Hello, and welcome to the Soitec Q1 2023 sales disclosure conference call. My name is Ben, and I will be your coordinator for today's event. Please note this call is being recorded, and for the duration of the call, your lines will be on listen only. However, you will have the opportunity to ask questions at the end of the call. This can be done by pressing star one on your telephone keypad. If you require assistance at any point, please press star zero and you will be connected to an operator. I will now hand you over to your host, Mr. Paul Boudre, CEO, to begin today's conference. Thank you.
Thank you, Ben, and welcome to Soitec's conference call dedicated to the publications of the first quarter revenue of our fiscal year 2023. This is the quarter covering the period from the first of April to the end of June 2022. I am Paul Boudre, Soitec's CEO. Together with me on this call are Léa Alzingre, our CFO, and Steve Babureck, our SVP Strategy. As usual, we will briefly comment on our sales performance and after that, we will open the floor to questions. In short, we had a solid start to our fiscal year 2023. I'm very pleased to report that Q1 2023 was our highest first quarter ever, with revenue of EUR 203 million. This represents a 12% growth on a reported basis.
This performance breaks down between a 6% organic growth and a positive currency impact of +6%. Performance was driven by sustained growth in mobile communications revenue and by a strong increase in automotive and industrial revenue. This quarter's growth was impacted by two major unscheduled interruptions at our Bernin industrial site. The first one took place early April and lasted around four days. It was due to a power outage. Production went back to normal shortly after the power supply was restored. The second one took place towards the end of June and lasted around six days. It was due to strike actions. You know, as always, at Soitec we had a productive social dialogue, which allowed us to resume production quickly.
We will be able to progressively make up for the incurred delay, and these two events will not impact our fiscal year 2023 guidance. In the meantime, our 300 mm Singapore fab continues to enjoy a strong ramp up in production, obviously supporting ongoing capacity increase. Before diving into our Q1 performance, let me give you an important information about our financial communication. As indicated during our fiscal year 2022 annual results presentations, we have started to report our revenue by end market to better reflect the way we conduct our business and monitor our activity. Mobile communication is our biggest segment, representing 75% of our revenue in Q1 2023. Automotive and industrial, which is bound to be our fastest growing divisions over the next four years, today represent 11% of our total revenue.
Finally, smart devices today account for 14% of our total revenue. You will find in the appendix of our press release the historical breakdown of our fiscal year 2022 revenue by end market and per quarter. Looking now in more detail at our Q1 revenue by end market. Starting with mobile communication. Revenue in mobile communications reached EUR 153 million. Compared to Q1 last year, this is a 6% increase, excluding currency impact. Revenue growth was mostly driven by higher volumes. It continues to be supported by the adoptions of 5G smartphones, both sub-6 GHz and 5G mm Wave, by the adoptions of Wi-Fi 6, and by the deployment of 5G infrastructure. This has a positive impact on the level of RF SOI wafer sales, particularly in 300 mm.
We continue to enjoy a strong leadership in RF applications for front-end modules. Indeed, RF SOI continued to benefit from the increase in RF content, every 5G smartphone, as well as higher penetrations of IM smartphones. In the meantime, the adoption of POI dedicated to our filters for 5G smartphone space continue to be under qualifications by several customers and still in progress. The number of new qualifications are expected in the coming quarters for POI. FDSOI wafer sales confirmed adoptions of FDSOI for 5G mm Waves by several players. Moving now to automotive and industrial. Revenue in automotive and industrial reached EUR 23 million. It is a strong 37% increase, excluding currency impact compared to Q1 2022. Revenue growth was driven by higher volumes, but also a slightly positive price mix effect.
As you are well aware, the automotive industry is undergoing deep transformations, which translate into an increasing demand for all types of applications, either related to infotainment, to ADAS and functional safety, or to power management for electric vehicles. Growth in automotive and industrial is mainly coming from Power-SOI. It also came from a strong surge in FD-SOI wafers, which moved from a minimal contributions of automotive and industrial revenue in Q1 2022 to a substantial part in Q1 2023. Regarding silicon carbide, we continue to sell prototypes and qualifications on customer side are progressing very well across all regions. Finally, turning to smart devices, our third end-market. Revenue from smart devices reached EUR 28 million. This is less than EUR 2 million decline compared to Q1 2022.
Lower volumes, mostly due to PDSOI, were partially offset by a positive price mix effect. Sales of Imager-SOI, which allow improved image or performance in near-infrared for 3D sensing applications and Photonics-SOI wafers for data transceivers in data centers remain at a solid level. Sales of FDSOI wafers recording a strong increase compared to Q1 2022, confirming a strong demand for IoT and edge computing devices across both customer and industrial sector. As indicated earlier, we are confirming both our top line and our EBITDA guidance for fiscal year 2023. We continue to expect fiscal year 2023 revenue to grow around 20% organically, and we confirm expecting our fiscal year 2023 EBITDA margin to reach around 36%. Let me now highlight a couple of great news that took place since we spoke in April.
Last month, leading RF fabless MediaTek in Taiwan announced that it will use a FDSOI-based module for 5G mm W ave. Another confirmation of the adoption of FDSOI for 5G mm Wave. As you may remember, we announced last April a new collaboration with CEA, STMicroelectronics, and GlobalFoundries aimed at defining the industry's next generation's roadmap for FDSOI technology. In line with this agreement, on July eleventh, STMicroelectronics and GlobalFoundries announced a new jointly operated 300 mm manufacturing facility. The facility will be adjacent to STMicroelectronics's existing site in Crolles, not far from our own operation in Bernin. This is particularly significant to us as this facility will be largely dedicated to FDSOI. The new facility will support both GlobalFoundries's FDX technology and STMicroelectronics's comprehensive FDSOI technology roadmap down to 18 nm.
The facility is targeted to ramp up at full capacity by 2026, with up to 620,000 wafers per year. That will be the capacity at full build out. These two announcements formalize FDSOI capacity and roadmap with a multi-sourcing approach at fund level. Among the fabless customers supporting the announcement, Qualcomm reiterated the value of FDSOI as part of their 5G mm Wave roadmap. It is clear now Soitec is indispensable across its three strategic end markets. Our products are standard in mobile communications and are progressively becoming indispensable in automotive and industrial and smart devices. Now this ends our opening remarks. We are now ready to take your questions. Ben, the floor is yours.
Thank you. As a reminder, if you would like to ask a question, please press star one now on your telephone keypad. To withdraw your question, please press star two. Also, please ensure your line remains unmuted locally. You will be advised when to ask your question. The first question comes from the line of Mr. Alexandre Peterc. Please go ahead.
Yes, good morning, this is Alexandre Peterc from Société Générale. I just have a couple of questions. First of all, if you could share the percentage of your overall production which is based in Bernin at the moment, so we can assess, you know, how much of the impact on your revenue came from those interruptions. The second would be on the state of the smartphone market. Could you share your underlying assumptions for the market for this calendar year or for fiscal year, as you prefer, and for 5G units? Have these assumptions changed in any way in the recent weeks as we had a couple of negative data points for this market? Thank you very much.
On the capacity, I mean, well, clearly the impact on Bernin. This is our largest site. You know that we have 1 million 200 mm wafers running in Bernin. We have also more than 700,000 wafers per year running in Bernin. Basically, quite easy to do the math. It was significant, and you can understand why. The second question is about the. Sorry.
Phone market.
Yeah. You heard that from the beginning of the year, we have this situation in China. Clearly our overall now landing point for fiscal year 2023 outlook is 700 million 5G smartphones. We continue to have and to see basically 10%-15% mm Wave penetrations. What is important is on this for you to remember is that we are also adding a very aggressive penetrations on this market because we are the only company in town capable to respond on the capacity. Everything that comes to 300 mm today comes to us, since our licensee is running full and the other one has no 300 mm capability.
Thank you very much.
On the high end, I mean, I can say again what I said last time. We continue to foresee a lower demand on this, what we call the low-end smartphone below $400. But we continue to see a very dynamic and very solid trend on the high-end smartphone. That's the situation today.
Many thanks.
The next question comes from the line of Mr. Emmanuel Matot. Please go ahead.
Yes, good morning. Several questions for me, please. Have you seen recently a negative change regarding demand from your key customers? What about also the chip shortage situation in the semi sector? Are you seeing your customers back to normal level of inventories, or it will take lots of time before it happens? I have also a question regarding the recent announcement of a new large 300 mm manufacturing facility in France by ST and GlobalFoundries to support FDSOI-based semiconductors. I wonder if it could justify a further acceleration of your CapEx program at Soitec. My last question, what about commercial negotiations regarding your silicon carbide technology? Could we have positive news in the coming months? Thank you very much.
Okay. On the first question, do we see things moving in the environment? Basically, overall, the answer is no. We have seen some shift in part number, as I said, I mean, moving from some of the low-end part numbers to the higher-end part numbers for our RF markets. But overall, no change. Okay? That's the reason also we are extremely confident, not only by contract, but by the dynamic that we see on the market today for Soitec. On the shortage, I continue to believe that shortage will continue across 2023.
Obviously, I mean, you can read everywhere that this is improving, but it will take another 18 months to get there. Clearly, auto is the most disruptive new market in our you know supply chain. Basically, in order to be able to sustain the automotive demand over the next 2-3 years, it will take time. On STMicroelectronics and GlobalFoundries, that's very good news. Okay, we have been working on this for many years. I mean, we needed a common roadmap. We needed a critical mass in foundries. We needed stronger collaborations, accelerations in the roadmap.
Everything that you have heard over the last couple of weeks, months, is really demonstrating that the value of FDSOI on the three markets we are talking about is there. It is really supported by our end customers. The news regarding this capacity dedicated, for most of it, to FDSOI is clearly an exciting time. We have been chasing that for many years. Regarding our CapEx, what is true, Emmanuel, and we have said last during our fiscal year, I mean, during the announcement of our fiscal year 2023, that we were accelerating some decisions in CapEx and specifically in Singapore, it is related to the dynamic of the market.
Okay, we have also to be cautious in terms of saying it's an acceleration. It's not going beyond what we said we will spend. We need to put in place, and that's the visibility that we have today. We need to put in place our capacity faster. That's clearly the outcome of several good news that you have heard today, and potentially there is more to come. More to come because everybody is waiting for Silicon Carbide, right? I can tell you that we continue to have a high level of confidence. I mean, it's too early to disclose names, but it will happen shortly. Interest across the industry is very high.
We have delivered wafers to around 10 customers. They recognize the value at system levels. Each of them see a different type of overall value, but they commonly agree and accept the value that we bring to this level. We are on track with our plan, and clearly it is, as you can imagine, also an opportunity for accelerations of 200 mm if these products come to manufacturing.
Thank you, Paul. I know this is your last conf call with us, so thank you again. All the best for the future.
Thank you, Emmanuel. Thank you. I will have the last word on this later in the call.
The next question comes from the line of Mr. Sébastien Sztabowicz. Please go ahead.
Thank you for that. Hi, everyone, and thanks for taking the question. Coming back to the first question from Alex, could you quantify the rate of sales that you missed due to the interruption of production in Q1? Was it around 5%? More than that? Lower than that? It would be interesting to have more indication on that. And attached to that, should we expect an acceleration of the organic growth moving into the second quarter of the year now that you have production returning to normal level? And lastly on the fiscal year 2023 guidance, the 20% organic growth, what kind of visibility or confidence do you have in reaching this target, taking into account that you start the year on the slow trends at around 6%? Thank you.
Thank you very much for the questions. The trend is clearly the overall trend is the one that we have budgeted. I mean, we didn't budget these two weeks. That was not really scheduled. By the way, we had a maintenance week also scheduled this quarter. That was part of our budget. That was part of our overall plan, so I cannot point at this as a problem. If you come back to the two weeks, so basically these two weeks. I mean, you do the math, right? And you will come into a high single digit type of numbers.
Yes, maybe Paul, if I can add something. As we said early June, when we announced our result, the growth will be higher during H2 than during H1. It was fully anticipated except for this two weeks.
Should we expect an acceleration in Q2?
Yes. Yes, we do now.
Clearly our fiscal year 2023 visibility is very high. I mean, you can hear that in the way we take your questions on this. We know that we can recover. We have a plan to recover these two weeks, and we know that, you know, the target that we gave you at the beginning of the year are the target that we will deliver at the end of the year.
One last question, if I may, on the FD-SOI. The announcement that we have seen from ST and GF, and also the one from CARIAD, from Volkswagen and ST, is this something that could lead to reach the high case of the range for your fiscal 2023-2026 target, or it is too early to say?
Yeah. Everybody around me is trying to slow me down, right? I have the temptations to say, obviously, it's part of the good news. Okay, this is still a long way. There is still three years down the road, but it is part of the good news that we were expecting to for that trajectory. Now, you know, it's not done yet, but that was a very important announcement. What is even better is the motivation behind it. I mean, clearly this is not just two companies having a deal. It's an ecosystem pushed by the end customers who need that deal. Okay?
The deal was needed by the industry, so that means that it will not be a technology push, but it will be a product push. You have seen all the names that GF put on its announcement. Welcome as part of it.
Okay. Thank you, Paul.
The next question comes from the line of Mr. Didier Scemama calling from Bank of America. Please go ahead.
Morning, everyone. Thanks for taking my questions. Don't have many. Most of them have already been asked. I just wanted to double-check, in case of electricity rationing, you know, in the coming weeks or months, you know, did you have a, do you have a feel for how you would be treated by the authorities? Related to that, did you use gas, natural gas at any time in your manufacturing process or any of your suppliers? Just so we understand the potential risk on the macro side. Thank you.
Hello and thank you for the question. I think that you probably remember that during COVID-19, we have been one of the few industry that was allowed to continue to work. In the same situations today, we are a part of this priority company, priority industry that are strategic and critical not only for the French people, but for the rest of the industry. We will be protected on this, and we are obviously working on the administrations to secure the power that we need.
On gas?
On gas, I mean, I would say it's not significant. We do not have any larger, you know, consumptions for gas, so we are pretty clean on this.
Many thanks. Again, you know, thank you, sorry for your amazing service as a CEO of Soitec. All the best.
Thank you.
The next question comes from the line of Mr. François-Xavier Bouvignies, please, calling from UBS. Please go ahead.
Thank you very much. I have two quick ones if I may. First one is on the smart devices. Can you elaborate a bit on the performance this quarter, a bit more details about the revenue down? I mean, is it related to the macro environment, seasonality? Just having a bit more color on this. The second one is a bit more hypothetical, but if we are thinking about a slowdown and recession that everybody seems to talk about, how do you plan to manage your CapEx? How much flexibility do you have? Do you want to have with your CapEx plan?
Are you in a situation to say, like, we will spend in CapEx whatever it takes, or do you think that you will be also pragmatic and adjust accordingly, depending on the demand environment? Thank you.
Yeah. Again, thanks for the questions. I think they are good questions. Regarding the smart devices, I mean, clearly, Léa, you can probably give a little bit of color on this, but we have a very strong underlying business supported by PDSOI and clearly also covering the image sensing business that we have. Clearly the situations that you see there was not really a part of this. Léa, you want to give some color on PDSOI, maybe for the Q1 last year.
Yes. On PDSOI, last year during the Q1, we booked one-off sales. It was non-recurring. We don't see, we still see a strong demand for smart devices. We expect this end market to grow during FY 2023.
Yeah, I think it's very reassuring on our side. I mean, we don't see a significant situations that will give us a kind of warning, not at all. In terms of the CapEx, you know the situations for equipment is extremely tight today. I mean, if you look at the lead time and everything else around the world. I was in the U.S. a couple of weeks ago. It is clearly one of the things that you have to watch. We at Soitec are watching it very, very closely. Two main reason. We are not one of the largest company in the world, so it is important for us to stick with our plan.
You know that we have this five years plan in front of us. We are really working end to end with our equipment suppliers. We need this CapEx. We do not manage the company on a quarterly basis. We need this CapEx because they are part of the you know fiscal year 2024, 2025 growth. We feel extremely comfortable with the communication path that we have with our equipment supplier. As I said from the very beginning, it is backed up by our you know customer orders. We have not moved anything compared to what we said last time. We have in fact accelerated Pasir Ris.
We are marching on the plan for Silicon Carbide, and so we have no change compared to last quarter.
Thank you, Paul. All the best.
Thank you.
The next question comes from the line of, Mr. Adithya Metuku calling from Credit Suisse. Please go ahead.
Yeah. Good morning, guys. Thank you for taking my questions. I have two. Firstly, Paul, I just want to understand how do you think about the indirect impact from chemicals that use natural gas as an input in the manufacture of semiconductors? So I'm talking about companies like Merck, BASF, that use natural gas to produce things that are used in semiconductor manufacturing. Have you looked through your supply chain to understand what the impact will be on this front? And if you have, if you could give us any color here, that would be very helpful. And secondly, on the power outage, you're talking about making up as you go along through the rest of the year. From my understanding, you've always run your production facilities at full capacity.
Will you have enough capacity in the later parts of this year to make up for the lost production? How do you think about that? Any color there would be super helpful. Thank you.
For the chemicals and the supply chains, it's daily communications with all our supply chains overall, right? I can report today that I have not seen any situations where in a short- or medium-term there is situations at risk. We have basically what we need to deliver the next 12 months, and basically after that as well. Clearly it's a long run. No real situations that we have to manage in a particular way. It's business as usual. When it comes to, you know, the recovery of the situations. Yes, we will recover.
Clearly we have put in place you know plans situations to continue to reinforce our working shift. We also are taking care of what happened during the quarter. You know that the first power outage really put us in trouble, and all the teams have done an incredible job to recover. We have to do it. Clearly, as Léa said a little bit earlier, we see our H1 clearly back in the race for the 20%. We see also H1 a little bit lower than H2. We are confident with this trend. Basically, that was the trend that we also designed for the year in our budget.
with a little bit of acceleration in Q2, we have the capability potentially to recover in Q2.
Got it. Very clear. Congrats again and all the best for the future.
Thank you. Thank you very much.
The next question comes from the line of Mr. Jérôme Ramel calling from BNP Paribas, please.
Yeah, good morning. Quick question, Paul. With the new fab of STMicroelectronics and GlobalFoundries, over 600,000 wafers per year on FDSOI. Historically, most of the FDSOI customers were in the range of 20,000- 40,000 wafers per year. Should we expect many more customers adopting FDSOI, or is there any big new killer application or blockbuster in FDSOI?
Jérôme, thanks for the questions. My direct answer would be both. Okay, we are seeing an increasing number of end customers. This is clearly true in mobile, and you see it coming. This is not yet in high volumes, but the trend is going to be very, very strong. In automotive, clearly, it is already happening. On IoT, it's a very fragmented market, but you name it, all the big guys in terms of GAFAM have an interest in this. Not to forget the MCU roadmap, as supported by NXP and supported by STMicroelectronics. It's really driven by the auto market.
Yes, we are seeing a lot of new customers engaging in this. I remind you that one of the problem that we had to fix was not only the capacity but the IP platforms. Now we have both. We have everything enhanced for the three markets. It is an accelerating phase that we were planning, but that is happening, which is even better.
Thank you. One more question, Paul. You said on POI you were expecting more qualification this quarters. What kind of market share do you think POI could get in filters eventually?
It's a very complicated market, because you know, it depends on what we are talking about. I will say that in the market segment that we are targeting, I mean, it is basically, which is the mid band. We clearly would like to get in the I will say 15%-30% market share very quickly next year. Then customer will tell. What is happening right now is we on POI, the value that we are shipping to, not the wafers, but the value that we are shipping inside the wafers are recognized by the customers. We have, as I said, a lot of custom. Sorry.
A lot of customer qualifications. Now, it takes time. I said that last time. It takes time for our direct customers to qualify the POI at their end customer level because they have to tune their process and their device and the design to the performance that their end customer would like to see. This is where we are basically spending most of the time today. Clearly, we are very confident on the adoptions because all key RF companies are engaged today with us, and that's the message. A bit slow this H1, but because mainly on the qualifications, that takes a little bit longer.
Okay. Thank you. Thank you very much. Congratulations, Paul, for the fantastic ride that Soitec had with you. Thank you again.
Thank you. Thank you, Jérôme.
We currently have no question coming through. As a final reminder, if you would like to ask a question, please press star one now. Well, there are no further questions, so we'll hand you back to your host to conclude today's conference.
Thank you, Ben. Thank you all for your interest and your questions today. As you know, I mean, this is my last call as Soitec CEO. I will be finishing my term at today's AGM. It is with great pride that I leave the reins of Soitec to Pierre Barnabé. While we are celebrating Soitec's 30th years anniversary, Soitec is extremely well-positioned to address the challenges set by our ambitious roadmap for the years to come. More than ever, our products are providing an adequate response to meeting the needs of our end markets while being at the cornerstone of a more sustainable and responsible future. I'm therefore fully confident in Soitec's future.
I wish all the best to Pierre and the management team and to all my dear colleagues at Soitec. I also wanted to take this opportunity to thank you all for your deep interest in Soitec along the years and the relationship we have built together. The next date in our agenda will be a release on our Q2 revenue on the 26th of October after market close. For now, this ends our call for today. Thank you for your attention.
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