Thank you, operator, and good afternoon, everyone. Welcome to Wolfspeed's Third Quarter Fiscal 2023 Conference Call. Today, Wolfspeed's CEO, Gregg Lowe; and Wolfspeed CFO, Neill Reynolds, will report on the results for the third quarter of fiscal year 2023. Please note that we will be presenting non-GAAP financial results during today's call, which is consistent with how management measures Wolfspeed's results internally. Non-GAAP results are not in accordance with GAAP and may not be comparable to non-GAAP information provided by other companies. Non-GAAP information should be considered a supplement to and not a substitute for financial statements prepared in accordance with GAAP. A reconciliation to the most directly comparable GAAP measures is in our press release and posted in the Investor Relations section of our website, along with a historical summary of other key metrics. Today's discussion includes forward-looking statements about our business outlook, and we may make other forward-looking statements during the call. Such forward-looking statements are subject to numerous risks and uncertainties. Our press release today and the SEC filings noted in the release mention important factors that could cause actual results to differ materially.

Thanks, Tyler, and good afternoon, everyone. Thank you for joining us today to discuss our latest financial results. Now before we dive into the details, I want to take a moment to express our gratitude to President Biden, Secretary Raimondo, Governor Cooper and all of those who joined us at our Durham headquarters last month. As an American company, we share the administration's goal of driving U.S. innovation and manufacturing. At Wolfspeed, we are a testament to the power of long-range investments in complex technology with silicon carbide being rapidly adopted across various industries. Our company's mission aligns with the energy efficiency goals of governments across the world, and we are proud to be making a significant impact. In the last several years, we've gone from being a global leader in silicon carbide materials production to building a vertically integrated semiconductor powerhouse that started with the expansion of our power devices capacity in the Durham fab and then turning a field of mud in Upstate New York into the world's first 200-millimeter silicon carbide device factory. I'm proud to share that we shipped our first product from the Mohawk Valley fab in the third quarter. While it's a relatively small number of devices shipped to an industrial off-board charging customer, it's an important proof point that we are now producing product on 200-millimeter substrates. We have a meaningful head start in executing our strategy, and the learnings from ramping the new fab will be important as we continue to expand capacity to better support the industry transition from silicon to silicon carbide. Our focus on vertical integration positions Wolfspeed for a multi-decade growth opportunity. Customer demand is robust as we secured $1.7 billion of design-ins in Q3. This total reflects a new quarterly record for nonautomotive designs, which included a heat pump application and an EV off-board charger. Our cumulative total for design-in secured since fiscal 2020 now totals approximately $18 billion. Demand is there, and we are continuing to lead the expansion of the silicon carbide market. My primary focus is on expanding our capacity, especially ramping materials production as it relates to wafer supply to feed Mohawk Valley. For most of our history, our growth was driven by supplying the market with silicon carbide wafers. Now we have a best-in-class fab and we need more materials to feed it. Producing more silicon carbide epi wafers out of our Durham facility will be the governor of our ramp in the short term, and our longer-term outlook is supported by the ramp of the JP. Neill and I are leaning in directly to support capacity expansion efforts. We've realigned the team with operations leaders now reporting directly to myself and Neill. Missy Stigall is overseeing devices and our wafer fabs, while Adam Milton will lead the materials production for the company. We believe this will provide greater visibility into the ramp of substrates as well as our device footprint expansion. Our strategic vision and expectations for silicon carbide expansion have not changed. Wolfspeed has a deep moat in the industry with a decades-long runway. But the journey requires focus, persistence, and patience. We'll continue to make long-range investments in this complex technology, expanding our capacity footprint with purpose-built facilities for both materials and devices. We believe this is validated by customer demand and increasing investments in silicon carbide across the industry. The world needs more silicon carbide, and Wolfspeed will continue to lead the pack. Now I'll turn it over to Neill who will provide an overview of our financial results and an outlook for the fourth quarter of fiscal 2023 and fiscal 2024.

Thank you, Gregg, and good afternoon, everyone. During the fiscal third quarter of 2023, we generated revenue of $229 million at the high end of our guidance range which represents a 6% sequential increase when compared to the $216 million in the fiscal second quarter of 2023 and growth of approximately 22% year-over-year with power device products growing more than 50% year-over-year. We recognized our initial revenue from our Mohawk Valley fab in the third quarter and continue to expect low single-digit millions of revenue in the fourth quarter with a greater ramp in fiscal 2024. I'll go into more specifics in a few moments, but going forward, we will continue to explore ways to show the underlying economics coming out of Mohawk Valley and its relative margin impacts. As a reminder, Mohawk Valley will dramatically change the dynamics of the business as its scale, automation, and wafer size advantages will lower our overall die cost by greater than 50%. We also saw strong revenue growth from our merchant 150-millimeter silicon carbide substrates as we solved many of the production challenges we had on the taller holes, albeit at higher-than-expected costs. This results in a one-time inventory drain, and we expect revenue levels to return to more steady state-run rate levels in fiscal Q4 and beyond. Additionally, from a power device perspective, as I mentioned last quarter, we now believe that we have achieved full capacity in our Durham wafer fab and almost all future top line growth in power devices will come directly from the Mohawk Valley fab. Looking at RF products, we continue to see weaker demand but within range of our prior estimates. Moving down the income statement, non-GAAP gross margin in the third quarter was 32.3% compared to 33.6% last quarter and 36.3% in the prior year period, representing a 400-basis point decline year-over-year. Consistent with our outlook, gross margin was impacted by lower yields and higher costs on our taller 150-millimeter goals. In addition, gross margin was impacted by a heavier mix of high-volume automotive customers running on the smaller 150-millimeter wafers in our Durham fab. As a result of these items, we generated adjusted loss per share of $0.13 in the fiscal third quarter compared to a loss of $0.11 a quarter ago and a loss of $0.12 in the same period last year as revenue growth was offset by lower gross margins and higher investments in OpEx. Before I discuss our guidance, I will provide a quick overview of our balance sheet position. We ended the quarter with approximately $2.25 billion of cash and liquidity on our balance sheet to support our growth plans. DSO was 53 days, while inventory days on hand was 162 days. Free cash flow during the quarter was negative $245 million, comprised of negative $11 million of operating cash flow and $234 million of net capital expenditures. We now anticipate net CapEx for fiscal 2023 to be approximately $775 million, down from our previously announced $1 billion primarily due to the timing of facility spend related to the 200-millimeter substrate expansion. During the quarter, we incurred start-up costs primarily related to the Mohawk Valley fab brand, totaling approximately $45 million. Moving forward, we expect overall start-up and underutilization costs for Mohawk Valley to start winding down as we ramp the fab. This included a non-GAAP adjustment for these start-up costs in the reconciliation table in our earnings release. In terms of our capital needs, we continue to evaluate multiple avenues of additional funding, including upfront customer payments or investments, debt instruments, and government funding in the United States and Europe. While we cannot comment on the timing or certainty of any government funding, we believe we have made great progress in this regard. In addition, we believe we need to secure approximately $1 billion of additional nongovernment financing between now and the end of the calendar year to support an approximate $2 billion of CapEx in fiscal 2024. The majority of this investment will be for 200-millimeter substrate facility construction and tool capacity, both at JP and Tyler City and our Durham campus in North Carolina, with the intention of leveraging this investment to ramp the Mohawk Valley fab as fast as possible. While we are currently investing a modest amount of design work for the German Saarland fab, we don't expect to see significant facility construction-related CapEx until calendar year 2024 while we await final incentive notification from European authorities. However, we have made good progress on this front and, as of now, expect final notification later this calendar year. We also remind you that our CapEx investments can be highly variable depending on the timing of facility construction, tool lead times, supply chain challenges, and other items. As we look forward to the fourth quarter of fiscal 2023 and beyond, we recognize that, especially recently, there has been variability in our financial performance compared to our forecasted growth trajectory. While predominantly related to the challenges of the timing of the ramp of Mohawk Valley and our 200-millimeter materials production, we recognize the need to help you all assess near-term expectations. As a result, in addition to giving our fourth quarter outlook, I will take a moment to help frame our thinking about fiscal year 2024. Starting with the fourth quarter of 2023, we are targeting revenue in the range of $212 million to $232 million. Our revenue guidance reflects low single-digit revenue from Mohawk Valley, as previously communicated. As I mentioned before, we are essentially capped in Durham from a power device capacity perspective. And going forward, much of the incremental revenue we will generate will be from Mohawk Valley. In addition, as previously mentioned, we will see lower materials revenue related to the one-time inventory drain in Q3 as we improved output on our taller 150-millimeter pools that will not repeat in Q4. Our Q4 non-GAAP gross margin is expected to be in the range of 29% to 31% as we continue to work through the cost recovery on the taller 150-millimeter pools, and we shipped our Durham fab mix to higher-volume automotive customers that were initially slated to be produced in Mohawk Valley. We expect non-GAAP operating expenses to be between $105 million and $106 million for the fourth quarter of fiscal 2023. We expect Q4 non-GAAP operating loss to be between $34 million and $43 million and non-operating net gain to be approximately $5 million. We believe we will realize approximately $8 million to $10 million of non-GAAP tax management as a result and expect Q4 non-GAAP net loss to be between $21 million and $29 million or a loss of $0.17 for diluted share to $0.23 per diluted share. Our non-GAAP EPS target excludes acquired intangibles amortization, noncash stock-based compensation, project transformation and transaction costs, factory start-up and utilization costs, and other items as outlined in our press release today. As always, our Q4 targets are based on several factors that affect them very greatly, including supply chain dynamics, overall demand, product mix, factory productivity, and the competitive environment. Turning to fiscal 2024. Given that our growth will be governed by how quickly we ramp 200-millimeter substrate capacity and, in turn, the Mohawk Valley fab, we will target fiscal 2024 revenue between $1 billion to $1.1 billion. This outlook assumes we achieve 20% capacity utilization at Mohawk Valley by the fourth quarter of fiscal 2024, while our epi materials product line revenues remain closer to current levels as we focus our efforts and resources on ramping 200-millimeter substrates in Mohawk Valley. Additionally, as a result of the ramp timeline and continued focus on customer timelines, as I mentioned earlier, we plan to run more auto-related products at a smaller 150-millimeter diameter in the Durham fab for the foreseeable future to support our customers, which will flatten the gross margin trajectory for the next several quarters until Mohawk Valley reaches critical mass. As we are in the early stages of these critical EV ramps, it is important to support our customer ramp schedules, but it will likely keep gross margin in your current levels as the Mohawk Valley ramps to higher output levels. That said, as we reach 20% utilization at Mohawk Valley, we would expect the trajectory for gross margin to improve because the unit economics are significantly more favorable than Durham.

Thanks, Neill. We recognize there is work to be done against executing on our strategic vision and capacity expansion plans. That said, we are confident that we are on the right path. As Neill discussed, we are adjusting our fiscal 2024 revenue forecast to better reflect the current trajectory for the ramp of the Mohawk Valley fab. We continue to win business at a solid rate. And a large part of that is due to our investments in capacity and our device quality. As we further our capabilities in vertical integration and continue to innovate, we expect to continue to capture share in our power device product line for automotive as well as industrial and energy applications as the supply of silicon carbide devices continues to expand. At Wolfspeed, we have an extremely wide moat in an unbelievably attractive industry with decades-long opportunity. We believe we have the best talent, a technology advantage based on our 30-plus years of silicon carbide expertise and cost advantages as we ramp our 200-millimeter production and design-ins with premier automotive OEMs, Tier 1s, and industrial customers. We are the leader in silicon carbide technology and are hyper-focused on expanding our footprint to maintain that lead and are focused on executing our strategy as I know we can. And now I'd like to turn it over to the operator for any questions you might have.

We have our first question from Jed Dorsheimer from William Blair. You may proceed with your question.

Thank you for taking my questions. First, Gregg and/or Neill, a couple of quarters back, you mentioned the yield issue with 6-inch regarding the taller bulls, and now you're highlighting the 200-millimeter capacity. Can you help us understand the limitations? Is this related to the furnace, the bull height, or wafer thickness? Can you provide more insight into what's happening? Additionally, when you were at CREE, if I remember correctly, you experienced a similar transition from 4-inch to 6-inch. Could you give us an update on the timelines for thickness, bull height, etc.? This seems like an important factor until Siler City is operational. I have a follow-up after this.

Okay, Jed. Thanks a lot for the question. Let me frame it this way. First off, we're running wafers right now, 200-millimeter wafers, in the Mohawk Valley. As I mentioned in the prepared remarks, we shipped our first product to an industrial customer, and we're going to ship a couple of million dollars’ worth of product this quarter. Our cycle times, our yield, our throughput, initial reliability, all of that out of Mohawk Valley, is looking really good. The quality of our crystals and the quality of our substrates as well as the yield in producing those substrates in our materials factory in Durham is also at or above where we have targeted at this point. What we're really talking about here is a challenge of scaling and scaling the materials operation to feed Mohawk Valley. And basically, there are two things that are basically slowing that down, so to speak. One is some infrastructure delays that we had with things like switchgear and other items as we expanded in our Building 10 facility in Durham, so basically, supply chain issues with electrical infrastructure here. That's been resolved, and we're now expanding inside a Building 10. And the second is a more methodical approach to growing the capacity, I think that's a prudent point for us to take at this point. So, basically, quality of bulls, quality of crystals, crystal height, number of wafers per bull, all of that kind of stuff in line, material flowing through the factory, doing really well, just simply a delay from an infrastructure perspective and a more methodical ramp.

Got it. That's helpful. On my second question, I know that when you evaluated Mohawk Valley, you decided to increase capacity from six to eight to take advantage of the benefits you mentioned. However, there were specific customers intended for Mohawk Valley, and now you're discussing moving those to Durham. Can you elaborate on what that means for customer qualification timelines and the implications for that business? Do those customers view things differently now given the change in capacity, or can you transition them over? I would assume that qualifying in Durham wouldn't automatically qualify them in Mohawk Valley. Thanks.

There is a very proactive approach from our customers who are eager to accelerate the qualification of products from Mohawk Valley. They clearly recognize the significant increase in capacity from that location and understand the value of obtaining materials from there. We have customers who have committed to starting projects in Mohawk Valley even before full qualification. Typically, transitioning to a new wafer fabrication facility involves a slow process of bringing customers along, but that isn't the case here. The demand for the product is so high that customers are eager to get into Mohawk Valley quickly. So, there has been no change in that regard.

Next question comes from Brian Lee of Goldman Sachs. Your line is open, Brian.

Hi, good afternoon, and thank you for taking my questions. My first question is about the additional details and updates on Mohawk Valley, which I appreciate. With the goal of reaching 20% utilization by the end of fiscal '24, could you discuss what gross margin performance you would be targeting or satisfied with across the business by that time? Are we expecting margins in the low 40s when reaching 20% utilization in Mohawk, or are we aiming for the high 30s? Also, considering the extensions in Mohawk and the more gradual ramp-up, I’m curious about the implications for the fiscal '26 and '27 targets in the model. And I have a follow-up.

Brian, it's Neill. So yes, I appreciate the question. So just looking at the kind of the staging of gross margin as we move forward, so Q3 kind of landed within the range. But as you look forward, with some of the delays we're seeing in Mohawk Valley, and as I mentioned earlier, we're just going to run some more of the higher volume automotive customers through Durham to try and support those ramps. We always kind of thought that kind of the '23, '24 timeframe, we would see some of these automotive ramps start to come online, and that's exactly kind of what we're seeing. So, we've really got to support our customers through this period as we start to get the fab ramped up. But what that's going to do is that's going to flatten out margin for the next couple of quarters until we start to see Mohawk Valley start to ramp up. So, you kind of think of margin as kind of flattish for the next couple of quarters. And then as Mohawk Valley starts to see utilization improvement, we'll start to reap the benefits of the margin, the cost structure that you get out of Mohawk Valley as you start to get closer to that 20% utilization mark. So, I've said it before, kind of all roads point to Mohawk Valley, both for revenue and margin. I think that's exactly the case here.

What are your thoughts on the broader outlook for fiscal '26 and '27, considering the updated perspective for '24? Also, when do you anticipate returning to your previous gross margin targets? You mentioned aiming for around 45% in '24. Is there a possibility of achieving a 40% margin by the end of fiscal '24?

As we approach the latter half of 2024, it's important to consider that some of our targets may be extended. We anticipate that once we begin to turn the corner on certain initiatives, we'll see utilization in Mohawk Valley exceed 20%. However, we are not planning to provide a complete guidance update regarding our long-term model at this time. This is because, as we move through 2024, we expect Mohawk Valley to begin receiving supplies from Siler City, which will support 200-millimeter production. There is a strong possibility that we can accelerate our progress beyond that period. Thus, I wouldn't interpret the lower numbers for 2024 as a negative indication for the overall plan. Instead, it represents a shift in trajectory. Particularly after 2024, we anticipate increased output from Siler City, which will help boost Mohawk Valley's performance in 2025 and 2026, leading to higher utilization rates. Therefore, while we may not see significant acceleration in 2024, we expect it to come in the following years.

Next question comes from Gary Mobley of Wells Fargo. You may proceed.

Hi, guys. Thanks for taking my question. I wanted to revisit something Greg addressed earlier, and that is the revision to fiscal year '24 revenue. So back in October on Halloween at your Analyst Day, I think the projection was $1.6 billion in revenue in fiscal year '24, and we've walked that down, I think, for the past few quarters. And at that October Analyst Day, I don't think there was really anticipation of having much contribution from Siler City to support that fiscal year '24 revenue. So, I'm just curious where we've seen that 35% reduction in revenue forecast. Is it all just because you're having a hard time ramping specifically in Durham 200-millimeter and now it's a pure contingent on Siler City?

Thanks, Gary. It's not just about Siler City; it's more about the timing of the ramp-up for what we refer to as Building 10 on our Durham campus. Bringing up 200-millimeter on the Durham campus last October aligned with the plan we discussed at that time. So, this issue primarily revolves around the timing of activating that facility. There are two main factors at play here. First, there's been a delay related to some of the items Gregg mentioned earlier regarding facility rollouts. Second, it's important to adopt a more methodical pace in our approach. We have experienced some delays, but we will bring that facility online in a thoughtful and systematic manner. As we've mentioned before, bringing up silicon carbide capacity poses challenges, as it's difficult material to work with. We aim to ensure we introduce that capacity carefully and steadily to achieve reasonable results.

Okay. And my follow-up, I wanted to ask about your design-in conversion rate, Greg. I think you mentioned $18 billion of cumulative design-ins, $1.7 billion for the quarter. Does this slower-than-expected ramp in 200-millimeter substrates and related to that, Mohawk Valley, does that reduce the outlook for the conversion rate on these design-ins? And maybe if you can just give us a general sense of how that conversion rate has been trending?

We've been very positive about the conversion rate. Over the first three quarters of this year, we've converted $1.7 billion of design-ins to design wins, which is quite good. I don't believe this slows us down at all. In fact, the conversion rate we've experienced over the last few years has been significantly stronger than we expected. This reflects the growing demand for our product from customers. This demand is increasing sharply. Regarding electric vehicles, a recent article predicted that by 2032, over 60% of vehicles in the United States will be electric, which is much faster than anticipated. We've also seen strong design-ins in heat pumps and other applications, achieving a record quarter this year with nearly $700 million in non-automotive design-ins. Our design-ins for the first three quarters have surpassed those of the entire previous year, which was already a record, and the conversion is happening more quickly. This situation puts pressure on customers who are looking for more product. They recognize the progress at Mohawk Valley, noting that we are currently running wafers there and have shipped product out of that facility. We expect to generate a couple of million dollars in revenue from it soon. While they would prefer more product sooner, they acknowledge our investment of several billion dollars in the world's largest silicon carbide fab, so there is definitely a light at the end of the tunnel.

Thanks, guys.

We now have Matt Ramsay of TD Cowen.

Gregg, I wanted to kind of backtrack the clock 6 months or so, you guys had the Analyst Day back at Halloween and revised some of the fiscal '24 targets and added the fiscal '27 model at that point. And I guess I'm trying to understand some of the variables around 200-millimeter output to feed Mohawk Valley that were considered then, and I think the bull heightening issue on 150 was already sort of known publicly at that point, and I would imagine you guys had risk-adjusted the 200-millimeter ramp for that. So maybe you could just walk us through, I guess, the chain of events since then that's now allowing Durham on 200-millimeter to ramp more slowly on materials and just what those variables were over the last 6 months and the model was adjusted the last time. Thanks.

Thank you. The situation is clear. First, we encountered some supply chain challenges related to the infrastructure for the expansion of Building 10. Specifically, there were delays with switchgear and basic electrical infrastructure, which impacted our timelines for receiving the necessary products and getting them operational. In fact, these delays became more pronounced between October and the beginning of the year. Consequently, the time required to install the infrastructure and obtain the certificate of occupancy was longer than we had expected. Secondly, we decided to take a more measured approach to ramping up production, rather than rapidly scaling up. This technology is quite complex, and while we currently have excellent output quality from our crystal growers, we have implemented a gradual ramp in response to this complexity. We have successfully activated quite a few crystal growers in the Building 10 facility, and the quality and yield of the crystals are impressive. Regarding the taller bull issue that you mentioned with the 150-millimeter size, addressing that challenge has been beneficial since we've already designed solutions for the 200-millimeter size, and our team is actively resolving that issue for 200. Therefore, we believe it is wise to proceed with caution and avoid accelerating the ramp-up too quickly, given that things are progressing well. This combination of factors has led us to our current approach.

I understand. As a follow-up question, it seems that with the limitations at the 200-millimeter facility in Mohawk Valley and the capacity strains at the Durham device fab, you are now prioritizing automotive customers by reallocating some of the devices planned for Mohawk Valley back to the 150-millimeter facility in Durham. My question is, if that facility was previously expected to be operating at full capacity, what happens to the customers who were counting on that capacity, which is now being redirected to automotive needs? If it was going to be fully utilized, you likely had commitments for all those devices. How will this impact non-automotive customers in the coming years due to these changes?

Yes, thank you. Essentially, we are not retreating from Durham. We are still shipping automotive products from our Durham facility. The plan is to eventually transition this production to our New York or Mohawk Valley facility, but that transition is occurring more slowly than expected. For our non-automotive customers, we have already shipped our first product from Mohawk Valley and have several more ramping up. This situation is leading to a tight supply-and-demand scenario. We are actively engaging with our customers; Neill and I met with one last night to discuss this. They are aware of the situation and recognize the upcoming capacity of the new fab in New York, and they are collaborating with us to prioritize their products from that facility.

We now have Sam Chatterjee from JPMorgan. Your line open now.

Thanks for taking my questions. I guess just to start on the delay here in ramp of Mohawk, I think what you're talking about is more of a 6-month delay relative to earlier sort of your own expectations. And I just I'm wondering with the more methodical approach you're taking to ramping, the materials capacity, as we think about sort of the flow-through of this into the future years, does this sort of mean there's a 6-month delay to all the sort of ramp projections that you had? Or does the more methodical approach really drive a greater delay? Or do you sort of pass the S-curve at some point where you say, okay, this is the inflection point, we can catch up to some of our earlier targets because we are now more confident about not having to go slow in terms of this ramp? And I have a follow-up.

Yes, sure. I think it's very much a second one. I think we're seeing a delay now in terms of bringing this on. We want to do it methodically for the exact purpose you just mentioned. So, when we get to a certain level of volumes, both in materials and through the fab from a utilization perspective, we'll have the right level of confidence to ramp it faster as time goes on. So, I wouldn't say this is a onetime pushout of everything, but I think this is a thoughtful approach to making sure we can underpin the capability of our factories. Remember, we're doing something for the first time in many places, our first 200-millimeter silicon carbide fab and we're ramping 200-millimeter volume all at the same time. So now what we want to do is just make sure we get that right. And once we get that to certain levels of volume, as Gregg said, we feel good about the fab and where adept from a capability perspective, we feel good about the crystals and the yields and everything else we're seeing from that perspective. So, once we have enough volume under our belt, I think we'll be able to accelerate that faster kind of later in the timeframe of that kind of outlook.

Okay. Got it. And just as a follow-up, I think the cash burn in the quarter itself was higher than the last couple of quarters with now sort of forecast for next year being similar gross margin, and probably OpEx does go up into that timeframe. How should we think about cash burn next year, any sort of guidance on that?

Yes. So overall, look, right now, we have $2.25 billion on the balance sheet. As I talked about in the prepared remarks, we're looking to fund another $1 billion this year, and we've got $2 billion CapEx plan next year. So, I think we'll be in pretty good shape. It probably pushes out the operating cash flow capability out by maybe that same type of timeframe until we can accelerate. But I don't see that as moving the needle substantially versus what I just talked about. So, I think about it as $2.25 billion on the balance sheet, with a $2 billion CapEx plan next year, and we've raised some money between now and the end of the year, and I think we're right on schedule from a funding perspective. And then I think the operating cash flow will get pushed out a bit. But I don't see that being a significant factor in terms of building out what we're trying to do. I think that just keeps us on schedule.

We now have Edward Snyder of Charter Equity Research.

Neill, you kind of warned about the delicate process of getting new material fab up and running last quarter, I think, even if it's just across the street from the existing fab. I guess, we shouldn't be surprised by this. But if you're having that kind of a problem with the 200-millimeter expansion in Building 10, why will we see similar greater issues with the massive expansion you're planning for Siler City, which is not across the street from the existing fab? But I know approximately it doesn't have that much to do with it. But from all that you said and all that JP had told us, et cetera, this is obviously very slight changes and a number of different metrics can cause big deviations in what you're actually putting out in terms of wafers. So why shouldn't we expect Siler City to see similar delays? And I have a follow-up.

Thanks, Ed. And let's just back up a little bit. So, what we're seeing here is the major delay we're seeing is not really related to the crystal grow technology or the 200-millimeter technology really at all. That was really related to electrical infrastructure and building out the facility. That's really what's causing the first stage of the play. After that, it's really about bringing on this thing in the methodical way, but again, the crystals, the quality, the yields and everything else, all look very, very solid from the first production out of that facility and we anticipate that going forward. So, I think once we prove out kind of Building 10, I think we'll be in good shape to transport that over to Siler City over in time. But I think what we're talking about here is in that same type of methodical approach, we'll ramp this up, and we'll do the same thing as we move over to Siler City. We'll bring that also in the same fashion for the exact reason you mentioned. It is a tricky technology, and you want to make sure, we're watching it very, very closely with the right team overseeing it. And I think that's what the plan we're laying out is designed to do.

We discussed the capacity issues at both RTP and Durham extensively last quarter, and it seems that situation remains unchanged. I want to revisit the earlier question. Is it reasonable to assume that Durham's capacity is around $100 million per quarter, give or take a little? I assume that's still a valid estimate. If that’s the case and you're increasing automotive production there, does this mean you are necessarily shipping less to nonautomotive customers? Am I interpreting that incorrectly? If that's the case, could this result in a loss of market share? Many industrial customers have a more predictable design cycle, allowing them to potentially find alternative options and redesign their products, unlike automotive, which has a longer timeline. I'm trying to understand the dynamics happening at Durham and in power devices since there seems to be insufficient capacity to serve even the customers you had last quarter. Thanks.

Thank you, Ed. One of our main focuses is maintaining strong relationships with our customers. We recently had 60 industrial customers at the Mohawk Valley last quarter to assess our progress. They are looking for more now, but they are also considering the upcoming capacity in the market. The attention keeps returning to our new 200-millimeter silicon carbide fab, which is currently being launched. We shipped some initial products last quarter and expect to generate a couple of million dollars this quarter. We anticipate reaching 20% utilization of that fab by the end of fiscal '24, which will yield considerable output. If we didn't have the Mohawk Valley facility coming online, the situation would be more challenging. However, as customers explore their options worldwide, they find nothing comparable to what we're achieving at Mohawk Valley. They continue to support us, evidenced by our delivery of $1.7 billion in design-ins this quarter. Over the past two to three quarters, $700 million of that has translated into actual design wins. Additionally, this quarter marked a record for nonautomotive design-ins. While we acknowledge that we aren't fulfilling all their demands, we are proud of our decision to build this factory four years ago, as it allows us to have something substantial to present to our customers.

We now have Colin Rusch from Oppenheimer. Please go ahead.

Just given the dynamic you're just talking about here around tightness in supply and scale, can you talk about how mature the conversations are with incremental customers that may help support some of the CapEx here? Obviously, you guys have had some success with that. But how robust are those conversations at this point?

I would say, quite robust. We've had a lot of discussions. We've had a lot of wins where customers have put upfront money to help us with our capital needs and the expansion needs, and they see a huge benefit from that. So those are pretty good conversations. They continue to this day. And I think it's something that's probably going to continue for the foreseeable future.

Okay. And then just turning to OpEx, as you guys look to optimize cash here over the next, call it, six to eight quarters, can you talk a little bit about what you're going to need to spend to support the work that you're doing both with customers and with multiple facilities ramping here and how we should think about that OpEx spend growing?

Yes, that's a great question. I'm pleased you brought it up. When considering our expansion efforts, particularly regarding the 200-millimeter wafer at Mohawk Valley, we have increased our research and development expenses, as reflected in the recent quarter. We are dedicating more resources to both our products and to accelerating the ramp at Mohawk Valley. Currently, you are seeing various charge-outs from the fabs related to new products. We anticipate this will increase as we move into the next quarter and the following ones. In the first quarter, we will also see our annual merit increases and similar adjustments, which will lead to a more significant uptick at that time, followed by a gradual increase as we approach the end of 2024. That is how I view operational expenses regarding both the fourth quarter and the transition into 2024.

We now have Blake Friedman of Bank of America.

This is Blake on for Vivek. Thank you for taking my question. Just wanted to drill down more into the fiscal '24 guidance because I believe in the past, you guys have given a rough breakout between device and material sales in your long-term target and with the new FY '24 target, Curious if you can break that out again between devices and materials.

Yes. Currently, power devices are being supplied from the Durham fabrication facility, and this is expected to generate approximately $100 million each quarter. This cap has been in place, and we have observed that RF numbers have decreased, generally aligning with our expectations. The materials business is anticipated to be a bit subdued as we concentrate on the 200-millimeter wafer. From this starting point, we previously guided for $220 million last quarter; with an additional couple of million from Mohawk Valley, we expect $222 million in Q4. Future growth will primarily stem from Mohawk Valley, providing a clearer trajectory. Essentially, the growth of power devices will extend through the end of 2024, as indicated by these figures.

Great. That's helpful. As a follow-up regarding capital expenditures, I know you mentioned that it came in below expectations for this year. However, with revenue levels being lower at this point, I just want to confirm that the plans you outlined at your Analyst Day are still generally in line with your current thinking.

Yes. I don't think there's any change to the total build-out or cost of build-out or anything like that versus what we talked about. I think we're seeing a little bit slower spend on some of the facilities and structures that we're seeing from a CapEx perspective, particularly on the Siler City project. But I think of that more as timing. We'll see about, like I said in the prepared remarks, about $2 billion of CapEx in '24. It could be variable depending on a number of things. But the vast majority of that is focused on bringing on 200-millimeter materials substrate capacity to support Mohawk Valley. So that's really where our focus is both from an execution perspective and from an investment perspective, to bring that type of capacity online, again, with the intention of ramping Mohawk Valley as fast as possible.

Thanks for taking my question. So, it's going to be the last question. And I'm sorry, I'm going to ask again about like the delay and things like that. But what I wanted to do is really to make sure I understand it at a high level. What I'm understanding is that roughly at the end of this fiscal year, so in June 2024, you'll be about 20% behind schedule compared to what your previous guidance was meaning. And it's just because it's taking you maybe about 20% longer to get started in ramping materials production. And I think in the numerous questions we heard about that, you qualified that as being like maybe running three or six months behind plan. So, I just wanted to make sure at a high level, that's the way we should understand it. Everything is going fine. The yields are fine. Things are just like walking through all what you have to do to run this production capacity is just running three to six months behind schedule. Is that the right way to think about it?

Thank you for the question. I believe that's an accurate assessment. Our goal is to achieve 20% utilization of the fab by the end of 2024, which is incorporated into our model. I consider this a risk-adjusted plan, as there are many factors we need to navigate, and we will need to address any challenges that arise. Regarding being three to six months behind schedule, I think that's correct. Initially, we aimed to ramp the fab in the latter half of fiscal year 2023, and in the June quarter, we generated roughly $2 million in revenue. It may actually be a bit further behind than that. Additionally, the rate at which we ramp up will be more deliberate. This will affect the financial impact, making it appear more significant and potentially extending the timeline. However, once we reach that 20% utilization and expand our capacity, we expect that beyond 2024 and into 2025 and 2026, the growth can accelerate due to our enhanced capabilities. We won't be in those early stages of building capacity for the first time.

Well, thanks a lot, everybody, for participating in today's call, and we look forward to chatting with you next quarter. Thank you.

Thank you all for joining. This does conclude today's call. You may now disconnect your lines, and have a lovely day.