Soitec SA (SOI) Earnings Call Transcript & Summary

Hello, every one. I am Steve Babureck, VP of Corporate Development and Investor Relations. Welcome to all of you, and thank you very much for attending Soitec 2021 Capital Markets Day. As we are gearing up for extended ambitions, we are very excited to disclose today our FY '21 results and our strategic and business outlook for the next 5 years. In the next 3 hours, we will have 2 main sessions. In the first session, we will be discussing about our vision for sustainable growth, our strategy, our business units and our innovation. We will close this first session with Q&A. After a short break, we will be back for the second session to discuss operations, our FY '21 results, our FY '22 guidance and our midterm financial model. This session will also end with another Q&A. On top of the speakers from our management team, we are also thrilled to welcome CEOs from several strategic customers. I would also like to remind you that the information presented today contains forward-looking statements with regards to Soitec's financial condition, results of operation, business strategy and plans. Actual results may differ materially from the forward-looking statements as a result of a number of risks and uncertainties. Risks described in the documents Soitec has filed with the AMF and our universal registration document. Now before kicking off and give the floor to our CEO, Paul Boudre, let's watch a short video about Soitec. [Presentation]

Thank you, Steve, and welcome, everyone, to Soitec Capital Markets Day. I hope you are all safe, and we are delighted to spend the next few hours together. Our last CMD was in June 2019. And well, a lot has happened since then and in the world in our semiconductor industry, and of course, at Soitec. Today, we are excited to share with you our refreshed outlook for the next 5 years and Soitec is gearing up to deliver extended ambitions. Let me begin with 3 important messages. First message, our strategic visions. In the next 5 years, our addressable markets will keep growing at a very rapid pace. We continue our amazing journey, supporting by very strong semiconductor megatrends. Second message, our business and operating models. They are getting even stronger to deliver profitable growth, which means that by fiscal year '26, we anticipate to triple our revenues to around USD 2 billion and to increase our EBITDA margin to 35%. Third message ESG and sustainability. They are the heart of our value creations and are completely integrated in our corporate strategy. This is a long term engagement. This is expected from our entire ecosystem and stakeholders. Now let's go back to our strategic visions, which is deeply attached in the world we live in. Our semiconductor industry has transformed our lives for the last 30 years, and it will continue to shape the multiple technology disruptions that we will need in the next decades. These disruptions will require more and more semiconductor devices. And our industry could double over the current decades to reach around USD 1 trillion by 2030. We have discussed multiple times about this semiconductor megatrends, which materially feed each other. 5G technologies drastically enhance mobile connectivity, but 5G is also mandatory to enhance autonomous driving, edge computing, remote health care, Industry 0.40 (sic) [ 4.0 ] et cetera. So we will come back on these megatrends and how they impact Soitec in several presentations today. Soitec will play a critical role to enable the semiconductor megatrends for 2 main reasons. Reason #1, we are unique in the world of semiconductor materials. We are unique because we combine our design capabilities with strong customer intimacy such as foundries and fabless. The combination allows us to understand the technological road map of our clients and to rapidly expand our engineered substrates product portfolio. Reason number two, we have built a unique collaborations network in the semiconductor value chain where cross collaboration is key to deliver innovations at the right cost and optimize time to market. Soitec needs and nurtures all these collaborations to design and manufacture in high-volume engineered substrate to make the world more connected, more energy efficience, and more intelligence. So starting with 3G and 4G, we have established standard products for front-end modules in every smartphones. We have pursued the same ambition for 5G front-end modules, connected cars, mobile base stations, et cetera. Our products also make the world more energy efficient. This is, in fact, very important, if you think about our SOI products, which, by design, are products that enable a significant reductions in energy consumptions compared to traditional silicon substrates. So for almost 2 decades, we have developed products for the automotive industry, the Internet of Things, and we will continue to expand to bring silicon carbide into electrical vehicles. So beyond substrate, we also have dolphin designs to accelerate our customers' system on chips energy efficiency designs. And finally, our products make the world more intelligent, and at multiple levels, very close to us, when you think about facial recognitions in the smartphones, in the cloud with silicon photonics for optical data centers and for a variety of smart sensors to enable safer, more secure intelligent networks like in edge computing. As a result of these strong semiconductor megatrends, and our capability to design the right products for the right applications, we're able to bring more value and bring higher differentiation at the system level. Our addressable market is expected to reach around 7 million wafers by FY '26, which is about 2.5x larger than the size of this addressable market in FY '21. You will note that as of today, we will start communicating and give you more granularity on our 3 strategic end markets: mobile communications, automotive and industrial, and smart devices. So strong megatrends, fast-growing addressable markets. What does that mean for Soitec? In the next 5 years, our revenues are expected to reach USD 2 billion, which is 3x the level of what we have just delivered in FY '21, which means that, for the next 5 years, our revenues are expected to grow faster than our end markets. In order to deliver our revenue growth, we are planning to grow steadily our global production capacity across all product lines. And we expect to reach beyond 4 million wafers per year by FY '26. This is more than double the capacity we had installed in FY '21. Overall, we plan to spend EUR 1.1 billion of CapEx between FY '22 and FY '26. Our operating model is set to deliver higher value creations, and 1 KPI to measure it is our EBITDA margin. This was established at nearly 31% in FY '21. In FY '22, we expect our revenue to grow more than 40% organically to USD 950 million, and our EBITDA margin to increase to 32%. In 5 years, by FY '26 in our financial model, we expect our revenues to reach USD 2 billion, and our EBITDA margin to further increase to 35%. Now let's talk for a moment about sustainability and let me be very clear on that. Sustainability is not something new or fashionable at Soitec. Sustainability and ESG are part of our corporate strategic initiatives. Sustainability supports our business and value creations because our clients wants to be more sustainable, and we provide solutions to help them meet their objectives. Let me share with you some examples. On energy efficiency, we have constantly improved our products, and we'll pursue to do so as it is an absolute requirements of our clients for continued innovation. [Audio Gap] substrate used in their applications, have been able to save the annual carbon emissions equivalent to a city of 1 million people. Since its creation, Soitec has been very engaged with our local stakeholders, which allows us to partner with the best universities and research institutions. We attract, develop and retain talented women and men on gender equality. We have a favorable grade of 94%. I'm convinced that the diversity of our workforce is essential to build a great company. To go back to the fiscal year we just landed, I must say that I have been really impressed with Soitec people all over the world. I'm also really proud to have a strong management team to deploy and execute Soitec strategy. You might already know some of them, and you will soon discover the new high-profile members that recently joined us as you can see on the slide. So before moving to Thomas, I would also like to thank all of our customers that contribute to our growth and common success. Today is a special day. So some friends and partners gave us the honor to share a few words with you. The first on the list is Jean-Marc Chery, the CEO of STMicroelectronics. Jean-Marc and I have known each other and worked together for decades, and it's an immense pleasure for me to have his testimonial today. Jean-Marc, the floor is yours.

Hello, everyone. Thank you, Paul. At ST, our strategy is driven by 3 long-term enabling trends for the electronic industry. The 3 trends are smart mobility, power and energy and IoT and 5G. While they were already strongly influencing our industry before, they have further accelerated during the last quarters, and are driving demand for the associated semiconductor products. First, smart mobility. So for ST, this is about helping car manufacturers make driving safer, greener and more connected for everyone. It is also about creating the supporting infrastructure such as fast charging stations for electrical cars. We have seen this trend has strengthened recently with an even stronger push towards car electrification and digitalization. Second, power and energy management. Key here is to enable the many different industries to increase energy efficiency everywhere and the use of renewable energy sources. This is a main focus area for ST, and we have made a number of strategic investments in this area. The third enabler is the Internet of Things and 5G. Here, we want to support the proliferation of smart connected IoT devices. We provide the necessary building blocks and the associated development ecosystems to device creators with a strong focus on embedded processing solutions. We also provide sensors, stand-alone connectivity and security solutions and the analog and power management products needed for a complete system. These enablers are at the heart of our end-market, market focus, covering automotive, industrial, personal electronics and communication equipment and computer peripherals. Here, we see a very good fit with Soitec with our focus on automotive, industrial and smart devices. An important part of our innovation comes through the differentiated propriety technologies for which material are often an important enabler, especially SOI. The wafer substrates we use are the starting point of the creation of our products in our fabs. Many of our highly differentiated technologies are based on materials that have specific properties, allowing us to design leading edge solutions for target applications. A few examples where we successfully work with Soitec include partially depleted SOI with high resistive substrate, which is used for demanding radio frequency applications to build switches, LNAs and amplifiers. Partially depleted SOI for radiation-hardened space applications. Fully depleted SOI called FD-SOI for low power digital CMOS applications, such as our newest family of automotive microcontrollers designed to meet the needs of the evolving car architecture and ADAS vision processing systems from our partner, Intel Mobileye. Few companies are capable of delivering this kind of materials. So we value our long-standing partnership with Soitec, and we look forward to additional opportunities to work together.

Thank you, Jean-Marc. Hello. My name is Thomas Piliszczuk. I'm Head of the strategic office. Paul already gave you some perspective on markets and the megatrends that are crucial to our business. I would like to dive deeper into those trends, but also outline the strategy that Soitec is putting in place in order to leverage them and ensure our company's long-term growth. There are 3 key points that I want to address and share with you today. First, the semiconductor industry is driven by few fundamental mega trends, which are changing the world and society. These trends will help to double the size of semiconductor market in the decade. Second, there's an urgent need for new semiconductor solutions to meet the challenging requirements of numerous mass markets. The engineering substrates are providing a unique value proposition. The third is about Soitec strategy to establish industry standards in engineered substrates. We are at a crucial junction today. On the one hand, our ability to leverage our technologies, fuel growth and support societal progress to create a convenient life on earth is at its tipping point. On the other hand, we are facing unprecedented challenges regarding climate change, environmental protection, energy efficiency, health and social security. This challenges demand a total transformation of our world. We must do more by consuming less, live better and longer by sharing resources and increased output while reducing waste. It seems like squaring circles. Our opposing demands are driving 4 new economies to cope with these challenges and allow future generations to exist. Digital, longevity, net-zero and sharing. These 4 economies, which are transforming the world now are setting unprecedented requirements and challenges for more connectivity, more intelligence, more energy efficiency. The number of connected devices will multiply by 5 in next 10 years. And the amount of the generated data will grow even faster, 5x by 2025. The ICT, information and communication technology industry will consume 20% of the world's electricity in 5 years from now, twice as much as today. Again, it seems like squaring a circle. We definitely need major technology disruption to transform these challenges into real growth opportunities. Behind the need for connectivity, intelligence and energy efficiency, there are 3 megatrends which are driving the semiconductor industry. 5G, with the ongoing deployment of the new smartphone generation, we will exceed the 1.6 billion mark of new 5G devices per year by 2030. 5G will become a global communication platform, far beyond just smartphones, connecting everything,and everywhere at nearly any speed. Intelligent objects are entering all domain of our lives from health care to security to industries and agriculture. Artificial intelligence on the edge will be, by far, the fastest-growing market and application in the coming years. Finally, the automotive market is facing the biggest transformation since car brands build the first car in 1886. Connected, autonomous, sharing, electric vehicles will become a new common transportation platform with over 45 million EVs rolling off the production lines each year by 2030. Let's look deeper into these 3 mega trends. After having served on the 4G wave for the last 10 years, we are now mounting and accelerating on a much more powerful wave, 5G. 5G offers 100x the network capacity, 10x the speed and 10x less response time with 10x less energy per data. These are just a few key vectors showing the quantum leap brought by 5G. And the reality is, 5G is clearly on its way to deliver on these promises. But 5G is not more of the same. 5G will not only dramatically improve our smartphones performance, but it will also scale up in new key markets and enable new types of devices and applications. Just think about Industry 4.0, connected cars, wearable devices, health care and augmented reality. And the next-generation is already on the horizon and in the making. 6G will be the next step, another 10x step, another order of magnitude. 5G is a massive step change compared to the 4G standard. 20x more mobile data traffic will flow into double the bandwidth, managed with 2x higher frequencies and 4x frequency combinations. This is extraordinary complexity leads to 2x of the RF semiconductor content and requires continuous technology improvements and even disruptions like for our filters. But the main disruption is with introduction of millimeter wave, requiring multiple active antennas in package modules. We estimate that by 2030, the front-end module semiconductor market will grow by 3.5x. In the past few years, artificial intelligence has been implemented mostly through cloud technologies. Executing AI in the cloud has considerable weaknesses and limitations. The key factors are energy efficiency and saving, low latency with real-time computing and action, data security and applications such as autonomous driving and data privacy. For these reasons, AI is now happening at the edge, on the device. By 2030, almost as much of the processing will happen on the edge device as it's in the cloud. With this trend, edge devices applications with integrated machine learning capabilities will grow from 15 million shipments in 2020 to 2.5 billion in 2030. This trend towards ever smarter edge computing devices will require more semiconductor content to support the multitude of functions and ever better user experience. For example, 3D image sensing is stopping 2D and allowing IoT devices to recognize objects, shapes, positions, motions. With this depth of information and computing, new human machine interaction like gesture recognition and immersive experiences with virtual and augmented reality will be introduced. Finally, by supporting a wide range of connectivity, including 5G, our devices will be more connected at ever higher data rate. Today, the acronym CASE connected, autonomous, shared, electric is widely used to address the once-in-a-century automotive revolution. These trends will shape the future of mobility focusing on passenger safety, comfort and convenience, and at the same time, reducing global carbon footprint. The electrification of cars is one of the most promising trends enabling major technology and supply chain disruption. By 2030, every second car sold will be an electrical vehicle. However, there are still tremendous challenges to be overcome to drive EV adoption. Major automotive OEMs are, therefore, investing heavily in new powertrain platform with silicon carbide. This technology together with battery systems is solving several issues at the same time, enlarging the driving range, shortening the charging time and diminishing the cost. With the implementation of stringent vehicle emission standards, they plan to reduce CO2 emission by 55% in the EU by 2030. Plug-in electric or battery electric cars will be the only ones able to meet these new requirements. With that, a fully autonomous electrical vehicle will need over 10 times the semiconductor content versus a conventional gasoline car today. Automotive innovations no longer rise from the mechanical level but now comes through electronic systems. The growth of level 2 and above autonomous vehicle will lead to proliferation of ADAS related semiconductor content. A fully autonomous vehicle will have more than 7x higher semiconductor content compared to typical car today. Driven by these megatrends, the overall semiconductor market is expected to reach more than $1 trillion in revenues in 2030, more than double its level in 2020. Soitec is well positioned to benefit from the trends representing 2/3 of the total semiconductor market. The momentum is strong. All these markets are expected to enjoy double-digit growth in the current decade. For almost 40 years, the semiconductor industry has been driven by one simple rule. Moore's Law, predicting that the density of transistors directly linked to pure digital performance will double every 2 years. Today, in the era where the growth of the industry moved from supercomputers to mobile devices and connectivity, the equation to be met by semiconductor solutions is way more complex and challenging. There is a combination of factors, which must be met simultaneously. It starts with PPAC, power, performance, chip area and cost. It must take into account time to market. And finally, the new factor, which is becoming essential moving forward is sustainability, considering the chip's carbon footprint impact at system level. While the traditional Moore's low scaling slows down, new solutions and contributors are required. We need new architectures, new structures, new materials, new ways to shrink and package. More than ever, engineered substrates can bring decisive solutions to successfully meet the new equation for mass markets and applications. You'll hear more later about Soitec product portfolio and value proposition. For the time being, I would like to just give a quick example on how Soitec-engineered substrates fit the equation of PPAC, time-to-market and sustainability. RF-SOI, FD-SOI and Photonic-SOI have been making great inroads and business impact. But SOI and energy efficiency are linked. Energy saving is the essence of Soitec value proposition. When we consider all electronic chips built in 2020 on this 3 Soitec substrates, the reduction of CO2 emission at system-level during the lifetime of products, thanks to Soitec wafers compared to alternative solutions is equivalent to carbon footprint of 1 million inhabitant city. I described earlier how Soitec is establishing industry standards. Let me spend next few minutes showing how this objective is key to our strategy and put it into perspective. When you look into engineered substrates, they are basically a combination of thin layers of different materials. Nature gave us a tablet of materials with nuances of properties that can be directly related to system figure of merit. Whatever type of signal to be handled by chip electrical, acoustic, photonic, there's always a combination of materials forming an engineered substrates, which can provide a perfect solution to create unique value at system-level related to connectivity, computing, sensing or power electronics. Soitec has technology and the know how to deploy an almost unlimited pallet of materials to enable specific performance required at system level. That's why Soitec is engaged not only with its direct customers, foundries and IDMs, but also with end customers, system makers by bridging the ecosystem and understanding their ultimate requirements and challenges, we developed a combination of materials, which have a critical impact on their success and adoption at mass markets. I will end my presentation by summarizing Soitec's strategy. A simple way to visualize it is the Soitec flywheel. It all starts with an understanding of customers and market needs decoding disruption linked to megatrends. This analysis feed our annual strategic plan, which is focused on 4 fundamentals: how to protect and expand our core business, how to expand to attractive adjacent markets and applications, how to evolve our operating model and how to reinforce global position. The outcome of our strategic plan is setting a course and priorities for the company at a 5-year horizon and supporting 3 key elements of the wheel, innovation, bringing new material solutions to feed the system requirements, product development with unique engagements with customers, both direct and end customers and manufacturing with the power of performance and flexibility. All this will expand profitable growth and accelerate the Soitec flywheel to turn fast and propel us to the following cycles. To conclude, 3 key mega trends are the base of growth of the semiconductor industry and Soitec in the current decade. Engineered substrates play unique role, providing solutions and meeting system requirements. Soitec's strategy is to set up sustainable standards, strongly engaged with customers across the entire value chain. Finally, it is my pleasure to introduce now to the stage Bernard Aspar who will give you the full perspective on Soitec products and business. Thank you very much for your attention.

Thank you, Thomas. Hello, everyone. And thank you very much for being with us today. I am Bernard Aspar, Chief Operating Officer at Soitec, and I am very pleased to present the main driver of our 5-year business plan. I will show you how we position our company as leader in some strategic markets and how we are penetrating some new markets. To achieve this it is critical to be very close to our customer. After the message from Jean-Marc Chery, we will have 3 testimonial from key customers. As Paul and Thomas mentioned, we have identified 3 strategic markets. For this market, everything starts by understanding the challenges that our industry is facing and the solution that our customers need to deliver. We have developed a real customer intimacy with all our direct customers, foundries, integrated device manufacturers and even fabless customers. Thanks to this intimacy, we are designing, developing, manufacturing, differentiated products, which are enabling new feature for this market today and tomorrow. Thanks to a strong and expanding product portfolio, we are confident that we will be able to deliver solid profitable growth in the next 5 years. With our wafer shipment expected to be multiplied by a factor of 2.5, we will triple our revenue to reach around $2 billion by FY '26. Let's talk a few seconds on these 2 numbers, 2.5x in volume and 3x in revenue. This trend demonstrated the value that we are creating for Soitec and for our customers. From today, we want to give you more color and more visibility on how we build a product portfolio for each strategic end market by focusing on the strategic market and by understanding their drivers. For mobile communication, 4G, 5G application and whole new connectivity protocols are driving us to design different products such as RF-SOI, FD-SOI, piezo-on-insulator and gallium nitride. For automotive and industrial markets, autonomous car, infotainment and vehicle electrification will take advantage of our current SOI product, but also of our new products under development such as Smart Cut, silicon carbide and gallium nitride. For smart devices, they need a balance between performance and power consumption so we have designed different flavor of SOI from FD-SOI to Photonic-SOI and Imager-SOI. Taking into account the value of our product and our capacity to penetrate this market, we have identified a 7-million-wafer opportunity in FY '26. This number is 2.5x larger than our market in FY '21. This represents a significant opportunity ahead. Mobile communications will remain our largest market. Automotive and smart devices are becoming significant. To estimate this addressable market, we use the content opportunity for our products that I will explain later on, and the penetration of our product on each market. When you think about addressable market, what does that mean in terms of wafer diameter. As you can see on this slide, 200, 300-millimeter demand will continue to grow significantly much FY '26. 150-millimeter will become more strategic, with the demand coming mainly from mobile with POI and GaN, and the demand coming from automotive with Smart Cut, silicon carbide and GaN. In the next 5 years and beyond, a part of this new product in 150-millimeter will move to 200-millimeter as our technology is enabling wafer size scalability and faster 200-millimeter market penetration. This is the case for POI, Smart Cut silicon carbide and GaN. Let's turn to our first market regarding mobile communications. Here, we are proposing a comprehensive product portfolio based on 4 main product family. First, we have our RF-SOI family, which is a standard for RF front end modules. Second, we have the FD-SOI family. FD-SOI provide a platform to integrate different functions on the same die. Third, we have the POI family. We have designed a new product called POI for piezoelectric-on-insulator wafer, thanks to our customer intimacy. This product is showing a very good adoption, thanks to the value proposition that it brings to filter makers. Fourth, our GaN product family is suitable for high-performance power amplifier. When you open a 4G, 5G smartphone, you can see that several parts are dedicated to cellular communication and connectivity. The so-called front-end module is based on 3 main block: 5G Sub-6GHZ, 5G millimeter wave and Wi-Fi connectivity, containing several products such as switch, antenna tuner, filters and different amplifier. Over the last decade, at Soitec, we have designed a comprehensive product portfolio by understanding the challenge of the front-end module makers resulting from 4G and 5G requirements. You can see on this slide that our comprehensive product portfolio covers the majority of the need whatever the architecture that is chosen by the front-end module maker. This is a strong statement, confirming our leadership in engineered substrate for 5G. I will not go into detail, but the value of each product is described in the package. However, we can highlight that RF-SOI is the industry standard today for 4G. And it will remain the standard for 5G. This leadership is supported by our product road map to cover the full range of applications from high-end to low-end products. POI wafers have been designed to allow superior thermal stability, larger bandwidth and to integrate multiplexer. EpiGaN structure offer strong power amplifier efficiency and power density. FD-SOI offer an energy-efficient analog mix signal solution and system-on-chip approach. By understanding the value of our products for each device, and by knowing the size of this device, we have been able to evaluate the content opportunity of our product for this market. The content is the aggregate die size of all RF chips using our products. Today, the total opportunity is in the range of 60 square millimeter per smartphone, and this opportunity is expected to more than triple in the next 5 years to over 200 square millimeter. For 5G, Sub-6GHZ, RF-SOI will remain a standard. POI wafers for filter presenters, very significant opportunity for 5G high-performance band and more precisely mid-high band. We are also expecting that POI to become a standard for this 5G high-performance band. For 5G millimeter wave, 2 solutions are available, either the architecture will be based on RF-SOI for RF front end and by the way, GaN could be used for power amplifier or the architecture will be based on FD-SOI to add more integration such as power amplifier and part of the transceiver. In addition, WiFi 6 and ultra-wideband will also present additional opportunities. In conclusion, the cumulative opportunity in 5 years is larger than 200 square millimeter. In the world of mobile communications, Soitec and GlobalFoundries have a long history of collaboration. So it is a real pleasure for me to introduce Tom Caulfield, CEO of GlobalFoundries. Tom?

Hello, I'm Tom Caulfield, the CEO of Globalfoundries Foundries. I'd like to start by thanking Paul and the Soitec executive team for inviting me here to your investor conference. GF and Soitec have a deep and strategic partnership that's immensely important to the semiconductor industry and then by extension the world economy. About 15 years ago, our semiconductor industry began this transition from a compute-centric focus to our pervasive deployment of semiconductor technologies, bringing new features to a host of applications. And it all started with the smartphone and the connectivity it created. And this connectivity gave rise to the Internet of things that is now evolving to not only all things connected, but connected with intelligence. Now GF provides unique and critical solutions to this pervasive deployment of feature-rich solutions to all things connected. In fact, this segment represents 70% of the semi foundry TAM, which, today, is about $50 billion and growing strong. Now at the heart of this feature-rich pervasive semi-market is connectivity, especially, and maybe more accurately, specifically, in the mobility segment. And the solution of choice in all the front end modules for handsets is GF, and that solution is built on Soitec technology. And this ranges from all the frequency bands, but most important, to the new and emerging 5G Sub-6 gigahertz and the millimeter wave applications. GF has 90-plus percent participation in this use case. And not only that, we're designed into the #1 bluetooth provider, the #1 network WiFi provider and #1 millimeter wave provider. And again, all of GF's unique, differentiated sole-source solutions, leverage the various types of silicon on insulator technology from Soitec. And together, our companies will play an important role as the semiindustry grows from about $0.5 trillion today to well over $1 trillion over the next 8 to 10 years. So here's to our partnership, Paul, and to the next 10 years as we enable this industry that changes the world. Have a great conference.

Thank you very much, Tom, for this very supportive message. For the automotive market, the demand for semiconductor devices is strongly increasing. And we are enlarging our product offer in order to cover a broader range of application. For autonomous driving, infotainment and vehicle electrification, our historical Power-SOI product is used for power management in IC and vehicle -- in vehicle networking. FD-SOI suitable for microcontrollers, radar and autonomous driving system. We are also designing 2 new products: gallium nitride on silicon and our new Smart Cut silicon carbide to enable automotive electrification efficiency. We are expanding our product portfolio around these all 3 segments. First segment, infotainment. We are proposing several products. Power-SOI is used today in more and more applications, such as Class D amplifier in vehicle networking. This product combines the advantage to integrate low- and mid-voltage IC with high reliability. For multimedia application, FD-SOI is used for low power application processor with strong reliability. Second segment, autonomous driving. Our FD-SOI solution allow integrate rather on the chip and flexible computing performance while improving system reliability and software. For the last segment, regarding power train, Power-SOI are addressing several applications such as gate driver, battery management system, power management IC. However, the challenges in electrification require us to develop a new solution for silicon carbide using our technology. Christophe, our CTO, will present in detail later this development, and you will see that our solution will improve device yield, improve performance and will allow larger dies. While the silicon carbide ecosystem is dominated today by 150-diameters, Soitec solution will accelerate the transition to 200-millimeter in the coming years. Since we present to you this new technology 2 years ago, we have made a lot of progress on the technology side, on the product development and road map, and we are working on business milestone with customers. So taking into account all these inputs, we have evaluated the opportunity in square millimeter corresponding to the die size of the chips, where our products are bringing value and differentiation. The outlook, over the next 5 year, is highlighting that this opportunity will grow significantly, mainly thanks to our new product, such as Smart Cut silicon carbide and gallium nitride on silicon suitable for vehicle electrification. And also, thanks to Power-SOI and FD-SOI, this opportunity will reach around 2,500 square millimeter, which is a huge increase comparing to our opportunity today. As a reminder, the size of the addressable market is linked to the opportunity of the die size and estimation of the penetration rate of our product. Who else than NXP to talk about automotive engineering substrate. NXP is one of our oldest strategic customer, and it is a great honor to have Kurt Sievers, CEO of NXP. Let's welcome Kurt's message.

Thank you to Paul and the team for inviting me to speak with you all today. With our long-standing history between Soitec and NXP, it is truly my pleasure. NXP enables secure connections for a smarter world, advancing solutions that make our lives easier, better and safer. We also have strong and leading market share positions within our 4 major end markets: automotive, industrial and IOT, mobile and communication infrastructure. NXP's relationship with Soitec started in the mid-'90s when and then still Philips Semiconductors, when we designed devices on thick SOI technology for high-voltage applications, which was very unique at that time. Now fast forward to today, SOI is used in several of NXP's key products. And as you know, Power-SOI is used for high-voltage applications. And with the growing demand in battery management for electric vehicles, in-vehicle networking and secure car access, NXP does expect to see significant growth in demand for Power-SOI in the coming years. At the same time, fully depleted SOI is used in NXP's edge processing and automotive processing business lines, where we have partnered with Samsung and Soitec on 28-nanometer FD-SOI to create NXP's i.MX family of applications processes. Looking into the future, a key part of our strategy is to drive the 5G transition of communication infrastructure by building upon our LDMOS leadership position, and with the recent opening of our new gallium nitride factory in Arizona. Now gallium nitride on silicon carbide is used by NXP to enable the 5G transition. With Soitec's acquisition of EpiGan, I believe Soitec is well positioned to capitalize on the growth within this emerging market segment. In closing, Soitec is NXP's largest SOI substrate supplier and a true partner to us. Thank you, and I wish you continued success. And hopefully, we can all be together in person very soon. Thank you.

Thank you very much, Kurt, for your message. Let's move now on the smart device market, where, by the way, NXP is also a strong player. Smart devices are used in many different applications, and, in many case, our products are enabling this application. Artificial intelligence at the edge with our FD-SOI product, 3D sensing with image sensor-based on Imager-SOI for improved performance in near infrared, health care monitoring for wearables with new technology-based on silicon photonics. High-speed data center with silicon photonics, where our product is a standard today and where we propose different flavor supporting the silicon photonic road map. For smart device, I would like to focus on FD-SOI. When you think about wearables, one of the critical feature is about power consumption for device, which are always on and ready to capture and compute the data. FD-SOI is providing a real platform, allowing system-on-chip combining performance and lower active consumption. The development of ultralow power IP design capability offered by Dolphin design allow performance on demand. Furthermore, FD-SOI platform can integrate other function such as communication. So with all this figure, you understand all the potential of this technology for wearables, IoT and edge computing, which represents the largest opportunity for FD-SOI. We have the pleasure to share testimony from Shimizu San, CEO of Semiconductor, which was a pioneer in adopting SOI for consumer electronic. Shimizu San?

I'm Shimizu from Sony Semiconductor solutions. Thank you for this opportunity to talk at your important event. Our group's mission is to spark imaginations in the society through the power of technology. We are involved in various semiconductor devices, including the world #1 CMOS image sensor. Soitec is popular in the high frequency switch business. Since we started this business in 2012, we have collaborated together on various challenges such as RF improvement required for high-frequency switches, improvement of the quality, including yields and cost reduction. Also, we have continued to receive support in terms of the stable supply of high resistivity silicon substrates. In response to expanding wireless device market, mainly for mobile, we are planning to expand our business. Therefore, we are -- it is very important to continue our collaboration with Soitec, including new devices. The high-frequency switch business is an important business for our mission to contribute to society through technology. For that, we appreciate your continued support and cooperation. Thank you very much.

Thank you very much, Shimizu San, for your testimony. I believe that now you understand better how we build our business case and some of the key assumptions, which are behind it. Let's move on the financial model and the outlook for our expected revenue in FY '26, 5 years from now. First, comparing to our FY '21 revenue, we are planning to be in the range of $2 billion. This is 3x our revenue of FY '21, meaning CAGR of roughly 25% per year over the next 5 years. This growth is based on a wafer volume increase of 2.5x. I would like again to highlight here our focus to increase our margin and profitability with more added value product, providing differentiation to our customer. Léa will present later today more details of our financial model. This expected revenue of $2 billion will come for our 3 key strategic market, where our main business will remain mobile communications. This business is solid and growing strongly. Thanks to a broader product offering, we are targeting to increase our revenue coming from automotive and industrial to 20% for our FY '26 expected revenue. And smart device will grow in line with the rest of the business. Our strategy to focus on these 3 markets leading to a more balanced business exposure with different cycle in terms of product lifetime, growth driver and customer exposure. Taking into account the upside and downside, we are anticipating for fiscal year '26 a low case and a high case. If the 5G adoption is lower-than-expected, and if the penetration of our new product, such as POI, Smart Cut silicon carbide is lower-than-expected, then we can have a low case around $1.7 billion of revenue. On the contrary, if the 5G adoption is higher than expected, a strong adoption of our new product and a faster penetration of FD-SOI in China, we can reach a high case scenario with an expected revenue of $2.4 billion. In conclusion, you see by focusing on 3 strategic markets, and with a strong customer intimacy, we have designed new products, and we are expanding our portfolio of differentiated product. We are now expecting a profitable growth of $2 billion in FY '26. So we are planning a significant growth. And you will hear from both Cyril and Christophe that we will be ready for that. Thank you very much for your attention.

Thank you, Bernard. [Foreign Language] Hello, everyone. I am Christophe Maleville, and I am Chief Technology Officer of Soitec. It's my pleasure today to provide you with some insights of our approach to innovation and to spotlight results of that innovation. Before going into detail, let me highlight a few key points. Today, engineered substrates incorporate best-in-class materials to sustain semiconductor innovation and leverage material science to trigger performance, power and cost optimization. This is made possible, thanks to our technologies, technologies that we continuously improve and involved with more and more materials. A compelling example of this evolution is Smart Cut silicon carbide. Finally, agility and speed are driving our innovation and influencing the unique collaboration models we are implementing. 5G, artificial intelligence, battery life, all are evidence of the impact of semiconductors on our daily lives. And 6G, quantum computing, virtualization, health care will all contribute to further expanding the place of our semiconductors in our future. Our technologies and engineered substrates are bridging material science with applications, allowing electrons, photons, electromagnetic waves or the piezoelectric effects to make our lives better. In order to achieve this, the development of advanced technologies is critical to design best engineered substrates. We now clearly see 2 families. Our well-known SOI products portfolio that we are continuously improving and the emerging so-called anything-on-anything solutions, including non-silicon active layers for semiconductor device benefits. Indeed, adding value to our customers and our customers', customers' devices is driving our innovation. We are engaged in a dialogue with all the parties along the supply chain to identify what performance improvement, power consumption requirements and budget are needed to intercept the market and achieve the right differentiation. And of course, time-to-market is also critical. We summarized these drivers in a PPACt indicator. We have listed here a few examples of performance benefits, power savings and cost contributions. Let's now move on discuss our technologies, the link between materials and applications. Smart Cut is, of course, a pillar of our technology portfolio, but we have much more in our toolbox. Epitaxy, process layer transfer, substrate and material expertise, wafer reuse and advanced process steps are all decisive when it comes to create new engineered substrate. But let's come back on Smart Cut. It's been almost 3 decades since the first successful Smart Cut of a perfect 100-millimeter SOI wafer. Smart Cut is now clearly established as the reference process for thin SOI manufacturing. Oxidation, hydrogen implantation to define cutting plane, bonding of a stiffener and splitting is now a classical sequence we routinely use with very mature yield for millions of wafers. Finishing options have been implemented to drastically improve uniformity and quality. Of course, we use wafer, a donor wafer as many times as possible via refresh as a key contributor to generating cost efficiencies. But I'd like to take a moment to describe how we generically think about Smart Cut today in designing our product. We select or prepare the best on a wafer, which is sometimes considered a more expensive option initially, but which is rounded cost-effective for multiple use. With smart cut it to the most effective substrates with regards to overall PPAC. And finally, we incorporate intermediate layers to bring more functionalities. I already referenced anything-on-anything when talking about new engineered substrates. This is a way to describe all these examples, where our aim is clearly to deliver the best active layer on the most convenient substrate. As you know, this could be achieved through bringing a piezoelectric layer in silicon world or compound layers onto a silicon or other active substrates. Over the past decade, we carried R&D demonstration of the multiple material layers transfer. As you can see on this slide, every wafer that you see is a real demonstration of our capabilities. Thanks to that unique experience, we can now move much faster in initial phases of development and engineering our new substrates. And silicon carbide is an excellent example. 2 years ago, we told you about our smart cut silicon carbide concept for power devices. This innovation is a reality today. And since the end of 2020, we have been able to gather electrical data from our prototypes. In 2020, we have built and kicked off our pilot line in collaboration with our partners, CEA-Leti and Applied Materials. From a technology standpoint, how do we do it? We have adapted the smart cut process adjusted for silicon carbide as shown here and running in our pilot line. We prepared the highest quality active layer so that our customers can grow their epitaxy device layer with no killer defects. We reduced resistivity and handled wafer to achieve the optimal energy efficiency for vertical devices. Then joining these 2 wafers, wafer bonding is adjusted for conductive bonding, which is a must for vertical devices. Let me now summarize our value proposition. Here, you see a key benefit of our smart cut silicon carbide. It is ready for epitaxy process. When using a conventional silicon carbide substrate, a conversion buffer layer must grow to eliminate killer defects in the crystal before growing the device active layer. Epitaxy ready for a substrate means that our substrate is ready for drift epitaxy without the need of a costly buffer layer. This is our approach of best active layer, which is our focus for this year 2021. Looking ahead, in 2022, we will focus on lowering resistivity of the handle wafer to further improve energy efficiency at system-level and shrink dies further. Let's now discuss our innovation assets, people and partnership, and how this enhances efficiency in our innovation. In a nutshell, Soitec's global innovation team is made up of European, U.S. and Asian talents. A total of some 200 researchers and inventors, 25% of them being Phds, are pushing the limits and are at the origin of more than 3,500 patents to date. To give you a sense of just how dynamic our innovation capabilities are, you will see on the right-hand side graph, that we filed almost 1,000 new patents in the last 3 years. We should note that in order to do so, we typically spend 10% to 15% of our annual revenue to gross R&D. And for instance, in FY '21, we allocated 13%. We want our innovation to meet time to market, solving gaps and challenges that our customers are facing in their road maps. This is always a matter of innovation speed versus visibility of the future needs. Agility, efficiency, cycle time are all critical items in the innovation dashboard and the R&D management process. Setting up clear priorities for our actions is another critical focus area for us. We are globally driving 80%, 20% baseline between the mandatory support of our 5 years business plan and the long-term technologies incubation to capture future opportunities, future product lines or create future business units. Our short-term incremental innovation delivers next-generation for SOI, POI and silicon carbide. Turning to disruptive innovation. We are considering new materials and new approaches, pushing once again the limits in material science. But let me give you an exciting example with tiling that will break substrate diameter limitation for future usage of any material in any diameter. Indium phosphide that we call InP is seen as the best material for multiple strategic applications, such as RF devices, 6G, long wavelength laser sources, image sensors and so on. But -- and there is a major bet. Indium phosphide is very expensive and limited to 100-millimeter substrates, not allowing proper design to cost efficiency innovation. When involving tiling combined with our market, we are able to deliver Indium Phosphide in 200-millimeter as shown via this R&D demonstration. And of course, we can reuse the donut wafers multiple times and dilute the initial cost of indium Phosphide. There is still some work to do, but we expect to bring key materials in 200-millimeter or even 300-millimeter in the coming years. We talked about visibility and technology needs or changes, speed of innovation. This is where collaboration is needed to amplify and accelerate learning. We are benefiting from our unique collaborations with Leti, IMEC and A-Star and developing new links worldwide with 2 key objectives in mind: gaining access to new ideas and expertise, and creating extensions to our internal R&D teams to be in a position to deliver high-quality prototypes early in the product life cycle. Our substrate innovation center in Grenoble within the Leti facilities is the best-in-class example of advanced collaboration implementation. This is a unique hub hosting the Soitec lab and daily joint innovation work with Leti employees. The silicon carbide pilot line has been implemented there, with the addition of Applied Materials employees. Having this lead semiconductor equipment supplier joining our hub clearly gives credit to our model. We will continue leveraging this hub for new products and further collaboration with suppliers, customers and academics. To summarize what our innovation model can deliver, this graph shows you how Soitec is able to capitalize on years of knowledge to accelerate time-to-market for our new engineered substrates. It has been an amazing journey to bring SOI products to market standard. We are now leveraging these rich learnings to accelerate the maturation of our new products and meet time to market required by our industry. POI learning curves has been quite fast. We discussed major progress on silicon carbide in less than 2 years, and we will maintain this momentum when innovating for next-generation technologies and products. In conclusion, 3 key points to keep in mind. We bring the best of material science for our engineered substrate to optimize PPACt for our customers. We design our best products, aiming to deliver the best active layer on the best substrates. And we have implemented a unique innovation model to deliver quality and optimize time to market. Thank you very much.

Thank you, and we are now going to start our first Q&A session. In this first Q&A session, we will be focusing on the first part of this presentation in CMD today, meaning that we will take questions regarding strategy, business and our innovation. Operator?

[Operator Instructions]

So if we start with the web question, the question we had from Varun at JPMorgan relates to the silicon carbide. How much will it contribute to our top line in the next 5 years. What are key decision points for us? And I think we will start to address this question with Bernard.

Thank you for the question. Thank you, Steve. So regarding silicon carbide, today, you see in our presentation that it will represent -- is in the automotive and industrial part and which will represent 20% of our revenue. And the silicon carbide part is a part of it, okay? A significant part of it. We are planning to have the first sales end of FY '23, with a ramp-up in FY '24 and then progressing across the year. So this is for the question regarding the revenue. Now if we look at the confidence level that we have. Today, we have demonstrated that on this wafer, we have made some IP, and we are confident on the results. And we have several customers who are qualifying this product and this technology. So key milestone will be in the next months to be in line with our ramp end of FY '23.

Thank you, Bernard. Is there a question, operator on the line? If not, we can build up with questions from the web.

Yes, we do have a couple of questions on the phone line. This first question comes from the line of Aleksander Peterc from Societe Generale.

Can you hear my voice?

Yes, Alex. I can hear you well. Yes.

So my question is essentially, regarding your fiscal '26 outlook. It seems to be there's a big element of a higher ASP there, about 20% higher that's currently because you have revenue growing times 3 and volume times 2.5. So is that the bulk of the upgrade of your outlook today? Or do you also plan to build new plants under this part of this plan. And compared to what you presented in the 2019 CMD, you gave us a full fab fully loaded model at $1.6 billion. Is this $2 billion also under fully loaded fab concepts and which fabs are included there.

Okay. Thank you, Alex. So as a reminder, this is the first time we give an outlook for our financial model in FY '26, the previous model for full fab around FY '24, '25. Regarding the underlying assumptions of this model, I think on the high level, I will let Bernard respond. But on the CapEx and capacity side, I suggest we will address this points in the session #2. Bernard?

Okay. So regarding the revenue with our -- we are triple our revenue with a 2.5x growth in volume. So this means that the product mix essentially linked to this -- is linked to the product mix and the value of the product that we are providing to our customer, which is making the main difference in this revenue. So you see that with this number, as I highlighted in my talk is very focusing on providing added value product and increasing our margin and profitability.

Thank you, Bernard. Maybe just to hold on a second, operator. Maybe 2 questions from the line. One is from Robert Sanders at Deutsche Bank about millimeter wave penetration in smartphones behind our assumptions. So maybe a quick clarification from Thomas regarding how we see millimeter wave evolving over the next few years.

Okay. So maybe first, the perspective on overall 5G smartphones grows. We are expecting this year to be in the range of 500 million to 550 million units in 2021 calendar year. And this is for sub-6 gigahertz. The millimeter wave module, we expect to be in the range of 60 million to 70 million of these phones on top of sub-6 gigahertz. And we expect this trend to continue probably for another couple of years and with acceleration likely in 2023, where the combination of sub-6 gigahertz and millimeter wave will be more present across multiple regions, not just as it is today in the U.S.

Thank you, Thomas. And maybe from a product standpoint, product exposure standpoint, Bernard, if you want to continue on the millimeter wave exposure?

So on the millimeter wave exposure, we have 2 solutions today, okay? And this, we are offering 2 solutions, depending on the architecture that our customers want to choose. The solutions first based on RF-SOI, where you can also have the gallium nitride for power amplifier and a more integrated solution with FD-SOI. So with these 2 platforms, we believe that with the challenge that this industry will have in terms of power consumption, we are very well positioned to have this product, and we are expecting some revenue starting FY '23.

Thank you, Bernard. And operator, I'll take 1 last question and then we can move on to the audio line. From Ken Rumph at Jefferies, a question, I think when you mean GFGW, I believe, it's on global foundries and global wafers capacity expansion and 300 mm entry. How does that -- if this is the right time to ask if our figures imply a smaller capacity. So maybe, Paul, you can give some context and Bernard, you can follow-up.

Yes. The context, you have seen the positions we have taken, and we are -- and the ambitions we have and the way we, I will say, characterize the evolutions of the RF market. It's going to be -- to continue to be a very large market. And we welcome our licenses to really engage more in capacity. That's one thing. I mean, they see the same thing, and we -- basically, we enjoy to have these kind of reactions of the market but also our licensee as well. So talking about where we stand in terms of this, I would say, maybe, Bernard, you can talk a bit about the relationship that you have built with customers that -- across the value chain. And what is important for you to look at is that you mentioned a little bit as part of the value creations. We are the technology leader, and we are really bringing this new capability for 5G across the board with multiple type of products. And this is where these connections, this relationship is built on, and it will continue for a long time. Bernard, do you want to add something?

You did pretty well. Good.

Operator, any questions on the line?

The next question comes from the line of Jerome Ramel from BNP Paribas.

Yes. 2 quick questions. What is the market share assumption you have in your model because we saw the news between global wafer and and global foundries. So do we still think in terms of 70/30 or 75/25 percent in the range? And second question is concerning the fastest value versus volume, is it due to price increase or just the mix, purely the mix?

Okay. Yes. So I'll continue maybe on the first one, and then Bernard, you can go on the second one. So in fact, if you think about our positions today, our market share range between 60% to 90-plus percent. Why? Because depending on the segment and product, we are bringing new product to the industry and to our customers. So at the beginning of the cycle, we normally have a very, very large market share. And we normally go down to the 70%, 75% type. But this is basically the model we have built, and we don't see a reason this change for the -- on the horizon.

Yes. For -- regarding our [ ISP ], it's -- we need to have in mind as Paul has highlighted that with the new generation of product, we are bringing new value. So we are able to offset the price discrete on 1 generation, but the new generation appearing and that we are proposing on the market.

Next question please.

Next question comes from the line of Sébastien Sztabowicz from Kepler Cheuvreux.

Looking at 6G, do you have any idea of the evolution of the substrates that could be used for the front-end module and moving into 6G and what could you offer for this specific generation for the front-end module? And coming back to the opportunity on the compound semiconductor could you have -- could you give us, please, a little bit of visibility on the production addressable market in terms of wafers for both silicon carbide or gallium nitride, let's say, 5 years from now? And where we are standing right now?

Thank you, Sébastien. So I think on 6G and the new engineer substrate, we will let Christophe respond. And then on the market, we'll have some comments on the market size by diameter and end market, but we'll leave that maybe to Bernard.

Yes. Thank you for the question on 6G, which is a difficult question, but typically, we are working with the leaders to see how to accelerate the performance of the devices, which means going into the high mobility type of semiconductors. In the presentation, I mentioned Indium Phosphide as one possible option. But of course, we are looking also at continuously improving the solutions we have in hand and on the other hand, going to disruptive solutions like bringing these new materials. So of course, selection is not made yet, but we are bringing any best materials we can from our engineered substrates. And and we'll see how -- which solution is the best.

And maybe I just wanted to add here one comment on the 6G, put it in perspective. We are just starting 5G, and this is after 10 years, a decade of 4G. So we have multiple generations of 5G with new materials and solutions, which will boost our business for really the whole decade. So just keep it in mind that 6G is maybe towards the end of this decade where this will become first trials.

So regarding the volume, when we are talking to compound today, we are mainly talking about 150 millimeter. And you will see with the presentation of Cyril, how we are planning to expand our 150-millimeter capacity, both on gallium nitride and silicon carbide in a place that we need to define and we have also to consider that with our technology, we are enabling the transition also for 200 millimeter. When we are using Smart Cut is enabling the transition for 200-millimeter diameter. So this is something that we are looking for, and we have already started in 200-millimeter of gallium nitride in asset.

Thank you, Bernard.

The next question comes from the line of Dominik Olszewski from Morgan Stanley.

Yes. So the first question is around your envisioning time frame of 2026. Does the POI or FD-SOI, in your perspective, have a greater chance of becoming the second largest product driver there after RF but obviously, you've shown that the POI seems to be ramping faster than prior technology generations? And then the second question is just if you could update us on the very useful video that you provided from GlobalFoundries. But where are we on the 12-nanometer product there? Is that a 2023, '24 time frame?

Thank you, Dominik. I think, Bernard, you can take the first question. And on the 12-nanometer, either Paul or Christophe, you can comment.

So on POI, it's -- we're already at the stage that we are working to make a standard. Our ambition is really to make a standard with POI. It's -- today, we are starting with a [indiscernible] product and then to enlarge this -- in fact, POI is not only 1 product. It's a real product family. With a product road map covering the different range of application. So our ambition is really to have this product standard for 5G high-performance filters.

Yes. Regarding the road map for FD, I mean, you know that it starts from 28-nanometer today, down to 22 and 18 nanometer. And you have seen some major customers engaging their new product portfolio. And you heard about Jean-Marc Chery talking about his own products. So we believe today that first, there is a huge market in the range of 28 to 18 nanometer that is going to materialize between now and fiscal year '24. And clearly, I mean, we are still working with all the parties and specifically also with GlobalFoundries on how do we and when do we activate 12-nanometer as part of the next generations of product.

Thank you. Paul. Next question please.

The next question comes from the line of Adithya Metuku from Bank of America.

I have got 4 questions. Firstly, just on the POI fraction, I just wondered if you could give us an update on what's happening beyond Qualcomm. I know you expect to become a standard, and I believe in that, too, but I'd be keen to get any color you can give there. Secondly, on silicon carbide, again, it reads like your solution could become the industry standard here, given the cost benefits, et cetera. Is this -- am I thinking along right lines or -- if it's not going to become the standard, what would be the hindrances? Any color there would be helpful? And then I have a couple of follow-ups.

Thank you, Adi. Maybe on POI, Bernard, you can comment. On silicon carbide, it would be interesting to hear Christophe maybe reiterate the value proposition and differentiation versus other existing technologies.

Yes. So on the POI, beyond our leading customer, we are several customer. And when I say several is across the world on the different -- the different leaders around the world are at the different phase, qualification, evaluation, ramping. So we are really seeing a lot of traction of the different player with this new POI wafer.

Yes. And regarding the value proposition of silicon carbide, we select best substrates to grow a high-quality layer on the donor wafers and then cutting and closing all the defects, allowing our customers to grow defect-free epitaxy directly on our wafer. And this is #1 advantage we want to bring. Second advantage is this low resistivity base substrates that is a low, less energy loss during the operation of the transistors and to also to gain on the die size. So clearly, 2 advantages. And regarding the milestone, as we said, just to remind you, we are focusing on the defectivity part in 2021 in this year, and we will focus our effort on the base wafer lowering the resistivity next year.

Thanks, Christophe. Adi, you add some follow-ups.

Just on the silicon, would it be fair to say that your solution could become the industry standard for silicon carbide substrates or would that be something I need to keep in mind before we jump into that conclusion?

In fact, I will say that it's -- it depends what product and what system you are talking about. I think that what we are really targeting is to -- in the automotive system to improve really the current dynamic and trends that we see in silicon carbide because clearly, yield and defectivity at customers level is a problem. And as Christophe said, basically also low resistivity is also an issue, and we can improve the functioning of the system. So as we demonstrate this, it will be clear that we will become a standard for some very specific applications. I cannot predict if this will go across the board. But when you start to fix customer problems, then if customer realize that this is a lot of value for them, it's an easy jump because our technology is compatible with what they are using today. And that's very important. I mean they can switch and they can integrate a lot of what we do in their current supply chain.

Understood. Very clear. And just a couple of follow-ups. First on the GaN use in automotive, would this be for fast charging? Or would this be for some other applications that you have in mind? And finally, just on SOI, I couldn't help but notice the Sony CEO talking about imaging products. I just wondered if you have had any success with Imager-SOI with any other customers beyond your lead one? Any color there would be helpful.

Bernard?

So regarding gallium nitride, it's -- we are mainly considering the opportunity for 48-volt DC/DC converter in the automotive market, okay? This is the main focus. And we know that GaN can go also to higher voltage. But the main part is linked to the 48 DC/DC. This is for the first part. The second question was related to?

Imager-SOI.

Yes. On Imager-SOI.

This is the Sony discussion.

Okay. Yes. So here, perhaps, Christophe, you can more answer to that on this approach on the development side.

On Imager-SOI, so you know we had a first win with our materials. And of course, we follow the same story, the same effort, trying to bring the best material into the active layer. And on the second substrate to make sure that all the signal-to-noise efficiency is bring to the maximum to our customers. And so difficult to disclose more, but there's a lot happening right now, and we keep default.

Thank you, Christophe.

There are currently no further questions on the line.

Okay. Thank you, operator. Well, we have a couple of questions on the business side, again, on POI and related to silicon carbide. Maybe another one from Rob regarding filters. Is the long-term goal to enable SAW filters, so surface acoustic wave filters, to replace more expensive BAW filter across all band? Or is there a limit to what POI can deliver?

This is a good question. Today, it's -- we are more we are progressing. And again, more we are developing different kind of POI, more we see the value for this product and addressing more and more band. So is there are a limitation today? We don't know. We are at the starting point of this, and we are developing a different product to address the different bands.

And another question related to connectivity for UWB, ultra-wideband, from Harrison Barrett at Arete Research. Are you designed in with any of your engineered substrate on the devices ramping today? Or do you expect to be designing more as the technology matures and optimizes? Is it a design in today or for tomorrow?

I think that today, with WiFi 6, we have already some customer using our product for that.

So we are in.

We are in, yes.

So we're in. All right. Another question regarding FD-SOI. Can you share your thoughts on FD-SOI applicability in automotive beyond MCUs and dedicated accelerator products like vision processor and to larger SoCs?

I think we addressed that during the automotive part, but maybe if we can refresh.

Yes. On this -- so on the FD-SOI, so you see that with FD-SOI, we can combine all the property-related to the low-power consumption to the reliability for the MCU and so on, but also for [indiscernible] performance with everything linked to the radar and ADAS. So you see that there is a lot of application cover by FD-SOI for automotive, and this will continue to grow in the next year.

Okay. Thank you, Bernard. Operator, any follow-up question?

There are currently no questions in the queue.

Okay. Well, we still have almost 4 minutes for this first Q&A session. So I will continue with some questions on the webcast. So a follow-up from Alex regarding micro LEDs. You haven't talked much about micro LED and in [ GaNos ]. Is this product opportunity now no longer on your road map? Or is it too small to be mentioned?

Well, in [ GaNos ], we worked hard on it. We bring it to the most advanced level we could by ourselves. So taking some options into the material and then we delivered that to the customers. They need that to look at the value, prove the value, and we are in this cycle. So we'll see from their feedback where we can go with this option.

Thank you, Christophe. Another question following from Emmanuel Matot at ODDO. Regarding FD-SOI ecosystem in China, maybe, Paul, if you can give us an update?

I can maybe -- Thomas, you can start to maybe share a bit what you see in China.

China ecosystem is slowly but surely increasing and reinforcing related overall semiconductors, but FD-SOI, it's also one of the key technologies where Chinese industry is looking to design in and to build the whole ecosystem there. You know about VeriSilicon. You know about Rockchip. So Rockchip, one of the leading Chinese fabless companies specialized in artificial intelligence chips. There is multiple projects related to FD-SOI foundry, 1 which is fully public. It's related to Huali Foundry in Shanghai. And we see from R&D to fabless to design IP to system, the whole ecosystem is strengthening up.

Thank you, Thomas. Any follow up?

No. I mean, clearly, this is the good -- the positive things about China is that despite all the situations with COVID, where we couldn't really travel there and all the situations, and we continue to see the resilience of the Chinese to really engage and develop this technology on their soil. So this is a positive sign. It takes time.

Thank you. Another follow-up from Adi at Bank of America and maybe a tough one for you, Christophe. You talked about anything on anything. In addition to InP, so indium phosphide, what other substrate excites you the most?

Well, that's a tough question. Well, the compound materials, I think, being able to bring the compound materials onto the easiest substrates. And the one I can think is silicon. So being able -- so InP is very exciting, but what is very exciting is to really break the barriers from the diameter and the limitation from the diameter of any material and what I'm really looking at is bringing this material in 300-millimeter to benefit from the best of the materials, but in a design and on an under substrate that bring it design to cost friendly and then to enable a lot of exciting applications. So that's the way.

Thank you, Christophe. So time is up for this first session. So we will conclude here, and we will be back after this short break. Thank you. [Break]

Welcome back to the second session of Soitec Capital Markets Day. It is now my pleasure to introduce Cyril Menon to discuss our operations. Cyril, the floor is yours.

Thanks, let me introduce myself. I'm Cyril Menon, In charge of operation, IT and engineering for Soitec. I'm very glad to present Soitec operation and introduce our next challenges. Our operation must continue to support our business growth across multiple products, diameters and geographies. Actually, we already doubled our fab outputs from fiscal year '18 to fiscal year '20. A great challenge in front of us to tackle, scaling up our capacity by 2x beyond 4 million wafer by fiscal year '26. Three of our plants are running at full capacity since the beginning of calendar year 2021. We will continue to maximize overall equipment efficiency in order to further increase our operating leverage. Speed is everything in such a high-growth business demand and ramping up both our fab in Bernin 3 for POI as well as in Singapore for 300 mm strong demand will bring substantial operating leverage. Finally, capacity optimization is ongoing as well as yield improvement to further increase our efficiency. Last but not least, we are engaged in numerous sustainable growth initiative to reduce our resource consumption and build an attractive and inclusive workplace. So where our fab located? In the French Alps, we have 3 high-volume manufacturing fab for SOI and POI. In Singapore, we have a SOI fab. In Belgium, we build compound semiconductor, AP wafer. And finally, in China, near Shanghai, we have our partner, Simgui. In addition, we are planning capacity expansion for further SOI capacity and silicon carbide, subject to business milestone. So in fiscal year '21 we are at around 2 million wafer. And we will continue to expand our capacity to support our business growth beyond 3 million wafer in fiscal year '26. As explained previously by Bernard, the main drivers of this capacity increase are 300 mm as well as POI for both 150-millimeter and 200-millimeter to meet customer demand. For 300-millimeter, the strategy relies on 3 different time horizon. One, Bernin 1 is running full, and our teams are focusing to extend our capacity at minimum investment in the same building. We now anticipate a capacity at 700,000 wafers per year in Bernin, which is 50,000 higher than our previous model. Two, Singapore is ramping up, and capacity installation is ongoing. We have a large investment plan this year to accelerate the room for both our RF-SOI and [ Imager-SOI ] product. Finally, three, additional capacity will be necessary to go beyond 1.7 million wafer per year in fiscal year '26. Our Bernin 3 fab has been transformed from a pilot line to high-volume manufacturing fab and is supporting an aggressive acceleration to support POI adoption. We have a lot of engineering effort, clean room optimization and synergy with Bernin 1 asset, this fab will be able to go up to 750,000 wafer per year. Note that 750,000 is 250,000 higher that what we communicated last November. We are implementing a very agile production model to produce either 150-millimeter or 200-millimeter POI substrate in our Bernin 3 fab to better respond to our customer demand. Bernin 1 is running at full capacity and is able to deliver 950,000 wafer per year while Simgui capacity will be gradually upgraded up to 450,000 wafer per year. Finally, some new great opportunities are growing, and we are ready to accelerate. In Belgium, our GaN AP wafer fab is now qualified for high-volume manufacturing for 150 millimeter, and we are preparing qualification for 200 mm. This fab in Belgium will cover both RF and power application. Regarding silicon carbide, our pilot line has been deployed in the substrate innovation center in Leti and in Bernin. We will prepare additional capacity to be ready by fiscal year '24 to support high-volume manufacturing and able to support up to 500,000 wafer per year. For the next 5 years, between this fiscal year, fiscal year '22 until fiscal year '26, we are planning to spend EUR 1.1 billion to support our business plan. 25% of this total CapEx will be used to complete the expansion of our Singapore plant. 20% will be spent to support our POI factory in Bernin for both 150 and 200 millimeter. 10% will be spent for emerging activity such as gallium nitride and innovation project, and 5% to upgrade our facilities, maintenance and IT. Finally, pending business milestone: 20% will be spent developing silicon carbide capacity and 20% will be spent to further expand 300 mm capacity. So if we now focus on fiscal year '22, we plan to accelerate our capacity expansion plan with EUR 240 million to support 300 mm growth by expanding Singapore and POI capacity expansion in Bernin 3. Large initiatives have been deployed to strengthen our factory business. State of the art application to deploy industrial standard across all production sites. Artificial intelligence to support pattern recognition, smart sampling or advanced run to run to improve our production yield and some new features to improve our team efficiency, our asset or real-time asset performance. Our initiatives have been awarded by the French Industrial Magazine, L'Usine Nouvelle as Factory of the Year. To illustrate the benefits of all these initiatives, you will find here some operational KPIs. Singapore fab will match Bernin 2 competitiveness within 2 years. We are able to rapidly industrialize innovation into HVM, delivering high-volume manufacturing yield in less than a year in Bernin 3 as well as in Singapore. And finally, both skills and methodologies enable further capacity acceleration. As an example, the volume manufacturing in Bernin 3 have increased sixfold over a year. Last but not least, we are committed to remain a reference in our sustainability initiatives. Doing more with less resources is key for our competitiveness, and for our environment and ultimately enable our sustainable growth. We have substantially reduced our resources consumption over the last few years. Additionally, we are committed to double our water recycled by fiscal year '24. We are engaged in reducing our carbon emission, and we joined Science-Based Target Initiative to drive a sustainable growth according to the most challenging criteria, which are in sync with the climate change limited to 1.5 degrees. 100% of our energy use in Bernin will be renewable this year in fiscal year '22. And our plant in Singapore is aiming 50% by fiscal year '24. And over 80% of our wastes are recycled or recovered. Finally, attracting talent is key for Soitec today and for the future. We are engaged in a program to hire young people in our industry and more females. So quality of life has improved by 5 points over a year, reaching the best score ever in such an environment. And finally, safety on-site has been dramatically improved leading to an injury rate reduction from 10 down to 4. So as a conclusion, here are the 3 operational takeaways. We are ramping up capacity with scalable and agile operation footprint. We are improving our operating leverage through execution excellence and Industry 4.0. And ultimately, we are delivering a sustainable growth. Thank you for your attention, and I will now leave the stage to our CFO, Lea.

Hello, everyone. I am Lea Alzingre, Soitec CFO, and I am very happy to be here with you today. As you have seen in the previous presentations, we have a lot of exciting projects. One [indiscernible] on my side, and I will come back to that at the end of my presentation. Our EBITDA will more than triple in value between FY '21 and FY '26, thanks to our value-added products and our ability to financially support this growth. But let's begin by taking a look at the FY '21 financials. As expected, FY '21 was a transition year. As I told you in this introduction, we are happy to report that the group performance is in line with our annual guidance. Despite the current difficult environment, we'll reach a flat revenue with an EBITDA margin of around 30%. We were able to maintain an EBITDA margin above to 30%, while strengthening our efforts to structure our group to support the growth expected in FY '22 and beyond. In addition, we significantly improved our cash flow generation. Our operating cash flows increased from EUR 100 million in FY '20 to EUR 174 million in FY '21. We disclosed our annual revenues in April, so no surprise there. Let me just refer to several important items from that report. We achieved a small growth in revenues at constant exchange rate as we reported a full year organic growth of plus 1% by type of products. Our revenue for other products remained strong and is flat as compared to last year. We enjoyed an increase in POI products and Imager. This was offset by the decrease in FD products, power products due to the automotive economic situation, as well as photonics products. Overall, we achieved sales of EUR 584 million in FY '21. We had a 3% negative currency impact due to the weakening of the U.S. dollar. This means that our FY '21 sales are down 2% on a reported basis. But we enjoy a quarter-over-quarter sequential growth. Royalties and other revenues are mainly related to Dolphin Design and Soitec Belgium. The increase during FY '21 is mainly due to a strong growth of Dolphin design business. Our Group reached EUR 183 million of gross profit, which represents a 31.4% gross margin. As expected, we benefited from more favorable raw material purchase prices, thanks to our long-term agreements with our key suppliers. On the other hand, a few headwinds impacted our gross margin. Depreciation grew faster than sales due to the investments plan implemented in the last few quarters and years. Our Bernin 3 factory for POI product is still in its early stages of ramp up. And our Bernin 1 and Bernin 2 factories were less loaded than last year. Finally, as expected, we had an unfavorable exchange rate effect. When you look at the gross margin history, please keep in mind that since FY '20 we have two more fabs, Singapore and Bernin 3. From this EUR 183 million of gross profit that I just mentioned, the group generated EUR 90 million of current operating income, which is just above 15% of our revenue. As we said before, this fiscal year is a transition year. We were flat in terms of revenue. But at the same time, we needed to prepare for the growth expected in FY '22 and beyond. For this reason, we continue to invest in R&D, and we expanded our staffing in multiple growth areas. Gross R&D costs increased by EUR 7 million representing an 11% increase compared to last year. Indeed, we boosted our efforts to maintain leadership in our SOI business and to further develop for our POI and SIC road maps. If we consider flat R&D grants and tax research credit as well as lower prototype sales, net R&D increased by EUR 12 million as compared to FY '20. Regarding SG&A, we continue to reinforce the group, which is now more diverse in terms of geography, customer profile and products in order to prepare the group for the growth. Consequently, SG&A expenses increased by EUR 4 million compared to last year, due to a rise in employee expenses. These expenses included new hirings and higher employee free share plans, essentially because of the increase of the share price. At the net income level, our net profit decreased from EUR 110 million to EUR 73 million for FY '21. Last year, we had a positive nonrecurring impact of EUR 1.8 million related to the disposal of a building. Regarding our financial results, we reported a loss of nearly EUR 15 million. This is explained by the financial expenses mostly related to the noncash interest of our 2018 and 2020 convertible bonds. And we had a foreign exchange loss of EUR 4 million. Finally, our income tax continued to benefit from tax loss carry forwards. We reached 30.7% EBITDA margin, in line with last year and with our expectations. We were able to maintain almost the same EBITDA margin as last year, even with the increase of the R&D costs and of SG&A expenses as well as unfavorable FX rate effects. Moving on to take a look at the cash and the balance sheet. We can see a strong improvement in the group's operating cash flow. With a slightly lower EBITDA, the cash improvement has been driven by a better manager -- management, sorry, of the working capital that decreased by EUR 9 million after an increase of EUR 59 million last year. This decrease is explained by an increase in other payables which was partially offset by a slight increase of inventories. Combined with lower taxes paid than last year, operating cash flows improved from EUR 100 million in FY '20 to more than EUR 174 million in FY '21. The free cash flow are positive at EUR 38 million. CapEx amounted to EUR 137 million. And we are mainly used for industrial capacity investments, both in Singapore for SOI and epitaxy capacities as well as in France for PY production in Bernin III. This amount also includes IT investments and capitalized R&D. We had a strong increase in the cash position from EUR 191 million in March 2020 to EUR 644 million at the end of March 2021. As explained just before, the free cash flows are positive at EUR 38 million. Investing flows are positive at EUR 417 million thanks to -- the EUR 321 million for our new convertible bond net of transaction costs. The EUR 95 million first brought in on the EUR 200 million long-term loan granted by the Banque des Territoires as part as the Nano 2022 plan. The EUR 39 million of a new Singapore loan in order to finance tools. These amounts were partially compensated by the reimbursement of credit line and leasing agreements during FY '21. This new financing fully reflects the confidence of our investors. Now let's move directly to the financial structure. We see a few KPIs to underline the strength of our balance sheet. All in all, our balance sheet structure has been reinforced during this year with equity up EUR 124 million, thanks to the year result and the equity part of the 2025 convertible bonds. Net debt decreased from $54 million to $4 million, thanks to the cash generated from operating flows during the period. Liquidity is at high level and further facilitated by unused credit lines and the long-term loan from the Banque des Territoires that will secure our future development plans. FY '21 was a transition year. FY '22 will be the year of the rebound with significant growth and profitability. We'll now move to the outlook for FY '22. Back in June 2020, we were expecting a revenue at around EUR 800 million for FY '22 or USD 900 million based on FX rate at 1.30. Last November, we updated this guidance to above $900 million. Based on our analysis of end market trends, especially in terms of smartphones, and based on the customer demand dynamics, we are now targeting revenues to be around $950 million in FY '22, meaning an organic growth of around 40%. As a reminder, several tailwinds should fuel our revenue growth in FY '22. We target a strong boost coming from 5G, which will impact many product lines as discussed before. RF-SOI, POI, FD-SOI, and GaN. We also target a recovery in automotive and consumer IoT, mostly impacting FD-SOI and Power-SOI. This recovery began in Q3 FY '21. This revenue of around USD 950 million will convert into EUR 800 million. We are almost fully hedged on our FY '22 net exposure at the euro-dollar rate of around 1.20. We expect an EBITDA margin of around 32%, meaning an improvement of more than 1 point as compared with FY '21 resulting from operating leverage, thanks to our fully loaded Bernin I and Bernin II and improved loading of our Singapore and POI factories. But also in the continuity of FY '21, a favorable effect from our raw materials long-term supply agreements. This effect should be partially compensated by a negative FX rate effect. Cash out from CapEx is expected at around EUR 240 million, which can mainly be explained by investments in our Singapore factories for 300-millimeter SOI ramp-up and a refresh. As mentioned by Cyril, the target is to reach a capacity of 1 million wafer within 5 years. Investments in our Bernin III factory for POI product ramp up, but also various investments in capitalized R&D, IT and innovation. This strong growth in FY '22 is expected to continue in the following years and beyond. If we now move to our midterm outlook. As Bernard explained a few minutes ago, we have several very solid growth driver focused on value-added products. Our revenue is expected to triple from FY '21 to FY '26 to reach around USD 2 billion, with a low end at USD 1.7 billion and the high end at USD 2.4 billion. Our profitability will benefit from this increase in activity, and we expect to reach an EBITDA margin of around 35% in FY '26. Our profitability will benefit from a full loading of our current factories, Bernin, Bernin II, Bernin III and Singapore. But we'll still be in the ramp-up phases for SIC fab and our 3 -- third 300-millimeter SOI-fab. Our EBITDA will more than triple in value from FY '21 to FY '26. In addition to the operating leverage, we'll benefit from more value-added product. We will continue to invest both in capacity investment and in R&D. As Cyril presented, we will invest around EUR 1.1 billion mainly for capacity investments outside of building costs. CapEx will represent 18% of revenue on average on the FY '22 -- FY '26 period. On the financing side, we will be able to generate sufficient cumulative operating cash flows to finance our high CapEx level. In addition, on the balance sheet side, our financial structure is robust. We have available liquidity tools, if necessary, such as credit lines or the possibility of growing of our loans. We have multiple growth drivers that will allow us to triple our revenue in the next 5 years, and our profitability will clearly benefit from this strong growth, our EBITDA in 5 years' time, which equal our current revenue. Our mission is to continue to structure our group in order to support this growth. And this is exactly what we have been doing over the last few months, and we will continue to do. Thank you for your attention. And Steve, back to you.

Thank you, Léa. Now let's move to the second Q&A session, where we will be focusing on operations, finance and maybe some remaining questions you might have regarding our strategic vision. Maybe, operator, I will take a first question on the website. Regarding the CapEx plans, one of the question that was asked from Emmanuel Matot at ODDO. In your previous long-term model described mid-2019. So that was 2 years ago in our Capital Markets Day. You were speaking about a budget of EUR 700 million of CapEx to deliver $1.6 billion of annual sales. Now you are talking about EUR 1.1 billion of CapEx to deliver $2 billion of annual sales. This is what we mentioned for fiscal year '26. How do you explain this inflation of the CapEx on sales ratio? So maybe the first part of the question for Léa to discuss the capital intensity, and then we'll leave the floor to Cyril to complete.

Thanks, Steve. So on average over FY '22 to FY '26, we are expecting a CapEx and sales ratio around 18%, which is totally in line with our expectation and what we did in the past. So no surprise there. Maybe I can give you the floor.

Yes. Sure. Thanks, Léa. Thanks, Steve. So basically, as you have seen in the presentation, we have detailed our CapEx. So the first step for sure is the growth of Singapore, the fab of Singapore. And we plan to equip the Singapore fab 300 mm on SOI and as well a refresh in order to go to 1 million wafer SOI, and this represents 25% of our CapEx. Second, POI, POI will drive a significant part of the CapEx as well due to the fact that the growth we will equip the fab up to 750,000 wafer on the horizon, and this is -- so 20%. On top of that, we have the imaging activity where we do include both innovation in gallium nitride, which allows represent 10%. And finally, 5%, which is linked to maintenance and IT, basically what we call recurring CapEx to sustain our industrial footprint. So as well as the 60% of the overall CapEx, which is EUR 1.1 billion. And on top of that, we disclaim today that we will need on the horizon, 2 additional industrial asset. One, which is associated to 300-millimeter SOI growth. We will need a third fab by the end of this 5-year horizon, beginning of FY '26. So decision is not for today, for sure. But associated to a business milestone, we will most probably take this decision in the coming 3 years. And second, SIC, we'll need an additional fab of SIC, which represents as well 20% of the CapEx. And this is linked to business [ maison ] as well. This decision will be taken before the end of FY '22 and is associated to the demonstration of the product value as well as the traction of the ecosystem.

Thank you, Cyril. Maybe just a quick follow-up on this revenue and CapEx trends for the next few years. I think we can split the question also between Léa and Cyril. Can you provide some color on: a, the revenue phasing in fiscal year '22 and CapEx facing in fiscal year '22 and beyond.

Okay. So on the revenue side, we expect a growth quarter after quarter. So the sequential growth as we had -- as we will have quarter after quarter. And regarding the CapEx, we expect a higher amount during the first half of the year. If you want to comment?

Yes, definitely, I mean we have EUR 240 million CapEx this year, which is a substantial increase basically associated to additional business, and you have seen our growth for this year and the coming years. This EUR 240 million, 50% of it is associated with growth on the 300 mm in Singapore which will drive the most -- the biggest part of the CapEx. And as well, we have 25% of our CapEx, which is associated to our growth in Bernin III in POI as you have seen in the presentation. We had a pretty steep growth over there because last year, we had a sixfold growth in this plant, which is a pretty aggressive product adoption, and we'll continue to support the growth of this product.

Thank you, Cyril. So just on the CapEx and sales ratio, as Léa mentioned, around 30% this year and then if you do the math, it will -- trending down to low double digits by fiscal year '26. Operator, do we have a question on the line? Otherwise, I have a few on the website on my end.

Yes, we do have a couple of questions on the current line. [Operator Instructions] Our first question in the queue comes from the line of Aleksander Peterc of Societe Generale.

So I just have a couple. First one is, is your EUR 2 billion revenue guidance for '26 contingent on generating business in silicon carbide in particular? And therefore, whatever that means that you will need to meet operational milestones in this business still here the [indiscernible] context? And then the second question on POI. You're increased to 750 kilowatts versus 500. Is that related to winning more sales of customers beside the existing one? Or is what you see with this existing customer? And just a side question on that, can you tell us what is your current run rate in Bernin III?

Okay. Thanks to you, Aleks. I think the 2 first questions are for Paul. SIC business milestones and on POI.

Yes. As Cyril was saying, we have -- and Bernard previously. I mean we have a series of business milestones that we are engaged with. And clearly, we will be in a position to make decisions by the end of the fiscal year on how do we go in terms of manufacturing. If things goes well, I mean clearly, we will go into manufacturing, starting the end of fiscal year '23 and significantly ramp in fiscal year '24, and again on the following years. So that's the plan today. And you have seen that we have a base case, and we have a low case and a high case. And obviously, as part of the embedded risk that we have into our business model, we also have diminished totally the risk on the low case. And this is not only just on silicon carbide. I mean this is about 5G speed of adoptions. It's about the number of smartphones. It's about millimeter wave isn't going to be in H1 on H2 in fiscal year '23. So we have model all this to give you a very solid statement on where we believe our model drives us. So that's maybe the best I can answer right now.

Thank you. On current Bernin III capacity?

So basically, regarding Bernin III, I mean as you have seen, we will significantly invest since I was talking about 20% on the full horizon of CapEx for Bernin III and -- which is around EUR 200 million. And basically, this year, we will invest 25% of our CapEx of EUR 240 million, which is around EUR 60 million. So basically, you have an idea about how much we do invest in order to be prepared by the end of the year for the next step.

Thank you, Cyril. Operator, any follow up?

The next question comes from the line of Varun Rajwanshi from JPMorgan.

First question is on your EBITDA margin guidance for FY '26. Just trying to understand, what drove the upgrade and guidance compared to your prior midterm full financial model of 32%? I'm just trying to understand, are you -- is this a function of product mix? Are you assuming lower margin dilutive products like FD-SOI in your overall revenue mix, which is driving this upgrade? And the second question is on, again, the margin assumptions for the new capacity that you will be adding over the course of the next few years. For example, you talked about adding new silicon carbide capacity. Are you assuming these new capacities to be margin accretive by FY '26?

I think these 2 questions are for you, Léa.

Yes. So first question regarding the comparison between our current guidance, the current outlook, I will say for FY '26 with an EBITDA margin at 35%. In 2019, we said in the full fab model, the EBITDA margin will be at 32% based on 1.13 FX rate. We are now expecting 35% at 1.20 FX rate. So this is really a strong improvement. Yes, the revenue is higher. So we have an operating leverage. But this is also due to the value brought by our product and the product mix. Yes, maybe if you will...

Yes. If we can add on the fact as well that we'll have 2 fab, which we -- will be not fully loaded as we were presenting as a full fab model. And despite the fact that this fab will be not fully loaded would be a beginning of the round for this fab. Finally, still, we will -- we target an EBITDA margin at 35% with this exchange rate, which gives some perspective about operating leverage for the future.

And this one, don't you remember?

The new capacity by fiscal year '26 for silicon carbide when we will start to be accretive on the overall business. That's correct, Varun.

And like -- and maybe Cyril, you can complement, but the first 2 years, when you start a factory and Cyril showed that example, I mean we are now able to really capture this overall efficiency of a factory within the first 2 years, 2.5 years, so maybe you can complement on this?

Yes, yes, for sure. I mean first of all, all this is model in our picture today, both EBITDA and top line, we consider the fab at the loading at that time. And for sure, still, we will have operating leverage to fill this fab. And we believe that we are able with such a loading to generate value and even further increase with the operating leverage to go full fab on these 2 new assets in our industrial footprint.

Yes. Maybe before we move on to the next question, operator, a question from Ken at Jefferies. So you exclude the cost of new buildings from the CapEx, expecting some government help for the 300-millimeter new SOI and silicon carbide fabs from wherever you choose to site them?

So yes, basically, we have several options in order to finance the building and the main assumption here is that we will go into a lease option. So that's the first point. And the second point is, in our model, we have considered the depreciation, which is associated to this lease. So it's including in our margin and gross margin, but it's not part of our CapEx since we'll go through a lease.

Thank you, Cyril. Operator, any follow-up question?

We do have another question in the queue. This is from the line of Sébastien Sztabowicz from Kepler Cheuvreux.

On FD-SOI. Could you help us understand how do you see the business building up on FD-SOI in the coming quarters? Do you see an accelerated traction as we move into the back half of the year or it is already starting right now? And looking at the revenue, I would say, profile beyond 2022 will be a very strong year of organic growth. How do you see as the revenue evolving from 2023 to fiscal year 2026? Should we expect something rather, I would say, linear? And lastly, on the fab loading, could you tell us a little bit what was the fab loading of the different fabs in 2021? Bernin I, II, III, Singapore, please?

Thank you, Sébastien, for this overview. So maybe Paul will take FD-SOI and beyond fiscal '22 organic growth. But you mentioned linear growth, and I think this is what we are going to confirm. And for the fab loading, Cyril will answer.

Yes. I mean clearly, on FD-SOI, I mean I told you last year that we were on a plateau, and we were really expecting this second wave of products coming from different things. But the first one that we are exercising right now that we were expecting is around this more intelligent object, and this is really what is happening. So this is clearly happening now, okay? We are not going to wait the end of this year. We have basically accelerated our manufacturing for FD-SOI. And the second wave will come, I mean in different angles. You have seen that millimeter wave will be part of the second wave. You see it in some object also, and that will fuel some of the new systems like automotive and radars, for example, but also in smartphones, and we are already engaged in this qualification. So that's also another wave. Regarding above and beyond FD-SOI, I think that Bernard gave you the full pictures. But clearly, 5G will continue to drive many of our products because it's not just RF-SOI. It's POI. It's GaN, it's also FD-SOI. The automotive and industrial is going to also fuel us with several products, including FD-SOI, but not only. I mean we are talking about Power-SOI, we are talking about PD-SOI. We are talking about GaN as well. So we see that -- and smart devices, obviously, FD-SOI. So this is the beauty of the next 5 years. I mean we are indispensable in these 3 market segment that are really touching a lot of our product portfolios.

Yes. Thank you, Paul. And regarding the fab loading. So as you know, last year was a real special year during this year of COVID and I think that the [ war ] organization of Soitec has really focused in order to perform this consolidation and to be there stronger to take the opportunities that we have in front of us right now. So basically, I will give you an average because thing has not been linear over the year in fiscal '21. And first, as an average, the loading was in between 80% to 90% in Bernin I, Bernin II as our plant, which are now fully loaded since beginning of calendar year. And the additional point for sure is Bernin III and [indiscernible] and Bernin III, every single tool which is getting in is fully loaded the very next day. So here, the traction is high, is huge and the same now in Singapore. So I would say that 80 to 90% for Bernin I and Bernin II. And 100% now on since the beginning of calendar, so since the last quarter. And every single day is important to further increase our speed to fuel the growth.

Thank you, Cyril.

And what was the capacity installed in Bernin III in 2021, how many wafers did you had?

So I would say, in fiscal year '21, below 100,000.

Thanks, Sébastien. Operator, any follow-up question?

We currently have no questions on the phone line.

Okay. Thank you. So I've got a couple in the queue here. One from Trion at Berenberg. How much conservatism is there in the EBITDA margin guidance for fiscal year '22 and fiscal year '26? With such strong organic growth, isn't there likely to be more operating leverage than implied by the guidance? Thank you, Trion.

So for -- the question is for me, I assume. So obviously, our guidance is reflecting our best estimate as of today based on this level of revenue. I would say -- I will not use the word conservative. Really, it's our best estimate. Maybe it's an opportunity for me to say that on the FX side, which is a very important topic for us, we are fully hedged for -- almost fully hedged for FY '22 in terms of net exposure. So we don't see any significant risk or opportunities on it. As a reminder, the main tailwind we will have for FY '22 regarding the EBITDA margin is improvement of the raw material supply, the fab loading, as explained by Cyril just before. But in terms of headwind, we'll have a product mix a little bit less favorable than this year. And regarding the second part of the question for FY '26, I will say yes, the main -- the main topics having an effect on the EBITDA margin will be, for sure, the variation in the bulk price and the loading of our fab and fix, for sure.

Thank you, Léa. And maybe just to follow up, when you think about our the cost of raw materials, maybe, Cyril, you can complete about...

Yes. I mean for sure. We announced that already 2 years ago, we decided to perform a make strategy in Singapore on top for sure of our SOI capacity to add on some capacity on refresh and epitaxy. This first help in term of operating leverage, for sure, even if we have a part of our CapEx is dedicated to this strategy that we have put in place. It helps, for sure, for this operating leverage. But as a second point as well, it does help to secure the supply chain by having this AP and refresh strategy in the current environment to be sure that raw material won't be an issue to our growth in the coming quarters and years.

Thank you, Cyril. So we have a bit more than 3 minutes left. Maybe moving away from profitability and CapEx topics, there's a question regarding M&A from Emmanuel Matot. Maybe, Paul, this is for you. Is M&A part of the growth story of Soitec in the coming years? And Emmanuel is asking this question because he feels that we have a huge amount of cash on our balance sheet. Maybe then, Léa.

Thank you, Steve, and thank you, Emmanuel, for the questions. I mean on the M&A side, I mean you know that we have already, I mean started to look at and execute on some of the M&A. And clearly, the things we have done are doing well. So we are not excluding within the horizon to really continue to look at external options or opportunities. It can be different options. It can be to acquire technology that we don't have, and it could be to strengthen our supply chain. It could be to develop or accelerate some of the product that we have already and we will have within the horizon. So this is in the play. But what we are presenting today is really based on organic growth. And yes, we have cash. So maybe I can give you the floor for that.

Yes. Thank you, Paul. So yes, we have a little bit more than EUR 645 million of cash at the end of March '21. We have to keep in mind that the world change, our group change and is now bigger as we -- and we really need to have sufficient or even, I could say, comfortable level of cash in our balance sheet in order to be able to manage and to catch up business acceleration, if needed, or business slowdown. But we believe this is a good strategy to have a sufficient level of liquidity.

Thank you, Léa. Operator, any follow-up question on the line?

No question from the line.

Okay. Thank you. So I've got a couple of questions online. Going back to maybe capacity and profitability. Just maybe some clarification regarding the silicon carbide fab question from Jerome Ramel at Exane. Is it 6 or 8 inch? And what will be the wafer capacity?

Okay. So basically, as you have seen, first of all, the 6-inch or 8 inches is a real question. And we believe that we can create industrial assets which are compatible, 150 and 200 millimeter. So we have done it basically in EpiGaN, on epitaxy. We have done it. We are doing it in POI in Bernin III, and this is what we're going to target in the additional plant on SIC. So -- and after a second question about timing and capacity, what we foresee today, as explained, is to take the decision before the end of fiscal year '22. Once again, if all the business milestones are there and to implement capacity on the horizon before the end of fiscal year '26 of 505,000, 0.5 million wafer, 150 and 200 millimeter.

Thank you, Cyril. I see that the timing is up. So thank you very much for all your questions. There are still plenty of questions that have not been answered today. We'll be happy to see you virtually on the road over the next few days and weeks and answer all these remaining questions. Before leaving the floor to Paul for wrap-up remarks, I would like to thank you very much for attending this event, and we wish you well. Thank you.

Thank you, Steve. So today, we are at one of the most exciting moments of the history of Soitec. This is, again, a new chapter with extended and unprecedented ambitions. So we are gearing up. There is one thing that I want to say. I mean you can count on me, and you can count on this team, on my team to really deliver on this commitment. By fiscal year '26, we will triple our revenues. By fiscal year '26, we will significantly increase our profitability. And we continue to build a sustainable business for our clients, for our employees, for our investors. With this, I would like to thank you for your time today. And hopefully, we will be seen -- we will be all together soon, face-to-face in the coming months. Thank you very much.