Soitec SA (SOI) Earnings Call Transcript & Summary

Hi, everyone, and welcome to Soitec fiscal year '25 Results Presentation, whether you're here with us in Paris or joining remotely. I am Alexandre Petovari, Investor Relations Director at Soitec. And on behalf of the team, thank you very much for joining us today. Before we begin, let me remind you that today's presentation includes forward-looking statements. I encourage you to review our disclaimer available in the presentation materials. Today's session will begin with our CEO, Pierre Barnabe. Then you will hear from the rest of the executive team on strategy, innovation, operations and finance. These prepared statements will last about an hour and 10 minutes, and we will then move into Q&A and close the session with the wrap-up from Pierre. Thank you again for being with us today. And with that, Pierre, over to you.

Thank you, Alex. Good afternoon to everyone here in Paris, and a warm welcome to all of you joining us online wherever you are in the world. Thank you for attending our fiscal year '25 results presentation today. I'm joined by the management team here, and it's a pleasure for all of us to be with you again. Fiscal year '25 has been a year of continued transition. We made meaningful progress despite persistent volatility. We have continued to execute with discipline to accelerate our diversification and to prepare Soitec to deliver on its long-term growth ambition. Today, I'd like to discuss how we have strengthened the company, how we are navigating this complex environment and why we remain confident in the strong fundamentals of our operating model. Let me start with an overview of the context. Fiscal year '25 was impacted by the ongoing inventory correction across the smartphone supply chain, coupled with weakness in the automotive market. These headwinds have affected our top line, but not our trajectory. We stayed resilient maintaining a strong EBITDA margin, solid cash generation and a healthy balance sheet. We also used this period to get stronger, accelerating diversification, expanding our customer base and sharpening both industrial and financial execution. Our foundations are stronger than ever, which helps us navigate this volatile environment. Our operating model position us for 2x revenue upside, significant operating leverage, improvement in cash generation potential. We will give you more details on that model through the presentation today. Our revenue declined by 9% overall, in line with our revised guidance with different dynamics across divisions. Mobile communication was down 12%, strong growth in PI and continued FD-SOI adoptions were offset by the RF-SOI inventory correction. Automotive and Industrial declined 22%, reflecting the broader weakness in the automotive market, but product adoption continues to progress. And in Edge and Cloud AI, we saw very strong traction, especially from demand related to AI. That growth was partly offset by lower imager-SOI sales as we saw the first impact of the phase out. Let's now dive into our first end market mobile communications. Let's start with RF-SOI. Our reference substrate for RF front-end modules embedded in 100% smartphones. We continue to strengthen our leadership. Our segment share moved above 90%. New design wins confirm our strong position, notably with GlobalFoundries' 9SW, UMC 3D IC for 5G and Broadcom and Tower for Wi-Fi 7 RF-SOI. Regarding RF-SOI customer inventories, it is going in the right direction. If you remember, 1.5 years ago, they picked at a much higher level, around 18 months. At the end of December, they were sitting around 14 months. These inventories are coming down step by step. If the smartphone market sustains its ongoing recovery, they should continue to go in the right direction, probably around 11 months at the end of December '25. Moving to POI. On its way to becoming the industry standard for advanced so filters. Momentum is strong. POI is our fourth product to reach around $100 million in annual revenue in fiscal year '25. We now have 10 customers in production and 13 in qualification. Adoption continues across high-end smartphones, Chinese OEMs and also wearables, including notably the iPhone 16e, Google Pixel 9, Samsung Galaxy Z Flip5 and even smart glasses now with Ray-Ban Meta model. We continue to see strong engagement from all key U.S. fabless. We are also working on next-generation POI to address ultra high-band performance requirements. And finally, FD-SOI adoption continues to build up. We have secured strategic design wins for millimeter wave and envelope trackers across several flagship devices. And we are now expanding into new verticals beyond smartphones. Turning now to Automotive and Industrial. The market environment was tougher than expected. But our long-term road map remains robust. Starting with Power-SOI, volumes were lower in fiscal year '25 due to market weakness. Interest from existing customers and new prospects continue to grow, especially as we are developing road maps aligned with a growing China to China trend. And with a strong outlook for battery management systems, we are preparing the transition Power-SOI to 300 millimeter. FD-SOI is gaining traction in radar and connectivity with adoption expanding across leading players, including GlobalFoundries 22FDX. That said, in fiscal year '25, sales were impacted by 2 key customers who put on hold orders. Despite this temporary pause the fundamentals remain strong, and we see clear momentum building up. And finally, on SmartSiC despite the previously communicated delay in ramp up, commercial interest remain high. We have engaged in a sixth customer qualification and 35 prospects are evaluating our product, many of them in China, a strong testimony of our efforts to remain competitive. Customers continue to validate our value proposition, superior device performance, 10x mono SIC substrates usability and lower CO2 emissions. And beyond EVs, we are seeing rising interest from sector like renewables and data centers. Let's move on to Edge and Cloud AI, where we are seeing some of the most exciting dynamics across our portfolio. Photonics-SOI is another strong example of our product diversification and should become our fifth product to reach $100 million in annual revenue in fiscal year '27. We are now a leading supplier of Photonics-SOI for optical transceivers in AI data centers, enabling greater performance, lower latency and lower energy consumption. Photonics-SOI is embedded in 100% of next-generation AI data centers. Silicon photonics is the leading architecture for co-packaged optics being adopted by industry leaders like NVIDIA, Broadcom and Marvell. Together with AI players, we are accelerating the photonics product road map, keeping Soitec at the core of next-generation AI architecture. FD-SOI is also powering AI at the edge, in smart devices, wearables and industrial applications. Adoption is growing fast, and we are collaborating with multiple foundries and IP providers to bring the next wave of products to market. Finally, in Imager-SOI, the phaseout of our first generation is completed. We are already developing the next-generation platform with improved performance for advanced near infrared sensing and imaging. A few words now on our key financials. Despite the top line pressure, EBITDA margin remained resilient, a clear reflection of our operating discipline. Operating cash flow improved, supported by tighter control of working capital and our balance sheet remains very solid, giving us both flexibility and stability. All in all, we maintained strong cost control, optimized fab utilization, wherever possible and continue to prioritize investment in R&D and sustainability even in a more constrained environment. We also made strong progress on our sustainability road map, which remains a core pillar of our strategy and a key differentiator for us and our customers. It enhances our attractiveness to talent and partners and drive industrial efficiency. On the environmental front, we reached our carbon emission reduction targets 2 years ahead of plan, as validated by the SBTi. We have also made significant progress on water reuse and reduced overall water intake. On the people side, we continue to lead on diversity in our industry while strengthening our efforts to make Soitec a place where people can grow and thrive. And in governance, we are raising the bar. We are rolling out training and awareness programs across the company and ensuring that ESG performance is embedded in incentives at all levels. As we just spoke about people, another key highlight of this year is appointment of Ruth Hernandez as Chief Commercial Officer. With a strong engineering background, Ruth is a veteran in the semiconductor industry where she has held several executive positions in Texas Instruments, Maxim Integrated and global foundries. During her career, she has driven exponential revenue growth in all different segments working in several countries across the globe. After only 4 months with us, she is already a very strategic part of the executive team contributing to tech Soitec to the next growth chapter. Also, you heard yesterday about a new addition to our management team, and I'm very glad to introduce you to Albin Jacquemont, who was appointed yesterday. Albin brings over 30 years of international experience in financial leadership, strategic planning and corporate governance. His career spans listed and private equity-backed industrial and technology companies, including Inetum, Saur, Altran Technologies, Darty and Carrefour throughout his tenure. In this organization, he has led major financial transformation and delivered significant value through operational performance improvement, cash flow optimization and M&A execution. In his role, Albin Jacquemont will be responsible for all finance related matters at group level. He will play a pivotal role in reinforcing Soitec's financial and operational foundations and supporting the company's next phase of sustainable growth and value creation. He succeeds Lea Alzingre, who is stepping down to pursue new professional opportunities having supported Soitec's growth over the past 6 years. I would like to warmly thank Lea for a strong commitment and valuable contributions to Soitec's development during her tenure. Looking ahead, giving ongoing uncertain environment, we are withdrawing any guidance given previously and will guide revenue on a quarterly basis. Q1 '26 will reflect the phaseout of imager-SOI and ongoing inventory corrections with revenue down approximately 20% year-on-year. This number reflects a further significant correction in RF-SOI inventories, a continued weak automotive market and a strong edge and cloud AI dynamic, partly offset by the phaseout of imager-SOI, which contributed $25 million in Q1 fiscal year '25. We are adjusting our investment pace. CapEx will decrease from EUR 230 million in fiscal year '25 to around EUR 150 million in fiscal year '26, reflecting our agility and disciplined capital deployment. Our fiscal year '26 profitability model is designed to preserve margin resilience by reinforcing cost control while continuing to invest in R&D with discipline to secure future growth. The macro environment continues to evolve from geopolitical tensions and tariffs to FX volatility and climate-related risks. We operate in a world of growing complexity. That's why we remain absolutely focused on what we can control. We are strengthening our foundation and accelerating diversification continuing to invest in R&D, deploying capacity with agility across both SOI and compound platforms driving diversification across product, customers, geographies and suppliers, building strategic partnership with key players in the ecosystem. And just as important, we are investing in our culture, our tools and our processes. All of this while maintaining costs under control as we navigate a tougher environment. Let's talk about product diversification, one of the clearest sign of our momentum. Just 3 years ago, only RF-SOI generated revenue well above $100 million. Today, Power-SOI, FD-SOI and POI are now around or well above $100 million of revenue annually. And we expect Photonics to join them this year or next as adoption continues to accelerate. These products are now becoming established industry standards. We are focused on the next wave of innovation, SmartSiC gaining traction beyond EV into renewables and data centers and NOI, emerging as a key enabler for optical transceivers in AI infrastructures and crucial to expand the range of our POI solution for higher frequency saw filters. GaN and SmartGaN, targeting both RF and automotive segments and next-generation Imager-SOI, expanding into a broader range of advanced sensing applications. And we are not stopping here, of course. We are developing new materials to extend SOI road maps within our extended market and markets that we do not address yet and new materials beyond SOI, new layer transfer technologies to strengthen our position across markets. There is not a market that we cannot serve today or tomorrow with our technologies. We are also accelerating diversification on other strategic fronts. On the customer side, we are expanding our base and reducing dependency on our top 5 customers, a sign of broader market traction. Geographically, we are building a truly global footprint take China, for instance. Our direct exposure to China has more than tripled in the last 3 years. And on the supply side, we are actively diversifying our supply base, securing long-term growth and strengthening our ability to protect our margin. While the short-term remains challenging and uncertain, our fundamentals are strong. And we continue to strengthen them as we accelerate diversification. As end market normalized, we are getting ready to fully deploy our operating model. Our addressable market is expected to grow from around 5 million wafers in 2024 to 12 million wafers by 2030. This supports our potential 2x revenue opportunity. This timing will depend partly on what we control, R&D, execution and agile capacity deployment and partly on external factors like macro trends and customer adoption. When we get there, our cost structure is designed for operating leverage. With tight OpEx control, improved EBIT margin and disciplined working capital we are positioned to significantly enhance cash generation over time. To conclude, fiscal year '25 was a year of transition, but also a year of progress. Headwinds will persist into fiscal year '26, but we are getting ready to emerge from this cycle more diversified, more resilient and more agile. We have continued to invest in our innovation, our people and our long-term impact. And we are now ready to deploy our operating model with strong upside across revenue margin and cash generation. Today, we are building Soitec for the decade ahead. Thank you very much for your attention. It is now my pleasure to hand over to Steve Babureck, our EVP Strategy, Steve.

Thank you very much, Pierre. Hello, everyone, in the room and on the webcast. So let's take a moment now to walk through our strategic outlook. So first, we are seeing powerful mega trends reshaping the global economy. AI, mobile connectivity and electrification are all fueling semiconductor demand. These are long cycle shifts and they continue to drive strong, sustainable growth for Soitec. Second, our differentiation is clear. Engineered substrates are not just materials, they are enablers. They unlock features that make chips smarter, more connected and dramatically more energy efficient. This is the core of our value proposition. Third, our addressable market is scaling fast. We expect it to grow at around 15% CAGR through 2030, rising from around 5 million wafers today to 12 million wafers by 2030. That is a massive opportunity for us. Yes, as Pierre said, we are managing short-term headwinds, notably excess SOI inventories, but we also see upside from our innovation incubators and emerging markets. Put together, these 3 drivers give us a clear, compelling path for long-term growth, and we are executing with speed and precision to capture it. From the PC era to mobile and now, of course, AI, semiconductors have powered every major technology shift. Today, we are laying the groundwork for the AI era. In 2025, global semiconductor sales are expected to hit around $710 billion, and the industry is on track to reach $1 trillion sales by 2030 with AI, of course, driving most of that growth. Now looking at the history of semiconductors, it has not all been smooth sailing. Geopolitical tensions, macro uncertainty and inventory corrections have tested the industry again and again. But each time we have seen the same thing, a pretty strong rebound. Because beneath the noise, the long-term fundamentals of the industry remain rock solid for semiconductors. On one side, we have the analog chips, the semiconductor chips that capture and communicate real-world data. By 2025, global data creation is expected to hit 180 zettabytes and more than double to 400 zetabytes by 2028. This growth is being fueled by AI, IoT and a massive wave of connected devices. So to put this in perspective, 1 zetabyte with 1 zetabyte, you could store the entire content of every book ever written not just once, but over 100 million times. This is the volume that we're building for. On the other hand, you have digital chips, the chips that process and make sense of all the data. As the data volumes explode, the ability to process it fast and intelligently become just as critical. We are not just following the Moore's Law anymore. We're going beyond it. Since 2010, the computing power required to train AI model has been doubling every 5 to 6 months. That is not incremental. This is exponential. This acceleration is powering real-time AI autonomous systems and the next wave of digital experiences, where data becomes insight instantly. To put this enormous numbers in perspective again, the human brain is an astonishing machine, but it would take a single brain over 30 million years to match the amount of thinking that went into training GPT for all. So data is exploding, compute is accelerating exponentially. Together, we're setting the stage for a major shift. This is what is driving the AI revolution from smart assistants and robotaxis to education, health care and beyond. And of course, this is only the beginning. AI solutions and services are projected to generate nearly $22 trillion in cumulative economic value by 2030. This creates a powerful self-reinforcing cycle putting semiconductors at the core of the next wave of global economic growth. What is the flip side? AI and electric vehicles are driving global electricity demand to new heights, faster than anything we have seen before. This is creating real pressure on energy infrastructure, and this is why we need scalable, energy-efficient technologies that can meet this demand without compromising sustainability or reliability. So what does that mean for us, for Soitec? Today, Soitec engineered substrates matter more than ever. So let's zoom out for a second and look at the global wafer demand. Our semiconductor industry consumes on an annual basis, around 300 million wafers a year, and the vast majority of these wafers are made on bulk silicon. Only a small share of that volume today fall within our addressable market, which is focused on engineered substrate. So what's the difference? A bulk wafers is only the starting point. An engineered substrate is a bulk wafer that has been enhanced with additional layers that add physical functionality, improving performance, power efficiency, both at the chip at the semiconductor level, but also at the system level, the smartphone, automotive, edge and cloud AI. By design, engineered substrates deliver value where it matters most at the device and at the system level. Engineered substrate unlock better performance and greater energy efficiency across a wide range of applications, whether it is RF chips, delivering faster connectivity and longer battery life in your smartphones, optical interconnects, powering the backbone of AI data centers or maybe even quantum computing in the near future. In short, engineered substrates are what makes this breakthrough in semiconductors possible. Given the role, the critical role that engineered substrate play in enabling high-performance, energy-efficient semiconductors, this is no surprise that the demand for our product is accelerating across our 3 end markets. In Mobile Communications, supported by the recovery of the smartphone market, the ongoing adoption of 5G and Wi-Fi 6, 6E 7 technologies and the emergence of new use cases such as satellite communications or fixed wireless access. In automotive and industrial applications also growth is being driven by the adoption of electric vehicles, the increasing penetration of ADAS systems, and also new industrial applications for data centers or renewable energy systems. Finally, in Edge and Cloud AI, momentum continues, thanks to sustained investment in the hyperscale AI infrastructure as well as the expansion of the Edge AI ecosystem. So taken all together, we estimate Soitec addressable market to grow at a robust 15% CAGR through the end of this decade. In terms of products, we can split our addressable market into 2 main categories: SOI first, which remains the core of our portfolio, this market is expected to grow at more than 10% per year. Second, compound materials, silicon carbide, gallium nitride, POI, LNOI, now for silicon photonics. This is scaling even faster, and the growth in this segment is projected at around 30% per year until the end of this decade. So overall, we anticipate 15% CAGR for addressable market. And this is why diversification across materials is such a strategic advantage for Soitec. Now in the short-term, clearly, there's still some uncertainty mainly due to the persisting excess SOI inventories at some of our customers, even as Pierre said, in RF-SOI, it's clearly going in the right direction. This could continue to weigh on near-term demand for SOI before we see a clear rebound. But that said, the fundamentals are intact, and we are focused on navigating this phase with discipline. On the other hand, looking further ahead, supported by our innovation. We do see strong potential upside beyond the 12 million wafers projected for 2030. This would come in part from our incubators, which are exploring new products in RF, power, image sensing and even advanced computing. These programs are still early and at different stages of maturity, but they reflect our long-term ambition and commitment to keep expanding the scope of engineered substrates and to capture new growth opportunities over time. So in summary, global megatrends from AI to energy efficiency are driving a major shift in semiconductor demand. Our engineered substrates are central to that major shift, and we are accelerating our diversification to meet that demand. Engineered substrate enabled smarter more connected and more energy-efficient semiconductors, delivering value right at the heart of the device and at the system level. And as a result, our addressable market are expected to grow at 15% CAGR with potential upside from our new technology incubators. This is a perfect transition to introduce our next speaker, Christophe Maleville, our Chief Technology Officer.

Thank you. Steve, and hello, everyone, in the room in Paris and in the webcast. If strategy sets the direction, technology is the engine that gets us there. And I'm very pleased today to walk you through how we are advancing innovation at Soitec and why it's key to everything we do. So at Soitec, our innovation model is scalable, focused and built for impact. We continue to invest steadily in R&D, not just to maintain our competitiveness but to accelerate diversification and drive growth. This model has proven its ability to deliver efficiency and speed, taking innovation from lab to fast to fab fast. But innovation isn't just about what we are building today. It's about what we are unlocking next. It's about value. Our unique and versatile material expertise enables our customers to deliver devices with superior performance and energy efficiency. It all starts at the substrate level. We innovate at the substrate level and create value where it matters most directly at the chip and device level. This is how we differentiate. Finally, we've launched dedicated incubators to push the frontier even further on SOI and beyond. Incubators help us explore potentially disruptive projects, assess different revenue streams while focusing on high differentiation and optimum resource allocation. Customer engagement is central, ensuring alignment with market needs and accelerating the path to impact. We don't innovate in silos. We are constantly working to push the boundaries of what our technology can do. We do that with our own capabilities and also by staying fully connected to a reach and global innovation ecosystem. We partner with leading players around the world foundries, fabless, OEM, research institutes to amplify our innovation power and stay ahead of the curve. We are deeply involved in driving global innovation road maps ensuring we don't just follow technology trends, we help shape them. And we keep our eyes wide open, constantly scanning the technology landscape to watch for changes and spot emerging trends early and turn them into real product opportunities. And if a disruption happens, we want to make sure we are not reacting to it and we are leading it. When we talk about semiconductor innovation, the industry typically follows 3 main paths. First, there's Moore's Law and I won't spend time on that one. You all know the story. Second, more than more, where innovation comes from new materials that unlock new functionalities, TCRF, power, photonics and more. This is where Soitec is fully active and where we continue to lead and differentiate. And third, 3D integration combining different technologies in a tighter footprint and more aggressive form factors to deliver higher performance and energy efficiency. Here, we are developing a unique and promising platform, transistor layer transfer or TLT. TLT enables 3D heterogeneous integration of any substrates combining more functionalities into a single package and doing it with higher throughput, lower material usage and greater design flexibility. So what do we bring to the table specifically? We bring 3 things: die performance, high-quality data and energy efficiency. On performance, we enable more value per square millimeter and the lower cost of ownership with products like POI and Photonics SOI delivering real system level gains. On data, our substrate drive better connectivity and faster transfer speeds from RF-SOI in 5G to Photonics-SOI in data centers. And on efficiency, we help reduce power and greenhouse gas emissions with up to 70% lower CO2 footprint on SmartSiC and low energy use across the board. It's this combination performance plus efficiency that defines our impact. Let's now take a first concrete example on how we push device performance POI for high-frequency filters. We are now developing next-generation POI substrates to get to higher frequency, higher performance. And this higher performance, saw filters for advanced RF front end. At the heart of this advancement is our Connect POI stack. This unit structure combines a Piezo electric layer with through-silicon engineered for high performance. What that means? Sorry, some technical problem. But what that means? First, new materials are being introduced to support wider bandwidths and higher frequencies. We are also optimizing the top layer thickness to extend performance beyond 3 gigahertz while ensuring strong manufacturing yield and multiplexing capability. The result is a better integration of filters for both transmit and receive pass, a critical requirement for the next generation of 5G and 6G devices. Among the new materials, we are introducing a lithium niobate, which brings more performance in the POI family. And we are leveraging this platform as thin-film lithium niobate for high-frequency modulators in silicon photonics. Talking about silicon photonics, let's look at Photonics-SOI, a key enabler for high-performance optical transceiver in all data centers. Our substrate is designed to minimize optical losses and maximize signal quality. What makes the difference? Precise control of top silicon thickness, improving modulator performance, cross-stock and yield. Optimal surface roughness, reducing optical losses at the interface and boosting photodiode responsibility. Mechanical stability to ensure robustness in high-volume wafer handling and load effectivity, which is critical for through-silicon via driver integration and chip to fiber attachment. All of this enables the performance needed for next-generation pluggable transceivers and copackage optics, which lower latency, faster data rates and better energy efficiency. This brings me to our anything-on-anything metrics. This is our toolbox, a toolbox that enables us to deliver these next-generation products. It shows you our strengths, our ability to combine different materials to create differentiating substrates. All of these wafers are combination we have demonstrated combining the best active layer with the range of functional substrates we have used so far. Behind each of these wafers, there is multiple years of R&D, numerous patents and secret recipes. With all of these assets in the bank, we can innovate faster, we can innovate better and bring unique added value engineered material to market. Let's now talk about how we stay creative, focused and enable upside. That's exactly what our incubator strategy is designed for. We've launched 4 incubators on SmartGaN, image sensor, advanced SOI and next-generation FD-SOI. Each one is a focused internal venture program built to explore high potential opportunities at low cost and high speed. The model is simple. We start small, invest progressively and track progress constantly. We work hand-in-hand with customers and ecosystem partners from day 1, and we focus only on segments where we see true differentiation potential and strong return on investment. It's about expanding our product portfolio with agility, with cautious investment and sustained execution excellence. To wrap up, at Soitec, we've built a scalable and efficient innovation model, one that delivers today and prepares us for what is next. Our technology road map is driven by deep material expertise, unlocking performance and efficiency right at the device level. And with our incubators, we are expanding into new frontiers with focus, agility and a clear eye on where we can truly differentiate. Innovation is just -- is not just part of what we do, it's the foundation and how we grow and execution is what turns it into results. To show how we are scaling our operations with agility, efficiency and sustainability, I'll now hand it over to Cyril Menon, our Chief Operating Officer. Thank you very much.

Thank you, Christophe. Good morning, good afternoon, and good evening to all of you. So let me now take you through how we are managing our industrial operation at Soitec, especially in this uncertain and rapidly changing environment. We are navigating short-term volatility with discipline while building the formation for long term. Our operational focus is centered on 3 pillars: First, deploying a global industrial model that scale efficiently without overbuilding. Second, keeping this model agile and capital efficient, enabling us to adapt to demand fluctuations. And third, continuous sustainability in every aspect of how we build and run our fabs. Let me start with how we drive our operation at Soitec. Our model is built to scale efficiently and adapt even in a volatile environment, and we focus on 3 levels. First, maximize operating leverage in the current uncertain environment, we have strong levers to protect our margins. Fab allocation, including same way and flexible workforce deployment. Bulk optimization to align our sourcing with market trends and in-sourcing steps like SOI refresh to lower cost, reduce emission and absorb fixed cost ahead and earlier. Second, minimize cash consumption. We scrutinize every cost on the OpEx side from materials to logistics. We also make sure that we delay fixed costs like building or hiring as much as possible, finding creative ways to optimize our current assets. And third, reallocate assets and cut idle capacity. Speed matters. We use common tools across fabs, move teams where needed and shift production line to meet demand, all without new infrastructure. This flexible lean model keeps us responsive, protects margin, and preserves cash. No matter the global context. What does this mean for our industrial operation footprint? Is our ability to keep delivering in line with dynamic customer demand using the same fab year after year. That's by design. We build for resilience and adaptability not just for scale. In downturn, we protect without destroying, preserving talent, infrastructure, and readiness to rebound fast, especially in mobile and auto. In expansion, we are ready to ramp quickly and efficiently. That's why our footprint is scalable, robust and agile, able to absorb both slowdowns and surge with minimal disruption. Tech POI. Demand is strong, and we are scaling without building a new fab, leverage existing capacity at Bernin 3 and at the same time, the SOI market is shifting to 300 MM, where we are more competitive. If 200 MM SOI demand softens, we can reallocate that capacity to POI where growth continues. This ability to switch allocation lets us respond in real time and boost output with a limited investment or core principle of our capital discipline. We will also drive efficiencies through synergies. Tool commonality across compounds means fewer assets and share maintenance and internalizing SOI refresh, lowest cost reduces emission and helps absorb fixed cost earlier. This has levers flexibility, reallocation and share infrastructure that make our model resilient, efficient and build for profitable growth. In terms of capacity, we are deploying our operating model to grow from around 3.4 million wafer per year to around 4.3 million wafer per year. The biggest driver of that increase is POI, where we now see a potential to reach 1 million wafer annually. What's important is that we can achieve this by raising part of our Bernin 1 fab, which drastically reduced the CapEx required. In parallel, we continue to invest in 300 MM SOI to support growing demand and stay ready for new opportunities, and we are advancing SmartSiC deployment steadily, in line with customer program. In short, we're scaling. But we are doing it with discipline and by making the most of what we already have. This approach is also reflected in our CapEx strategy. To deploy our operating model and materialize to roughly double the size of the company, we anticipate a total investment of around EUR 770 million. Importantly, that's not for building new fabs, it's about making smarter use of what is already in place. For 300 MM SOI, we're investing mainline tools, notably for new products and also for the completion of the Singapore expansion. For POI, we are scaling beyond initial plan by reusing capacity especially in Bernin, which drastically reduced the investment needed. SmartSiC continued to progress with investment aligned to confirm customer demand. Beyond those, we're also funding enablers like automation, sustainability and IT, which help us scale efficiently and future-proof our operations. So overall, we are investing, but we are doing so selectively step by step and with a strong capital discipline. In this unstable macro environment, resilience matters more than ever. We are focused on what we can control and we've made meaningful progress in 3 key areas: one, yield improvement. We've implemented tighter process control across fab, integrate fab teams with engineering and continue our global yield management strategy. The result year-on-year yield improvement, which directly translates into margin protection. Second, automation. Robotics deployment continues across our production line, improving direct productivity and consistency. Our goal is not just to automate for the sake of it, but to support scale with fewer fixed costs and lower viability. Three, sourcing. We secure long-term strategy agreement with key suppliers. We've also diversified, especially on critical materials to reduce concentration risk and improve negotiation leverage. This operating backbone is what allow us to stay competitive through the cycle. Now let's talk sustainability, a topic that is increasingly central to our operational strategy. Scope 1 and 2 emissions are down 37% compared to 2020. and we reach our 2026 SBTi target 2 years ahead. Water reuse. We're now reusing 44% of our water and we are on track for 50% by fiscal year '30. Energy. In France, we operate on 100% low carbon energy. And in Singapore, we are now above 50%, and still rising. Transport. We shift to sea freight as our default mode, reducing internal logistic emission by 75% over the past 2 years. This effort are not just about compliance. They are about operational resilience, cost savings and strengthening our partnership with customer who increasingly factor ESG in their sourcing decisions. Let me close with 3 messages. First, our operating model is scalable, efficient and ready to support the next phase of Soitec's growth without compromising capital discipline. Second, we are building agility in our DNA. Reallocating capacity, aligning with demand and driving productivity with automation and share assets. And third, we are executing a best-in-class sustainability road map, reducing our environmental impact while enhancing competitiveness. Thank you very much. I will now hand it over to Steve for the last part related to finance.

Thank you very much, Cyril. So as you understand, during this CFO transition, I have the privilege to present the finance part warming up for Albin for the next time. So key messages for this finance section. So fiscal year '25 has obviously tested our ability to manage through uncertainty, both in terms of visibility and performance. Before diving into the numbers, 3 takeaways. First, we have accelerated the diversification of our business model across products, geographies and customers to better absorb short-term market volatility and prepare the group for recovery. Second, we have strengthened the flexibility and agility of our operating framework. This is what enabled us to preserve profitability and manage cash effectively in a volatile environment. Third message, we are now positioned to capture the full potential of our operating model. This means significant revenue upside, improved operating leverage and stronger free cash flow generation. So with that in mind, let's take a closer look at the fiscal year '25 results. So let's start with the highlights. We delivered EUR 891 million in revenues, down 9% year-on-year at constant ForEx and scope, in line with our revised guidance back in February this year. Despite this revenue decline, we maintained a resilient EBITDA margin of 33.5%. This performance reflects strong cost discipline and our ability to continue investing in innovation. Also importantly, we generated positive free cash flow of EUR 26 million. This was driven by a reduction in CapEx and better working capital management, two areas where our agility made a difference this year. Pierre already commented on the revenue performance. So let's move directly to our gross margin performance. Our gross margin in fiscal year '25 came in at 32.1%, down 2 points versus last year. This reflects two main headwinds higher depreciation expenses as expected with recent capacity investment and lower volumes, particularly in mobile and automotive. That said, our model once again demonstrated its resilience. We were able to partly offset these pressures, thanks to tight cost control, strong industrial execution, as outlined by Cyril, and to some extent, support from public grants such as IPCEI. Let's continue on the P&L. We delivered EUR 136 million of current operating income or 15.2% of revenues, a 6-point decrease compared to the previous year. This performance reflects 3 drivers: first, drop in gross margin, as previously discussed; second, a 39% increase in net R&D expenses. We continue to invest in talent, strengthen our innovation, partnerships and reduced R&D capitalization. Third, SG&A expenses were up 4% year-on-year. While we kept a strong handle on cost discipline, we were again a difficult comparison with EUR 4 million of nonrecurring tailwinds last year. Despite all this, our EBITDA margin held steady at 33.5%, just 0.5 point below fiscal year '24. A few additional remarks on the P&L. Other operating expenses totaled EUR 16 million, mostly related to the disposal of Dolphin design, a noncore business for us going forward. Net financial result came in at EUR 9 million loss, reflecting interest from recent financings and some foreign exchange losses. Our effective tax rate increased from 11.3% to 17.4%, mainly due to nonrecurring items this year. All in, we delivered a net income of EUR 92 million, representing 10.3% of revenue. Now let's turn to cash flow. Operating cash flow reached EUR 202 million, up from EUR 165 million last year. Working capital was more moderate than last year. The EUR 79 million change is mainly due to higher inventories driven by a shift in customer demand and 2 customers putting deliveries on hold, higher receivables, reflecting a less favorable customer mix and specific commercial agreements. Regarding CapEx which totaled EUR 230 million before leases and interest in line with the guidance. They included additional POI capacity in Bernin, expanded RF-SOI and Photonics-SOI production in Singapore, refresh investment for 300-millimeter SOI in Bernin, completion of the smart SIC 200-millimeter pilot line and ongoing investment in IT and sustainability. Thanks to tight cash discipline, we delivered positive free cash flow of EUR 26 million. Looking at to the working capital, which ended the year at EUR 488 million, up EUR 95 million compared to last year. This increase in working capital reflects 2 main factors: First, receivables remain high with a stable DSO at around 113 days. This was largely due to a strong Q4 revenue contribution and diverse payment terms across our customer base. Second, inventories remain elevated as we navigated an adjustment phase in demand mix, a consequence of 2 customers requesting to put some deliveries on hold. Turning to net debt. We closed fiscal year '25 with a net debt of EUR 94 million, up EUR 55 million from last year. This net debt increase was primarily due to EUR 65 million in new lease liabilities mainly related to leaseback arrangements for the Bernin 4 building and tools related to POI and SmartSiC. Overall, this increase in net debt is moderate, and we continue to operate with a strong and flexible capital structure, fully aligned with our investment strategy and long-term goals. To conclude on fiscal year '25 numbers, our balance sheet remains healthy with strong equity and moderate net debt. So now let's talk about the outlook. As Pierre mentioned, we have moved to a quarterly guidance approach to reflect our uncertain environment and ongoing volatility. So Pierre already covered the outlook for Q1, so I'll focus on the rest. First, on CapEx. We are moderating our investment in fiscal year '26 with CapEx expected at around EUR 150 million, down from EUR 230 million in fiscal year '25. As Cyril highlighted, we're operating with very strict capital discipline, and we prioritize flexibility and maximize asset utilization. Regarding financing, as you know, we have EUR 325 million OCEANE convertible bond with a maturity in October 2025. We're planning a partial refinancing of this convertible bond with about 2/3 through non-dilutive instruments and the rest covered with available cash. Regarding profitability, we will continue to manage the cost tightly, and we will maintain a high level of R&D to support our long-term differentiation. Now to give you a sense of our operating leverage potential. In fiscal year '25, if you look at our cost of goods sold structure, it was made up of roughly 70% to 75% variable cost and around 25% to 30% fixed cost. So this setup enables margin expansion as volumes recover. Regarding the revenue potential, you remember the slide that Pierre described earlier, we are deploying our operating model and see significant potential to double our revenues. The timing of this upside will depend on a mix of a few factors, some within our control, like how we execute R&D, deploy capacity and move with speed. And some of these parameters are outside of our control, macro trends and market cycles, customer adoption, et cetera. When we reach that next level of revenues, there is significant upside on profitability. Our current EBIT margin, which today stands at around 15%, has a potential to move towards around 25%, thanks to 3 key drivers. First, operating leverage. Remember, our cost of goods sold breakdown. It gives us strong leverage in growth cycles, and that's going to be a big part of our EBIT margin improvement. Second, as we scale, we will see better absorption of SG&A and R&D with a larger revenue base. This is a structural driver of our margin expansion. Third, we will continue our cost discipline, a cornerstone of our model even in a gross mode. At the same time, we remain committed to sustain investment in R&D. Just to note, this model assumes a euro-dollar exchange rate of 1.10. Let's now turn to cash generation and the potential we unlock as we scale our model. As we deploy our operating model, we see clear upside in free cash flow, driven by 3 core levers: first, profitability improvement, as we just talked about. Second, working capital efficiency. We are targeting a reduction from 55% of sales in fiscal year '25 to around 40% over time. We will reduce working capital with a better inventory and receivables management as we return to a more normalized production run rate. Third, lower capital expenditure intensity. We expect our annual CapEx to sales ratio to decline from 22% in fiscal year '25 to roughly 15% as we better leverage our existing industrial footprint. Together, these levers create a clear path to stronger free cash flow and support a step-up in our post tax return on capital employed from around 7% today to around 20% through the deployment of our operating model. To conclude. One, we accelerate the diversification of our model to mitigate current market volatility. By doing so, we are preparing the group for our upcoming recovery. We have a flexible and agile model, which should help us secure margin in a quite uncertain environment. And finally, our operating model enables 2x revenue upside with strong operating leverage. Thank you. I will now hand it back to Alex to open the Q&A session.

Thank you, Steve. Before we start the Q&A, I just would like to remind you that you can find our presentation on the homepage of our website. [Operator Instructions] We've got on stage, Pierre, Cyril, Christophe and Steve, but the rest of the management team is in the room as well. So please ask your questions. We will start with the questions in the room.

This is Alex from Bernstein. I have 3 questions, if I may. So the first one is you pointed out in your presentation that 3 years ago, only RF was well above EUR 100 million, and now you have 3 businesses in this category, soon 4. Yet your revenue base is basically the same as it was 3 years ago. So obviously, great execution on what's growing, but the decline of RF is stronger. So I'd like to understand at what point you will see this erosion in RF to stop and stabilize and then we can enjoy growth. That will be my first one. And then I have a follow-up then.

Thank you, Alex. Maybe I will ask Jean-Marc of [indiscernible] to complement my answer. Then we have started 3 years ago with a very, very high level of inventories, very high. Then we moved to 18 the year after, then 14 and we expect to have another, let's say, depletion of few months additional for the coming year. But of course, this level of inventories are based, the calculation is based on the consumption rate, that remained modest. And if the consumption rate is increasing by 15%, that is possible, then you gain 2 months in the calculation. But for the month, we prefer to be cautious because you understand that looking at the volatility and lack of visibility, we are cautious and we prefer to calculate on a modest consumption rate. But we believe that we are reaching now a kind of plateau that's going to make -- that's going to normalize the revenue of RF we're going to generate not perhaps this year, but the year after. And the drivers of this market remain for us because after this correction done, the content increase, even if it's a few percent going to continue. The new application to come, we were talking about new products, 9SW, 3DIS -- 3D IC with UMC Wi-Fi 7 extensions and so I'm going to continue. And we have, even if it's modest growth in volume by few person per year. And everything cumulated will make RF-SOI pick up again, but we need this correction now to go to plateau, but we are now very close to it. Then perhaps, Jean-Marc, if you can add some elements.

Yes, just to complement. So again, thank you for the question. So it's right. In the past year, we did correct the inventory about 3 months. And it's right that the market today still see some growth. I mean the front end module growth for calendar '25 is expected to be 5%, including the smartphone sales at around 2%, 3%. So which means that there is extra content. Extra content coming right from the 5G penetration, which is still not at 100%. As Pierre mentioned, we are winning share also in the Wi-Fi, Wi-Fi 7, with the integration of Pierre. Then we see also the premiumization of the smartphones. So the share of the premium phones is increasing. And on the drawback on the headwind, we see the -- there is more and more shrink. So the fact that the fabless, the foundry are designing today in 300 millimeter helps them to do more shrinks to address advanced nodes. And also to optimize the footprint within the modules, which was not the case in the past. So all in all, I mean, we see a content growth of about 3.5% in the coming years. I mean before the 6G penetration, which is a different story. So -- and again, I think it was well mentioned in the slides, we have to face this inventory corrections. We believe we still have to correct about 3 months this year to bring the level below 12 months. overall. And then we'll be close to what we call a new normal because, I mean, again, before COVID, the normal was more in the range of 6 to 9 months. Today, we see just in case scenario is still in place, especially we've seen some restocking in the latest Q4 because probably of the tariff threat. And yes, so I mean we still have to correct a little bit, I mean, before seeing the real demand of the market.

Okay. This brings me to my second question. Could you quantify the revenue Soitec could realize if you didn't have all these moves in inventory, had a bit of destocking, had a bit of restocking towards the end of the year, apparently as well. So it will be helpful to understand where your revenue base is if your customers were just ordering what they consume in their production. And then just a final one for Cyril. What was the average capacity utilization? It is my assumption that it's about 50% to 55%, correct? Or is there a mistake there? And also on the Pasir Ris expansion, is that now shelved? I didn't see that in the slides. Obviously, the market doesn't really support that right now. So if you could give us a perspective on that.

I propose to start with capacity. Capacity loading, for sure, as this is not as straight as giving you a standard figure for all the capacity. This is really heterogenous in between our different plants. When we look for sure, POI,was 100% full last year, will be 100% full this year as well. So here, the demand is strong. We have to, for sure, the 300 mm loading is much lower than 300 mm. That's the reason why we revised our industrial strategy, transforming, I mean, cutting some capacity in Bernin to transform this capacity into POI and reuse asset, which, by the way, are fully depreciated since it has been invested as 2 decades ago almost. And basically, regarding 300 mm, I think that this one is a bit tricky as we have seen in fiscal year '25 as in fiscal year '24, we phased up high seasonality between H1 and H2, especially. So in H2, 300 mm loading was 100%. Obviously, in H1, it was half of it almost which gives you a bit of an idea what was the average loading in between 300 mm for the fiscal year '25. Then back to your question regarding Pasir Ris. Obviously, in Pasir Ris just for -- just to recap for everyone, we have already one plant with 1 million capacity. The shell is fully equipped, will reach 1 million. Today, we have deployed 80% of the capacity, meaning that we have the capacity in Pasir Ris deployed at 800,000 a year. We don't use yet the total industrial footprint in Pasir Ris 1 and that's the reason why even if the shell of Pasir Ris expansion is ready, we won't equip today and in the coming quarters, a clean room to not generate any fixed cost in Pasir Ris extension, waiting for the, I mean, some tangible information traction from our current core business or potential upside to deploy a clean room and equip and obviously generate fixed cost only when we are 100% sure so that we will use this capacity.

Yes. And just maybe regarding the first question. So we're guiding on -- we're guiding the next quarter. So we don't want to pay too much what-if scenarios. But if you remember, we posted a presentation at Mobile World Congress this year where we showed you the RF-SOI revenues against the smartphone market in volumes. So pre-COVID, which was a year ending in 2020, RF-SOI was in the range of $450 million. You can see that it jumped pretty high despite and against the smartphone market, lower performance. So if you extrapolate from that $450 million and plug some 10%-ish every year until now, you see up roughly where we could be in RF-SOI if we didn't have the inventories disruption in the supply chain.

Emmanuel Matot from ODDO BHF. First, have you seen a further deterioration of some of your markets recently due in particular to the trade war? Do you see more customers asking for orders to be put on hold? Second, do you think Soitec could capture some of Wolfspeed business for silicon carbide wafer manufacturing because this company is facing major financial risk and still doing 400 million euros or dollars in revenue in silicon carbide wafers. Last question. Just to clarify, the euro-dollar exposure because you mentioned EUR 0.05 evolution has an impact of 150 basis points on your EBITDA margin, it was 100 basis points a few years ago. So it has increased. I'm quite surprised knowing that the Singapore platform has also increased. So it takes. So do you know why this exposure is even higher than a few years ago.

Okay. I'm going to give the last question, Emmanuel, to Steve. For the 2 first questions, then we don't see deterioration. The term is very strong. But due to volatility uncertainties, we see customers taking time before making decisions. We see customers thinking yearly, not multi-yearly. We see customers in some cases, asking for delivery in advance in order to avoid some tariffs impact. But at the end of the day, we see a bit more of nervosity regarding the overall geopolitics environment. But no deteriorations in, first of all, the segment shares we have today, on the contrary. And secondly, in the dynamic of penetrations we have in different markets where we diversified so rapidly. Regarding -- and one of it is, of course, SmartSiC, even if, of course, we are still in the adoption phase and we see through the Wolfspeed, difficulties that the market is taking time and is a kind of new -- is looking for a new shuffle. The SiC market, the SiC market is now the big [indiscernible] is in China, where the rising stars in mono SiC are settled. And we see that some key players are now working with mono SiC suppliers in China. And Wolfspeed is still, of course, let's say, one of the non-Chinese suppliers. The difficulties of Wolfspeed but, of course, I don't wish any bad things to this company. But in case of persistent weaknesses -- it could be an opportunity for us to be the kind of a non-Chinese independent SiC supplier with -- on top of it, the ability to enhance the product because SmartSiC is bringing additional advantages towards mono SiC. And it is recognized by the 6 under qualification customers we have today. plus the 35 under evaluation. And this is -- this could be an opportunity. But of course, we don't wish any bad things to Wolfspeed. But that's something we have to contemplate. Steve, for the third question.

First of all, the cost base in euro has continued to expand, We spoke about the expansion of POI, SmartSiC in Bernin. Remember that what we mentioned for this fiscal year is that 75% of the net exposure is already hedged. And in the previous year, we had a higher net hedging exposure, which could limit maybe the impact of the foreign exchange on the EBIT margin.

Sébastien from Kepler Cheuvreux. One question for Christophe. On silicon photonics, you have already a very strong market share on Photonics-SOI, almost 100% market share. We now see the market shifting to LNOI and ultimately InP. Do you see any competitors coming to those markets? And what could be our market share with the silicon photonics market beyond Photonics-SOI? And attached to that, what kind of market opportunity do you see by the end of the decade? We know the photonic integrated [indiscernible] market is about to grow 40%, 50%. What kind of growth do you see for your own Photonics-SOI business? That would be my first question.

Okay. So indeed, we are quite successful with silicon photonics platform. The important point is that the others you are mentioning with the lithium niobate for the high-frequency modulators and the indium phosphide for the light generation are adders to this market. So the silicon photonic space remains and the lithium niobate modulator is coming on top and the indium phosphide is coming on top as well. So this is going to further improve our position into this market, okay? So -- and the second point, as you understand from the discussion today is that we are developing a global lithium niobate platform that will serve the filters and the silicon photonics, which is super interesting for us in terms of the synergies. As far as -- yes, the growth of the silicon photonics is huge in front of us due to the data center needs, AI and so on. How much we're going to get? More. But you see that we were growing with the silicon photonics platform. And as I said, again, we'll add new material on top as early as possible and that's why we are really accelerating in lithium niobate. And I believe this will bring our position even better. I think it's difficult today to clearly identify where we're going to be in terms of this business. But the pluggable transceiver is going to grow. And on top of that, the co-packaged optics is going to accelerate that.

[indiscernible] Yes. Maybe I can, while you covered most of it. So maybe 1 element that you didn't really mention, right now, if you look at silicon photonics, the application is really in the data center. This is where it's happening. Christophe already commented on what is the trajectory when it comes to modulation, speed and efficiency, et cetera, we have new materials coming in. Obviously, if you think about silicon photonics, it can also be used in different kind of applications. So I do believe that moving forward, we see new opportunities for the same technology. right now and we have, of course, the market share you talked about. I'm looking into other kinds of applications, think of health care, think of -- well, biosensing, think of LiDAR applications, think of quantum computing. I mean the technology as such is not limited to the data center. So I believe that further down the road, there are a lot more applications that we can serve with our silicon photonics solution.

Okay. And one question for Emmanuel [indiscernible]. On SmartSiC, you announced a sixth customer under qualification for your technology. Can you comment a little bit on the qualification process? We know you are progressing step by step but it has been a long process since you started to qualify the first one that was [ FT ]. Can you update a little bit on the progress you've made on the qualification process?

Okay. You've seen the silicon carbide market evolving because at the beginning, it was overall development of the silicon carbide just after Tesla and the -- there were [ no ] shortcuts in the qualification, especially for the auto. Now the business is back on track under the normal auto qualification. So hopefully, evaluation, it's between 12 to 18 months. Qualification could be up to 3 years. So it's a long run from the automotive. But the good thing is that when you are in, you're in for a long time. As of today, what we noticed is that the qualification are doing okay for both [ 150 and 200 ]. We are focusing more on the [ 200 ]. And what we also noticed, Pierre, underline it, is that the demand of the customers are a little bit different also for the data center. So with the question of the increase of the need of energy into the data centers, there's more and more centralized now data centers, starting in DC, 800 volt, going in DC, 400 volt and after that [indiscernible]. And for us, that's a sweet spot for silicon carbide first but also, we are thinking about GaN that could play a role. So that's the kind of things we are looking for.

It's Daniel Schafei from Citi. So just wanted to come back to RF-SOI inventories, given that you mentioned that your goal is to go to 11 months roughly by the end of '25 calendar year. If I understand correctly, in the first Q, we will see the, again, kind of big hits. And then given that you're targeting 11 months or 3 months down, plus the FX and tariff -- potential tariff headwinds, can we then expect 2Q to be more muted in comparison to last year where we saw bigger spike?

We will not -- we will only talk about Q1. Then on Q1, clearly, as a kind of classical pattern we have in Soitec for a long period of time on RF, our customers are getting big orders on their Q1 calendar, that is our Q4 in order to be sure that they're going to be on time to deliver the big 2 periods for smartphone sales that are back-to-school and Christmas time and so on. And this is always the same cycle. Then clearly, with still some inventories in excess the fact we get -- we got big orders and deliveries in Q4 is making Q1 quite weak. Whatever we forecast Q1 quite stable for mobile because POI is offsetting a part of some softness on RF-SOI, including a bit of also FD-SOI activities. And this is really the frame we see for this Q1.

Okay. And the second, just a follow-up in terms of operating model. Before you had a medium-term target of EUR 2 billion, then you kind of now scrapped it. And now you have an operating model, And in your presentation, most of the time, you mentioned 2030. So can we imagine that this operating model is something to achieve by 2030? Or what conditions have to happen in order for this to be achievable?

So no date. But clearly, as soon as we have wins in the sales again and we have many sales now, that's a good news and [indiscernible]. It is clear that today we have the structure, the people, the partners provided EUR 770 million additional CapEx investment, We are in a trajectory able to table our revenue. But again, they are in this world of volatility and uncertainties, the strengths and the coming of the wins in our sales to propel the multi [indiscernible] that we have today.

Oliver Wong, BofA. A couple of questions. First is, could you talk a bit about your customer inventories for not RF-SOI, but maybe Power-SOI, FD-SOI? What's the situation there? And then my second question is, you mentioned the EUR 770 million long-term CapEx investment plan, 30% of that will be for POI, 5% to 10% of that will be for SmartSiC. So is that roughly correlated to what you expect the long-term revenues for these product lines?

I will let Cyril taking the second question. On your first question, is the breakdown of customers by other SOIs and RF products. That was your question? Okay. Then overall, inventories are fortunately lower than for RF in other areas. Then we are more in normality. But everything depends also on the demand. If we take automotive, inventories are in a normality but the demand today is very low. Then automotive industry is suffering from low demand because the market today is very weak and very shy. That's the point. But for the rest, if we look at the different pictures we have today, we are in a normal mode. And in some areas, like photonics, there is quasi, very small inventories because the demand in that case is very high.

So regarding CapEx and capacity expansion. I mean, I guess that you noticed that in our operating model, we consider that we have to increase our capacity from 3.4 million wafer to 4.3 million wafer. This is capacity installed. It doesn't mean that today, we have 100% fab loading, that's for sure. So this will be necessary to extend capacity and load our fab to reach the operating model at 2 billion. Out of it, this plus 900 -- basically 900,000 wafer 25% of it is for SmartSiC. Back to your question. And you have the indication how much this plus 25% capacity increase means in terms of CapEx.

Jakob Bluestone from BNP Paribas Exane. And -- just to get back to the inventories. I mean, you talked -- you mentioned a few times that you expect to get to 11 months of inventory. Can you maybe just help us understand what gives you the confidence that's the right number that we're going to end up? And why don't we go back to the 6 to 9 months. Is this what your customers are telling you? Does that take into consideration maybe a slightly weaker economic environment? Just if you can maybe explain your confidence around that is genuinely the plateau for inventories? Jean-Marc, if you...

Jakob, Thank you for the question. So I will add a few things to my previous comment. So I mean, pre-COVID the pattern was 6 to 9 months. But I mean, as you see, during the COVID, they were short in terms of, call it, inventory. And we had to put most of the customers in the [ allocation ] mode. So today, that's why we see the confidence level of our customers to increase this level to something which is close to 10, 12 months is the security -- I mean, for them, especially with current uncertainties today, geographic, I mean, in terms of geopolitics. So that's why, I mean, today, I believe it will be the, new normal will be 10, 12 definitely for FD-SOI.

And then just if I can ask a question just around sort of margins and, I guess, things you can do to offset revenue pressure. And I appreciate you're not guiding for this year's revenues but you obviously have a fair bit of operating leverage within your business model. And I guess the question is just what can you do to offset some of that? I mean in last year in FY '25, your revenues were down 9% and your operating margins ended up down 6 percentage points. If we saw a similar revenue decline, do you think margins could fall similarly? So if you can maybe just help us understand what are some of the cost-cutting measures that you can take to offset some of that operating leverage, which obviously works against you in a declining revenue environment?

Sure. I mean, definitely, this operating leverage is great in an environment where we grow. Unfortunately, last year, we were not in that situation. So anything that we can play on the P&L is at stake. Basically, we can start from the first item, one of our major cost, which is our supply of bulk. I think that definitely, we have reorganized totally our supply chain diversification and leverage that situation. Two things that we emphasize on that one, yield improvement, quality improvement, which drives customer satisfaction. And this is important, even more in such an environment. But at the same time, does improve our yields and those improve our bottom line. This is really important as well. And 3, in terms of structure, being able to manage the fab allocation. So 2 examples, which is pretty simple. One, the fact that our -- we have managed allocation between Simgui, our partner, 200 mm and our fab in France, where our competitiveness obviously is better, thanks to synergy on that side. Plus a second item, which is pretty important. You notice that we have a new a new fab, Bernin 4. Fortunately, [indiscernible] is idle, I mean, the extension, the project. But in Bernin 4, we have a new fab with new fixed cost. We have been able to offset that by having a strategy, an agile strategy, implementing our refresh, so which is basically something which was subcontracting to some supplier. We internalized that one, which is in a way to absorb all the fixed cost from this new factory. And obviously, you see the benefit, especially in the EBITDA.

Alex, a follow-up and then maybe we take the online questions.

I just have a follow-up. You've mentioned shrink a few times and I'm just looking for reasons why we've seen the smartphone market basically stabilizing for the better part of the past 2 years, yet your revenue is still going to reverse quite strongly. So I'm looking for explanations here. So is shrink an enemy here? And on that note, when Apple brings the modem in-house away from Qualcomm, what's that going to do to the SOI content?

Okay. I will start with the questions. So it's right that the foundry was moving from 18 to 12-inch brings them to advanced nodes. And this is obviously an opportunity for them to benefit from the tighter node and to shrink the die. So we see -- I mean, there is a trend also to add more features on the same die, so that we have more compact die. This is also demand from the smartphone makers to optimize the modules. A few years ago, I mean the modules were not optimized in terms of footprint. And today, there is more and more modules. The smartphone's size and thickness is still the same or even shrinking when you look at ultraslim smartphones. So overall, this is the headwind in the model. I mean, as we shrink, is impacting the overall growth. So -- and again, it's compensated by other factors and other factors include, already mentioned, I mean, in smartphone but also diversification to adjacent markets of front-end modules like automotive, like IoT, like fixed wireless access, like infrastructure, et cetera, which -- where there is front-end modules, which are also integrated. Then on the second question. So today, I mean, Apple is reporting or Qualcomm is reporting that they are going to keep 70% of market share in the modem of the next iPhone generation at least for calendar '25. It might be less in calendar '26, et cetera. This could have some consequence on our side that we have some FD-SOI today, which we utilize for our [indiscernible] tracker. But on the other side, we have strong, let's say, expectation that Qualcomm will be able to bring the next generation of [indiscernible] chipset with FD-SOI. So today, which is integrated already in the Galaxy S24 and S25. Also, I mean, the Apple modem designed by Apple will bring more content to the front-end module makers, the legacy one like Skywork [indiscernible] Where are we today? We have -- we are penetrating also with new products like the POI. So yet, we don't believe that we are going to lose anything but we should win, I mean, in terms of content overall by this new Apple strategy.

Okay. We have a few questions online. Maybe Steve will start with your questions on Imager-SOI. Can we quantify the revenue in fiscal '25 for Imager-SOI and the breakdown, especially in Q1, Q2 and the rest of the year.

Okay. So regarding Imager-SOI in the Edge and Cloud AI division, the revenues in fiscal year '25 was in the -- were in the range of 4% of the total revenues. And they were in large part in H1 '25, so very front-end loaded. And this is why the impact of the phaseout of this product line completely in fiscal year '26 will mostly impact our H1 revenues and as we discussed yesterday, it impacted for $25 million in the first quarter ending in June.

Thank you, Steve. The other item, I'll package 2 questions that would be for Cyril. So inventories and working capital. Working capital on sales at around 55% today. You mentioned a target to go towards 40%. So can you help us to get a sense of how to get there. And the second one is on inventories. Inventories on the balance sheet went higher. What's the right level of stock that we should expect in the future and is this sustainable?

Well, definitely, this year, we are definitely hit by what we communicated beginning of February with 2 customers putting on all deliveries. So basically, these deliveries were already either in inventory in our [indiscernible] or at least in bulk. So that's a direct impact in our inventory and then on our working cap. We expect this to be a one-off situation and to improve over the years.

[indiscernible] Could you elaborate a bit on SmartSiC with the collapse of the silicon carbide price, the bulk, I understand you bring more qualities and properties to the product but what's the impact in the end because one of the advantage is to cut [indiscernible] in more than 10. So a word on than that. And then we are talking about 3 years qualification. I think end of the year, you would be at 3 years with [ sc ]. So I know you don't give guidance anymore but when should we anticipate the start of some [indiscernible] deliveries for SmartSiC.

Okay. So first question is about mono [indiscernible]. It's true that the price are really going down, especially from China. The Chinese government allows 60, 6-0 licenses for 150 and each region wanted to have their own fab. And the result of that is that in 150 millimeters, the price really went down and much faster than what we thought at the beginning. Then the 200 millimeters is more reasonable in terms of first barrier of entry. It's more complex to make it. And there's much less license in China that has been given, less than 10. So probably the price will remain a little bit higher. So what does it tell us today? Is that first with this level of price for silicon carbide that's opened new domain that was not touchable by the silicon carbide because of the price. And now having this price much closer to the IGBTs, to the silicon, probably there's much more options for silicon carbide to be touched, especially where there's more power density needed. For us, because we buy mono silicon carbide and we buy poly silicon carbide and we do the recombination of both, we are working very hard to reduce the cost of the [indiscernible] at the same, or not exactly the same trend but in the trend similar to the mono silicon carbide. For the mono silicon carbide, we are benefiting for the low price. And we are working with the production to reduce our production costs. So we are very good at challenging our production costs when the volume will be in and we know how to leverage that. So now it's -- we have delayed the ramp, so we cannot have right now the price we want. But in the future, if we follow the volume we are expecting, I'm pretty confident we will remain -- very competitive in terms of what we have with our solution of SmartSiC and on top of that, we are creating the value we are creating through this solution. So that's still been to the market. Regarding the qualification, it's a long process. So started with the [ GDA ]. After that, we have [indiscernible]. Now we are in a long process. We have now 6 qualification ongoing. Some of them or all of them, they are in different regions, which is great, Pierre underline it. We are also qualifying in China. So just telling you that how we are probably seen as a real value creation leader in terms of silicon carbide because we are able to be -- to do it in China. It will take time. I cannot give at the end of the story because that's a long story. And in parallel of that, silicon carbide at the first was for the car industry. And you know the car industry today is really a little bit tricky for plenty of reasons. And so we are patient. We are controlling what we are doing. We are sharp on our engineering and we are pretty confident that we will see the ramp of silicon carbide very soon.

Thank you, Emmanuel. To make sure we finish on time, I suggest we leave a couple of last minutes to Pierre for his closing remarks. If you have any follow-up questions, the IR team is here to answer them. And I remind you again that the presentation is available on our website. Thank you very much.

Okay. Thank you. Thank you, everyone, for your attention, attendance and also your questions and thank you, of course, for the whole management team including the newcomers for being there. Then, of course, we are living the longest crisis ever in the semiconductor industry, okay? That's a fact, longer than ever. But in this difficult time with product volatility, uncertainties and so on. As we -- as I mentioned and as it has been mentioned by Steve, Cyril, Christophe, Soitec is getting stronger with a stronger mindset, stronger mindset. And I hope that during the lunch time, you had occasion to discuss with the management team, also the key leaders we are here and of course, during -- right after these meetings. But a very strong mindset because at the end of the day, we passed 2 crisis and we are passing a third one. The first crisis was a governance crisis. It has been the biggest clash on the markets, [ Parisian place ], it's the title of [indiscernible]. We passed this crisis. And I can tell you that the relationship we have today with the Board members are very, very strong, very good with a lot of interaction, a lot of synergies. We passed 2 days on Monday and Tuesday with all Board and all the management meeting, exchanging a lot of information. As a team, we passed the second crisis same time. That was a structure crisis. Soitec in '22, was depending on 1 customer, more or less, 1 product, 1 supplier with huge stock, huge inventories on this product and the market getting down, collapsing. In 3 years' time, we manage -- and the team, I'm very proud of what the team did everywhere. In 3 years' time, we managed to shift 50% of our revenue from 1 product to 3 other products making Soitec more stable and stronger and others coming and joining the $100 million, let's say, entity. We are passing now the third crisis, business market crisis with volatility and so on. But we'll pass it. We'll pass it. No doubt. And every morning when I wake up somewhere on the planet and it's in a different place. What makes me confident, resilient, super motivated. I think about 5 things. First of all, our financials, we are keeping control. We know how to keep control and we have demonstrated 2 years in a row by generating good level of profitability, improving our cash, managing in difficult times the different metrics of the company with a balance sheet that is very solid. I'm thinking about the fact that we are stabilizing, if not increasing our segment shares even in some areas where we are already very strong. We have a very, very inventive R&D. Yes, we are spending money. No, we are not spending money in R&D. We are investing money in R&D for our future. Christophe, he didn't say anything but we are working on the many, many interesting elements, key elements for our future. And our plants and factories are extremely agile and flexible because shifting 50% of our activities after more or less 8 years of mono product pattern in a so short period of time, it is demonstrating a lot of flexibility and agility by Cyril and the team. The fourth element is our customers. We have excellent relationship with our customers. I met personally over the last 3 weeks with more than 11 of our key CEO, CFO customers because of. meetings, exposition, booths and also calls and whatever review. And I can tell you that today, our relations with our customers are in a solidarity mode. Yes, we look at quarter as everyone. But we are working also on the foundation for the future. We are developing common products more and more. The level of quality we are delivering to them is praised and is a reference more and more. We are entering into the top 3 of some of our main customers for each of the products we are delivering to them, delivering more and more product because the diversification is now in our DNA and it's everywhere. And the fifth thing that make my morning happy to lead this company is my people because what has been made, what has been achieved in this so difficult environment is really amazing, and I'm very proud for my team, my management team and all the guys who are leading this company with me for this achievement. And it makes me confident because when the wins will come back into the sales on this, again, multiple boats we built as a Soitec Group, I can tell you, we'll have to fasten our seatbelt. Thank you very much for your time and your listening and see you very soon.