Soitec SA (SOI) Earnings Call Transcript & Summary

Hello, and welcome to the Soitec Full Year 2020 Results Call. [Operator Instructions] I will now hand over to your host, Steve Babureck, to begin today's conference. Thank you.

Welcome to Soitec's Fiscal Year '20 Annual Results. Good morning, good afternoon, and good evening, everyone. My name is Steve Babureck, and I am the Investor Relations Officer for the company; Paul Boudre, Chief Executive Officer of Soitec; and Sébastien Rouge, Chief Financial Officer, are with me on this call today. Before we start the call, I would like to remind you that this presentation is available on our website, and the disclaimer can be found on Slide #2. Now let me give the floor to Paul Boudre to kick off this presentation.

Thank you, Steve, and hello, everyone on the webcast. I really hope that you and your families are all safe, wherever you are. We have a lot to cover today. And so let me take you straight to Slide #5. We are happy to report this fiscal year '20 results today as Soitec continues an extraordinary trajectory in the semiconductor materials market. On the left side, you know the megatrends that pushes the limit of our semiconductor industry. I'm talking about 5G, artificial intelligence and energy efficiency. Sorry, it's a problem in the audio. So for each of these megatrends, we develop and commercialize highly differentiated engineered substrates to serve our strategic end markets. That is to say smartphones, automotive, IoT and cloud. So 3 figures I would like to insist on. We deliver around EUR 600 million in fiscal year '20, a 28% organic year-on-year growth, in line with our guidance. EUR 600 million is also 2.5x the level of sales we generated 3 years ago. This is a very strong performance compared to the semiconductor market as a whole. We also delivered a 31% EBITDA margin in fiscal year '20, also in line with our guidance, and this EBITDA in million euros is about 4.5x the level achieved 3 years ago. As promised, we succeeded in delivering a very profitable growth. Last but not least, we are also proud to benefit from a strong confidence from our investors around the globe with a EUR 3 billion market cap. We doubled the valuation of the company in the last 3 years. So now let me share a few KPIs in Slide #6. So I already mentioned sales and EBITDA, but we are also satisfied with our strong balance sheet. As you can see, our shareholder equity is about 10x the level of our net debt. Now let's make you to Slide 7. The numbers we report today underline our differentiations. Thanks to women and men that work hard every day in our organizations from innovations to manufacturing, supply chain, sales, business development and all other support functions. A few topics I wanted to share with you today. Regarding talent, we now have a global organization with 1,600 employees, which is roughly 20% annual increase in fiscal year '20, and we successfully reorganized our company into business units to better address our strategic end markets and serve more closely all our customers. Regarding innovation, this is the DNA of Soitec, and we invest in new product generations for our core SOI technology portfolio, but as you know, we are also going beyond SOI and invest in new engineered substrates such as Piezo-on-insulator, gallium nitride and the newcomer, silicon carbide. Regarding operations, we have a global footprint with fabs of various diameters in France, Singapore and Belgium, and our CapEx run rate is in the range of EUR 100 million to expand capacity and invest in strategic projects. We also have a strategic partnership with Simgui in China to expand our capacity in 200 millimeter. So regarding supply chain, our main challenge is to continue to expand a robust supply chain to cope with our volume growth across several products using multiple manufacturing sites. With our critical mass, we succeeded in diversifying our supply chain with multiple strategic suppliers. The business of our supply chain has been tested during the pandemic crisis, and it was very strong. So our overall execution must be able to generate profitable growth. And of course, at times, to be able to face crisis like the one we -- the world is facing through the COVID-19, and we have done it today. So please go to Slide #8. Where I want to talk a little bit more about what happened over the last quarters. So regarding our management of the COVID-19 pandemic, we reacted early and globally. And our guidelines have been driven by the following priorities. Priority number one, protect our people. Early on, starting in Singapore and then deploying in France and in all our locations, we distributed masks, checked temperatures, manufactured our own gel and put in place organization shifts with an emphasis on work-from-home policies when possible. Priority two, maintain our operations, which means the fabs but also our supply chain. Our fabs have never stopped. Priority number three, support our clients. And we are proud to report that our deliveries have always been on time and the few delays we had in March due to air freight issues were in complete agreement with our customers. Last but not least, priority number four, help our communities. When possible, we proactively offer to help through various initiatives such as giving maks, gel, PCs to families in need, et cetera. So we are getting out of this crisis stronger internally and stronger within our abilities to support our customers. Now let me say a few words about each business unit. And so please, I go to Slide 10. Okay. And this is RF-SOI business unit. And this is our #1 business unit in volumes and revenue with a strong exposure to the smartphone market where RF-SOI is a standard for 100% of the smartphones' RF front-end modules. So some of you already heard me say, I mean, there is no smartphone without Soitec. Well, there is -- and there will be no 5G without Soitec. The first generations of 5G, so the so-called sub-6 gigahertz, will require an additional content of RF-SOI, and we continue to expand our footprint in square millimeters with the new generations of products. The second generations of 5G, the so-called millimeter wave, will require even more content than sub-6 gigahertz, which means that for Soitec, even more square millimeters. So from a momentum standpoint, and as we told you in April, COVID-19 has created a bit of weakness in the smartphone market this year. And we expect the global smartphone market to decline by around 10% in calendar year 2020, followed by a strong rebound in 2021. I wanted to remind you that the RF-SOI content per smartphone continues to grow and compensate any decline in smartphone units. On the 5G side, we still expect a strong entry of 5G smartphone in 2020 with around 200 million units. And this number should more than double to around 450 million units in 2021. Now let's talk about FD-SOI, and turn to Slide 11, please. So for the FD-SOI business unit, as a reminder, FD-SOI is a unique technology to address several key challenges offered by energy efficiency. AI and 5G semiconductor chip based on FD-SOI can deliver lower power consumptions, increase security, embed memory, integrate RF connectivity, and all of these can be packaged with a cost-efficient device integration. Today, this is now a reality. Confirmed with our first wave of adoptions, FD-SOI is being adopted in a wide range of end products from cars to IoT smart homes and smartphones, supporting the largest consumer brands. After many years of ecosystem development, a strong takeoff in the last couple of years, FD-SOI is in a transition year. New products in automotive have been a bit slower than we had expected. The lack of foundry in China impaired some businesses relationship in the FD-SOI ecosystems and the competitive environment has been tough on us. Even if we are seeing a revenue plateau in 2020, we are very happy with the number of design win activities across the board between edge computing with the FPGA platform, voice and vision processors for automotive and smart home and, of course, 5G, where FD-SOI is currently designed as integration platform for millimeter wave applications. For FD-SOI, we're expecting a strong inflection in 2021 and 2022. If we go now to Slide 12 on Specialty-SOI business unit. Here, we have several products in this business unit, addressing automotive, imaging and the data center end markets. That said, the products in revenue is Power-SOI, and the main end market is automotive. Automotive end market has been weak since the second part of calendar year '19 and strong decline in 2020. And for the time being, we expect a slow recovery ahead. Imagers for 3D sensing follow a specific smartphone brand. And finally, Photonics are expected to grow at a very decent pace, thanks to data centers traffic growth and technology transitions in optical transceivers. If you now go to Page 13, please. I will cover the Filter business unit. And regarding filters, our goal is very simple, create a new standard for surface acoustic wave filters using POI-engineered substrate compatible for 4G and 5G. 5G offers a perfect opportunity to differentiate our POI technology due to the much higher requirements on the filter side compared to 4G. As shared before, customer traction is already here. I mean, we have started to ramp this business at the beginning of calendar year 2020. And we are building a 500,000 wafer fab capacity in France, which is above the 400,000 targets that we shared with you last year. Slide 14. Let's move now to the EpiGaN business unit. On this one, we are very happy with this acquisition, which was concluded a year ago. The business has been integrated as a business unit within Soitec. And we have already seen many synergies on the technology and operation sites. Outlook remains the same for GaN epiwafers. Our ambition is, first, to penetrate base stations power amplifiers in a meaningful way, then smartphones and later, penetrate the power automotive market. If we go now to Slide 15 on Compounds business unit. I would say that regarding compounds, I will focus on silicon carbide as we are developing a unique engineered substrate to address the electronic -- the electric vehicle market. And where we have already received strategic interest from automotive devices and system makers. Where do we stand in our development? So we are working with applied materials, as you know, to develop the technology, and we expect the pilot line to be fully operational in calendar year Q4 2020, which is a slight delay compared to our original plan due to COVID-19. We have already built R&D samples, and they will be shipped shortly. Finally, we will deliver qualification products still in our fiscal year but in Q1 calendar year '21. On Slide 16, if you go there, I'd like to tell you a bit about Dolphin Design. Dolphin Design is a semiconductor design company, in which we own 60%. The remaining is owned by MBDA. The recovery since we acquired this asset almost 2 years has been fantastic, both in terms of revenue, growth and profitability. Main synergy for Soitec are about the IP business related to FD-SOI, especially what we call ABB, that means adaptive body biasing. Tractions on that front is very strong, which support the development of the FD-SOI ecosystem and accelerates the demand for FD-SOI substrate. On Slide 17 for 5G and Slide 18 for automotive, and the wrap-up of our message is here on business unit. And this is basically the global view. And as a reminder, on Slide 17, 18, we have recapped our engineered substrates offering for 5G and automotive. As some of you know, I mean, we have a very detailed presentation on our website on these 2 very strategic topics. So this will conclude my remarks related to the business units. I will now leave the floor to Sébastien to discuss our financial results.

Thank you, Paul. If we go to Slide 20, the highlights of the financials. So Paul has disclosed in his introduction, we are pretty happy to report that the group has met its financial commitment for the fiscal year. While the end of the year took place in a tough environment, both in Asia and in Europe because of the COVID, we can report record levels of sales and profit. As you can see from the Slide 20, all profit indicators are going in the right direction from the revenues that are now very close to EUR 600 million, to net profit at EUR 110 million. This being said, all the profit indicators are not evolving at the same pace, and we will come back to that in the following slides. On Slide 21. If we come back to the revenue disclosed in April, so no specific surprise. Let me come back in to the important items. Over 28% of organic growth this year, fueled by our very good RF-SOI volumes and in particular, driven by the success of 300-millimeter products. They now represent more sales than our small diameters. This being said, we still have a continued growth of the 200-millimeter products. Sales are up 20% versus last year. And as Paul noted, still symbolic but important contribution in the small diameter of POI. So our product for filters that are now in production and commercial production soon growing and that will be progressively visible in our chart. The last point I wanted to share is actually the growing part of revenues that are not linked with the wafer mass production, reaching EUR 28 million and coming in particular from the contribution of Dolphin Design. If we go down the P&L on Slide 22. The gross margin and gross profit. So gross profit for the group has reached EUR 195 million. When we look at that as a percentage of sales, the margin reached 32.7% percent. It's lower than last year, and that's an impact that we have already shared with you in the H1 financials. The drivers for that, on the positive side, very good load in our Bernin fab, great operational performance in all our sites throughout the world. And that's important to keep in mind. And some headwinds anyhow. Simgui, our partner in China, is running very well and now represent roughly 20% of our 200-millimeter production. But you remember that the model we have with them is dilutive in terms of margin. We buy finished product from Simgui and then resell. So obviously, not with the same margin as a percentage of sales as something we do in house. The second big item is the large investment plan that the group has embarked into since fiscal year '18. With that, depreciation is still growing faster than sales and that has also an impact as well. Singapore is still in the early years of its ramp up, not full, and we have to wait a little bit until these 2 items coming from the increased capacity that we are putting in the group has a positive impact on the margin. But right now, it's slowing down a little bit, the growth -- the growth rate of the margin. And the last point we highlighted already in H1 is the bulk price. We've finished a large cycle of bulk deals that were contracted through the tough times in terms of price but participated to the headwinds. And we believe we can move forward with actually a better buying conditions in the next months and years. If we continue through the Slide 23 and the current operating income. From the EUR 195 million of gross profit that we commented, we get to EUR 118 million of current operating income at 20% of sales. It's important to remember, we have a step change in R&D coming from -- half of it from the contribution of our newly integrated businesses, Dolphin and EpiGaN. By design, Dolphin is higher on R&D. And EpiGaN business unit is still very early in its development phase, and thus very high on our R&D. We want to add up also more efforts to maintain leadership on our SOI businesses. And at the same time, we do speed up the development of POI and silicon carbide, all of them also contributing to this increase of R&D. On the SG&A, on the other side, we keep on reinforcing the group and its structure. The group is now more diverse in terms of geography, customer and product. But we contain this growth when we compare it to sales. And actually, then, as I said, are able to post a profit, operating income of EUR 118 million. On Slide 24, if we continue as well down to the net profit. At this level, we do enjoy an improvement of profitability. We had already discussed in H1 the gain on the disposal of the building, which is posted with EUR 1.8 million. We have net financial expenses well under control, better than last year because of the ex rate evolution. And we have a small loss in the discontinued operation, mostly linked with the depreciation of the South African rand. But as you know, the assets have now been sold, and we do not bear any material risks for the future anymore. Thanks to all these elements, the net profit exceeds EUR 100 million and it's up 22% versus last year. On Slide 25, a small look at the EBITDA and the EBITDA margin, which are the main profitability indicators that we share with you in terms of guidance. We reached 31% of EBITDA margin, up also 22% versus last year. We have the same headwinds that what we disclosed in the gross margin, except depreciation, of course, which is not included in EBITDA. This slide is also a good way to look back at the EBITDA, which is 5x as high as what it was 5 years ago, showing the journey in which the company is. On Slide 26 and following, I would like to share with you our look at the cash and the balance sheet. Another good achievement for the year is the strong improvement of operating cash flow. First of all, driven, of course, by the improved profitability, but also by a better management of the working cap. In spite of a very large Q4, our receivables are under control. Inventory is up a little bit. It's important to keep in mind, we have some structural reasons of that, in particular, the integration of in-house of the epitaxy steps. It's good for the bottom line down the road, but doing in-house, and we do that in Singapore what was done outside, mechanically increases the raw materials and WIP inventory. Looking at working cap, as a CFO, I can never be fully satisfied. But at the end of the day, taking into account the logistics condition in which we finished the year, we are happy with the performance and that enables us to end up with a cash from operation that also exceeds EUR 100 million and which is up 70% versus last year. If we continue as well, what we do have in the next slides is the waterfall of cash. You see that the EUR 100 million of cash coming from operations is almost at the same level as the cash that we are spending for investments. And here, we do represent all the CapEx that we have, whether we finance it through leasing or not. You see as well on the slide, the impact from the acquisition of EpiGaN that we did earlier in the year. We have also a positive contribution from the sale of our solar business. That's the EUR 16 million net proceeds that you see on this slide. And one small point, which is also to make sure that we had liquidity at high level, some growth drawing on the credit line, which is the net of what we have reimbursed of the new leasing that we have implemented and the drawing that we have done on regular credit line. So at the end of the day, EUR 191 million on -- of cash in end, at the end of the year, which ensures a good level of liquidity for the company. If we look now at Slide 17 -- 27, sorry, and the balance sheet, 28. As we have all -- 2 main elements here, a global balance sheet, which is growing as compared to last year as a normal impact of the growth of the business. Fixed assets going up because of the large CapEx that we keep on doing. Current assets and liabilities, driven by the business volumes, and in particular, the strong Q4. And an equity, which is going up as well and that I will comment in the next slide. In particular, what I want to share with you is actually a reinforcement of the structure of the balance sheet throughout the year. With equity up EUR 150 million; net debt, very stable, around EUR 50 million; and liquidity, which is at high level and also, which you cannot see directly on the balance sheet, further facilitated by the new RCF lines that we have in place and by the new long-term loan that we have secured from the Banque des Territoires and the Caisse des Dépôts Group. This liquidity will enable us to secure our future development plans. On this note, let me hand back the line to Paul, who will go through these plans.

Thank you, Sébastien. Now let me conclude our prepared remarks by sharing with you some forward-looking statements. If you can go please to Slide 31. So the outlook and guidance. So regarding our fiscal year '21 guidance, on the revenue side, we expect a flattish growth compared to fiscal year '20. On the EBITDA side, we expect our margin to be in the range of 30%. And to give a bit of color on fiscal year '21, RF-SOI content will continue to grow. But the business growth rate will be impacted by the overall smartphone decline. At the same time, some end markets, such as automotive or IoT consumer markets will also be impacted by the weak macro, which will impact our FD-SOI and Power-SOI products. Finally, we expect positive or very positive growth coming from POI, GaN, Photonics, Dolphin. Regarding fiscal year '21, please also remember our typical seasonality. H2 is usually much stronger than H1. Now if we look at the situation regarding fiscal year '22, we were expecting EUR 900 million in fiscal year '22, as discussed in our CMD last June. COVID-19 has created a weakness in the smartphone market and a weakness in the microenvironment impacting automotive and consumer IoT end markets. We now expect around EUR 800 million revenues, which means that we still anticipate a very strong organic growth between fiscal year '21 and fiscal year '22. In fiscal year '22, we expect a strong boost coming from 5G with -- which will impact many product lines, as discussed before, I'm talking about the RF-SOI, POI, FD-SOI and GaN. We also expect a recovery in automotive and consumer IoT mostly impacting FD-SOI and Power-SOI. We also expect ongoing adoptions of new products such as Photonics for data center. Finally, let me turn as a conclusion to Slide 32 to highlight our midterm outlook. So for the next few years, we expect a solid growth across our various products and end markets. The solid growth will be fueled by our SOI products portfolio and by the new products we are developing and ramping such as POI, GaN and silicon carbide. Our technology leadership in engineered substrates are the foundation of 3 major megatrends in semiconductor: 5G, AI and energy efficiency. There is also no doubt for us that Soitec is emerging as a stronger company through this pandemic. We are emerging stronger in our own organizations because we have an extraordinary workforce and amazing talents inside the company. We are emerging stronger in our competitive environment because our goal every day is to push our innovation and maintain our technology leadership. We are emerging stronger with our customers and thanks to the reliability and trust we demonstrated through this crisis. So this will conclude our preliminary remarks, and we can now turn to the Q&A sessions. Operator, please.

[Operator Instructions] The first question comes from the line of Emmanuel Matot from ODDO.

Emmanuel Matot speaking from ODDO. Do you hear me?

Yes.

I've got several questions for you, please. First, is that just COVID-19 which explain your warning on fiscal year 2022? Or are you also taking into account other impacts such as a delay in FD-SOI in China? And where are you in the process of finding a new friendly Chinese ecosystem for FD-SOI? Second question. Do you think your revalued down sales target for fiscal year 2022 may have a significant impact on your initial target of 31% EBITDA margin? And I've got also a question about your budget of CapEx for this year. What level would you expect to spend for CapEx in fiscal year 2021? And why there is no information about that in your press release yesterday evening? And maybe a question about your current production capacity in Singapore. Can you update us on what it is today and where you want to be at the end of this fiscal year in Singapore in terms of production capacity?

Okay. So a lot of good questions, Emmanuel. So let's make sure that we cover it all. Yes, your first point was regarding what is the impact of COVID-19 versus other possible impact? Clearly, the driver of this readjustment between fiscal year '21 and fiscal year '22 is driven by COVID-19. I mean, clearly, the overall readjustment of the market on 4G, 5G is clearly one of the major drivers. We were -- and we were, and I was personally also talking about automotive, very early on even before COVID-19 and the difficulty in this space. And clearly, COVID-19 has just pushed the limit a little bit further down in this part of the business. So clearly, the overall readjustment that we had to do was driven by these macroeconomic situations. And with some ripple impact, obviously, because there is some new product introductions that have been slightly pushed out. And we know that. I mean, part of the -- this crisis, a lot of the focus was on delivering the goods and delivering the goods that you had. And not understanding too much the future, it was clearly the right focus for our customers and customer's customers. So yes, the impact that we see is mainly driven by COVID-19. And I will say it's a good news, by the way. It's a good news because we know that depending on you to talk to, there is a V shape or a U shape. I mean, we have our own shape at Soitec, and that's the one we want to share with you. I mean the recovery is going to be very strong. And we target this recovery towards the end of our fiscal year, as you know. As you understand, H2 will be the beginning of this with an extraordinary growth in fiscal year '22. That's for sure. So you talked about also a fiscal year '22 EBITDA margin and what can we say. I mean, there is no comment, obviously, at this stage. But the 31% we mentioned last year should not be out of reach. That's for sure. Regarding the CapEx, the run rate that we have indicated in our presentation will be above EUR 100 million, and this is in this presentation. We are clearly looking at a growth rate here in terms of how do we continue to implement our capacity in France with POI and in Singapore. And that's very important and very critical. So maybe I can say that -- maybe there is some confusion also sometimes between cash outflow and engaged CapEx. So we are talking about here engaged CapEx that we will do during the course of this year, so more than EUR 100 million. And the Singapore capacity today is around 165,000 wafer per year. And it will -- it is going up, and it will continue to go up with clearly an accelerations towards the end of this fiscal year.

Okay. And maybe a word on FD-SOI in China. Where are you in the process of finding a new friendly ecosystem for FD-SOI in China?

Yes. This is an important question. As I said, we -- there is many discussions going on. And hopefully, by the end of the year, I mean, we will have clarity on that. And you can understand that with this -- under these current situations that we are going through, there is a better appetite to find solutions.

[Operator Instructions] The next question comes from the line of Jerome Ramel from Exane BNP Paribas.

Paul, could you help us to understand a little bit how you come with your 30% growth for 2022 -- fiscal year 2022? Is it based on backlog on already preliminary orders or the road map of your clients? How do you build up this to give us a little bit confidence on how strong this forecast is?

Yes. I mean, clearly, it's basically everything you said. We are working with customers and customers and the long-term -- are giving us long-term visibility. Because we are the -- basically the only one to be able to grow their business at the speed they want to grow this business, right? When I say there is no 5G without Soitec, I'm serious about it. I mean we have the large majority market share on this business, and we have this intimacy with our customers that they can confirm their trends in terms of volumes. And we materialize that with, obviously, contracts and purchase order and other financial agreements sometimes to secure the majority of what we have to put in place. So we understand also the 5G trend as a whole, and we are planning to make sure that we cannot fail in terms of sustaining and supporting the 5G growth -- and 5G, 4G growth, by the way, in this case. So we are extremely confident in the way we looked at the business. Now if you go back to -- you know the situations on COVID-19. Nobody knew, right? I mean this is clearly a situation where even if you have contract, this is a different type of crisis that you have to manage. But as soon as the sky get clear, we do see appetite. I mean China is moving extremely fast. Today's U.S., recovering. We see it already. And we have a lot of excitement around us to secure the growth coming. And just also to add to it. We have developed a lot of internal modeling capability since we talk to our -- all our customers since we understand the global market on 4G, 5G. We have had this top-down but also bottom-up analysis that we match pretty well. So we are fairly confident on what we say today.

And maybe as a follow-up, could you share with us a little bit your view on your new opportunities, namely EpiGaN, but also maybe an update on the silicon carbide opportunity?

Yes. EpiGaN is clearly -- the takeoff is expecting this year, and we are going through major qualifications. And you understand our ambition is first to penetrate base stations' power amplifiers. And we are, at this stage, very well engaged with several customers right now. Then we'll go into -- I mean, we have some unique opportunities with EpiGaN. We don't know it will -- if it will materialize today, but we are very well engaged also on smartphones. And clearly, we have a play on power automotive. So over the next 2 years, we believe that EpiGaN will be -- will start to be a great add to the growth of the company in these 3 opportunities that I just mentioned. On silicon carbide, I would say that if you read between the lines, what I said today, I said that we have a slight delay on our pilot line. Yes, we have because we -- through COVID-19, it was -- we have been extremely creative by continuing the development of the technology as a kind of virtual fab since we could not really travel anymore. We were traveling wafers and using our suppliers to work remotely to continue the development of this technology. Now as you can all understand, I mean, bringing tools and bringing the engineering capability coming from Japan, coming from U.S., coming from different places in France in Bernin was difficult. And we basically aggregated some delay into this. But the plan is still to be ready for the end of this calendar year and to have a full qualifications by the end of this calendar year. And clearly, we have not stopped, and we will be shipping first samples very soon to some critical and strategic customers.

The next question comes from the line of Frédéric Yoboué from Bryan Garnier.

So my first question is around FD-SOI. Could you please tell us, you said that the competitive environment was tough on FD-SOI. Is it affecting your pricing strategy? And what application will drive -- particularly drive the strong growth you expect in fiscal year 2022? And does it include any contribution from China? And I have a follow-up.

Yes. I mean there is -- if I want to simplify the way you should think of FD-SOI, you could think of there is 2 waves in front of us, okay? I told you about the first wave. Now there is 2 waves in front of us. The next wave is still on the digital world. And clearly, this is touching the -- this edge AI opportunity and all these IoT or like the voice recognitions, like the security cameras. And you have seen that Lattice Semiconductor announced at the end of last year that they were moving a full portfolio of products on FD-SOI to really for -- to bring the FPGA on the edge of the applications. So all the design wins that we are seeing right now are really getting into this wave of new applications. And this is what I call the second wave, which is a continuum of the first wave, but with more capable and more intelligent products, I would say, into this low-power, high-performance, in the range of 28-, 22- and 18-nanometer type of products because you understand that now Samsung is also going to offer 18-nanometer. And we are still talking about 12-nanometer in the future for FD-SOI. So is there a second wave? The answer is yes. And this is the wave that I'm talking about now. Now there is also a third wave. Okay? And the third wave is 5G. And this is going to be in calendar year '22, '23. And we are already engaged, okay? It's not something that is out of reach. We are already engaged in this with several -- not one, several customers. And this will be the platform where you can integrate your front-end modules for millimeter waves. So basically, in millimeter waves, you will have some company who will develop their architectures through RF-SOI. And you will have companies who are going to develop a new architecture, okay, fully integrated based on FD-SOI. And we, at Soitec, we are designing the substrate. And based on the architecture, we have this a la carte menu that we are going to offer us. That means for us that we continue to protect our leadership positions going into millimeter wave and 5G as a whole. And that's very, very important. So that's the reason we position this in the future. Regarding China, I do not expect my fiscal year '22 to be clearly boosted by China because it will be too early, but I do expect fiscal year '23 to be boosted by this.

And the second question I have would be on POI. You said you prepared to ramp to 400,000 to 500,000 wafer per year. And this compared to 400,000 initially. When do you think you reach this objective? And I mean, when do you think you'll be maybe running at full speed on this?

So first of all, thank you for these questions, and thank you for catching this point. That's a very important point. And it shows our -- also confidence. I mean, we told you last year that we were prepared to ramp the Bernin III factory to 400,000 wafers. I'm telling you today that we have the -- we have been creative and within the same world, we are going to expand this capacity to 500,000 wafer. We do expect to fill this capacity by fiscal year '24, '25. That's what we have today in our plan.

So the next question comes from the line of Ken Rumph from Jefferies.

A couple of things. One was to ask -- 3 things. One was regarding the impact of the bulk raw materials. I think you confirmed that, that was finished in the last financial year that we're reporting. Second one was regarding R&D and just should we expect a similar kind of growth rate in R&D? Or obviously, there was a step from the acquisition of EpiGaN and so on. So just trying to understand kind of how much that continues to increase over the next couple of years? And finally, you talked obviously about overall, a flat year in revenues in the current year, with the second half bias. I'm just wondering how much, therefore, of a decrease are we expecting at the beginning of the year? How severe is the impact in the current quarter, for instance, just to try and get some sense of kind of the slope through the year?

So regarding the bulk on your first questions, what we mentioned is -- what Sébastien mentioned to you is that we were, in fiscal year '20, still running under long-term contracts and agreements that we had on the bulk. And we secured fiscal year '20 with this contract at a time where bulk was extremely difficult in terms of the global market. So we were forced into this difficulty at the time. And we are now getting out of this contract. And the new contract are going to give us much better pricing than what we had in the past. And that was the message. It doesn't mean that it's -- and what we have done over the last several years, also, we have been able to engage and manage several -- with several strategic suppliers in bulk. And this is also helping us in the overall supply strategy that we have put in place. And benefit -- and we have the benefit today. So this will be good. So on the R&D remarks that you have seen that, yes, there is an increase on the R&D. And you have to realize, and I know that you realize that we are investing in more than SOI, okay? This is an important message. And this is a positive message because the engine of Soitec is really -- the gross engine of Soitec is our ability to design new materials. And this technology leadership that we bring to our end customers is because we have this ability and the capability in the platform that we are building to design and deliver quickly new materials. So we are investing in more than SOI, and this is also increasing our spending. And you should expect midterms at this range of 7%, 8% of sales. That's, I will say, the level of which we are planning to continue to run the company. On the last questions, yes, we wanted to mention the seasonality because it's part of what we are used to see, and we see it again this year. So we do not go into the details of the quarterly trends. But just to let you know that we are comfortable with what we see, and it's not abnormal, and it's the way we will run this year again. So the H2 versus H1 seasonality, I will say, take it as last year, right? I mean this is the range of what we see.

Okay. Can I just go back on to the question of the bulk material price point? You mentioned the 2 headwinds, one to -- one group to do with capacity increases. The second was the sort of bulk material price thing. I would take it that it was the former group. It's -- clearly, it's the new capacity at Singapore and buying from Simgui and so on as the bigger factor. Is that fair that the bulk materials was part of it, but probably the smaller part compared to the capacity-related points?

Basically, what we said last year is that the headwind was kind of -- I mean, if you look at fiscal year '19 to '20, we said that the -- on top of my head, but that was reality, we said that the headwinds on this was basically 1/3, 1/3, 1/3, where it was capacity, it was Simgui and it was the bulk, okay? So that's the range that you can put in that you have to think through.

And also just to highlight on that. I mean, obviously, the first 2 will last longer than the third one. That's also something that I think you have in mind.

We have one last question from the line of Robert Sanders from Deutsche Bank.

My first question was just on utilization. It looks like utilization will be coming down into the June quarter for the -- and probably the September quarter as well. So I'd just love to get an idea on the percentage, is it around 80% that you're thinking about, for example? Second question would be on Singapore. You've got to 165,000 per year. But when do you actually expect to get to a kind of efficient scale? And I'm sort of defining efficient scale as when your fully loaded cost of Singapore is lower than Bernin II. It might be the case already, but just to ask that. And the last question is just on Slide 10. You outlined your smartphone growth assumptions. But I was just wondering if you could actually just tell us what the percentage growth is you're expecting for '21. It looks like roughly 10%, but just -- love to just confirm what percentage growth you're looking for, for calendar year '21.

Yes. Thanks. And yes, I want to go back maybe to the first question, which is the utilization rate. I mean, we do not really comment, but you can obviously derive revenue estimates with our comments on seasonality. So what we are doing very clearly is the overall efficiency of Bernin and Singapore are managed on the monthly basis. So we have flexibility in our workforce. We have also capability to be very agile in the way we move things around in France and in Singapore and in Simgui, okay, because Simgui is very included into that. So we maximize basically our overall efficiency through this internal process that we have. That is to say that the good news is that as we ramp, for example, our Bernin III fabs, we have -- we can benefit immediately from more resources capability. And so there is clearly an overall efficiency that you can understand here. Regarding the Singapore situations, the full capacity target is 1 million. It is clear that when we get into the range between the 500,000 wafer to the 1 million wafer and the overall performance of Singapore will end up -- will be better than what we can achieve in France. And we start also to believe that starting fiscal year '22, the -- during the ramp of Singapore in fiscal year '21, second part of the year, we will start to see some improvement, significant improvement in the overall performance of the factory because we do not run only SOI in Singapore. We do run at least 4 technologies. We run the refresh, and we are running full, and we are maintaining full our refreshed capacity in Singapore. We have now insourced the epitaxy, and we are running full and continue to grow capacity there but running full in Singapore. And we have FD-SOI and RF-SOI. And you remember, as I said, I mean, we have the flexibility and the tool set here. The difference is a few tool set differences. And so we do also here manage very well the current capacity, but also the growing capacity that we will implement in the second part of the year. So the calendar year '21 on smartphones and the assumptions that we are taking for this is basically in the range of plus 10% growth. That's what we have in -- today in our -- that's what we are using. But don't forget about the growing content in 4G and even more in 5G. So this percentage of growth is clearly an opportunity for us to create a very, very strong growth in next year.

We have no further questions. I'll hand back over to the host of the call for any concluding remarks.

Thank you very much, everyone, for attending this call, and we will see you -- speak to you next month for our Q1 fiscal year '21 sales results. Thank you, and have a good day and stay safe.

Thank you. Thank you all. See you soon.

Thank you for joining today's call. You may now disconnect your handsets.