Wolfspeed, Inc. (WOLF) Earnings Call Transcript & Summary

Good morning, everybody, and thanks for joining us for the final day of our Silicon Valley Tech Bus Tour. Given that this is virtual, we get to make stops in North Carolina today. So we're starting off with Cree. We have Neill Reynolds, CFO; we have Gregg Lowe, CEO; and Tyler Gronbach, the VP of Investor Relations. I'm Amanda Scarnati, one of the semiconductor analysts here at Citi. We're going to jump right into some Q&A. I have a couple of prepared questions. But investors on the line, you're more than welcome to e-mail me questions. I'll be checking my e-mail throughout this presentation. And I will ask any questions as they come in as well.

All right. So let's jump right into it. Earlier this week, the White House released its supply chain review, which includes recommendations for strengthening the domestic semiconductor manufacturing ecosystem, as well as bolstering the supply chain for U.S.-made large capacity batteries for electric vehicles. Biden has also talked about investing $15 billion to build out a national EV charging infrastructure and $100 billion in consumer incentives for EV purchases. We're still in the early stages of moving these recommendations to actual policy, but the Senate passing the infrastructure bill or this portion of the infrastructure bill earlier this week was certainly a good step. This seems like it would be very good news for Cree in terms of EVs and charging stations. How are you [ being ] with government in these policy objectives? And how do you think these initiatives will benefit Cree in the midterm?

Well, thanks for the question. And obviously, all of these initiatives are very favorable to the semiconductor industry in general, and us, specifically. Obviously, the CHIPS Act that was going through Congress and the support of semiconductor manufacturing in the U.S. is very important, obviously, for national security. We obviously are ahead of the curve on that as we begin construction of our wafer fab in New York, now 1.25 years ago or so, and are actually moving first tools into that facility here just 2 weeks ago. And we'll be manufacturing qualified -- qualifiable product in the early part of 2022. So we are sort of 6 months away from that fab beginning to produce qualifiable samples and then ramp into production in the back half of the year. So obviously, it's something really good for us. In terms of the broader impact of some of these acts, the $15 billion for charging and the $100 billion for the EV purchases and so forth, obviously, will also give a tailwind to the adoption of electric vehicles and, quite frankly, the adoption of silicon carbide. The tremendous call on this from consumers, from governments, from incentive plans, this one now in the U.S. Europe did a very similar thing, I don't know, 6, 9 months ago or something, where similar kinds of orders of magnitude of numbers, where a ton of money being pumped into charging infrastructure, high-capacity charging and rapid charging, but incentives focused on longer range and more efficient electric vehicles, which, again, translates into silicon carbide. So these are all, quite frankly, tailwinds for us in terms of the adoption of electric vehicle. We're super bullish on that in general. And then with these added incentives, it just adds to our enthusiasm about it.

Does it change how you look at your capital? Or were you sort of expecting these incentives and some of these programs to come through when you came out with that sort of $10 billion opportunity pipeline?

No. We weren't expecting us back pre-pandemic, I would say, obviously. We did see a tremendous amount of enthusiasm for EVs prior to the pandemic. During the pandemic, we're finding that the enthusiasm is actually heightened. More and more car companies, one of the latest ones announcing that they're going to go fully electric by a certain date, 2030, 2035 and so forth, for a variety of different companies. So a lot of positive momentum there. And just recall, on the $10 billion pipeline that we have, we've converted $2.5 billion of design-ins over the last 5 quarters or so. So good momentum there. Those will begin to ramp -- I mean, designs that we win today typically ramp in 4-ish years. So those are going to be ramping in '24 or '25. The ones that we won a couple of years ago that we announced with Delphi, now BorgWarner, ZF and so forth, begin initial production ramps in the later part of '22 and then start ramping up in '23 and '24. So it all kind of lines up with the progression that we're seeing from a revenue perspective. And I think all of these things that are happening right now create a stronger potential for us beyond '24, again, just simply because of the time frame to go from design-in to production for the auto industry.

Perfect. Let's talk a little bit more about the market opportunity. I think there's been some conflicting information that we've been seeing through various sources. So the first, when we look at -- through the SAM, you talked about the SAM being about $5 billion in 2024. Both Gartner and you all expected that, that will be closer to $2.2 billion in 2024. What do you include in that SAM opportunity for silicon carbide that pushes it 2x above what market estimates are?

We just take a look at the adoption rate of electric vehicles, as an example, where we have sort of a bogey of approximately 5% in that time frame of adoption of EV, and that some percentage of that is going to be silicon carbide. So it's just -- and then we obviously take a look at content per vehicle and so forth. So I don't know if there's a precise -- if there's a precision you can get to, but I think the order of magnitude that we're talking about, this $5 billion number, I think it's in the right ZIP code, and we see it as a potential for pretty strong growth thereafter.

Another question here from an investor in terms of market opportunity, just bear with me for a second. There's different thoughts on how the silicon carbide market share is up in terms of merchant share. You've talked about 60% merchant share. Other competitors like II-VI have talked even about a 50% merchant share. I've seen II-VI closer to about 16%. How do you look at the market shaping out as we see more competitors coming in line, adding more capacity? II-VI is talking about adding more capacity. You're obviously adding significant capacity. And then you have others in China, an internal capacity at an ON or an STM. So how are you looking at how the pie is going to shape out over the next couple of years?

Well, basically, from a materials perspective, I think we have a pretty reasonable expectation of holding where we're at from a market share perspective. So the idea is we're 60% today, that we would be investing in a rapidly growing market, and we'll be growing at that market growth rate through the next 4 years or so. And I think that's a reasonable expectation, especially on top of the amount of CapEx it takes to do that. And so our nearest competitor is about 1/4 size of market share that we are today, and they would presumably be investing at a similar rate as well to maintain their market share. Our viewpoint is that this is a -- the silicon carbide -- the appetite for silicon carbide is growing very, very rapidly. And whenever you have an industry that grows that quickly, it definitely attracts new players coming in. It attracts capital, and it attracts investment and so forth. And that's normal. And so we have to -- we just have to recognize that. And there's 2 things that I would say. First off, we are not resting on our laurels by any means. In fact, Neill and I just wrapped up a monthly meeting that we have with our team in terms of driving cost of silicon carbide substrates, driving that cost down, driving the yields up. We literally just wrapped that up 5 minutes before we started this call. We continue making really good progress. So there's no sort of resting on our end in terms of driving the cost of silicon carbide down, the yields up and so forth, and we're making tremendous progress on that. And we still have a good line of sight. So that's number one. Number two is, just to reiterate something we said all along, this stuff is pretty hard to do. Silicon carbide is not an easy substance to -- material to grow. It takes a lot of capability. It takes a lot of intellectual knowledge. The machines that you use to grow silicon carbide are proprietary custom machines by all of the manufacturers that are attempting to do it. So there's not like a merchant supply of machines that you can just go buy. You have to have the know-how to build those machines and get the material growing. It grows at incredibly high temperatures, 2,500 degrees C. So you don't get halfway through the process and open up the machine and see how it's doing. I mean you've got to kind of know what you're doing when you press the start button. And then finally, one of the key aspects of driving costs is getting cycles of learning. And as a 60% player in the market, we get a lot of cycles of learning just simply because of our scale, and we're rapidly increasing that scale. And so what we've created is sort of a flywheel or a virtuous cycle, where we're using our capacity to drive cost reductions. We're using the cost reductions to engage with long-term supply agreements with customers and increase our demand. We're using that increased demand to justify an increasing capacity. That increase in capacity gives us more cycles of learning, which lowers our cost, which allows us to get more business and so forth. And so creating this virtuous cycle is definitely very intentional on our end. And it's working really well, wherein, like I said, we still have a line of sight. So I guess all of that in a nutshell says we totally understand that there's going to be competitors there. And the best way for a leader to maintain a leadership position is to act like everybody is coming after your customer's mind share and market share every single day. And as I mentioned, just -- I guess it's now 15 minutes ago, we just wrapped up a call, a monthly call we have on cost reductions, and we still have pretty good intensity around that topic.

I'm going to harp on this topic for just a little bit longer. I've gotten, I think, 5 questions while you were talking about costs. So I just want to follow up a little bit here. When we look at cost, can you talk a little bit about the dynamic between improving cost dynamics on 150-millimeter versus improving cost dynamics when you switch to 200? Is there sort of a vast difference there? Is there a way to improve costs on 150 to be a little bit more competitive with those existing in the market? And is there a concern that when China enters the market, they can do what they did in solar, where they just kind of come out, commoditize the pricing and pull everything down? Or is China sort of more of a threat for growing in China and not necessarily growing in the U.S. and Europe?

Yes. I mean, like I said, this market is going to attract a lot of competitors and that'll include Chinese competitors as well. There are some very unique and inherent barriers to market for silicon carbide that just make it tougher for the normal playbook, if you will, for China. So as I mentioned before, you can't just go on a merchant market and buy a bunch of machines. So it's not like there's equipment that they can go buy. They have to figure out how to design that equipment, build that equipment and create something that is going to deliver a silicon carbide crystal. And then they need to do that in a very, very specific way. Silicon carbide, when it grows, conform into one of a couple of hundred different crystal structures. Only one of them is really good and the rest, really, you can't really work with. You then have to figure out how to slice the material, which is also not for the faint of heart. So these are all pretty tough barriers to entry. And then the final thing that I would say is, one thing that's been a typical playbook is to simply just hire a bunch of people to go work on this. And the available knowledge base of silicon carbide on Earth is pretty small. So it's not like there's a whole bunch of silicon people out there that you could just hire them and bring them in from Taiwan and working in the Mainland China and so forth. It's just the natural supply of individuals is just lower. That all being said, we are totally focused on the fact that there are -- there is going to be competition, that people are going to try to come out of it. So we have a monthly review on driving our cost down and staying ahead of that game, and again, utilizing scale to get improvement, utilizing improvement to drive cost down, using that to get more business and then create this virtuous cycle. So anybody entering this market has those natural barriers that I talked about in terms of it's hard, you have to develop your own machines, all of this kind of stuff. But they're also chasing us down the cost curve. And so -- and we're not slowing down on that.

Going back a little bit to a comment you made about -- when we talked about the magnitude of the market, you talked about silicon carbide and a percentage of that in the market. Can you talk about what ASPs look like for silicon carbide for a typical vehicle, and what the current penetration rate is that you're seeing in the market?

Yes. So the bogey that we have out there is somewhere between $250, $350 per car of silicon carbide content, and then that would be trending. And I think that's a -- Neill, correct me if I'm wrong, I think that's a 2024 number. Is that right?

Yes, '24 type plus -- type number. Yes.

Yes. And then beyond '24, you'd probably see an ASP decline on that. But think of it as -- if you just want to call it $300 per car, that's probably the right bogey for that kind of time frame. And then if you think about the number of cars and the silicon carbide content, you can kind of come up with that. So I think there is a -- so it's actually a pretty -- I believe silicon carbide is going to be the highest semiconductor content in an electric vehicle. I don't know that for a fact, but I believe at $300, that's probably true in terms of the content. And what that has done is it's got silicon carbide to become a very, very strong interest to the OEMs and the Tier 1s across the world because they know that silicon carbide has such a unique value proposition in electric vehicles. It enables the car to go further -- between 5% or 15% further depending on drive cycle, number of inverters and so forth. And range is everything in selling an electric vehicle. And in terms of the penetration today, most of the cars that are on the road and were coming out today, especially from the traditional OEMs, were designed 5 years ago before we were making a lot of investment in silicon carbide. So those were -- those designs were chosen as silicon-based designs for the inverter. And I've had a lot of discussions with car manufacturers. Most of them are kind of -- I mean, they know they had to make that decision 5 years ago because there really wasn't a silicon carbide alternative at that point. But most of them are regretting it because they're coming out with cars with 250 or 300 miles, maybe 200, maybe 300 miles of range -- have a [ big yawn ]. When you look at Lucid coming out with their new car, 517 or 519 miles, I can't remember, but yes, over 500 miles of range, rapid charging becoming more important things. So in terms of what's on the street today and what's coming out today, it's mostly silicon-based in terms of what's being [ designed ] and then what will be coming out in '23, '24, '25. I can't point to a statistical number. But in terms of my discussions with the OEMs out there, most of them have shifted over to either 100% silicon carbide designs or most of their designs being silicon carbide. And it's just simply because they've got to get more range, and they can't do that with batteries added because batteries just simply cost too much. So I think that's the transition we're making. I will be visiting Europe again here in a couple of weeks together with Neill. We've got a number of OEMs and Tier 1s meetings going up. And despite the fact that we've been in a global pandemic, this will be my third trip to Europe in 6 months. And it's because the customers are very, very interested in kind of looking us in the eyes and making sure we're building the capacity that they're going to need. It's -- I'm sure it's not lost on any of you that there's a supply-demand mismatch right now in semiconductors in the auto industry. And this has taken the availability of supply and the investment in capacity, and that has become a huge care about for the OEMs and the Tier 1s. And the fact that we're going to be putting in production the world's largest silicon carbide fab and the world's only 200-millimeter silicon carbide fab in less than 6 months, that fact is not lost on any of those guys in terms of their view of who they want to go with in terms of supply assurance for silicon carbide.

Hey, Amanda, just to put one final thought into the group's head here, though. We're still very early stage on automotive EV. We've talked about on previous calls that device revenue for automotive is less than 10% of our device revenue. So you really don't see traction for us until like '24. Mohawk Valley is going to be up and running, but that's really where you start to see our automotive revenue start to roll on. So as Gregg has told people previously, we're still in the very early stages of opportunity, and that will ramp. And like we talked about, in 2024, we're only assuming about a 5% penetration rate for EVs at that point. So you really start to feel it probably in the back half of this decade, from '25 to '30, where estimates have about a 30% penetration rate. So there's still wood to chop in terms of opportunity as we think about it.

One more question on competition, and then we'll kind of put a pin in this topic. Soitec had their Analyst Day yesterday, and they talked about a joint technology with Applied Materials. Obviously, Applied Materials is a very good partner of yours as well. Neill has mentioned that you've just installed some Applied Materials equipment in Mohawk Valley. So can you talk a little bit about how the Soitec-Applied Materials joint technology, this sort of smart cut technology, could potentially impact the SiC market? And if you're seeing that, and any sort of product you were doing something similar with Applied Materials?

We have a lot of knowledge of this industry. We've been in it for 30 years. We're very familiar with what's going on there and a number of -- there's a number of different other efforts underway to figure out variations of how you can use silicon carbide and make it more cost-effective, et cetera. So we're very comfortable that we have a pretty good understanding of what's going on there. And quite frankly, we don't see anything in that, that is a -- opposes any kind of imminent threat. We feel real good about where we're at from a cost perspective and from a line of sight to reduce that cost. So I think we're constantly on the lookout for different ways of being more efficient and so forth. And I think at this point, we feel pretty good about the path that we're on.

Switching gears a little bit away from the automotive side. Over the past couple of quarters, you've talked about nearly $3 billion in device wins, with a portion of those wins sort of outside of automotive and other areas. Can you talk about some of these other wins and how the revenue pipeline is different from automotive? Could we expect to see some revenue pickup earlier in those opportunities? Or is that on a similar sort of 3- to 4-year time horizon?

Yes. So it's a -- over the last 5 quarters, we've had $2.5 billion worth of design-ins. Approximately half of those are automotive, and so therefore, the other half are not automotive. In that other section, it's really predominantly -- I mean, we definitely have some wins in the 5G as well for our RF products. But on the power side of things, it's predominantly in the broader industrial space, and maybe Tyler can hit some of the specific applications here in a second. But one of the things that we're finding is that the appetite for silicon carbide is really starting to accelerate in that broader industrial space. Now the characteristics of the industrial market are dramatically different than automotive in terms of fragmentation of customers, size of designs, number of customers and so forth. You're talking about $1 million to $10 million per opportunity versus hundreds of million dollars of opportunity for automotive, but you're talking about thousands of opportunities versus tens and twenties of opportunities. So what we've done in order to go after that, our scale from -- and our footprint from a sales perspective is actually quite small. So what we've done is we've partnered with Arrow to go after and reach out to those customers. They've done a fantastic job. We're now on our third -- we're in our second year of an exclusive relationship with them as our global partner for distributing and selling and promoting our silicon carbide products. But we're in our third new product promotion with them, where they've gone out and promoted products to a number of different customers. And when we're talking about hundreds of design-ins, over $1 billion worth of opportunity pipeline identified, a lot of it in countries where we don't have employees or workforce and so forth. So that's been really strong. And maybe, Tyler, you could just hit some of the unique kinds of applications that we're designed into.

Happy to, Gregg. Yes, it's really interesting when you look at the spectrum of some of the things that are in there, but we've got a -- we're powering a drivetrain for an electric bike, the power supply for a drone and air conditioning applications, so as -- and a robotic arm. So as Gregg said, what people are starting to realize is that the efficiency of the technology makes so much sense in the design of things that, a couple of years ago, we didn't even give any thought to or we didn't even have a presence to. So this partnership with Arrow has really opened up the aperture for us on these types of applications, and the list continues to grow.

And one of the biggest debates that I get from investors is on the viability of the silicon carbide road map. I think it seems pretty clear that silicon carbide is going to be dominant in automotive, and we're starting to see this indication in other industrial areas. Do you see a little bit more competition in these other areas in GaN? And do you view silicon carbide as, thus, threatened by GaN? Or do you view it as a cost opportunity to maybe switch to GaN and other applications?

GaN does a nice job in the lower voltage and the lower power. You're seeing a tremendous amount of excitement and enthusiasm for GaN in some of the -- I call them wall warts, but basically charging kind of devices where they can make an iPhone charger or what have you, smaller, more compact, so you're talking about number of watts, not kilowatts. And so you're seeing good opportunity there. GaN has a play up to somewhere a little bit north of 400 volts, much higher than that. Silicon carbide really kind of takes over in terms of efficiency and so forth. So GaN kind of plays more in the lower voltage, lower watt kind of area. We obviously keep an eye on that, but we feel pretty comfortable that as customers are looking for more power and higher voltage, really, the natural winner in that is going to be silicon carbide.

And Amanda, when our Chief Technology Officer, John Palmour, talks about the evolution of silicon carbide, he goes back to 30 years ago where he said, we knew silicon carbide, as Gregg points out, was a super efficient platform for power management because of minimizing the loss in switching. But it was so -- what the inhibitor was, was cost. So over the last several years, as this cost curve continues to come down on materials, but also on devices, this is where the practical application is really starting to stick. So there are interesting technologies certainly in the market at the lower voltages. But if you're looking at something in the medium and high voltage platform, and if you look at the savings one gets when they design something in, so like, I don't know, electric vehicle for every dollar of silicon carbide that goes into the vehicle, there's about $3.50 to $7 savings in the rest of the design of the vehicle, whether it be smaller battery, less wiring. And so the same thing is starting to happen in other markets, where they say, "If I put silicon carbide in there, the efficiency in my design and my savings outweighs the investment of putting that chipset in that silicon carbide chip set in. So we just think that, that will continue to create more and more of a bigger opportunity for us as we go forward.

Talk a little bit about the Mohawk fab. You talked a little bit already about being up and running by the end of the year, qualifications early part of next year. In the past, you've talked about once New York is fully up and running, the LED facility is converted over to silicon carbide, that you'll have the capacity to support 5.5 million vehicles with devices and 22 million vehicles with materials. Do those numbers assume 150-millimeter? Do they presume that you would be at 200-millimeter in Mohawk? And how should we look at the length of time it's going to take to fully ramp up that Mohawk facility?

I'll kick it off and then maybe Neill can give you some more specifics here. We're very pleased with the progress we're making in the Mohawk Valley. Our goal was to get our first tools in there. Right around this time, we've accomplished that goal. In fact, we're a couple of weeks early in terms of first installation of tool. Neill and Tyler were just up there last week, week before last, over the last 2 weeks. And Neill, when he talks, can give you a little bit of a sense of how things are going up there. The intention -- not the intention, we are ramping that technology directly of 200 millimeters. We've got really good confidence that that's going to go well. We have a pilot line in New York as well that was converted to 200 millimeters a while ago, and yield off that pilot line is looking pretty solid as well. So first half of the year, we're going to -- '22, we're going to be producing product that will be qualified -- qualifiable. We will run through the calls internally, and then we'll get customers to qualify them. And we anticipate that we would begin shipping product for revenue in the back half of '22 with a steeper ramp in '23, so that by '24, roughly 75% of our revenue for our power devices would be coming out of Mohawk Valley. So we will go from effectively none of that revenue out of Mohawk Valley right now to [indiscernible] in -- by '24. And Neill, I don't know if you want to add any additional comments based on your visit to that factory as well.

Yes. I had a chance to be up in Mohawk Valley, 2 weeks ago. I met with the team. I met with the builder and the tool install folks. And like Gregg said, the team is making really great progress. It was nice to see tools coming into the fab. And we're making progress, I think, on the time line Gregg talked about. So a lot of qualification work we should be ready for and bring up the fab in the first half of calendar year '22 and shift more to revenue as we move out to the second half of the year and really begin that transition we've talked about for quite a long time. So it was great to see the progress that we're seeing in terms of what the team is working on in driving that fab up to capability in producing wafers. To answer your other question, Amanda, in terms of 200-millimeter, we always had anticipated we would get the fab to 200 millimeters out in time. And I think that supports some of the data you've said. And what I'm going to remind folks is that what we're -- about 50% of the fab will be built out from a 4-wall capacity standpoint. So when Gregg talks about 75% of our revenue coming from Mohawk Valley, in the 2024 time frame, that only reflects about half of the physical 4-wall capacity. So there'll be a runway out beyond '24, which we'll be able to leverage the facility in that time frame. Meanwhile, with the ability now to launch 200-millimeter right out of the gate in the factory, that gives us several years of experience before we hit what we think is a really big -- or a really large potential from a market standpoint to see silicon carbide drive in support and electric vehicles and other applications out beyond the '24 time frame. So when you think about -- people call it 5% or 10% EV adoption rate out in '24, '25, a lot of customers we talk to think about 30%, 40% out by the end of the decade. So there's a pretty big runway out beyond that time frame. And I think that factory will be in a position to help us support us as we continue to grow, I'd say even in a bigger way potentially out being on the '24 time frame happen.

All right. Neill, I have another one for you. I muted myself there. So another one for you, Neill. Can you talk a little bit about the depreciation assumptions in that 2024 gross margin target? And how should we think about modeling that given the subsidies that New York State has given for the Mohawk Valley facility?

Yes. Really, really great question. I think one of the advantages we've gotten is the partnership that we've developed with the State of New York in terms of how we build a fab. I mean it's a greater -- given the size of the company we are today, it's north of $1 billion kind of fab. As I think with the -- great automation capability, kind of state-of-the-art capability, but we're going to get about $0.5 billion of reimbursements from New York. So what that means is as we put tools into the factory, we'll turn around and send an invoice to the State of New York and they'll reimburse us for those tools tax free, so it's basically cash reimbursement. So what that means is this, right now, we're spending a lot of CapEx really on our own dime, so to speak, to build the factory and start to fit it out. And the depreciation on a building and a fit out is usually between the 15 to 30 years, you can think about this initial kind of spend we're having now in that kind of time frame, then we'll shift to the tools. And you can kind of think of what that initial tool -- those initial tool sets going into the fab are really going to be funded by a lot of the reimbursements we're going to see from New York. So normally, you'll see a semiconductor company between 5- and 10-year kind of depreciation schedule and those types of things, which puts a lot of pressure on the margins earlier in the time frame because you're depreciating a lot of those first sets of tools as you bring them into the fab. In this case, those tools really will have come in case free on selection on the first set of tools that come in. So we should get a nice lift originally. So as we transition the fab in '23 to revenue, we do see a good line of sight to seeing pretty significant improvement. And we've talked about now is the reason we're building the fab, the line of facilities are underscaled and cost footprint is a lot higher. So it's really a function of getting the fab up and running, transitioning revenue over to Mohawk Valley, which is a much better cost footprint, which is going to be helped partially by the reimbursements from New York in terms of how that's going to impact our depreciation schedules. And we'll bring up that fab from a revenue standpoint, more significantly in '23 and then out in '24, as Gregg said, up to 75%. So all this plays together. There's a lot of moving pieces between now and then, but so far, so good in terms of the execution. And that is as we look forward to our expectation.

One follow-up there for you, Neill. Can you clarify whether the depreciation is based on the net or the gross CapEx spend?

It's on net. So what you'll see is a gross spend, a layout that we'll have, and then we'll see reimbursements coming in. So depreciation is based on net of the reimbursements we'd see from New York.

[Operator Instructions] The next question I have is on sort of a broader thematic question that I've been receiving from investors. How do you view margins longer term, given this push towards higher supply chain reliability, continuity, the shift in Mohawk Valley that you're seeing specifically internally? And this general push towards more localization, do you see that impacting how you view margins going forward?

I'll take a crack at that. I guess what I would say is we've got a target to be in the low 50s in the '24 time period. And we believe that all the things that we've got in place in terms of the transition to Mohawk Valley, 200-millimeter yield improvements, et cetera, give us line of sight to go do that. The issues right now from a localization of supply chain and the issues around supply chain are really manifesting themselves more in decisions to go with suppliers or not. And so it's -- I would say from at least our view, from our perspective, it's impacting where it's having a greater impact on choosing us as a supplier. Previously, I would say that customers were looking at the device technology and the specs that you delivered and that remains important. They looked at your knowledge of the silicon carbide industry and do you know the technology, we obviously score super high points there. They would look at your knowledge of the auto industry. Here, we historically did not score high because we weren't a -- many of our competitors have 30 years of industry knowledge there. We've been hiring people from the industry, and we'd basically solve that challenge that we have. And what I would say what's now happening is -- very much front and center is a discussion around the capacity that we're putting in place and the capability to assure to the OEMs that when they ramp, we will be there with production. So supply assurance, continuity of supply, all of that has become a really key topic. And let me amplify that by saying this. I've been in the semiconductor industry for 35 years. Almost all of it has been associated with automotive. I lived in Detroit, worked in Germany and so forth. So I've dealt with car companies and the Tier 1s for many, many, many years. And never in those years have I seen a car plant stop production because of chip. And there are hundreds of cars that have been stopped from a production standpoint because of the chip shortage. I happened to talk to -- I took my car in for service the other day, and I was talking to the dealer. And the dealer told me that their supply, their allocation of cars, is now sold out through June of next year. So this is something that is having a dramatic impact on our customers. I talked to the head of purchasing of one of the car manufacturers, he is talking about a weekly call they have with their Board of Directors, talking about chip shortages and so forth. And so this has become very front and center. And what we get to point to is not a future of maybe investing in a new fab. We get to point to 1.5 years ago, we made an announcement to invest in a fab. We've been investing in that fab in March of 2020. And in 6 months from now, not a whole bunch of years from now, but in 6 months from now, we're going to be running qualified materials through that factory. And so there's this definite sense of light at the end of the tunnel for us and for a company that is -- that chose to invest a year and -- actually, 2 years ago, we made that announcement. Now I've joked with folks, and I'd love to tell you, Amanda, that 2 years ago, we had the foresight to know that there is going to be this huge supply crunch in semiconductors and that building a fab was going to look really smart. Of course, we didn't have that foresight. And so quite frankly, it's just a happenstance that we chose to build the fab and bring that fab in production right when supply constraints and assurance of supply has really become almost the #1 item that customers are looking for right now. So we check a pretty big box there and not too many others do. And so we're feeling very good about that. And obviously, as I mentioned before, I referred to before, this will be my third trip to Europe in 6 months. And it's pretty easy to meet with customers right now despite the fact that you got to have a test every day and a sore nose every night, but we're doing that. And yes, Neill and I will be heading over there in a couple of weeks' time, and we'll be over there for a couple of weeks, meeting with a variety of different customers, and they're very interested. And one of the pictures we showed them is March of 2020, our fab was a field of mud. And in June of 2021, we've got machines, and we have multiple machines now in our wafer fab. They're not up and running yet, but they're in that clean room space and ready to kind of get moving. So they feel all quite good about that.

Great. Last question I have is sort of on supply chain reliability. It kind of ties in here. Internally, are you seeing any sort of impact? I know, obviously, you're getting new equipment from Applied Materials and from others as well. Those are a little bit longer lead time, and you've been having those conversations for a long time to secure that. Are there any instances where you're seeing supply tightness either on materials incoming or on equipment or componentry that are coming in to build out that facility?

All of those items are experiencing longer lead times. The good news is that we began this process, the actual construction of the fab began in March of 2020. Our commitment and our Board commitment from a CapEx standpoint was before that, we knew that there were longer lead times already on some of those big expensive machines as well as the materials. So we were way ahead of it, again, not because of any foresight we had, we just were -- we were building a fab, and we knew we needed to get the orders in. So we were ordering product in December, January -- December of '19 and January of '20, February of '20. So the whole industry goes into this COVID lockdown, and we're still buying stock. So I think we just -- it was just fortunate that we were a year ahead of the pandemic. And so that's not to say we have zero impact. We certainly have. As we look at expanding the fab and ordering tools now, the lead times now are longer. We also were very, very thoughtful on how we dealt with our supply base during this time. Neill and I have posted a weekly call with the head of our purchasing organization, talking about how we're going to work with suppliers during this time, and it was very much a partnership mode. We didn't get aggressive on the suppliers when everything shut down, and they all remembered it as things flipped around. And so we had a very good partnership relationship with them. The number of e-mails I've gotten from Sun, thanks a lot for taking care of us during the downturn, and now here's the upturn, and we're going to take care of you kind of thing in kind of a reciprocal way has been very, very positive.

Just about out of time here. Did you guys have any final thoughts that you'd want to share with investors at this point?

One of the things that we continue to do is build out the infrastructure. We're adding people to our organization. We've become a very, very attractive place to come to because of -- if you're in power semiconductors, silicon carbide is kind of the place to be. I apologize for the weird -- it looks like I'm in a CIA interrogation booth here, but I'm actually in a hotel. Because I had dinner, had dinner invitation -- interview last night with a prospective employee, and I've got a lunch meeting today, meeting with somebody that -- 2 folks, very high-capability people that are interested in joining our company. So we're going kind of out of our way to make sure that while we're in an attractive place, we're actually going out and meeting people, convincing them to come join our efforts and so forth. We've actually been very successful in doing that, and we continue to view, I'd say, as an opportunity for us.

Excellent. Thank you so much for your time, and enjoy the rest of your day. And we'll see you at earnings and then at our tech conference in September.

Sounds good. Thanks a lot. Thanks a lot, Amanda, and thanks to everybody for your interest.

Thanks so much.

Thank you. Bye-bye.