On Semiconductor Corp (ON) September 2026 Capital Markets Day Transcript

We would like to draw your attention to the screen for the Safe Harbor Statement and today's agenda.

Every foundational technology eventually reaches a physical limit.

We have reached it. AI, electrification, automotive, robotics. The future is arriving faster than the systems beneath it can support. The challenge is no longer just more power. It is better power. Faster, cooler, more efficient, more reliable, more dense. Because power density is not a device problem. it is a system problem. Electrical, thermal, mechanical, physical, all working together, all at once. That is why OnSemi matters. OnSemi has been building the capabilities required to solve power density ahead of the curve, from silicon carbide and GAN to sensing and across intelligence systems, from grid to core, from vehicle to robot, from factory floor to physical AI on semi turns complexities into capability in AI data centers power is not just a resource it is the limit to performance capacity and enabling intelligence on semi integrates power technologies across the system to reduce loss manage heat improve efficiencies and unlock more compute where it counts in automotive intelligence has to move through the entire architecture On Semi's intelligent power enables longer range, better efficiency, and improves safety and system value, designed together, not added later. In industrial, the cost of inefficiency compounds, miss the signal, and lose uptime, add complexity, and burn margin. On Semi integrates intelligent power and sensing with machine vision technologies across the system to help factories move faster, see more clearly, and operate more efficiently. The systems that win can sense, convert, deliver, protect, and optimize energy in real time. Power density is not solved by a single device. It requires electrical, thermal, mechanical, and physical challenges to be solved together. OnSemi turns those constraints into opportunity by combining these technologies at a system level, enabling efficiency, reliability, density, and scale. The next era will not be defined by compute alone. it will be defined by power density on semi is built to break the constraint without intelligence built into the system limits don't disappear they multiply higher losses slower scale more complexity less value but when power sensing and control are designed to work together the system becomes the advantage the future is not being limited by ambition it is being limited by the physical systems beneath it. The next era will be defined by companies that can transform energy into efficiency, signals into insight, and complexity into competitive advantage. That is where OnSemi is built to lead. OnSemi, built to break the constraint.

Ladies and gentlemen, please welcome on stage, President and CEO of OnSemi, Mr. Hassan El Khouri.

It is the era of AI, but just like any foundational technology, it's hitting already a physical limitation. Because foundational technology, it's not an invention. It's really not a product. It is a layer upon which all industries after it are going to be built. And the problem we have is we've reached that limit. The good thing, though, companies are using technology to break through that limit. You're going to see a new on-semi that is foundationally different in order to break through those limitations and through that breakthrough, create the opportunity that we will also be talking about today. Because it is not unexpected. Reaching this physical limitation has always happened throughout our civilization that the further you go with the capabilities of that layer, the faster those limitations start to occur. we've seen it all the way back to the first foundational technology as simple as what we consider now the steam engine it really didn't unlock that capability until we figured out how to do machining to make those cylinders the computing didn't really unlock the capability of that foundational technology till decades later with the transistor design. And today, with the era of AI, those technologies are compute, memory, and power. And those are the breakthroughs that we have to have in order to really unlock AI into the potential that it is meant to be. And we've seen those limitations. We've seen the first limitation with compute. We've lived through it and we've unlocked it with advancements in technology and capacity. And we've also seen it with memory. We're actually, I would argue, we're living through it with memory with advancements that are going to break through. But neither of these are at the physical layer where power sits. And that is the breakthrough that we have to unlock in order for the deployment to not just be contained to a building, but really proliferate into the foundational technology that AI is going to enable across all of our end markets. Because more power is really not enough. We need better power. and it we need different power than yesterday where loads were deterministic it was okay not to be efficient we had enough of it because the loads were not as intense but that challenge has changed where power is always at a max it's always on always at peak and it has to be perfect and it has to be distributed, not only centralized. And that is where we come in. We solve power. We solve the power of yesterday, and we are going to solve the power of tomorrow, which is the power density equation that we're gonna be talking about. Because as we look at what systems are requiring, All requirements are going in opposite directions, and they're not converging. Customers want higher voltage inputs, lower voltage outputs, smaller areas, cooler areas, and of course cost is always a challenge in order to bring deployment. And these requirements pull the solutions further apart, and it's getting worse it's getting harder we all know whether it's data center automotive going from 400 to 800 and above automotive already broken through the 800 into 900 volts the grid needs to upgrade and if any of you cover or invest in grid you know how quick that happens and that's going to be pushing that boundary and pulling those requirements for what a capable solution needs to cover and for that you need a different approach it is no longer an approach of just technology we have to change the solution that we provide and And because of that, we had to become a different company in order to deliver on that power density to unlock the value that the new era brings. But we've built that company on a strong foundation of technologies that we have had. And over the last six years, we have continued through investments, through capital deployment, and through accelerating what is possible into the company we've become today with a very broad set of capabilities that have delivered the OnSemi portfolio of power, sense, and control across all of our end markets. and we will continue expanding those capabilities and that portfolio with the connected compute as we've announced already because for every investments and every breakthrough we've had has been very deterministic ahead of an inflection point, whether it was automotive with electrification, the first wave of upgrades of energy infrastructure, all the way into the future of what we expect the physical AI to be, which is starting to happen today around us in industrial with robotics, and I would argue already in automotive with the autonomous vehicle and autonomous driving. And that capability and that company we have built is here to address a growing market across all of these secular growth from automotive to AI data center and industrial. and the AI overlay on top of it driving that growth and that content starting with the AI halo and industrial all the way to a over $200 billion market that we as a company are addressing with the innovative solutions that you'll hear about today. But more importantly, all of these markets, no matter what drivers are driving them from a content perspective, are converging on one clear outcome, which is more than half, is centered around power and is centered around better power. But to solve the power, it is not a new product. It is not a new technology. It is not a new system. It is a layering effect of a value stack that has to work across top to bottom to deliver on that power density with the efficiency that is required to scale. starting with the foundation of technology into a deployment of products that extract the capabilities of these technologies and together create these solutions that are going to solve these customer problems and deliver the systems with the value and scale that will solve those generational problems. And with that combination of technologies all the way up and down, systems impacting products, products defining systems, is how we will change the power system paradigm and take in those requirements that are pulling apart and creating very focused, specific platforms, technologies and products from devices to the intelligence required to the interface and the integration that is going to unlock the value of these technologies, products, solutions all the way to systems. And that's how we will make those requirements that are historically pulling apart, converge into a center solution where OnSemi plays and OnSemi creates and extracts that value. From high voltage to the intelligence with Treo, to EPP, Embedded Power Platform, which I will introduce today. Starting with high voltage, our broad portfolio covers all of the constraints, but also all of the solutions and the required technologies that customers look for. from an unconstrained with silicon power to optimizing for high voltage, optimizing for efficiency, and optimizing now for density. And we are the only company that is able to optimize across the complete high voltage stack and deliver sustainable and competitive solutions for our customers to solve the most complex power density problems and the latest high voltage introduction and breakthrough in a series of breakthrough in a high voltage is on the vertical GAN which we have been able to develop, sample, and manufacture and already put in the hands of customers on their boards to solve from automotive to industrial and AI data centers. And the intelligence comes from our Treo platform. Again, talking about platform as a foundation to any product that goes on top of it with the innovation that is required across voltages and across deployment with a modular architecture that allows us to very quickly introduce the solutions that are required across all of our end markets, across all of the applications, and the secular growth that we have seen. But on top of high voltage and the intelligence, we cannot forget the integration, because all of the benefit of technology is lost if we are not able to extract what that potential would be.

The next era of innovation will be defined by how efficiently we deliver power. Artificial intelligence, electrified transportation, industrial automation, and energy infrastructure are all demanding more power in less space. With greater efficiency and reliability, the real challenge is power density. Solving that challenge requires a new way to design the power system itself. The solution, Embedded Power Platform, or EPP. It is not a product. It is a platform to solve power density. EPP reimagines the package from passive housing into an active contributor to system performance. By using the silicon wafer itself as the package, it embeds and interconnects heterogeneous semiconductor products built on silicon. silicon carbide, and gallium nitride in a highly integrated wafer-level architecture. Multiple devices, FETs, drivers, and controllers can be embedded together for optimal electrical, thermal, and mechanical system performance. EPP enables complete power system co-design. Electrical, thermal, and mechanical properties can be evaluated, simulated, and optimized together from the beginning to accelerate system development, reduce late-stage changes, and unlock new levels of power density with a faster go-to-market. EPP represents the next revolutionary step in electronics integration and miniaturization. A new foundation for power systems, a new platform for power density, and another example of how OnSemi is redefining what is possible.

Redefining what is possible is what we've done. The ability to take high voltage, any technology, take the intelligence with Trejo and embed those products in a wafer, solving not only the density or the mechanical constraint, but at the same time being able to deliver on the thermal benefit that is otherwise going the opposite direction, pulling the density and the mechanical constraint apart. And we've delivered it. You'll see it in our demo showroom. Across all end markets we service. And that technology, and we know power and we know packaging because we're leaders in both. And I'm here to tell you, we've solved high power already. We've solved it with surface area. That's how we cool. Other technologies, state-of-the-art technologies, have tried to solve the density problem. And they failed with the thermal. EPP is the only platform today that not only obsoletes the best in class, but delivers on the promise of a true power density that does not use mechanical and thermal as trade-offs for electrical. And this is not some far away concept we have. We have been able to deliver within five days or less a customer platform that customers can take and simulate their power domain for their cooling and their thermal concepts. And then quickly using our standard 12-inch manufacturing, a sample, electrical, thermal, and mechanical, in this case, an inverter, across automotive, across AI data centers, and across the industrial markets. And puts us in a class of companies that is from technology all the way through delivery in a unique and competitive position where we are able to use the high voltage, the intelligence, all the way to the integration. to be uniquely positioned to deliver those solutions to the customer. Because as the requirements pull apart, we have been able to make them converge, not with a product, not with a one-off solution, but with a platform spreading across devices, intelligence, and integration with advanced packaging to solve those high-intensity power-density problems across all of our end markets.

Good afternoon. Good to see everyone here. I'm Achyut Shah, and I'm the president of OnSemi's Power Solutions Group. I've been at OnSemi just over four months now, and I'm very excited with the opportunity we have to continue to help AI scale. I've been part of this AI and data center market for over 10 years, first at Maxim Integrated and more recently at Marvell. And I've seen the tremendous value a company can create when the needs of the AI market converge with the capability that a company has developed. And that is exactly the opportunity we have today in front of us at OnSemi. Now, you all have seen multiple chip companies create value in compute, in connectivity, in memory, by solving the bottlenecks of AI to help it scale. But as we look forward, the bottleneck is no longer just in a single chip or a single technology or a single capability. The bottleneck moves to power, and more specifically, the entire power domain, from grid to site to core. The reason this becomes a challenge is the sheer amount of power required to scale the compute for AI. The processors grow from hundreds of watts to kilowatts. The amount of power in racks needs to go from tens of kilowatts to megawatts. And when you look at this increase in the power at the rack level and multiplied by the number of data centers that need to be built, you now see that there is hundreds of gigawatts of power that need to be developed. And the architecture of old simply cannot deliver that. It simply cannot scale. You need to upgrade the entire architecture for the power tree. And the fundamental challenge, as Goldman Sachs put it very well, is power density. How do you fit the power of 1,000 homes in one small cabinet? The enabling factor for the power architecture of the future is going to be power density. And the company that can enable this power density, enable this architecture of the future, is going to be the one to capture and generate tremendous value. Before we look at what this new architecture is and what opportunities it's going to create, let's take a step back. What is power density? What is the value of power density? This power density is fundamentally what's going to help redefine the economics of compute, the economics of AI. Power density is not just taking the amount of power you need and closing it into a smaller space. You also have to do that very efficiently. You also have to take into effect the cooling and the thermals behind that solution. So the space, the efficiency, the cooling, they're all different facets of the same power density challenge. And if you give your customers a highly power dense solution, a solution that solves this power density problem, they can use it in multiple ways to optimize their systems. They could use the same amount of power in less space. They get to build less data centers, solving a space problem. You can take the same amount of space and deliver a lot more power in that space. Now we have a lot more tokens per unit area, a lot more tokens per dollar, a lot more tokens per capex that you've generated. And all the while, you can run all of these solutions at a lower temperature. You can run them cooler. Now we are using less natural resources like water. So not only is power density important to improve the total cost of ownership for our customers, It also helps them use less natural resources like land and water. This is why this is the fundamental challenge, the foundational challenge that needs to be solved to enable the architecture of tomorrow. If you look at the architecture that we have today, where the processors, XPUs, GPUs are hundreds of watts going to a kilowatt, what we see is the power distribution and conversion is primarily AC, all the way from the grid to the site and all the way to the computer. Rack. Within the compute rack, you have a couple of conversions at lower voltage. And finally, at the core itself, the point of load, you have what we call lateral power, where power is sitting side by side in a larger area. But as the power in these processors grows, it doubles and then doubles again in the following generation, the architecture of old no longer scales. We now need to move to what we call the HVDC, the high voltage DC architecture, where DC is transmitted all the way from the grid to the site as close as possible to the compute. You have lower number of conversions directly from high voltage to the compute, and the compute power itself, the point of load, instead of sitting next to the GPUs and XPUs, now sits underneath it, again, creating a power density challenge. And the opportunity here is not just everything in this forward power tree, But you also have solutions like fault management, energy storage systems, uninterrupted power supplies, all of them sitting on this low-voltage AC system today that all need to be converted to high-voltage. Now, as you see the extent of the change that is needed, clearly all of this doesn't happen overnight. You can be doing this on a step function. It happens in a phase manner over time, and different customers will deploy this at different points of time over the next few years. So if you look at what the major steps are going to be in this transformation, you start looking at the rack of today. You have AC coming into the compute rack, a PSU at the top, a few tens of kilowatts, using low voltage semiconductors like silicon. The first step, as these racks need to now go to 30, 40 kilowatt racks, is the PSU itself starts using high voltage semiconductors like silicon carbide, increasing the HV content as it can make these AC to next power level conversion a lot more efficiently. The next big change we see is when high-voltage DC, 800 volts now, 1,500 volts at some point in the future, comes directly to the power rack. And two things happen here. The distribution of power in the compute rack as the bus bar goes from 54 volts to 800 volts because as the level of energy goes up, as the level of power goes up, a low-voltage bus bar will need so much copper and you will lose so much in energy and heat, it's not feasible anymore. So first, you've got to upgrade the bus bar to a higher voltage. And with a bus bar at high voltage, the power on the compute trays itself right next to the processor is now high voltage. And the first conversion step on the compute tray goes from low voltage to a high-voltage conversion step. This is what we call as a sidecar architecture that's going to be deployed in the next 12 to 18 months. Now, looking at another couple of years, the entire distribution from the grid to the site to the rack goes from AC to high voltage DC. And so now we essentially have a one line of high voltage with new content like solid state transformers going all the way from the grid to the rack with less number of conversions down to the core. And if we take all of this new content that needs to be created at the core and all the high-voltage distribution and conversion, and you think about normalizing at the rack level, the amount of content growth it drives for OnSemi goes from about $15,000 a rack to over $115K, about an 8x increase in content, and this is what's going to drive the revenue growth at OnSemi at a fundamental level. And when you look at this growth that's created, it actually helps growth in two different end markets. for us. Everything that's inside the building of the data center, or even when hyperscalers put ESS technologies or SSDs right at the site of the data center, we consider all of that to be part of our AI data center segment of revenue. And as AI continues to scale, this will see tremendous growth over the next few years. But when the utility sites and the power grids also upgrade their infrastructure to go to solid state and use high voltage ESS, that part drives the growth in the industrial part of our business. So we essentially see an AI halo that also helps further drive the growth and increase the growth potential in the industrial portion of our business. Now, when you look at this new architecture end-to-end, there are two things that become very clear. The first, look at the amount of high-voltage content there is across this entire grid-to-site-to-core. You have power conversion, power distribution, power storage, UPS, high voltage content all the way to the core with the intelligence and the control that goes with it. Now, this high voltage technology is exactly what we've developed, is exactly where we are leaders in, in the automotive and industrial space. So it's the same technology base, it's the same research R&D, it's the same platform that we've developed that has made us a leader in industrial and automotive that is now coming into the world of AI that will help make us the leader there too. This is exactly what I meant when I said that the needs of the AI market are moving to our playing field. The other part that you see here is it's one end-to-end connected systems. There's less conversions. It's not AC going to DC going to AC. It's all one high-voltage system directly going to the compute rack and to the core. This is why our customers talk about this as one end-to-end interconnected system that needs extreme co-design because any issue, any fault, any transient at one end of the system, you can see how it would directly translate and move to the other end of the system uniformly. So only companies that have the capabilities to serve every single piece of this power tree can help our customers design these end-to-end systems. And when you look at it, for all the capabilities required, all the technologies required, all the investment required for intelligence, for control, for high voltage, multiple high voltage technologies, low voltage technologies, core and control, How many companies actually have the scale and the capability to be able to invest and to be able to design leading at solutions across this entire power tree? If you look on the low voltage side, on the core side, this is where you have the most number of competitors. Now there's 10, 15 competitors with press releases out there talking about having a core solution. But when you talk to our customers, there's probably five or six that actually have the technology, the engineering ability, and the scale to be able to deliver these solutions to them in the manner that they require. Now, when you build onto that, what's needed in the middle part of this power tree, the high voltage requirements of silicon carbide, of GAN, you can see that the competitor list shrinks considerably. Now there's just a handful, three or four competitors that have the ability and the scale to be able to deliver these solutions. When you now look at the grid side with further high voltage and energy storage solutions, and now you need fault management all the way across from the core all the way to the grid using technologies like silicon carbide JFETs, you're really left with just two companies, OnSemi and one more, that have the capability to participate across this entire power tree from grid to core. This breadth of technology is no longer a nice-to-have. This is a must-have to participate and compete in this market. And at OnSemi, we are not just in this to participate. We are in this to actually win at every single point in this power architecture. And the way you do that, the way you win, is you have the breadth of technologies, you have the best-in-class technologies at every point in the breadth, But then you also deliver breakthrough innovations for our customers to solve the fundamental challenges they have to enable AI to scale, the fundamental challenge of power density. And Hassan shared with you a couple of these innovations that we have made, high-voltage GAN, vertical GAN, and EPP. Vertical GAN has the unique characteristics of high-voltage as well as high-frequency switching with very high efficiency. And EPP, it's not a product, it's a platform that applies for a solution at every single point in this power architecture, helping improve the power density that our customers want. And I'm going to walk you through a few examples of where we are working very closely and I've already delivered some of these solutions in the hands of our customer. Let's first start with the high voltage conversion, the 800 volt or 6 volt or 12 volt conversion right at the rack, in the compute rack. Using our unique VGAN technologies and using the magnetics expertise we have, we've created our own system that provides 20% better efficiency, 20% lower size than the nearest competitors that we have. And if you think of providing 20% lower size in the compute rack, in the most precious real estate in the data center, you're essentially allowing more compute per rack. and a lot lower cost per token or a lot more tokens that our customers can deliver per hour from that investment that they've already made. Another place that we help using our unique technology is on the circuit breaker side because as you look at this entire high-voltage system, fault protection and safety becomes an absolute requirement going forward. So the mechanical systems and circuit breakers of yesterday no longer scale. you now need to move this fundamental solution into a solid-state technology with the introduction of a solid-state circuit breaker. But you don't just have one circuit breaker in the system. You have multiple solid-state circuit breakers at multiple points in the system, which uses precious real estate, which is why power density, again, is the fundamental problem to solve, the fundamental challenge to solve, to enable this new high-voltage DC architecture. And so what OnCME has done using our leading silicon carbide JFETs and embedding them in this EPP platform, we have come out with a solution that for the same functionality is 50% smaller than our nearest competitor. Now, when you make a solution that small, the logical question to ask is, yeah, but what happens about the thermals? How hot is that thing going to run? So not only have we solved the space problem using the unique characteristics of EPP, we have also made the solution which is 50% smaller, we made it run 20% cooler. Now, if you have a solution that's 50% smaller and 20% cooler, and that's not a breakthrough, I don't know what is. The combination of both of these capabilities, we fundamentally deliver significantly better total cost of ownership for our end customers. The last example that I would like to walk through is the V-Core. Now, this is a place that we came a little later to the market, but we have solutions that have caught up, and we have a best-in-class power density solution that our customers are using today on the lateral V-Core side. But as you look forward, where we are investing going forward, is taking the EPP technology and using it to provide the best-in-class height of the next generation V-Core solution as it goes into vertical power. So you take the SPS, embed it within the EPP solution, and now within the same X, Y dimensions that the customers want, we now have a much thinner solution than our competitors, and the cooling runs a lot better. You have a lot better airflow across the XPUs, the GPUs, and the TPUs, providing significant benefit to our customers. And vCode is not something that we will only win in the future with the EPP-based vertical power solution. In fact, I'm very happy to announce that we won a major V-Core socket this year with revenue starting at the end of 2026 already in this market. So when you look at the fundamental shift from low-voltage to high-voltage architecture, the fundamental problem that needs to be solved with power density and this breadth of technology capability with innovation breakthroughs that OnSemi has delivered to help solve the power density problem, Our goal is to deliver better TCO to the customers, and that will fundamentally drive higher revenue and higher margin for OnSemi going forward. The question is, how high is this revenue growth going to be? When we look at the growth estimates that the analysts put out, some of you are here, it varies across from a 20% range to an 80% range. We have a wide variation of what this is. But one thing we are very confident in is the technology that we've talked about, the technological breakthroughs that we are providing today, are going to enable us to significantly outgrow the market. And you're already seeing this in the near term. In 2026, we're going to more than double the AI data center part of our business. And we have visibility into 2027, where this business is going to double again. So our expectation is for the long term, through 2030, we are going to grow at least 10% above the market. We are going to take market share and grow at least 10% above whatever market estimate is out there. So if you take an example, if you create a baseline to say the market is going to grow somewhere in the middle, say at 40%, then we will grow our revenue on the AIDC segment at at least 50%. And what that means is from a $500 million base in 26, we will deliver over $2.5 billion of revenue just in 2030. AI has scaling of AI, where power has become a fundamental problem, has turned this entire power architecture, the high-voltage architecture, into an end-to-end connected system. It takes a breadth of capabilities and leading-edge capabilities to play in this. And as you've seen, the price and the market continues to grow, and the size of the competitive field continues to shrink. And we are focused on delivering revenue and margin and value to our shareholders by solving the toughest challenges in this AI market. Thank you.

On to the markets that I know you really came to hear about, automotive and industrial. I'm Sudhir Gopal Swami, and I'm going to spend about 20 minutes talking about our strategy to grow in automotive and industrial, which together represent the core of our business. And I'll start with automotive. There, we've been very public about our intent to grow at high single digits above SAR. And I'm happy to say that, in fact, we've done just that. We've grown by 9% in an environment where SAR has been flat between 2019 and 2026. And the way that we've done that is by executing the recipe that Hassan outlined at the start of the presentation. Recognize the megatrend, build a value stack of capability, and deliver products that generate business growth. And, of course, the two megatrends that have driven the automotive space, no pun intended, have been the evolution of electrification and electrified vehicles and the evolution of autonomy and autonomous vehicles. In each of these areas, we have actually built these value stacks that have fueled our growth. And the center of those stacks have been silicon carbide and CMOS image sensing, respectively, for electrification and for autonomous. But around that center, we've built an array of ICs that contribute to our growth. And our plan going forward is essentially to do the same thing, to outgrow SAR by 9%. We forecast that between 26 and 2030, SAR will continue to be flat, while we'll grow our automotive revenue at about 9% a year. And so two things are different about the next phase of our plan relative to where we've come from. The first is that we benefit from a third megatrend. So electrification and autonomous will continue to provide tailwinds for us. In electrification, there'll be a continued penetration of EVs across fleets. So going from 25% of all vehicles today to about 40% of all vehicles by 2030. And in autonomous, there's an evolution to the levels of autonomy from L2 today to L2+, which yields a lot of benefits and creates a lot of value to semiconductor companies and to L3 and L4. But in addition to these two megatrends, we benefit from a third one. And that's the transition to software-defined vehicles that are executed based on a zonal systems architecture. So that third megatrend is a difference going forward. The other big difference is our strategy going forward is not just to outgrow the SAR, we will do that, but also shift to value. And so I'll describe an array of products that deliver more value to our customers, and we intend to share that value that we create with our customers. Now, we'll walk through step by step how we're going to grow this business, starting with electrification. And here, the focus of our product portfolio is intelligent power. And there's a three-phase or element strategy to grow here. and they're consistent with the layers of the value stack. So at the foundation, we're going to continue to extend the leadership that we have in silicon carbide technology. At the next level up, we're going to introduce and proliferate a broad array of products based on the trail platform that create more value at the system level. And then at the upper layer, at that system layer, we're going to bring EPP into electrified vehicles in the form of traction inverters. Let me talk about each of those starting with silicon carbide. So over the past several years we have grown or increased the performance of our silicon carbide technology by about 20 to 25 percent a generation and this has unleashed tremendous system level value. Now going forward we intend to do the same increase by 25 percent or even more by generation and we're going to announce in about two months the next generation which has device structure changes that is going to deliver that type of performance improvement and so when you deliver this performance improvement in silicon carbide essentially what you're doing is you're reducing power losses whether they are conductive losses or switching losses. And when you reduce those power losses, you have kind of a twofer in terms of benefits that you create. One, you improve efficiency, so you get more useful or usable power out. The second, and one that's becoming increasingly important, is that you get more power density. So now customers can benefit from these efficiency and power density gains in multiple ways. You guys already understand that efficiency can translate into either extended range or reduce system costs because the thermal solution becomes much more efficient and you need less battery. So you avail of those options as a customer. Now, power density is an interesting one. So if you think about power density, you're either packing more power into a given area or volume, and when you do that, you're able to deliver, for example, more horsepower. Or you can pack the same amount of power into a smaller volume and when you do that, you're getting the benefits of actually reducing system cost. So you again have a layer of benefit that as a customer you can choose from with these performance increases in silicon carbide. Now in addition to these performance gains, we're also extending the voltage of our silicon carbide devices And the intent here is to enable a better experience with respect to charging, faster charging times. Doing that requires that we actually scale our voltage over time up to 1,400 volts. And when we do that, we address solutions with 1,000-volt batteries. Now, we're already beginning to do this, and some of the leadership that we have created for ourselves in the China market is tied to their movement to higher-voltage batteries, where they're already at 900-volt batteries. This will continue over time in China, and it will scale across the world. The foundation is silicon carbide. All of these innovations raise the bar and distance us from the rest of the field. The next level up is then to introduce a wide variety of ICs. And these ICs, as I said, are based on the Treo platform, and they range in complexity, but all of them solve very specific system problems. SO WE HAVE POWER PROTECTION DEVICES AND LOW DROPOUT VOLTAGE REGULATOR DEVICES THAT SCALE ACROSS THE POWER TREE AND HELP OUR CUSTOMERS IMPLEMENT THOSE FULL POWER TREE SOLUTIONS. AND THE POWER TREE STARTS AT THE SOURCE WHICH IS EITHER THE HIGH VOLTAGE EV BATTERY OR A 12 VOLT GOING TO 48 VOLT LOWER VOLTAGE BATTERY AND IT CULMINATES IN THE NODES OR THE DEVICES THAT ULTIMATELY CONSUME THE POWER. We're also introducing intelligent current controllers for traction, and I'll talk more about that in a minute, and then LED drivers that are actually responsible for delivering power to the LED lights that are increasingly adopted in systems. And then finally, that same vCore capability, the controllers coupled with the smart power stages that Achith was talking about in data center, also applies to power the brain, the central computer in vehicles. so a range of products let's talk a little bit more specifically about one of those which is the intelligent current controller so for that let's just get a little context if you look inside attraction inverter and remember its job in life is relatively straightforward take power from a battery and deliver it to a motor at the core of that at the center of that you need high voltage FETs like the type Hassan described and today the most prevalent one is silicon carbide so silicon carbide again benefiting from those sequential performance improvements is the essence of a traction inverter and it's coupled with a gate driver and as the name implies that gate driver just drives the silicon carbide and you switch it as fast as you possibly can and that's how you generate power in addition there are a number of other system components and you see some of them outlined here this is the industry standard inverter now what we're doing is introducing new capabilities in the silicon carbide FET we call that sense FET capability and new capabilities in our new class of product in the gate driver family which we call the intelligent sick current controller and the simplified view of what these things do is they work very tightly together to deliver superior performance the idea is simple, that if I can sense the FET, current and other characteristics that determine reliability, like, for example, temperature, and I can respond very quickly, then I can actually drive that FET to a higher performance than I would otherwise be able to do. And when we do this together, we will deliver a one-generation improvement in performance, in essence, for free. So take any silicon carbide generation and you get a one generation performance boost and you already know how OEMs will be able to utilize that. And also because we're integrating some of the components on the BOM, we're able to reduce the system costs for our customers. And so this is something that we are sampling this month and we've already pre-engaged with a variety of different customers on the solution that combines these two elements. and customers are genuinely excited about this. Silicon Carbide Foundation, these ICs that create value like the Silicon Carbide Intelligent Current Controller and then at the highest level, it's bringing EPP to traction inverters. And so you see here an idea of the size of EPP for traction inverters, but it's probably a little bit more helpful for me to show you. so this is something called a power box it's the essence of the traction inverter and inside it you can see these three modules and those three modules carry the silicon carbide FETS and it's coupled with this cooling solution here and again this is essentially what a traction inverter is you couple with electronics something called the DC link capacitor and you have a traction inverter so this is the existing state-of-the-art we're delivering solutions at this level of complexity and now this is the same capability but now leveraging EPP so with EPP you get a dramatic increase in volume so 2x what we're talking about here and at the same time because it's smaller and because of the innovation that we're creating you get a 2x increase in power so 2x increase in power in half the area gives you 4x the power density. And when you get a 4x in power density, it obviously delivers you the benefits that I described a moment ago, but I think much more importantly, it creates design flexibility. So Inoue-san at Subaru in this video explained that that's a value proposition. By reducing area, you're reducing the consumption of a very precious commodity space in vehicles and you also can do very creative things so now I can consider putting this traction inverter in for example each of the four wheels of my car and when I do that I can deliver call it a megawatt of power in each of those four wheels so for high performance vehicles this is a breakthrough that's an example of one of the things you do design flexibility Another thing is the same module, the same system, power system, by simply populating or depopulating parts, allows you to scale as an OEM from the lower end of your fleet in terms of power all the way up to the high end of your fleet. Single platform, low end to high end. That means you spend less R&D resources to test these things, and you spend less in manufacturing because you have a single platform. This is another extreme value add for OEM customers. And in addition, because it's smaller, you get all of the benefits associated with efficiency. So this is a real breakthrough, and customers like Subaru and other high-performance vehicle manufacturers are truly excited about getting started with EPP. Okay? So that's the growth plan for power. Let's transition now to sensing. In sensing, there are, again, three elements of the plan. The first one is to take advantage of the natural evolution that is going to drive more sensor content. And the second is that we're going to improve that sensor technology fundamentally and increase or create value by doing that. And then finally, we're going to tackle some of the biggest problems in perception by extending vision. So let's start with the sensor portfolio that we have. You guys are very familiar with our CMOS image sensing. We're leaders from a technology perspective in that space. You may be less familiar with the fact that we are number one in ultrasonic sensing, and ultrasonic sensors are used primarily in park assist today to help you park the car. And as well, number one in inductive sensing, and inductive sensing is used to measure the position. For example, the position of a steering wheel or the accelerator and brake pedal, which you do in X-by-wire or drive-by-wire type of applications. So you're replacing mechanical components with electrical ones, improving reliability by using these type of inductive position sensors. So that's the broad portfolio that we have today. And as I said, there's a natural increase in content that's just happening as autonomy scales. If you think about that in the context of cameras, I think it's readily apparent that as you scale from L2 to L4, you need more. And we size that at about a factor of three. And even in ultrasonic and inductive sensing, we're going to see a proliferation. But here, the proliferation is going to be driven by more use cases. So one example for ultrasonic is that you can combine it with image sensing to actually clean lenses. And you'll see a demo of that downstairs. There's many demos you'll see that really bring to life all of the benefits that I'm talking about. And so new applications will drive more ultrasonic content. And similarly, as you have more X-by-wire applications, so will you have more inductive sensors. As I said, not just that, but we're actually improving the performance and the capability of these sensors. In image sensors, one of the big deals right now is to drive higher levels of system integration. And the biggest opportunity to do that is to take the CERTES that connects it to other ECUs, like, for example, the ADAS system or the IVI system that exists in cars, and integrate that into the sensor ASIC. So we're doing that, and that presents BOM savings and system cost savings for our customers. Meanwhile, in ultrasonic and inductive sensing, the focus is on improving precision. precision so in fact in each of these cases we are improving precision or accuracy by a factor of 20 so in ultrasonic what this means is now you can detect position of obstacles within one centimeter and you can see how that improves the safety of for example the parking experience inductive sensing gets that same 20x improvement in resolving the position and the control of the things that I'm trying to control so steering wheel or brake pedal and accelerator belt all of those translate into improved vehicle safety so all these sort of raise the bar on sensing and then finally we're going to try to tackle some of the most pernicious problems in perception so if you look at all of the technologies that comprise the perception stack today vision is really good at resolution but it suffers from bad weather conditions radar is really good at measuring velocity and does well in bad weather conditions but very difficult for radar to resolve where something is and what that something is and lidar has some benefit but also suffers in poor weather conditions and also has an exorbitantly high system cost so how do you improve perception in light of these challenges well one solution is just throw more at the problem throw more sensors in one sense that's good but we don't think that's the most effective approach. Instead, ours is to extend vision. And what we're trying to do is take advantage of that core capability that we have in sensing technology, in image sensing technology, and augment it to solve perception problems. One example is using indirect time of flight through which you measure the phase shift when you project light and it's reflected back and when you do that you can identify depth of objects and in doing that better understand whether those objects impede progress while you are driving the vehicle and we're working with customers on building that capability right now and potentially even more exciting is to take our shortwave IR technology which today finds applications in industrial and military or aerospace defense and security type of applications and bring that into vehicles. Now, we're in the advanced technology stage here, but when that works, what we'll be able to do is see through inclement weather conditions like fog and rain. And so in aggregate, all of this essentially extends vision and creates what we call superhuman vision, addressing those fundamental perception problems that exist in the industry today. So power and sensing, and then now moving to the third growth driver for us and for the industry overall, which is the evolution to software-defined vehicles based on a zonal systems architecture. So the industry is aligned on the first two pictures shown up above. The move from this domain-controller-based architecture with a hodgepodge of controllers and a wide array of connectivity technologies, kind of spaghetti through the vehicle, to a zonal architecture where you have an Ethernet backbone, and that backbone now extends into the zones using a technology called 10Base T1S, or single-pair Ethernet. So you have Ethernet end-to-end, and you have the electronics aggregated into clusters for zones. So you have a zonal controller for, for example, the top the front left the front right and then similarly for the back so the industry is moving to this and our participation is to provide the 10 base T1s technology that exists in the zones now what we're doing is changing the game by introducing a capability called remote control protocol and that's reflected in the image on the right and when we do that what we're doing is simplifying the entire network you see in the first step there's still a complexity with respect to software but with remote control protocol what we're doing is enabling that brain that central computer to talk directly to the node remotely control that node and when you do that you eliminate layers of software complexity and also layers of MCU that exist through that network makes the network very simple to deploy and software to find vehicles more easy to realize. And as we do that, we participate today, as I said, with the 10Base T1S, which today manifests as MAC-5 products, and we couple those in the cases where we have the node sensor or actuator, like, for example, ultrasonic sensing or an LED actuator. So our content is the combination of those two discrete products. Now, as we move to RCP, what you'll see here is we're subsuming MCU and software functionality so our solution becomes richer and saves the OEM in complexity and in cost, and in doing that, we double the opportunity that we have per vehicle. And then as we move forward, our intent is actually to create these intelligent node SOCs leveraging that trail platform. So combining the node actuator or sensor with the RCP software and Tempase T1S, and when you do that you create even more value 3x of what we could get today with simply the MacFi and the node device. So you can see how this contributes to growth. Now if we bring all of these together we create an opportunity that scales up to $2,000 per vehicle across all of these. Electrification, ADAS and now zonal systems architecture, up to $2,000 of on semi-content per vehicle. And this is great in and of itself, but also every innovation that we take advantage of in automotive, silicon carbide, zonal architecture, the various sensing technologies, not only drives growth in automotive, but extends our potential to grow into the inductive area. You see, each of these technologies doesn't just apply to automotive. It also finds application in industrial. You see that today with silicon carbide in energy infrastructure or image sensing in cameras. Those are apparent. But just like that, Tenbase T1S and ultrasonic and inductive sensors make their way into industrial applications. And collectively, they lead us to the era of physical AI. You see, all the innovations that we talked about fit within the pillars of physical AI that Hassan talked about. He described power, sense, and control, and everything that we've talked about fits within each of those pillars, and they pave the way for the era of physical AI. And that era has already begun. If you look at the array of systems that sense, decide, act, and adapt, it's already pretty broad it ranges from robot vacuums that you might have in your phones to cobots and autonomous mobile robots and drones and all the way up to autonomous vehicles which are the prototypical example of physical AI and we don't count that in the numbers that's captured in automotive but it is an example of physical AI and so you see here these systems are can be organized in terms of the level of autonomy they have and the level of power that they consume and so the performance that they can deliver. And for us, the opportunity increases as you go up in autonomy and to the right in terms of more power and performance. And all of these systems, they don't just sit still. Those systems are evolving as well. For example, the warehouse AMRs that exist today are getting legs and through that creating more value. or factory arms are getting grippers, dextrous hands that allow them more precision in a factory environment. And even autonomous cars are getting smarter in the ability to reason. So as these systems evolve on this path to humanoids that everybody's super excited about, they create opportunities for content and growth for on-setting. Ultimately, as we get to humanoids by 2030, that becomes a factor as well and it contributes. But in aggregate, the physical AI, again, excluding automotive, represents a $6 billion TAM for us by 2030. And similarly, the content that we can offer in humanoids, building on the capability that we have in automotive, looks very simple. Here we can scale to about $900 of content in the various subsystems of the humanoid. So let's bring it all together. In automotive, we're going to grow by 9% a year by creating the system play with EPP, by proliferating content in sensors and expanding through that growth, and by creating a new growth engine with zonal architecture. Industrial, we're going to leverage automotive into industrial applications. And then, as I just talked about, we're going to create a new growth in this AI halo, the industrial side that benefits from the proliferation of AI and is well evolved to physical AI. So those things in aggregate will allow us to grow by 10% in the industrial market. So the core of the business expands at 9% and 10% respectively. Thank you. As we do that, we're going to, obviously in the products that I talked about, we're going to expand the value that we create. When we do that, we share it with our customers, and as a result, our margins expand.

Great to see everyone. Thanks for joining us today. For those of you that maybe I don't know, I'm Thad Trent, CFO. Again, thanks for joining. We're going to wrap this up. The guys have done a great job of talking about the megatrends in the markets that we're focused on and the capabilities. So I'm going to take you through what this means for our financial model and how we create value for our shareholders as we deliver on these promises. Now, I'm going to spend a few minutes kind of taking you behind the scenes, showing you what we've been working on for the last five or six years that maybe you haven't seen from the outside. And I think I'll get you some context of how we're set up for growth in this next leg of the company. So the first thing we have to do is we have to calibrate on what's happened, right? So if you go back 10, 12 years ago, company, highly volatile, unpredictable, did well in good markets, not so well in poor markets. So through the cycle, you can see the gross margin and the operating margins at that time. We haven't been standing still. Again, we've gone through an up market, we've gone through a down market, and we're coming out of it, as you all know. We haven't been standing still. We've been investing heavily during this time. We've been making changes, structural changes of the company to set us up for this next leg of growth. And we're starting to see the early signs of this now. So what you can see here on this chart is that the gross margins are higher in this cycle and the operating margins are higher than what they've been historically. So big structural improvements. We've been working on our fab right. I'll show you more on that. Investing in differentiated products. We've also exited $900 million of non-core business, and the exits are now done and behind us. So we're completely done as of Q2. We are driving the operating leverage. And again, I'll show you more of this, but we're seeing the signs already. As we're seeing the revenue growth utilization coming up, we're seeing the leverage in our model start to fall through. And so we're seeing a much more resilient model. So we've had this step function, and now we're ready for the next step function, given the resilience that we've built into our model of what we've been doing. And if you take that and you look at cash flow, the cash flow margin is significantly different. And this is really a transition of moving from a manufacturing company into a product company. We've made big investments that we're now ready to leverage. And again, you'll see a step function improvement in our free cash flow as well. We've been making brownfield investments as well. So I would say in a CapEx light environment that we've been driving. So I think this sets us up for good growth. Now, the other thing that you haven't had great clarity on the outside is the investments. So we made $8.7 billion of investments over the last five years. And I'm going to walk you through where those investments were. So the first thing is R&D. So $3.6 billion of R&D. The guys have talked about the capabilities. Treo, low, medium, and high voltage. The EPP that we're introducing today. Our sensing platform. Siddhar talked about that one. and then we've been investing in our core portfolio as well. So if you follow the money on the ribbon, you can see that we're leveraging these investments across all of our end markets. So I think this is another advantage of our model, that we can create products and actually deploy them into multiple end markets as these markets mature. The other thing that we've been doing is some M&As. So we've done five tuck-in M&As, $800 million. You can see them there, various markets there. Follow the money. you can see what we've been investing in. These are all in production or ramping very quickly. We've talked a lot about vertical GAN. Hassan talked about the plans for vertical GAN there. And then CapEx, $4.3 billion of CapEx. We brought on our 300-millimeter fab with EFK. We've tuned that cost structure up now. We've invested in our franchise in silicon carbide. We've been investing in vertical GAN. We have a fab in Syracuse now. and then we're in maintenance mode on a lot of this. So you can see where the markets go there as well. So if you take that and you roll it all out, you can see we've been investing ahead of the curve, right? We're going to where the puck is going. We're skating to where the puck is going, right? So we've seen these megatrends. We're investing in advance, and now it's time for us to monetize those investments. So as a result of these, we see a significant TAM expansion. So you can see $20 billion in auto, $16 billion in industrial, and the big one, AI data center, $45 billion TAM expansion there as well. So we've invested $8.7 billion for an $81 billion TAM expansion. Focused on the right markets, seeing them ahead of time, having the right products. That's critical for where we're going. So how do you monetize that now? You have to have the customers. So if you look at our customer base, we're engaged with all the winners. We're enabling them. We're working strategically with those customers. We create those products, then we deploy them broadly. We have 9,000 customers around the globe. We have a large distribution network. We're solving very complex problems with our customers. The engagements are very strategic. The guys talked about a lot of it. You heard from some of our customers and how they're engaging with us. They're not buying products. They're buying solutions and systems from us. We also don't have customer concentration. No 10% customer, and our top 20 customers are 35% of revenue. So broad network, we've been investing in the mass market through distribution as well. That's paying off. We've talked about that in our earnings call, that we're starting to see growth in that market as well. So if I take the markets now, the guys did a good job of explaining it, and I start talking about, okay, let's sum it all up for the company. So our other market, this is where we play opportunistically. We don't make big investments here, but when we make an investment, if we can leverage in this market at favorable margins, we'll play there all day long. So we expect that margin or that growth over this 26 to 2030 timeframe to be at about a 1% growth. And by the way, this 26 number, everything I'm going to show you is based on street consensus. It's not our estimates. It's actually your estimates. So we're using your numbers as a baseline. On the AI data center, I should have talked about this, 50% plus. 5x revenue growth when it comes to AI data center. If the market grows at the high end of that range, we're going to outgrow that by 10%. So if there's upside there, you'll see upside to this number as well. On the industrial side, we're going to grow at 10%. About 40% of our industrial revenue is broad-based, kind of traditional. We expect it's going to grow about GDP plus. That's historically what it's done for us. The other 60% is secular, and it will be growing at double digits. So in there is also the AI halo. We've got other markets there that we're playing. You've got physical AI that Sadir talked about that will start to kick in as well. So we think there's about a 10% growth when it comes to industrial. Automotive, we're going to outgrow SAR. We've got $2,000 of content per car. If SAR, we're assuming a flat SAR during this time frame. If SAR actually grows, you will see this number grow as well. So there's upside to that number as well if the market grows faster than what we're projecting here. So when you sum that all up, you get to about a 12% to 14% growth rate for the company. This is higher than what we've been historically. Like I said, there's upside to that as well. If you do the math on that, again, using the 2026 consensus numbers, you get to just under $11 billion of revenue in 2030. So, how do we scale? How do we support this growth? If you go back to what we've been working on over these last few years, and again, behind the scenes a little bit more, we talked about where we started this in 2019. We started with FabLighter. We had a bunch of subscale fabs. They were really from a bunch of acquisitions that hadn't been integrated well. and so we've exited and divested five fabs one back end that we've announced as well and so what we're doing now and where we sit today is we actually have a really clean network that's working well together so we went through fab right we're continuing to take cost out but now we've got a network that we can actually scale effectively so again brought in the 300 millimeter fab cost advantage to that you can see Syracuse that's for a vertical GAN and we've got external so we're still projecting that we'll be manufacturing about 65% externally even in this model as we go forward so the key point here is it's right sized and it's built to scale we're ready so and it's not a big capital investment here so there won't be additional brownfield investment during this time horizon we can do this at about a 5% capital intensity that's That's where we've been running the last few years, what we've been talking about. So we can actually expand within this footprint and scale the business to that $11 billion number without having to add significant investment in capacity. Also, if you look at the current footprint versus the previous footprint, and you go back over time, look at them both fully utilized. You kind of put them apples to apples. The current cost structure is 17% lower than it was historically. So that shows the fab right initiatives that we're driving and we're continuing to drive are taking cost out So it's not just about reducing the number of fabs. It's actually tuning up those fabs to be more efficient and to take cost out So we've got more to do there So how does that impact margin? So first it's scalable. It's efficient. It's lower cost. So when you go to margin You'll see here our targets remains 53 percent. That's what we've had for a while here We're not raising that target, but if you listen to everything that Achyut, Sadir, and Hassan talked about, those are all products that are favorable to this target. The 53% is a milestone. It's not a destination. So we're going to hit the 53, and then we'll talk about going higher at some point in the future. So if you walk through the pieces, you've got utilization, 650 basis points. This is just the absorption cost that we have. so as we ramp continue to ramp our utilization that will improve we've taken our utilization up significantly this year exited last year at 68% we're roughly around 83% in Q2 exiting Q2 so you've already seen us taking it up given what we're seeing in the market on the fab right 225 basis points now it's a little bit different than what we've talked about in the past it's a little higher but this also now includes the divestitures that we did previously the four divestitures. And what we're doing now is we're actually going to move some of that production to the outside to keep capacity for the high-value products that the team is talking about internally. So we'll maximize the margin out of that. So we'll get about 225 basis points off of that. Now, 50 of that is already in the bag. We've announced the two divestitures. It's now just a matter of time that we'll start to recognize over the next 18 to 24 months as we execute on that. And then the last piece is the mix and ramping of new products. So these are the products that are favorable to margin. There's also a mix. If you think about the change in what I was telling you on the end markets, there's favorable mix change on that one. And this is the result of us keeping that capacity for that high margin product in there. So that's how you're going to get to 53%. So we'll do the math here. So structural changes, innovation, execution is putting us in a good spot talked about the 12 to 14 percent revenue growth if you take that 53 percent gross margin the profit gross profit dollars are going to grow by 22 percent and the operating margin is going to grow by 30 percent so operating margin is going to grow 2x operating income is going to grow 2x revenue so this is the the leverage in our model as we ramp you'll see more dollars falling through the bottom line so if you take that to cash flow you look at what we've been doing on cash flow. We've been creating strong free cash flow. Right now, street consensus is about $1.6 billion in free cash flow for 2026, 25%. If you look at 2025, our free cash flow margin was 24%. That was in a down market. So that's clearly coming through that the company is structurally different and these actions that we have taken are actually coming through. If you look at the investments that we made, we made our big investments in the capacity that I talked about earlier. So during this 23 and 24 timeframe, we invested about $2.2 billion just in capacity. Bring it on East Fishkill, silicon carbide, all the all the capacity is there for all of this ramp that we've talked about. And that's why we're comfortable with that 5% capital intensity going forward. So if you model it out, we're looking at free cash flow more than doubling by 2030. more than three and a half billion dollars and the free cash flow margin is going to go up our targets going to 30 to 35 percent it was previously 25 to 30 so again I think again the leverage in the model if you look at what we've done between 23 and 26 we put back 4.2 billion dollars of shares while investing that's 92% of free cash flow and we've reduced our share count by 12 percent during that time so the natural question is what are you going to do with that cash so let's talk about what we're going to do we're going to continue to do what we've done we're going to invest in our business differentiated products higher ramp higher growth we'll continue to invest there we'll continue to do m&a to bring in capabilities of the company faster time to market if it exists if we can do it quicker externally than internally we'll we're happy to do that. So we're going to continue to invest in our business. So you saw that on the slide that I showed you earlier. Next piece is balance sheet flexibility. We're in a great spot here on the flexibility. We've got plenty of liquidity. We're going to continue to keep that as well. And then after all that, we'll continue to return cash to shareholders. So the plan is 100% free cash flow back to shareholders, net of everything else. We've got $5.3 billion left on our existing authorization so moving to the financial model summing it all up what I want to call out to your attention is the 25 and 26 numbers and again the 26 number here is street consensus but if you just compare 25 and 26 this is where you can see the leverage in our model already taking place as the market is starting to recover so you could see gross margins going up you see operating margins going up and you see our free free cash flow improving as well so if look at the 2030 model, we've hit on most of this, but we're looking at 12 to 14%. Previous model was 10 to 12, so we're taking that up, primarily driven by the AI data center growth that we didn't see a few years ago. Gross margin, milestone, 53%. We'll talk about more later once we hit the 53. Operating expenses, we've been investing through the downturn. You can see where we've been, 18, 19%. Model is 15%. Now, it's slightly higher than what it was previously because we're investing heavily, but still an from where we are today you get to an operating margin of 38% and our capex as I said earlier 5% we can scale this business to 11 billion dollars by only investing 5% of revenue during this time frame and then free cash flow goes 30 to 35 previously was 25 to 30 so it's a big improvement in the model we think it's it's compelling there and this is standalone on simi has nothing to do with synaptics so if you're curious about what we're going to do with the synaptics when we close that next year we think by next year we're we'll close but this is the standalone synaptics plan as it sits today as we project today so looking at greater than 15% growth this is higher than weather streak currently has synaptics we're looking at margins higher than 55% so accretive to our model this is differentiated products you know So premium products, we're sure we can improve those margins as well, and that gets you to an operating margin greater than 30%. Now, there's $200 million of synergies in this number over the first 18 months, gets us to accretion, and by the way, that includes stock-based compensation because we report that in our non-GAAP numbers. If you exclude the stock-based compensation, it's accretive coming out of the chute, but we account for stock-based comp and non-GAAP. We believe over the long term, there's actually more synergies here on the manufacturing side. So we believe there's some opportunities for us to pull some of their products into our manufacturing footprint and actually improve these margins and improve the operating margin. So I believe there's actually, over the long term, I think there's some upside to the operating margin here as well. But this is standalone. So just going back to the on-semi standalone so you can see it again. This is without synaptics. You guys can do the math on the combined company. but we do believe Synaptics is accretive to the overall margin or model. So as we think about wrapping up here, so coming back to the foundation, step function improvement. If you map the model, we're now positioned for another step function improvement in the financial model there as well. So we're going to accelerate the growth. We're going to continue to work on cost and manufacturing cost. We're going to continue on our FabRite initiatives. There's leverage. And the key point here is that the targeted operating margin is higher than the historical or the legacy gross margins. So I think this clearly shows this company is a different company in position for growth, earnings growth, revenue growth, and free cash flow growth. So as we wrap up, you guys did a great job talking about the markets. the megatrends in each one of these, the AI data center, automotive and industrial. We talk about differentiated capabilities. We have unmatched breadth, advanced platforms. We've been investing in the right products. We have a compelling financial model. And when I think you put it all together, you've got expanding markets, you've got differentiated capabilities, and you combine that with the discipline that this leadership team has exercised and proven over the last five or six years, you'll get durable and profitable growth. Thank you. All right, so we'll open it up to questions. We have a lot of people here, so I'd appreciate it if you could keep your question to one question. And we've got some mic runners here, so just raise your hand, and we'll get through all the questions.

Go ahead. Thank you so much, Vivek Arir from Bank of America Securities. Thanks for an informative analyst day. Maybe if I could turn that into a clarification and a question, Thad, if that's okay with you. So the gross margin progression from 40 to 53, is that just kind of a linear progression, or did you see kind of, you know, different steps along the way? The question really is on the data center business, because I think, Achyut, you mentioned a doubling into next year, right? of 500 million right getting to like a billion billion plus but then if we take your 2500 plus by the end of the decade that suggests that growth slows down a lot just at the time when 800 volt is supposed to take up a lot so is that conservatism is is it like how do we kind of square this um you know deceleration and growth with when the market trend is just about to take off thank you yes let Let me take the first question on the gross margin.

So the gross margin, look, in the short term, the biggest driver of gross margin is utilization. So that's going to be market-driven. The next biggest piece is really that mix and layering in these other products. We'll continue to execute on our fab right. I already mentioned that 50 basis points is in the bag. So think about that next 18 to 24 months. Is that playing out? But as we look here today, I think it's really going to be market-dependent. So I would sit here thinking modeling, very linear. right if the market takes off faster we should hit it faster you know I think you know I talked about if SAR grows that's going to be a tailwind to us if AI data center grows faster than what we've modeled here today that'll be a tailwind to us so there could be some step functions in there right now I for modeling purposes based on what you think the market is going to do you can make that call but I would think about a pretty linear progression you've already seen over the last couple quarters we've had some nice step functions so if the market continues to take off at this rate, we could see improvement to that. So it could be better than linear.

And the number you mentioned, I mean, that's just a function of exactly what the estimates are that are by the analysts. If you look at it, everybody's more confident in near-term growth, and then people are not sure exactly how fast it's going to be in the outer years based on how quickly the data centers are going to be built, how many data centers can be built. So regardless of what the market grows, we are very confident in growing at least 10% over the market. Now, if you look at the last couple of years, the actual growth has actually been more than what the analysts were predicting a couple of years ago also, right? So I think as you get closer to that, and I think as the estimates get more and more confident, if those numbers keep going up, we would definitely grow faster than that. So the numbers we have are just purely a reflection of what the four-year analyst estimates are today. That's what we're modeling it off, saying we'll grow higher than the market. But if history repeats itself, that growth is going to be a lot higher, and we'll continue to grow with that.

But like you said, a lot of the high voltage is going to drive the growth. we're expecting about there's a penetration rate right the 800 volts not gonna go flip the switch and it's gonna be a hundred percent so there's that progression along with the timing so if if we as we get closer we see the higher than the 40 baseline that we picked that we're gonna grow 10 above that we've proven it over the last few years we'll continue to do that but it's really the length of that time horizon. But the content is there.

Thad and Hassan. Hassan, I like your shoes there. Just a quick question for Hassan. I think as you look at the data center side, with the 15,000 going to 115,000, are you assuming a 145 kilowatt rack going to a megawatt? And can you talk to what's the mix of silicon carbon and GAN at that 145 kilowatt rack, which is a one megawatt? Obviously that helps you capitalize on some of your capabilities there.

Yeah, so a couple of things. One is, yeah, you can think about it going from about 100, 120, you know, in that range going to the megawatt. Of course, there's different hyperscalers, different capacity within the rack, but that's about the range you can think about to go from the 15 to the 100 and 15K. From a voltage perspective, we're not looking at it as here's how much vertical GAN, here's how much silicon carbide, or here's how much silicon. The whole progression of our high-voltage capabilities that I've shown in my slide is really what we are targeting. If the customer's optimizing for area, then vertical GAN is how you're going to achieve that density. If the customer's optimizing for just the efficiency because they have the area for whatever reason, then we have silicon carbide already. That's what we're shipping today. The flexibility and the breadth of the portfolio in high voltage combined with intelligence and EPP is going to give us the optimized solution. We're going to meet the customer where they need us to meet them. So we don't have to pick, is the beauty of it, because we have that breadth. And the breadth comes that differentiation, and we are going to meet the customer at any point of the optimization. We do that in automotive. Sudhir highlighted it very well. If you want more horsepower, pack more into that area. If you want to save money, just shrink the area. That flexibility and putting it in the customer's hands is a competitive advantage that we're going to leverage.

You have one here? Okay.

Hi, Quinn Bolton from Needham. Thanks for the informative presentation. I wanted to follow up on the 800-volt data center opportunity. There's been some market chatter that 800-volt may be pushing out to the right. So can you give us your sense, when do you expect to start to see sort of the first sidecar racks beginning to ship in high volume, and what are you assuming for the true 800-volt data centers you know, driven by solid-state transformers, when does that start to come into the model?

Yeah. So from the first part of your question on the 800-volt racks with the sci-cut architecture, we expect that to start ramping in the next 12 to 18 months, sometime towards the end of next year. Yes, there are, you know, there's always a concern when it comes to a new market transition, but there are solutions also for that, that we are working very closely with our customers on. So we expect that to start towards the end of next year, getting to the 12 to 18-month range. For the second part of your question on the solid state transformers, that might take maybe another 12 months after that, so I would say sometime in the end of 28, early 29 is when we would start the first wave of the mechanicals going to solid state, essentially.

Thank you. Chris Casso from Wolf Research. The question is on the Synaptics acquisition, and I know you've discussed it, but it, aside from the financial targets, wasn't the subject of a lot of discussion today. to give you opportunity to talk a little more about why the 1 plus 1 is more than 2 in that acquisition and how that may affect the rest of An's business going forward by having synaptics inside the portfolio.

Yeah, well, first, you're not going to hear a lot about it because we haven't closed the deal. After announcing the deal, we're two separate companies. So I can highlight what we've said about the markets in general. Every product that you've seen here connects to a connected compute platform that is at the center, whether it's physical AI and robotics, AMR, and so on. So you see that leverage of Y1 plus 1 with our portfolio, we're able to deliver that value to customers. That's an inflection point that is forward-looking. So we do see that as expanding in the future. But today, you know, Sadir talked about it, robotics, for example, are happening already. So the opportunity is here today. On top of that, the go-to-market that Thad talked about with the breadth and the channel, that will also continue to expand. But one thing I do want to highlight and I want to correct a word you used, it's not one or the other. What you've seen here today is a very strong core that we've built for Ansemi, which actually allowed us to expand our TAM into a connected compute that is built upon a very solid core that is already delivering value based on the financials that we've delivered over the last five and six years, also moving forward as a core business that we had. Because without a solid core, you can't solve a core problem with M&A. We have a solid core. We are coming at it from a very strong position of power, no pun intended, but both technology and financial performance. And adding to that expanded TAM is where Synaptics comes in once we close the deal. So it's not one or the other. It doesn't do anything to what you've seen here today. it accelerates the financial model and it builds upon a technology and a capability that we can offer our customers as a combined company.

Thank you very much for hosting Chris Rolland, Susquehanna. I guess first a clarification and then my question. Just that, did you contemplate pricing and pricing increases in the gross margin model or is that additive? And then for my question uh it's it's really around ai uh it was a a pretty remarkable tam number the 47b um the it's perhaps twice sometimes three times as large as some tams that competitors have given the two biggest components in there are v core uh and ibc um congrats on your first V-Core win or your vertical or lateral power win. Can you talk about addressing this from here, whether you have the technology to both go vertical and then eventually IVRs to address that? That'd be great. Thank you.

Yeah, so, Chris, on the margin side, sorry, I lost the question. No, so the pricing. pricing pricing yeah I was thinking pricing in terms of margin so yeah so you know in the last couple calls you know we've talked about and we've been very clear we're raising pricing right we're raising pricing with our customers we're in our second round that is to offset the input costs that are already hitting us today right so that will be a tailwind of margins over the short term so I think you'll see that improvement layering in up in the next several quarters right that's something that is sustainable and gets us to that 53 percent faster but we've got the headwind of the input costs hitting the margin line already without the benefit of the pricing.

And to answer your question on the largest part of the market in VECOR and HVIPC, I mean, the simple answer is yes. We have all these technologies. We have the lateral power. We have the vertical power, as you're showing, we're already enabling that with our partners today. And even IVR, we have the technology ready for it. We have all the combination of capabilities for it. It just depends upon when our customers want to go deploy that into their systems and what makes sense for them. But being ready for all three generations of technologies For lateral and VPD and IVR, we absolutely have all the technologies ready to help our customers go implement that as soon as they're ready with it.

And you can check out some of the implementation because, you know, the two millimeter, the one that I showed in his slide, we have it downstairs on boards. And you can see, and I will tell you, there is no solution today in the market that has been able to achieve a two millimeter Z height. I guarantee you that. It's downstairs. It's on a board. and it's sampling with working with customers. So you can see we have the technology, we have the capabilities. IVR is basically putting that technology, you know, at some point in the layer, depending on the hyperscaler or the XPU, but that's the timing with the customer that we will work on. But this is back again to investing ahead of the inflection points as we see them to mature the technology so we are able to push that through with customers.

Joe Moore from Morgan Stanley. I was really interested in a lot of the platform approaches that you guys talk about with Treo and EPP. And I know there's a progression of you've already moved from discreet to modules and things like that. But how pervasive is the customer interest in those kinds of platforms versus buying, you know, more discrete modules? And just is that a selling effort from your part? Is it something customers kind of naturally pull?

Sure. So let me let me clarify. So obviously the approach, there are two reasons you would approach a technology with a platform. One is scale, our scale. You know, like you saw with Treo, for example, we introduced a platform, which is a BCD 65 nanometer BCD, as a platform that allows us to proliferate very, very fast across all markets and all applications with a very well-managed OPEX, which back to Thad's financial gives us that leverage. So we're able to scale using a platform much faster than you'd need OPEX. That's the same thing that we do with our customers. So it's not one or the other. I showed the value stack pyramid where we have the technology as the foundation, then you have products, solutions, all the way to systems. It's not one or the other. It's, again, the flexibility. Having the platforms gives us the flexibility to meet the customers where the customers need us to be. If the customers got the expertise to solve those system level or those solutions, then we will happily provide them differentiated technology based on the platforms like Treo. If the customer is creating a more complex system and they actually ask for, like a module, say, Ansemi, you do the module, you figured out the thermal and the mechanical, then we are able to deliver a solution or a system level. You know, the two power boxes that Sudhir highlighted, we're able to ship either the three modules that are sitting on top of it, or in this case, we're able to ship the whole thing with the metal jacket. Again, it's not one or the other. That flexibility that we're able to meet the customer where they need us to be is a competitive advantage, but we can only do that by developing platforms rather than point products. Otherwise, you can't scale. So it's no different than our sales force and our engagement with the customer at the same levels, just a different product, system product or semiconductor product.

Hi, guys. Gary Mobley at Stonex. Thanks for hosting this event. It seems like you might have an emerging first-class problem when it comes to capital allocation. The Synaptics acquisition is an all-equity acquisition, and you're signaling that your free cash flow is going to accelerate, maybe generating $3, $4 billion in free cash flow by 2030. So, you know, and I would assume that you're going to slow your pace of acquisitions as you're trying to integrate Synaptic. So if that's the case, and if you can confirm that, what are you going to do to return cash to shareholders or manage that first-class cash generation problem?

Yeah, you're right. It's a good problem to have. Look, our capital allocation policy doesn't change, right? It's invest in the business. organic, inorganic. We've already achieved the balance sheet flexibility. After that, it is returning the free cash flow to shareholders. 100% free cash flow is planning to go back to shareholders absent, you know, and after the other investments. So, nice problem to have.

Thanks, guys. John Venn from Gabin Capital Markets. A couple of follow-up questions. First, on EBP, how quickly do you see that platform scaling and what sort of incremental investments do you really need to bring that to market? And then just a follow-up question on the data center business. You talked about there's only one other competitor out there that has an end-to-end solution that can compete with you. Can you just talk about what your differentiation against kind of that other competitor is?

Sure. So I'll cover EPP. So from an EPP perspective, what I had in my, and you'll see it again in the demo room downstairs, there is no incremental investment. We actually do it with our standard 12-inch process in East Fishkill. The kind of the technology platform, the differentiation, and the patent protection that we put on it gives us a pretty good competitive advantage as far as how to do it. But we've been doing it. We're sampling all out of our East Fishkill Fab with no additional capex outside of what Thad talked about within the baseline of the 5%. And I put that under the maintenance category because we already have it. That's point number one. Point number two, as far as introduction, we're already sampling in all three markets. You will see an example of every one of these markets downstairs. So just for everybody here, we have it in the VPD, or for the AI data center, where we have an EPP-based vertical power delivery that goes on top or below, or lateral or under the XPU. Back to the prior question of are we ready for it, the answer is yes, we have it both next to and under. An industrial solid-state circuit breaker that is both in the industrial and AI data center or AI halo, including inside and outside, we have those already sampling with our JFET embedded into a silicon. And then actually this small power box is 100% EPP and 100% internal. So that gives you an idea. The scale is ready. The tooling is ready. The technology is ready. And customers are evaluating all the way through automotive. Now, of course, the revenue is going to layer based on the design cycles for the respective markets. But you can just layer those out respectively with AI data center industrial followed by automotive. So we're very excited about it because it is based on a silicon 12-inch process that we already have.

The second part of your question, when you look at how do we differentiate ourselves, I mean, fundamentally, the entire focus on the investments we're making is to provide differentiated technologies so that we can drive the value from a margin perspective with our customers and share in the value that we create. And the three core technologies that we have developed here that Sudhir and I both talked about, one is EPP, right? I mean, it solves the thermomechanical problem that you have as the electrical content scales for to solve the power density problem. So EPP is something that today is unique, is unique technology we've developed, a breakthrough technology that Onsemi has developed to differentiate ourselves from our competitors. The second one is Treo. I mean, this is the most intelligent control platform that you have along with, you know, FETs up to 90 volts. Nobody else has a combination of 65 nanometer BCD technology and embedded sort of 90 volt FETs together that can solve a lot of problems in, again, all of these end markets from AI to industrial to automotive. And then the last piece, again, is the vegan piece. You know, unique, probably the best technology for high frequency, high efficiency, and high voltage, all three together. And I think this is what we've invested in for the last two, three, four years. We have a significant lead on our competitors here. So when you put, you know, a fundamental power technology, when you look at the intelligent control and the BCD technology and then the system integration technology on EPP, I mean, that's a very unique set of differentiation to have versus any competitor in the market today.

Next question.

Hi. Yeah, thanks for this presentation. Kevin Cassidy from Rosenblatt Securities. My question is around VGAN. How scalable is the manufacturing that you have? And also, what's the barrier to entry from competitors when it comes to vertical GAN?

Yeah, so scalability, I don't think that's a good problem to have. But we already have the manufacturing site. We already have the fab. So it is not something that is being developed on a bench exercise or a side fab. we have a dedicated vertical GAN fab that is only running vertical GAN in Syracuse. This is where we have been producing and sampling the qualified technologies that we've delivered. So that's point number one. I'm not worried about it. It will be, it's not a, when we get to capacity expansion needs, we will do it as a brownfield within that 5%. So there is no new fab or a greenfield investment that is needed. So we feel pretty comfortable about the scalability of the existing foot print that we have. As far as defensibility, a couple of things. One, nobody's been able to figure it out yet, and we know the companies that have tried, because it's the same companies that have been saying how it can't be done. Well, we've done it, and you'll see it downstairs, and we've sampled customers, so I would argue otherwise. Number two is the patent portfolio that we have on the technology and the device on the vertical GAN, which is the GAN on GAN. It gives us that moat that we can protect that investment. And three is time. A lot of these technologies, once you're designed in, you're not going to get a redo because they're complex, they're thermal, they're electrical, they're mechanical. This is not a component or a die that we are shipping. So the barrier of entry is going to continue to increase as we continue to develop on technologies. We're in our second generation vertical GAN, so I would say we're probably half a decade ahead from the closest competitor because nobody's yet come out with a sampling strategy on anything close to it. So we feel pretty good about it.

We feel good about the barrier of entry, and we feel good about the roadmap in conjunction with, for example, trail that adds that intelligence to just the device hey guys matt prisco with cantor thanks for taking the question i guess on the data center side how often are you guys working with customers across um the entire power chain from from grid to core versus specific stage how does that how does the embedded power platform potentially change that dynamic and is there any way to quantify the benefit that on can offer with greater collaboration and providing more of a complete solution across that chain to customers. Thanks.

So, you know, we work closely with all of our major customers. Some customers want to work with it directly. Some customers want to farm out some pieces of that to some of their partners that we work with very closely also. But we have a close working relationship with all the major players, hyperscalers or processor players in this AI data center market. And each of them, like Hassan said, they want to take this value that we provide in a slightly different direction based on what constraints they want to solve, what their investment thesis is, what their CapEx thesis is. But from a customer relationship perspective and a customer engagement perspective, we are deeply embedded with all of these customers. Sorry, the second part of the question.

It changes the behavior that we have with the customer. To give you an example, just the solid, say, circuit breaker that I showed, instead of giving three of these discrete components, we're giving them EPP to put on their board as an example. So it doesn't change the aspect. It changed the product definition, if you will, where EPP as a platform becomes the product once you embed the electronics in it. And cutting 50% and 20% cooler changes their dynamic from a cooling perspective, and they get that benefit. So it doesn't change it. It just makes it more competitive and more defensible, because unless somebody can shrink those three packages, which I know it's not possible because we make those packages also by 50% or cool it 20%, you have a sustainable competitive advantage that is not electrical. It's thermal and mechanical. And that's the four differentiation that I talked about. The ability to solve all four gives you a non-typical semiconductor competitive advantage, but more of a system competitive advantage, but that the customer benefits from as well.

Hi, Mark Lopatsis, Evercore ISI. Thank you very much for the presentations. Thad, I thought the context that you provided about how the transformation has manifested in the business models was really interesting. It reminded me, you know, 10 years ago, we thought about, you know, commodity products coming out of ON. And as you have improved the business model and you shoot for the next leg of improvement on the business model, You know, I was also struck by the comments from the customer clips talking about, you know, integration partner. How should we think as you execute the next level transition, the business model improvement, to what extent is that from just coming up with higher quality, discreet products versus, you know, of providing your customers with solutions and platforms like EPP. If you could help us understand, how should we think about OnSemi going forward on those dimensions?

Yeah, I think if you summarize of what do all of this, all of the innovation that we talked about, whether it is the platform innovation that you're referring to, or how we go about giving it to customer. Because it is not, again, one or the other. We're still given solutions, which is a chipset, if you will, to use non-power. You have the trail or drivers, and you have silicon carbide. We can put them in EPP or we can give it separate. They still provide that value when given together. That cross-selling, that value creation that gives the customer the flexibility to leverage that value the way they can monetize it is the competitive advantage we're going after. And you're going to see that in margin expansion via mix. So as we get more and more of the mix of our revenue into those high-value, and I want to call it high-value products, because I want to remind everybody, yes, we introduced EPP. Yes, we introduced Vertical GAN. They are complementary to a very broad portfolio that we already are ramping like Trejo, like a lot of the core technologies that we have and together are going to create that value at a system level for the customer no matter by which the means that we deliver it. Either components that work very well together, better than any competitor, or as an embedded power platform in the case of EPP. And that is the competitive advantage I want to highlight. the breadth of the portfolio and how we deliver it is a competitive advantage all by itself. And you're going to see that in margin expansion and growth through scale.

Yeah, Mark, I would add that if you look at the chart that I had on the R&D investments, there was a significant investment in the core platform as well. So as Hassan said, we're still investing there. That mix shift, as we shift more into the higher value, into more of those solutions and systems, that will obviously help with the margin. but we have been making investments there. I want to be really clear, we're not exiting that business, right? As I said, the exits are behind us. So it's building on our core competency. Yeah, go ahead, Tom.

Tom O'Malley with Barclays. Thank you guys for doing the event. So outside of data center, auto is your biggest TAM expander, and you showed three ribbons kind of going into auto. So you had electrification, ADAS, and then the zonal side. So you've seen the beginnings of the electrification cycle start, and can we talk about barriers of entry on the zonal side and also on the ADAS side. There's obviously been a lot of questions around, you know, moats in China. Can you talk about those other two ribbons? Are the moats deeper there? And where does the geo exposure look like with those two others? Thank you.

Yeah, for sensing technology, it's a very few set of competitors that actually have sensing technology of any type, let alone the variety that we have. So it's actually the technology itself. I mean, And image sensors are among the most complex technologies that exist in semiconductor space and there are different vectors of complexity. But image sensor, to get an image and infer what that image is, is a very complex task. So it's the fundamental technology and then you extend across the breadth of technologies. So it takes a long time to develop the product. It takes a long time then to get the design when associated with it and to establish credibility that you can solve perception problems with these sensing technologies. That's the biggest barrier to entry. In zonal, it's an entirely different phenomenon. It's a very new market and relatively emerging in terms of the solutions there. I think the focus is being first to provide a winning solution and getting that level of traction in that space. So that's the first element. So what we're able to do, and we didn't elaborate on our solution, but we have this hybrid hardware-software type of solution in the existing zonal products that we offer, the Tembase T1S products. And what that allows us to do is to respond quickly to changes in requirements, and change is actually ever-present as the standards emerge. So we're able to create value that way, which gives us the time to market. From that point, providing value above standards, providing value above the existing zonal architecture is really the source of kind of a moat or differentiation. And so as we do things in the way of adding RCP and enabling and simplifying networks, and as we integrate that 10-base T1L with other functionality, we think that those continue to provide competitive differentiation and add to a moat over time.

But it's emerging. And just to prove, so we're obviously, we started talking about 10Base T1S. We're new specifically to networking and software-defined vehicles or zonal. And on the last call, I talked about our first automotive disruptor ramp starting, actually, at the end of this year. So not only have we introduced the new products, because that's what Treo platform enables, is venturing into new applications as inflection points happen. but also providing that value that Sudhir talked about that translates to a win even for OnSemi as a newcomer in this emerging market.

All right, we probably have time for two quick questions.

OnSemi team, thanks for your time today and a fantastic presentation. Harsh Kumar from BMO. Hassan, I was fascinated by the EPP product. Is it fair and accurate for me to think that you will not have a lot of competitors here because it requires both silicon, silicon carbide, and GAN, and there just aren't a lot of players. So my question really is how well covered up are you with patents should somebody try to get in? And then maybe I'll ask Tad for a clarification. Did you assume a zero SAR from 2026 to 2030? If so, what would be the biggest risk to the scenario that you laid out to your long-term model?

Yeah, so we're assuming a zero SAR, right? So if SAR is higher, that's a tailwind. Whatever SAR is, we're going to outgrow by high single digits. We've been doing that consistently. Sudhir laid out the reasons why. We'll continue that. So index to SAR.

Yeah, so just to close on that and then I'll answer the EPP, the growth is coming from a lot of the content that Sudhir talked about with the transition that is happening as you can think about it as a mixed shift within the SAR. Of course, as the SAR goes up, that mix ship is compounded on top. So it's actually a tailwind. The SAR increasing will be a tailwind because EVs are going to be a higher percent of SAR even if the SAR is flat. Software-defined vehicles are going to be a higher percent of SAR even if the SAR is flat. If the SAR is up, we'll be up high single digits above that. So you can do the math. On the EPP, it is – so, yes, I would agree. And I would say it is the most competitive power platform in the market today. The best in class today is PCB embedding. What PCB embedding doesn't cover is the thermal. It does the size, but it does it at the expense of electrical and thermal performance. EVB is the only technology today as a platform that is able to deliver it, not because we have silicon carbide and silicon and VGAN. it is the platform by itself. What we put in it could be 100% silicon carbide or it could be 100% silicon. So again, think about it as a technology that is the most advanced packaging that solves thermal, electrical, and mechanical. How comfortable are we in it? One is it's very hard to make. I know that because we struggled through it and now it's ready and sampling and delivering on the promise of the investment thesis. So that's point number one. And two, along the way, we cover our IP with patents, not just on the idea but the process by which we go about it. So we feel very comfortable about it. It's validated by our customers that have seen the value and we'll continue to push what else we can integrate in it. And like I said, you'll see very impressive examples that are products that we develop for customers downstairs. And again, thanks for joining us.