8-K: Wolfspeed Reports Mixed Fiscal 2024 Results, Accelerates 200mm Fab Transition

Wolfspeed's fiscal fourth quarter results show a mixed performance with revenue slightly down, but the company is accelerating its transition to the 200mm Mohawk Valley fab and reducing capital expenditure.

Summary

• Wolfspeed reported its financial results for the fourth quarter and full fiscal year 2024.
• Consolidated revenue for the quarter was approximately $201 million, slightly down from $203 million in the same quarter last year.
• Full fiscal year revenue was approximately $807 million, up from $759 million in the previous year.
• The Mohawk Valley Fab contributed approximately $41 million in revenue during the quarter.
• The company experienced a GAAP gross margin of 1% for the quarter, compared to 29% last year, and a non-GAAP gross margin of 5%, compared to 31% last year.
• These margins were impacted by $24 million of underutilization costs in the quarter and $124 million for the full year.
• Wolfspeed is accelerating the shift of device fabrication to its 200mm Mohawk Valley Fab and assessing the timing of the closure of its 150mm Durham device fab.
• The company plans to reduce its fiscal 2025 net capital expenditure by $200 million.
• For the first quarter of fiscal 2025, Wolfspeed targets revenue between $185 million and $215 million, with a GAAP net loss between $226 million and $194 million.

Sentiment

Score: 4

Explanation: The sentiment is moderately negative due to the significant losses, low gross margins, and underutilization costs. However, the acceleration of the 200mm fab transition and cost-cutting measures provide some positive outlook.

Positives

• The Mohawk Valley Fab is ramping up faster than expected, reaching 25% utilization one quarter ahead of schedule.
• The company is taking proactive steps to reduce capital expenditure by $200 million in fiscal 2025.
• The 200mm device fab is producing solid results at significantly lower costs than the 150mm Durham fab.
• Wolfspeed has made progress at the JP facility, installing and activating initial furnaces.
• The company has accrued a significant amount of tax credits on its balance sheet.

Negatives

• The company experienced a decrease in quarterly revenue compared to the same quarter last year.
• GAAP and non-GAAP gross margins were significantly lower due to underutilization costs.
• The company is reporting a significant GAAP net loss for the quarter and full year.
• The company is targeting a significant GAAP net loss for the first quarter of fiscal 2025.
• The company incurred $24 million of underutilization costs in the fourth quarter of fiscal 2024.

Risks

• The company faces risks related to global economic and geopolitical conditions.
• There are risks associated with the company's expansion plans, including potential delays and cost overruns.
• The company's ability to obtain additional funding is a risk.
• There is a risk that the company may not meet its production commitments.
• The company faces risks related to fluctuations in customer demand and capacity.
• The company faces risks related to the ramp-up of production of new products.
• The company faces risks related to the concentration of its business among few customers.
• The company faces risks related to managing an increasingly complex supply chain.
• The company faces risks related to outbreaks of infectious diseases or similar public health events.

Future Outlook

For the first quarter of fiscal 2025, Wolfspeed targets revenue from continuing operations in a range of $185 million to $215 million, with a GAAP net loss targeted at $226 million to $194 million, and a non-GAAP net loss targeted at $138 million to $114 million.

Management Comments

• We have two priorities we are focused on: optimizing our capital structure for both the near term and long term and driving performance in our state-of-the-art, 200-millimeter fab, and this quarter was a step forward on both of these priorities, said Wolfspeed CEO, Gregg Lowe.
• Our 200mm device fab is currently producing solid results, which are at significantly lower costs than our Durham 150mm fab.
• This improved profitability gives us the confidence to accelerate the shift of our device fabrication to Mohawk Valley, while we assess the timing of the closure of our 150mm device fab in Durham.
• We are taking proactive steps to slow down the pace of our CapEx by approximately $200 million in fiscal 2025 and identify areas across our entire footprint to reduce operating costs.

Industry Context

The announcement reflects the ongoing industry trend of transitioning to larger wafer sizes (200mm) for improved efficiency and cost reduction in semiconductor manufacturing, particularly in the silicon carbide market. The focus on electric vehicle revenue also aligns with the growing demand for silicon carbide in EV applications.

Comparison to Industry Standards

• Wolfspeed's transition to 200mm wafers is in line with industry trends, with companies like STMicroelectronics and Infineon also investing in 200mm silicon carbide production.
• The reported gross margin is significantly lower than industry benchmarks, with companies like ON Semiconductor and Microchip Technology typically reporting gross margins above 50%.
• The underutilization costs are a significant factor impacting Wolfspeed's profitability, which is not uncommon during the ramp-up of new fabs, but the magnitude is concerning compared to other companies in the sector.
• The company's focus on EV revenue is consistent with the industry's growth in this sector, but the company's ability to capture market share remains to be seen.

Stakeholder Impact

• Shareholders will be concerned about the significant losses and low gross margins.
• Employees may be affected by the potential closure of the Durham fab.
• Customers may benefit from the increased production capacity and lower costs at the Mohawk Valley Fab.
• Suppliers may be impacted by the company's efforts to reduce costs.

Next Steps

• The company will continue to ramp up production at the Mohawk Valley Fab.
• The company will assess the timing of the closure of the 150mm Durham device fab.
• The company will continue to engage with the CHIPS office on potential capital grants.
• The company will host a conference call to review the results and outlook.

Key Dates

Keywords

silicon carbide, Mohawk Valley Fab, 200mm fab, electric vehicles, power devices, semiconductors, CapEx, gross margin, revenue, underutilization costs