Wolfspeed, Inc. (WOLF) Earnings Call Transcript

Good morning, everyone. Even better, Happy Halloween. It's really good to be back here. But I'm sure some of you were kind of saying to yourself, it's Halloween, we saw these guys 11 months ago. Why are we back here at the New York Stock Exchange? Well, a lot has changed in the last 11 months, and we're really excited to tell you about it today. The way you should think about this is, hopefully there will be more treats than tricks today. I think what we want to talk to you a little bit about, we're going to outline our plans to expand capacity. But I think it's super important for us to spend a little bit of time today, understanding the dynamics of what's driving that decision to expand capacity. And it has a lot to do with electric vehicles and it has a lot to do with this exciting partnership that we announced today with Jaguar Land Rover. And I hope on the way in, you saw those fantastic cars. The best questions today will win one of the cars. So think very creatively. And I'm sure Jacob and Santino and the team will be happy to let you take those cars home with you. But let's talk a little bit about, first, forward-looking statements. We're going to be talking a lot about the future of the business. Neill is going to give you an update on the long-term outlook. So Brad, our General Counsel would like me to read this. So just bear with me for about the next 6 minutes. Kidding. That is a trick, not a treat. But let's talk a little bit more about what we're going to go through today. First of all, Gregg is going to give you a strategic update on the business, tell you where things are at, some of the things that we're kind of observing in the broader market. Then we're going to have Elif Balkas come up and talk a little bit about silicon carbide technology. She leads our research and development for materials. So she's got some really exciting things to share with you. Next, we totally appreciate, there's a lot going on in operations. So Rex and Missy and Adam and Lisa are going to kind of give you an update across operations and how things are going. And I know you're all very keenly interested to hear what's happening at Mohawk Valley. Then we're going to take a break. And this is a good opportunity. The members of the senior leadership team are here, some of our leaders in various areas of product and technology, in sales. And we invite you to go outside. We're going to give you about 30 minutes to interact and catch up with those folks. And then we'll come back, and we'll get a financial update from Neill and an update on the longer-term outlook. Then finally some Q&A. But one of the things that we're super excited about is that Thierry Bollore from -- the Chief Executive Officer of JLR, is going to join Gregg for a fireside chat and talk a little bit about, not only the exciting things that we're going to be doing together, but also give you some insights on why pick Wolfspeed. And we think that there's a great story to tell there. So at this juncture, I'd like to now turn the mic over to Gregg. Gregg?

Thank you. All right. Well, thanks a lot, Tyler. Welcome, everybody. Really appreciate you joining us today. And I want to kick off with the announcement that we made this morning. We made an announcement of a joint partnership together with Jaguar Land Rover as they move in a direction of their new strategy, which is to reimagine strategy at JLR, moving towards an electric-first platform and an all-electric future for the Jaguar brand. We're super excited about this. This is more than a supply agreement. This is a partnership that encompasses a lot of different things. We're thrilled today to have with us members of the JLR team, Francois, Jacob, Santino and Joe, just raise your hands here. They've all joined us here today, and we'll be at one of the conversation kiosks. And then as Tyler mentioned, later on, today, we'll have a fireside chat with Thierry Bollore of JLR. We've been partners with JLR, we've been working with JLR since 2017, and this takes us into a completely new level and a new opportunity. Super excited about that. And JLR will be supplied this material for their next-generation vehicles through our new Mohawk Valley 200-millimeter factory. So thank you very much to JLR. We're very, very pleased about the announcement. All of those cars that are out front will all be moving to an electric platform, and they'll all be utilizing Wolfspeed: Silicon Carbide. So super excited about those. So thanks again for the JLR. How about a round of applause for the JLR folks? Thank you very much. A year ago, we had this meeting, and I told you that I went for a bike ride, and it didn't turn out all that well. Many of you know, I broke my shoulder, tore this and that, and all sorts of things. And the issue is, I wasn't focused on the right thing. I was looking around and not focused. And I talked about how we, as a company, we're going to focus the business and focus on this opportunity we have in front of us called silicon carbide and the electrification of so many different things and the need to do and transition to an electrified future in a much more efficient way. And that's essentially what we've done over the last couple of years is -- over the last year is focus the business on that opportunity that's coming out right in front of us. So last year, I took a bike ride. This year, I went on a road trip. And I decided, we're part of this whole electrification of vehicles. I mean, you hear so many different things about what's good and bad and so forth about electric vehicles and range anxiety and all this kind of stuff that I decided to test it myself. So I went on a 1300-mile road trip. I took my car from Raleigh, North Carolina up to Cleveland, Ohio and back, And I learned many different things. Probably the most important thing I learned is that a long-range car helps a lot with range anxiety. And so I think range is going to become one of the key deciding factors of vehicles. In fact, from 2011 to 2021, the average range of an electric vehicle has increased 3.5x. And now the range of the average electricity is about 60% the range of an average internal combustion engine car, and that gap has been narrowing and it's projected to go to 0 at some point in the near future, next 5-ish years. So pretty amazing, 3.5x. And the longest-range electric vehicle in 2021 compared to the longest range electric vehicle in 2011, has -- that range has increased by 4.5x. And that's in 2021, and that was a 400-some mile range. Just this year, a car has been released to market for -- with a 520-mile range. So range is a really important thing because it kind of gets you out of this mode of, "Oh my gosh, what if I get to this next station and it's not working?" Well, when I took this trip, it wasn't a bother to me at all because I knew if the station wasn't working, I could get to the next one. So I think range is going to be a key compelling factor for electric vehicles. The second thing I learned is that the charging stations actually work. The infrastructure works just fine. I had no problems charging. There were roughly 10 chargers at each of the different stations that I stopped at, although I only needed to stop at one, I stopped at 6 just to see what it was like. So that's 60 x 10, there were 60 charges there, 58 were working. No big deal. So that was working just fine. And I think actually, the charging infrastructure is probably good for about 3x more electric cars. There obviously needs to be improvement to the infrastructure as we become all electric, and I know there's a lot of work going on there. And I would say that the other thing that was really interesting is that I only spent 20 minutes at every charging station, and I added between 150 and 250 miles, which is quite a bit. 20 minutes, not that big a deal. And it was quite an enjoyable time because it turned out charging was kind of a social event. People got out of their F-150 and showed me their car, I showed them my car and so forth. So the time went by quickly. I will tell you, there was one sort of you can't make it up story. And that was after leaving one of the charging stations, I happened to pass a guy who is walking back to his stalled vehicle with a can of gas. So I guess, range anxiety is also with internal combustion engine cars. What also has happened in the last just 4 quarters, 1 year since we were on this stage here, is that the investment by the car companies and to the electrification of their powertrains has continued to accelerate. We had noted that -- last year at this time that there was $330 billion worth of investment that was publicly announced by car companies that were going to happen over the next 9 years or so. That number has now grown to $500 billion. And that's just a publicly announced numbers. I'm sure there's lots of other investments that are going on. So this momentum continues to build and build and build towards the electrification, and that's going across all different cars and the companies throughout the world. And so what we're seeing in our business, and what we've seen pretty dramatically, especially over the last 4 quarters, are 2 pretty significant trends: one is the increasing acceleration of the adoption of electric vehicles, the pulling in of the demand and the increasing acceleration of the adoption of EVs, and the increasing adoption of silicon carbide and EVs. When I started at the company 5 years ago, there was really only 1 company doing a whole lot with silicon carbide. Today, I can't say 100%, but when we talk to customers, their minds are all on silicon carbide. And so this debate of whether it's going to be silicon or silicon carbide is pretty much by the wayside. And so you're seeing a pretty significant adoption of silicon carbide. So you take the increasing acceleration of the units and the increasing acceleration of the adoption, and that translates into a pretty significant and steep ramp for silicon carbide opportunities. This happens to be a Cowen report showing a 39% CAGR over the next 5 years or so. There's a lot of different numbers that are out there, but the bottom line is that this CAGR is going to be just ginormous over the next -- probably through the end of this decade. And this only takes us to a 30%, 40% adoption rate of electric vehicles. So even beyond 2027, you're going to see a tremendous adoption rate here. This is probably the steepest adoption rate of a semiconductor technology that's going to happen for the longest of period of time that I've seen in my 35 years. I've never seen anything like this. And what it probably means is that we're going to be -- the industry is going to be chasing the demand through the end of this decade. And you can see the content for electric vehicles, it's largely on the inverter. Most of the content, 90% of it's on the inverter. The rest of it's on onboard charging and DC to DC. In fact, if you look at the electric -- the semiconductor content of an electric vehicle, most of you know that it's twice that of an internal combustion engine car. What you might not realize is that greater than 100% of the increase is in the circle over there. It's the powertrain, which is basically compound semiconductors, silicon carbide largely, a little bit of GaN in the DC-to-DC converters. So greater than 100% of the increase is going to be an opportunity that we go after. So you're going to see a tremendous amount of increase and opportunity, and a tremendous amount of adoption of EVs. Now the adoption across EVs and vehicles and passenger cars is now spreading to other parts of the industry, too. In transportation, we're seeing commercial applications, we're seeing farm implements, we're seeing avionics, both for traditional airplanes doing -- utilizing electric power for perhaps getting around the airport itself, sometimes for taking off as well. There are some airplane companies that are talking about an all-electric future. We're seeing companies that are doing vertical takeoff and landing equipment going all electric and so forth. So you're seeing the transportation industry broader than passenger cars adopting silicon carbide. And then that's spreading over to the industrials. And we're super excited about that because that's a very, very fragmented market, covering everything from solid-state circuit breakers. So instead of the switch flipping, you go down to your cabinet and go change it, it's much more accurate, much more precise, much more modern, much more controllable solid-state switch. As an example, we're seeing buildings, server farms, a whole bunch of different industrial applications. In fact, I think the previous quarter, we talked about 1,600 different applications across the industrial market moving towards silicon carbide. So you're seeing passenger cars, spreading to more transportation, spreading to broader adoption across the industrial industry. And again, this is driving that fundamental shift from silicon-to-silicon carbide. Our industry has been based on silicon for the last 50 years. There's a whole valley in California named after it. And we're seeing a transition from that technology to silicon carbide across a number of different applications. Super exciting. Now from an opportunity pipeline perspective, this pictorial kind of tells the whole thing. For a long time, we were evangelizing silicon carbide. And you can see what's happened over the last couple of years. The opportunity pipeline has just exploded from $5 billion back just a few years ago to now greater than $40 billion worth of opportunity, again, across transportation, across vehicles, across industrials, et cetera. This opportunity pipeline just keeps growing and growing and growing. And our team has done a fantastic job of converting that pipeline into design-ins. So here we are today, and we've got a cumulative roughly $15 billion worth of design-ins. That is 3x higher than we were here -- than when we were here last year, it's 3x higher than when we were here last year. And hence, a lot of demand has been generated, and we'll talk about how we're going to satisfy that demand as well. So this is an amazing story. It's also a story I've never seen in my history as well. This kind of surge in demand is just phenomenal. And the team has done a great job of converting these design-ins to design wins. You see that conversion rate is 43%. What that means is, we have an opportunity pipeline that's $40 billion, and roughly $15 billion worth of customers have said, you won. And of that, 43% of the number of those design-ins, the customer not only said you've won but they've now ramped into initial production. And that's a lot higher than I've seen in my past before. That's a pretty good conversion rate. It certainly surpasses anything we would have imagined would have been the case. So sales team is doing a great job. And by the way, you'll see several of our sales executives are here as well. So during the breaks, make sure you visit with Owen and Rick and the rest of the team. Angelo is here from Europe as well. All right. So this kind of summarizes things. Previous Investor Day, automotive companies have invested -- were planning to invest over the coming 8 years, $330 billion. Those announcements are now $500 billion-plus. And I'm sure there's many non-announced additional investments that are out there, so who knows what this total number is? But from a direction standpoint, you can see, it's nothing but up into the right. Opportunity pipeline more than doubled from $18 billion to $40 billion and the cumulative design-ins that are just tripling that I was talking about. And just the 4 quarters that we've had, we've had 4 record quarters in a row of design-in. But when you add it all together, it's 3x than what we had in the entire previous history since we started measuring design-ins. So pretty phenomenal success. Okay. So what that means is, we got a whole lot of giddy up to do to put a lot of manufacturing in place to satisfy this demand. So we've got several different areas that we're working. First off, we have our capacity expansions in our Durham Materials factory. And you can see pictorially, if you take a look at our Durham factory today, that kind of represents the size. You can see, we're going to do a 10x increase by introducing our new manufacturing plant in Siler City. Rex and the team are going to talk a little bit about where we stand on that. I can tell you this, we announced that at the Governor's mansion on a Friday, and on Monday, there are a bunch of machines on that site ripping out trees, moving earth, doing things. So we hit the ground running right away on that site, and that site continues to progress today. This will be the world's largest silicon carbide factory -- materials factory by far, and it will also be a highly automated factory, and that is not the case today in our Materials operation. They're going to sell automation, but this will be kind of grounds up automation, which ought to drive scale, which ought to drive costs, which ought to drive quality, et cetera. And then finally, our Durham wafer fabs. Missy is going to talk a little bit about the progress that we've made in those fabs. Adam is going to give you an update on how we're standing on the Mohawk Valley ramp. Both are good news. And so that's all for the near term, but we know we're going to need a new fab. Neill will talk a little bit about the timing on that. But basically, based on the amount of design-ins, we've got the interest in silicon carbide, the ramp schedules, et cetera, that factory will need to be up and running by 2027. And if you back that up, it means we need to start doing something in 2023 for that fab. So you'll see a little bit more detail on that. Our intention is that fab -- that graph of that fab is exactly the intention of it. We have in Mohawk Valley, the world's largest and the world's only 200-millimeter fab. The next fab will be bigger than that, just based on the demand we're seeing across all of the different applications. So exciting stuff going on inside our company, inside the industry. The $40 billion opportunity pipeline that we have is likely going to continue to grow as more and more industries, as more and more companies switch over and realize the potential for silicon carbide. There's an interesting little side benefit to that. Almost all of our customers have some kind of carbon-neutral greenhouse gas emission goals, et cetera. And silicon carbide, when they put it into their application, substantially helps them improve their ability to hit their goals by certain dates. And in some applications, using silicon carbide over silicon is a 50x improvement in being able to do that, and that's been studied by third parties and so forth. So this is another additional benefit, lower cost at the systems level, better efficiency and my -- ability to meet my own ESG goals, way enhanced. We're seeing an incredible expansion of our capacity that's happening as we speak. And you'll get an update on how things are going with Mohawk Valley, and we're seeing the adoption of silicon carbide in all sorts of new markets. And I think what's -- one of the things that's really been important for that aspect of it is the partnership that we've had with Arrow Electronics. They've been a terrific partner with us for the last 5 years. We don't have a huge sales force, they have the largest sales force in the world. And we've been partnered with them for the adoption of silicon carbide across that broad range of markets. I talked about 1,600 different opportunities. There's 0 possibility, we could have gone after those opportunities ourselves. So we've got this extensive partnership with Arrow, that's helping us do that, and we're super excited about taking that to the next level. So with that, what I'd like to do is turn things over to Elif Balkas. Elif is in charge of our R&D activities and is specifically in charge of the 200-millimeter program. She had a lot of weight on our shoulders when we started putting all of our plans in place, and I can tell you, she is delivering really well. Please welcome Elif Balkas.

Hi. Good morning, everyone. Thank you, Gregg, for the really nice strategy introduction and introducing me. I'm here today to give you a perspective on the silicon carbide technologies, and we'll talk about a lot of challenges and what we do about them, and we will also talk about how our technologies at Wolfspeed respond to our market opportunities. I'll talk about a little bit about 200-millimeter and how that program is going, and we will be looking at it, some really strong data. I would like to start by introducing myself. So I love technology and application, and working with heterogeneous teams are important for me. I personally strive to be an invested leader in the technology field. And I take reward out of collective achievements, especially in the areas that are -- in difficult technology areas. I've been in the silicon carbide technology field for more than 20 years, mostly at Wolfspeed. I wasn't there from the beginning, but I really learned from the best, and I continue to do so every day. I spend most of my time with the crystal growth technologies. But I did my PhD also in wide-bandgap materials at NC State, and I also completed the executive education at the Wharton School. My personal interests are mainly in the product management and strategy and scaling a business and also leadership development. And I'm really excited to talk to you about the silicon carbide technologies today. But before that, I would like to also talk about us as Wolfspeed for a minute. We are the leading pure-play vertically integrated silicon carbide company in the world. We do grow our own crystals, silicon carbide crystals. We wafer them and then we start building the device layers, depending on the end application already with the epitaxial process. And then we take those wafers and fab them, fabricate them and then to create the bare die. And then depending on the application, we create the devices. Those are our package devices, whether MOSFETs, Schottky Diodes or modules and GaN devices. So just briefly, what is silicon carbide? I think, to me, is an amazing material, as a material scientist, I'm amazed and fascinated by its amazing properties. And a leader in technology, I'm also excited that we are able to harness the benefits of this beautiful material to make our world a more sustainable one. And silicon carbide is a combination of silicon and carbon basically in the crystalline structure. And it crystalizes at a very high temperature. I think if I give a perspective here that I think this room is about 20 degrees now. You need to heat it up to 2,000 and 2,500 degrees Celsius to create silicon carbide crystals. Silicon carbide inherently can take many crystalline forms. But for the power devices that we're all interested in one structure. And then we'll talk about this in the upcoming slides more during today, but what I want you to take away from here, that you take the elemental silicon and carbon, you take them in the most pure form and then you're able to heat it up to 2,000 degrees. But the materials still want to do that. This beautiful picture that you see, that bunch of little crystals, shiny, they're looking beautiful, but they're all going -- they want to go in all different directions. It's kind of like the party going on there, if you will. But we want that, you see the bunch of wafers stacked in there as well in front of the Anneal furnace. We want that. We want the wafers to be 200-millimeter, just 1 structure that we want for the power devices, highly uniform through the wafer. And we want many of those wafers, all to be the same, and we want them in the high volume. And with our 35-years technology of experience that we will be talking about that, we can do that. And in turn, this turns out to be our strength. So these wafers, they can be electrically conducted and as well as insulator. And silicon carbide material inherently has outstanding mechanical, chemical and electrical properties. And it's rare that it has it all together combined, all 3 of them. When you look at electronic materials that you see usually 1 or 2 of the properties combined. But as I say, silicon carbide is rare that you find them all together. And that makes silicon carbide a very actually attractive material for variety of applications, not only for the power applications such as ceramics, abrasives or -- as well as the medical industry. But all in all, silicon carbide is the ultimate material for -- to design and build power electronic devices as well as optical and RF devices. So I want to dive a little bit deeper into the -- producing the silicon carbide materials for the power applications, and then producing them at a scale. It can come with a unique challenges because of the material properties that we just talked about. But when managed with our unique technologies, it can also turn into a significant advantage for us in the competitive field. We talked about the growing silicon carbide crystals. It requires a very high temperature. We talked about 25,000 degrees. I want to take a -- I want you to take a moment to imagine what that means. It's basically harder than anything that you can imagine or describe as hot. I kind of use the analogy that actually the surface of the sun, the temperature is about 5,000. So it's half of that temperature. So if you can imagine this in the -- not even the industry but the lab environment, imagine this temperature from the equipment and the infrastructure perspective, it's very challenging. But when we talk about the material stuff, the silicon carbide also doesn't melt. So let's say that you put the infrastructure, you heat it up the material. Instead of melting, material goes straight from solid into the gas phase. And that requires extra controls, extra attention to the process, conditions, so that you can build that one structure of silicon carbide. And here, on that -- actually right-top corner that you see the silicon carbide structure that we want to have for the power devices, this is 1 of 200, as I mentioned. And here, you see the dots represented the atoms of silicon and carbon, and then they are actually perfectly stacked together to form that structure that we want. But remember, just a minute ago, we also talked about how they like to kind of party especially at that temperature. So all in all, the message that I want to give you or bring home here is that producing silicon carbide materials or the power applications or the industrial applications really require experience, proprietary tools as well as the processes. And our wafers at Wolfspeed, we recognize, and we demonstrate that they are very critical for designing and then for the high performing and the quality of the devices. And at Wolfspeed, recognizing that, and with that really the goal over the 30 years, that we have continues to refine that low defect silicon carbide processing and the technology. Okay, how we do that? I like -- this is one of my favorite charts that it talks about how we approach that and how we developed it and what we have done over the past 35 years. So the starting seed is very important for us. We expand and we create our own seeds. It's -- our seed stock is one of our alpha assets at Wolfspeed. And then we apply those seeds to our high-quality growth. And then the way we explain that is that we have 2 goals there: don't add new defects while you grow the crystal, you start with a high-quality seat; but then during the growth, reduce the existing defects. Then we get a really high-quality crystal, and then after that, we slice those crystals to make wafers, prepare the surfaces. We do, of course, at every stage that we do a lot of analysis and control. And then we look at those wafers and to produce high-quality wafers. But we -- at the same time, we take the best out of that material and then turn them into seed and then cycle them back into our process. So for us, the cycles of learning enabled the continual optimization of the production. So every time -- each time this wheel turns, we learn a little bit and then we get better and also that our volume, of course, accelerates that. We do that at a high pace. I want to build on the volume part of it a little bit, talking about the 200-millimeter. You heard us talk about the die counted -- the advantage of the large diameter silicon carbide wafers. Now this year that -- first of all, the graphs are here based on the 2-millimeter square die size. And then when you look at the 150-millimeter to 200-millimeter in comparison, I noticed that the number of whole dies, it almost doubles. But we, at the same time, that we gain from the edge effect that we reduced the percentage of die, the wasted material, almost in half. So by going from 150-millimeter diameter to 200-millimeter, we create more devices from a single wafer. And you heard us, as I mentioned that Neill talked about that what it means for the -- in terms of the cost and the fab advantage. But you can also imagine that to get that advantage, when we go from 150-millimeter diameter to 200-millimeter diameter, we also want to -- of course, to have the quality per area to be identical between the 2 wafers. So you get the real benefit of that enlargement. In Materials, we have bunch of indicators. We extended the diameter or when we look at the quality of the material before we send it even to the fabrication that we passed the material from through those gates. I want to talk about just 1 of them today, that is micropipe. It's the fundamental structural defect in silicon carbides and it's also the killer defect for the devices. What we do here is that we basically look at the hypothetical map of the silicon carbide wafer. We look at it by the 5x5-millimeter dimension dies, and then we look at the whole surface, characterize the whole surface. And then when we see a micropipe there, we label the die, and we don't even build the device there. So it's basically 1000 projected fab die yield. Here, we see it going from 150 and 200-millimeter, we see really good quality as we extend the diameter. You see actually only 1 of the pipe in the center. The center pipes are more difficult for us to clean, but you also see some issues on the edges that we feel really confident and that we're really there with our quality. And then what it means for us when we talk about the volume and our technology and scaling the technology, I want to talk about 2 charts in contrast about also to tell you about the status of our technology capability. First, looking at on the left-hand side, the chart is -- the vertical axis of the chart is a normalized volume. We normalized 2016 because, as also Gregg mentioned, that we see that really did increase in scale that more in the recent years. So we take the 2016 volume as 1, and then we looked at the half the 150-millimeter volume has increased over the last 5 years. If you notice that we increased our volume by 15x in the last 5 years. And then when we look at the right-hand side, and then we talked about the technology, how the technology is looking and then the technology readiness, we're basically doing the same thing. But we look at it at the last 2 years. In a still normalized '16, it's very exciting for us that we're already did the 2016 volumes with 200-millimeter technology. Okay. And so that summarizes for me and for us. That shows us, I think, that the silicon carbide is the new generation of the semiconductors, it's here. And I work every day with the individuals that are like 30-plus years that they've been working, and it's actually very exciting. It's -- right now it's happening. Our -- it will speed our combined expertise, technology and volume is basically unmatched, that we don't see any close competitor actually that -- near us. Looking at the 200-millimeter quality, and we see that is equal or better than 150-millimeter, giving us the true advantage of the die count at the fab. And we also -- we see that our volume is already increasing, and our technology is ready for that because we show a really strong outlook for the technology performance. Thank you so much.

Elif, now for the fun part. How about a little Q&A? Please have a seat. And what we're going to just do is just talk about 10 minutes or so before we move to the next presentation. But I -- a lot of really good content there. So thank you. I think as we sit here, though, and we think about things, how do the cycles of learning and the vertical integration kind of play into the opportunity for us in terms of being able to continue to lead the market both from a materials perspective, but then how that plays into devices, how should we think about that a little bit?

Yes. Thank you, Tyler. As I mentioned that as we produce, so we start with growing the crystal slice them, there's a lot of data for us. We look at the performance -- we look at the product performance a lot, and then our vertical integration gives us a lot of very quick feedback. And then we -- our internal fab is our customer that we value, and we look for their feedback, and then take that feedback to our process and then keep learning and then keep turning that wheel that I mentioned.

Terrific. That chart that you showed us at the end there with that compares 150 versus 200. Why do we think -- or what should give us the confidence that we'll see a similar trend that we witnessed on 150 on what you're seeing so far with 200? Because that seems pretty important.

Yes, yes. So we have a technology. I kind of call it very mature now, over the 30-plus years that the work that we've done on the several different diameters, and then 150 was the last diameter. But then our technology refinement continued while we expanded the diameter. But then seeing that 15x increase in the volume, that tells us that is actually our technology is very robust, and it's ready. And then what we do, when we carry to 200 millimeter, we kind of take the same of the technology basics, foundations but add to that in terms of diameter and the quality. And then from there, actually, our history, [indiscernible], that the technology readiness.

But I think the takeaway is, these things can't be rushed, right? Is that fair?

Yes, correct. And it takes time. The material itself is very -- it's difficult to grow, difficult to process. It takes time. We actually have -- it's actually reminded me, Tyler, that we have very senior scientists that are coming from the actual academia. They're still there within our company, that they're supporting the new scientists in our organization. One of our leading scientists said that you have to rush slowly, and then we just go by that. We have to rush slowly. So you need to take your time to look at the data. But our volume is the pace for us.

And I think that's probably what's underappreciated a little bit because as -- given our scale and what we're able to produce, I think that uniquely positions us, right, in terms of being able to move the technology forward as quickly as we can.

Correct. And now it's the time, we feel like.

Very good. Last question. So we talked a little bit about -- and the ops team is going to come up in a little bit and talk about Siler City, but greenfield operations and being able to build -- or build capacity in kind of a new way because we're kind of stretching the parameters of the Durham campus. But how does that -- we haven't seen a lot of investment from our peers just yet, but how does the greenfield operations really play into some leadership for us?

That makes me think that there are twofolds like as a technologist, and I know that my team will say the same thing, that we love the concept of the greenfield because based on our -- what we know and what we learn, that we can go and implement and then we can build this, the perfect factory that's great from the greenfield perspective. But from the -- I think that from the scale perspective, you -- I think, in my opinion, that you kind of need to know what you're going to put there because the plane and it's out, carrying our, I think, expertise. But you're going to invest a lot of the infrastructure there, that combining those and then when you put it that knowing that it's going to work. I think that is our differentiator compared to the -- our peers that are going to come in. Of course, they will want to, I think, to create the same, but then putting it all at the same time within the time limit, I think, it will be the key.

Terrific. How about one more round of applause for Elif. At this time, we'd like to invite Rex to the stage, talk about ops.

Yes. Good morning, everybody. Great to be here. About a year ago, as Tyler mentioned, I stood up here, I've been in the role for a few weeks at that time, so it was great to greet the team and really talk about our team and our plans. If I look back in the last year, I'd really characterize the main thrust of our activities in only 3 areas. First one was to build a world-class team and a world-class operations excellence culture. And we'll talk about that in a second. The second one was to really leverage our existing fab and materials footprint to drive the kind of growth that we needed to, to fund the future. And I think we've achieved a lot of that over the last year. And the third one, obviously, and this has gone through a number of iterations was, create a long-range plan to enable the vision and the growth for silicon carbide and device manufacturing that we're developing. I can tell you that, that plan has -- we've called it, as we say, in football, a lot of audibles along the way, over the last year as we've seen that plan grow and seeing that design-in grow. I would say right now, we have actually, either in the planning stage or in the execution stage, 6 footprint activities, whether they be greenfield or brownfield. And so we are not resting. We are moving quickly and executing to a lot of those plans. We've got a great team up here to talk about some of those plans today. As I mentioned, I joined the company about 3 years ago, first, to help and lead the Mohawk Valley activity we have up in New York. Moved into the current role about a year ago. I'm going to introduce Missy Stigall. And she'll come up and speak right after me. I mentioned, really leveraging the existing footprint. And for the fabs, that's been what Missy's done over the last year in our North Carolina footprint, driven a lot of the great device growth we've seen with really that operational excellence and what I call [indiscernible], right, getting more out of the installed base. So she's done a fantastic job of that. Missy has 20-some years of experience, both with us and Texas Instruments prior to that. We introduce then Adam. Adam is now leading all our activities up in Mohawk Valley. Adam really went up there with me about 3 years ago and concurrently helped lead actually the building of the factory, the pilot lines we created to enable the automation that's going to be game changing this factory and then also the pilot line to create the 200-millimeter processes that we'll be employing. We're already seeing very good results, and Adam is going to talk about some of those results. And then finally, Lisa Fritz. Lisa leads our global quality. Lisa also has a very well-rounded background from TI and Fabs, global quality operations. Lisa is going to talk about the metamorphosis were going through when it comes to automotive quality. Gregg talked about the inverters. Our key thrust and our key growth area, obviously, is in the automotive space. And we all recognize that we've got to continue to get better and continue to improve and step up to the bar and automotive expectations. We also have 3 other members of our team that are here today: Tom Egron leads our global facilities; Michael Daly leads our materials operations; and then -- I'm sorry, we've got -- who else do we have? Please raise your hand.

Joe.

Yes, I'm sorry, Joe Roybal. Joe is also on the back. Joe leads our back end. Joe joined us also from TI late last year, and he's doing a lot of things again to exist -- deliver just that existing footprint. So as I mentioned, the culture, the underpinning of that culture, being our one pack culture is really key. We're starting to really leverage that over the last year, and it's really 4 major concepts: it's excellence, it's family, it's scalability and its passion. And the best probably way to really summarize that is all about a safe, right, fast mentality. Elif talked about the types of operations we have. They grow half the temperature of the sun, things we have to really focus on, on the safety side. Doing things right really lines up with our quality aspirations for automotive, and then having operations, fast turns, being nimble and agile when it comes to prototypes, when it comes to operations, performance and things like cycle time are things we've made a lot of good strides in over the last year. We certainly have more work to do. We'd like to say, we'd like to make it personal, personal culture and make it personal to win, and that we're really striving for perfection. And then even when we don't reach perfection, we're going to catch excellence along the way. We made a really big announcement beginning of last month, as everybody knows, to expand significantly our Materials capability and capacity. Before I talk about that for a moment, I want to draw your attention to the picture at the top here. And this is the existing footprint we have for Materials in the Durham campus. And this is the largest silicon carbide factory in the world currently by far. And this factory produces about 60% to 65% of the overall silicon carbide wafer usage. And we are taking that and we are going to be expanding that by really incredible amounts. The new factory site we're putting together is on a very big site, it's 400 acres. Right now, we see use of about 250 of those acres. It's going to be between 1.5 million probably 2 million square feet initially, space for what we call Phase 1. We're actually showing both Phase 1 and Phase 2 in this picture. And we're also going to build it on what we call a modular or foreign-based concept, which is really going to allow us to modulate that capital investment as we see the growth. And it will allow us to grow into this, over time. And I know Neill will talk about some of that. But the overall capacity is going to be about 10x or more than 10x what we have today or in the Durham site. And as was mentioned earlier by Elif, this is going to be a highly automated facility from end to end, from really crystal growth through epi. And we'll be really, like I said, just transforming the industry with this kind of capacity. And one more picture that really, to me, kind of drives at home here is, we look at this -- again, this first Phase 1 or Phase 2, but that purple shaded area represents the current footprint that I just showed in the last slide. Look pretty incredible. And we're very excited about this facility. We anticipate it actually contributing to the company at the beginning of calendar year 2024. Though as Gregg mentioned, we've already got a lot of activity going on, a lot of earth moving, a lot of plans that are really taking shape and so we're very much in execution mode. And with that, I'm going to hand it over to Missy, who's going to talk about our Durham fabs.

All right. Good morning. So just to put it in context, I've been with Wolfspeed for about 15 months now. I was actually brought in to go help drive our North Carolina operations. We wanted to make it efficiently better. And as part of that, when Rex came onboard last year and showed this, we wanted to present our world-class manufacturing footprint. And so if you look at this blueprint that we've put together today, I would say we're really going after those efficiencies that we wanted to drive. And so in the last year, if you look, we've had, as Gregg alluded to, record revenue for the last 4 revenues. We've been able to decrease the cycle time at that side, again, driving those efficiencies. We've decreased it in half. We also had 67% output from Q1 of FY '22 through Q4 of FY '22. And so what we believe is that this blueprint that we've put together to talk about how we go achieve manufacturing excellence, it's working. And so I've listed some of the other metrics here today, but I wanted to really highlight how proud I am of our team and that we're headed in the right direction. Also, I wanted to share, what does the overall fab capacity look like? So if you look at the timeline here, in 2021, we put in some strategic capital investment, right? But I will remind everyone that this factory was retrofitted. It was an LED factory that we have decided to go produce silicon carbide wafers out of. And so if you look with the strategic investment we made along with that blueprint, we've actually created 50% more capacity to date from the FY 2021. So that's what has helped us have the significant revenue increases that you've seen over the last 4 quarters. So what are we going to continue to do in this factory? We still have a lot of work ahead of us, right? So we were very open about some of the supply-chain issues that we've seen. For those of you who don't know, that's normal. I've been in operations for 23 years. The reason it's highlighted so much for Wolfspeed is because this is the only device factory that is contributing to revenue today. So any supply-chain issues is going to have an impact. But what my team is focused on is our process harmonizations, how do we go get [indiscernible], Rex just referenced, more out of installed tools? And then also, what do we need to do to go reduce our one-of-a-kind tools within that factory? So again, it's a very small footprint. It wasn't intended to go drive enormous revenue growth, but I'm really proud of where we've been over the last year. Also wanted to take a chance to highlight yields. So we've talked a lot about yields. We talked about yields last year as well as part of our Investor Day. And so if you look at the 2 yields that we're highlighting here, the first one is process yield. So process yield is actually just wafers out, right? So you start a wafer and you expect to get those same number of wafers out. Well, my factory and the factories in Durham happen to be very manual. And so process yield is extremely important because it's a human-based movement, right? You're going to hear a lot about Adam. He's going to talk about his automation. But in Durham, we rely heavily on our people. And so the fact that we've been able to increase our process yield percentage, it's better and it's moving in the right direction, says a lot to what we're doing with our manual task reductions. We're also working on a lot of the tool stability. Again, these tools were retrofitted from LED to go on silicon carbide. And so we're continuing to work through some of the hurdles there. On the other side, you see die yield. So die yield is, once we process this wafer and we're able to ship it, how many of those die actually yield? And so as you can see, again, over the last year, we've put a lot of effort into increasing the die yield. From a customer standpoint, we want to get more output. We know this is the only factory reducing revenue. And so we're working through our defectivity. Elif referred to some of the defectivity we see from Materials. We see it as well from a factory standpoint. And so we're continuing to drive that defectivity down. Now I want to caution everybody. We are at the max capacity for this factory, right? So we have reached its full capability. We're going to continue to go drive the performance. We expect to see the process yield continue to improve. We also expect to continue to drive the die yield. But for our company to see any increase in both revenue and gross margins, that's really going to come from Adam and his team in Mohawk Valley. So I'm going to hand it over to Adam now so he can talk about what's going on in Mohawk Valley.

Awesome. Thanks, Missy. Good morning. So yes, I want to really talk about, first of all, what is unique about Mohawk Valley fab? So every square inch of the factory built in upstate New York was designed for 200-millimeter fully automated, automotive quality silicon carbide wafers. So we've been working over the last 3 years to really design this building purposely for 200-millimeter silicon carbide devices. We're already undergoing our IATF certification to focus on the automotive quality, really, again, focused on making sure that we are making the best quality, highest reliability devices for our customers. Missy spoke about North Carolina, you're retrofitting a factory. All of our competitors, they're retrofitting old legacy factories. So this factory is designed specifically with the automation in mind to really deliver the highest volume output we can get for a given factory. Not just a factory, right? So we can't run -- we have a great technology. We can't make product without a great team. So we've built a really phenomenal leadership team and organization, over 300 employees already in our Upstate New York factory. Individuals, I came from -- I have 18 years of experience in silicon carbide. We have other individuals with silicon carbide experience. We brought in a lot of legacy silicon experience as well as automotive experience to really drive the culture of automation, high quality, high reliability. Again, we also are building this to be a fully automated factory. So we're leveraging what the silicon industry has implemented in their latest and greatest 300-millimeter silicon fabs. We retrofitted it to work in silicon carbide at 200 millimeters, which has never been done before. So again, really, really a great opportunity we have here in Mohawk Valley fab. Just a quick look at how the campus is looking now. Really, the take home here is, we've moved away from the construction phase. So the building is done. The team that we have there is 100% focused on qualification and ramping this factory to our fullest extent possible. So how is that going? So first and foremost, our metrics are, how do we get parts out of the factory, get them to our customers as quick as possible? So days per mass layer, it's a measurement for cycle time, and we're working to drive that to really world-class levels. As we've turned on tools and processes, we've already seen that come down really close to our target. And so by the end of this calendar year, we should be right on target for our cycle times. And really, we expect it to be about half of what we see today out of the North Carolina facility. And then on the right here, yields. So we leveraged all the learnings out of the 200-millimeter pilot line that we had in Albany to really demonstrate capable yielding 200-millimeter power devices out of the gate at Mohawk Valley fab. So it's not typical. It's pretty often that you're building a new factory, you may have lots that don't yield. So I'm really excited to share that every lot that's come out for our MOSFET devices so far has demonstrated yield and really providing some good baseline for our factory going forward. And as more lots come out, we continue to see that improvement day over day and week over week. And so we're continuing to, again, leverage that knowledge from the Albany pipeline, leverage the automation, which really drives less defects, less contamination and really quick cycles of learning to really drive that quality going forward. And so as we already have a lot of really promising results, a lot of good progress so far, we're focused on qualification but we also really want to continue to focus on the ramp. So we're continuing to install equipment. We're continuing to purchase additional capital to really drive that ramp that we expect to see over the coming years. And just to give you a frame of reference. Once we get to about 15% utilization in Mohawk Valley fab, we're already bigger than North Carolina fab. So just to think about that. So we have a long way to go in Mohawk Valley fab, but just 15%, which you kind of see represented on the slide here, we are already bigger than what we're producing out of North Carolina fabs today. And so it's really, really important. And again, the team is super focused on the ramp and the install going forward for our factory. And so leveraging the automation that I spoke about, leveraging the really good baseline yields that we've seen so far, you put that all together, and we're expecting really, really, a great margin contribution from this factory. So specifically, given the size, the scale, the automation, which drives not only quality and improves cycle time, it also drives a much lower labor cost. So leveraging that and the yield that we're expecting, we've already seen and demonstrated so far in the Mohawk Valley fab, that's going to translate into a 50% reduction in our cost per unit coming out of Mohawk Valley fab. So really excited about what we've seen so far. Again, really good progress thus far with turning on the automation, demonstrating yields on both, our diodes and our MOSFET devices. And again, looking forward to continuing to ramp up this factory. So I'm going to hand it over to Lisa, who's going to talk about our culture and our quality organization. Thank you.

Thanks, Adam. So good morning, everybody. So to start, before I go into the slide, I just want to share that applications out there are becoming increasingly complex and diverse, and EVs, our friends at JLR, your cars as well. And it is really important and critical that we continuously improve the quality of our devices. And an automated factory such as Mohawk Valley is only going to help in that space. And that being said, to share from the quality side, fiscal year '23 to date for our consolidated power devices, we have met and exceeded our quality goals. Now as we look to the future, we're going to maintain our focus on 3 strategic pillars that drive our global quality strategy, which is to integrate our people, systems and culture to drive quality as a competitive advantage. The first is building out experienced quality engineering teams with industry experts, and we have built out my quality leadership team, and you can take that down a level as well, with key and very experienced automotive and quality expertise. And we're very proud of what we have accomplished thus far. And we'll continue to look for talent and build it out further as we scale and expand. We'll look towards improving our training methods, our problem-solving capabilities and instilling that quality-focused mindset. And the second pillar is about investing in scalable quality management systems and processes. And I think it was 3 years ago, I was on this stage. We did put together a large investment in the state-of-the-art quality management system, and that system is now fully built out and fully deployed across all of our factories. And it is scalable as we grow. You'll see it in Siler City as well. And as we look at our zero-defect strategy, we will continue to invest in and standardize more processes and systems and automate wherever possible. And finally, we want to advance our automotive culture through key quality initiatives. Next, we are leading the silicon carbide industry in advancing industry standard organizations. So we have key -- I think 2 key codeshares on our [indiscernible] subcommittees. From a Materials side, we actually engage in the semi standards and, of course, the IEC conference. And we have added a product stewardship expert to our quality team, and he engages and actually co-chairs one of the key IEC subcommittees, which is product level environmental standards. So we're hitting it on all fronts. Our automotive -- excuse me, our businesses and our factories are automotive-certified to IATF 16949, and we're on track for Mohawk Valley, I keep looking at Adam here. We are on track to get it certified as well within the year. And we have deployed industry standard metrics and qualifications. And you heard about the designs wins from Gregg, you'll hear more from Neill. And those industry standard qualifications are a key part of doing business and how we partner with our customers. We also audit ourselves for compliance to continual improvement and our customers do as well. And more of our European customers, we do what's called a VDA level audit, and we've been achieving over 90%. So we're getting an A out there. So I really like that. And then we're implementing key quality initiatives, and the biggest one is zero defect strategy. And that includes things such as zero -- or excuse me, defect reduction focus, statistical process control, supplier assessments. And then overall, we're focused on improved customer satisfaction. And one piece which isn't on here is, as a company, going into this automotive transformation phase across all corporate functions. So automotive is not just about quality. And that's a good lead-in for my final slide on quality culture. And this one here, I want to point out, we have to go beyond processes and systems. That, along with our people, is really the foundation here. We have to have the right behaviors with active engagement, the right attitudes with that proactive mindset to really drive the culture that we must have for automotive. And to tie it back to how Rex started to our one pack culture, that really is the ethos that we operate in our company and our factories. And we want to instill that safe, right, fast culture with our employees as well as the sense of pride and ownership in what they do and what we produce because when it becomes more personal, there's a greater desire to win. So I'm going to close with how Rex opened. It's a good closer. When we reach for perfection, we catch excellence. And I know our entire Wolfspeed team is not here, but it is really due to them. So I'm going to close out for the team and give a big thank you to the Wolfspeed team from those of us here on the stage and in the room. So thank you, and I'm going to hand it back to Tyler.

We'll do a little Q&A. You're not done so fast.

We're not done.

I get to sit next to Missy. Don't worry. Easy stuff, I'll tell you. No, but I think, listen, one of the things, I think, as you sit in the room and you look at the team and what you guys presented today, I think the reality is, is how can we, as we look at this capacity footprint, think about risk of oversupply in terms of what we're talking about? I mean, Gregg showed some great slides on demand, Neill is going to talk a little bit about what the outlook looks like, but how can we ensure that we're not oversupplying the market at this point?

Well, I think one of the things I touched on was the modular farm approach we're going to take in Siler City. It's a very significant footprint. It's going to drive, again, a game-changing level of capacity for us and even for our LTA customers. But I think the approach we're taking is one that's a responsible capital approach to be able to step into it as we go. Sure, we're going to have to work with supply chain and have to stay ahead things like fabs where we have long -- very long lead time items. Now thankfully, in Materials, we build a lot of our own crystal growers, so we can control that, modulate that.

Okay. Missy, what do we do with Durham once we get Mohawk Valley up and running and we're going to add Siler City capacity? How do we -- I mean, you guys have been running it pretty hard. So what do you think about what we do with Durham?

It's a good question. When you go back and you think through the slides like Gregg showed and then when you and then when you hear what Neill has to show later, we have just a substantial amount of growth in front of us. And so while Mohawk Valley is going to be automated and it's going to contribute a lot to our bottom line, there's still going to be real demand out there that we have -- we have, as a company, have to go chase. And so for me, I see lots of potential still in Durham. There's a lot of opportunity to continue to optimize it, make it more efficient and drive the yields forward. So I see it being around for quite a while as we continue to chase our demand.

And isn't it fair to kind of remind everybody that you were doing something similar on a much larger scale at another place. So applying those learnings is really what's helping there, right?

Yes, definitely. I have a background in running manual factories. And so there's a lot to be said for what we do and how we grow. And those factories can actually be a competitive advantage for companies in terms of just bringing in engineers. When you have older equipment, it's actually -- allows engineers to be more innovative and to do real traditional engineering type work on tools. And so it's a good place to come in and grow our team. It also -- we also have the opportunity to do some of the R&D work there in the Durham, right? So Adam and I will be able to multifactory flow lots. Most of our R&D team for the business unit lives in North Carolina. And so to be able to have those tools in a place where they can do the work, and then we ship wafers back and forth, will be really key for our growth as we continue to expand our business.

Adam, you gave a great update. It seems like the team is making great progress. How do you feel about the next couple of quarters here in terms of the ramp and things like that, team feeling good, everyone not feeling too stretched at this point?

Yes. Really good progress so far. I touched on, we've already seen really solid yields from the lots coming out of the fab so far. I can't highlight enough that it was kind of expected that you might not get yield on the first few lots. And so just the fact that -- we leverage all that learning from Albany. We basically started out of the gate already going. And so all the yields so far have been really solid. So I think you take the yield piece, you take the automation. So again, automation doesn't just help reduce the number of people you need. It speeds up everything, so learning cycles, how quickly can I see those signals that I need to go dial in? If I have an issue that I think might be substrate-related, it's not, "Go tell my supplier, they need to fix it." I'll just give a phone call to Materials team and let them know, "Hey, we've got to work on this." So leveraging all that vertical integration, leveraging the automation, I think things are still looking really solid for us.

That's great, Thanks, Adam. Lisa, when automotive customers come in and talk to us, we're still kind of a newer player in the device marketplace. How does that dialogue go? Do they immediately want to jump to one particular area? Or what do you think is kind of the 3 things that automotive customers are looking for when they talk to us?

Well, one, they're looking to -- I'm going to reference that culture slide because that is a slide that we share with customers. And I know and more importantly, we share it internally. But they want to see that we go beyond just systems and processes, right? They want to see that we get that it's a culture that we need to drive. And that is a huge thing. When I've been with the company now 4 years, and some of the first automotive customers I met with, I showed them that slide and like, "Okay, you get it." And I got a big check for that. Also understanding how we're going to respond, right? They know that in this world, there will occasionally be issues and how fast we respond to them, how thorough, that's that structured problem solving we talk about a lot, that's another key aspect they look at. And then I'm going to touch on -- I mentioned the industry standard qualifications, right? How we qualify ourselves, how we help and enable them to qualify in their platforms, whatever the product is. That's another key one. We have to hit those industry standards. And I'm going to add a fourth one, and I really -- sorry.

Go for it.

I'm going to go for it. It also really comes down to the people. And that's one reason I joined the company, this is an incredible journey that we're on, is this blend of the people that we're creating now Wolfspeed and the external influence. You can see Rex, Missy, myself, others in the room. We've got this fantastic blend. But they see that we're bringing in the right expertise to pull everything up at the speed that we need. So people was also a big piece of it, too.

That's great, Lisa. Thank you. Rex, I think this next one is for you, but anybody on the team, please jump in. You look at what Gregg presented in his slides in terms of the demand, you start to rack up the design-ins. It feels like we're trying to thread a needle with capacity at this point because it sounds like Adam is going to be pretty full a little bit faster than he originally thought. So are we going to be at a point to where capacity is going to be pinched? Or how do you feel about the plan for Siler City coming up at the same time, we're filling that second half of Mohawk Valley?

I think we've not been bashful about the fact that we're going to be chasing demand, right? We know that the good thing is fuller factories also mean better -- obviously, better factory utilization better economy of scale, better costs, better margins. And so we're excited about that. But we're definitely going to be in that mode for a while. And I think we've got to continue to -- as Gregg has pushed us to do, look at the future faster and figure out how we solution the future faster. There may be some opportunities here with Silicon maybe getting a little softer for us to leverage that because we're not seeing the softening. We're continuing with the [indiscernible], we're very, very strong and so that is a chance for us to leverage something that maybe wasn't there, 6 months ago. And then just being very opportunistic whether it be working with our partners like we did in New York, working with other partners, we have right -- we're working with right now to not just have good sites to actually build the factories, but also the workforce, as Lisa mentioned, is incredibly critical, right? And we've already leveraged a lot of these partnerships in New York to create a pipeline of talent coming into our teams. And that, to me, is probably the biggest thing we've got to work. We'll get the facilities, and we'll get the equipment right, in time. But we've got to make sure we have top notch leaders, engineers and everything to take advantage of it. So that's a big focus for our team as well.

What -- to build on that, what is -- and Adam, you're the host for a lot of these things, but when automotive customers come in, we've announced a terrific partnership with JLR today. And when they come into Mohawk Valley and the facilities, what are kind of the takeaways? Or what are the first impressions like when they see that?

Go ahead, Adam.

Yes, it's the scale. We did pick a good site with a really good view. I see some familiar faces that have come out and visit us, so happy to host any time I can because we love showing off the building. It was purposely designed and built for 200-millimeter silicon carbide. I think as I mentioned, every square inch of that building, I'm proud of it. My team is proud of it. We poured a lot of blood, sweat and tears into that building. And so I think it shows well. I think the design, as I mentioned, was really, really well done, focused on automation, focused on not only we provide efficient products to the market, but we wanted to build a factory that was efficient. So lead certification, recycling our own water, using robust power sources. So all the things that we designed in, I think that helps -- when we bring customers in, they love to see it. It's been really, really exciting, both for me and my team to show off the building, but to hear the feedback from our customers about how great of a building it is and how excited they are to start getting some parts out of it.

That's super helpful. Last question. We've talked a lot about a second fab, and Adam is kind of alluding to the pace of play is accelerating at Mohawk Valley. Probably, is it likely that in the next 12 months, we're going to have to make some kinds of decision of more capacity from a device perspective? Not that Missy isn't tapped out, it's just, it's busy, is the best word.

Certainly, I think within the next, yes, 6 to 12 months, we will definitely be making a decision to -- on what -- where exactly that next footprint is going to be. And we're already actually working some of the design phases right now to get ahead of that. So I mentioned the 6 footprints that we're kind of actively either doing or planning. This is one of those.

That's great. How about one more round of applause for the ops team. Well, we've gone through a terrific amount of content. We still have a lot of great stuff to share with you. But what we're going to do right now is we're going to take a break. We're going to give you 35 minutes or so. So get some coffee, get it -- please, take the opportunity to talk with some members of our team here, and then we'll be back in the room at 10:00. So thank you.

Thank you.

Thank you.

Thanks.

Thank you. [Break]

A few people coming in. I hope everyone had some good conversations out at the kiosks, talking with the team. It's actually hard getting everyone back in here. So I assume those conversations were going well. Didn't expect that today that I'd be waiting for the audience to come back in for this part of the presentation. But a couple of things here. So I think you heard it this morning, overall, a lot of change in the company since we spoke to you last year at Investor Day. The market has accelerated. The pipeline has accelerated. We've seen our design-ins take a different trajectory over time, and we're also seeing more revenue and investment expansion over that period. So if you look at it just last year, we talked about the power device market being roughly $6 billion. It's now grown over 50% to $9 billion. If you look at the opportunity pipeline, it's more than doubled, as Gregg mentioned earlier, from $18 billion to $40 billion. Our cumulative design-ins have almost tripled from $5 billion to $15 billion. So a lot of change over that period of time. So when you look at the overall power device market, let's just drill into that a little bit. So as I just talked about 2024, going to 2026, the $9 billion, if you accelerate that out to 2027, we see that being roughly $11 billion, primarily driven by the adoption of electric vehicles, north of 25% EV adoption rate. And if you look at the top right of the chart, 90% of that opportunity within electric vehicles is in the inverter and in the drivetrain, which silicon carbide is uniquely suited for. In addition to that, if you look at the bottom of the chart in terms of the areas that are lighter shaded, you can see that also other applications -- industrial energy applications are also increasing. And our opportunity pipeline has increased as well. If you look at the left-hand side, 2.7x increase to $40 billion as well as our design-ins going to $14 billion over the same timeframe, going up over 3x. So clearly, a lot of momentum in the business. You heard about it this morning from the team, and we're seeing that kind of come through. So what I want to do next is drill into the design-ins a bit. How do our design-ins work? If you look at the chart here, typically, there's a 2- to 4-year design-in to revenue cycle, meaning we negotiate a deal, we have some sort of award of business. We've won some kind of award. And then it takes 2 to 4 years from that design-in until we start ramping revenue. And what you have here is an automotive example. So over 2 to 4 years or a 7-year period, you start to see a cycle where the revenue starts to accelerate and then comes down the back end. And that's generally how our deals work, particularly if you're looking at an automotive application. What this chart is here, is an actual breakout of our $14.8 billion in design-ins over that period. And if you look at the top of the chart, you can see the automotive portion of that. So you see that long tail of design-ins from an automotive perspective. But why is that important? It's important because it gives us very good revenue visibility over time. So we get very positive view of what our revenue is going to look like over a long period of time. In addition, if you go to the bottom of the chart, again, you see the lighter color, you see nonautomotive applications. So those design-ins or revenue cycles are a lot shorter. And that's why we see more industrial or nonautomotive type of applications today that are ramping in revenue in the earlier periods. Now the other thing to think about when looking at our design-ins is the left-hand side of that chart and how fast it's ramping. Our design-ins are underpinning our growth. We will likely be supply-limited over the next portion of this period and probably out to the end of the decade based on how the market is going. But if you look out to that 2026 and 2027 timeframe, what it says is, our capacity is going to meet or exceed -- or sorry, the demand is going to be ahead of what our capacity can meet even over that timeframe. So if you go to 2026 even, we're going to see that Mohawk Valley will more or less be sold out based on what we're seeing from a design-in perspective. If you go to the right-hand side of that chart, that's where we have to continue to drive design-ins out of the pipeline. So what you can take away from the chart is a lot of revenue visibility over time as you see what we've seen come through the design-in cycle. We're seeing steady growth out of the 2026, meeting our capacity limits and having to expand our capacity. And we'll start to see that come down over time, but we'll have to fill that in with additional design-ins over time. But clearly, a lot of momentum from a design-in perspective. Now what's changed from a revenue and CapEx cadence? Now if we are going to be having a lot of supply requirements to hit these revenue targets over time, you can see what's changed. If you go back just a year ago in 2021, we guided revenue at $700 million. If you go out and look back at our results from last year, we actually achieved $746 million. So we saw it go ahead. If you look at 2026, we had roughly $2.1 billion in the outlook. And now we're looking at $2.95 billion in the same period, a 40% increase of what we thought just a year ago. And if you expand that out to 2027, we see that revenue growing down to $4 billion. And that's also going to come with more investment. We're going to have to invest in capacity to drive that revenue growth. So last year, we thought a few hundred million dollars of capital in 2026 -- or back in 2021 when we looked at this, and -- sorry, 2023 CapEx when you go back and look behind. And then start looking at this year. Last week in the earnings call, we talked about $1 billion of CapEx investment just to meet the higher and steepening demand curve that we're seeing for our products. So what does that mean from a revenue perspective? From a revenue perspective, that means we're going to grow at a 40% CAGR between now and 2027. And if you look at the pieces of that revenue, it's broken down in 2027 into the 3 buckets. You have roughly $700 million of Materials revenue, $400 million coming from the RF device products. But even more importantly, you're seeing a bigger chunk of that revenue come from $2.9 billion of power devices in that period. And those power devices are going to grow at a 60% CAGR clip over that timeframe. So clearly, a lot of growth in the power device number, over time. And the big question is -- look, we see the EV adoption rates picking up, we see the opportunity in nonautomotive and industrial applications and other nonautomotive applications. But the real question is, how do we bring on capacity to support that level of growth over time? So this is a breakdown of our revenue related to that power device number. So what you see there is, if you look to the left-hand side of this chart is that it's our Durham fab today. So there's a small amount of capacity today that we run out of Durham. By 2027, we'll be filling 3 fabs in order to meet that type of requirement. You see Durham at the bottom, roughly $400 million. Mohawk Valley will have -- be full at that timeframe, full utilization and have about $2 billion of revenue. And the remainder of that would be based on another fab that we would -- that we're going to announce hopefully in the not-too-distant future. But that also gives us an incredible footprint, an incredible footprint to continue to grow out beyond 2027. So you can see that other fab, that one we just announced, it wouldn't be full. In fact, the 4-wall capability of those fabs will be greater than $5 billion if you look out into the future and a really tremendous capital return. So as you start to invest more tools into these fabs, over time, they're going to create a really nice cash generation machine that I'll talk about here in a minute. Now you think about $5 billion of device revenue, you also want to think about that as a backdrop of what this industry could be out in time. So if you look at the right-hand side of that chart, at a 40% EV penetration rate, this market could be looking at $18 billion to $20 billion even by the end of the decade. So clearly, what we've built here is a fit-to-function type of facility and footprint we have for our factories from a capacity perspective with a long avenue to continue to grow these out beyond -- out to the end of the decade into a market that's going to far surpass that as you look out in time. Now these factories that we're building, Mohawk Valley, for instance, is not just about bringing capacity online. These fabs are terrific cash generation vehicles. And this is -- this chart here is an actual example of our model of how Mohawk Valley will work. And you can see the progression there from a cash flow perspective. Over on the left-hand side, if you look at there, we're going to put net $1.5 billion into the factory. That's after the incentives we receive. You start to drive revenue out of the fab, the team talked about it earlier today, so driving the revenue out of the fab. And you get to kind of a breakeven point at 30% to 40% utilization. So cash breakeven at just 30% to 40% utilization. Then as we start to drive the fab up to full utilization, it can achieve $2 billion of revenue. But more importantly, it can generate greater than $1 billion, $1.2 billion per year of cash flow, so a tremendous cash generation vehicle. So once we put the investment in, we drive it up to utilization -- up to full utilization and we'll have an incredibly strong return over time. So we believe we have the blueprint, the blueprint for creating silicon carbide-based capacity. 200-millimeter substrates, we talked about it today, putting it into a highly automated fab and then driving revenue through those fabs at a great cost footprint and tremendous cash generation potential. Now how is that cadence going to work in terms of building out all of these facilities, and I'll talk about them in a little bit more detail here in a minute. So we're going to drive that revenue, as you see the shaded box in the back, up to over $4 billion. We announced last week that roughly $1 billion will be required in 2023 and then worth of $2 billion in 2024. And then we'll start to come back down that curve over time. And the reason for that is twofold. Number one is, if you look at the chart the bottom part of that chart is facilities-based, meaning those are fixed investments in facilities. So we'll start to build out these factories and start putting the facilities' kind of a fixed cost footprint into place. And then as we get revenue visibility, we'll start putting the tools in. We'll start driving those tools into the factories from a variable perspective to match the revenue capability and the opportunities that we see into the future. Now right now, what we see is as you look at that demand and that design-in curve, a lot of opportunity for a while. So we'll need that supply. So the plan has continued to tool those factories out as fast as possible. But we are going to have a fixed cost investment in facilities, and then we'll also see tooling out those facilities over time as we drive up to $4 billion of revenue by 2027. So what do you get for that? So overall, what we -- I've said it many times, it's 2:1 CapEx to revenue ratio. And what does that mean? That equates to roughly a $6.5 billion investment over the next 5 years -- 4 to 5 years. But what do you get for it? You're getting the largest and the top state-of-the-art automated 200-millimeter silicon carbide footprint in the world. And that footprint is here to serve the industry's top customers. So if you look at the pieces here, we're going to finish tooling out Mohawk Valley. That will have $2 billion of revenue capability. We're going to add another fab, which we hope to announce early next year. That will be larger than Mohawk Valley. And we'll have Siler City, a manufacturing capability for 200-millimeter substrates, wafer processing and epitaxy that will take us and fill all of these fabs with 200-millimeter automated capability. So a tremendous amount of investment, but also a lot of great returns off those investments as you think about the market opportunity and the cash flow generation that these facilities will generate over time. And that's what the -- essentially, the cash flow model shows. If you look at the left-hand side of that chart from an operating cash flow perspective. Over time, as we build out these facilities with this great operating cash flow capability, you'll start to see the operating cash flow pick up over time, getting to over $1.3 billion by 2027. And if you look at the right-hand side of the chart, as we make investments, we'll see a decrease in the free cash flow and start making that transition to free cash flow positive out in 2026 and 2027 as you really start to see the benefit of these large, automated facilities taking hold. Now how are we going to fund this? I've gotten a lot of questions on the side about how we're going to fund this. So maybe if you see the reaction, a few people were waiting for this chart. So look, there's 4 ways we're looking at doing this, okay? And I would consider this kind of the order in which we're approaching it, okay? First is government incentives. We've been very active in the U.S. and outside of the U.S. I think we feel very comfortable with what we've seen so far from a government perspective and the team has been very engaged there. There's some more work that needs to be done. I think we'll get a better view of exactly how this is going to work early next year, but I feel really great about where we are with government incentives. And I would say with the passing of the CHIPS Act and the ITC, that really puts us in a nice position as we start looking forward. Secondly, we're looking at customer funding. Customer capacity arrangements as we start seeing the steepening demand curve and working with customers on payments to help us. The third bucket there is either private or project financing. And I would think of this as kind of low dilution type of financing, whether it be secured or unsecured, that we can look at as well. And then lastly, public markets. And we've done this before, whether it be ATM equity or convertible offerings and those type of things. Now what I can say is that we're going to need to do a tranche of financing in the not-too-distant future. And the reason for that is our CapEx related to these new investments we're talking about today are going to start to pick up in the back half of this fiscal year. And we would like to get a lower dilution targeted type of financing completed in advance of some of those big step-ups in CapEx. Now we're in a good position today. We have $1.2 billion of cash on the balance sheet, but we will be thoughtful about how we bring this to market, but also dilution will be top of mind in terms of what we're targeting and when and how we approach this. Now from a bottom-line perspective. If you look at the chart, over time, we will expand gross margins, and the plan is essentially the same. We'll drive those margins. If you look at last year at Investor Day 2021 and you look at Investor Day here today, we'll still drive that long-term model to the low to mid-50s. The one change is that we have extremely high demand in the short term, not leaving us a lot of opportunity to make changes to our Durham footprint like changing the RF products from 100 to 150-millimeter. And we're going to take our 2026 and 2027 kind of revenue numbers up, and we're going to have to run the Durham factory longer to support that. And that's going to cause a bit of a drag as well, and I'll take you through that. But overall, the basic elements of our margin expansion remain the same. And you can see that here. So if you look at the left-hand side of the chart, we'll go from the 30% to 40% gross margin range. As you move over to 2024 and 2025, as we push more revenue through the 200-millimeter footprint that we're building, we'll start to see that margin expansion come up. And then as you move out to fiscal year 2027 and beyond, we'll see that higher margin, 50% to 54%, as we continue to expand the power device business through that 200-millimeter footprint. And what we have here is just a more detailed breakdown of the margins. So if you look on the left-hand side, the main elements of our margin expansion remain the same: drive continued improvement in Durham. You heard about that today; expand our 200-millimeter diameter change from 150 to 200-millimeter on power devices. You've heard about that this morning in terms of not just the science that the team talked about, but also the execution and the yields in the fab. And then the third piece is putting these through large, automated facilities in the fab and getting that scale and benefit out of a factory like a Mohawk Valley. Now on the flip side, we're going to see some drags, the RF diameter transition I talked about. We're also taking our 2024 revenue up. So they'll be -- in the short term, you'll see an impact of more mix coming out of Durham than we initially anticipated. So that will take us to about 45% gross margin in 2024. But as you look out over the long term, those same tenants still apply: continue to improve Durham, drive that margin diameter transition or that wafer diameter transition to create better margins and then eventually see benefits from the cost and scale benefit that you get out of these large factories. And you can see that here. I think I stole the chart out of Adam's deck and then kind of stuck it in here. I think what you see here is from a Durham fab perspective, we're making a lot of progress in the fab. We have a long way to go but we're making progress, but regardless. Normally, when you shift from a 150-millimeter to a 200-millimeter wafer, you get about a 40% cost advantage at the die level. In this case, because of the automation and the scale and the yields we'll see out of Mohawk Valley, we're looking at greater than a 50% cost reduction. The path is pretty clear. You just have to continue to work with these 200-millimeter wafers, drive them through these large, automated facilities, and we'll start to see the benefits down the line. Now from an OpEx perspective, if you look over the last several years, since a year ago in fiscal year 2021, we were roughly at 60% OpEx as a percent of revenue. We've driven that down over 20 points just in the last year -- last couple of years. And as you look out into the long-term model, those targets remain the same, low to mid-20s operating expense as a percent of revenue. But that's made up of a couple of different things. The first one is, we are going to continue to invest in R&D. These are heavy growth rates. We need to support our customers with new products, and we will continue to see the actual R&D spend increase over time. But our revenue growth will far exceed that, driving down OpEx as a percent of revenue. So I think that will be a positive for us. On the other side of that, as you look at SG&A, we're driving a digital transformation, we're improving our functions and creating scale in those functions. So over time, we'll be able to grow our revenue with just modest increases in our SG&A functions, particularly when you look at the G&A side. So I think we're creating not just a great footprint for what we want to do from a gross margin expansion perspective but also from an operating expense perspective to scale the company but also support our customers with higher R&D expenditures. So with that, that gets us to the target operating model. So if you look in 2024, we've taken the revenue up to $1.6 billion. The margins will expand to 45% gross margin, a little bit behind where we were when we talked last year just based on those couple of items that I discussed. We'll continue to invest in OpEx. But as you look out to 2027 and beyond, a strong growth rate up to $4 billion out in 2027, with north of 50% gross margin, that 50% to 54% range. And then OpEx at 20% to -- 23% to 25% kind of low to mid-20s in gross margins. But as you start to get to scale, you start to see adjusted EBITDA of roughly 45% in that timeframe will start to drive more cash flow through those large, automated facilities and creating that footprint as you look at over time. So with that, look, I started out with it. We're expanding in a lot of ways. We're seeing the market accelerate. We're seeing our device pipeline accelerate. We're seeing more design-ins more than we had anticipated previously. And we're going to invest to create growth and underpin those investment plans. With that, I'll end it here, but I'll maybe invite Gregg up to do some Q&A.

All right. Thanks a lot, everybody. So at this point, we're going to open it up for any Q&As you might have. I think we've got somebody right around -- there's a few Q&A. So we'll go ahead. And Tyler, why don't you just go ahead and...

Yes.

Yes. And if you don't mind waiting for the mic, we've got this being broadcast around.

Brian Lee, Goldman Sachs. I guess 2 questions on the outlook here. One, the fiscal '27 target of $4 billion in revenue, I think you had the slide with the design-ins and how that translated into revenue. So I know you have more design-ins coming, but it showed a fiscal '26 peak. And then you've got the $4 billion target which you're introducing for '27. So can you kind of bridge either what visibility or what you're embedding in the assumptions to get to the $4 billion just given the other slide that showed the [indiscernible] on that?

Yes. To kick it off, so first off, that's basically a traffic of all the wins that we have and how they're [indiscernible] over time. As you can imagine. [Technical Difficulty] we've got a pipeline of design-ins. There's opportunities that are out there. We have a conversion estimate [indiscernible] code we need to be.