Wolfspeed (WOLF) Citi's 2024 Global TMT Conference summary

Operational progress and manufacturing transition

• Achieved significant improvements in Mohawk Valley fab yields and production quality, with utilization ahead of expectations and a 50% increase in output per crystal grower compared to initial forecasts.

• Announced the planned shutdown of the 150 mm Durham line, transitioning to 200 mm production, with a detailed plan to be shared at the next earnings call.

• All automotive powertrain parts qualified at Mohawk Valley, with nearly all passing on the first attempt, supporting a smooth transition from Durham.

• The new 200 mm platform delivers a 40% cost advantage at the die level, with further cost improvements expected as utilization and yields increase.

• The Mohawk Valley fab is expected to reach 25% utilization in the September quarter, one quarter ahead of plan, and 40% by mid-next year.

Financial strategy and funding outlook

• Actively engaged with the CHIPS office for grant funding, with negotiations down to a few remaining terms; funding is expected to be milestone-based.

• If CHIPS Act funding is delayed, alternative financing options include a $1.5 billion secured carve-out from the JP Siler City facility and leveraging existing lending agreements.

• Over $640 million in 48D tax credits are expected, potentially growing to $1 billion, with substantial inflows anticipated in 2026.

• Additional funding levers include government lending programs, tax credits, and potential capacity reservation deposits similar to the Renesas agreement.

• Minimum cash balance covenants in lending agreements will decline as Mohawk Valley utilization increases, with lenders remaining supportive.

Market outlook and competitive landscape

• EV market growth is slowing, especially in Western economies, but silicon carbide adoption remains strong, with new design-ins yet to enter production.

• Plug-in hybrids are emerging as a new opportunity for silicon carbide, expanding the addressable market.

• Industrial and energy markets are currently weak due to inventory corrections, but are expected to recover, with continued focus on fragmented industrial segments for higher margins.

• China has improved quality at 150 mm, but there is skepticism about their 200 mm capacity; the company is focused on maintaining its lead through operational improvements.

• Competitive pressure from China and other global players is acknowledged, but ongoing yield and cost improvements are seen as key to maintaining an advantage.