Hello and welcome to the Soitec H1 fiscal year 2021 results. For the duration of the call, your lines 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. 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, Steve Babureck, to begin today's conference. Thank you.
Thank you, Operator. Welcome to Soitec H1 fiscal year 2021 results. Good morning, good afternoon, and good evening. My name is Steve Babureck, and I'm the VP of Corporate Development and Investor Relations for the company. Paul Boudre, Chief Executive Officer of Soitec, and Léa Alzingre, Chief Financial Officer, are with me on this call today. Before we start the call, I would like to remind you that this presentation is available on our website, and the disclaimer can be found on slide number two. Now, let me give you the floor to Paul Boudre to kick off the presentation.
Thank you, Steve, and hello everyone on the webcast. I really hope that you and your families are all safe wherever you are. We have a lot to cover today, so let me take you straight to slide five. So, despite the challenging year so far due to the global pandemic and the difficult macroeconomic conditions, we are happy to report these first-half results for our fiscal year 2021. Soitec is quite resilient. Our growth story is intact, and we continue our exceptional trajectory in the semiconductor materials market. On the left side, you know the mega trends that push the limits of our semiconductor industry, i.e., 5G, artificial intelligence, and energy efficiency. For each of these mega trends, we develop and commercialize highly differentiated engineered substrates to serve our strategic end market, i.e., smartphones, automotive, edge computing, and cloud. Three figures I would like to insist on.
In line with the guidance we gave you back in June, we delivered EUR 254 million of revenue in this first half, which means stable revenues at constant exchange rates and perimeter. We also delivered an EBITDA margin slightly above 30%, also in line with our guidance. Last but not least, we have generated more than EUR 100 million of operating cash flow. If you go to slide six, I will cover the financial highlights on this slide. You can visualize how these KPIs evolved over the last three fiscal years. The message regarding these KPIs is clear. Not only are we committed to generate profitable growth, but we are also dedicated to deliver growth that generates a strong cash flow, and Léa will give more details about how we generated this strong operating cash flow.
The other important element that you should keep in mind is that a strong operating cash flow is mandatory for us to self-finance the capacity plans that will support our very ambitious revenue growth over the next five years. If you go to slide seven, and before we discuss further the performance of this first half, let me remind you of several guidelines we followed very carefully since the beginning of the COVID-19 pandemic. Priority number one: protect our people. Early on, we put in place organizational shifts, and we have now the right balance between work from home and activities on site to be efficient, sustainable, and safe for everyone. Priority number two: maintain our operations, which means the fabs, but also our supply chain. Our fabs have never stopped. Priority number three: support our clients.
We are proud to report that the performance of our supply chain of our entire ecosystem, from equipment to materials, has been outstanding in this environment. Last but not least, priority number four: help our communities. Whenever possible, we continue to offer our support through various initiatives such as masks, gel, PCs to families in need, etc. Now let me take you to slide number eight. The fiscal year is somewhat a transition year for all of us, but at Soitec. Despite the stable revenues, we are very actively preparing the steep revenue growth and capacity ramp coming in fiscal year 2022 and beyond. I wanted to give you an update on a few topics today.
Regarding talent, our global organization has remained stable in H1 with around 1,600 employees, but we anticipate around 200 recruitments in the second half to support the growth in operations, innovations, and business unit, etc. We have also implemented a free share allocations plan to all employees to acknowledge the efforts made by everyone to reach the company's targets and continue serving customers in recent months in spite of the constraints generated by the health crisis. We have also strengthened our top management team with the appointment of Bernard Aspar as COO, and Yvon Pastol joined us recently as EVP of our Customer Group. Regarding innovation, this is the DNA of Soitec, and we are developing new products and technologies to enable new applications in our strategic end markets. I will come back to that later in the presentation.
Regarding supply chain, our main challenge is to continue to expand a robust supply chain to cope with our volume growth across several products using multiple manufacturing sites. Regarding raw materials, we continue to put in place long-term contracts with typically two to three years' maturity terms. On the equipment side, we have also secured capacity expansion slots with our vendors and anticipate our steep capacity ramp. Now, let me say a few words specifically on operations on slide number nine. I'm sure that some of you have already seen that we are raising our CapEx target for this current fiscal year, and this is important that you understand the rationale behind it, so from left to right, let's start with 150 mm. Regarding POI, our new engineered substrate for 5G filters for smartphones, we need to ramp our capacity faster than we were previously expecting.
As you can see, we already doubled our capacity in H1 compared to the capacity that was installed in the second part of last fiscal year. We already told you that the targeted capacity is now 500,000 wafers per year, and we need to get there pretty fast due to solid commercial tractions from several customers. Regarding GaN, Hasselt, our CapEx plan is on track, and our MOCVD tool is under qualification. Regarding 200 mm, in Bernin 1, we were running at full capacity in H1. Most of the CapEx for this fab is related to maintenance CapEx. As you know, the additional volume growth for 200 mm is captured through our partnership with Simgui in China.
Finally, on 300-mm, in Bernin 2, we reach a lower utilization rate in H1 in line with the lower demand for our 300-mm products, but we will be back to full capacity in the second half of this fiscal year. I also wanted to highlight that Bernin 2 is the best-in-class fab in terms of Industry 4.0 initiatives and was awarded Factory of the Year by the French business technology weekly magazine L'Usine Nouvelle and BFM TV for significant energy savings achieved by deploying artificial intelligence systems. In Singapore, we are also expanding capacity in several areas: RF, epitaxy, and of course, SOI substrate capacity to prepare our production growth in H2 for the next fiscal year. Now, let me say a few words about each business unit, and if you can, please go to slide 11, and I will start with the RF-SOI business unit.
This is our number one business unit in volumes and revenues, with a strong exposure to the smartphone market, where RF-SOI is a standard for 100% of the smartphone RF front-end modules. I said it before, and I will say it again: there is no smartphone without Soitec. There is no 5G without Soitec. 5G sub-6 gigahertz smartphones require an additional content of RF-SOI, and we continue to expand our footprint in sq mm with new generations of products. 5G millimeter wave smartphones contain both sub-6 gigahertz modules and an additional module for millimeter wave. This means that the opportunity for Soitec is even larger than standalone sub-6 gigahertz phones. The recent multi-year supply contract announcement with GlobalFoundries regarding RF-SOI wafers for their most advanced solutions for RF front-end modules provides strong evidence that we are increasingly well-positioned to lead the opportunity created by the 5G market.
From a momentum standpoint, and as we told you in April, COVID-19 has created a bit of weakness in the smartphone this year, and we expect the global smartphone market to decline by around 10% in calendar year, this calendar year, calendar year 2020, followed by a strong rebound in 2021. I wanted to remind you that the RF-SOI content per smartphone continues to grow and compensate any decline in smartphone unit. On the 5G side, we now expect a stronger entry of 5G smartphones in 2020 with around 20 million-25 million units, and this number should more than double to at least 500 million units in 2021. Now, let's talk about FD-SOI and turn to slide 12. As a reminder, FD-SOI is a unique technology to address several key challenges offered by energy efficiency, AI, and 5G semiconductor chip-based.
So FD-SOI can deliver lower power consumptions, increase security, enable embedded memory, integrate RF connectivity, and all of these can be packaged with a cost-efficient device integration. Today, this is now a reality confirmed with our first wave of adoptions. FD-SOI is being adopted in a wide range of end products, from cars to IoT, smartphones, supporting the largest consumer brands. After many years of ecosystem development, a strong takeoff in the last couple of years, FD-SOI business is in a transition year. New products in automotive have been a bit slower than we had expected. The lack of foundry in China impaired some business relationships in the FD-SOI ecosystem, and the competitive environment has been tougher on us.
Even if we are seeing a revenue plateau in 2020, we are very happy with the number of design win activities across the board between edge computing with FPGA platform, voice and vision processors for automotive and smart home, and of course, 5G, where FD-SOI is currently designed as an integration platform for millimeter wave applications, so for FD-SOI, we are expecting strong inflections in 2021 and 2022. If you go to slide number 13, I will cover the specialty SOI business unit. We have several products in this business unit addressing automotive, imaging, and data centers and markets. That said, the product in revenues is Power SOI, and the main market is automotive. Automotive and markets have been weak since the second part of calendar year 2019, in a strong decline in 2020, and we expect a solid recovery in 2021.
Imagers for 3D sensing follow a specific smartphone brand, and the demand remains sustained. Finally, photonics, we are expecting to grow at a very decent pace thanks to data centers' traffic growth and technology transitions in optical transceiver, so let's move to slide 14 and talk about the filter business unit. Regarding filters, our goal is simple: create a new standard for surface acoustic wave filters using POI engineered substrate compatible for 4G and 5G. 5G offers us a perfect opportunity to differentiate our POI technology due to much higher requirements on the filter side compared to 4G. As shared before, customer traction is already here, and as you know, we announced a strategic business agreement back in July with Qualcomm.
This new POI product and the strong commercial tractions confirm that we can leverage our smart technology capabilities across a wide range of semiconductor devices to enable new and unique applications. Our customer intimacy, in this case in the RF ecosystem, allows us to be positioned both as a reference innovation partner as well as a robust industrial player. Moving to slide 15 and covering EpiGaN business unit, we are very happy with these acquisitions, which were concluded, as you know, a year and a half ago. The business has been integrated as a business unit within Soitec, and we have already seen many synergies on the technology and operation sides. Outlook remains the same for GaN epiwafers. Our ambition is first to penetrate base stations, power amplifiers in meaningful ways, then smartphones, and later to penetrate the power automotive market.
As shared earlier in the presentation, we must deploy our high-volume MOCVD capacity to accelerate commercial adoptions. Moving now to slide 16 and covering compound business unit. So regarding compounds, I will focus today on silicon carbide as we are developing a unique engineered substrate to address the electric vehicle markets and also industrial markets, and where we have already received strategic interest from automotive device and system makers. Where do we stand in our development? We are 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 ship to customers. And finally, we will deliver qualification products in Q121. Moving to slide 16 and covering Dolphin Design. Dolphin Design is a semiconductor design company in which we now own 80%. The remaining is owned by MBDA.
As a reminder, main synergies for Soitec are about the IP business related to FD-SOI, especially what we called ABB or adaptive body biasing. Tractions on that front are very strong, which support the development of the, obviously, FD-SOI ecosystem and accelerate the demand for FD-SOI substrate. So at this stage, this will conclude my remarks related to the business unit. I will now leave the floor to Léa to discuss our financial results.
Thank you, Paul. And hello, everyone. You can go on slide 19, please. In line with what Paul has disclosed in his introduction, we are happy to report that the group performance is in line with our expectation and with our annual guidance, flat revenues, and EBITDA margin around 30% despite the current difficult environment related to the COVID-19. We significantly improved our operating cash generation.
We were able to maintain a 30% EBITDA margin despite the flat revenue and the fact that we continued our efforts to structure the group in order to prepare the growth in FY 2022 and beyond. Slide 20 is showing the sales performance. We have disclosed our H1 revenues in October. So it's no surprise there. Let me come back to several important items. We had a flat revenue at constant FX and perimeter. Compared to H1 last year, 150 mm and 200 mm sales growth reached 15%, excluding currency effects. Most of the growth came from a more favorable product mix, essentially more RF-SOI and less Power SOI. In addition, we benefited from the continuous ramp-up in the production of 150 mm POI wafers for RF filters at our Bernin 3 factory. Regarding our 300 mm business, sales decreased by 16%. Sales of RF-SOI 300 millimeter remained at very high levels.
On the other hand, sales of FD-SOI were lower than last year. And finally, sales in royalties and other revenues are mainly related to Dolphin Design and EpiGaN. On slide 21, you can see the gross margin. Our group reached EUR 77 million of gross profit, which represents a 30.4% gross margin rate. As expected, we benefited from more favorable bulk purchase price thanks to our LTA with the key bulk supplier. On the other hand, a few headwinds impacted our gross margin. Depreciation grew faster than sales due to the investment plan required in the last few quarters and years in order to support the growth. Also, our B3 factory for POI products is now in its early stage of ramp-up. On slide 22, you have the current operating income.
From this EUR 77 million of gross profit that I just commented, the group generated EUR 37 million of current operating income, which is almost 15% of our revenue. This fiscal year is a transition year. We are and we will be flat in revenue, mainly because of the COVID-19 context, but we need to prepare the growth expected in FY 2022 and beyond, which is why we continue to invest in R&D and to expand the staffing of the group in multiple areas. Therefore, R&D net cost increased by EUR 1.5 million, which represents a 10% increase as compared with last year. We added more efforts to maintain leadership on our SOI business and to further develop our POI and silicon carbide roadmaps.
Regarding SG&A, we keep on reinforcing the group, which is more diverse now in terms of geography, of customers, of products, in order to prepare the group for the fiscal year 2022 growth and beyond. As a consequence, SG&A expenses increased by EUR 2.5 million as compared with the same period last year due to employee expense rise because of new hiring during last year and because of higher employee free share expenses related to plans approved during the previous fiscal year, especially with the increase of the share price. On slide 23, the net profit. At the net income level, our net profit decreased from EUR 45 million last year to EUR 22 million at the end of September 2020.
We did not report any exceptional item in H1 this year, whereas last year, we had a positive impact of EUR 1.8 million related to the disposal of a building. Regarding our financial results, we reported a loss of nearly EUR 10 million this year due to financial expenses mostly related to the non-cash interest on our 2028 convertible bonds and a foreign exchange-related loss of EUR 6 million due to an unfavorable FX rate effect. This FX rate evolution does not have an effect on our operating result because we were hedged. Finally, our income tax continues to benefit from tax loss carry forward, and we did not have any significant change in our income tax rate. On slide 24, just a quick look at the EBITDA and EBITDA margin as this is our main profitability indicator in the guidance.
We reached 30.4% margin in line with the last year and in line with our expectation for the full year. Same headwinds than gross margin, except depreciation, of course. We maintain almost the same EBITDA margin as last year despite the increase of the R&D cost and SG&A expenses with a flat revenue. If we look at cash and balance sheet now on slide 25, another good achievement for the period is the strong improvement of the group operating cash flow. With a flat EBITDA, the cash improvement has been driven by a better management of the working capital that is decreasing by EUR 31 million as compared with an increase of EUR 28 million last year. Receivables are down by EUR 60 million. Inventories are up by EUR 24 million to meet sequential sales increase expected in the second semester.
Combined with a lower tax paid than last year, operating cash flow improved from EUR 36 million in H1 2020 to more than EUR 101 million in H1 2021. On slide 26, you can see that we had a strong increase in the cash position from EUR 191 million in March 2020 to EUR 291 million at the end of September 2020. Obviously, this amount does not include the EUR 325 million convertible bond issued on the 1st of October. The free cash flow is positive at EUR 54 million. Cash out for Capex amounted to EUR 48 million, and they were mainly used for industrial capacity investment, both in France in our Bernin 3 factory used for POI products as well as in Singapore for SOI and Epitaxy capacities.
Investing flows are positive as well because of the EUR 58 million drawn on the EUR 200 million long-term loan granted by Banque des Territoires as part of the Nano 2022 plan. On slide 27, our balance sheet, it remained very strong in H1. I already commented on the cash position of EUR 291 million. On the debt side, we ended this half year with a total gross debt of EUR 297 million. Non-current assets are driven by CapEx. Current assets and liabilities are driven by seasonality effects versus March 2020 and by working capital management. Finally, a few KPIs to underline the strength of our balance sheet on slide 28. All in all, the balance sheet structure reinforced during this period with equity up EUR 25 million. Net debt decreased from EUR 54 million to EUR 5 million thanks to the cash generated from operating flows during this period.
Liquidity is at a high level and further facilitated by credit lines and long-term loans from Banque des Territoires that will secure our future development as well as our convertible bonds issued early October. On this note, I will give the floor to Paul to comment on our outlook.
Thank you, Léa. So regarding our fiscal year 2021 guidance, on the revenue side, we continue to expect a flat-ish growth compared to fiscal year 2020. On the EBITDA side, we reiterate that our margin should be in the range of 30%. On the CapEx side, we are now expecting a cash out of around EUR 135 million versus at least EUR 100 million previously expected. And this revised CapEx plan is mostly related to the strong momentum we are seeing for our POI products.
Now, if we look at the situations regarding fiscal year 2022, back in June, we were expecting around EUR 800 million in fiscal year 2022 or $900 million based on a euro-dollar rate at 1.13. Based on current analysis of our end markets dynamic, especially on the smartphone side, and based on our customer demand dynamics, we are now expecting revenues to be above $900 million in fiscal year 2022. As a reminder, several tailwinds should fuel our revenue growth in fiscal year 22. We expect a strong boost coming from 5G, which will impact many product lines as discussed before. I'm talking about RF-SOI, POI, FD-SOI, and GaN. We also expect a recovery in automotive for Power SOI and growth in edge computing for FD-SOI.
So to conclude, after a solid, resilient year in fiscal year 2021, we are preparing the entire company to grow again very fast in fiscal year 2022. Now, this will end our preliminary remarks, and we can now turn to the Q&A session. Operator.
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. Our first question is coming from the line of Jérôme Ramel from Exane BNP Paribas. Please go ahead.
Yeah. Good morning, good afternoon. Two questions. First of all, what happened to the current receivables, which explains the huge working capital swing? So I'd just like to understand what was the movement behind. And second question, Paul, how do you explain the stronger-than-expected POI demand?
Is it because your customers are becoming more successful, or is it because your technology is getting more market share and maybe more customers? So if you could shed light on the POI dynamic? Thank you.
Hi, Jérôme. Thanks for your question. So maybe we'll start with the first question on POI demand for Paul, and then we'll take the second question with Léa.
Hi, Jérôme. Thanks for the questions. Yeah. I would say on the POI, it's clearly both situations. We are with the number one customers that is going in the market with our product. We are getting really market tractions. The value proposition of our product at the system level is also rewarding this first customer that is going to market. As a consequence, the initial volumes are accelerating, and that's very good news because this is a market reward here.
On the second side, I mean, we are obviously now working with many other customers that are in late qualification phase or at the beginning of manufacturing decisions. Léa, maybe if you want to take the second part.
Yes, of course. So as you know, we have a seasonality effect, and our H2 is always higher than the H1. In March, we had a very high level of invoicing, whereas for H1 2021, the revenue and the invoicing was better spread over the months. That's why we were able to collect EUR 60 million of receivables during the period.
Okay. Thank you very much.
The next question is coming from the line of Emmanuel Matot from Oddo. Please go ahead.
Hello, Paul. Léa and Steve, Emmanuel Matot speaking from Oddo. Three questions for me, please.
First, GlobalFoundries is speaking about $4.5 billion of design wins for its 22FDX platform. It is a very high number. What does that mean for Soitec in terms of volumes of FD-SOI wafers? And do you have visibility regarding the ramp-up of the related orders from that customer? Second, I was surprised to see that the new iPhone 12 has a 5G mm wave module in the U.S., which is doubling SOI content compared to sub-6 gigahertz. In your financial target of more than EUR 800 million of sales for fiscal year 2022, are you taking into account a significant number of 5G smartphones to have this millimeter wave module, or is it pure upside for you? And my last question, do you believe that some technologies could disrupt your RF-SOI business, or do you think it will remain the standard for many years regarding smartphones?
What are your latest views on that key topic? Thank you very much.
Thank you, Emmanuel. Thank you for the question. So I will start with the number one questions regarding GlobalFoundries. Yes. GlobalFoundries is basically winning a lot of new designs that they are turning into a ratio for them in terms of revenues. So this is good news, right? I mean, this is clearly good news. Why? Because if you think about 5G millimeter waves, if you think about Wi-Fi 6, if you think about Bluetooth, if you think about edge AI, yes, the leaders are moving onto this technology. And this is obviously a fantastic opportunity for FD-SOI. Now, how does it turn into wafers for us?
Depending on the stage of where these major customers are today, which is between the first tape-out or the construction of their design, it takes on average 18 months-24 months to get these wafers in manufacturing. So that's the reason we always said from the beginning that our fiscal year 2022 will be starting to be loaded in the second part of the fiscal year and will be starting to see some growth for this type of innovations that FD-SOI will bring. On 5G millimeter wave, yeah, what we have seen, like you, is that millimeter wave is obviously first. I will say, 5G is already on the market. And that was the big things that we were all expecting to see in 2020. The good news is that all the top phone makers have now switched to 5G.
The first adoption is sub-6 gigahertz, which is already a significant improvement in terms of millimeter wave on the smartphones. That's the first given that we can now confirm. When we opened the boxes, we have seen one brand coming with 5G millimeter wave, which is very important news because 5G millimeter waves, we could have seen it coming later in the game. Now, what is true is that on these current generations, it is done with no SOI inside on the millimeter wave. It's done with mainly bulk, with the consequences that the performance is not really what it should be. The power consumption is lacking. We know that we are now developing and working with the phone makers for these second generations of millimeter wave product that will be enabled, we believe, in calendar year 2022 then more than 2021.
But nevertheless, this is a beautiful growth path for RF-SOI and FD-SOI because these millimeter wave second generations of product will clearly embrace our product roadmaps for the futures because we are enabling these low power consumptions. We are enabling this performance that is needed. And you don't want to have your smartphone to become a heater in your pocket. So this is very, very important. On the third question, that is RF-SOI, do we see competitions here? We are paranoiac about competitions. But I can tell you that I do not see any major significant technology that can really come and eat today our position in this field. So we are confident to stay the leader. We are confident to continue to grow this market, sub-6 mm wave. But we are paranoiac about it. So we are obviously working on all the options.
Thank you very much.
The next question is coming from the line of Varun Rajwanshi from JP Morgan.
Please go ahead. Good morning. Thanks for letting me on. I have a couple of questions. First one is on your EBITDA margin evolution into the second half of this fiscal. The implied EBITDA margin is approximately flat, and I'm just trying to understand, given the 35% acceleration in sales growth, you also mentioned that Bernin 2 fab will be back to full capacity in the second half. Why are you not seeing some amount of leverage on the EBITDA margin front? Are you being conservative for your full-year guidance? The second question is on free cash flow generation, and first of all, congratulations on the great job in the first half of this year.
But looking into the second half, your working capital is again likely to go up because you have the seasonality is such that you have a more second-half loaded revenue profile. So the receivables are likely to go up. The CapEx would also go up. You will probably end up spending more than EUR 85 million in cash CapEx in the second half. So how should we think about free cash flow in the second half and then going forward? And is there any long-term working capital target that you have going forward? And my final question is for you, Paul, on the RF-SOI content and 5G models that have already been launched. So you have your own content assumptions for the purpose of internal modeling for 5G RF-SOI content.
But seeing the models in the market today, how do you see the RF-SOI content in launched 5G devices versus your content assumptions? Is there any upside to that? Thank you.
Thanks, Varun. Okay. We'll start with the two financial questions. But as you know, remember, the only guidance and forward-looking statements are related to the EBITDA margin. So maybe they are on the question.
Okay. So maybe regarding your first question regarding the EBITDA margin, so we confirm our guidance or flat EBITDA margin for the full year. We have some expenses that have been postponed from H1 to H2 regarding the current economic context, especially in Q1. The level of external expenses was very, very low. And remember, we are preparing ourselves for the growth. So we are continuing investment both in R&D and the structuration of the company in SG&A.
Regarding your second question, as Steve just said before, we are not doing any guidance on cash flow. However, we know that during H2, we will have some headwinds on working cap due to the building up of inventory to prepare the FY 2022 growth. And we will have probably a high level of invoices expected in March 2021. So we will not have the same trend as during this first semester. Maybe, Paul, I can give you the floor for the last question.
Yes. Thank you. Yes. So on sub-6 GHz, on average, RF-SOI content is 60% higher on 5G versus 4G, and basically up to 100% for mid-tier phones. So this is basically what we have today is exactly in line with this model. And this is what we see. So we confirm that what we see is what we were hoping to see.
Thank you.
The next question is coming from the line of Robert Sanders from Deutsche Bank. Please go ahead.
Yeah. Hi. Good morning. I've got three questions, actually, today, if that's okay. First question would just be about the Tower Semi press release on phase change memory. It seems like they're going to implement that in both bulk and SOI substrates, but they're offering a 10x improvement in switching frequency. I was just wondering whether you thought that was a game changer because, obviously, it could have quite an impact on your market share and potentially the opportunity set in RF. The second question would be on silicon carbide. What are you actually seeing in terms of progress in terms of development?
Are you confirming that you're still seeing this up to 10x reduction or number of wafers, etc., or cost reduction that you talked about when you were doing your provisional analysis? And the last question would just be on battery management system. I noticed you mentioned it on the Power SOI side. Your historical customer here is Freescale, which is now NXP. And they've announced that they've taken, I think, 17 of the top 20 OEMs. So I was just wondering if there was any connection here or not. Thanks a lot.
Thanks, Rob. So regarding your first question that is related to the Phase- Change Memory, I think it is good news. And I'm not going to comment too much on the impact for this particular customer. But for our ecosystem, it's good news because the performance that I have read is extremely good.
So it shows the value of the FD-SOI platform because it's really a platform that can really capture the value of computing, but also embedded memory, and also some RF capability. So as we go into this edge AI and edge computing, it's a very important add-on for the platform. And yes, it's an enabler for market share gain. Absolutely. On silicon carbide, clearly, just maybe to remind the value propositions, we are talking about defect density reductions. We are talking about electrical performance increase. We are also talking about die size reduction capabilities and simplifying at least device processing for our customers. So in this, we also say that if we are successful to bring this technology in six-inch, 150 mm, we can basically copy and paste our technology to 200 mm.
So we are at the stage right now where the pilot line is up and running, and we are processing the wafers for qualifications. And the last question, yes, was on the power side and the NXP drivers. Yes, this is clearly what we said during the call today. We expect a recovery in automotive for Power SOI. And this is a good sign because this is now clearly driven also by NXP. Yeah.
Thanks.
We currently have one question remaining in the queue. As a reminder, if you would like to ask a question, please press star one. The next question is coming from the line of Ken Rumph from Jefferies. Please go ahead.
Hi, Paul. Yeah. Only a couple of financial questions left, I think.
One was to ask about or to remind us of the hedging position and your use of, I think it's 1.13 for next year as a Euro-D ollar rate. And the second one was an indication on the change to the financial item that relates to the OCEANE for the new bond. Thank you.
Yeah. Maybe both questions for Léa, I believe.
Yes. So regarding the hedging position for next year, as of today, we have hedging for more than half of the net exposure between 1.13 and the current spot rate. So we will communicate later on our final figure in euros for next fiscal year. Regarding your second question, I am not sure to have catch it. Can you repeat, please?
Did you estimate the financial expense for the new convertible bond, Ken?
Okay. So we are not.
Sorry. I'm sorry.
Oh, okay.
So the cost in the P&L, you mean we are not giving such kind of details, but it will be higher than the current one as the amount is bigger as you can see. But I can remind we have zero coupons. So nothing in cash. That's only IFRS expenses.
Okay. So directionally, I understand. Thank you.
There are no further questions, so I will hand you back to your host to conclude today's conference.
Okay. Thank you, everyone, for attending this call today. And we wish you a very good day. We will report to Q3 number third week of January for start. Thank you. Stay safe.
Thank you, everyone. Stay safe.
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