after TSMC raised the cost on you guys and everybody else. But is the -- are the stair steps, albeit off a lower base, roughly the same and the reasoning behind them or something -- has something changed on that front?

Yes. I think -- so from here, I mean, again, the acquisition may have changed that a little bit. But the things to think about are -- and Gene touched on product transition, right, Gen 3 to Gen 4, that's clearly a driver. There's the pure tactical operations moving from 1 assembly house to another and driving down back-end costs. The GeneSiC deal, in this case, is a benefit to gross margin. And then ultimately, market diversification. I mean when you go into -- and we talked about motor drive and into industrial applications and things like that, it's a little bit of a longer slope to revenue growth. But once you're in, you're in. And that's the beauty of those markets. And you're aware of that. It's really sticky, generally higher margin. And this 1 customer we talked about, not only is our margin improving, their system cost, total system cost it's coming down significantly because of that. So their margins benefit and our margins benefit. So it's a win-win there. So I feel really good about that. And that's why I can think about and say, okay, 50% to 55% makes sense. And when we roll out a long-term model, I think we'll be able to better articulate kind of the time frame for that, but we're clearly on that track.

So in the last couple of minutes, if I tie this all together, the size of your company, the opportunities you have in some very large and attractive markets, people really want to see revenue growth acceleration. At different points in time, cyclically, semiconductor cycles and macro cycles, they can be choppy. But if we think forward to the revenue growth rate of the company, from where you're going to end this year, you add probably, I don't know, $30 million, $40 million year-over-year next year, just from the acquisition. And then you'll have your organic growth as you expand into new markets, take advantage of the ones you've already penetrated, et cetera. Walk us through the road map from kind of where you are going to end this year to multiple hundreds of millions of revenue as you look 3, 5 years down the road, what are the key steps that investors should monitor?

Well, Ron can probably add to it. But I think if you look at it strategically, the silicon carbide market is growing, I think, something like 30% to 40%. And clearly, the GeneSiC technology for all the reasons I said about technology differentiation and supply chain benefits is growing faster than at 60%. So that gives you one frame of reference. I think the GaN business is probably growing. It's kind of a new kid on the block, a little bit less mature, something in the range of 50% to 100%, and we're clearly the early leader in that space. So I think that's kind of the backdrop under which it sets up a really good growth trajectory for the company. With that said, as Ron explained earlier, we're going to be digging in to understand the China slow down a little bit better. Understand that snapback analogy as you described what that is going to mean as well as the GeneSiC technology and getting deeper with those 500 customers that they already have. So then look at how to update our operating model and our multiyear plan in the coming months or quarters. So we'll give better guidance on all of that, but I think it gives you sort of a frame of reference about the market growth rates and our position to capitalize on that.

And do you think the next steps, obviously, you're going to have the integration, an update of your views on the deal and what that will add? But beyond that, as people think about the resurgence in growth in the mobile side versus diversifying into new areas, how do you think those 2 are an offset for maybe the next 2 years? Which one is bigger the 10 out of 10 finally ramping in mobile or the diversification into new markets?

Yes. I'll give that a shot. I think mobile, by definition, can move and move really quickly up and down, right? So I think as those design wins kick into production, that can drive revenue up really quickly, much faster than your typical industrial customer. So if I had to look near term, near term being to say the next year, and you said, well, what would be the primary driver of significant growth? It's more likely than that would be the mobile side. I think longer term, though, you would -- the diversification efforts will kick in, whether it's industrial, solar, automotive and so on. I think over time, those segments should be a bigger part of the overall business. I think when you look near term, longer term, it's just the dynamics of those businesses and segments.

Well, guys, we are exactly on time. So thank you so much for coming to Vegas and telling us all about the company. Apologies for butchering the name repeatedly. I won't even try to say it again. I'll just stick with Navitas. That's what it's going to be named going forward. Thank you very much.

Thank you.

Thanks very much.