What changed in this filing

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Item 1. Business

2024-08-22 compared with 2023-08-23 · 42 added, 56 removed, 131 unchanged (43% of the section changed)

Wolfspeed, Inc.

(Wolfspeed, we, our, or us) is an innovator of wide bandgap semiconductors, focused on silicon carbide and gallium nitride (GaN) materials and devices for power and radio-frequency (RF) applications.

Our product families include silicon carbide and GaN materials, power devices and RF devices, and our products are targeted for various applications such as electric vehicles, fast charging, 5G, renewable energy and storage, and aerospace and defense.

(Wolfspeed, we, our, or us) is an innovator of wide bandgap semiconductors, focused on silicon carbide materials and devices for power applications.

Our product families include power devices and silicon carbide and gallium nitride (GaN) materials.

Our products are targeted for various applications such as electric vehicles, fast charging and renewable energy and storage.

Our materials products and power devices are used in electric vehicles, motor drives, power supplies, solar and transportation applications.

Our materials products and RF devices are used in military communications, radar, satellite and telecommunication applications.

The majority of our products are manufactured at our production facilities located in North Carolina, California and Arkansas.

Our materials products are also used in military communications, radar, satellite and telecommunication applications.

During and prior to fiscal 2024, we designed, manufactured and sold radio-frequency (RF) devices.

We completed the sale of certain assets comprising our former RF product line (the RF Business Divestiture) in the second quarter of fiscal 2024.

The RF Business Divestiture represented a strategic shift that had a major effect on our operations and financial results.

As a result, we have classified the results and cash flows of the RF product line as discontinued operations in our consolidated statements of operations and consolidated statements of cash flows for all periods presented.

Additionally, the related assets and liabilities associated with the transaction are classified as held for sale in the consolidated balance sheet as of June 25, 2023.

Unless otherwise noted, discussion within this Annual Report relates to our continuing operations.

The majority of our products are manufactured at our production facilities located in North Carolina, New York and Arkansas.

We also use contract manufacturers for certain products and aspects of product fabrication, assembly and packaging.

We maintain captive lines at some of our contract manufacturers.

Additionally, we recently opened a silicon carbide device fabrication facility in New York and started construction on a new materials manufacturing facility in North Carolina.

We operate research and development facilities in North Carolina, California, Arkansas, Arizona and New York.

We are constructing a new materials manufacturing facility in North Carolina and renovating an epitaxy facility in Texas.

We operate research and development facilities in North Carolina, Arkansas and New York.

Wolfspeed, Inc.

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Power products are sold to customers and distributors for use in applications such as electric vehicles, including charging infrastructure, server power supplies, solar inverters, uninterruptible power supplies, industrial power supplies and other applications.

Our RF devices consist of GaN-based die, high-electron mobility transistors (HEMTs), monolithic microwave integrated circuits (MMICs), and laterally diffused MOSFET (LDMOS) power transistors that are optimized for next generation telecommunications infrastructure, military and other commercial applications.

Our RF devices are made from silicon, silicon carbide and GaN and can provide improved efficiency, bandwidths and frequency of operation as compared to silicon or gallium arsenide (GaAs).

We also provide custom die manufacturing for GaN HEMTs and MMICs that allow a customer to design its own custom RF circuits to be fabricated by us, or have us design and fabricate products that meet their specific requirements.

As discussed more fully in Note 17, “Subsequent Events,” in our consolidated financial statements included in Item 8 of this Annual Report, on August 22, 2023, we entered into a definitive agreement (the RF Purchase Agreement) to sell certain assets comprising our RF products line (the RF Business) to MACOM Technology Solutions Holdings, Inc.

(MACOM) for approximately $75 million in cash, subject to a customary purchase price adjustment, and 711,528 shares of MACOM common stock (the Shares), valued at $50 million based on the trailing average closing price for MACOM’s common stock for the 30 trading days ending on August 21, 2023 (the RF Business Divestiture).

We will retain certain pre-closing liabilities associated with the RF Business.

In connection with the RF Business Divestiture, MACOM will assume control of the Company’s 100mm gallium nitride wafer fabrication facility in Research Triangle Park, North Carolina (the RTP Fab) approximately two years following the closing of the transaction (the RTP Fab Transfer).

The Company will continue to operate the RTP Fab and supply MACOM with Epi-wafers and fabrication services pursuant to a Master Supply Agreement (the RF MSA) between the date of the Closing and the date on which the RTP Fab Transfer is complete (RTP Fab Transfer Date).

Prior to the RTP Fab Transfer Date, the Shares will be subject to restrictions on transfer and we will forfeit one-quarter of the Shares if the RTP Fab Transfer has not occurred by the fourth anniversary of the closing.

The Company expects to close the transaction by the end of calendar 2023.

Research and Development

We invest significant resources in research and development.

Our research and development activity includes efforts to:

Our research and development activities include efforts to:

• develop silicon carbide materials and fabrication technology for a 200mm platform;

• develop higher performance power and RF devices;

• develop higher performance power devices;

• increase the quality, performance and diameter of our substrate and epitaxial materials;

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Sales and Marketing

We have continued to make investments to expand our sales, marketing and technical applications support, as well as distribution capabilities to further enable new and existing customers to design and implement our silicon carbide and GaN materials, power, and RF technology into their products.

We also have continued to make investments to promote and build market awareness of our Wolfspeed brand.

We have continued to make investments to promote and build market awareness of our Wolfspeed brand.

Our sales, marketing and technical applications teams include personnel throughout North America, Asia and Europe.

In fiscal 2023, 2022 and 2021, we had two, two, and three customers that represented more than 10% of our consolidated revenue, respectively.

In fiscal 2024, 2023 and 2022, we had two, two and three customers, respectively, that each represented more than 10% of our consolidated revenue.

These customers, in the aggregate, accounted for 37%, 36% and 48% of our total consolidated revenue in fiscal 2024, 2023 and 2022, respectively.

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instead, their customers place orders directly with us or through distributors.

Our backlog at June 25, 2023 was approximately $2.9 billion, compared with a backlog of approximately $2.2 billion at June 26, 2022.

Because of changes in a number of factors, including manufacturing lead times and customer order patterns, we do not believe that our backlog, as of any particular date, is necessarily indicative of actual revenue for any future period.

Significant amounts of our backlog relate to agreements that extend past one year.

Our June 25, 2023 backlog contained $18.4 million of research contracts signed with the U.S.

Government, all of which were appropriated as of the last day of fiscal 2023.

Our June 26, 2022 backlog contained $20.0 million of research contracts signed with the U.S.

Government, all of which were appropriated as of the last day of fiscal 2022.

Our backlog could be adversely affected if the U.S.

Government exercises its rights to terminate our government contracts.

Design-ins are customer commitments to purchase our products and are one of the factors we use to forecast long-term demand and future revenue.

To meet the qualification of a design-in, the customer provides us with documentation (e.g., a letter of intent, statement of work or developmental contract) that can include details such as the expected delivery timeline, estimated price, necessary capacity and required support.

A design-in, even with a formal commitment, does not always convert to future revenue (a "design-win") for a variety of reasons, including, but not limited to, the customer delaying or abandoning the project, capacity constraints, timeline challenges, and/or technology changes.

Therefore, management uses the design-in amount as a guide to forecast future demand but it should not be taken as an absolute indicator of future revenue.

Design-ins for the fiscal year ended June 30, 2024 were $9.1 billion, compared with design-ins of approximately $7.9 billion for the fiscal year ended June 25, 2023.

For further information about our design-ins, see “Research and Development” in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of this Annual Report.

Design-ins are considered design-wins when a customer issues a purchase order for at least 20% of the expected first year revenue.

Design-wins reflect each project's entire commitment at the time this criterion is satisfied and should not be taken as an absolute indicator of future revenue.

Depending on timing, certain projects may be reflected within a single period's design-in and design-win figures.

Design-wins for the fiscal year ended June 30, 2024 were $5.8 billion, compared with design-wins of $1.8 billion for the fiscal year ended June 25, 2023.

Manufacturing

We manufacture silicon carbide substrates, silicon carbide MOSFETs, Schottky diodes and power modules as well as GaN on silicon carbide RF devices and LDMOS power transistors.

We manufacture silicon carbide substrates, silicon carbide MOSFETs and Schottky diodes and power modules.

We utilize manufacturing facilities located in the United States in combination with assembly and test subcontractors throughout Asia.

Manufacturing assets are managed together through one centralized organization to ensure we leverage scale in asset utilization, purchasing volumes, and overhead costs across the business.

Silicon carbide substrate manufacturing occurs in our highly complex materials factory and involves production of a bare wafer substrate with or without epitaxy.

Silicon carbide substrate manufacturing occurs in our highly complex materials facility and involves production of a bare wafer substrate with or without epitaxy.

Our front-end processes occur in manufacturing facilities called "wafer fabs".

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In order to maximize both yield and quality, we maintain in-line process monitoring and testing.

Our substrate and wafer fab manufacturing facilities are certified to ISO 9001, IATF 16949 (automotive), and ISO 14001 (environmental).

Our silicon carbide device fabrication facility in Marcy, New York is certified to ISO 9001 and is in the process of being certified for IATF 16949 and ISO 140001.

Our substrate and wafer fab manufacturing facilities are certified to ISO 9001, IATF 16949, and ISO 14001.

Our silicon carbide device fabrication facility in Marcy, New York (the Mohawk Valley Fab) is certified to ISO 9001 and IATF 16949 and is in the process of being certified for ISO 14001.

ISO 9001 is the international standard that specifies requirements for a quality management system and focuses on the ability to consistently provide products and services that meet customer requirements.

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We have mitigated these increases by leveraging our growth to negotiate efficiencies and productivity-based cost reductions.

China recently announced an export restriction of gallium and germanium, two metals mined from the earth and used in the manufacturing of semiconductors and electronics.

We do not purchase these metals directly.

While we do purchase two products containing gallium, these products are not within the current export restrictions.

We will continue to monitor our exposure but at this time we do not expect to be materially affected by China's current export restriction.

We have continued to be successful in managing through these current issues and have shown the ability to navigate through significant supply challenges, including multiple COVID-19 pandemic supply chain constraints and natural gas supply limitations forced upon some of our European suppliers.

We have continued to be successful in managing through these current issues and demonstrated the ability to navigate through significant supply challenges.

We believe our operations are currently not materially impacted by our ability to source raw materials, components and equipment used in manufacturing our products.

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We have continued to maintain a well-established leadership position in the sale of silicon carbide wafer and silicon carbide and GaN epitaxy products.

As market adoption of the technology grows with rapidly expanding power and RF device designs, we have experienced increased competition from companies such as Coherent, Inc., SiCrystal GmbH, IQE plc and Showa Denko K.K (now Resonac Holdings Corporation).

As market adoption of the technology grows with rapidly expanding power device designs, we have experienced increased competition from companies such as Coherent, Inc., SiCrystal GmbH, IQE plc and Resonac Holdings Corporation in the United States, Europe and Japan.

In China, we have observed increased competition from companies such as SICC Co., Ltd.

and EpiWorld International Co., Ltd.

We believe our leading technology and leveraged production scale position us to reliably supply production volumes to the device manufacturers in the market.

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Our silicon carbide power devices compete with silicon carbide power semiconductor solutions offered by Infineon Technologies AG, ON Semiconductor Corporation, Rohm Co.

Ltd., and ST Microelectronics, as well as an increasing number of smaller competitors.

Ltd., and ST Microelectronics N.V., as well as an increasing number of smaller competitors.

Our silicon carbide products also compete with silicon semiconductor devices offered by a variety of manufacturers.

Our power products compete in the power semiconductor market on the basis of performance, reliability and overall system price.

Our RF devices compete with Ampleon Netherlands B.V., MACOM Technology Solutions Inc., BOWEI Integrated Circuits Co., Ltd., Mitsubishi Electric Corporation, NXP Semiconductor N.V., RFHIC, Qorvo, Inc.

and Sumitomo Corporation, which all offer competing RF products and solutions.

Our products also compete with a variety of companies offering silicon and GaAs-based products.

Our products compete in the RF semiconductor market on the basis of reliability, performance, design predictability and overall system price.

Patents and Other Intellectual Property Rights

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We have also acquired, through license grants, purchases and assignments, rights to patents on inventions originally developed by others.

As of June 25, 2023, we owned or were the exclusive licensee of 703 issued U.S.

patents and approximately 1,282 foreign patents with various expiration dates extending up to 2048, with certain patents expiring in the near term.

As of June 30, 2024, we owned or were the exclusive licensee of 552 issued United States patents and approximately 1,048 foreign patents with various expiration dates extending up to 2049, with certain patents expiring in the near term.

We do not consider our business to be materially dependent upon any one patent, and we believe our business will not be materially adversely affected by the expiration of any one patent.

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• consulting with and encouraging the participation of workers and workers’ representatives, as applicable.

Our EHS management systems in our manufacturing facilities in Durham and Research Triangle Park, North Carolina and Morgan Hill, California are certified to ISO 14001:2015 for environmental management.

Our EHS management systems in our manufacturing facilities in Durham and Research Triangle Park, North Carolina are certified to ISO 14001:2015 for environmental management.

The benefits of implementing environmental and safety management systems include improved risk management, cost savings, meeting external stakeholder expectations, ensuring compliance with environmental and occupational safety laws, and decreasing our environmental footprint through discovering new possibilities for energy, water and waste usage reductions.

We are also subject to import-export controls, tariffs and other trade-related regulations and restrictions in countries in which we have operations or otherwise do business.

These controls, tariffs, regulations, and restrictions (including those related to, or affected by, United States-China relations, as discussed below in Item 1A, "Risk Factors," of this Annual Report) may have a material impact on our business, including our ability to sell products and to manufacture or source components.

These controls, tariffs, regulations, and restrictions may have a material impact on our business, including our ability to sell products and to manufacture or source components.

Working Capital

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We are committed to creating and sustaining a culture where all employees are engaged and can contribute to their full potential.

We aim to provide

our employees with competitive compensation, as well as opportunities for equity ownership and developmental programs that enable continued learning and growth.

We aim to provide our employees with competitive compensation, as well as opportunities for equity ownership and developmental programs that enable continued learning and growth.

We endeavor to utilize recruiting practices that yield qualified and dedicated employees who are driven to achieve our vision.

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Our benefits package includes employee learnings, health and welfare, tuition reimbursement, student loan repayment, several wellness and emotional support options, adoption assistance and a family care program.

Additionally, we sponsor a 401(k) employee benefit plan for our U.S.

based employees and we match a defined percentage of employee contributions.

We offer a 'work where it works' arrangement that allows employees who are able to perform their job duties from an off-campus location to have the flexibility of working remotely full-time or part-time.

Additionally, we sponsor a 401(k) employee benefit plan for our United States based employees and we match a defined percentage of employee contributions.

Health and Safety

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We aim to provide a safe and healthy work environment through various measures, including accountability for health and safety performance with line management, setting acceptable levels of risk based on government regulation or industry best practice, and evaluating health and safety incidents to prevent recurrence, among other programs.

We continue to maintain certain safety protocols and procedures put in place in response to the COVID-19 pandemic, including an extensively used 'work where it works' arrangement that allows employees who are able to perform their job duties from an off-campus location to continue to have the flexibility of working remotely full-time or part-time.

Diversity, Equity and Inclusion

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Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, proxy statements, statements of changes in beneficial ownership and amendments to those reports are available for free on our investor relations website as soon as reasonably practicable after these are electronically filed with, or furnished to, the SEC.

The contents of our website, including our investor relations website, is not incorporated by reference into this filing or any other report we file with or furnish to the SEC.

The contents of our website, including our investor relations website, are not incorporated by reference into this filing or any other report we file with or furnish to the SEC.

We have no duty to update or revise any forward-looking statements in this Annual Report or in other reports filed with the SEC, whether as a result of new information, future events or otherwise, unless we are required to do so by law.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business