Hello and welcome to the Soitec fiscal year 21Q3 sales call. For the duration of the call, your line will be on listen only. However, you will have the opportunity to ask questions. This can be done by pressing star one on your telephone keypad to register your question at any time. If you require assistance at any time, please press star zero on your telephone keypad and you'll be connected to an operator. I will now hand you over to your host, CEO Paul Boudre, to begin today's conference. Thank you.
Thank you, Roberto, and welcome to Soitec conference call dedicated to the publications of the third quarter sales of our fiscal year 2021. This is the quarter covering the period from the 1st of October to the end of December 2020. I am Paul Boudre, Soitec CEO. Together with me on this call are Léa Alzingre, our CFO, and Steve Babureck, our investor relations officer. As usual, we will briefly comment on our sales performance, and after that, we will open the floor for questions, so let's start with a review of our Q3 sales figures. As you can see, we enjoyed another very solid performance. As anticipated, Q3 confirms the solid rebound in revenues that we had already seen in Q2.
You may remember that at the beginning of the fiscal year 2021, we told you that Q1 was expected to be our lowest quarter and that we would enjoy quarter-over-quarter sequential growth thereafter. After EUR 114 million in Q1 and EUR 141 million in Q2, we achieved EUR 149 million in Q3. This represents a 7% sequential growth at constant exchange rates in Q3 versus Q2. Overall, our first nine months' sales are up 5% on a like-for-like basis compared to the first nine months of fiscal year 2020. On a reported basis, the performance is slightly lowered as we are facing a small negative currency impact. Q3 reported growth stands at +10%, and the first nine months' reported growth stands at +2.4%. With this performance, we reiterate our full year guidance.
To guide you maybe more precisely, I remind you that our fiscal year 2021 sales are hedged at an average EUR/USD rate of around 1.15. If we take a closer look at our Q3 performance and look at sales by category and products, the deployment of 4G and 5G continues to be our main growth driver. The RF growth story remains very, very strong. We enjoyed another increase in our RF- SOI products, but as opposed to Q1 and Q2, which were supported by 200-millimeter wafers, in Q3, growth mainly came from an increase in RF 300-millimeter wafers. In addition, sales of POI wafers dedicated to RF filters are growing as expected and should continue to increase quarter after quarter. POI is already ramping with multiple product lines and multiple bands. In addition, we are gaining design wins in Wi-Fi 6 for smartphones.
We continue to demonstrate that our product roadmap brings the best performance in a major new standard for connectivity applications. Imager-SOI and Photonics-SOI also recorded a reversed performance for this quarter. And on the other hand, both Power-SOI and FD-SOI were lower than in Q3 2020, essentially because of the economic environment, but they did better in Q3 than in the previous quarter. By revenue type, starting with 150- to 200-mm, I would like to say that compared to Q3 last year, 150- to 200-mm sales growth reached 9%, excluding currency effect. Growth in RF-SOI 200-mm continued to be driven by the increase in RF-SOI content in every new smartphone, 4G and even more 5G. Lower sales of Power-SOI remain due to the decline of the automotive market in the context of the COVID-19 crisis, but they were higher than in Q2.
In addition, we were able to respond to the increasing demand for our 150-millimeter POI wafers for RF filters, and thanks to the ongoing capacity increase and good ramp-up in production at our Bernin facility. If we now look at our 300-millimeter business, compared to Q3 2020, 300-millimeter sales increased by 23%, excluding currency effect. We had a strong growth in RF- SOI 300-millimeter sales. Like in 200-millimeter traction for RF- SOI content comes from the need for more switches, more antenna tuners, and more low-noise amplifiers in 4G and 5G smartphones. Sales on FD- SOI were lower than in Q3 last year, but much higher than in Q2. As we shared with you, last quarter, September quarter, was a bottom for FD- SOI. We have seen an increase in tape-out activities of chips built on FD- SOI wafers.
We are talking here about tape-outs for applications dedicated to edge computing, automotive, and 5G. Regarding Imager-SOI for 3D sensing applications and Photonics-SOI for data centers, sales were higher than in Q3 last year. So let me now give you a quick update on the main events which took place during the quarter and since the beginning of the calendar year in order to prepare a strong growth in Fiscal Year 2022 and beyond. You may remember that we signed early November a multi-year supply agreement with GlobalFoundries to supply them with RF- SOI 300-millimeter wafers. This is for GF to cope with the increasing demand for their most advanced front-end module, which is built on RF- SOI. Another news, in order to support our future growth, we launched early January Elevate. It's a job creation program designed to attract new talents.
Under this plan, we aim to recruit first one of the new high potentials in Bernin within the next coming months. In part, a similar program is being deployed in Singapore. Finally, we are very pleased to have recently joined the Gaïa Index. Indeed, we ranked 16 among 230 rated companies as part of the Gaïa Rating 2020 ESG survey, with the 70 top-rated companies joining the index. To strengthen our commitment on this ESG side, we decided to set ourselves new ambitious climate and sustainability targets that will notably include greenhouse gas emissions. We are very keen to contribute to the objectives set by the COP21 Paris Agreement on climate change through our highly performing and low-energy products, as well as through the reductions of our own direct carbon footprint.
To conclude these opening remarks, I would like to reconfirm our outlook for both the fiscal year 2021 and the fiscal year 2022. We confirm expecting our fiscal year 2021 sales to be stable at constant exchange rates and perimeter. To guide you more precisely, I remind you that our fiscal year 2021 sales are hedged at an average euro-dollar rate of around 1.15. We also continue to expect our EBITDA margin to reach around 30% in fiscal year 2021, and we confirm that we expect our fiscal year 2022 sales to reach above $900 million. This ends our opening remarks. We are now ready to take your questions, Operator. I turn it to you.
If you would like to ask a question, please press star one on your telephone keypad. Please ensure your line remains unmuted locally. If you would like to withdraw your question, please press star two. You'll be announced when you can ask your question. Our first question is coming from the line of Aleksander Peterc from Société Générale. Please go ahead.
Yes. Good morning. I just have a couple of questions here so first, your guidance is obviously reiterated for the year, and given the strong third quarter, this would then imply a decline year on year in the current quarter, so maybe you could just explain a little bit the drivers around that. Presumably, you had a very easy comp for the third quarter and a much higher comp for the fourth quarter, which was very strong last year, but is there anything else here at play? My second question would be regarding Piezo- on- Insulators, so you indicated an acceleration in demand in your first half report. Is that continuing at the same pace in the current quarter?
Regarding your midterm plan for POI, do you need further design wins beyond Qualcomm to fill your planned fab in Bernin, or are you going to reach that even if you don't have any sizable additional wins in Piezo- on-I nsulator? Thanks a lot.
Thanks. Maybe I'll start with the first question that is basically on the trend quarter after quarter. As we said, I mean, we are enjoying now a sequential growth quarter after quarter. And yes, if you look at basically if you compare the trend last year versus this year, basically the shape on the trend is slightly different this year. It's a continuous growth on the quarter after quarter. As you mentioned, I mean, last year, our Q4 was a gigantic number, but we are still very, very confident now that with our Q3 under the belt, I would say our Q4 will be a clearly significant also improvement and to reach the flat-ish year as we were expecting from the beginning of the year.
So one of the comments here is that we are extremely pleased to see that there is not only a strong momentum, but it's a regular momentum quarter after quarter. It's very well shaped, and we like the trend that we see as it is clearly on the right directions, and it doesn't look like a bumpy road. But what we and this is obviously driven by, as you can expect, the clear drivers are obviously 5G, but not only. As explained during the call, we see now automotive backup. We see also the second wave of FD- SOI product coming to reality. So we do expect all these drivers coming together across the next fiscal year. Regarding POI, I hope that I got all the questions, but maybe what I will say is that extremely pleased also we will enter into this market. We're buying several companies behind Qualcomm.
The good news is that we have this mid-band. We have already, I mean, several products targeting several bands, and this is clearly a very, very good start because this is an aggressive start if you look at it this way. So we are looking at also the expansions of our Bernin, and the manufacturing is clearly the executions will be the main focus for next year. But I don't know if I missed a part of your questions on POI. I don't know.
Yeah. I just wanted to clarify. You obviously have a solid win with Qualcomm backing this technology. And the question is, do you need additional major manufacturers of filters coming on board to fill your midterm plan for POI?
Clearly, we have with the driver, I mean, the main customers that we have today, I mean, this is clearly securing a lot of what we expect to deliver in the coming quarters. But as you said, I mean, the ambitions that we have on POI is much bigger than that. I mean, we are now under discussions and under qualifications with other companies. We have also a strategy to attack the mid-bands and to expand our footprints with several bands in this mid-band range. But we have also a product roadmap that will obviously get us into the lower band and also in the higher band. So if you try to envision what the ambition is on POI, it's clearly to bring these products into a standard for POI for filters in the year to come.
So we have big ambitions, and we clearly based our ambitions on our product roadmap and the intimacy with our customers who are also driving us in these directions.
Thank you. Can I just have a very quick follow-up? You mentioned the second wave for FD-SOI, which was a little bit softer recently. Should we expect FD-SOI coming back more strongly in fiscal year 2022 already?
Yeah. Energy efficiency for edge computing in automotives, and this is basically NXP, ST, Mobileye, and IoT with NXP, Sony, Dialog, Nordic, Lattice, Rockchip, and smart home. I would name Synaptics and Ring. These are the three main drivers that we see coming, and again, I repeat, automotive, IoT, and smart home, but this is going into these edge AI capabilities that we are seeing in the years in the next year, but also the years to come, so you know that we have also an opportunity to get into integrated digital radio RF with digital, and today, several companies are qualifying, ramping, but we cannot be today on these applications, so we are extremely strong and solid on the second wave where we are executing, and our customers and foundries are executing the path, so we are going to deliver in fiscal year 2022 exactly the way we were expecting.
Thank you very much.
The next question is coming from the line of Varun Rajwanshi from J.P. Morgan. Please go ahead.
Good morning. Thanks for letting me on. I also have a couple of questions. Starting with your demand outlook, Paul, what are you seeing in terms of ordering activity and inventory at your IDM and foundry customers? I guess what I'm trying to understand is, has there been any change in the past three months versus your expectations? And as a related question, obviously, your plan for this 10% growth in smartphone volumes and calendar year 2021 with 5G smartphone shipments reaching 500 million units. Now, if there were to be upside to this 5G smartphone shipment number, given your upstream position in the supply chain, at what point do we start to see this upside flow through in Soitec's numbers? And then finally, a clarification on FD-SOI.
I remember the last time we had a chat. You mentioned that FD-SOI is likely to see an inflection towards the second half of fiscal year 2022. Now, you have mentioned that September quarter is a bottom for FD-SOI. So should we see gradual improvement in FD-SOI sales from here, or is there a sort of hockey stick improvement that you expect towards the later part of fiscal year 2022? Thank you.
Okay. So on the inventory, basically, what we have seen over the last three months, it's basically very good news across the board, across all products. So if you think about RF- SOI, I mean, the supply chain is running at a minimum inventory across the board. If you look at automotive, clearly, you know where we were middle of last year, and you understand, I mean, the turnaround of this market. So here as well, I mean, we are getting out right now of the inventory problem that we were having last year on automotive and gradually, I mean, moving to a very, very tight level of inventory across the board. So that's good for next year. And finally, I mean, that's the same situations basically on FD- SOI and POI. I mean, clearly, everything we can build, we have to ship.
So across the board, I will say that, yes, the dynamic of all the businesses around have really created a very healthy situation in terms of inventory. And so that's very positive news. On millimeter wave, yes, we have upgraded our next year target from 450-500 million smartphones. And you know what? I mean, this market seems to be very, very dynamic. So for now, we stick with our 500 million unit as the guidance for next fiscal year. But you can read and we can see, I mean, that there is a dynamic that could move above this number very quickly. So that will be obviously a benefit for us, but this is not clearly our guidance right now. We stick with 500 million for now. Back to the FD questions. As you mentioned, and yes, the September quarter has been our bottom.
Yes, we are still continuing to see an acceleration towards the second part of our fiscal year 2022. Nevertheless, between now and then, we continue to see gradually an improvement on FD based on exactly what I said, I mean, really driven by the edge computing in automotive, the IoT, and the evolutions of this IoT going into more complex devices and obviously smart home. These are the three things that are currently driving. As I told you already, I mean, we expect in calendar year, not in fiscal year, but in calendar year 2022 to get into this millimeter wave integrated digital radio RF where we know that FD- SOI is also a key player for integrated radio. That's basically the situation.
Thanks, Paul. Maybe if I can just ask a very small clarification. So you mentioned that 5G smartphones is a very dynamic market. Completely understand that. But my question is, at what point do we start seeing that upside in Soitec's numbers if 5G smartphones are indeed shipping better than expected? Because you have a six-month lead time from wafer shipments to actual end device shipments. So how do we see this flow through the Soitec numbers?
Yeah. We say that basically our fiscal year 2022 will be above $900 million, and our fiscal year ending in March, so we are still grabbing all the trends and as part of our strategic planning also, and we will update in June during the fiscal year results, but that's the situation today. The dynamic is really positive for now.
Thanks, Paul.
The next question is coming from the line of Sebastien Sztabowicz from Kepler Cheuvreux. Please go ahead.
Yeah. Hi, everyone, and thanks for taking the question. Have you seen any specific impact from the global component shortage that is impacting the whole semiconductor industry? And if yes, what could be the impact on Soitec? Is it on your top line, prices, raw material cost, and so on? So any comments there would be quite helpful. And looking at the guidance for 2022, it seems that it is calling for a strong organic growth, maybe above 30%. Should we expect something rather back-end-loaded with an acceleration towards the back-end for the year, or it will be something already quite solid as we enter 2022? And the last one is on the margin dynamics for the fiscal year 2022. I know it is a little bit early in the year, but what are the puts and takes for your EBITDA margin moving into 2022? Thank you.
Okay. So I will let the last questions to Léa, but I can take the first two. I mean, what is the impact on some of the shortage that we see, device shortage? So basically, this is, I mean, the shortage that you can read right now is really impacting the automotive. And clearly, for us, we are back to what we said. We are cleaning the inventory situation in automotive, and we are back to this quarter after quarter sequential growth again. So there is a positive impact on this for us in fiscal year 2022. As I told you last year, we were expecting second part of fiscal year 2022 recovery in automobile. So there is an acceleration of this recovery that we start to basically capture in early fiscal year 2022 for us. So that's a positive.
When it comes to the overall supply chain, and basically what I can say here is that there is, we are buying our silicon on a long-term agreement, so we are pretty well protected in terms of volumes, pricing, and we're on the safe side of the road right now, so that's pretty good. We feel fine and good about that, and we don't foresee, and we will not put ourselves as a bottleneck for the growth that we see coming on the different markets that we support. The trend that we see in terms of quarter by quarter, yeah, we will have, as I said, we are very pleased to see that we are gradually, I mean, we are gradually improving every quarter, and we will continue to have basically a strong fiscal year.
We don't expect major up and down in the quarters to quarters type of profile as we could have seen in the past years. Again, driven by this lot of accelerations on the market. Léa, if you want to take these EBITDA margin questions for next.
Yes, of course. So at this stage, it's a little bit early to give any indication regarding the FY22 EBITDA margin. What I can say is that the 30% EBITDA margin in FY21 is a floor, and so we are expecting an improvement in the future.
You don't see any specific impact from, I would say, the potential higher increasing wafer prices, maybe not today, but in the next six-to-nine months because of the shortage?
No, no. We are protected with that. I mean, we have long-term agreements on raw materials, silicon wafers. So we have agreements that go over and beyond the fiscal year 2022 horizon.
Okay. Thank you. That's great.
As a reminder, if you would like to ask a question, please press star one. The next question is coming from the line of Emmanuel Matot from Oddo. Please go ahead.
Hello, Paul. Hello to the team. Emmanuel Matot from Oddo. Several questions for me, please. Paul, first, what can you tell us about the way you are addressing the new Wi-Fi 6 standards? My understanding is that you have won several promising design wins. Can it be a great growth driver for Soitec in the coming years? What is the size of the Wi-Fi 6 RF chip? Second, what are the latest developments regarding your silicon carbide technology? How long do you think it will take for being qualified by customers? My last question maybe is for Léa, if you can update us on your hedging for the euro/dollar level regarding fiscal year 2022. Thank you.
Yeah. On the Wi-Fi 6, basically, I would say that the good news is that we see now that from our product portfolio, we are winning some of the slot right now for these applications. So that's the good news. It's obviously very early to describe the size of the market, but the size of the chips depends on the architecture around, I would say, a mid-single digit in millimeters square per smartphone. The second wave will be other than just smartphone devices. So we believe that Wi-Fi 6 can really go above and beyond just smartphones. So this is a new opportunity, and we are trying to also characterize the size of this opportunity.
But again, the strategic news, the good news is that this is another demonstration of the performance of our product and also the impact on the intimacy that we have with our end users in order to really drive very early on the adoptions of our product. And sorry, Emmanuel.
Silicon carbide.
Yeah, on silicon carbide. So where do we stand on development? We are, as you know, working with Applied Materials to develop the technology under a joint development agreement. Our pilot line is now fully operational. We are now building R&D samples that can be shipped to customers. The value propositions of our new product is better yield, epitaxy simplifications, and that will drive to a smaller die to our customers. So as planned, we are delivering evaluations product in calendar Q1 2021. There is no delay on this. But clearly, we don't target customer qualifications during this calendar year, right? And this is not the purpose. What we want to do during this calendar year is clearly to tune the design of our product. It's like the design of device, right?
I mean, we have to optimize the design of our product with more complex devices that our customers will be running on the wafers we are going to ship, so there is this year in terms of aligning the performance of the product, the quality of the product to the performance of the device.
Regarding your last question regarding the FX rate for FY22, so we are now covered for more than two-thirds of FY22 net exposure, and we are hedged between 1.13 and the current spot rate. We will communicate later on the FY22 revenue in euros.
Thank you. That's useful. Thank you very much.
We currently have one question remaining in the queue, and that's coming from the line of Robert Sanders from Deutsche Bank. Please go ahead.
Yeah. Hi. Good morning. I think most of my questions have been answered. But maybe just to dig in a bit on the imaging side, one of your customers had quite a disappointing guidance for 2023. There's a lot of speculation that they may have lost a socket at Apple, which is using your technology. I was just wondering if you were thinking of that business as stable or potentially at risk. I think it was discussed as being at risk in the past. And then I have a follow-up. Thanks.
Thanks, Paul. So obviously, we are not going to comment. I'm not going to comment on other customers' guidelines. But what is very important, we are very, very confident on the demand regarding these applications. In fact, very strong visibility on what is happening. And as you know, it's a long story, but the story continues, and we are very pleased with what we have today for the next couple of years.
Got it. And in terms of the other question I just had, I think it was kind of addressed in the past, but on the wafer input pricing, I know you say you have long-term agreements, but I seem to remember you seeing an opportunity to pass through higher pricing in 2017 and 2018. Do you think that the relative attraction of SOI versus bulk could mean that you could have an opportunity to increase prices selectively for SOI wafers in the current tight environment?
So first of all, yes, I want to confirm that we are clearly secured with all the long-term agreements that we have. And clearly, we feel extremely comfortable in securing not only the volume, but we have also a clear understanding on pricing. And it is also true that we are on a case-by-case basis. We are also looking at our pricing, and this is obviously something that you know the model, right, that we have. The model is that we are bringing innovations to the market. And clearly, we have a model in terms of pricing that really to have a win-win in capturing the value on our side, but also giving our customers the extra performance that is needed for their product. So pricing is always a topic. It's not a one-size-fits-all or one moment in the life of our products.
It's an ongoing process, and we continue to adapt and adjust our pricing to the value that we deliver to our customer.
Great. Thank you very much.
We have one more question coming from the line of Aleksander Peterc from Société Générale. Please go ahead.
Apologies, I was amused. I just had a quick follow-up. Given the strong growth that you had in 200 millimeters, maybe you could update us on capacity utilization in your Bernin and Singapore sites at large diameter. Thank you.
Yeah. Clearly, the capacity of our sites in France, I mean, Bernin 1 and Bernin 2 are full. And we are planning to basically now, I mean, we have started obviously to run Pasir Ris, our Singapore site. We will, as you probably have seen in our CapEx profile during the course of this year, we were end of the year loaded this year in terms of CapEx, but clearly, it shows the accelerations that we are putting in the factory. All the tools that we are buying right now were already slotted. So that means that we don't have a nine-month type of sequence in order to bring the tools and get the tools and qualify the tools. All the tools that we are buying right now, as I said, they were already slotted with our suppliers.
That means that we are, as we speak, growing our capacity in Singapore. And this will have an impact in H1 fiscal year 2022 and obviously in H2 fiscal year 2022 as we continue to expand. But all the capacity that we are going to bring, we expect to fill it as we go into the next fiscal year.
Thank you very much.
We will be using also the leverage that we have with our partner in China, Simgui. That is going to be very, very important also in fiscal year 2022 as we need most of the capacity that we have installed there.
There are no further questions, so I will hand you back to your hosts to conclude today's conference. Thank you.
So thank you very much. Thank you very much, operators. And thank you all for your questions. I mean, I think it was a very important update this quarter. And I think the next date in our agenda will be the publications of our Q4 sales figures on the 21st of April after market close. And this ends our calls for today. Thank you for your attention. I wish you all a great new year, good health, and a lot of fun in this new normality. And hopefully, we will be able to see each other soon face-to-face, probably during this summer. Thank you very much.
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