Q2 2024 Navitas Semiconductor Corp Earnings Call
Cath: Thank you for standing by. My name is Cath, and I will be your conference operator today. At this time, I would like to welcome everyone to the Navitas Semiconductor Second Quarter 2020 Earnings conference call.
Cath: Thank you for standing by. My name is Cath, and I will be your conference operator today. At this time, I would like to welcome everyone to the Navitas Semiconductor 2nd Quarter 2020 for Earnings Conference Call.
Cath: All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I would now like to turn the call over to Stephen Oliver, Vice President of Investor Relations. Please go ahead.
Speaker Change: All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session.
Speaker Change: If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad. If you would like to withdraw your question, press star 1 again. Thank you. I would now like to turn the call over to Stephen Oliver, Vice President of Investor Relations. Please go ahead.
Stephen Oliver: Good afternoon, everyone. I'm Stephen Oliver, Vice President of Investor Relations. Thank you for joining Navitas Semiconductor's second quarter 2024 results conference call. I'm joined today by Gene Sheridan, our chairman, president, CEO, and co-founder, and Janet Chou, EVP, CFO, and trustee. A replay of this webcast will be available on our website approximately one hour following this conference call, and the recorded webcast will be available for approximately 30 days following the call.
Speaker Change: Good afternoon, everyone. I'm Stephen Oliver, Vice President of Investor Relations.
Stephen Oliver: Additional information related to our business is also posted in the investor relations section of our website. Our earnings release includes non-GAAP financial measures. Reconciliations of these non-GAAP financial measures with the most directly comparable GAAP measures are included in our second quarter earnings release and also posted on our website in the investor relations section. In this conference call, we will make forward-looking statements about future events or about the future financial performance of Navitas, including acquisitions. You can identify these statements by words like we expect or we believe or similar terms.
Speaker Change: Thank you for joining Navitas Semiconductor's second quarter 2024 results conference call.
Speaker Change: I'm joined today by Eugene Sheridan, our Chairman, President, CEO and Co-Founder, and Janet Chou, EVP, CFO and Treasurer.
Speaker Change: A replay of this webcast will be available on our website approximately one hour following this conference call. And the recorded webcast will be available for approximately 30 days following the call.
Speaker Change: Additional information related to our business is also posted on the Investor Relations section of our website.
Speaker Change: Our earnings release includes non-GAAP financial measures. Reconciliations of these non-GAAP financial measures with the most directly comparable GAAP measures are included in our second quarter earnings release and also posted on our website in the investor relations section.
Speaker Change: In this conference call, we will make forward-looking statements about future events or about the future financial performance of Navitas, including acquisitions.
Speaker Change: You can identify these statements by words like we expect, or we believe, or similar terms.
Stephen Oliver: We wish to caution you that such forward-looking statements are subject to risks and uncertainties that could cause actual events or results to differ materially from expectations expressed in our forward-looking statements. Important factors that can affect Navitas' business, including factors that could cause actual results to differ from our forward-looking statements, are described in our earnings release. Please also refer to the risk factors section in our most recent 10-K and 10-Qs. Our estimates or other forward-looking statements may change, and Navitas assumes no obligation to update forward-looking statements to reflect actual results, change assumptions, or other events that may occur, except as required by law. And now, over to Gene Sheridan, CEO.
Speaker Change: We wish to caution you that such forward-looking statements are subject to risks and uncertainties that could cause actual events or results to differ materially from expectations expressed in our forward-looking statements.
Speaker Change: Important factors that can affect Navitas business, including factors that could cause actual results to differ from our forward-looking statements, are described in our earnings release.
Speaker Change: Please also refer to the Risk Factors section in our most recent 10-K and 10-Qs.
Speaker Change: Our estimates or other forward-looking statements may change, and Navitas assumes no obligation to update forward-looking statements to reflect actual results, change assumptions, or other events that may occur except as required by law.
Speaker Change: And now, over to Gene Sheridan, CEO .
Gene Sheridan: Thanks, Steve, and thanks to all of you for joining us today. I am pleased to announce Q2 revenue of $20.5 million at the top end of our guidance, which completes the first half of 2024 with a nearly 40% revenue increase compared to the prior year despite a slowdown in most semiconductor and market segments. Gallium Nitrite and Silicon Carbide continue to take share from legacy silicon chips. Our GAN Safe ICs offer the highest performance, most reliable, and most protected GAN power device in our industry and continue to drive new business at an extraordinary pace. Dan Safe is now being qualified or designed into over 100 customer projects, targeting different end markets and in all major regions around the world.
Gene Sheridan: Thanks, Steve. And thanks to all of you for joining us today.
Gene Sheridan: I am pleased to announce Q2 revenue of $20.5 million at the top end of our guidance, which completes the first half of 2024 with nearly 40% revenue increase compared to the prior year despite a slowdown in most semiconductor end markets.
Gene Sheridan: Gallium nitrite and silicon carbide continue to take share from legacy silicon chips.
Gene Sheridan: Our GAN Safe ICs offer the highest performance, most reliable, and most protected GAN power device in our industry, and continue to drive new business at an extraordinary pace.
Dan Safe: Dan Safe is now being qualified or designed into over 100 customer projects, spending for different end markets, and in all major regions around the world.
Gene Sheridan: Our latest Generation 3 FAST carbon carbide technology has improved performance by an additional 20% compared to our prior generation, which already demonstrated the industry's leading efficiency and thermal performance, and now also has over 100 customer projects in our pipeline. The combination of GaN-safe and Gen 3 fast silicon carbide for AI data centers and EV onboard chargers is creating next-gen power systems that exceed even our own expectations and set new industry standards in terms of power density, energy efficiency, and system cost. Let me give further specifics on each of our target markets.
Dan Safe: Our latest Generation 3 fast silicon carbide technology has improved performance by an additional 20% compared to our prior generation, which already demonstrated the industry's leading efficiency and thermal performance, and now also has over 100 customer projects in our pipeline.
Dan Safe: The combination of GaN-safe and Gen 3 fast silicon carbide for AI data centers and EV onboard chargers are creating next-gen power systems that exceed even our own expectations and set new industry standards in terms of power density, energy efficiency, and system costs.
Gene Sheridan: The AI data center market continues to evolve at a rapid and exciting pace. Traditional servers require a total power of up to 30 kilowatts per rack. With NVIDIA's Grace Hopper GPUs, those power levels are being pushed to 60 or even 120 kilowatts. With Blackwell, Ultra, and Rubin, we are targeting 240 and even 480 kilowatts in the next two years. Our system design center focused on data centers has stepped up to the challenge with AC to DC server power supply platforms expanding rapidly from 2.7 to 3.2 to 4.5 kilowatts and targeting 8 to 10 kilowatts by the end of the year.
Dan Safe: Let me give further specifics in each of our target markets.
Dan Safe: The AI data center market continues to evolve at a rapid and exciting pace.
Dan Safe: Traditional servers required a total power of up to 30 kilowatts per rack.
Dan Safe: With NVIDIA's Grace Hopper GPUs, those power levels are being pushed to 60 or even 120 kilowatts.
Dan Safe: With Blackwell, Ultra, and Rubin, we are targeting 240 and even 480 kilowatts in the next two years.
Speaker Change: Our system design center focused on data centers has stepped up to the challenge with AC to DC server power supply platforms expanding rapidly from 2.7 to 3.2 to 4.5 kilowatts and targeting 8 to 10 kilowatts by the end of the year.
Gene Sheridan: The recently announced 4.5-kilowatt platform combines our newest Gen 3-faceted silicon carbide in the front-end Power Factor Correction, or PFC, section and with the industry-leading GAN-SAFE technology in the back-end LLC portion to set new industry benchmarks with energy efficiencies of 97% and power densities of nearly 140 watts per cubic inch. As a result, our data center pipeline has grown rapidly, faster than any other segment in the last three months and has doubled since our investor day in December, now with over 60 customer projects in development. We're pleased to announce another seven data center design wins in C2. In addition, I'm excited to announce a major technology innovation from our System Design Center. Traditional PFC circuits operate at a low frequency with moderate efficiency.
Speaker Change: The recently announced 4.5-kilowatt platform combines our newest Gen 3-faceted silicon carbide in the front-end Power Factor Correction, or PFC, section.
Speaker Change: With the industry-leading GANS-AID technology in the back-end LLC portion to set new industry benchmarks with energy efficiencies of 97% and power densities of nearly 140 watts per cubic inch.
Speaker Change: As a result, our data center pipeline has grown rapidly, faster than any other segment in the last three months, and has doubled since our investor day in December , now with over 60 customer projects in development. We're pleased to announce another seven data center design wins in Q2.
Speaker Change: In addition, I'm excited to announce a major technology innovation from our System Design Center. Traditional PFC circuits operate at low frequency with moderate efficiencies.
Gene Sheridan: Our team has unlocked an additional 30% energy saving for data center PFC circuits by innovating a novel high-frequency soft-switching control method, which translates to over 99% peak efficiency for that PFC section with higher power densities and attractive costs. This technology is patent pending and is available immediately for our customers to implement in their Blackwell and Blackwell Ultra designs. It will be integrated with our 8-kilowatt and higher design while we retrofit the 4.5 and 3.2-kilowatt platforms in the coming months.
Speaker Change: Our team has unlocked an additional 30% energy savings for data center PFC circuits by innovating a novel high-frequency soft-switching control method, which translates to over 99% peak efficiency for that PFC section with higher power densities and attractive costs.
Speaker Change: This technology is patent pending and is available immediately for our customers to implement for their Blackwell and Blackwell Ultra designs. It will be integrated with our 8-kilowatt and higher design while we retrofit the 4.5 and 3.2-kilowatt platforms in the coming months.
Gene Sheridan: In electric vehicles, we see strong growth in our customer pipeline, which now includes over 200 customer projects, and it's the largest segment of our pipeline. Our latest 22-kilowatt onboard charger platform, which enables three times faster charging with two times higher power density, 30% energy savings, and 40% lighter compared to comparable solutions on the market, is seeing strong interest.
Speaker Change: In electric vehicles, we see strong growth in our customer pipeline, which now includes over 200 customer projects, and it's the largest segment of our pipeline.
Speaker Change: Our latest 22-kilowatt onboard charger platform, which enables three times faster charging with two times higher power density, 30% energy savings, and 40% lighter, compared to comparable solutions on the market, is seeing strong interest.
Gene Sheridan: This platform contributed to a total of 15 new customer design wins in Q2, which included three major new silicon carbon wins that will start production next year, while we're on track for our first GAN EV revenues to start by the end of 2025. The customer pipeline in both appliance and industrial segments continues to be strong and growing well beyond the $380 million we stated in December, with strong ramps expected in 2025 across diverse customers and regions, including seven of the top 10 appliance leaders, with a total of 25 new design wins in Q2 expected to wrap production next year or 2026. These customer projects span hair care applications, washers, dryers, refrigerators, heat pumps, industrial HVAC, robotics, and automation applications.
Speaker Change: This platform has contributed to a total of 15 new customer design wins in Q2, which includes three major new silicon carbon wins that will start production next year while we're on track for our first GAN EV revenues to start by the end of 2025.
Speaker Change: The customer pipeline in both appliance and industrial segments continues to be strong and growing well beyond the $380 million we stated in December , with strong ramps expected in 2025 across diverse customers and regions.
Speaker Change: including 7 of the top 10 appliance leaders with a total of 25 new design wins in Q2 expected to wrap production next year or 2026.
Speaker Change: These customer projects span hair care applications, washers, dryers, refrigerators, heat pumps, industrial HVAC, robotics, and automation applications.
Gene Sheridan: While the solar industry experienced a significant slowdown due to higher interest rates over the last 18 months, as replacement technologies, we are working on over 100 customer projects with GaN for residential microinverters and silicon carbide for higher power, higher voltage string inverters, in addition to their related energy storage systems. We continue strong engagement with the majority of the top 10 solar players and are pleased to announce another six customer design wins in Q2.
Speaker Change: While the solar industry experienced a significant slowdown due to higher interest rates over the last 18 months.
Speaker Change: As displacement technologies, we are working on over 100 customer projects with GaN for residential microinverters and silicon carbide for higher power, higher voltage string inverters in addition to their related energy storage systems.
Speaker Change: We continue strong engagements with the majority of the top ten solar players and are pleased to announce another six customer design wins in Q2.
Gene Sheridan: We are also progressing well for a major U.S. GAN-based microinverter ramp in the first half of next year. GAN revenue growth continues in mobile markets as all major OEMs across smartphones, tablets, and notebooks continue to increase the percentage of GAN adoption in their fast charger portfolios over legacy silicon power. As discussed in the last call, GAN adoption in customers such as Xiaomi and Oppo is expected to be 30% this year. Following our fast charger design lens for Samsung Galaxy S23 and S24 phones, we are pleased to announce that the new Galaxy Z Flip 6, Z Fold 6, and all A-series phones, as revealed during July's Galaxy Unpacked event, now use Navitas ScanFast technology to deliver fast, light, truly portable fast charging experiences for the consumer.
Speaker Change: We are also progressing well for a major U.S. GaN-based microconverter ramp in the first half of next year.
Speaker Change: Dan revenue growth continues in mobile markets as all major OEMs across smartphone, tablet, and notebooks continue to increase the percentage of GAN adoption in their fast charger portfolios over legacy silicon power chips.
Speaker Change: As discussed in the last call, GAN adoption in customers such as Xiaomi and Oppo is expected to be 30% this year.
Speaker Change: Following our fast charger design lens for Samsung's Galaxy S23 and S24 phones.
Speaker Change: We are pleased to announce that the new Galaxy Z Flip 6, Z Fold 6, and all A-series phones, as revealed during July's Galaxy Unpacked event, now use Navitas ScanFast technology to deliver fast, light, truly portable, fast-charging experiences for the consumer.
Gene Sheridan: Growth in the laptop PC market resumed in Q1, with GanFast adopted again by Lenovo for 105 and 170 watt fast chargers and again by Dell, this time for 100 and 130 watts, achieving up to 50% size reduction. Overall, Q2 saw another 16 charger launches, bringing the total to over 470 production designs, and Navitas remains number one in mobile fast charging. Our new GAN SLIM portfolio, with integration, ease of use, and low-cost manufacturing methods, continues to grow the customer pipeline, now with over 50 customer projects.
Speaker Change: Growth in the laptop PC market resumed in Q1, with GandFast adopted again by Lenovo for 105 and 170 watt fast chargers, and again by Dell, this time for 100 and 130 watts, achieving up to 50% size reduction.
Speaker Change: Overall, Q2 saw another 16 charger launches, bringing the total to over 470 production designs and Navitas remains number one in mobile fast charging.
Speaker Change: Our new GAN SLIM portfolio, with integration, ease of use, and low-cost manufacturing methods, continues to grow the customer pipeline now with over 50 customer projects.
Gene Sheridan: Dan Slim increases our GAN-served market by enabling lower system costs compared to silicon design for many applications, targeting applications under 500 watts across mobile, consumer, and home appliances. Overall, I'm pleased with our Q2 results at the high end of our guidance, combined with the growth of our pipeline, major new design links, and significant new technology launches. Electrification and energy savings have never been more important, and Navitas is well positioned as the only pure-play, next-gen power semi-company with leading-edge gallium nitride and sodium carbide technology. With that, I will turn it over to our CFO, Janet Chou, to discuss the
Speaker Change: Dan Slim increases our GAN-served market by enabling lower system costs compared to silicon design for many applications, targeting applications under 500 watts across mobile, consumer, and home appliance.
Speaker Change: Overall, I'm pleased with our Q2 results at the high end of our guidance combined with the growth of our pipeline, major new design wins, and significant new technology launches.
Speaker Change: Electrification and energy savings have never been more important and Navitas is well positioned as the only pure-play next-gen power semi company with leading-edge gallium nitride and silicon carbide technologies.
Janet Chou: With that, let me turn it over to our CFO , Janet Chou, to discuss the financials.
Janet Chou: Thank you, team. In my comments today, I will first take you through our second quarter financial results, and then I will give you our outlook for the third quarter. Revenue in the second quarter of 2024 grew 13% year over year to $20.5 million. While we are experiencing similar macroeconomic factors as others in certain of our end markets, Our mobile business was strong in the second quarter, demonstrating the benefits of our smaller, faster, more energy efficient technology as we continue to gain significant traction in mobile and consumer charging applications. Before addressing Francis, I'd like to refer you to the gap to non-gap reconciliation in our press release earlier today.
Janet Chou: Thank you, Jane. In my comments today, I will first take you through our second quarter financial results, and then I will give you our outlook for the third quarter. Revenue in the second quarter of 2024 grew 13% year over year to $20.5 million.
Janet Chou: While we are experiencing similar macroeconomic factors as others in certain of our end markets.
Janet Chou: Our mobile business was strong in the second quarter, demonstrating the benefits of our smaller, faster, more energy-efficient technology as we continue to gain significant traction in mobile and consumer charging applications.
Speaker Change: Before addressing expenses, I'd like to refer you to the gap-to-non-gap reconciliation in our press release earlier today. In the rest of my commentary, I will refer to non-gap expense measures.
Janet Chou: In the rest of my commentary, I will refer to non-GAAP expense measures. Growth margin in the second quarter was 40.3%, compared to 41.5% in the second quarter of 2023, due to mobile market product mix, as we continue to see strength in that part of the business. Growth margin was down sequentially from 41.1%. However, total operating expenses for the second quarter were relatively flat sequentially at $21.5 million, comprised of SG&E expenses of $9 million and R&D expenses of $12.5 million. This is a good demonstration of our focus on operating efficiently.
Speaker Change: Growth margin in the second quarter was 40.3%, compared to 41.5% the second quarter of 2023, due to mobile market product mix, as we continue to see strength in that part of the business.
Speaker Change: Growth Margin was down sequentially from 41.1%.
Speaker Change: Total operating expenses for the second quarter were relatively flat sequentially at $21.5 million, comprised of SG&A expenses of $9 million and R&D expenses of $12.5 million.
Speaker Change: This is a good demonstration of our focus on operating efficiency.
Janet Chou: Adding all this together, our second quarter 2024 loss from operations was $13.3 million. Our weighted average share count for the second quarter was 183 million shares. Turning to the balance sheet, it remains very strong with high levels of liquidity; cash and cash equivalents at quarter end were $112 million, and we continue to carry no debt. While accounts receivable were relatively flat at $22.7 million, compared to $22.2 million in the prior quarter, we made good progress on reducing inventory to $25.2 million from $33.2 million in the prior quarter.
Speaker Change: Adding all this together, the second quarter 2024 loss from operations was $13.3 million.
Speaker Change: Our weighted average share count for the second quarter was 183 million shares.
Speaker Change: Turning to the balance sheet, it remains very strong with high levels of liquidity. Cash and cash equivalents at quarter end were $112 million and we continue to carry no debt.
Janet Chou: Our goal is to continue to improve our working capital. Moving on to guidance for the third quarter, we currently expect revenues of $22 million, plus or minus $500,000. At the midpoint, this represents a sequential growth of more than 7%. Growth margin for the third quarter is expected to be approximately 40%, plus or minus 50 basis points, as our mix continues to lean more towards the mobile market in the near term. We expect margin improvements will align with demand recovery in higher margin markets.
Speaker Change: Our goal is to continue to improve our working capital.
Speaker Change: Moving on to guidance for the third quarter, we currently expect revenues of $22,000 plus or minus $500,000.
Speaker Change: At the midpoint, this represents a sequential growth of more than 7%.
Speaker Change: Growth margin for the third quarter is expected to be approximately 40% plus or minus 50 basis points as our mix continues to lean more towards the mobile market in the near term.
Speaker Change: We expect margin improvements will align with demand recovery in higher margin markets.
Janet Chou: In total, our NAMGAP operating expenses in the third quarter are expected to be approximately $21.5 million, and this excludes stock-based compensation and amortization of intangible assets. We're keeping our expenses as flat as possible as we improve our efficiency and optimize our cost structure while supporting our growth initiatives. For the third quarter of 2024, we expect our weighted average share count to be approximately 185 million shares. In closing, we are pleased with our second quarter performance, which includes good progress in expense management and improvements in working capital. This positions us well to scale the business towards long-term growth and profitability. Operator, let's begin the Q&A session.
Speaker Change: In total, our non-GAAP operating expenses in the third quarter are expected to be approximately $21.5 million, and this excludes stock-based compensation and amortization of intangible assets.
Speaker Change: We're keeping our expenses as flat as possible as we improve our efficiency and optimize our cost structure while supporting our growth initiatives.
Speaker Change: For the third quarter of 2024, we expect our weighted average share count to be approximately 185 million shares.
Speaker Change: In closing, we are pleased with our second quarter performance, which includes good progress in expense management and improvements in working capital. This positions us well to scale the business towards long-term growth and profitability.
Speaker Change: Operator, let's begin the Q&A session.
Operator: Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again. If you are called upon to ask a question and are listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not in mute when asking your question. Again, press star one to join the queue. And your first question comes from the line of Ross Seymour with Deutsche Bank. Your line is open.
Speaker Change: Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, press star 1 on your telephone keypad to raise your hand and join the queue.
Speaker Change: If you would like to withdraw your question, simply press star 1 again. If you are called upon to ask a question and are listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not in mute when asking your question.
Speaker Change: Again, press star 1 to join the queue. And your first question comes from the line of Ross Seymour with Deutsche Bank. Your line is open.
Ross Seymore: Thanks for letting me ask a question. Gina, I wanted to get an update on what you're seeing as far as end market trends go. And really, what I'm going for is everybody knows that some of the rebound has been a little slower in a lot of end markets, but how are you seeing the macro side and, more importantly, the company specific ramps, any pushouts, pull-ins in those ramps, any color and your visibility would be great.
Ross Seymour: Hey, thanks for letting me ask a question.
Ross Seymour: Gene, I wanted to get an update on what you're seeing as far as the end market trends, and really what I'm going for is, everybody knows that some of the rebound has been a little slower in a lot of end markets.
Speaker Change: How are you seeing the macro side and, more importantly, the company-specific ramps? Any push-outs, pull-ins in those ramps? Any color and your visibility would be great.
Gene Sheridan: And with that, Ross, thanks for the Question. I think the good news with the choppy markets today is that we're not seeing pushouts and delays. That's pretty fundamental to our mid to long-term outlook. In fact, the pipeline, as I highlighted in my prepared remarks, continues to grow. Across all segments, we see growth with EV, especially around onboard chargers. You know, that's a focus area for us. Now only with sodium carbide in the near term, but again, in the medium term, late 25 and into 26.
Gene Sheridan: And that last line is for.
Gene Sheridan: Question. I think the good news with the choppy markets today is that we're not seeing pushouts and delays. That's pretty fundamental to our mid to long-term outlook. In fact, the pipeline, as I highlighted in the prepared remarks, continues to grow.
Gene Sheridan: Across all segments, we see growth with EV, especially around on-board chargers, you know, that's a focus area for us.
Speaker Change: Not only with sodium carbide in the near term, but again in the medium term, late 25 and into 26.
Gene Sheridan: We're really pleased with Appliance and Industrial. Even though that market's a little softer on volume, 25 new design wins, I think it's an all-time high. And that's pretty broad, as I highlighted, hair care, dryers, washing machines, refrigerators, Heat pumps is a big one, that market takes a little longer, as we've been talking about, but now we're getting close to those ramps, quite a few of them in 25, even more in 26.
Speaker Change: We're really pleased with Appliance and Industrial. Even though that market's a little softer on volume, 25 new design wins, I think is an all-time high. And that's pretty broad-based, as I highlighted.
Speaker Change: Inner Care, Dryers, Washing Machines, Refrigerators.
Speaker Change: Heat pumps is a big one. That market takes a little longer, as we've been talking about. But now we're getting close to those ramps, quite a few of them in 2025, even more in 2020.
Gene Sheridan: Even solar, which has probably hit the hardest in the last 18 months, as I mentioned, is still on track for that GAN launch. Next year, we see GAN moving into a beachhead position on microinverters, as we talked about for many quarters, but also sodium carbide continues to win more in the commercial string inverter.
Speaker Change: 26
Speaker Change: Even solar, which has probably hit the hardest in the last 18 months, as I mentioned, still on track for that GaN launch. Next year we see GaN moving into a beachhead position on microinverters.
Speaker Change: As we talked about for many quarters, but also sodium carbide continues to win more in the commercial string inverter market.
Gene Sheridan: And of course, I got to highlight AI data centers and enterprise in general. Coming from a zero base, it's still one of the smaller segments for us, but it doubled in terms of the number of customer projects. 30 in Q1, 60 now. With three design ones we highlighted in Q1, now seven. So we like those trends. It's not too meaningful this year, but it really starts to be appreciable in the overall revenue next year and continues to grow strongly with those sort of ancillary pieces that I talked about.
Speaker Change: And of course, I've got to highlight AI data centers and enterprise in general. Coming from a zero base, it's still one of the smaller segments for us, but it doubled in terms of the number of customer projects.
Speaker Change: 30 in Q1, 60 now, with three design ones we highlighted in Q1, now seven. So we like those trends, it's not too meaningful this year, but really starts to be appreciable in the overall revenue next year.
Speaker Change: and continues to grow strongly with those sort of power increases that I talked about in my remarks. So all that stuff's pretty encouraging. I don't highlight mobile consumer because that is our position of strength. It's where we're seeing upsides in the near term, but that's certainly not going to go away as well. It'll just become a smaller percentage of the pipeline over time.
Gene Sheridan: In my remarks, all that stuff is pretty encouraging. I don't highlight the mobile consumer because that is our position of strength. It's where we're seeing upsides in the near term. But that's certainly not going to go away as well. It'll just become a smaller percentage of the pipeline.
Ross Seymore: That's very helpful. I guess my one follow-up question either for you or Janet on the gross margin side when those company-specific design wins that you just went through genes start to ramp over time. How do we think about the gross margin puts or takes? I think most of them are accretive. But when do you think those are going to start being built in in a more meaningful way? And then what are the kind of aspirational gross margin targets you think the company could attain over the next year or two?
Janet Chou: That was very helpful. I guess my one follow up either for you or Janet, on the gross margin side, when those company specific design wins that you just went through, genes start to ramp over time.
Speaker Change: How do we think about the gross margin puts or takes? I think most of them are accretive, but when do you think those are going to start being built in in a more meaningful way? And what's the kind of aspirational gross margin targets you think over the next year or two that the company could attain?
Janet Chou: Ross, thank you for your question. Let me first take that, and Jean can add more color.
Speaker Change: Ross, thank you for your question. Let me first take that and Gene can add more color. You know, our growth margin is heavily dependent on next.
Janet Chou: You know, our growth margin is heavily dependent on mix. We're seeing very strong momentum going on in mobile. Last year, mobile was less than half of the revenue. Now this year, year to date, mobile is more than half.
Speaker Change: We're seeing very strong momentum going on in mobile. Last year, mobile is less than half of the revenue.
Janet Chou: So that's kind of margin diluted. But at the same time, we're doing everything we can to drive margin improvement. We've been doing a lot of work with our suppliers to negotiate down the price. As those demands start to ramp up in higher margin markets like solar, EV, or industrial, we will see margin improvement. We're still very committed to the long-term growth margin target of 50% and above. Yeah, if I add to that, Ross, just to kind of
Gene Sheridan: Now, this year, year to date, mobile is more than half, so that's kind of margin diluted. But at the same time, we're doing everything we can to drive margin improvements. We've been doing a lot of work with our suppliers to negotiate down, you know, price.
Gene Sheridan: As those demands start to ramp up in higher margin markets like solar, EV, or industrial, we will see margin improvement. We're still very committed to the long-term growth margin target of 50% and above.
Gene Sheridan: Yeah, if I add to that, Ross, just to kind of relate it back to your earlier question, the market mix and the pipeline, you know, we're winning these customers, we're pricing them, we know whose price points are, we know what's coming in 25 and 26. So that adds to our competence, as Janet said, that it's a market-mix-based approach. While we're, I think, practical about, realistic about mobile consumers being below that average in the short-term and even in the long-term, for obvious reasons, other markets, we continue to feel competent and good about being at that long-term margin model, if not higher, driving the overall corporate average where it needs to be. So I think that puts us in a good place, and that's why we were comfortable reiterating those margin terms.
Gene Sheridan: If I add to that, Ross, just to kind of relate it back to your earlier question, the market mix and the pipeline, you know, we're winning these customers, we're pricing them. We know what those price points are. We know what's coming in 2025 and 2026.
Ross Seymour: So that adds to our competence, as Janet said, that it's a market-mix-based approach. While we're, I think, practical about, realistic about mobile consumers...
Janet Chou: being below that average in the short-term and even in the long-term for obvious reasons.
Janet Chou: The other markets, we continue to feel confident and good about being at that long-term margin model, if not higher, driving the overall corporate average where it needs to be. So I think that puts us in a good place, and that's why we were comfortable reiterating those margin targets.
Speaker Change: Perfect. Thank you.
Operator: Your next question comes from the line of Blaine Curtis with Jeffries. Your line is open.
Speaker Change: Thanks, y'all. Thank you.
Speaker Change: Your next question comes from the line of Blaine Curtis with Jeffries. Your line is open.
Blaine Curtis: Hey, good afternoon. Thanks for taking my question. I just want to follow up on Ross's question. You know, last, I guess in the June quarter, it seemed like mobile was growing and everything else was kind of correcting. I just want to understand, are the other kind of non-mobile businesses flattening out, or are they still declining as you looked at September?
Blaine Curtis: Hey, good afternoon. Thanks for taking my question. I just want to follow up on Ross's question. You know, last, I guess in the June quarter, it seemed like, you know, mobile was growing and everything else was kind of correcting. I just want to understand, are the other kind of non-mobile businesses flattening out, or are they still declining as you look to September ?
Gene Sheridan: Yeah, we don't break it up by quarter by market, but what I can say is, yes, we've seen further upsides on mobile and consumer, which is helpful on the top line. And now we're sequentially growing into Q3, as we guided. At the same time, I would say solar, in particular, is still a pretty small percentage, quite a bit down from where it was last year. So I think that's the one we've probably seen this, a trade-off between solar as a percentage of revenue versus mobile consumers, skewing that gross margin a bit.
Speaker Change: Yeah, we don't break it up by quarter by market, but what I can say is, yes, we've seen further upsides on global and consumer, which is helpful on the top line, and now we're sequentially growing into Q3 as we guided.
Speaker Change: At the same time, I would say solar in particular is still a pretty small percentage, quite a bit down from where it was last year.
Speaker Change: So I think that's the one, we've probably seen this, a trade-off between solar as a percentage of revenue versus mobile consumer, skewing that gross margin a bit, but I think things are pretty stable on the others, EV, appliance and industrial, and of course enterprise is really just getting started.
Gene Sheridan: But I think things are pretty stable on the others, EV, appliance, and industrial, and, of course, enterprise is really just getting started, near the zero point as we're just ramping this program. So that's how I'd see some of the pluses and minuses across the market. More to you, folks.
Speaker Change: I give the zero points for just ramping this program. So that's how I'd see some of the pluses and minuses across the markets and the.
Blaine Curtis: Helpful. And I'm just kind of curious, as you look long term, the, you know, between the kind of four segments outside a mobile data center, the EV, mobility, appliances, and solar, just kind of curious. I mean, you can see the pipeline building. I'm just kind of curious between those four, which one do you think will contribute revenue the earliest? And is that mostly next year? Or could you see some into the end of the Yeah, we're already shipping.
Speaker Change: more to you folks.
Speaker Change: helpful and I'm just kind of curious as you look long-term the you know the between the kind of four segments outside a mobile data center the EV mobility
Speaker Change: Appliances and Solar. Just kind of curious, I mean you can see the pipeline building. I'm just kind of curious between those four, which one do you think will contribute revenue the earliest? And is that mostly next year or could you see some even into the end of this year?
Gene Sheridan: Yeah, we're already shipping. We're already shipping silicon carbide into EV and solar. We're already shipping GAN into appliances, and shipping SICK into industrial. So we've got a base of business with each of those, but we're going to be layering in new growth.
Speaker Change: Yeah, we're already shipping.
Speaker Change: We're already shipping silicon carbide into EV and solar. We're already shipping GAN into appliance and shipping SIC into industrial. So we've got a base of business in each of those.
Operator: GAN is going into solar for the first time next year and ramping up. GAN is going into EV by the end of 2025, and ramping up in 2026. Both GAN and silicon carbide are ramping for the first time in appreciable production volumes in the second half of this year, so they're all sort of layering in at different times. And those are largely driven not by product availability but just design time from when we launched the higher power GAN and other new products in the last
Speaker Change: But we're going to be layering in new growth, GAN going into solar for the first time next year in ramping, GAN going into EV by the end of 2025, ramping in 2026, both GAN and silicon carbide ramping for the first time in appreciable production volumes, second half of 2022.
Speaker Change: This year, so they're all sort of layering in at different times, and those are largely driven not by product availability, but just design time from when we launched the higher power GAN and other new products in the last year.
Quinn Bolton: Your next question comes from the line of Quinn Bolton with Needham. Your line is open.
Speaker Change: Got you. Thank you.
Speaker Change: Thanks, Blake.
Speaker Change: Your next question comes from the line of Quinn Bolton with Needham. Your line is open.
Janet Chou: Thank you, Janet. Thanks for letting me ask a question. I guess I wanted to start, I believe last quarter, you guys seemed to feel comfortable with a growth rate in 24 of about 20% for the full year. The September guide looks like it's coming in below consensus. And not sure if you're willing to comment on a growth rate for the year, but just trying to sort of level set where you think 2024 might come out.
Quinn Bolton: Thank you, Janet. Thanks for letting me ask the question. I guess I wanted to start, I believe last quarter you guys seemed to feel comfortable with the growth rate in 24 of about
Quinn Bolton: twenty percent for the full year. The September guide. Looks like it's coming in below consensus and I'm not sure if you're willing to comment on it growth rate for the year, but but just trying to sort of level set where you think 2024 might come out.
Gene Sheridan: Yeah, we didn't formally guide but certainly anticipated a moderated growth rate. This year, we still feel good about it.
Speaker Change: Yeah, we did formally guide, but certainly anticipated a moderated growth rate this year. We still feel good about it. Obviously, it's important that Q3 is now sequentially growing 7% from Q2. We're not formally guiding Q4, but feel good about a growth outlook going from Q3 to Q4.
Gene Sheridan: Obviously, it's important that Q3 is now sequentially growing 7% from Q2. We're not formally guiding Q4, but we feel good about a growth outlook going from Q3 to Q4. And certainly feel good about growth rates obviously going into the next year, albeit not giving a formal guide yet. So we'll continue to go quarter by quarter, but I'd say that's kind of the color commentary I would offer up.
Speaker Change: I certainly feel good about growth rates obviously going into next year, albeit not giving a formal guide yet. We'll continue to go quarter by quarter, but I'd say that's the color commentary I would offer up.
Quinn Bolton: Got it. And then you guys have given us really good detail on the customer engagements and customer pipelines. But you know, in the near term, it does feel like some of those projects are either delayed, or maybe it's just taking longer to clear inventory before some new projects take off. And so I'm wondering, can you give us any commentary about bookings, trends, or backlog? You know, I think you've got a couple questions, but you know, do you feel like you're starting to see the turn in some of these other markets beyond mobile, just kind of Besides the customer activity, which, you know, Maybe at no fault of your own is subjected to getting delayed or pushed out in time? What gives you confidence that growth accelerates next year?
Speaker Change: Got it. And then you guys have given us really good detail on the customer engagements, customer pipelines.
Speaker Change: But you know, the near term, it does feel like some of those projects are either delayed, or maybe it's just taking
Speaker Change: Longer to clear inventory before some new projects take off and so I'm wondering can you give us any commentary about bookings trends backlog You know, I think you've got a couple questions But you know, you feel like you're starting to see the turn and some of these other markets beyond mobile just yet kind of
Speaker Change: Besides the customer activity, which, you know, maybe at no fault of your own, is subject to getting delayed or pushed out in time, what gives you confidence that the growth accelerates next year?
Gene Sheridan: Yeah, I think short-term, you know, backlog coverage for near-term quarters is solid. That's encouraging. Inventory correction, as we said, pockets of inventory definitely in the channel, but we see those stable and improving. So that's encouraging.
Speaker Change: Yeah, I think short-term, you know, backlog coverage for near-term quarters is solid, that's encouraging. Inventory correction, as we said, pockets of inventory definitely in the channel, but we see those stable to improving, so that's...
Speaker Change: encouraging and announcing the projects
Speaker Change: Push out, staying on track. I don't think we saw any appreciable
Speaker Change: Push-outs or delays or certainly cancellations. So at the end of the day, it comes down to the actual production volumes. Customers can be on schedule, they can launch on time, but are they launching at 20% less volume or 20% higher volume? Those are things that ultimately you don't know until you get closer and the orders are coming in.
Gene Sheridan: And then not seeing the projects push out, staying on track. I don't think we saw any appreciable push-outs or delays or, certainly, cancellations. So, at the end of the day, it comes down to the actual production volumes. Customers can be on schedule, they can launch on time. But are they launching at 20% less volume or 20% higher volume?
Speaker Change: But I think some of those other points about inventory, backlog coverage are encouraging, so we're cautiously optimistic, but just don't want to get ahead of ourselves in this choppy market.
Gene Sheridan: And those are things that, ultimately, you don't know until you get closer and the orders are coming in. But I think some of those other points about inventory and backlog coverage are encouraging. So we're cautiously optimistic, but we just don't want to get ahead of ourselves in this choppy market.
Speaker Change: Got it. So it sounds like it's maybe more fluctuations in those production volumes.
Gene Sheridan: Got it. So it sounds like it's maybe more fluctuations in those production volumes that may be the biggest swing factor rather than projects pushing out. Yeah, exactly.
Gene Sheridan: Yeah, exactly. And obviously, that's on running programs as much as it is on new, new programs. So that's, that's a good summary.
Speaker Change: That may be the biggest swing factor rather than projects pushing out.
Speaker Change: Yeah, exactly. And obviously that's on running programs as much as it is on new programs. So that's a good summary point.
Operator: Your next question comes from the line of Jack Egan with Charter Equity Research. Your line is open.
Speaker Change: Got it. Thank you, Eugene.
Speaker Change: Thanks.
Speaker Change: Your next question comes from the line of Jack Egan with Charter Equity Research. Your line is open.
Jack Egan: Hey guys, thanks for taking the question. I had a bit of a high-level one on data centers. I'm curious as to what the biggest challenges are for the industry to increase the power level of power supplies. So you've talked about going from 3.2 kilowatts to 4.5 more recently and then aspirations for 8 to 10 kilowatts eventually. When it comes to product design for those server power supplies, what becomes, I guess, the long pole in the tent?
Jack Egan: Hey guys, thanks for taking the questions. So I had a bit of a high level one on data center.
Jack Egan: I'm curious as to what the biggest challenges are for the industry to increase the power level of power supplies. So you've talked about going from 3.2 kilowatts to 4.5 more recently and then aspirations for 8 to 10 kilowatts eventually.
Jack Egan: Is it the power chips themselves and whether they can, you know, develop them so they can handle more power without breaking down? I mean, I'm basically wondering if, you know, the chips themselves are the limiting factor or if it's something else.
Speaker Change: When it comes to the product design for those server power supplies, what becomes, I guess, the long pole in the tent? Is it the power chips themselves?
Speaker Change: And whether they can, you know, developing them so they can handle more power without breaking down. I mean, I'm basically wondering if, you know, the chips themselves are the limiting factor or if it's something else.
Gene Sheridan: Yeah, you bet, Jack. That's a good question for sure. And really, it does come down to the switching speed and the efficiency of the power chips. If you can get the gallium nitrate or film carbide chips to switch faster and more efficiently, the speed actually allows you to shrink the mechanical size of the other passive components, the transformers, inductors, and filters. When they shrink, not only are they coming down in size to pack more power in the same size, but you're also shrinking the case size, the mechanicals, the PCDs. So the mechanical shrink is going to come from the speed of gallium nitrate and carbon carbide. At the same time, you've got to worry about the heat.
Speaker Change: And then I had a follow-up.
Speaker Change: Yeah, you bet, Jack. That's a good question for sure. And really, it does come down to the switching speed and the efficiency of the...
Speaker Change: Power Chips. If you can get the gallium nitrate or film carbonate chips to switch faster and more efficiently, the speed...
Speaker Change: actually allows you to shrink the mechanical size of the other passive components.
Speaker Change: Transformers, Inductors, Filters, Capacitors. When they shrink, not only are they coming down in size to pack more power in the same size, you're also shrinking the case size, the mechanicals, the PCDs. So mechanical shrink is going to come from the speed of gallium nitrate and salt and carbide.
Gene Sheridan: You have more heat to pack into a smaller space if you don't improve the efficiency. And that's why efficiency is the other critical one. So you'll see us constantly talking about pushing frequencies up and pushing efficiencies up. We talked about not targeting 98% efficiency. That's two points bigger, 25% less power loss compared to that titanium standard of 96, which is actually really hard to hit for silicon, let alone anybody else in the GaN or sodium carbide space.
Speaker Change: At the same time, you've got to worry about the heat. You have more heat to pack into a smaller space.
Speaker Change: If you don't improve the efficiency, and that's why efficiency is the other critical one.
Speaker Change: So, you'll see us constantly talking about pushing frequencies up and pushing efficiencies up. We talked about doing, now targeting 98% efficiency, that's two points bigger, 25% less power loss compared to that titanium standard of 96, which is actually really hard to hit.
Speaker Change: for Sullivan, let alone anybody else in the Gann or Sullivan Carbide space.
Gene Sheridan: So speed and efficiency are the key, and that's why I wanted to highlight that in my remarks about that PFC circuit. The PFC circuit, power factor correction, traditionally runs at slow speeds and mediocre efficiency, and that's been holding us all back. Even when you add gallium nitrate or sodium carbide, traditionally, you might get one point of efficiency, which is a big deal, but still not the size we wanted. The fact that our team has invented a new architecture for PFC that pushes another 30% energy savings is a really big deal and does it at higher switching speeds. So we're nailing those two things, and ultimately, that's what it's going to take speed and efficiency to deliver a lot more power in the same size rack or tray or individual server power.
Speaker Change: So speed and efficiency are the key, and that's why I wanted to highlight in my remarks about that PFC circuit. The PFC circuit, Power Factor Correction, traditionally is running at slow speeds and mediocre efficiency. And that's been holding us all back, even when you add downing nitrogen, sodium, carbonate.
Speaker Change: Traditionally, you might get one point in efficiency, which is a big deal, but still not the size we wanted. The fact that our team has invented a new architecture for PFC that pushes another
Speaker Change: 30% energy savings is a really big deal, and does it at higher switching speeds. So we're nailing those two things, and ultimately that's what it's going to take, speed and efficiency to deliver a lot more power in the same size rack or tray or individual server power supplies.
Jack Egan: Got it. That's really helpful. And then you are engaged in about 200 electric vehicle projects. Could you go over maybe kind of the wins or pipeline by silicon carbide versus gallium nitride and then is it fair to assume that most of those, pretty much all of them, are still in the DC-DC converter? Yeah, good question.
Speaker Change: Got it, that's really helpful. And then you are engaged in about 200 electric vehicle projects or WINS.
Speaker Change: Could you go over maybe kind of the wins or pipeline by silicon carbide versus
Speaker Change: Gallium Nitride, and then is it fair to assume that most of those
Speaker Change: are pretty much all of them are still in the DCTC.
Gene Sheridan: Yeah, good question. Silicon carbide has been the biggest part of the flow. That's what's most commonly used. If you're an 800 volt battery car, you're pretty much exclusively going to focus on silicon carbide. If you're 400 volts, you start to have an option between the two. Now that Navitas has GANSafe, it becomes a very viable option.
Speaker Change: Converter for now.
Speaker Change: Yeah, good question. Silicon carbide has been the biggest part of the flow. That's what's most commonly used. If you're an 800-volt battery car, you're pretty much exclusively going to focus on silicon carbide. If you're 400 volts, you start to have an option between the two. Now that Navitas has GANS safe, it becomes very viable.
Gene Sheridan: But I'd say the majority of the EV pipeline is silicon carbide oriented today. We have a strategic focus on onboard chargers, which includes charging the battery, OBC, as well as discharging in the DC to DC converter, as you implied. We're also taking a look at traction inverters and traction motors. So you're going to hear more and more about that step by step from us and what role we can play in that EV electric motor or traction motor. And the third category to not forget about is roadside chargers. That's a very big and exciting opportunity.
Speaker Change: Option, but I'd say the majority of the EV pipeline is silt and carbide.
Speaker Change: We have a strategic focus on onboard chargers, which includes the charging of the battery OBC, as well as the discharging in the DC to DC converter, as you implied.
Speaker Change: We're also taking a look at traction inverters, traction motors, so you're going to hear more and more about that.
Speaker Change: Step-by-step from us and what role we can play on that electric motor or traction motor. And the third category to not forget about is roadside chargers. That's a very big and exciting opportunity. Today, most chargers are 100 kilowatts, 50 kilowatts.
Gene Sheridan: Today, most chargers are 100 kilowatts, 50 kilowatts. Tesla is leading the charge at 350 kilowatts. We're working with customers to push that to 400, 500, even 1 megawatt is not out of the question. And that's entirely 100% silicon carbide focused. You can kind of look at those three buckets with a majority towards silicon carbide as I described.
Speaker Change: Tesla is leading the charge at 350 kilowatts. We're working with customers to push that to 400, 500, even 1 megawatt is not out of the question. That's entirely 100 percent silicon carbide focus. You can look at those three buckets with a majority towards silicon carbide as I described.
Operator: Your next question comes from the line of Kevin Cassidy with Rosenblatt. Your line is open.
Speaker Change: Great, thank you.
Speaker Change: [inaudible]
Speaker Change: Your next question comes from the line of Kevin Cassidy with Rosenblatt. Your line is open.
Kevin Cassidy: Yeah, thanks for taking my question. And congratulations on the good results. Last quarter, you named you had three data center design wins and 30 in the pipeline, and you said that was going to drive 10 to $20 million in 2025. Are these new wins, is this going to be additive to that? Or were you kind of including that in the entire pipeline?
Kevin Cassidy: Yeah, thanks for taking my question and congratulations on the good results.
Kevin Cassidy: Last quarter, you had three data center design wins and 30 in the pipeline. You said that was going to drive $10 to $20 million in 2025. Are these new wins, is this going to be additive to that, or were you kind of including that in the entire pipeline?
Gene Sheridan: Yeah, we certainly expected the pipeline to continue to grow from the 30 jumping up to 60 is maybe a little better than we expected, but not totally out of line. So I wouldn't change any expectation or guidance for next year. It'll certainly be very material and a significant ramp up for next year.
Speaker Change: Yeah, we certainly expected the pipeline to continue to grow from the 30, jumping up to 60 is maybe a little better than we expected, but not totally out of line. So I wouldn't change any expectation or guidance for next year. It'll certainly be very material and a significant ramp for next year.
Kevin Cassidy: Okay, maybe if you could talk a little bit about the competitive landscape, because, you know, data centers are screening for more power and more efficient power, and it seems to be attracting a lot of competition. Can you say, you know, how, if you've got 60 design wins, do you have an idea of what percentage of the new designs that are happening that would be?
Speaker Change: Okay, maybe if you can talk a little bit about the competitive landscape, because, you know, the data centers are screening for more power and more efficient power, and it seems to be attracting a lot of competition. Can you say, you know, how
Speaker Change: Of your, if you've got 60 design wins, do you have an idea of what percentage of the new designs that are happening that would be?
Gene Sheridan: Yeah, the 60 is the total number of customer opportunities in the pipeline. Not all of them are converted to wind, let alone, of course, revenue, which takes time.
Speaker Change: Yeah, the 60 is the total customer opportunities in the pipeline. Not all of them are converted wins, let alone, of course, revenue, which takes time.
Gene Sheridan: But competitively, when you go to higher power, it's actually even more challenging to use discrete GAN in these very high current, high power, high temperature environments. So our GAN IC, specifically GAN Safe, brings a lot of value. Also, if you think about discrete GAN is an unprotected GAN, when you go into these high-power applications, they are expected to last 10 to 20 years. And GAN is the new kid on the block. It's a new technology.
Speaker Change: Bye.
Speaker Change: repetitively.
Speaker Change: When you go to higher power, it's actually even more challenging to use discrete GAN in these very high-current, high-power, high-temperature environments. So our GAN IC, specifically GAN-SAFE,
Speaker Change: brings a lot of value. Also, if you think about discrete GAN is unprotected GAN. You go into these high-power applications, they are expected to last.
Gene Sheridan: It's unproven in these high power applications, which is why we took the time to integrate a lot of protection reliability circuits, you know, calling it the safest and most protected GAN in the world. So all of that gives us a significant competitive advantage, not to say we're going to win everything. And there is competition. You can debate silicon versus discrete GAN versus our GAN ICs or GAN Safe. We also have silicon carbide being used increasingly in the PFC circuit, and I think we do really well there.
Speaker Change: 10 to 20 years lifetime and again
Speaker Change: The new kid on the block. It's a new technology. It's unproven in these high-power applications, which is why we took the time to integrate a lot of protection and reliability circuits.
Speaker Change: You know, calling it the safest and most protected, you know, GAN in the world. So,
Speaker Change: All of that gives us significant competitive advantage, not to say we're going to win everything. And there is competition. You can debate silicon versus discrete GaN versus our GaN ICs or GaN-SAFE. We also have silicon carbide being used increasingly in the PFC circuit, where I think we do really well there. So there's certainly competition. I don't think the landscape...
Gene Sheridan: So there's certainly competition, but I don't think the landscape has changed. And I think step by step, you'll see, you know, strong wins and strong market share from Novitas, especially having the combination of GAN Safe for that second stage that I talked about, Generation 3 Fast silicon carbide for the first stage, and, of course, to bring the system design center, which helps our customers speed their time to market, but also get the most out of these technologies to maximize that power advantage and efficiency. So I think all of that' I don't see any major change to the competitive end.
Speaker Change: has changed and I think step-by-step you'll see strong wins and strong market share from Navitas.
Speaker Change: Especially having the combination of GAN-SAFE for that second stage that I talked about.
Speaker Change: our Generation 3 fast silicon carbide for the first stage, and of course to bring the system design center which helps our customers speed their time to market but also get the most out of these technologies to maximize that power density and efficiency. So I think all of that's going to play well. I don't see any major change to the competitive landscape.
Kevin Cassidy: Okay, great. Thank you.
Speaker Change: Okay, great. Thank you.
Operator: Your next question comes from the line of Joe Moore with Morgan Valley. Your line is open.
Kevin Cassidy: Thanks, Kevin.
Speaker Change: Your next question comes from the line of Joe Moore with Morgan Stanley . Your line is open.
Joseph Moore: Great, thank you. I guess following up on the data center, you know, when you talk about customers, is it, are you working with hyperscalers, ODMs? Is it chip providers? Just give us a sense of who the partner is that you work with on that.
Joe Moore: Great, thank you. I guess following up on the data center, you know, when you talk about customers, is it, are you working with hyperscalers, ODMs, is it the chip providers? Just give us a sense of who the partner is that you work with on that.
Gene Sheridan: Yeah, definitely, Joe. Thank you.
Joe Moore: Yeah.
Gene Sheridan: So, we ship to the power supply makers, which are predominantly in Taiwan and China, companies like Lighton, Delta, Actel, Chikoni, Compuware, and many others. Those power supply companies then take that power supply and ship it to the guys who are going to do the system integration at the rack level, and then ultimately go into the hyperscalers and the overall data center sort of aggregator. So, there are a number of steps in the process, but that's the flow.
Speaker Change: Definitely, Joe. Thank you. So we ship into the power supply makers. Those are predominantly in Taiwan and China, companies like Light On.
Speaker Change: Delta, Ackbell, Ciccone, CompuWare.
Speaker Change: and many others. Those power supply companies then take that power supply and ship it into the guys who are going to do the system integration at the rack level and then ultimately go into the hyperscalers.
Gene Sheridan: Increasingly, we're talking directly to AWS and Alibaba and Google, Azure, and NVIDIA themselves to make sure we understand those future power requirements. And I mentioned in the call that we're marching towards really a doubling of that rack power, 60 to 120 to 240 to 480. Probably that keeps going on, and those comments are coming from what we're learning about future system requirements to try to work with our design center and those power supply companies that I mentioned over in Asia to kind of get ahead of that curve, which is not going to be easy, but clearly that's the goal.
Speaker Change: and the overall data center sort of aggregator. So there's a number of steps in the process, but that's the flow. Increasingly, we're talking directly.
Speaker Change: to AWS and Alibaba and Google, Azure and NVIDIA themselves to make sure we understand those future power requirements. And I mentioned in the call that we're marching towards really a doubling of that rack power.
Speaker Change: 60 to 120 to 240 to 480, probably that keeps going, and those comments are coming from what we're learning about the future system requirements to try to work with our design center and those power supply companies that I mentioned over in Asia to kind of get ahead of that curve, which is not going to be easy, but clearly that's the goal.
Joseph Moore: Okay, great. Thanks.
Speaker Change: Okay great thanks and then I think you just talked about competition in the context of of data center but can you talk more generally a competition in GAN are you seeing anything from China the bigger power or any companies who have done acquisitions in GAN just anything change in the competitive dynamic from who you're competing against?
Gene Sheridan: And then I think you just talked about competition in the context of data centers. But can you talk more generally about competition in GAN? Are you seeing anything from China, the bigger power, or any companies who have done acquisitions in GAN, just any change in the competitive dynamic from who you're competing against? Yeah, my comments.
Gene Sheridan: Yeah, my comments about GANs and higher-power GANs, you know, apply broadly to each of these higher power segments, whether it's data center, EV, solar, or even appliance industrial, where discrete GANs are going to be increasingly challenged due to reliability concerns, complexity, and trying to get the most performance out of them. So I think all of that plays well for our GANSAFE technology. Also, something we didn't talk about this time but did last quarter is the bi-directional GAN.
Speaker Change: Yeah, my comments about GAN and higher power GAN, you know, apply broadly to each of these higher power segments, whether it's data center, EV.
Speaker Change: Solar, even Appliance Industrial, where discrete GAN is going to be increasingly challenged due to reliability concerns.
Speaker Change: complexity, and trying to get the most performance out of it. So I think all of that plays well for our GAN-safe technology. Also something we didn't talk about this time but did last quarter is bidirectional GAN. That's opening up all new applications in some of these higher power industrial areas. That's even more differentiated than discrete.
Gene Sheridan: That's opening up all new applications in some of these higher power industrial areas, and that's even more differentiated than discrete GAN. So again, no change in the competitive landscape. I just think as we get more and more in the market with our GANSAFE ICs and then bi-directional GAN, it's going to strengthen our position and wins.
Speaker Change: Again, no change in the competitive landscape, I just think as we get more and more in the market with our GAN-safe ICs and bidirectional GAN, it's going to strengthen our position and wins.
Operator: Your next question comes from the line of Jonathan Tanwanteng with CJS Security. Your line is open.
Speaker Change: Thank you.
Speaker Change: Yeah, thank you, Joe.
Speaker Change: Your next question comes from the line of Jonathan Tanwanteng with CJS Securities. Your line is open.
Jonathan Tanwanteng: Hi, thanks for taking my question. I understand the design momentum and the no real push-out commentary and that the swing factor may be, you know, customer production volumes. But I was wondering if you could give a little more color on which end markets are maybe feeling a little bit more uncertainty or maybe a little bit more urgency to get products out. You know, where are the deltas and the momentum, or maybe, you know, a lack of momentum as you look forward?
Jonathan Tanwanteng: Hi, thanks for taking my question. I get the design momentum and the no real push-out commentary and that the swing factor may be, you know, customer production volumes, but I was wondering if you could give a little more color on which end markets are...
Speaker Change: uhh maybe feeling a little bit more uncertainty or maybe a little bit more urgency to get products out, you know what's... where are the deltas and the momentum, or maybe lack of momentum as you look forward....
Gene Sheridan: Yeah, definitely, John. And I mentioned that while we're seeing some nice upsides in the mobile consumer, we also mentioned how Notebook has sort of firmed up and got some nice wins there. I'd still say solar is the area. If you look at the kind of percentage of revenue, percentage of pipeline, and solar, that still seems softer than the others. I'd say EV and industrial. As much as the growth rate came down earlier in the year, as many others commented on, those seem pretty stable as a mix of revenue and pipeline.
Speaker Change: Yeah, definitely, John . And I mentioned that while we're seeing some nice upsides in the mobile consumer, we also mentioned how Notebook has sort of firmed up and got some nice wins there. I'd still say solar is the area. If you look at kind of percentage of revenue, percentage of pipeline, it's solar that still seems softer than the others. I'd say EV and industrial, as much as the growth rate came down earlier in the year, as many others
Gene Sheridan: The one positive in solar, as I mentioned, is, of course, GAN for the first time going into microinverters next year. That continues to be a committed, stable, on-schedule program. So those are how I see the pluses and minuses across those.
Speaker Change: Commented on, those seem pretty stable as a mix of revenue and pipeline. The one positive in solar, as I mentioned, is of course GAN for the first time going into microinverters next year. That continues to be a committed stable on schedule.
Speaker Change: Program. So, you know, those are how I see sort of the pluses and minuses across those markets.
Gene Sheridan: Got it. And maybe you could address the AI market or the data center market a little bit more. You know, there's been a lot of recent investor consternation over capital spending returns. And, you know, there's been rumors in the market of chip delays. I was wondering if any of that filters down to and into your conversation with your customers. And now that you're talking to end users like AWS, you know, have they told you what kind of volumes you should be expecting down the pipeline or what kind of disruptions there might be if there's a delay?
Speaker Change: Got it. And maybe you could address the AI market or the data center market a little bit more. You know, there's been a lot of recent investor consternation, you know, over capital spending and returns. And, you know, there's been rumors in the market of chip delays. I was wondering if any of that filters down to and into your conversation with your customers. And now that you're talking to the end users like AWS, you know, have they told you?
Speaker Change: You know, kinds of the volumes that you should be expecting down the pipeline or what kind of disruptions there might be if there's a delay.
Gene Sheridan: Yeah, if anything, I'm glad you brought up the cost of capital, because that complicated sort of supply chain, or the number of steps from going to chip to power supply to rack to integrator to hyperscaler, actually is a bit of a challenge for us. One, we've got to anticipate the future power requirements, so we really have to link down the supply chain. Also, another benefit I didn't even bring up earlier about trying to pack more power in a smaller size due to switching speed and efficiency is that when you get higher efficiency, you start reducing the cost of electricity for the data center. Those numbers are actually pretty big, and then you start reducing the cost of cooling the data center. Those are the second most expensive things.
Speaker Change: Yeah, if anything, I'm glad you brought up like cost of capital because that complicated sort of supply chain or the number of steps from going to chip to power supply to rack to integrator to hyperscaler
Speaker Change: Actually, it's a bit of a challenge for us. One, we've got to anticipate the future power requirements, so we really have to connect.
Speaker Change: Down, down the, the fly chain.
Speaker Change: Also, another benefit I didn't even bring up earlier about trying to pack more power in smaller size.
Speaker Change: The other one is when you get higher efficiency, you start reducing the cost of electricity.
Speaker Change: The data center, those numbers are actually pretty big. And then you start reducing the cost of cooling the data center. Those are the second biggest expense of things.
Gene Sheridan: And right now, we feel like we're not getting paid for those benefits by the power supply guys because they're trying to ship the power supply at the – just keep up with the power density requirement. So I think there's a real opportunity to better articulate and help the down-the-line hyperscalers and the rack integrators to truly understand the cost of electricity benefits, the cost of thermal benefits. And I think that'll all come out over time, but this is a new field. Again, it's a new technology, and we're still kind of getting that message out and building a deeper understanding of all the value throughout that supply chain.
Speaker Change: And right now, we feel like we're not getting paid for those benefits at the power supply guys, because they're trying to ship a power supply and just keep up with the power density requirement.
Speaker Change: So I think there's real opportunity to better articulate
Speaker Change: integrators to truly understand the cost of electricity benefits, the cost of thermal benefits, and I think that'll all come out over time, but you know this is a new field, again it's a new technology, and we're still kind of getting that message out and building a deeper understanding of all the value throughout that supply chain.
Gene Sheridan: Is it fair to say as you go into higher, you know, kilowatts per wreck, you know, where maybe the competition won't be able to keep up? We charge a higher margin for it. Yeah, we do. In fact, if anything, we'll be better off.
Speaker Change: Is it fair to say, as you go into these higher kilowatts per rack, you know, where maybe the competition won't be as able to keep up, that you could conceivably charge a higher margin for those kinds of products?
Gene Sheridan: Yeah, we do. In fact, if anything, when we talk to these guys, they're like, don't worry about the cost; you need to deliver efficiency, you need to deliver the thermals, you need to deliver the power. Now, they're not the guys buying the power supply; they're down the supply chain. But still, that seems to be their obsession. So this adds to our confidence that we've got real value here, that value is going to grow over time, it'll help us with our long-term margin expectations, of course, as we said earlier. But we got to get that message out throughout the entire supply chain.
Speaker Change: Yeah, we do. In fact, if anything, when we talk to these guys, they're like, don't worry about the cost, you need to deliver the efficiency, you need to deliver the thermals, you need to deliver the power.
Speaker Change: Now, they're not the guys buying the power supply, they're down the supply chain, but still, that seems to be their obsession. So this adds to our confidence that we've got real value here, that value's going to grow over time, it'll help us with our long-term margin expectations, of course, as we said earlier, but we've got to get that message out throughout the entire supply chain.
Speaker Change: Great, thank you. Yeah, thank you, Chuck.
Operator: Again, if you would like to ask a question, press star 1 on your telephone keypad. Your next question comes from the line of Richard Shannon.
Speaker Change: Again, if you would like to ask a question, press star 1 on your telephone keypad. Your next question comes from the line of Richard Shannon with...
Richard Shannon: Okay, thanks, guys, for taking my questions. Most might have been answered here.
Speaker Change: [inaudible]
Richard Shannon: Okay, thanks guys for taking my questions. Most might have been answered here, but one thing that was interesting here, Gene, is in the last conference call you talked about this new product called GANSlim, and I think you said you had
Gene Sheridan: But one thing that was interesting here, Gene, in the last conference call, you talked about this new product called GANSLIM. And I think you said you had 20 projects. Now in the press release today, you said you got 50, which is a pretty big pickup, although I see it's mostly mobile consumers. So I can see why you're picking up pretty fast there. But I guess my question is, how fast do you expect that to take over most of the interest from the consumer and mobile market?
Richard Shannon: 20 projects, and now in the press release today, you said you got 50, which is a pretty big pickup, although I see it's mostly mobile consumers, so I can see why you're picking up pretty fast there, but I guess my question is how fast do you expect that to take over most of the interest from that consumer and mobile market?
Gene Sheridan: Yeah, thanks for bringing that up. We didn't put a big spotlight on it with everything else going on.
Gene Sheridan: And you're exactly right. We see Dan Slim taking up a lot of creating new opportunities, even more price sensitive ones. It's now clearly more cost-effective than silicon at the system level, and that's opening up not just mobile opportunities but consumer opportunities. I didn't put much emphasis on appliances just because that takes longer, but it's definitely going to be going in there and accelerating the appliance sector, which is already growing pretty strongly with those 25 new wins. So yeah, I think you hit on it correctly. Dan Slim is really promising.
Speaker Change: Yeah, thanks for bringing it up. We didn't put a big spotlight on it with everything else going on. And you're exactly right. We see Dan Slim taking up a lot of, creating all new opportunities, even more price-sensitive ones. It's now clearly more cost-effective than silicon at the system level. That's opening up not just mobile opportunities, but consumer opportunities. I didn't put much emphasis on appliance just because that takes longer, but it's definitely going to be going in there and accelerating the appliance.
Speaker Change: Sector, which is already growing pretty strongly with those 25 new wins. So, so yeah, I think you hit on it correctly. Ganslinger is really promising. It's opening up new markets, helping us grow share in the existing mobile markets. And, you know, all those markets are under 500 watts, right? So there's kind of no limit.
Richard Shannon: It's opening up new markets, helping us grow share in the existing mobile markets. And all those markets are under 500 watts, right? So there's kind of no limit to where it could go. 500 watts is a lot of power, fast charging, or even powering your TV, even powering LED lights. So there's a lot of applications out there across mobile and consumer that are sub 500 watts and a good target for
Speaker Change: to where it could go 500 watts is a lot of power, fast charging, or even powering your TV, even powering LED lights. So there's a lot a lot of applications out there across mobile and consumer that are sub 500 watts and a good target for Ganslin.
Gene Sheridan: Okay, that's all full perspective, Gene. My last question here is on mobile. I've asked this, and I think many people have asked this question over the years or the quarters you've been doing calls here, but curious as you have seen an increased attach rate to chargers here and getting any visibility as you go into next year with, with major phone introductions, moving up the charger power curve, getting above that level that you think is going to be a kind of a breakpoint for, again, adoption, getting into more visibility into that as you get into next year.
Speaker Change: Okay, that's all full perspective, Gene. My last question here is on mobile. I've asked this, and I think many people have asked this question over the years or the quarters you've been doing calls here, but curious as you have seen an increased attach rate through chargers here and getting any visibility as you go into next year with
Speaker Change: with major phone introductions, moving up the charger power curve, getting above that level that you think is going to be a kind of a breakpoint for, again, adoption, getting into more visibility into that as you get into next year.
Richard Shannon: Yeah, no, thanks for bringing it up, Richard. We've talked a lot in the past about 65 watts and up being kind of that sweet spot. When you're down around 20 watts, 30 watts, it's mostly plastic in case there is, and it's already pretty small. So there's not a lot of leverage for GaN. You can do it, but you're kind of a cost play at that point.
Speaker Change: Yeah, no, thanks for bringing it up, Richard. We've talked a lot in the past about 65 watts and up being kind of that sweet spot. When you're down around 20 watts, 30 watts, it's mostly plastic in case there's, it's already pretty small.
Speaker Change: So, there's not a lot of leverage for GAN. You can do it, but you're kind of a cost play at that point. So, we're obviously very focused on value and improving that consumer experience. 65 watts is very fast charging for a phone and actually quite fast charging for a tablet or a laptop. If you look across the major...
Gene Sheridan: So we're obviously very focused on value and improving that consumer experience. 65 watts is very fast charging for a phone and actually quite fast charging for a tablet or a laptop. If you look across the major players out there, you know, it's the Chinese Oppo, Xiaomi, Vivo, and others that have been super aggressive to go to 65 watts and higher, 100 watts, we even talked about 200 watts to fast charge a phone, which is easy, fast, zero to 100% in nine, nine minutes. So these are crazy numbers.
Gene Sheridan: But we continue to believe those are an indication of where the whole industry is going. There's no reason that Chinese suppliers in particular would be at these higher power levels and others wouldn't. I think others have their own roadmaps, they have their own sort of conservative approach to product development. But I think those are coming.
Speaker Change: The major players out there, you know, it's the Chinese, Oppo, Xiaomi, Vivo, and others that have been super aggressive to go to 65 watt and higher, 100 watt, we even talked about 200 watts to fast charge a phone, which is easy, fast, 0 to 100% in 9 seconds.
Speaker Change: Nine minutes. So these are these are crazy numbers, but we continue to believe those are an indication of where the whole industry is going There's no reason that China Suppliers in particular would be at these higher power levels and others wouldn't I think others have their own roadmaps They have their own sort of conservative approach
Gene Sheridan: If you look at the Koreans and the American players, they're now pushing mainstream in the 45 watt range and the 30 watt range, which means you're just a step or two away from that 65 watt tipping point, if you will. So I think we see that the trends are going to continue; everything's going to keep going up into that 65 watt and higher range. And ultimately, we're not done until the consumer can really, really fast charge all their devices from one tiny 100 watt, 200 watt, multi-port charger.
Speaker Change: to product development, but I think those are coming if you look across.
Speaker Change: The Koreans and the American players, they're now pushing mainstream in the 45-watt range, 30-watt range.
Speaker Change: which means you're just a step or two away from that 65 watt tipping point.
Speaker Change: if you will. So I think we see that the trends are going to continue. Everything's going to keep going up into that 65 watt and higher range. And ultimately, we're not done until the consumer really would fast charge all your devices from one tiny, you know, 100 watt, 200 watt multi-port charger.
Richard Shannon: Okay, great for that. Again, thanks for that perspective, Gene. That's all for me.
Speaker Change: Okay, great for that. Again, thanks for that perspective, Gene. That's all for me. Yeah, thank you, Richard.
Operator: And your next question comes from the line of Jack Egan with Charter Equity Research. Your line is open.
Speaker Change: And your next question comes from the line of Jack Egan with Charter Equity Research. Your line is open.
Jack Egan: Great, thanks for taking the follow-up. I just had one. So on the expansion of the internal silicon carbide epi capacity, given some of the lower... Just for the overall, have you guys adjusted the kind of pace of your expansion at all, or is it still just, Yeah, no, you're exactly right, Jack.
Jack Egan: Great. Thanks for taking the follow-up. I just had one. So, on the expansion of the internal silicon carbide epi capacity, given some of the lower expectations just for the overall SIC-TAM growth this year, have you guys adjusted kind of the pace of your expansion at all, or is it still just going full steam ahead with the internal epi?
Gene Sheridan: Yeah, I know you're exactly right, Jack. With the markets adjusting for slower growth rates, there was not the pressing immediate need to bring that first reactor online. So we put it on hold. We expect to bring it online next year when we can ramp it up and get those cost and margin enhancement benefits we talked about. When we originally announced $20 million in strategic manufacturing investments over three years and sort of one reactor a year, so probably fair to say you can assume that plans shifted by about one year based on the market outlook and the market need.
Speaker Change: Yeah, no, you're exactly right, Jack. With the markets adjusting for slower growth rates, there was not the pressing immediate need to bring that first reactor online. So we put it on hold. We expect to bring it online next year when we can ramp it and get those cost and margin enhancement benefits we talked about. When we originally announced
Speaker Change #100: a $20 million strategic manufacturing investments over three years instead of one reactor a year. So probably fair to say you can assume that plans shifted by about one year based on the market outlook and the market need.
Jack Egan: Great. Thanks, Gene.
Operator: Ladies and gentlemen, that concludes our Q&A session and today's call. Thank you all for joining us. You may now disconnect.
Jack Egan: Yeah, thank you, Jack.
Speaker Change #101: Ladies and gentlemen that concludes our Q&A session and today's call. Thank you all for joining. You may now disconnect.
Speaker Change #101: [inaudible]