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

Good morning. It's great to see a lot of you. It's been a long time. And it's nice for us to be back together. I know for some of you, this is the first Analyst Day that you've been to. So we take great pride in that. But a lot has changed. The company name has changed. The company colors have changed. My waist line has gotten a little bit bigger during COVID. But I'll tell you, one thing that you're going to take away from today that hasn't changed is our conviction about our efforts to transition from silicon -- the industry from silicon to silicon carbide. And so that's what we're going to show you this morning. We're going to give you an update on a few things. What you'll see here is -- if we can get to it. First, Brad, our General Counsel, in the back of the room, wants me to make sure that I read this to you word for word this morning. So for the next 10 minutes, just bear with me, all kidding aside. Today, we are going to be making some forward-looking statements. We're going to be talking about the future of the business. Some of these things are not going to be comparable to other peer information. We're going to be talking about non-GAAP today. So please, I would ask you to familiarize yourself with the forward-looking statement. Brad, how did we do? Great. Okay, thumbs up from the back. Next, let's talk a little bit about what we're going to cover today. First, Gregg is going to give you an update and talk a little bit about the marketplace. He talks with a lot of customers. We have some aggressive plans from a strategic perspective, and you're going to get an update on that. Next, in our continuing effort to educate you on silicon carbide, Dr. John Palmour is going to talk to you a little bit more about technology overview, the competitive landscape, too. Next, we're going to hear from the front lines, our business unit leaders, our -- Jay, Gerhard and Cengiz are going to tell you kind of what's happening from a competitive standpoint, from a product standpoint, and we think that, that's going to be a really robust and nice update for you all. Then we're going to take a quick break. We started a little bit late today, so we're going to be as efficient with your time as possible. So quick break. And then we're going to come back. We thought it would really be interesting to hear from a customer. So Kenric Miller, who runs global sales for us, has invited a guest. I'm not going to unveil that just yet, but I think you'll find that to be a very exciting and engaging conversation. Next, Thomas Wessel, our SVP of Global Sales and Marketing, he's going to talk about the opportunity pipeline. As you heard on our last call, it's gone from $9 billion to $18 billion. So what has changed, what the composition of that looks like. Thomas is going to take you through that. Then, as you know, we have been working really hard to expand our capacity. And Rex Felton, who has been in charge of the Mohawk Valley build-out, but is also going to talk to you a little bit about what we're doing on the material side of the business and what's changed there. So that will be a very good update for you all. And then finally, Neill Reynolds, our CFO, is going to give you an update to the long-term outlook. And then we're going to have time for Q&A. One thing that Gregg will talk a little bit about, we also have something for you at the end of today's session, where you're going to get to meet some other members of the team and talk a little bit more about our business, but I'll let Gregg take you through that a little bit later today. So it is with great pleasure that I now turn the presentation over to our CEO, Gregg Lowe.

Well, thanks a lot, Tyler, and welcome, everybody. I appreciate you taking the time to visit with us today. For those of you that are new to Wolfspeed, we are a silicon carbide company focused on that technology and transitioning, as Tyler mentioned, this industry from silicon to silicon carbide. The company is about a $16 billion market cap. We've got about 3,500 employees, mostly in the U.S., but also some spread throughout the world as well. And the company has been through a number of different areas in terms of areas of focus. But one thing that's been consistent across all of those 35 years is the foundation technology that everything we've done has been based on silicon carbide. So the company has 35 years of silicon carbide expertise and has been focused on that technology and growing that technology across a number of different end equipments. Now today, we're going to talk about -- a lot about the future and the opportunity in the future and hence the forward-looking statements. But we're going to talk a lot about the potential that we have. We've got a greater than $18 billion device pipeline right now. We've secured $2.9 billion worth of design-ins over the last fiscal year and so forth. So a lot of -- we're going to talk a lot about what the opportunity is. You're going to hear from a variety of different speakers here today. But I'd like you to remind you that from 2017 to 2021, we grew roughly 4x the growth rate of the semiconductor industry, so 24% CAGR that we've already kind of posted. So pretty good track record of getting this technology into kind of the mainstream, but we're in the very early innings of that. So a lot has happened since the last time we met, which was in November, I think, of 2019, so just before all this chaos happened. Then, of course, in between then and now, we've got COVID, we've got supply chain disruptions. When COVID initially happened, basically the demand for everything went away, except toilet paper. And then that, of course, was on allocation. But then as COVID -- as it continued to linger, the demand started to really pick up and you saw a tremendous amount of demand disruption. We had fires in various different semiconductor factories around the world. We had weather issues in Texas shutting down plants. We had boats stuck in the Suez Canal. There was all kinds of disruption in that industry. And despite all of that, our company had a pretty amazing response to all of this. So first thing we did, obviously, was get together and say, how are we going to manage this situation despite the fact that we've got all these lockdowns and you can't visit customers and so forth. You're going to hear later on from Thomas Wessel right here. Thomas runs our worldwide sales operation, talking about how we continue to engage with customers, to work with customers, to continue to partner with customers and again, deliver $2.9 billion worth of design-ins despite the fact that we were visiting with customers primarily virtually during that time. So you're going to hear from Thomas in a little bit more detail about that. And then as Tyler mentioned, at the end of the day, we've got some kiosks out there. You're going to see the Head of our North American sales. You're going to see the Head of our European sales. You'll be able to talk to them about how those engagements continue. We obviously shored up our balance sheet during that time and announced during that time, that we were going to be building the world's largest, and the world's first and the world's only 200-millimeter silicon carbide wafer fab. We'll talk a little bit about that in a second. We sold our LED Business and basically positioned ourselves as a pure-play compound semiconductor company focused on silicon carbide. And that all basically was really signed, sealed and delivered on October 4, when we changed our name from Cree to Wolfspeed. We changed the branding of the company. We listed on to the New York Stock Exchange here under the ticker WOLF and announced on that same day, a strategic partnership with General Motors, which was a truly magnificent design-in for us. So tremendous response by the company despite all of those supply chain issues, COVID restrictions and all of that kind of stuff. Now many of you know that during COVID, I forgot to learn to ride a bike. I forgot how to ride a bike and had a bit of an accident. So this is me about a month ago, here at the New York Stock Exchange, ringing the bell, and I couldn't ring it with my right hand because that wasn't working at the time. I'm pleased to let you know that things are actually working. I can actually raise my hand. I can shake and things like that. So everything is back in the right position. But as I joke a little bit, riding a bike, enjoying the scenery, looking around and not paying attention to what was in the road in front of me is what caused the issue and is a fab wipe out and so forth. And so the lesson from that bike riding that we really have applied to Wolfspeed over these years is focus. Focus on where we're going, focus on what roadblocks and what obstacles are in front of us and just continue with total passion. And we've been doing that basically since 2017. And if you look at what the company has done over those years, whether it's moving the lighting business out, selling the LED, driving this transition from silicon to silicon carbide, that's exactly what we've been doing all of these last 4 years, and we're going to continue doing. We started with the announcement of the acquisition of Infineon. Gerhard Wolf is with us today. He'll talk a little bit about our RF business and how that's transitioning, again, the sale of the lighting business way back then. But also take a look at that $1 billion announcement that we made in May of 2019, that we were going to build a fab in May of 2019. Turns out to be great timing. I'll talk about that here in a little bit. And then some of you are going to actually visit the fab tomorrow up in Upstate New York, and we'll show you some pictures of that. But basically, over the last 4 years, it's been a continuing -- a continuation of focusing the business on the opportunity in front of us and helping the world transition from silicon to silicon carbide. And the reason we're able to do that is the fundamental technology of silicon carbide is dramatically better than the fundamental existing technology called silicon. It's more efficient. You see some power density numbers, 3x, 10x dramatically better electron mobility in silicon carbide. And basically what that means is applications are going to be more efficient. They're going to waste less energy. They're going to be better for the environment. Systems are going to be lighter because they can be smaller. They're going to be more efficient. In an electric vehicle, as an example, if you use silicon versus silicon carbide, there's been a number of different studies on this that have been done. But all of them point to if you use silicon carbide instead of silicon in an electric vehicle, you're going to get longer range for that car. And that range difference can be 5% to 10% to even -- I've seen numbers of 15%. So depending on what the driving conditions are, it's pretty dramatic. And for vehicles, the battery is the most expensive thing. So if you can use the same battery, but get a dramatically longer range, range anxiety, range is a really big deal. And if you look at the new cars that are coming out, Lucid most recently had EPA approval of 520-mile range for their vehicles. This is now pretty comparable to pretty much anything out there with a gasoline engine. And you're also, with silicon carbide, because of the higher voltage capability and the better efficiency, you also have shorter time for charging as well. So the 2 big things that kind of hold back folks from thinking about electric vehicle's range and charge time, are helped by silicon carbide. You're going to see as well a little bit later on that these same attributes apply to industrial-type applications. The application is going to be smaller. It's going to be lighter, it's going to be more efficient. It's going to need less battery. And we're seeing the adoption of silicon carbide across a very wide range of applications. You're seeing the same thing with GaN on silicon carbide. Gerhard will talk about this as well for 5G applications. More efficient, increased capacity, more users, better, basically. So silicon carbide, as I mentioned, much more efficient. It's a very difficult technology to master. We've been working on it for 35 years. We're the leader in silicon carbide, we've got a pretty good handle of how to manage this stuff. It's a very difficult technology to grow. It grows at substantially high temperatures, 2,500 degrees C. And we recently saw a study by the biophysical institute here that looked at all of the energy it takes to create a silicon carbide chip. And what's the return on that energy when you actually use silicon carbide versus silicon in a different application. So in an electric vehicle, for instance, the advantage you get in terms of energy that you save kind of against the energy that it takes to create this is 13:1 over silicon. That's amazing. Many of our customers are looking at ESG, carbon footprint, carbon neutral, how to be more efficient and so forth for their own companies. And as they choose silicon carbide, they're going to get this kind of advantage. And this is just on a vehicle that would be something that you and I would drive. JP, John Palmour, our CTO, is going to speak next, is going to go into a little bit more depth on this investigation or this study that was done. In an Uber or a taxi, this number turns into 24:1, I believe. And across a number of different applications, it's 50:1, 60:1 and so forth across some of these more industrial applications where the device is kind of running more 24/7, you get a tremendous ESG footprint improvement. And when we show these numbers to our customers, they are all over it because all of them have programs -- or the vast majority of them have programs about limiting carbon footprint and improving their impact on the environment. In between the last time we were here and now, we're seeing a tremendous adoption and more enthusiasm for the investments in electric vehicles. Now we're just seeing $330 billion of investments being announced by a variety of different companies. Many of these companies are pure-play electric vehicle companies. And some of them are historic vehicle manufacturers that are moving to pure-play electric vehicle companies, where they will only be doing electric vehicles after a certain time. We've got engagements and discussions going on with a number of these, probably -- the most recent one we announced was with General Motors, where they're going to be using us as their silicon carbide providers. So a very exciting opportunity, and we're seeing this -- and Neill will talk about this later on. We're seeing this investment is turning into an earlier ramp in electric vehicles and the electrification of the power train. Now at our last Investor Day, there was a lot of debate. And I remember when I showed that slide that's in the middle there that basically -- I think there was a lot of doubters on that slide. And what it basically said is if you look at the carbon emission standards in Europe and you make an assumption that 35% of the vehicles are going to be electrified in -- by a certain time frame. In order to meet that standard -- it's a simple math equation, in order to meet that standard, you basically can't have many hybrid vehicles. It has to be -- the vast majority of them have to be electric. And I remember when I presented that slide there was -- you could kind of tell in the audience, there was a lot of doubt as to -- I don't know, it seems like hybrid is going to be the way to go and there's going to be this huge transition period, et cetera. And then you look at the announcements that are all around there, good bye to hybrid vehicles, only electric vehicles, et cetera. And I think this math just caught up with everybody that if you're going to meet the emission standards, this pause of having hybrid probably isn't going to be a long pause. And I think the pull from a customer perception has also had an impact on this as well. So we're basically seeing a transition from the internal combustion engine, almost skipping hybrid, there's still some hybrids out there. But pretty much the investment is now moving towards electric vehicles. Thomas will talk about this actually in a lot greater detail, but this is some pictures of just some other types of applications that we're seeing silicon carbide get introduced into. Forklifts, field power supplies, that one on the top left, that portable power supply is with a company that showed a demo in Canada, sort of up in the forest in Canada where there's no grid, no nothing, and you could power your devices off of this charger using silicon carbide. EV charger is going to be the infrastructure for charging of electric vehicle. It's going to be a really, really important thing. Using silicon carbide basically allows for rapid charging and fast charging and so forth. At one of our kiosks later this afternoon, we'll have Angelo, who -- Angelo, raise your hand up. There he is back there. Angelo is in charge of our European sales organization. But in addition to that, his team has sort of the ownership or the strategy of how we're going to go after the charging infrastructure. So if you have questions about that, you'll be able to talk to Angelo and hear sort of straight from the ground source, if you will, about that. But we're seeing thousands of applications adopting silicon carbide, led by the auto industry, but across a numerous different set of end equipments. Now the opportunity for us is pretty huge. For devices, we're seeing it grow pretty substantially. And this is the overall opportunity we see. So although that says $4.3 billion in 2022, the vast majority of that is silicon today. And as we -- as you go through the years, the opportunity at $8.9 billion is pretty substantially moving towards silicon carbide. And that's what we're trying to do. We're trying to convert this industry from silicon to silicon carbide. Tremendous growth potential for us as we -- as I mentioned earlier. We've delivered a 24% compounded annual growth rate over the last 4 years, but we're looking at substantial growth even out into the future as well. Good growth for our Materials business as well. Cengiz will talk about that here in a little bit. When you hear about our opportunity pipeline and the fact that, that is $18 billion -- or actually greater than $18 billion today, and that our design-ins are $2.9 billion over fiscal '21. I'll just remind everybody that, that is all focused on the top section right there. That is all on devices. From a Materials perspective, again, Cengiz will talk about it, but we've got a tremendous amount of opportunity there as well. So obviously, supply has become a key issue in the industry and we all know that, and it's not just semiconductors. It's a lot of different things. But semiconductors has been kind of front and center. Now I've been in the semiconductor industry for 35-odd years or so. I've been mostly associated with the auto part of that. And never in my career have I seen a car plant shut down because of chip. The same can be said by Kenric Miller, who's with us here today. He'd worked for Motorola and Freescale for a bunch of years, you -- this just didn't happen. And today, numerous car plants across the entire world have been shut down because of this, and this has been going on now for quite some time. It's a solid year. And when you look at sort of the forecast, it's not like there's no end in sight, but there certainly isn't an end in sight over the next several quarters. And probably next year is what most people say. So this has become a real big issue. And what that means for -- from our perspective is that assurance of supply and capacity is going to be really important. We made the decision in May of 2019 to announce that we were going to invest in a fab. And in March of 2020, we began construction of that wafer fab. This is what it looked like in March of 2020. And today, that's what it looks like. That is not an image that was drawn or anything. That is an actual photograph of that same facility. This is about for 3 hours, 3.5 hours north of here in Upstate New York. And this is the world's first 200-millimeter silicon carbide fab. It is the world's largest silicon carbide fab. And it's going to provide a tremendous amount of opportunity for our customers. Now Wolfgang [indiscernible] is with us today. Wolfgang is right here. He is the CEO of [ Excite ]. They're the company building this wafer fab. He'll also be at one of the kiosks later on. You can talk to him about this. The one thing that I would say is timing is everything. We started building this fab in May of 2020, and we will be in initial sort of qualification runs in the early part of this coming calendar year. So I think January, February, we'll be in early qualification runs for that. We then will be qualifying our customers in the back half of the calendar year. If we were to build this fab today, it wouldn't be 2 years from that to this, it would be an extra at least 1.5 years, maybe even 2 years. You can talk to Wolfgang about that. So trying to do this today would be substantially longer because of all the supply chain issues that are happening. This fab will also be LEED certified. It will be a clean facility. It will use reusable energies, and it will -- all of this will actually amplify and help that return on investment that you saw from the biophysical Institute, that 14:1 and the 24:1 actually improves as we move to this wafer fab. We are also expanding our Materials business in North Carolina. If you visit our facility and our headquarters in North Carolina, you'll see a lot of orange fences and stuff digging things and tractors moving stuff around and equipment being installed. You can see that we're actually expanding that Materials factory. It's across the street in another facility. On-campus, Rex will give a little bit more detail on that, But substantial increase in our wafer fab capability with the building in Upstate York, substantial increase in our Materials business here in -- well, in North Carolina as well. And then finally, we're investing in our capacity. We're investing capital. We're investing in our manufacturing growth. We're also investing in our people. We've had a tremendous ability to actually bring people in from the outside, people that have substantial amount of automotive experience or semiconductor wafer fab experience and so forth. You'll meet some of those folks here today. We also have internal development programs that we've done that have taken folks and given them opportunity to grow internal to the company as well. You see 350 years of experience of -- semiconductor experience that we've brought in. And quite frankly, I think our ability to -- our attractiveness as a company to come work for is very, very high. If you're a power electronics person or somebody associated with automotive, it's not lost on anybody that the future is going to be electrification. The future is going to be silicon carbide. And if you want to be a part of that, we're a pretty good place to join. So just kind of summarizing, we've got a market-leading position. We're expanding our capabilities in that market. We are not congratulating ourselves, patting ourselves on the back. I technically can't do that at all right now. At some point, I will be able to. But the -- we are not resting. We are continuing to drive as fast as we can this transition from silicon to silicon carbide. Executing on the growth strategy, you'll see a little bit from Neill on that a little bit later. Growing our diversified pipeline. In 2017 that pipeline kind of didn't exist. A couple of years later, it was a little bit north of $9 billion. And over the last couple of years, we've more than doubled it to greater than $18 billion worth of device opportunity for us. And we're investing in the capacity. We're investing in the people, and we're investing in the company. Our goal is to transition the power electronics industry from silicon to silicon carbide. And there's a whole -- the semiconductor industry has been based on silicon basically since its foundation 50-ish years ago. And these kind of transitions don't happen a whole lot. And when we took the opportunity to relist on to the New York Stock Exchange and to change the name of the company to Wolfspeed, we gave ourselves an opportunity to introduce the Silicon Valley to silicon carbide. And this is what our goal is. We're in the early stage of this. It's super exciting to be a part of this. We're glad you're all here today to hear from a variety of different people. And then later on today, you'll be able to talk to the proverbial people actually doing the work. And I think that will be very exciting for you as well. So with that, what I'd like to do is introduce John Palmour. JP has been with us since the founding of the company. He's actually a co-founder of the company. We have 2 co-founders that are here today and very, very active in the company, JP, who's going to be speaking. And then John Edmond, if you could just raise your hand back there, is also a founder of the company and he's very, very active in the company as well. JP has been working on silicon carbide, this entire time, and it's super exciting for me to introduce JP to give you a little tutorial on what we've been doing. JP?

Okay. Thanks, Gregg. And yes, I did want to acknowledge John Edmond, one of the other cofounders here. So I'm going to give a technology overview. I realize that you guys don't live and breathe the technology stuff every day. So not all of it will be maybe that understandable, but I'll at least try to put it in context for you. And this is what I'm going to talk about. So first -- This is not the right slide deck. Okay. This is not the order that I'm going to talk about. So I'm interested to see what the next slides are. First, I'm going to talk about actually the substrates, and then I'm going to talk about our -- 200-millimeter substrates. Then I'm going to talk about MOSFET development and where we're at with our 650-volt line and then some of the things we've learned on that to create a new line of 1,200-volt we're calling Gen 3 plus. Then I'm going to talk briefly about our module offerings, and then give you a demonstration of what our modules can do. And then I'm going to finish up with the study that Gregg mentioned, which is the one on -- or the fundamental question, does silicon carbide really save energy. All right. This is right. Okay. So here's the status of our 200 millimeter. So just a quick reminder, why are we bothering with 200-millimeter? Well, it's our good friend, Pi r². So as you go from 150-millimeter to 200 millimeter, you get almost double the number of die, and it takes kind of fundamentally about the same amount of work and cost to do fab on that wafer as the one on the right. So you get a lot more die. And particularly important to us because the die we make are pretty large, at least very large for silicon carbide. The largest value we actually make is 32 square millimeters. And if you look at that, it goes from 448 die to 845 and the percentage of edge die, which are subject to nonuniformities in your process or handling damage what we used to call Tweezermeat out on the edge, is 14% of the die are actually out on the edge. When you go to 200, it's 7%. So you a lot less die exposed to issues around the edge. So that's why we're doing that. For a given fab, it effectively doubles your efficiency and output, and that's where we're going. And obviously, we want to get cost reduction also. So we just announced recently that we're building this fab as 200 millimeter, but we actually announced our first demonstration of 200-millimeter wafers in 2015. This is the slide we showed at the International Silicon Carbide Conference in 2015. And we showed that we actually had a pretty good micropipe density of 2 micropipes per square centimeter. That's very detrimental defect that causes yield loss. Now we're an order of magnitude or so lower than that. But it was a pretty good-looking wafer. We demonstrated epitaxy on it. So I just wanted to remind people because we're hearing a lot of announcements of first demonstrations of 200-millimeter wafers from other people in the field. But demonstrating a wafer is a lot different than being able to do it with very high quality, good cost and in very high-volume production. And that's really what we've worked on since then. Now in 2019, this is where we were at. So what is this picture. This is called a cross polarizer image. And what that is, is it's literally 2 polarizers. So if you think of your polarized sunglasses, you take one pair and turn them this way and then another pair behind them turned this way, and that cross-polarization of light does an amazingly good job of showing any defect or imperfection in the crystal. So that's what this image is. And for silicon carbide, this was extremely exciting because we have a lot of area here in the middle that's clean, really clean. And you can see there are some defects in the middle and some out around the edge. But this was kind of the point where we got really excited about where we could go with the 200-millimeter and really said, we can make an honest run at trying to make this ready for a big fab. So that was December of 2019. So where are we at today? That's what it looks like now. And if you don't live cross polarizer images every day, you may not find this shocking, but I -- for me, this is shocking because of its incredible lack of features of details. You never see, ever in silicon carbide, an image this clean. So there are a couple of little imperfections just to show you it's real. Kind of up there, you can see one little dot, a little hint of something up in the upper left, a little strain around the notch, but this is a pretty perfect wafer. And that's what we're able to make now. And that's part of our confidence level of being able to do this for the Mohawk Valley fab. And we're making quite a few of these. So from a crystal and structural standpoint, it's really a phenomenally good wafer. Now I'm going to talk about some other things you look at that don't show. So there's dislocations we don't like that cause some yield loss, et cetera. One of them is called a basal plane dislocation or BPD in the industry is typically what they call it. We actually have a very low density of these, 309 per square centimeter. Another dislocation, we're always working to reduce is called a threading screw dislocation. We're down to 289 per square centimeter. These are very, very good numbers. These are very good numbers for 150mm. In general, I would say the quality that we're seeing out of the 200mm is actually better than what we're currently cranking out on a very high volume today for 150-millimeter. Still early in the game. We have to bring down the cost per square centimeter. But quality-wise, we're there. I mean it's -- now our goal is really to be able to make this quality and figure out how to make it cheaper and cheaper. Now once you have the crystal, you actually have to polish it. So this is a process called chemo-mechanical polishing. And this just shows a surface what's -- a surface scan where you optically detect any defects on the wafer after the CMP process and -- come on, there we are. And so there's only 66 visible defects on this wafer. So again, that's -- just to put it in context, that's really, really good. And if you assume that you only get yield loss at those visible defects, if you were making a 5-millimeter by 5-millimeter die, theoretically, you could yield 96.1%; a smaller die 2 by 2, 99.2%. Now I am no way signing up Rex Felton to get these kind of yields in Mohawk Valley. But this is really -- because there's epi defects, there's fab defects, et cetera. But this is a demonstration that the material can indeed yield very highly. And to prove that out, we've made devices. So as many of you know, we have a pilot line in SUNY Poly in Albany, where we've been fabbing devices. And this is a fully fabbed 200-millimeter wafer next to -- 1 of our exon 3 modules in a quarter to show scale. The thing you'll notice is there's a lot of process control monitor dropouts, these dark squares because the purpose of this fab in Mohawk -- in Albany, is to work on all the process yields, process uniformities, et cetera, so that when we drop those tools into Mohawk Valley, we can pretty much bring them up right away. So we've been proving out the process equipment, a number of the tools anyway, in the Albany line, and they are yielding very, very good. We're really excited about the yields that we're seeing. All right. Now I'm going to talk about MOSFETs. So I think January of last year, we brought out a line of 650-volt MOSFETs. These were our first offerings at 650 volts. And I'll show you how those compare to our competitors. And then I'll talk about our Gen 3 development that kind of was an offshoot to that. So again, we released a full family of 650-volt MOSFETs in a whole variety of packages ranging from 15 milliohms, which is kind of a 100 ampish-type device, down to 120 milliohms, which is kind of 10 ampish in a whole variety of packages, T0247, surface mount devices, et cetera. And the target markets for these -- or target topologies are a bridgeless totem-pole, which is a very common topology for server power supplies. So -- and also used for automotive onboard chargers. So that's kind of the one market. And then the other one would be for bidirectional systems. So the key there is for energy storage systems. Remember, you've got to put energy into the batteries that are storing the power, and then you've got to pull it out. So it needs to be bidirectional. And also for onboard chargers, A number of them now are being designed to be bidirectional, so that you can not only charge your car, you can pull power off of it when you need to. You could supply your house, your grid, whatever. So those are the 2 topologies that are typically used. This is a comparison of our increase in on-resistance with temperature versus our competitors. So the standard is to rate the milliohms of the device at room temperature, but that's not actually what the customer cares about. The customer cares about what is the on-resistance of that part at max temperature, so 150 C or something. And you can see that Wolfspeed's is the bottom one here. So our resistance doesn't go up as much as our other competitor's with silicon carbide planar or trench MOSFETs. And so what that means is at full load, at the high temperature, you get more current or you get lower losses. And how does that show up? This is a comparison of efficiency versus one of our competitors. That's actually a trench MOSFET. And typically, we're getting about a 0.2% increase in efficiency versus those really from low end, from 500 watts all the way up to 5 kilowatts in this boost converter. So we compare very favorably to our silicon carbide competition, and this has been a really quite successful part. This is another way to look at it because I realize 0.2% doesn't sound like much. But in terms of losses, it's actually pretty big. So you can see that our part, in the purple, at full load is saving about 20 watts of loss, which is about a 17% reduction in losses versus the competition. So that's a pretty big deal. So we've been really pleased with that. So how did we do it? Basically, we applied our standard kind of Gen 3 technology. But at 650 volts, we went to what's called a hexcell layout. So at these lower voltages, 650 volts to 1,200 volts we're actually dominated by a lot of different parasitic resistances that keep us from taking full advantage of silicon carbide, what silicon carbide can do. By going to this hexagonal layout, we actually shrink the cell pitch. So it was 12 micron by 6 micron. We get about a 25% reduction with this hexcell layout. It's 9 by 6, and we get more gate periphery per unit area. So one of our big resistance issues at 650-volt is a relatively high channel resistance. By putting more periphery per unit area, we bring that resistance down. So we developed that, and we are able to get a specific on-resistance of 2.3 milliohm centimeter squared. So that's a very solid on-resistance number for 650 volts. And as I said, we've had a very successful run with this product. So we said, well, why wouldn't we apply that to 1,200 volts? So we did. And we actually got about a 16% reduction going really doing nothing more than a mask change, a layout change. So it's a 25% increase in gate periphery per area. And we got a 16 -- a resulting 16% decrease in specific on-resistance. So that brings us down to about 2.7 milliohm centimeters squared, with a minimum breakdown of greater than 400 volts -- 1,400 volts. So we're calling this Gen 3+ because it is really pretty identical to Gen 3, the reliability, everything. The very well-established reliability of our parts is all still there. It's really just a layout change. And so we have not fully released this part yet, but we are strategic -- or sampling strategic customers. All right. Now I'm going to talk about power modules. Another thing that's changed since we met a couple of years ago is we've been further strengthening our power module offerings. So the discretes, which I just talked about, really cover kind of 1 kilowatt up to maybe 20 kilowatts. And then we've been releasing what we call our silicon carbide-optimized modules for -- that's good for 400, 500, 600 kilowatts. And we've really optimized the performance of those for high power, but we kind of had a gap in the middle for these medium power ranges. So more recently, we've brought out what we're calling the WolfPACK family of modules. And these really -- they're smaller, they have less die, less expensive, and it's a baseplate-less module that really is ideal for kind of what I would call the gap here from 50 kilowatts to a couple of hundred kilowatts. And this now really gives us a nice continuum from 1 kilowatt really up to like a 1 megawatt. We offer products that people can design around. And so that's been a very nice addition. But I want to go back to this module, which is the XM3. When we said we optimized it for silicon carbide, we brought the internal inductance, high inductance is a bad thing for us. So we brought the internal inductance way down in these modules. But that actually just passes the problem up to the system. So when you want to make a connection to this, if you bring in a small bus bar, that has a very high inductance. So we designed this module with offset power terminals. So now you can bring in a very large, I call it beefy bus bar to connect to one terminal, and one that's right above it, laminated to protect -- to keep it from shorting to the high one. So now you can get not only low inductance from the module, but very low inductance in the busing and that lets your system be far more efficient. So what does that mean? It means you get power density. So this is a demonstration we did recently, where we are not only using that very low inductance bussing, but we've put it on a unique cooling plate that's -- where you can put the modules on both sides of this cooling plate. So you can see there's 3 XM3s on top of that cooling plate and 3 underneath. And so you can operate this as either a dual inverter or a single inverter to get double the current, 750 amps per phase. And this is a quite small box. So we're putting all this in an 8.7 liter box. So it's smaller than a bread box. And we're getting a ton of power out. So how does that compare? In silicon, if you did this with IGBTs, you get about 250 kilowatts in a 12-liter box. So that's a power density of 19.8 kilowatts per liter. We had done a previous demonstration with the XM3, where we were able to get up to 32.2 kilowatts per liter. That's the one in the middle. But now with this more optimized, dual-sided cooling, we're getting double the power and actually in a smaller box. So we're getting 624 kilowatts out of 8.6 liters. To put that in perspective, that would be enough to power 3 battery electric vehicles or 1 just absolutely badass super car. So how small is 8.6 liters? A regulation soccer ball is 5.8. So it's about 1.5 soccer balls delivering a tremendous amount of power. I remember, 15 years ago, going to see a 50-kilowatt solar inverter that was the size of a sub-zero refrigerator. Now you can get far more power out of 1.5 soccer balls. All right. Briefly, I'm going to talk about patents. So we're -- we feel very good about our patent position. We've been doing this longer than anybody. And we filed a lot of patents. So in Materials, we have 412 worldwide patents either issued or pending; in RF, 1,300 patents issued or pending; and in power, 1,200 patents issued or pending worldwide. We've got coverage all over. So that's a total of just shy of 3,000 patents. And a lot of these are really solid fundamental patents. So we feel really good and strong about our patent position in pretty much all areas. Now I'm going to close up with what Gregg mentioned. This was -- we worked with the biophysical Economics Institute to answer the fundamental question, does silicon carbide really save energy. We know it saves energy in the application, but we also know it takes a lot of energy to make silicon carbide MOSFETs. So we worked with BPEI and their kind of metric of choice here is ESOI, which is energy saved on energy invested. So we do a thorough accounting of all the energy that we invest to make the silicon carbide, and then we compare that to that of the IGBTs. So this is a solid economic calculation in terms of energy and also a very solid green ESG metric. So how did we do it? So this was a deep, deep dive into everything it goes to make our wafers and devices. So obviously, one of the big sources of energies is electricity we use. We do very high temperature crystal growth. It's relatively slow, et cetera. So we accounted for all of that, but we don't just grow the crystals. We've got a wafer them, we've got to polish them. We do high-temperature epitaxy. And then we do cleanroomfabrication, which is in a highly controlled environment, and we have a number of high temperature processes there. So we accounted for every bit of everything to go from raw materials to a finished MOSFET. Then we looked at what's called embodied energy. So we buy raw materials, we buy consumables. We buy chemicals that we use. Well, how far did they travel? How did they get here? Was it by plane, by boat, by truck? We accounted for every bit of energy required to get those materials to us. That ended up being 18% of the energy. The electricity was 78%. Natural gas. So we're in a controlled environment in the fab. We use natural gas to control that humidity and we also use it to burn off some effluence. So that was 3.7% of the energy. Then we even did a deep dive into the tools and the machinery, how heavy is a crystal growth system? How heavy is an epi system? Where did it come from? How did it get here? How long is it going to last divided by how many wafers it can make a year? And we went through all of this, how heavy is an ion implanter? By the way, they're tremendously heavy. But they have enough output. So this actually ended up being a pretty de minimis amount, but we accounted for everything. And as Gregg said, we took that amount of energy, compared it to IGBTs, ran it through a generally accepted model for the driving cycle. And we came up with a payback of 7:1 for a 400-volt bus system. So that's the bus voltage. This would use a 650-volt MOSFET or 650-volt IGBT. The payback on that incremental energy used to make silicon carbide over silicon was 7:1. If you look at an 800-volt bus system versus the 400-volt, it's 13:1. And if you look -- and here, the assumption is the battery electric vehicle would go for 200,000 miles, pretty safe assumption because there's a lot less moving parts in EV versus an internal combustion engine car. And then we very simply for a taxi or Uber, we just assumed it would go a lot more miles. It's going to be driven a lot more every day, and it would be 500,000 miles. So the payback there is 24:1. So it's really -- as Gregg said, it's a tremendous payback on the extra energy it takes to make silicon carbide. And by the way, we picked the automotive application as the riskiest one we had because cars really don't operate that many hours, maybe 10,000 hours at most. So it's -- you don't have a lot of time to get your payback. Now what does this account for? So per sedan -- you've got a sedan. I forget the number we used, it was either 150-kilowatt or 200-kilowatt sedan. What would this save over silicon. We're not talking about BEVs over ICE or internal combustion engines, we're just talking about the incremental savings by using silicon carbide. It's 5.5 barrels of oil, the equivalent of that saved per sedan. The user, if they're in the U.S., would save about $233. And it'd be probably double that in other countries, depending on where you're at. And the lifetime greenhouse gas emissions would be reduced by 690 kilograms of CO2 equivalent, which is equal to the CO2 generated by 77 gallons of gas. So that's per car. And that's -- I mean, that's okay. That sounds pretty good. But then if you remember, in 2030, if 35 million battery electric vehicles are out on the road, which seems to be a kind of an accepted number now, that one model year would save 192 million barrels of oil, $8.2 billion of electricity and the lifetime greenhouse gas emissions would be $2.7 billion of gas. That's if they all use silicon carbide and -- but that's just for that one model year. The next model year, it would be that plus more as BEV penetration goes up. So if you save a few billion dollars of gas here, a few billion there, you're talking about real impact on the environment. So we looked at industrial also. And the example we picked was a 50-kilowatt PV inverter. And the payback here -- because an inverter now works 12 hours a day, every day for like 20 years. So you get a much higher payback in the solar inverter example, 77:1 in Phoenix, where the sun shines a lot. Where it's cloudier, not as much sun, Albany, you get 55:1; Beijing, 63:1; Shenzhen, 59:1, but all really big numbers in terms of payback. And this is going to apply to pretty much any industrial application where they run much more for a -- good bit longer. So as I said, the automotive one was the hardest one to get a payback on. The industrial, it's a slam dunk. All right. So to summarize. So 200-millimeter wafers show really good structural quality with minimum contrast. The BPD densities, basically dislocation densities, are 309 as low as at least, and the TSD or threading screws are as low as 289. Hexcell layout for planar MOSFETs has us being very competitive at 650 volts. And we've applied that to Gen 3 devices, which gives us a very competitive 2.7 milliohm centimeter squared, which is a 16% reduction from our standard Gen 3. And I am going to say that the future gens, we'll not only be focusing on driving that RDS(on) number, which is -- that's a fundamental number or metric to look at, but it's not the only one. So we have a lot of other ideas on how to deliver more usable amps to the customer to maximize the benefit of silicon carbide. And we're working on a number of things in that regard. Silicon carbide power modules allow unprecedented power densities, 72.5 kilowatts per liter. And silicon carbide does indeed save energy despite the fact that it takes more to make. So it's a really big deal, as Gregg said, for the automotive OEMs because they're looking for everything they can to reduce their carbon footprints. And thank you very much. I think we are next to Jay Cameron. And I'll let Jay introduce himself.

All right. Good morning, everyone. Thanks for spending some time with us today. My name is Jay Cameron. I'm responsible for the Power business here at Wolfspeed and excited to be able to talk to you about that business today. I came to Wolfspeed in 2018 to lead the Power business. And before that, I've been in the semiconductor industry with Texas Instruments for about 17 years as well. So with that, I'll transition to taking a look at our overall market opportunity for silicon carbide power devices. The first thing that I'll draw your attention to is we've got a very fast-growing market. You can see the market is expected to almost triple from 2022 to 2026 with a $6 billion power device opportunity in 2026. Clearly, the transition from combustion engine vehicles to battery electric vehicles is one of the major drivers of the increase in available market opportunity for us. But it's complemented by a nice host, a broad host of industrial and energy applications, some of which JP referenced in his talk. And I think what you'll come away from today with -- throughout the presentations for the whole morning is that it's really the combination of our sales strategy, our technology leadership and our manufacturing strategy and capacity expansion that are going to put us in a great position to capture share in a rapidly growing market here for silicon carbide power devices. So first, I wanted to ground everybody, and JP started this. I'll just put a couple of touches on it with what are our power devices. We've got 3 types or 3 categories of products that we sell to our customers. On the one side, you've got our discrete devices, which represent what I'll call the lower power end of the spectrum, kilowatts to tens of kilowatts. On the far side, you've got our power modules, which represent products that can serve the higher power applications, think tens of kilowatts to hundreds of kilowatts even into the megawatt range. And then we've got a third business that's very specialized and focused where we don't do the packaging ourselves, but we sell our bare chips to customers that have their own advanced semiconductor packaging so that they can build customized packages that are uniquely designed to integrate well into their systems. And primarily, what that means for us is these are automotive companies that are integrating their own custom packaging into automotive inverters. So that's a little bit about the product portfolio, just to give you the landscape. First, I want to talk about the industrial and the energy market. Here, you see a market that's also large and growing fast, more than doubling over the time period that we forecast here. So a $1.4 billion opportunity in 2026. And what I'd say is that we're really seeing a couple of different types of applications driving growth in the industrial and the energy space. The first is existing industrial and energy applications that are today using silicon and converting to silicon carbide. But then as JP showed, some of the inherent benefits of silicon carbide are also enabling a whole new host of applications that are coming to market for the first time because of silicon carbide. So we've got a $1.4 billion opportunity with a very fragmented customer base that puts us in a position to have some nice business characteristics over time as we grow in the industrial and the energy market. So let's look at industrial and energy in a little bit more detail in some of the applications because it is very fragmented and can be important to break down here. If I look at the industrial space, what this is really about is how do I use energy efficiently in these applications. I'll touch on a couple. Air conditioners, a very common application, historically based in silicon technology, now seeing trends for, hey, I've got to have higher efficiency, I've got to meet a new regulation, a new standard. My consumers want to have a greener personal footprint. We're seeing the air conditioning space transition from silicon to silicon carbide because of these trends. If I look at the other end of the spectrum, in the aerospace market, you're now seeing more and more electric vertical takeoff and landing aircraft. And obviously, the weight of these systems is really critical to be able to go farther, have longer operating time on a given battery that's on board. And so here, silicon carbide and the power density and the efficiency is really enabling a brand-new space. So broad-based trends here, solar implementations are really ramping up for generation. You're seeing that coupled with energy storage systems to smooth out the peaks and valleys of generation versus usage. And then you've obviously got the fast charger infrastructure for the electric vehicle space that's trying to take that generated and stored energy and deliver it to vehicles in a very short period of time. So some great trends in the energy space as well. All of those applications are benefiting from the fundamental values of silicon carbide with higher efficiency to waste less energy, greater power density for smaller and lighter solutions and then the higher voltage capability allows you to deliver more power. Now we're winning in the industrial and the energy market today and I see it as really on the back of these 3 key reasons. Number one, and Thomas will speak more about it later this after -- later this morning, we got a sales channel that's able to reach effectively both top accounts in industrial and energy as well as a broad and distributed group of customers with our relationships with Arrow Electronics there. We're building a really broad differentiated portfolio of devices to be able to serve these applications. And then as JP alluded to, what we're really trying to do is help our customers make that transition from silicon to silicon carbide. And that's where we're using our expertise and sharing it with engineers that our customers to really be able to accelerate them getting comfortable with the technology and moving through any development challenges that they might have. All right. So from there, I want to switch from Industrial & Energy and look at the automotive market. Automotive is clearly the big driver of the overall TAM. And you can see that from 2022 to 2026, we're projecting nearly a triple in the amount of available opportunity for us in automotive with $4.6 billion of opportunity in 2026. The big driver for this is obviously the conversion of the industrial -- the internal combustion engines to the battery electric vehicle architectures. And I think what you'll see as we talk about the automotive space is that there's a few key trends that are really contributing to the acceleration of this transformation. For me, the transition to the electric vehicle architectures is almost a foregone conclusion. And really, the challenge for us is just predicting how -- the rate at which that conversion takes place in the marketplace. If I look at the market, Gregg mentioned some of the regulatory pressures and the math that we had done a couple of years back on how we were going to see battery electric take on a greater and greater percentage and a diminished percentage of hybrid electrics. I think that's proving out. JP talked about it with some of his comments, but there's a real emphasis in the technology space not only on range, which is important to the consumer, but the automakers care about how much range can I get from a given battery and so range -- kilometers per kilowatt hour of battery is a great metric for that automakers are thinking about to be effective in their systems. And then you've got an automotive industry that's got a couple of big challenges in front of it. One, they're investing to -- in their infrastructure to make this technology conversion. A lot of that relates to how do they take care of the big components, especially batteries that are -- represent the most expensive portion of an electric vehicle. And they're doing all of this in the presence of a challenging supply chain environment and having to rethink how they think about semiconductors in that environment. So when we translate that to what it means for silicon carbide. If you look at all of those market drivers, all of those pressures, they're all pointing towards silicon carbide being a solution to these challenges. We talked about the regulatory and the greenhouse and the carbon footprint capability, consumers want to be greener. Silicon carbide directly hits the 2 key concerns or impediments to consumer adoption and that's being able to go farther, eliminating their range anxiety and being able to charge more quickly, get back out onto the road and not have to have a concern about waiting for charging time. You've got the automakers that are trying to transition to electric platforms, but they also want to do it cost effectively. And not only -- so you look at their battery concerns and if they switch to a silicon carbide architecture, they're able to go a similar range with a smaller and therefore, less expensive battery. So that's working in silicon carbide's favor. And then you've got the automakers that are making these large capacity investments in battery technology and manufacturing and they want to build as many cars as they can out of that battery footprint that they're putting in place. And so here, silicon carbide is offering them a way to get more effectiveness out of their big capital investment in the battery technology. So a lot of industry trends really focused on driving automotive towards silicon carbide and Wolfspeed is winning in this market, and we're really nicely positioned to continue winning because we've got a strong technology foundation that we're building on. The expertise that you all got a glimpse of listening to JP is present from the crystals the devices to the system level experience so we can help our customers through that transition effectively. We take that technology expertise, coupled with our manufacturing expertise. We put that together to yield great automotive levels of quality and reliability. And then all of that is on the foundation of the manufacturing strength that Rex will talk about putting in place a lot of capacity to serve the growing market needs and doing it in a state-of-the-art way with our 200-millimeter silicon carbide factory in upstate New York and the continued expansion of our crystal growth capability to be able to serve that entire value chain for silicon carbide for automotive. So we've got some really strong pillars that are enabling us to continue winning in the automotive space. The last thing that I wanted to talk about on automotive is really around our assurance of supply program. Many of you saw and commented on the General Motors announcement that we made on the same day that we listed here on the New York Stock Exchange. And I wanted to give a little bit of color to the challenge that we're trying to solve with our assurance of supply program for the automakers themselves. If you look at the traditional sourcing mechanics for the automotive companies, they've committed to purchases on a relatively shorter time line. And that's just based on their long legacy of having a lot of mechanical parts that are relatively easy to put capacity in place for when compared to complex -- more complex semiconductor devices. And then on the other side of the coin, you've got the semiconductor manufacturers that have to make capacity investment decisions 3 to 4 years in advance to be able to benefit customers out in time. And so there was risk on both sides. As a semiconductor manufacturer, we're having to make a capital investment decision far in advance on the hope that, that demand will be there. And vice versa, the automakers have to look at it and say, gosh, I have to hope that the supply is going to be there for me if I commit on a near-term time line. So what we tried to architect with the Assurance of Supply Program is really a program that brings those 2 needs and those 2 risks into alignment where we can invest with confidence well in advance, and our customers can rest assured that they've got capacity that will serve their forecasts out in time. So that's really what we've tried to accomplish with the Assurance of Supply Program. We were very pleased to have General Motors join that with us. And I think Kenric Miller would tell you in the conversation stations later that there's a tremendous amount of interest in this across the spectrum of automakers today. So with that, I think we've got some really great market conditions. You saw the TAM growth, the opportunity growth that's in front of us. We get some great breadth of opportunity from the industrial and the energy space. We have a really excellent vertical market, focused market with automotive and the electric vehicle transition. And then we've got a sales strategy, a manufacturing strategy and fundamental technology that all really nicely come together for us to have a successful consistent, growing business for power devices for Wolfspeed for a long time into the future. So with that, I'll say thank you and look forward to talking to you all later. And next, I'd like to introduce Gerhard Wolf, who leads our RF Power business.

Thank you, Jay. Thank you. Good morning. My name is Gerhard Wolf. I am in charge of the RF business. I joined Wolfspeed in 2018, I came through the Infineon acquisition. So I worked -- prior to Wolfspeed, I worked 20 years in Infineon. Today, in my RF update, I will give a look at the market opportunity. I will give application examples. I will detail the RF business strategy, and I will wrap it up with the why Wolfspeed RF. So first, looking at the trend in the communication infrastructure industry. There are 2 major trends popping out, connectivity everywhere and the explosive growth of data. The chart to the left, the graphic to the left shows a so-called 5G ecosystem, a typical 5G ecosystem implementation using a so-called heterogeneous network. It consists of macro base stations as well as small cells, for example, in venues like stadiums as well as train stations or small cells in smart lighting systems. So those connectivities, those base stations will provide more connectivity compared to previous standards like in 4G. 5G will enable data speeds up to 20 gigabits per second, roughly 20x more than 4G. It will reduce the latency to around 1 milliseconds, 50x lower than 4G, and it will allow more connected devices in a given cell. The second major trend is the worldwide growth in mobile traffic. So you can see the chart, it is forecasted to grow significantly 20-plus percent over the years to come. The chart shows gigabyte per month for a mobile device that growth in data is driven by the consumers, how we use data. So more and more data is used through online streaming, video as well as music, online gaming, remote work, which we had to take on during the COVID times as well as Internet on the go. This mobile growth traffic will be driven by the 5G ecosystem as well as then supporting technologies in macro base stations as well as MIMO base stations. Next, looking at the Aerospace and Defense industry. A major trends in the Aerospace Defense industry in the radar systems is the migration to face array antennas. Historical applications historical radar applications have been using rotating mechanical single transmitters to detect and follow objects. The use cases, the traction was limited to the 1 single transmitter and also the update rate is limited by the rotational speed of the transmitter. Moving forward, those radar systems will implement it will be implemented with semiconductor solutions. They will not have moving rotating devices anymore. There will be active antennas, electronically steering and antenna beam, which uses the electrical phase at each phase to adjust through a transmit and receive module. Those will significantly improve how many objects can be tracked as well how often the objects can be repeated in the visualization. This has increased system reliability and will significantly improve how greater systems will work in the future. So next, looking at the market, coming from those industry trends in communication infrastructure and Aerospace and Defense, the device, RF device pipeline -- the RF device market will grow from $2.1 billion in the year 2022, all the way to $2.9 billion by the year '26. So the drivers again are the revolution in 5G, increased mobile traffic as well as high-performance aerospace and radar systems and improved performance and higher efficiencies in a various range of communication, commercial and industrial equipment, for example, satellite communication, Test & Measurement systems. If we look at the year 2026 of the $2.9 billion, a vast majority of the market will utilize gallium nitride-on-silicon carbide. So we expect that 85% of that market in 2026 will use gallium nitride-on-silicon carbide due to its advantages accordingly compared to competing technologies, which I want to explain on the next slide. Looking at the fundamental advantages of gallium nitride-on-silicon carbide. First, let's look at gallium nitride-on-silicon carbide versus silicon, which is the main technology used in communication infrastructure. One big advantage is the efficiency gain. You can increase the efficiency of a system by 15% if implemented, for example, in the 3.5 gigahertz radio power amplifier base station. The second major advantage is the higher power density compared to silicon. It's 10x higher compared to silicon. If we look at the advantages of gallium nitride-on-silicon carbide versus gallium arsenide, which is the main technology used in a broad range of RF applications as well as in the Aerospace and Defense application, the power density is also 10% better than gallium arsenide. Another key advantage is the thermoconductivity, 9x higher compared to gallium arsenide. So if I translate that into customer benefits. So higher efficient solution will have lower power consumption. So lower OpEx, lower cost to operator systems for the operators. The higher power density allows more compact solutions, which is a key advantage if you put the base stations on the cell towers. The real estate on the cell tower is very scarce and costs money. The smaller the footprint of the base station, the lower the rent at the cell tower. High thermal connectivity, savings on the cooling systems, reduced system costs again, higher reliability, savings on maintenance costs, so a significant advantage, too. And then last but certainly not least, high bandwidth, broadband solutions. I talked about the explosive growth of data that can be realized through the broadband solution, the broadband application, the broadband use of the power amplifiers. And gallium nitride-on-silicon carbide is enabling that way better than any other competing technology. With that, let's look a little bit more detail into the application space to quantify it even further. Looking at the communication infrastructure industry, a typical application is a base station radio. So I've pictured here 2. One is a 4-transmitter macro base station, 4 times 60-watt using a radio and then an external antenna. Another typical application is a 64 times massive MIMO sense for multiple in, multiple out transmitters. So those 2 systems are typical implementation when using gallium nitride-on-silicon carbide. More and more of the new design customers we are engaging in using gallium nitride-on-silicon carbide to build more compact systems, have increased frequency bandwidth, lowered the carbon footprint because of the higher efficiency, the lower energy use and certainly lower the cost fit per second for the operator. If we quantify that in numbers, so the gallium nitride-on-silicon carbide implementation increases the data 10x more data through a given box. If we look at the cost per megabit transmitted, it uses up to 87% less energy to transmit data. And as we have seen, the data explosion is happening, the cost savings are significant. Looking into besides the communication infrastructure, what are typical applications utilizing the benefits of gallium nitride-on-silicon carbide more and more. There are Aerospace and Defense, radar systems, there are weather radar systems, air traffic control systems to mention a few and satellite communications. So they all use the benefit of gallium nitride-on-silicon carbide, the higher efficiency the higher power density to create lower power consumption, high-performing devices, smaller, lighter equipment. If I come back to the earlier transition industry radar systems using phased array systems. The example here shown is a so-called X-Band radar systems, which uses frequencies from 8 gigabits -- 8 gigahertz to 12 gigahertz. So if the highest available gallium arsenide module in the market is replaced with a gallium nitride-on-silicon carbide device, the resulting output stage is 20% more efficient, and there is 6x more power resulting out of using gallium nitride-on-silicon carbide. The 6x more power results directly into a 60% increased detection rate, which is significant for our radar system. So how are we going to address the RF market? First of all, we strive for technology leadership by utilizing the vertical integration we have with in Wolfspeed. Within Wolfspeed, we have everything from silicon carbide crystals all the way through an GaN IP, GaN manufacturing, assembly and test all the way to the RF devices in our control, and we are utilizing that vertical integration, our R&D and development process to our advantage. Looking at the market of communication infrastructure. So we are using a go-deep strategy addressing that market. So we are using dedicated products, dedicated team and also dedicated labs with specific selected customers to address those markets. Looking at the broad-based market RF market in the Aerospace and Defense, we are using a go-wide strategy. We're using distribution partners with global reach, for example, Arrow that address these customers in an efficient way. So that brings me back to my last slide. Why do we win in RF Power. So we have more than 50 years of experience in commercializing gallium nitride-on-silicon carbide. We have more than 50 million devices in the market successful today. We have deployed 800 billion field hours with lower field failure in time rates than silicon. And we have a 1/8 accredited trusted foundry by the U.S. Defense Systems. With that, thank you, and I hand it over to Cengiz Balkas.

Thank you, Gerhard. Just like Gerhard, I also joined Cree through an acquisition, but back in 2006. At the time, I ran the materials business for a couple of years and then our device businesses, I think, almost 12 years. And for last year, I'm back to the materials business. And I'll try to give you an update on our materials activities in the next 10 to 15 minutes. So I thought it's a good idea for us to start with our mission statement. As you've heard from Gerhard and Jay, our Materials business supports our Power and RF businesses internally. But our mission is really broader than that we're supporting the industry's transition across the globe from silicon to silicon carbide. And we're doing this in both the power electronics by supplying silicon carbide materials and also for the RF technologies, supplying GaN and silicon carbide materials to that technology as well. So if you look at our market -- if you look at our material strategy, we presented something very similar back in 2019. It hasn't really changed much. We have a globally leading market share in the space. We're expanding our capacity to serve our customers. And then we're using our scale to improve on the technology, the quality and also the cost to offer more cost-competitive products to our customers. In terms of the market, if you look at the next 3 to 4 years from '22 to '26, there is significant growth. I think you've seen similar graphs in Jay and Gerhard's presentations as well. And a lot of the growth is driven by the Power business. In the power side, application-wise, electric vehicles are driving a lot of the adoption for silicon carbide. So that translates into a very good opportunity for our Materials business. But also the industrial power, Jay gave multiple examples. Silicon carbide has been in the industrial power business for a long time. And those designs continue and gain momentum. As a result, this also creates a good market opportunity for our materials business. And on the RF side, Gerhard touched on this, too, the communification (sic) [communication] infrastructure and Aerospace and Defense, they're highly basically, both markets have adopted gallium nitride-on-silicon carbide to a very large extent. So that also creates a really good market opportunity for our Materials business. In terms of market share, obviously, we've been at this for a long time, and we've been adding capacity for a very long time as well. So you'll see on this chart, our best estimates on the material side, we're at 60% to 65% market share globally. We have a lot of leading device companies as our customers and we continue to add capacity in connection with their needs. So our goal is to maintain a similar market share going forward. As I said, we supply materials to a number of key customers, a few of them are listed here and one instrument that we use to do this is through long-term agreements. And you'll see here, we have about $1.3 billion already under contract with our customers. And just roughly about 1/3 of that has been shipped and we have another 2/3 to be executed. And I just wanted to touch on a few of the points we typically have in these agreements and point to some of the benefits for our customers. First of all, they are multiyear agreements, plus or minus 5-year type agreements. It is a binding commitment for both sides for us to produce and for our customers to purchase materials from us. And we can build in some upside capability in there, too, depending on the conversation we're having with the customers. Now there are 2 really important aspects here that our customers benefit from as well. One of them is, obviously, they get access to our long-term cost road maps, which is really critical for their businesses as well. And then where necessary, we can build in some development programs depending on what their needs are and put that also into the long-term agreement. So we found that this brings a really good stability to the material supply to these customers, and it's a very good way to manage the business. So here, I wanted to touch on something unique about Wolfspeed or at the early days at Cree. We've always focused on a high level of innovation on silicon carbide and GaN materials. And it shows here from our intellectual property position to a number of years that we have in terms of experience. But what was really key in this whole evolution was we had an internal device business that gave very rapid feedback to our materials capability. And also we engage the external market from very early on. So these 2 inputs to the business, we were able to create the necessary scale to serve both of those internal and external markets. So what that, in turn, gave us is in R&D, if you want to execute a certain program, we have pretty massive scale in place, and so we can modulate that capability. And of course, when you put the long-term agreements on top of this, it brings a different level of scale and stability to the materials business. So in this slide, I wanted to walk you through the typical phases of a wafer diameter change because we're getting this question a lot and especially recently with the 200-millimeter demonstrations that are happening in the industry. So I just put a few points here that will help us get through this -- what the typical time line is. So initially, obviously, it starts with the demonstration as John Palmour showed. You go to the next wafer's diameter and you have some demonstration materially available. You have initial specifications and a process of record. From there, you move into a definition stage. And here, basically, everything gets refined, the process of record and specifications and so on. But having an internal device capability is really critical here because that feedback loop works very fast in this phase of the development. So from this phase then we'll move on to the ramp phase where the process of record is stable. We make the material commercially available. And then from there, we move into production as we add volume. So there are really 2 themes here. One is what we need to do internally to get the material to the right specifications, the quality, the cost points that we need to do. But really, there's another factor here with our customers. They cannot switch their fabs overnight from 100 to 150 or 150 to 200. So they have their own time lines. So when you put all of them together, typically, you come up with a 7- to 10-year transition time line for a wafer diameter. And if you look at silicon, it's very similar numbers you'll find in the silicon industry as well. Okay. So in terms of our materials portfolio, we're unique in the sense that we supply materials to both power applications and also RF applications. And we have a variety of diameters that we offer. We offer bare wafers, we have for epitaxial wafers to customers. And then in this particular portfolio that you see, 150-millimeter power wafers is particularly important because it drives a lot of volume for us. And along with that volume goes, of course, we have to have an epitaxial product as well. So in this slide, I just wanted to touch on this topic again because if you want to make a power device, you have to have epitaxy on your wafer. And if you take a look at a bare wafer with epitaxy -- with bare wafer with epi on it, you really couldn't discern it by naked eye. But in terms of your product performance and yields in the device fabrication, the epitaxy plays a super critical role. And this is basically a very thin layer of -- in the case of silicon carbide, is very thin layer of silicon carbide that goes on the substrate. You could use multiple different ways in terms of a reactor geometry. Our team has experience in all of them. And so a few years ago, when we were increasing our capacity to serve the market, we saw a gap here because this step has to either be done at the vendor side or the customer side. So we ended up adding a tremendous amount of capability and capacity to the business. And if you -- in the past year, we added 7x the previous capacity into our capability to serve the customers. So if you look at our long-term agreements, all of them have a particular percentage dedicated to epitaxial products as well. So we are looking at different ways to depict how many wafers that we made. And 2 years ago, JP had a different graph. This time, we took a different approach. So basically, we said, okay, in the past 10 years, how many silicon carbide wafers that we've made the initial engineering answer came as 615 million square centimeters. And we decided, okay, well, what does that mean? It's about 15 acres of land or it's about 12 football fields. And then over the weekend something interesting happened as well, we had -- we made our 1 millionth 150-millimeter wafers. That's for the power business only. And I brought the wafer here, but I'm afraid it looks exactly the same as the wafer before and the wafer that was made after. So if you want to take a look at it, we'll put it up there. Similarly, for the epitaxy side of our business, we took a 5-year window, 2.5 million microns of silicon carbide epitaxy we've deposited. And as I said, this is a little bit of a different, it's a very thin layers that we put in. So if you add all these, it's a swimming pool that's about 8.5 feet deep. It will add to that. I'm not the best spokesperson for this, but if you wanted to convert it into human hairs, it's about 200,000 human hairs stacked on top of each other. So -- all right. So with that, I'll transition to my last slide. Obviously, we have a tremendous opportunity ahead of us converting this industry into silicon carbide. So at Wolfspeed, we have a great team both in the operations side of it as well as in the R&D side. We're investing tremendously in our capabilities on the production side, but we're also expanding our R&D teams. Obviously, with the markets that we serve, quality has to remain our #1 priority inside the company as we ship products to our customers. And every day, we are basically trying to offer the best value to our customers that we can. With that, I think we're at a break time.

So thank you for your attention this morning. And as promised, we had a lot to share we still have a lot of great, great information to cover with you. So what we're going to do right now, take -- I'm going to buy back 5 minutes from you all. So 15-minute break. There are refreshment outside. And if you have any questions, please let us know, but we'll see everyone about 15 minutes. Thank you. [Break]

Thank you very much. Everybody's backing on time. I like this, you guys spoil me. So this is terrific. Now we really thought it would be great to get some perspective, not just only from us, but why not talk to one of our partners. And that's what we're going to do right now. Kenric Miller, VP of Automotive sales is going to introduce our guests. So Kenric?

Thanks, Tyler. Good morning. My name is Kenric Miller, and I run our automotive sales and marketing. Prior to joining Wolfspeed in 2018, I led the automotive sales and marketing for the world's largest automotive semiconductor company, NXP. And today, I'm delighted to say that we're going to have Julian Fieres join us. Julian is part of ZF. And today, I think he's traveling. He's in Detroit today. Usually, he's out of Europe, but I think this week is a week of customer visits. So Julian, Hello.

Kenric. Hi, everybody. Very warm welcome from my side.

Julian, maybe you could say a little bit about your background as well as introduce the audience to who ZF is.

Certainly. So my name is Julian Fieres. I'm the Head of Strategy for ZF's e-mobility Practice globally. I'm with the company for 8 years, ever since we started gearing ourselves up to be one of the key suppliers in the e-mobility sphere. ZF is a global mobility corporation with around about EUR 32 billion of sales, round about 150,000 people employed globally, and we're active in all verticals of mobility. So passenger car is one area, but we are also one of the leaders in electrification of trucks and buses. We are active in the whole industrial field with marine, agriculture and construction applications, and we are, at this point in time, also engaging heavily after the acquisition of American player TRW 5 years ago in the field of autonomous driving and electronics. So we are looking at mobility from an integrated perspective, and we are looking at mobility from the future electrified perspective, which is why I'm very happy to be here with you today to speak about that part of the transformation.

Well, again, thanks for joining us, Julian. Earlier today, Jay Cameron talked about some of the trends in automotive. And I thought that maybe Julian and I would add some color to some of those trends. And Julian, over the last couple of years, we've seen a lot of change happening, especially internal combustion to battery electric vehicles. And maybe you could share some of the things that you've seen and maybe even quantify what you're seeing.

Absolutely. So I think it is important for the audience to understand that ZF has been in the field of mobility for 117 years. So predicting market changes and predicting paradigm shifts in the market is something that is, for us, at the essence of everything that we do. So over the better part of the last decade, we've built up a very comprehensive modeling tool with which we look at the electrification globally. That tool involves battery price development. It involves individual information that we receive from our customers. It plots the global legislative environment. And I have to tell you, in the past 3 years, we have to adjust or we had to adjust the forecast 3 times. So when we were looking at the market in 2019, we actually forecasted that in the year of 2030, 16% of all vehicles produced in 2030 would be electrified. Now we all know what has happened since 2019. We've had the EU Green Deal. We have had a new 5-year plan in China for the electrification of road transport. And we've had recent moves in the North American legislation environment for electrification. So in 2019, in 2020 and in '21, we have updated that forecast, and we are now for the year of 2030, predicting 40% -- 4-0% of all vehicle production in 2030 to be fully electrified, battery electric. And that is, for us, a significant transformation because we have a lot of business with combustion engine and hybrids today, which means we have no intrinsic motivation to overexaggerate that forecast but this is a very decisive transformation of the industry that has happened in the last 3 years in which we believe. And let me give you one key example on that. The first market in the world has reached the point where more battery electric vehicles were registered than any other drivetrain technology last year, and that was Norway, a European country. And that, for me, is an indicator of a tipping point year, which we've seen in 2020, 2021.

Thanks, Julian. The other thing that we're seeing, I think, is a big transition from silicon to silicon carbide. And I know that ZF has looked at it, but as we look at it from a Wolfspeed perspective, we're at the point where we're seeing RFQs come in from OEMs and Tier 1s. And basically, the shift looks like it is absolutely 100% moving now to silicon carbide. Do you see it the same way? Or can you share your thoughts there?

Absolutely. So to share that thought with a bit of detail and a bit of color, it is important to understand how we at ZF look at the market. And we are doing that with a simplistic yet very powerful metrics. So we have 2 by 3 metrics with the vertical access being 800-volt and 400-volt and the horizontal 3 boxes being the power classes from 100 to 200 and then to anything above 1 kilowatt of power of the electric drivetrain. What that gives you is a 6-year metrics and every customer requests every volume that we know of, we allocate to one of these segments. And what we've seen over the better part of the last 3 years is that a lot of the volume is moving from the 400-volt up to the 800-volt segment with some OEMs even preponing dedicated 800-volt platforms and what we also see is that there is a trend to higher powered drivetrains, okay? So rather take out a 100-kilowatt axle and replace it with a 150-kilowatt axle. So I can only underline what you say, what we're seeing from all the customers that we're speaking with is that the market is moving to an 800-volt silicon carbide electrified average powertrain kilowatt of 150 to 200 kilowatts. And that's the sweet spot that is increasingly relevant for a lot of customers to the point where we're seeing the dedicated 800-volt platforms are being redesigned and preponed to shift into this market segment quicker because there's an ecological and an economical case for OEMs to do so at this point in time.

You mentioned and talked a lot about 800 volts. 400 volts is where the present silicon market plays. What are you seeing in terms of silicon carbide and quotes from customers at that level?

Yes. So absolutely, at this point in time, we are seeing 400-volt silicon carbide quotes as well. Customer interest is there. I would segment it the following way. If an OEM is redesigning an entire platform for a newest generation of vehicles, these OEMs tangentially move to dedicated 800-volt silicon carbide platforms. If OEMs are looking at a step-by-step great yield of transformation from silicon to silicon carbide because they want the added benefit of efficiency now but from their road map and their cycle plan, they're not yet at the point where they're bringing an entirely new platform generation, these OEMs are going for a 400-volt silicon carbide step right now and they are also looking for potential synergies between 800-volt and 400-volt silicon carbide platforms within their vehicle landscape. So we see that at the moment. It is an increasing trend for those OEMs who don't want to move to an entire dedicated 800-volt platform at this point in time. But from a weighting perspective, we see significantly more dedicated 800-volt silicon carbide opportunities right now than 400-volt silicon carbide.

I think we agree with you in terms of what we saw so far, initially, the initial transition to silicon carbide was at the 800-volt level. And I think what happened over the past year, 1.5 years is car companies saw not only the system advantages at 800 volts, but we saw them saying they could do this at the 400-volt level, and they had the infrastructure already built for 400 volts. And so I think that's been probably 1 of the bigger surprises over the last year or so is how many OEMs are also moving their 400-volt systems over to silicon carbide. So I think long term, it's going to be interesting to see what happens. I think the infrastructure, how much fast charging goes in. And also, you mentioned it earlier, how quickly can OEMs move their architectures from 400 volts to 800 volts. But over the long term, we're probably heading to an 800-volt equilibrium, so to say, out there in the environment of fast charging, really driving the market over the long term [Audio Gap] about the supply challenges that are Tier 1s like ZF are facing today. Do you see today's problems, having any long-term implications in terms of how ZF or how OEMs or other Tier 1s source semiconductors and in particular, maybe silicon carbide?

100%. 100%. I think not only have we seen a tremendous market change and technology change in the last 2 to 3 years, but particularly with the COVID crisis and then the semiconductor crisis, what we've also seen is the revisiting of strategic steps in the value chain of all of the components of an electric vehicle. And what has become apparent for ZF, but also for other players in the market, is that the semiconductor supply should be treated less like one bill of material item among others, but more like a strategic long-term supply component, very similar to as it is already being discussed in the battery landscape. So OEMs and Tier 1s are today planning long term in terms of is battery capacity and other plants are now sufficient to actually float the trucks, buses and passenger cars that are being announced to be produced and they're doing a long-term strategic volume planning to actually account for these capacities. And that is a shift in thinking that is gradually taking place that this similar thinking needs to apply also for critical semiconductors and in this very case for silicon carbide semiconductors, which will see a significant increase in the demand curve that today, a not yet fully built out supply chain.

Thank you. Well, I think we have some time for some questions from the audience. So if there are some questions, I think we have some microphones.

It's the best way. That said, we can either sanction the war room or take it into the lunchroom. Yes, just so he has it when he is.

Jed Dorsheimer, Canaccord Genuity. I'm wondering, the auto OEMs treated Tesla as a bit of a joke over the past decade, and now they see them as a force to be reckoned with. And I'm wondering if the OEMs are rethinking the core strategy around lithium and battery where they were kind of caught flat-footed in terms of procurement. As you think about the benefits of going to silicon carbide and 800 volts, the secondary and tertiary benefits along 300-pound copper reduction, et cetera, seems to be a meaningful impact in whether or not the conversations have shifted of what is the cost on a component from IGBT versus silicon carbide and more around what are the system benefits as well as long-term supply chain impacts?

Absolutely. I can only underline your statement there. The way we look at it is there are 3 very easily explainable reasons why a transformation towards silicon carbide is taking place. The first is an ecological rationale, okay? So particularly in Europe, but also in other regions, the topic of CO2 emissions, the topics of sustainability of the supply chain is becoming a critical item and also something that is being put into law as we speak in the European Union. So taking out 5% to 10% of battery capacity in a vehicle, while still giving the customer the same range, that's an economical case, okay? Because the battery cost reduction overcompensates the added cost for the silicon carbide, which creates an economical tipping point from our perspective. But there's also an ecological tipping point because for these 10% and let's just say the average battery capacity size of a battery electric vehicle today is between 70 to 80-kilowatt hours. That means you're taking out 8-kilowatt hours of cobalt of lithium of the rare earths and of the whole manufacturing process. So there's also, let's say, the CO2 water and resource aspect. That's the ecological and economical point to look at it. But then there's the customer benefit perspective. And I don't know if you follow this, but there's been a recent study published last week in the European Union on the average acceptance of consumers for charging time. And if you make a median analysis and you look at that, the charging time needs to go down 15 to 10 minutes for 100 kilometers of range. And that is something that in the long run, is only going to be achievable with high-power charging, which in turn on a feature basis, then requires you to shift to silicon carbide. So putting a line under this, there's an ecological point to look at. There's an economical point to look at, and there's a customer function or customer benefit point to look at, and if these all 3 align, that is what not only the OEMs, but also the Tier 1s are looking at why this conversion makes sense.

Julian, so by supplying European auto OEMs as well as U.S., sounds like you're in Detroit today. So I would assume that there's a spectrum in terms of which company, where they're at in terms of economic versus ecological and the weighting. Is there an average savings that you see in terms of moving to -- from 400 to 800 from an IGBT 400 to a silicon carbide 800. Is that in the 2,500 per -- or how do you think about that?

Yes. Yes, yes, absolutely. It's a very good question. From an ecological and economical perspective, you can already switch from 400-volt silicon to 400-volt silicon carbide. If you want to do this in the platform that you have because you don't want to make the move to 800-volt silicon carbide. But that is not giving you that 7% to 10% increased efficiency of the overall drivetrain on a system level perspective. That is going to give you 2% to 5%. If you really want the big lift and by big lift, I mean, the bigger ecological economical saving and the feature of speed charging, which you obviously do not get at a 400-volt battery voltage, then you need to move to 800 volt. So there's a case for 400-volt silicon carbide clearly, and we're seeing that by customer interest. But the customers that have the choice because simply in their road map, they are at the point where they need to make a decision for an entire future platform. These customers are tangentially moving to 800-volt silicon carbide and that goes for all 3 geographies. So right now, ZF has booked business with silicon carbide in Europe as well as in Asia Pacific as well as with customers that are European/North American. So what I'm saying right now holds true for a global perspective, albeit that the ecological economical impact, there's obviously a weighting, right? The ecological impact just by the legislative environment is probably becoming the most important at this point in time in Europe whereas the economic impact applies to all geographies quite straightforward and the customer impact as well with speed charging.

Ed Snyder, Charter Equity. I want to step back and do a more of a 50,000-foot view here. Obviously, the benefits of silicon carbide are much more pronounced at higher power. That's where it started industrials, If you look at even -- you can get by with GaN on silicon for super little stuff like power. So the higher we go, the better the economic advantage of silicon carbide, what's preventing EVs from going to even higher voltages? I understand the tool for 400, but is it a safety issue? Is a regulatory issue? Why not go to 1,600? Because everything improves, charging time is an impediment to adoption and that would be much faster at higher voltages and your efficiency would also get better too. So what do you see as the impediment to go into even higher power levels?

Yes. Let me take a step back and speak about the history for a second before I go into the future outlook regarding your question. ZF is active in combustion engine transmissions in mild hybrids, in plug-in hybrids and in battery electric vehicles. And before the advent of 800-volt in silicon carbide, we had believed that the biggest synergies would come from 400-volt plug-in hybrids with 400-volt battery electric vehicles. That was the synergy play we were expecting, say, 5 years ago. What has happened now is that the real synergy play that is going to happen in the industry is not between plug-in hybrids and battery electric pass cars, but it is between 800-volt silicon carbide electrified pass cars and higher power applications such as truck, bus and industry who have always been on higher voltages. So any plug-in hybrid transmission or any electrified drivetrain of truck and bus is today at 650-and-more volt. So for the first time from a ZF perspective, in the history of electrified drivetrains, truck, bus industry and pass car are converging around the 800-volt architecture and around silicon carbide, which for ZF who is active in all of these fields: passenger cars, truck, bus, industry, agriculture, marine that plays very much into a strategy where silicon carbide is like the horizontal bar that goes through these segments. Saying that, the question is why would we not lift that horizontal bar, just another 400-volt up. At our analysis at this point, the additional value that you would get from the efficiency of the drivetrain itself compared to the additional effort you need for shielding for electromagnetic shielding for safety, for also equipping the garages and repair shops for handling such high voltages, there is no there is no justification or case at this point in time to lift the power up just for the benefit of the drivetrain seeing all of the counter rates on the other side at this point. We see, for example, Lucid 900 volt, that's not that big of an increase. It would still count for us in that field of around 800 volt. The big jump to 200 or more volt, we see in industrial applications but not in drivetrains that would have to go, for example, in [ recovery fashion ].

Any other questions? Okay. Julian, thank you so much for joining us, and good luck with your trip in Detroit.

Thank you very much, and I wish you a great day.

And now I'll turn it over to Thomas Wessel, who leads our sales and marketing.

Thanks. All right. Good morning, everyone. I'm Thomas Wessel. I'm running the Global Sales and Marketing. I will give you an update about our opportunity pipeline. But I was also recruited by our marketing team to take a picture of everybody who's speaking. So if you would, smile. All right. I think it turned out good. Send it over. All right, back to the pipeline. The way that I intend to do this is we look at the overall pipeline and some of the key characteristics that those businesses that we are after have then look at where or what is driving the pipeline, which segments, where does it originate from geographically? How do we cover it? And then switch gear to how does the pipeline that we talk to you about very often translate into revenue? Okay. With that, you see the current pipeline, you heard it from Gregg this morning, it's well over $18 billion right now, and it's a great foundation for continued growth in our component business. Now for this view, I have split the pipeline in 2 elements. One is the automotive business, the other one is the nonautomotive business to drive home 2 messages. So when you look at automotive, representing over 70% of our pipeline with great longevity in that business. Just look at the bars. It's growing all the way out to 2027. So a great business to be in. But on the flip side, when you look at it near term, it appears to be taking some more time for this business to roll on, okay? Now the second one, while we can't do anything about the design cycles in automotive, we have a great other business on the nonautomotive business that, as you can see, has much shorter cycle times and a much shorter time to contribution. And I'll talk about this a little later in a little more detail. But for the nonautomotive business, it's close to 60% of the pipeline when you look at the time frame for '22 to '24. So what's driving the pipeline, starting with the graph on the right-hand side with automotive. The end of the Ice Age, we just heard it, the end of the internal combustion engine, I think consensus among customers, as you've just heard, that silicon carbide is the way to go in those applications now and in the future is driving this. And it allowed us to triple the pipeline over the last 2 years. And you even see a strong acceleration in the last fiscal year, fiscal year '21. Industrial is a little bit different. Industrial is more like a steady growth that we are seeing. One of the drivers, among other, is legislation, more stringent requirements in terms of energy efficiency in many end equipments is demanding that you have to rethink how do you do this, and it opens up a lot of opportunities across the globe in many more applications than we had before. On the RF side, we had to pivot and refocus mainly because of the geopolitical situation, but we are now seeing good contribution from communication infrastructure and Aerospace and Defense. In total, you see the 2x increase. This is based on what we told you 2 years ago was $9 billion, but that included LED. So in fact, we really grew the pipeline 2.5x over the last 2 years, as you can see on the bar graph on the left-hand side. So where does it come from? And what I'm sharing with you here is are details about our fiscal year '21 design-ins. So this is just for one fiscal year. But first of all, look at the size. I mean, we secured $2.9 billion of commitments, customer commitments for projects to Wolfspeed. That's a great number. And it's mainly driven by EMEA and the Americas. And from a segment perspective, not surprisingly, I think, the automotive group or the automotive segment has the strongest contribution to that, followed then by Industrial & Energy and RF. When you look at the same for the number of projects, over 1,100 projects were committed to us last year. If you have 250 working days, that's more than 4 days. So I think that's pretty good. China and Asia strong contribution from that point of view. And not surprisingly, again, Industrial & Energy, the broad market, the broad business is a key contributor. But I'm doing the same as well for customers. And here you see that it's really a good contribution from all territories. But just look at the number, over 600 customers have decided to partner with Wolfspeed last year, last fiscal year, and have awarded their programs to us. I think that is an outstanding number, and you can see again on the right-hand side. Number one, industrial, followed by RF and think about it, not really surprisingly automotive because that is where you have the high concentration in fewer large accounts of the pipeline of the opportunity space. Overall, I think what I can claim is that over the past years, my team was able to establish a broad coverage, customers large and small across different territories across different segments. So good progress made here. Now before I talk about how we cover this, I have to establish something how we are organized. And in sales and my sales organization, I've got 2 groups that we refer to as the vertical namely automotive and communication infrastructure. You've just seen Kenric, Kenric Miller. He is actually leading this vertical automotive. The other gentleman is [ Fred Tyler ]. He leads our communication infrastructure vertical. Their teams operate globally and work with the largest strategic customers end-to-end. They apply a high-touch approach, which means they are going really deep. They own the demand creation all the way through to fulfillment. So those are the verticals. Now with the numbers that I've just shown you, 600 -- over 600 customers, over 1,100 projects. We've got over 8,000 projects that we are tracking. You would probably not believe me that I said I can cover this with my own sales organization, even with the continued investments that we are making in sales, and over 125 people that I have added to the organization since I joined in 2018, I guess you wouldn't believe that. And this is where our distribution partnerships come into play. When you look at the pipeline split by direct and distribution, about 35% of the pipeline is accounted for in distribution. Now if I exclude the verticals this number for distribution is almost 70% of the value and close to 90% of the projects that are being covered. So then on the right-hand side, you see it, if I told you that we are uncovering and identifying close to 1,000 projects every quarter. I think you understand that it's essential that we have a strong distribution channel for us, in particular with Arrow, that's our exclusive global distribution partner. So they are essential to help us converting the industry from silicon to silicon carbide and making sure that we have presence and engagement everywhere even in those countries very often where we have designs where we don't have a Wolfspeed person. We are seeing success through enablement and the collaboration with our partners. Okay. Now the last step of our selling process, buying process, whatever you want to call it, is obviously turning it to revenue. I mean this is what matters at the end of the day. Here again, this is the pipeline that I just described to you. Those are all the designs and those are the $2.9 billion plus that we secured. And this one assumes all of it is going into production. And as much as I would likely to happen it won't. But here, what I try to illustrate is how do those businesses roll on to give you a better sense about that. And I want to bring your attention back to automotive, as I mentioned it in the first slide. So when you look the roll on for automotive fear based on the '21 design-ins, we thought, okay, can we get more precision about this? And we went back and analyzed all the 8,500 projects that we have. We looked at each one of them what is either the projected design and date and the start of production date or if they were in production already, what was the reality? What happened? We then build a weighted average with the ELR, which is the estimated life revenue as the rating factor, and it turns out automotive in average, takes twice as long as twice the run rate to -- coming to fruition than the other businesses. Obviously, we have to now apply some more insight to this and say, okay, what is translating into revenue from that? And when we do that and compare our projected ramp-ups from our teams with the judgment that we apply, we are over 80% accurate or -- since we have started this process and over 90% accurate in fiscal year '21. That is a great number, in particular, given the situation that the industry is in right now and where supply challenges impact projects that we would supply into. So we have great confidence in using this pipeline data that we share frequently with you to derive from there, do we have enough to meet our corporate objectives. And the answer is yes. So why do we win? Automotive opportunities are proliferating across all major OEMs. We have strong growth from all segments, contribution from all geographies. We have a global distribution network that allows us a broad and effective coverage across the globe. And we have high confidence to turn that revenue to meet our corporate objectives of roughly $1.5 billion in fiscal year '24 at about $2.1 billion in fiscal year '26. One more thing. We brought in a couple of my senior leaders here to this event. And once these presentations conclude, we'll be available outside for you to engage and talk more about customer engagement, regions, territories, market trends, segments, et cetera. I'm looking forward to this. But for now, I'll thank you for your attention. Thank you very much. And the next speaker is Rick to talk about something very important for me, which is the capacity. Over to you, Rick.

It'll be my best, Thomas. Thank you. Good morning. I'm Rex Felton. So I am responsible to the fab operations currently. I joined the company in 2019, really for most of the last 2 years, I've been working to bring up our Mohawk Valley fab, which really is 2 pieces. We have the fab bring up and build. Also, we have the pilot line out of Albany, which JP touched on. We've got a lot of good success on. Prior to that, I was at Delphi Automotive for 3 years, leading their global electronic safety operation. And prior to that, I had 23 years of Texas Instruments. So as I move forward here, I think you've heard a lot of good presentations today. You've heard we have the right technology. We're at the right time. And we also have the right pipeline. So what does it take next right? Now we've got to become a semiconductor operations powerhouse to take advantage of these things. So when we look at what it takes to create a semiconductor, a world-class semiconductor powerhouse, I think we really have to start with where we're going, what's the vision, and what's the culture. So first of all, in our vision. And taking away from the fact that we're in basketball country in North Carolina, we kind of like to call our vision for 2024, cutting down the nets. And what does that mean? Obviously, it's a safe, right, fast mentality, which I think you have to have in a world-class operation. Specifically, we're targeting at least $1.5 billion in revenue and 50% plus gross profit margin. Those are lofty goals. However, we really think we have the right approach going forward and make those happen. It's not just operational performance either. It's also things that allow us to even win more business once it become more nimble and more agile, turning prototypes for customers incredibly quick cycle times to be able to leverage and win that business is really going to be key. And then on the culture side, something we're really just rolling out now, we're calling it our one pack culture. And it really has 4 major tenets that we are rolling across the operation and its family, it's scalability, it's passion and it's excellence. And we're really building a lot of our -- all of our operational initiatives around these cultural elements. So if we're going to be world class, and we're going to have a semiconductor powerhouse, it takes a world-class operating system. This is something that taking from the automotive world, in my previous time at TI, was always really critical to have a really strong strategy. And I know there's a lot on here, running a fab, running a semiconductor businesses, all that details, right? It's about managing the details better than my counterpart at a competitor. Some of the things I'll highlight off this are quality, right? You heard about that a lot today, and specifically automotive quality, and you see things on here like target 0, really driving things through structured problem-solving are really things we are making part of our operations culture going forward. Operations excellence, we've got to be able to deliver the product on time when our customers need it. That takes really good predictability out of the fabs, out of the material side, out of our back end. And that's driven by a lot of tool stability. It's driven by how we choose. The strategies we choose to run the operation. And we have a really good team that we're putting together, it's executing those strategies. And then finally, on the cost side, it takes running great efficiency. And I think we have a footprint strategy that's going to drive that over time. But there's also going to be some very specific strategies that we'll be using. One of my favorite is what I call [Moy], which is more out of installed. We're always going to have capital investments, but one of the best investments we can make is getting more out of our installed base. And that's something that I and a number of members of my team have had a lot of experience with. And you can see that the people is right in the middle here. We've made a lot of investments recently in people, bringing Missy Stigall in from Texas Instruments and several other folks that are really going to help us leverage our operation and get more out of our existing base. When you look at materials and epi, which is what mainly what I'm going to talk about today, you see the growth. So what does it take to grow into the levels of -- and realizing that pipeline that the team here just showed. First of all, we're focusing on maximizing materials growth in our current footprint and our current buildings. We've done some very creative things to be able to do that. And then beyond that, we're actually going to be looking at nonproduction spaces in the Durham -- on the Durham site to be able to further do that, and I'll show that in a minute. And then we probably are just within several years of having to look strongly at another site probably in North Carolina to expand our materials footprint further. On the wafer fab side, I'll show it in a minute, but we have 2 North Carolina fabs. We have an RTP fab and a Durham fab. And right now, we're very much focused on getting the maximum amount we can out of those factories. While we transition to our 200-millimeter fab up in Mohawk Valley. And then longer term, the things I showed on the previous slide, really driving the operational performance, really being focused on continuous improvement every day, have to become our bread and butter and what really drives our performance every day and every year. If you look at our silicon carbide substrate capacity, 200-millimeter is about ready to take off. 150 has been there and will continue to grow. We really feel like the 200-millimeter is well established, well on a great footing to grow as we expand in Mohawk Valley. We've got ongoing customer commitments, right, for RF on 150 and just our 150 substrate business in general, that will continue to keep our volumes very strong. And then as I mentioned, near term, we're going to be growing in the Durham footprint to the tune of about 50% on our material side more than what we currently have. So we're very confident in our ability to hit these numbers that I'm showing here in this graph and believe this really feeds that 200-millimeter pipeline and continues to feed the demands of our external customers. If you look a little more on the footprint I'm talking about. You can see in the yellow circle, that's the existing footprint or majority of our materials business currently is. On the red, you can see we're expanding a little bit more in that existing building, but really it's moving over, and that's to the east to what we call our Building 10. And a lot of the Building 10, some of that was in the pictures that Gregg showed earlier with the expansion into cafeterias, basketball courts, things like that, that we're finding a way to make into production space. Switching over to the fabs. I mentioned the 2 fabs that we have in North Carolina. We have an RTP fab, which primarily runs MOSFET and Schottky along with some of our 4-inch RF and then a larger fab in Durham, which also runs the power. We are actually starting to convert and run RF or 150-millimeter in Durham. And then ultimately, where we're going here in Mohawk Valley and the world's first 200-millimeter silicon carbide fab and largest footprint that's going to represent more than double what we have today in North Carolina, along with tremendous scale and capability driven by the 200-millimeter platform. And we're continuing to work. Wolfgang is here. He's going to be available to speak about all the collaborative work we're doing with X-Sight. We're very close to being able to start running wafers through that factory, and we believe we'll be running qualification material through in the third quarter -- in our fiscal third quarter, so early calendar year next year. Before I move on to more in Mohawk Valley, however, we are very excited about where we have seen our North Carolina fab move really over the last 3 months. I mentioned Missy, Missy came in from TI, had experience running the large -- one of the largest fabs at TI. And Missy's really put together, along with our leadership team, a call to action which we believe is having an extremely positive impact on our output and our consistency out of that fab. It's focused on utilization of key tools, strategic line management, enhanced engagement, and the early returns are really promising. We're seeing improved cycle time. We're receiving improved yields. We're seeing higher output. And we're seeing a really energized team. And so we're super excited about where we believe Missy is taking the Durham fab and believe it is going to be another shot in the arm for our operational performance going forward. If you look at where we're headed for power specifically, and this is the combined wafer capacity of what we have in Durham plus Mohawk Valley. We feel like we're well positioned. And I know Thomas and Jay are going to continue to challenge us with more and more design wins and pipeline. But we feel like we really have a very good trajectory here to intercept that demand. And not only the demand, Neill is going to come up and talk about the financial impacts. The financial impacts of transitioning the silicon carbide to 200-millimeter are huge. And you start and you look at that COGS impact up there, it gives you a feel for we're looking at a more than 50% reduction in our cost of goods sold on a unit basis for power, mainly driven by the yield sweet spot that John Palmour talked about, certainly some on scale and also quite a bit on the automation and efficiency impact of the kind of automated factory we're going to have. So really excited about that. As I mentioned, we're in kind of the final stages of facilities fit out in the fab. We're getting ready to run our first learning cycles. And we're also extremely encouraged by what we've seen in our pilot line in SUNY, really strong yields. We're going to have to work out the kinks, set a lot of things at 200-millimeter which is going to enable us to really move processes and almost copy exact from that pilot line into our new fab, and we believe really hit the ground running and have some very early success and really be contributing to the bottom line of Wolfspeed in fairly short order here over the next 6 months. A little bit more on the factory. There's 2 main buildings when you look at that picture of the fab is what we call the Central Utility Building, which houses a lot of the facilities, a lot of the support infrastructure for the wafer fab. That has been in place and is in really good shape for several months now. On the fab itself, that's where again, we're finalizing a lot of the fit out. We do have all of the production tools for the fab ballroom set in place. They're still being facilitized. Some of them are further along than others. The cleanroom is in really good shape. It's certified and also our automated material handling system, the infrastructure for that is about 90% complete. So we're super excited about what that's going to create and the possibilities that's going to create for us. Okay. So good. I'm glad you can see the video. So a third element in addition to what we've already been -- I talked about in the pilot line and out of the build site is that we also have had a relationship with Mohawk Valley Community College, where we're able to get some space and actually create it into an AMHS lab. So this has been really our kind of our second big readiness piece before we move out to Mohawk Valley. And that -- this has allowed us to test out something that's very unique to 200-millimeter. There are very few 200-millimeter factories that are automated, much like you would see in a 300-millimeter fab. And this -- we know this is the only silicon carbide fab that is going to be automated to this degree. And again, you can see here, you've got overhead transport. You have example of how you call -- these are called SMIF pods, we'll move around the factories day-to-day. And you also can see the pods themselves and the pods themselves or another opportunity where basically the wafers are in a mini environment, right? They never get exposed to the ambient air. So it's tremendously beneficial for particulate control. This is tremendously beneficial for our handling. Nobody has told you silicon carbide could be kind of brittle and breaks pretty easily. This is going to tremendously improve our breakage and handling type defectivity in scrap. So we're super excited about this. And the other thing that this facility has provided us is a great relationship that we're expanding on with the university community in New York, where we are creating a pipeline. Obviously, we have a lot of folks to hire and a lot of technicians. And this facility is creating that pipeline that we can start feeding the right kind of talent we'll need in the fab. So we had to have a good strategy. We've got to have the right people. We also have to make the right investments, right? So one of the biggest investments are probably the most important one, again, is that investment in people. I talked about Missy. And other thing is equipment, right? So we're in the -- we're heavily entrenched in the automotive space, having the right inspection -- type of inspection tools the right types of things, approaches for SPC and really just handling big data is going to be super key to driving to the automotive quality standards we know that the automotive industry expects. We're also doing a lot of training, and we're also pushing a lot of organizational initiatives, as I mentioned, that will be really key to our performance going forward. And as you can see, our expectations are is that we're going to drive our yields up into the right and our cycle time down into the right going forward, which is going to have, again, a very significant positive impact on our business. So on closing, why do we win? First of all, we're going to have an operational footprint that maximizes the revenue and growth and gross margin. Our culture is extremely important, and it's something we're working on every day. And we're trying to improve it. We think it's going to -- we're going to take it to an incredible place, and that support -- that's going to support our ops excellence. Automotive can really drive, again, that automotive quality. The factory we're going to have in New York and the other automation that we're building into our materials organization. And by the way, Michael Daly is here, Michael. Michael will also be available with the kiosk, Michael is our VP of Materials operations. Michael is doing some incredible things on that automation. We didn't show much of that. But that's going to help us bend that cost curve. And then finally, the investments we're making in the people, in software and in the right -- having the right tools going forward is going to drive the yield and cycle time improvements that our customers and our financial performance is really going to like. So thank you very much. I'm going to hand it off to Neill, who's our Chief Financial Officer.

Thanks, Rex. I appreciate the updates. So what I wanted to do -- first of all, great to see a lot of familiar faces in the crowd here today. We don't get to get together often as we talked about previously. As I'm looking out here, it's great to see folks. And for those of you who couldn't be here, we hope to see you in person soon. So what I wanted to do, there's a lot of great content here this morning. And what I wanted to do was break that down into financial summary before Gregg and I and the team, we answer your questions. So first of all, when you look at the summary here on the chart, you can see, look at the top left, the plan we're talking about is largely the same as when we got in this room a couple of years ago, okay? First, it was to transform the business, invest in it, expand the pipeline and bring in design-ins. And that we've been largely successful with that. The second stage then is to ramp the business, to bring that opportunity to fruition. And that's the stage we're in right now. And the second -- the last phase here is the third phase is to execute the business as a scaled semiconductor company over time. And what you see is, and you'll see here today is we've got good line of sight to that. Now with the execution of divestitures recently, we are focused now more than ever on executing that plan. Now one thing that has changed since we met last -- a couple of years ago, is the demand curve has steepened. And that's really been driven by industrial and energy and 5G applications. So the design cycle between design-in and revenue is a lot shorter. So we've seen the demand pick up from that. But we also know that the automotive pickup is still to come out into the future. So with that knowledge, we're continuing to invest in the business. We're going to expand our scale, expand our capacity and then strengthen our position. And all of that will translate into a 2026 outlook that will have high growth, high margins and strong cash flows. So let's take a look at the market. You heard it here today and many of you know this, the markets that we participate in, the end markets that our products serve is growing rapidly. And I just talked about it, industrial energy, 5G applications, we talked about today, shorter design into revenue cycles are kind of picking up faster. But as we look out to 2026, and we think that EV adoption rates will be roughly 15% in that time frame. The automotive market will grow the fastest and be the biggest. And if you look at the top right of that chart, you can see the breakdown of the automotive market between inverters, onboard charging and DC-DC conversion. And inverters will make up over 80% of that market. So silicon carbide is uniquely suited for those applications. And why is that important to us? Because automotive although it has long design in cycles, it also has long-term revenue. And we look at our revenue ramps, it gives us very good visibility into what our revenue ramps will look like out into the future. So what we have here is a revenue outlook. We will grow at a 30% plus CAGR between now and 2026, achieving $1.5 billion in 2024 and $2.1 billion in 2026. And if you break that down into its components between devices and materials, devices will grow faster than materials during that period. And if you look at 2024, devices will be approximately $1 billion versus what we previously thought would be roughly $900 million of content during that period. And devices that will grow out to about $1.3 billion as you get out to 2026. Now I talked about the different phases of growth in the company, the transform, ramp, execute. And when I look at those 3 phases, the first phase we talked about. It's invest in the business. sign up long-term agreements, build the pipeline. Now we're largely coming to the end of that stage of the transformation. And we're clearly now getting into the ramp phase, bringing it to fruition. But again, what's changed? The demand curve has pulled in. So we're working as hard as we can to execute through that ramp phase and drive towards execution to drive the company to $1.5 billion in 2024 and $2.1 billion in 2026, as we see the market taking on broad applications for our silicon carbide-based products. Now once in a while, someone will ask me, how do you get for mid-30s in gross margin, up to 50% gross margin out by 2024? And I'll take you through that now. Now one thing to think about in our business, we do a lot of our business under long-term arrangements. So because of that, we get pricing visibility out into the future. And what that means is gross margin execution for us is largely a function of cost and capacity. And by far, the biggest driver of cost and capacity execution, you just saw it here is Mohawk Valley. Now in the interim phase, we have to do some work on Durham. We talked about that earlier, Rex gave an update on it. We've got to improve the operations in Durham. We'll talk about that here in a little more detail in a minute. But primarily, the way to think of the long-term model is the more revenue that we get through Mohawk Valley, the higher the margins go up. So looking at the chart, you can see that. First, in '22 and '23, we've got to optimize Durham and have early transitions into Mohawk Valley for revenue. As you get out beyond that, you push more revenue through Mohawk Valley, you leverage the scale and the automation, the bigger wafer diameter, and the margins come up. And then as you get out and beyond '24, we start to expand that factory, there's more cleanroom space available, get better fixed cost leverage off the factory will bring the margins up again to 50% to 54% as you get out into 2026 and then beyond. But I want to double-click on this a little bit just to kind of bring home the point. Right now, we're in the mid-30s. So there are 3 elements to driving between mid-30s up to 50% gross margin. And the first one is we just talked about it, it's optimizing Durham. During the last 18 months, we put over 100 tools into that factory. We've transitioned it from an LED factory to a MOSFET factory. So now we've got to stabilize the fab, improve the yields, improve the cycle times. And as Rex talked about, we're seeing some good early execution in terms of some of the management changes we've changed -- we've done and the benefit that's driving. Now let's talk about the other 2 pieces of that. And these are very structural in nature. And the first one is wafer diameter changes, led by power going from 150-millimeter to 200-millimeter. Now this is, as you all know, there's a tried and true method in the semiconductor industry for driving cost improvement. You get a bigger wafer diameter. You get about over 70% good die off of that diameter. And then at the die level, you get about a 40% cost improvement more or less. And that's pretty standard math in terms of how to drive cost improvement in terms of diameter change. And the large majority of our device business will go through a diameter change over the next 2 years. And the third part of that bridge is driving, as I talked about, driving revenue through Mohawk Valley. The scale and the automation will drive wafer processing cost down by over 50%. Cycle times will improve versus where we're at today, by more than 50%, and yields will improve by 20 to 30 points. Now 20% to 30%, 20 to 30 points during that time frame because we're going to leverage the scale and automation of a fully automated 200-millimeter facility in Upstate New York. And then as you get out beyond 2024, we continue to fill out the fab. We continue to drive execution. We continue to expand the margin. So there's more margin expansion opportunity out beyond 2026 as we continue to bring the business up. So let me shift over to OpEx. So we've had a pretty significant investment in OpEx over the last couple of years and pretty decently sized intensity. And when you think about that, we focused on driving R&D expenditures and sales and marketing expenditures. And you saw the results of that this morning. In R&D, the technologies that John and others and Jay and Gerhard and Cengiz talked about, bringing 200-millimeter to fruition was a result of a big investment in our R&D expenditures to drive the product lines and capabilities so we can grow the business. The second area we focused on was sales and marketing. And you saw the results of that. The pipeline now is over $18 billion. We've driven over -- we've had over $4.5 billion of design-ins over the last 5 quarters. And we continue to see demand sharpen as we go through in these early adopting technologies for silicon carbide right now. The third element of our OpEx journey is going to be an investment in our G&A and other functions. We are right now in the midst of a large digital transformation where we're leveraging leading-edge cloud technologies to drive efficiency and capability into our OpEx structure. And as we do that over time, we will continue to invest in OpEx. You'll see OpEx grow over time. However, with the growth we're going to see, we feel we can scale into that very effectively and efficiently, create great capability within the company and drive the OpEx percent still down below 25% as we get into the middle part of the decade. And it's a similar story for CapEx between 2021 and 2022, when we finished the year, we're making significant investments. But what are we getting for that investment? By this time next year, we'll have invested in and built the largest 200-millimeter supply chain for silicon carbide in the world thinking about both materials and the factory. Now from a capital intensity standpoint, we'll start to see that capital come down. Why is that? Well, 2 reasons. One is our partnership with the state of New York. We have yet to see a lot of the -- or the vast majority of the reimbursements we will receive for the investment in Mohawk Valley. And the second one is, from a brick-and-mortar four-wall perspective, most of that investment will be complete as we go into 2023. So we'll see that CapEx start to come down. And then conversely, as you move over to the right-hand side of the chart, you see that the free cash flow starts to follow the same pattern. As you move into 2023, we should see the free cash flow start to improve. In fact, by the back half of this year, we should start to see just the CapEx investments start to slow down a bit with reimbursements from New York. As you get into the back half of '23, we should make that conversion of free cash flow positive and have a nice trajectory as we work into 2024. Now right now, we have roughly $850 million of cash on the balance sheet, we have $1 billion of convertible debt, and that's trading well above the conversion premium. And what we'll do is we'll continue to be opportunistic, and we've shown this to ensure that we can go and fund this business moving forward. So let's take a look at the operating model. What does this get us? So out into 2024, that's $1.5 billion of revenue at approximately 50% gross margin, 25% EBIT off of 25% OpEx. And you can think of free cash flow at about 15%. And the 15% cash flow was really driven by additional working capital requirements as we start to ramp the business faster and potentially some moderate increase in CapEx as we drive that business over time. But if you look at 2026, you start to see the capability to go beyond just creating what I think is the starting line for our company in 2024 as a scale business and you start to drive it going forward to over $2.1 billion of revenue in 2026. 50% to 54% gross margin as you leverage the effectiveness and capability and scale of Mohawk Valley will drive our efficiencies down or drive our efficiencies and improve our efficiencies and OpEx and scale the EBIT to 25% to 30% and drive free cash flow over 20%. So with that, I'll wrap up before we get to the Q&A. Obviously, we've invested heavily in the business, transformed over the last couple of years. We're now transitioning to ramp the business. The demand curve is steepening, and we're trying to meet that opportunity and drive an operating model out in 2026 that drives high growth, high margin and strong cash flows. Thank you. And Gregg, I'll turn it over to you for closing remarks.

Okay. Great. Well, thank you, everybody. And I'd like to turn it over to you now. Neill and I will take any questions you have. It looks like there's a few questions. So if we could just have the mics kind of come around.

It's Colin Rusch from Oppenheimer. I just want to talk a little bit about your pricing power given the leverage that you're seeing with battery factories as well as the optimization within the designs. How you're thinking about pricing and how inflation is getting built into the mechanisms for those prices over time?

Yes. So the vast majority of our business is conducted through long-term agreements. That's both the materials business as well as the $2.9 billion of LTA. So we've got pretty strong commitments from the customers in terms of what they're looking to buy, and we also have strong visibility as to what that pricing is. In the industry at large, you're seeing a lot of pricing changes near term because of supply and demand mismatch. We've seen that from silicon companies recently. I don't know how sustainable it is. That's not really what we're doing. We've got more -- when we price our products at price to value and long-term agreements, et cetera. So there's none of that played in.

Gary Mobley at Wells Fargo Securities. I have an easy question for Neill, and I have a question about the mix impact on gross margin. So Neill, you just presented the idea that OpEx would be $375 million for fiscal year '24. If you extrapolate out your most recent quarter of OpEx or a $360 million run rate. So not much margin for error there. And so how should we think about the ability to fit or the likelihood to fit into that $375 million guide? And then as it relates to the power business, you highlighted 3 different ways to productize your technology modules, die and then discrete as well. Thank you. And so I'm curious to know what the preference is for various types of customers and the way you deliver it and the gross margin profile of each of those?

So just on the OpEx -- I'll take -- I guess that was the easy one, Gary. Is that? Yes, okay. So in terms of growing the OpEx, one thing to consider is the variable kind of a fixed nature of the OpEx that we have right now. So as we think about building up Mohawk Valley, we're investing a lot in 200-millimeter and in process technology. So we have a lot of kind of disposable type of products that we kind of use that we throw away as we kind of test them out over time. So we'll start to see that come down as we ramp up Mohawk Valley. We'll actually start to use those products. So a lot of that got charged to R&D. So I think over time, you'll see as that start to kind of come off and then we're kind of -- I would call it more structural type of OpEx come in over time and replace it.

Jack Egan, Charter Equity. So the 50% to 54% gross margin target that you laid out for fiscal year '26, I believe that it's actually a bit of a step back from your previous expectations where you mentioned that gross margin would hit the 50% to 54% by fiscal year '24. So what changed since the last time you shared those targets?

Yes, Jack, thanks for saying that. Nothing's really changed. So if you go back to the LED disposition at that time about a year ago. Previously, Wolfspeed was 50% to 54%. When we disposed off LED, we put some -- 2 or 3 points of corporate cost back into the model as a stand-alone company. So the equivalent is 50% at that time. So it's really the same model at this point, and then we'd expand beyond that as we go to '26.

It's Rob Maina from Cramer Rosenthal. Just 2 quick questions. If you could clarify the timing in which New York State is going to write you a check for what they owe you as a New York State taxpayer. I'm looking forward to that. And then the second question is...

We appreciate your donation, Rob.

Yes. Second question is on the depreciation. Are you depreciating the full $1 billion? You only depreciate the part that you paid, not the refund from New York State?

So on the refund from New York State, I think I said it during the last call, we've received about $60 million through last quarter, and then we should start seeing bigger pickups as we get into the back half of this year. So when you look at the -- as you look at kind of the CapEx profile. And then secondly, what those will essentially do and the way I think about it is a lot of that CapEx is geared towards tools versus the building. So we'll essentially get a reimbursement for the tools. You can kind of think -- I kind of think of it roughly as that kind of that first full tool set gets reimbursed by the state of New York. And that nets off against the expenditures and essentially, you can kind of think of those as a zero-cost assets, there's really no depreciation on those.

Jed Dorsheimer from Canaccord Genuity. Thank you both for the day of the presentation. 2 questions. I guess, Neill, I'll start with you. If we think about the capital intensity and we look at the -- if you assume that you have pricing power or some pricing power that silicon carbide is a premium for all the reasons outlined today. And we look at the starts of Mohawk Valley I come up with about $1.5 billion in terms of revenue from that facility. $500 million, getting a 3x CapEx to revenue based on the subsidy. So looking at the $2.1 billion in materials that are growing, that would imply are you assuming leaving some buffer for surge in terms of utilization between Durham and Mohawk Valley? Or is that a function of materials to supply from a capital perspective?

I think, Jed, the way to think about it is it's actually a difficult number to call. And the reason for that and some of the differences that you see between from what we've talked about previously is just that the supply -- the transition to silicon carbide, it's just happening faster than we had anticipated. And you saw it in some of these industrial energy products. On top of that, we have the large automotive ramps coming. So we're going to have to aggressively invest to stay ahead of those curves. So I see that curve steepening. And we've just got to invest to stay ahead of it. So I think that's the kind of the way to think about it is we'll just stay -- we've got to stay ahead of it. And I think if you think about -- is there a buffer between the 2 fabs, it's really hard to say because the inflection on the demand curve, you just keep pulling it and changing so dramatically. And you heard Julian talk about it from a ZF perspective in terms of changing their model several times. We've been also changing our model regularly, trying to keep up with the demand changes and the inputs we're getting from customers.

Got it. And my second question is a segue to Gregg here. Strategically -- so if I look at that CapEx to revenue and I compare that to an IGBT. So Infineon built a facility in Austria, and that was about $2 billion, and that will yield but my estimate is just around $1 billion in revenue. So kind of the imburse of silicon carbide. And if the demand curve is steepening, all your estimates are based on Mohawk Valley, why wouldn't you be putting more capital into the graph?

Well, a couple of things. First off, Mohawk Valley is in the pretty early stage of ramp. So we want to make sure we do a good job with ramp there. We do have four-wall capacity, capability that's beyond what we'll be installing initially, obviously. As Rex mentioned, the initial production line, all of the equipment is now in that facility today and various different states of being energized or not. We'll be ramping that facility with qualification runs in the first quarter of calendar '22. So we're right around the corner with doing production rents. And then we'll see the acceptance rate of product out of that facility from our customers as they ramp. So a lot of it is kind of depend on that. My viewpoint on the customer acceptance of that facility is that there's never been a better time to bring on new capacity because that's what everybody is looking for. Over the last year or so, automotive customers, industrial customers, they've just run out of products. So they moved very quickly into a -- if you can get us something better, more et cetera, will accept it. So I would anticipate the acceptance rate of product out of that facility is probably going to happen a lot faster than it normally would with these types of industries. And then finally, in terms of the demand, I would encourage you to spend a little bit of time at some of the kiosks that we have. We've got Angelo who heads up our European operation. Rick runs the U.S. sales. Kenric is here or Thomas, et cetera, ask them about the demand profile and basically it really does appear to be running a lot steeper than we currently see.

Amanda Scarnati from Citi. Can you talk about when you anticipate ramping 200-millimeter material sales to customers? Or is there a strategic rationale to keep that at internal capacity only?

Well, we're focused right now on just feeding the internal capability. We're at the early stage of ramping the world's first 200-millimeter facility. So we're very focused on that at this point. And so that's where we've got our energy right now. All of the materials are basically that we're building out of -- with 200-millimeter is feeding into the pilot line and then we'll be feeding into that production. So that's something that we're focused on right now. And where we go later with that will be kind of TBD.

And then on the automotive side, you highlighted on Slide 13, a bunch of automotive customers that are committed to EV. We know that you have ZF as a customer who is here today and then GM. On those customers -- those suppliers that you named, how good is your penetration with them? Or are you more well penetrated on the Tier 1 side versus the OEM side?

We feel very good about the engagements that we have, both with Tier 1s and with the OEMs. We've got $2.9 billion worth of announced design-ins or design-ins that have happened over the last -- in fiscal '21. Some of the customers are willing to share that news, GM was very gracious to be able to do that with us on October 4. Utan Group before that. We've announced design-ins with Delphi, which is now Borgwarner. We've announced design-ins with ZF and a number of different customers. Many of them, though, don't want to share their names for their own internal reasons and so forth. So we feel very, very good about the engagement we have with customers across all of that spectrum. I will tell you that over the last year or so, despite COVID being [indiscernible]. We have been traveling quite often over to Europe to meet with OEMs and Tier 1s as well as throughout the United States as well. Personally, on Friday of this week, I'll be heading to Germany again, Neill, who will be joining me along with Rex for another couple of weeks of meeting with a whole bunch of different OEMs and Tier 1s over there as they start finalizing their plans for what Julian really highlighted, which is the adoption of silicon carbide. Incidentally, we also have at one of the tables, we'll have Ole Gerkensmeyer. Ole is over here somewhere in the back. Ole heads up our European automotive effort and a lot of the activities that you saw with setup and some of the OEMs over there Ole is driving. So feel free to chat with Ole as well at one of the kiosks. But I guess, I would kind of circle back to what's happening in the industry in terms of capacity and supply/demand mismatch and so forth is unprecedented. What's happening in terms of the change of the powertrain electronics going from the internal combustion engine to battery electric vehicles is also unprecedented. And it's got the OEMs very much of the mindset of they need to engage with -- directly with semiconductor suppliers, especially those that are going to help facilitate this transition an end of the internal combustion engine or as we say at the end of the Ice age, moving to electric vehicles. So I don't want to get into a lot of detail, but as I just look at my agenda for who I'm going to be meeting in the next couple of weeks over in Europe, it kind of blows me away at the level of engagement at the level of both Tier 1 and the OEMs and that's primarily because of these 2 fundamental issues.

Ed Snyder, Charter Equity Research. A couple of questions. First, Neill. So the material business is going to have to ramp, obviously, the split Mohawk Valley. And it sounds like you don't have to anticipate at least short term, supplying 200-millimeter to the rest of the world. And your margin profile on materials is obviously better than devices now, and I expect it will grow. So maybe you could speak to -- I'm just trying to get an idea where margins can go in your material business once Mohawk comes up, could you hit the mid-50s, but then later on, as Mohawk continues to ramp and maybe you offer 200 millimeter, is there much leverage beyond that with volume? Or you're kind of limited because it's like 1 or 2 steps, you don't get a lot of leverage there? So just maybe walk us through the margin profile of what materials looks like when you ship to Mohawk and then later on maybe when you supply the rest of the world? and then I have a follow-up.

Yes, we don't -- obviously, we don't talk about the margins between the businesses. But I think you're right in the sense that if you go out in time, the margins between devices and materials are probably in the same neighborhood from a product line standpoint. So I think that's probably fair. And I think as you look over time, you're right, we are intensely focused on bringing up 200-millimeter to feed Mohawk Valley. And a lot of the investment that we're making is to do essentially that. But as you shift over to the 150-millimeter side of the materials business, I think we've got a lot of projects and a lot of different things that we're leveraging to drive cost down. And we've talked about many times, the cost curve and the execution by the materials team has been outstanding. And they've done a great job on driving competitiveness and helping bring down those price curves in the whole market just to try and drive this conversion from silicon to silicon carbide. So I'm not sure if it's a -- there's a synergy there, of course, that you can put things you're doing on 150 and try and use them on 200 and those types of things. But we just continue to make progress on 150, and I think we still have a good runway in front of us in terms of driving costs down.

And then changes showed the pie chart of market share, so you had 62%. But if you take out RF and Sic, if you look just at Power, I mean, it's got to be substantially higher than that in the material side of the business, which provides -- and it's clear from talking to your customers and the device guys that there's really an arrival in terms of both defect yields for wafers and cost. So do you have a material cost advantage in all your partners buying from you? But maybe we can talk about the device be here because it's kind of an odd scenario at this point. You're building an automated fab. You kind of throttled in North Carolina with the fab you're dealing with because it's really a research fab, you're not going to get much volume to there. You already enjoy a 50% lower wafer cost because your margins on wafers are around 50%. And then when Mohawk comes out, it could be higher than that, given all the advantages that you have in automated you've talked about ad nauseam. So how -- what's going to prevent you from sweeping through the sick power device market, given your costs are going to be substantially lower than any competitor? And it's -- and I asked you 2 years ago and I saw you in North Carolina, do you want to be material company, you want to be a device company, you kind of hedged. Now it's very clear what you're doing. So how is it going to play out in -- forget 2024 but '25, '26, when your material cost is so much cheaper than everybody you're competing with. Doesn't that, a, change the nature of the penetration of silicon carbide because it's a cost -- it's a cost-driven market at this point as that comes down, TAM increases? And secondly, doesn't this make you far and away the biggest device manufacturer period? And unless they get another source of silicon carbide, how could they arrive you?

Well, thanks a lot for the question, Ed. And a couple of things. So from the get-go, one of the things we've been focused on as we have a plan to convert this market from silicon to silicon carbide is driving that delta between silicon and silicon carbide down by having great execution of our cost road map on silicon carbide. As Rex mentioned, Michael Daly is here, Michael raise your hand somewhere in the back over here. Michael is in charge of that operation, that team has been nearly flawless in terms of driving cost reductions. When companies look at the value proposition of silicon carbide at the system level, and they say, okay, it's going to cost me ex amount more for silicon carbide, but I get it back at the battery level, et cetera, and Julian talked about that. That math is actually done at a level that we've gone through. In other words, our cost base is now lower than what that math equation was based on. So we feel real good about our ability to continue driving penetration of silicon carbide across not only the automotive market, not only just 800 volts, as Julian talked about, but penetrating 400 volts as well, but also some of these other broader applications that Thomas had talked about as well. So we feel super good about that. Now what's really important for us in this activity. And those of you that have met me will realize, I say this all the time, we are not resting at all on this cost thing. And so as we continue to have a -- we have a scale advantage, as you mentioned, Ed, on the -- on silicon carbide substrates. We're using that scale advantage to drive improvements and things like J.P. talked about with VPDs and the various different defect densities and so forth. We're using that scale to drive efficiency. We're using efficiency to get a lower cost. We're using lower cost to drive more penetration, which gives us more volume, which gives us a flywheel effect or sort of -- well, a flywheel effect. And so we are continuing driving that. Michael -- if you chat with Michael, he'll let you know that every month, we have a meeting and we say, thank you, sir. Let's -- know what? We actually took him out for beer or so last quarter as well, though. So we did that. But it was -- it's definitely a case where we know we need to continue driving it. I think in the end, your supposition is basically right though. It's going to put us in a position really in an enviable position from a device perspective to have a cost structure that's really, really solid. And I think the fact that we've won $2.9 billion of business in fiscal 2021 at the device level, is kind of saying we're doing a pretty good job of bringing in the business.

Stan Shpetner from Pickering Energy Partners. I have 2 questions. First is probably clarification. Your fiscal '26 forecast of $2.1 billion, is that based on the current manufacturing base and doesn't take into account any expansion at the Mohawk Valley site?

It is the current four-wall manufacturing space. We've always talked about the cleanroom in Mohawk Valley not being fully completed in 2024. It would assume some installation and requirement in Mohawk Valley during that period.

But no construction on the ...

No, this is -- so all kind of 4-wall brick-and-mortar under this plan is kind of -- you start to see kind of completion of what we talk about today as you move into 2023.

And is there a time frame of when you may start to considering based upon demand of whether you want to have more substantive construction of the kind of Phase 2 at that site?

Look, I think, if you think about capacity just in the overall industry, right now, we're going to going beyond 2026. But if you think about beyond that, we still have capacity in Mohawk Valley in that time frame. But I think if you look at the whole industry, there'll probably be capacity constraints over time, and there will be more investment required. Obviously, it's something we continue to look at closely. But the plan we have today doesn't include any additional kind of 4-wall capacity, I guess, I'll say, versus what we talked about.

And then one question on your fiscal year '24 revenue forecast, which you've maintained at $1.5 billion. I think it was Rex who mentioned that your forecast for that period for devices has now increased from $900 million to $1 billion.

That's correct.

In that context, why not -- why are you still maintaining your existing forecast?

Look, I think from a device standpoint, obviously, we're doing a good job of bringing in design-ins, expanding the pipeline and everything else. And then from a materials perspective, we'll continue to kind of grow and maintain our share in the business. But I think at this point, it's just -- it's a solid plan to have. And I think there's also a lot of capacity increases that need to happen between now and then. So you think about where we are today and going out to 2024, there's a lot of different things that need to happen. So right now, I think our focus really is on 200-millimeter and getting Mohawk Valley in those devices going up. And then we'll kind of see how the materials business kind of plays out. But of course, we'll be there to support it and expand it if that's what's required.

The thing that I would add, though, is that with the success rate we've had the $2.9 billion and what we anticipate is kind of bubbling right now in terms of customer discussions and so forth. And as I mentioned, I'll be heading to Europe on Friday of this week and then there for a couple of weeks. And it seems like we're with a lot of different customers right on the cusp of a decision and so forth and some of them happen really quickly, and some of them you're on the cusp for 9 months and that just kind of plays out. But if we continue winning at the rate we're winning right now, we'll obviously need to be looking at what do we do from another fab perspective. And a lot of our customers are already kind of saying, well, if I do this, then can we fit there or will we need another one? And if we keep winning at the rate that we're running right now, that will obviously be something that comes to the table depending on how fast we win, it will come to the table sooner rather than later. Any other questions for Neill and I? All right. If we could just get to the next slide. Just press it, yes. Yes. So maybe one more. We have a lot of folks here that, as I mentioned earlier, are actually doing all the work in the organization. And I think it would be -- we thought it would be very, very valuable for some one-on-one time or at least some individual discussions. We've got a group we've got a table with Margaret Tamara, talking about our people and our strategies for hiring and developing and so forth, attracting talent. We've had a remarkable success on this, and I think part of it is just due to the fact that people in to now see this transition happening. And silicon going away, silicon carbide in the power market. really, really key. Technology leadership, you heard from John and Jay, you'll also see Jim as well. Jim is a key guy in our RF business, talking about some of the technology trends here. From an automotive perspective, you heard from Kenric earlier today, interviewing with Julian, but Ole is here, as I mentioned, Ole runs our European automotive business. Lisa joined us a number of years ago from TI runs quality. Our capacity expansion is going to be really important. You heard a lot about Mohawk Valley from REX, but we also have a lot of really great actions right now and really good initial progress that we're seeing with Missy in terms of turning around the North Carolina fab. So spend some time with her. Michael Daly, I mentioned, runs the materials operations, so you can talk to him about some of the cost reductions that we're seeing. And in addition, Wolfgang Buchele is the CEO of Exyte that is the company that is building our factory in Mohawk Valley. And I think just kind of getting a sense for him or if you tried to do this today, what would that look like with the issues of supply chain and so forth. And then finally, device pipeline, industrial and so forth. Thomas, you've heard from a bunch of different times. Steven runs our distribution partnership primarily with Arrow. Guy has been with us for quite some time, kind of evangelizing silicon carbide. Rick is in charge of our sales operation in North America, and Angelo is his equivalent in Europe. But in addition, Angelo's team is also responsible for the strategy and the development of the infrastructure -- the charging infrastructure market worldwide. With that, thank you very much for your time and attention today. We've got plenty of time out of the kiosk here. We've got some lunch, I think, as well. So thank you very much and look forward to for further discussions. Thank you.

Thanks, everyone. Appreciate it.