Financial Data and Key Metrics Changes - In 2025, the company delivered $6 billion in revenue with a non-GAAP gross margin of 38.4%, reflecting disciplined execution and alignment with long-term strategy [7] - Free cash flow increased 17% year-over-year to $1.4 billion, achieving a record free cash flow margin of 24% [17][24] - For Q4, revenue was $1.53 billion, with a non-GAAP gross margin of 38.2% and earnings per share of $0.64, exceeding the midpoint of guidance [10][23] Business Line Data and Key Metrics Changes - Automotive revenue was $798 million, up approximately 1% quarter-over-quarter, indicating stabilization in the automotive market [21] - Industrial revenue was $442 million, up approximately 4% quarter-over-quarter, marking the first quarter of year-over-year growth in industrial revenue after eight quarters of declines [21] - AI data center revenue contributed more than $250 million for the full year, with growth in Q4 [12][21] Market Data and Key Metrics Changes - The aerospace, defense, and security segment saw a 70% year-over-year revenue increase, driven by North America and Europe [12] - The company is experiencing improving order trends across core markets, contributing to a positive outlook for 2026 [10][27] Company Strategy and Development Direction - The company has evolved from a manufacturing-centric to a product-centric model, focusing on high-margin product revenue and strategic investments in technology [8] - The introduction of the Treo Platform and expansion into high-growth markets like AI data centers and automotive zonal architecture are key strategic initiatives [7][11] - The company aims to achieve margin expansion through operational efficiency and a refined product mix, with a focus on differentiated products [18][19] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about improving demand conditions across automotive, industrial, and AI infrastructure markets [15][27] - The company anticipates that the groundwork laid over the past years will enable it to benefit from improving demand conditions [15] - Management highlighted the importance of aligning manufacturing capabilities with market demands to enhance gross margins [19][88] Other Important Information - The company announced a new $6 billion share repurchase program after returning approximately 100% of free cash flow to shareholders in 2025 [18][24] - The company is reducing fab capacity by 12% to improve operational efficiency, which is expected to lower depreciation costs in 2026 [19] Q&A Session Summary Question: What was going on in the other category? - Management noted that excluding exits, the company is above seasonal trends, and the decline in the other category was due to normal seasonality and $40 million in exits [30] Question: Can you discuss the AI data center market and its potential? - Management expressed confidence in the growth of the AI data center segment, highlighting the company's unique capabilities in high-voltage power supply and its broad product portfolio [32][33] Question: What is the expected run rate for non-core exits? - Management clarified that the $50 million exit in Q1 is part of a larger $300 million total for the year, with varying quarterly impacts [37] Question: How do you expect gross margins to progress? - Management indicated that gross margins are expected to improve due to increased utilization and ongoing FabRight initiatives, with a target of reaching low 40s% in the long term [88][90] Question: What is the outlook for the automotive market? - Management expects automotive revenue to be roughly flat in Q1 due to seasonal factors, but overall stabilization is anticipated [50]

Financial Data and Key Metrics Changes - In 2025, the company achieved $6 billion in revenue with a non-GAAP gross margin of 38.4%, reflecting disciplined execution and alignment with long-term strategy [7] - Free cash flow reached a record $1.4 billion, representing a 17% year-over-year increase and a free cash flow margin of 24% [17][24] - For Q4, revenue was $1.53 billion, with a non-GAAP gross margin of 38.2% and earnings per share of $0.64, exceeding the midpoint of guidance [10][20][23] Business Line Data and Key Metrics Changes - Automotive revenue was $798 million, up approximately 1% quarter-over-quarter, indicating stabilization in the automotive market [21] - Industrial revenue was $442 million, marking a 4% increase quarter-over-quarter and a 6% increase year-over-year, the first growth after eight quarters of declines [21] - AI data center revenue contributed over $250 million for the full year, with growth in Q4 [12][21] Market Data and Key Metrics Changes - The aerospace, defense, and security segment saw a 70% year-over-year revenue increase, driven by North America and Europe [12] - The company is experiencing improving order trends across core markets, with seasonal patterns indicating a positive outlook [10][11] Company Strategy and Development Direction - The company is transitioning from a manufacturing-centric model to a product-centric approach, focusing on high-margin product revenue and strategic investments in technology [8] - The introduction of the Treo Platform is aimed at expanding into automotive applications and industrial markets, with a strong emphasis on AI data centers [9][12] - The company plans to continue rationalizing its portfolio by exiting non-core businesses and reallocating investments to high-growth areas [18] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about improving market conditions, particularly in automotive and industrial sectors, and expects to see clearer signs of growth in 2026 [15][27] - The company anticipates that its AI data center business will continue to grow, with expectations of high teens percentage growth in Q1 [43] - Management highlighted the importance of maintaining operational efficiency and aligning manufacturing capabilities with market demand [19][90] Other Important Information - The company announced a new $6 billion share repurchase program after returning approximately 100% of free cash flow to shareholders in 2025 [18][24] - The FabRight strategy led to a 12% reduction in fab capacity in 2025, which is expected to lower depreciation costs and improve gross margins in 2026 [19] Q&A Session Summary Question: What was going on in the other category? - Management noted that the other category saw weakness due to normal seasonality and approximately $40 million in exits, but excluding these, the core business is above seasonal [29][30] Question: What is the total addressable market (TAM) for AI data centers? - Management refrained from providing specific guidance but expressed confidence in continued growth due to the company's unique capabilities in high-voltage power supply [31][33] Question: Will the exits impact gross margins? - Management indicated that exiting non-core businesses would not negatively impact gross margins, as the margins were near the corporate average [44] Question: What is the outlook for gross margins in Q1? - Management expects gross margins to increase by 30 basis points in Q1, driven by FabRight initiatives and improved utilization rates [48][49] Question: How is the company positioned for silicon carbide and AI data centers? - Management confirmed ongoing growth in silicon carbide applications and highlighted significant design wins in AI data centers, contributing to revenue growth [78][79]

Financial Data and Key Metrics Changes - In 2025, the company achieved $6 billion in revenue with a non-GAAP gross margin of 38.4%, reflecting disciplined execution and alignment with long-term strategy [5] - For Q4 2025, revenue was $1.53 billion, with a non-GAAP gross margin of 38.2% and earnings per share of $0.64, exceeding the midpoint of guidance [9][20] - Free cash flow for 2025 was $1.4 billion, representing a record free cash flow margin of 24%, with a 17% year-over-year increase [17][23] Business Line Data and Key Metrics Changes - Automotive revenue for Q4 was $798 million, up approximately 1% quarter-over-quarter, indicating stabilization in the automotive market [20] - Industrial revenue reached $442 million, up approximately 4% quarter-over-quarter and marking the first year-over-year growth in eight quarters, increasing 6% compared to Q4 2024 [20] - Revenue for the Power Solutions Group (PSG) was $724 million, down 2% quarter-over-quarter and 11% year-over-year, while the Analog and Mixed Signal Group (AMG) reported $556 million, down 5% quarter-over-quarter and 9% year-over-year [21] Market Data and Key Metrics Changes - The AI data center segment contributed over $250 million in revenue for the full year, with Q4 showing growth quarter-over-quarter [11][20] - Revenue in aerospace, defense, and security increased 70% year-over-year, driven by North America and Europe [11] - The company is seeing improving order trends across core markets, with global PMI trends indicating early signs of expansion [9][10] Company Strategy and Development Direction - The company is transitioning from a manufacturing-centric model to a product-centric approach, focusing on high-margin product revenue and strategic investments in technology [6][10] - The introduction of the Treo Platform and expansion into high-growth markets like AI data centers and automotive zonal architecture are key strategic initiatives [5][10] - The company plans to continue rationalizing its portfolio by exiting volatile non-core businesses and reallocating investments to differentiated power and sensing technologies [18] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the improving market environment across automotive, industrial, and AI infrastructure, indicating a strong position for future growth [15][26] - The company anticipates that the groundwork laid over the past years will allow it to benefit from improving demand conditions [15] - Management highlighted that the automotive inventory digestion is largely complete, and they expect to see stabilization in the market [10][20] Other Important Information - The company announced a new $6 billion share repurchase program after returning approximately 100% of free cash flow to shareholders through share repurchases in 2025 [17][18] - The company reduced fab capacity by 12% in 2025 to improve operational efficiency, which is expected to lower depreciation in 2026 by approximately $45-$50 million [19] - The company is preparing to sample over 30 new GaN devices in 2026, expanding its leadership in wide-bandgap technologies [8] Q&A Session Summary Question: What was going on in the other category? - Management noted that excluding exits, the company is above seasonal trends, and the decline in the other category was due to normal seasonality and approximately $40 million of exits [30] Question: What is the total addressable market (TAM) for AI data centers? - Management refrained from providing specific guidance but expressed confidence in continued growth due to their unique capabilities in high-voltage power supply and a broad product portfolio [32][34] Question: Is the $50 million exit in Q1 indicative of future quarterly run rates? - Management clarified that the exits will not be flat at $50 million and that the core business is expected to grow above market levels [39] Question: What is the outlook for gross margins? - Management indicated that gross margins are expected to improve due to FabRight initiatives and increased utilization, with a target of reaching low 40s% gross margins over time [86][92] Question: How is the company addressing the silicon carbide market? - Management reported strong growth in silicon carbide for automotive and AI data centers, with no plans to convert to 300mm manufacturing [78]

Investment Rating - The report maintains a "Buy" rating for several companies including NAURA, SICC, SUMCO, Shin-Etsu Chemical, Mitsubishi Electric, and Infineon [2]. Core Insights - The report highlights significant growth in local production and demand for silicon wafers and SiC substrates in China, with local coverage expected to increase from 41% to 54% for 12-inch silicon wafers and from 80% to 87% for 6-inch SiC substrates by 2027E [1][6]. - Pricing trends indicate a decline in average selling prices (ASP) for 8-inch silicon wafers at a CAGR of -10% from 2024 to 2026E, while 12-inch wafers are expected to decline at -6% CAGR during the same period. SiC substrate ASP is projected to decrease from US$443 in 2024 to US$384 in 2026E [1][6]. - Capacity expansion is notable, with 12-inch silicon wafer capacity expected to grow at a CAGR of 21% from 2024 to 2027E, significantly outpacing the 3% CAGR for 8-inch silicon wafers. SiC substrate capacity is also set to expand at 26% and 96% CAGR for 6-inch and 8-inch substrates, respectively [1][6]. - The report anticipates a consolidation in the industry, with the top three Chinese silicon wafer suppliers projected to cover 36% of domestic demand by 2027E, up from 26% in 2024 [1]. Summary by Sections China TAM - The total addressable market (TAM) for silicon wafers in China is projected to grow from US$1.999 billion in 2021 to US$4.511 billion by 2030E, with a notable increase in shipments from 36,962k units in 2021 to 103,570k units by 2030E [37]. - The SiC substrate market is expected to grow from US$197 million in 2021 to US$2.770 billion by 2030E, driven by rising EV penetration and SiC adoption rates [39]. - The GaN devices market is projected to expand from US$66 million in 2021 to US$1.611 billion by 2030E, supported by applications in EVs, data centers, and consumer electronics [42]. Supply and Demand Dynamics - Local suppliers' capacity expansion in silicon wafers is primarily driven by logic and memory clients, while SiC substrate capacity is expanding due to increased adoption in EVs and fast charging technologies [43]. - The report notes that local suppliers are expected to cover 75% of SiC substrate demand in China by 2025E, increasing to 84% by 2027E [6][39]. - The demand for SiC and GaN is anticipated to replace IGBT in high power and high frequency applications, with SiC penetration rates projected to reach 75% in EVs by 2030E [52]. Pricing Trends - The ASP for silicon wafers is expected to decline, with 8-inch wafers decreasing at a CAGR of -10% and 12-inch wafers at -6% from 2024 to 2026E [1][6]. - SiC substrate pricing is also expected to narrow, making SiC MOSFETs more competitive against silicon IGBTs [1]. Industry Consolidation - The report indicates a trend towards consolidation in the silicon wafer industry, with the top three suppliers expected to significantly increase their market share in China by 2027E [1].

Financial Data and Key Metrics Changes - The GAAP net loss for Q1 2025 was $5.2 million or $0.17 per share, compared to a net loss of $4.8 million or $0.19 per share in Q1 2024 [21] - GAAP operating expenses in Q1 2025 were $5.5 million, an increase of $448,000 from $5 million in Q1 2024 [21][22] - Non-GAAP net loss in Q1 2025 was $4.4 million compared to a loss of $4 million in Q1 2024 [22] - Cash, cash equivalents, and short-term investments as of March 31, 2025, were $24.1 million, down from $26.8 million on December 31, 2024 [24] Business Line Data and Key Metrics Changes - The partnership with a major capital equipment provider aims to enhance the development and production of advanced material solutions, particularly in gate-all-around technology [4][5] - Significant progress has been made in gate-all-around applications, generating detailed silicon-validated performance enhancement data for customers [9] - New patents focused on DRAM sense amplifiers have been granted, relevant for both high bandwidth and standard DDR memories [9] Market Data and Key Metrics Changes - The epi equipment market is expected to reach approximately $2.6 billion by 2027, with a CAGR of 10% to 15% in leading-edge nodes [9] - The market for gallium nitride (GaN) applications is forecasted to exceed $2 billion at the device level by the end of the decade, growing at about a 40% CAGR [17] Company Strategy and Development Direction - The company is focused on expanding its technology licensing business within the semiconductor industry, particularly in areas related to AI infrastructure and advanced semiconductor applications [20] - The partnership with the capital equipment provider is expected to accelerate the closing of license deals and enhance the company's market position [20] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the company's positioning to deliver solutions for challenging electronic devices, emphasizing the importance of technology and relationships with large semiconductor companies [26] - The company is actively recruiting for its engineering and sales teams to support the transition to high-volume production and to close deals [20] Other Important Information - The company raised $2.4 million under its ATM facility by selling approximately 163,000 shares at an average price of $15.19 [24] - Non-GAAP operating expenses for 2025 are expected to be in the range of $17.25 million to $17.75 million [25] Q&A Session Summary Question: Can you provide details about the partnership with the capital equipment provider? - The partnership involves a long-term relationship with a major equipment provider, focusing on gate-all-around technology and leveraging their capabilities for testing and production [30][34] Question: What is the focus of the work with STMicro? - The work with STMicro is focused on optimizing manufacturability, yield, and throughput in preparation for high-volume manufacturing, with discussions ongoing in multiple product areas [12][40] Question: What is the status of the transformative customers mentioned in previous calls? - Discussions with transformative customers are ongoing, with one customer moving faster than expected and showing significant interest in expanding the scope of work [51][70] Question: What are the implications of the restated employment agreement? - The restated agreement aimed to correct a mistake regarding severance upon change of control, with no significant implications beyond that [66] Question: How are the electrical results from Sandia Lab? - The electrical results show improved device performance, consistent with previous observations of material quality improvements [72]

Financial Data and Key Metrics Changes - The GAAP net loss for Q1 2025 was $5.2 million or 17¢ per share, compared to a net loss of $4.8 million or 19¢ per share in Q1 2024 [21] - GAAP operating expenses in Q1 2025 were $5.5 million, an increase of $448,000 from $5 million in Q1 2024 [21] - Non-GAAP net loss in Q1 2025 was $4.4 million compared to a loss of $4 million in Q1 2024 [22] Business Line Data and Key Metrics Changes - The increase in operating expenses was attributed to a $397,000 rise in R&D expenses and a $277,000 increase in G&A expenses, partially offset by a $226,000 decline in sales and marketing expenses [22] - The company is actively working on multiple technology areas, including gate all around applications and memory technologies, with significant progress reported in customer engagements [10][14] Market Data and Key Metrics Changes - The EPI equipment market is expected to reach approximately $2.6 billion by 2027, with a CAGR of 10% to 15% in leading-edge nodes [10] - The market for gallium nitride (GaN) applications is forecasted to exceed $2 billion at the device level by the end of the decade, growing at about a 40% CAGR [17] Company Strategy and Development Direction - The company has announced a partnership with a major capital equipment provider to enhance its technology offerings and accelerate customer engagements [4][9] - The focus on advanced node customers and the collaboration with the equipment provider aims to optimize production processes and improve customer solutions [5][20] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the company's positioning to deliver solutions for challenging electronic devices, emphasizing the importance of technology licensing within the semiconductor industry [20] - The company is actively recruiting to expand its engineering and sales teams to support growth and high-volume production [20] Other Important Information - The company raised $2.4 million under its ATM facility by selling approximately 163,000 shares at an average price of $15.19, maintaining a comfortable cash position [23] - Non-GAAP operating expenses for 2025 are expected to be in the range of $17.25 million to $17.75 million [25] Q&A Session Summary Question: Details on the partnership with the capital equipment company - The partnership involves extensive collaboration on technology development and production, with the partner providing significant resources and capabilities [32] Question: Focus of the partnership - The work is primarily focused on gate all around technologies, applicable to both logic and memory sectors [33] Question: Updates on STMicro collaboration - The company is engaged in discussions with multiple groups within STMicro, indicating strong credibility and interest in various technology areas [36][38] Question: Progress with RF SOI customers - There is increased interest in improving low noise amplifiers (LNAs) due to changing specifications from mobile phone manufacturers [43] Question: Status of transformative customers - Discussions with transformative customers are ongoing, with positive momentum and interest in expanding collaboration [49] Question: Financial outlook and operating expenses - Non-GAAP operating expenses for 2025 are projected to be around $17.25 million to $17.75 million, with a gradual ramp-up expected [54]