Wolfspeed Inc at JPMorgan Global Technology, Media and Communications Conference Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Samik Chatterjee - JPMorgan Chase & Co, Research Division - Analyst : I did want to start with more of a background question. At your Investor Day last year, you outlined a $6 billion power device market by fiscal '24. That grows to about $11 billion by fiscal '27. And when we look back historically, it seems like the outlook does get raised as we sort of progressively make -- move forward. Just help us think about the drivers there. How much of that increase in the TAM has been more silicon carbide adoption versus electric vehicles in general sort of coming in better than expected? What's been sort of your experience of why that TAM has got raised over the last few years?

Question: Samik Chatterjee - JPMorgan Chase & Co, Research Division - Analyst : I guess where I was going with that is if we now sort of think about the likelihood that we see another increase in the TAM. We're seeing a confluence of different factors like EV forecast or something, for example, are coming down a bit. But we've also seen a lot more investment in silicon carbide from the entire ecosystem, you also have -- when we step out outside of automotive, we're seeing sort of your design wins showcase the opportunity beyond automotive as well. So as we think about the next driver of that increase in TAM, is it more likely to be the sort of less production airline REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 22, 2023 / 8:30PM, WOLF.N - Wolfspeed Inc at JPMorgan Global Technology, Media and Communications Conference and more driven by silicon carbide adoption across these markets rather than EV production itself. How do you think about that when you look at -- talk to your customers?

Question: Samik Chatterjee - JPMorgan Chase & Co, Research Division - Analyst : Okay. No, that's a good segue actually to one of things that I wanted to hit on next, which is historically, these automakers at least from the time I've looked at autos are very sticky to their incumbent Tier 1 suppliers. There's a natural inclination for them to stick to what they consider sort of the reliability of Tier 1s. When you think about your secret sauce for why you can position yourself in that ecosystem as a supplier, maybe talk us through sort of what the differentiation -- your differentiation in terms of go-to-market is with the automakers? And is it really 200 mm? Is that really the differentiation you're coming in? Or is there -- is it more broad than just sort of going to the next-generation technology?

Question: Samik Chatterjee - JPMorgan Chase & Co, Research Division - Analyst : And let me move to digging in into a bit of the design-ins and design wins that you've announced. I think the cumulative design-ins that we calculated was 18 billion. Can you get into more details around the design-ins in terms of like how much of that is autos versus non-autos? And how in terms of timing or maybe when in terms of timing to do those translate into design wins? And I have a follow-up. So let's go through that first.

Question: Samik Chatterjee - JPMorgan Chase & Co, Research Division - Analyst : Okay. I guess that maybe touches on somewhat the follow-up that I had is when I think about the conversion rate of design-ins to design wins, how is that tracking in automotive versus industrial? Can you give us some ballpark numbers in terms of how to quantify those? And is that based on your sort of last answer should we be assuming the conversion rate for autos picks up into next year? Is that sort of what you're implying?

Question: Samik Chatterjee - JPMorgan Chase & Co, Research Division - Analyst : Okay. Some of the OEMs you've announced the wins with or design-ins with, Mercedes, Jaguar, I think you said as well. What has been confusing to some investors is your competitors like ON Semi, ROHM. They've also disclosed some of the same OEMs, in some cases, a bit of an overlap. How do you see that sort of landscape? Is it that the OEM is going to work with 2 different sort of suppliers? Or is it more of like hedging your bet in terms of who might end up having the capacity eventually? How should we think about it?

Question: Samik Chatterjee - JPMorgan Chase & Co, Research Division - Analyst : Let me open it up and see if any questions in the audience. Any questions? Okay. Let me start taking a few that's come in over the system here. So the first one is 200 mm substrate seems to be critical to your success. Given the execution issues over the past -- last few quarters, push out at Mohawk Valley and slower and more methodical ramp of 200 mm supply, how can you assure investors that these are transitory issues and not a question of viability of scaling 200 mm?

Question: Samik Chatterjee - JPMorgan Chase & Co, Research Division - Analyst : Okay. The next one that's come in is, how will factory startup and underutilization charges be accounted for in your financials? Will those be adjusted out of OpEx going forward? Or will they move to COGS and be adjusted out of gross margin?

Question: Samik Chatterjee - JPMorgan Chase & Co, Research Division - Analyst : Okay. Next one, what level of utilization at Mohawk Valley can be supported by Durham today? How much of the 20% utilization target that you have for fiscal 4Q of '24 will be supported by Durham?

Question: Samik Chatterjee - JPMorgan Chase & Co, Research Division - Analyst : Okay. Another question is ZF announced a $30 billion contract with STMicro. How has this impacted Wolfspeed's market going forward?

Question: Samik Chatterjee - JPMorgan Chase & Co, Research Division - Analyst : Maybe just question on separate lines here where your largest competitor on the substrate side just announced intent to sort of explore strategic alternatives related to the silicon carbide business. How do you think about that impacting your business overall in terms of like are there -- is there more vertical integration for some of the device companies that becomes more of a headwind to your business in terms of market share for devices? Or would you even consider being a consolidated, although I understand some of the considerations on the balance sheet. But what are your thoughts, initial thoughts into that?

Question: Samik Chatterjee - JPMorgan Chase & Co, Research Division - Analyst : Okay. Interesting. Any questions in the room? Yes? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 22, 2023 / 8:30PM, WOLF.N - Wolfspeed Inc at JPMorgan Global Technology, Media and Communications Conference Unidentified Analyst Is there a relationship between voltage and the applications of silicon and graphics, I'm wondering. In other words, my -- I thought it was voltage-dependent as to when your product is engaged. And the LFP battery is below that voltage.

Question: Samik Chatterjee - JPMorgan Chase & Co, Research Division - Analyst : Let me move to one of the questions that's come in. What obligates customers to keep Wolfspeed as the primary source? If you have -- clearly, if you have capacity, they will default to you as the primary, but if the market outgrows, that is China substrate sourcing improves and they have options, would then -- why would they not comparatively bid?

Question: Samik Chatterjee - JPMorgan Chase & Co, Research Division - Analyst : Okay. I guess a follow-up on that front, and it's more near term. Just in terms of customers that were anticipating product from Mohawk in fiscal '24 where the ramp is now deleted. So how are you sort of making sure you deliver to those customers still in fiscal '24? And if you were in discussion phases with certain customers, how are they reacting in terms of like design-ins or design wins to, overall, the hiccups that you're seeing on the supply side?

Question: Samik Chatterjee - JPMorgan Chase & Co, Research Division - Analyst : Okay. Maybe just to close out then. Additional funding and how do you think about what's required. And if you sort of can parse that out between how much you're expecting from government subsidies or CHIPS Act versus how much do you sort of have to go to either partners like the BorgWarner announcement that you had. Or what are the other options you're evaluating on that front?

Question: Samik Chatterjee - JPMorgan Chase & Co, Research Division - Analyst : Okay. We are out of time, but thank you for coming to the conference. Thank you, everyone, for listening in. Thank you.