Financial Data and Key Metrics Changes - The company reported revenues of $2.77 billion, which was $56 million above the midpoint of the business outlook range, with automotive revenues slightly below expectations but offset by higher revenues in personal electronics and industrial [6][5] - Gross margin was 33.5%, in line with the midpoint of the business outlook range, but decreased by 660 basis points year over year due to unfavorable product mix and lower manufacturing efficiency [18][20] - Net income for Q2 was a loss of $97 million compared to a profit of $353 million in the same quarter last year, with diluted earnings per share at negative $0.11 compared to positive $0.38 [20][21] Business Line Data and Key Metrics Changes - Automotive revenues grew approximately 14% sequentially, driven by Asia Pacific excluding China and the Americas, but overall automotive revenues declined by about 24% year over year [16][17] - Industrial revenues exceeded expectations with strong sequential growth and year-over-year improvement, confirming that Q1 was the bottom [10][11] - Personal electronics and communication equipment revenues were above expectations, driven by increased content in personal electronics and the expanding low earth orbiting satellite market [13][14] Market Data and Key Metrics Changes - Year-over-year sales to OEMs decreased by 15.3%, while distribution sales also saw a decline [17] - The automotive market is projected to grow, with a total of 90 million vehicles expected, of which 30 million are battery electric and hybrid electric vehicles [42][54] - The company noted that inventory levels in distribution are returning to normal, with improvements seen in Asia Pacific and China [11][115] Company Strategy and Development Direction - The company is focused on car electrification and digitalization, with significant wins in silicon carbide and automotive microcontrollers [8][9] - The strategy includes reshaping the manufacturing footprint and resizing the global cost base, with expected annual cost savings in the high triple million dollar range by the end of 2027 [25][26] - The company aims to maintain its net CapEx plan between $2 billion and $2.3 billion for 2025 to support manufacturing reshaping [25] Management's Comments on Operating Environment and Future Outlook - Management acknowledged uncertainty in the automotive market due to trade and tariff situations but expects sequential growth in Q3 compared to Q2 [7][25] - The company anticipates Q3 revenues to be around $3.17 billion, representing a 14.6% sequential increase but a 2.5% year-over-year decrease [23][25] - Management expressed confidence in the strength of the product portfolio and customer base, despite specific customer dynamics affecting automotive revenues [43][54] Other Important Information - The company received recognition for sustainability, ranking 25th in the Time World's Most Sustainable Companies list and achieving an A-list rating for climate change tracking [14][15] - The company maintained a solid financial position with a net financial position of $2.67 billion as of June 28, 2025 [22] Q&A Session Summary Question: Can you clarify the impact of the manufacturing reshaping program on Q3 gross margin guidance? - Management indicated that the gross margin for Q3 is negatively impacted by approximately 140 basis points due to currency effects and nonrecurring costs related to the manufacturing reshaping program [30][31] Question: Have there been any changes in customer order patterns due to geopolitical uncertainties? - Management noted that all verticals are expected to grow sequentially in Q3, except for automotive due to specific customer dynamics, but overall customer demand remains positive [40][41] Question: What is the outlook for Q4 revenues and potential impacts from new U.S. rules on EVs? - Management expects Q4 revenues to grow sequentially and potentially year-over-year, with no significant impact from new U.S. rules on EVs anticipated at this time [62][65] Question: Can you provide insights on the pricing environment for general-purpose microcontrollers? - Management confirmed that pricing for general-purpose microcontrollers remains stable, with low single-digit pricing observed [104] Question: What is the current status of inventory levels in the distribution channel? - Management reported that inventory levels in distribution have improved, with excess inventory declining by about one month on average [114][115]

Financial Data and Key Metrics Changes - The company reported revenues of $2.77 billion, which was $56 million above the midpoint of the business outlook range, with a gross margin of 33.5% in line with expectations [5][18] - Year-over-year gross profit decreased by 28.5%, and net income was a negative $97 million compared to a positive $353 million in the previous year [20][21] - Days sales of inventory at quarter end was 166 days, slightly above expectations, compared to 130 days in the year-ago quarter [21] Business Line Data and Key Metrics Changes - Automotive revenues grew about 14% sequentially, driven by Asia Pacific and The Americas, but overall automotive revenues declined by about 24% year-over-year [6][15] - Industrial revenues were above expectations with strong sequential growth, confirming that Q1 was the bottom, and general-purpose microcontrollers returned to year-on-year growth [9][12] - Personal Electronics and Communication Equipment revenues were above expectations, driven by increased content and the expanding low earth orbiting satellite market [12][13] Market Data and Key Metrics Changes - The automotive market is experiencing uncertainty due to trade and tariff situations, but the company expects sequential growth in Q3 [6][23] - The industrial market showed strong demand, with point-of-sale (POS) growth indicating real demand rather than inventory replenishment [78] - Sales to OEMs decreased by 15.3% year-over-year, while distribution sales showed a positive trend [15][16] Company Strategy and Development Direction - The company is focused on car electrification and digitalization, with significant wins in automotive microcontrollers and electric vehicle power systems [6][7] - The strategy includes reshaping the manufacturing footprint and resizing the global cost base, with expected annual cost savings in the high triple million dollar range by 2027 [24][25] - The company aims to maintain a net CapEx plan between $2 billion and $2.3 billion for 2025 to support manufacturing reshaping [24] Management's Comments on Operating Environment and Future Outlook - Management acknowledged a challenging automotive market but expressed confidence in sequential growth in Q3 and Q4 [6][23] - The company expects Q3 revenues to be around $3.17 billion, reflecting a 14.6% sequential increase and a 2.5% year-over-year decrease [22][23] - Management noted that the automotive market is less stable than in previous years due to competition dynamics and customer-specific changes [42][54] Other Important Information - The company received recognition for sustainability, ranking 25th in the Time World's Most Sustainable Companies list and achieving an A-list rating for climate change [13][14] - The company is working closely with NVIDIA on a new high power density DC-DC architecture for AI data centers [11] Q&A Session Summary Question: Can you clarify the one-off effect from the manufacturing reshaping program in Q3 gross margin guidance? - Management indicated that about 20% of the 140 basis point negative impact on gross margin in Q3 is related to the reshaping program, with expectations for improvement in Q4 [30][31] Question: Have you seen any changes in customer order patterns due to geopolitical uncertainty? - Management noted that while there is a specific customer issue in automotive, overall demand is positive, and they expect sequential growth in Q3 [40][42] Question: What caused the year-over-year revenue decline? - Management explained that the decline was primarily due to customer-specific changes and intangible factors, with a strong expectation for sequential growth in Q3 and Q4 [52][54] Question: Will you be able to grow year-over-year in Q4? - Management expressed optimism about sequential growth in Q4 and the potential for year-over-year growth, depending on customer behavior [61] Question: What is the impact of new U.S. rules on EVs on your business? - Management stated that there is no significant impact from the new U.S. rules on EVs, and they are adapting their strategy accordingly [63] Question: Can you quantify the level of inventories in the distribution channel today? - Management reported that inventory in distribution has declined by about one month on average, moving in the right direction [115] Question: How do you see the pricing environment for silicon carbide in China? - Management acknowledged strong price pressure in China but is confident in their competitive position due to new product introductions and manufacturing capabilities [118][119]