Hello, everyone, a very warm welcome here to the GIP update call at the PCIM in Nürnberg. With me are Peter Wawer, Division President, GIP, and Peter Friedrichs, Vice President, SiC. After the presentations, we are going to have a Q&A, and everyone is invited to put your questions just by email directly to me. I will read it aloud, and this will then be part of the Q&A. With that, the floor is yours. Please, Peter.
Yeah. Thank you very much, Alexander. Warm welcome here, to the few ones who made their way here, of course, to all of you on the screen, at the video interface. I'm happy to be here and share with you now the recent advancements of GIP, formerly known as IPC. Green Industrial Power: Driving Decarbonization, that is the motto and the agenda of today. As already introduced by Alexander, I will share this presentation with our top silicon carbide expert, Peter Friedrich. That's the outline of the agenda. Maybe a few words about Green Industrial Power. What's it all about? With the renaming, there is no reorganization or something like this ongoing. That's a question which I'm always asked or multiple times.
It's basically to adapt a bit to the things that changed. You will see it in the following slides. It simply emphasizes our contribution to the energy transition. While we are totally committed to our industrial backbone and to our industrial customers, it reflects the reality that renewables and all these kind of applications which drive decarbonization have massively contributed and are massively contributing to our revenue growth and, of course, also profitability. Regarding today's scarcity on resources, meaning highly skilled talents and employees, of course, it shall also foster price to the team which is already there, but it shall be also help to attract new talents to support our growth and send a message to also external shareholders like you.
The paradigm shift I already mentioned on, it simply demonstrates a bit the transition that we are undergoing as a society but of course, also in our business. To give some meat to this bones, we prepared here the following slide where you see how this split on CO₂ emissions is being shared among the applications. The majority, 40% globally, stems from the energy that you burn to provide the electricity and the traditional fossil powered power plants, and of course, producing heat simply for warming our homes and, of course, also in the industrial space. Electricity and heat producers account to 40%, then transportation, meaning combustion engines. Majority is road bound traffic, but of course, also airplanes and ship is contributing to that one.
The whole industry sector, followed by buildings and remaining others. While we know that the planet cannot afford something like 37, close to 37 gigatons, which were emitted in 2022, again, the highest level in history, we know that energy consumption continuously will increase because simply population continues to grow globally. Of course, therefore, energy being consumed continues to grow, even outperforming the growth of population to a certain extent. Here are again, some numbers. EJ are exajoules. That's a unit not too well known. Anyhow, we know these are huge numbers, and they simply continue to grow. Now the good message for a semiconductor manufacturer, related to the growth is that to have a chance to achieve our CO₂ emission targets globally, the world has to electrify.
That's the message on this pie chart on the right-hand side. To what extent we will succeed in 2050, that's the long shot here, remains to be seen. The estimation goes here regarding on the IEA scenarios, depending on how aggressive the policies will kick in, that up to 30, between 30% - 50%, maybe up to 50%+ energy consumption will become electric. The need for semiconductors to support this transition is of course reflecting our growth looking forward. Now translating it for GIP division and Green Industrial Power at Infineon basically looks like this. We have the topic of growth in general. We have the specific role of silicon carbide. The transition is accompanied now by the conversion from traditional silicon-based technologies to wide bandgap, in our case, specifically silicon carbide.
Of course, you see here that the traditional business, the industrial business, continues to grow with a substantial single-digit growth rate. That's the grayer area below. The new market opportunities out of renewable energies, power infrastructure related to EV charging, and then of course, transmission and distribution, because the electricity, renewably generated electricity, has to be stored and distributed accordingly, that contributes to more than 20% growth carrier for the years to come. This is now assumed for the five-year timeframe and overall totaling to well above 10% growth. How far above 10% we will see? Somewhere between 10% and 20%. Of course, I will give you some numbers for now the ending first half here in a second. Maybe some selected examples where we see these kind of trends.
The topic of heating, decarbonization of heating, has been now a big political topic in, especially in Germany because there's no new ruling upcoming. Still heavily debated in the politics arena, where simply it's prohibited to replace oil-fired heating system and even gas-fired heating systems by new ones. If you replace the system, you have to go for a CO₂-free solution, for example, the heat pump. That is already seen and it translate into tremendous demand growth on the heat pump side. Of course, also a certain amount of M&A activities. Maybe you're aware of the recent announced takeover of privately held company Viessmann in Germany. Long tradition, very traditional midsize company, is privately owned now by the US brand Carrier. There's a lot of activity here on growth and of course also on efficiency, right?
One thing is that you have tremendous growth opportunities now more than 20% CAGR being here estimated. Of course, also the requirements for high efficiency are increasing. This is also a playground for semiconductors and of course, also very advanced semiconductors like our recent to be now launched generation IGBT8 and also silicon carbide. Another example, which we now also announced here at the occasion of PCIM, are our high-end high power modules. We are really proud to now expand the, in the community already well-known .XT technology also into the arena of silicon carbide. High power 3.3 kV is here the first beauty, I would say, out of our product family.
The well-known .XT technology really leverages on silicon carbide, where the traditional connection technologies show certain limitations if we talk about soft solar, high temperatures and thermal cycling wear out. .XT provides you superior properties which are already known from the silicon time and are now being transferred and used here for silicon carbide. Of course, Peter can comment a bit more on the details. Key message, you reduce the losses. The losses equals to energy consumption, electricity consumption for, in this case, public transport trains. Another important topic is also that by reducing the losses, you even improve other topics. As for example, noise. The noise of the rolling stock of the inverter is a significant environmental contribution, right? You do not want to have loud trains, trams or high-speed trains.
Therefore, also certain requirements regarding quietness. Enjoy the silence, you see the motto, can be fulfilled with applying this kind of high-end technology. Okay. These were two selected examples. Now, let's talk about numbers a bit. Business update. As you already have seen in the Q2 numbers, we really enjoy extreme strong first half of this fiscal year. With a real record-breaking Segment Result of slightly more than 30%, having achieved more than EUR 1 billion of revenue for the first half of this fiscal year. We're clearly targeting to go for more than EUR 2 billion for the full fiscal year. If you do the math, more than 20% growth for the first half of the year. We have a high confidence that we will sustain this momentum also looking forward.
I think this is particularly remarkable why we know that certain areas of the semiconductor market are in turmoil. Deep trouble, no? For example, the computing arena and memory players and also the consumer goods are weak. They continue to be weak. Of course, certain portfolio of Infineon and also GIP is affected. Now again, talking for GIP only, this weakness is completely overcompensated by the strength of the new energy topics. To be a bit more precise, on the subsequent slide here on this one, you see now the splits by applications. That is how we monitor and typically assess the market development. The percentage points you see on the left-hand side are the share, how our revenue is being split to this application.
This is not precise math, because we of course, do not know exactly what our customers are doing with our discrete products that we are selling to them. To a certain extent, of course, regarding the customers, we can cluster those topics. In aggregate, roughly speaking, this fits nicely. You see here majority of the arrows is green. That's the good message. Also, if you look into automation and drives, which still accounts to a bit more than one-third of our overall revenue, that is a yellow. Meaning stability, but a stability on a high level. It's not further growing, but it's flying high. If it stays like this, I'm also very happy. If it remains like this, I'm even happier also for 2024.
Very clearly for the remaining calendar year, we see it overall quite positive. The yellow arrow in the area of home appliance, this one I would like to highlight, is something where we stay stable on a low level. This market is down. That relates to what I said. Consumer exposure also that we have in the area of close to 15%, close to 20% of our overall revenue. Here we are in a weak situation already for the last three quarters. Also here, we rather expect a bit of a rebound towards the end of the year. Nevertheless, the evidence is not strong enough, so therefore we keep the arrow simply yellow, flat. All the other topics, I think, maybe very short comments on the green ones.
PV area of renewable generation, extremely strong. We are completely sold out. That's also a huge momentum coming out of the demand from solar customers for IGBT, but of course, also SiC. We are here completely capacity limited. Power infrastructure, especially the area of EV charging, exactly the same, being sold out for 2023 and also huge order backlog for 2024. The area of transportation, we see also very positive momentum regarding on-board charger, but of course, also the electrification of the larger vehicles. Not passenger cars, that is of course, predominantly served by our automotive colleagues. Business is also booming there, as you know. Also the area of CAV, so larger trucks, buses, that continuously gains momentum, which is quite positive. Others, I think I don't need to comment too much. With that, let's have a short look into the wide bandgap strategy topic.
There, of course, then also Peter will take over. That's a picture which I like very much. That's our application landscape, and that's also how we knew this is the environment, the industrial environment we live in. Maybe it's of course, already a bit biasing because the emphasis here on the renewable topics. You see in the upper left corner, wind generation, PV modules, and then of course, the distribution network. Here, of course, just the topics to explain what is meant here. CAV, of course, the world becomes electrified more and more. You see this tower on the right-hand side, grid-scale battery storage. Not to underestimate, grid-scale battery storage is a big thing.
Now containers of batteries to stabilize the grid, which is required when we step-by-step shut off the fossil fuel or in case of Germany, even the nuclear electricity power plants. You nevertheless, of course, need ways to stabilize the grid. Therefore decentralized storage or even grid-scale storage technologies have also a huge momentum. Of course, you might also be aware that Tesla is very much investing into this kind of applications. The heat pump you see over there, rail, CAV, et cetera, as already mentioned. Now comes the interesting thing. What is the technology being used? So far in semiconductors, that was served by silicon-made power devices. We very simply now added here where we see how we see from Infineon perspective, silicon carbide and also gallium nitride will penetrate this market.
If you look into it from a simple perspective, you say, "Okay, it will more or less penetrate each and every way." Well, I would say this is true, but of course, there are certain areas where the value proposition is very clear and others where, yeah, let's see. It depends then, as always, from a cost performance perspective and also from the customer history. There are customers who are very conservative and say, "Yeah, I'm looking into wide bandgap, but give me a break. It may take another five years. Until then, please supply me with the latest and greatest IGBT and MOSFET, silicon-based MOSFET technologies." Other customers being much, much more aggressive.
That's, of course, a topic, being a broadliner and the market leader in power, we need to take into account, and we want to serve all these customers. Going into some specific examples, which are not all mainstream, but where you see, and where indicate a certain trend, are now applications for very innovative concepts. Here, for example, for the famous PCB motor as we call it, where we see an opportunity that much lesser copper is being used. That's cost reduction on the motor design side by its own. This enables you to apply significantly higher switching frequencies. While using then silicon carbide for the inverter, you achieve energy savings, less size, less weight, and of course, overall, less material, less consumption, less CO₂ reduction. Less CO₂, generation, meaning CO₂ reduction.
That's also an interesting example. The on-board charger for the electric car, where we see, of course, an IGBT powered system. There you see now as a KPI, so to say, the kilowatt per liter, so the power density. Here you see consequent improvement while going from silicon to silicon carbide, you double. Then again, you increase by 50% from four- six kilowatt per liter looking forward, being expected for the future. While already now with silicon carbide, we are able to double the power density, which is quite impressive. Last but not least, the perfect fit for gallium nitride. Lower power switch mode, so power supplies. The blocking voltage on gallium nitride is still being limited to the area of 600, 650 volts.
Of course, also here innovation goes to higher voltages, but it's well below 1,000 as we speak of today. Therefore, the area of switch mode power supplies is a very nice fit. Again, the same logic applies. Energy savings, less size, less weight, and overall lower system cost. That is something we always have to keep in mind. The semiconductor, the wide bandgap semiconductor typically is more expensive than silicon. From the traditional view on how to procure from our customer's perspective, how to procure the devices, you need to understand the value proposition on the system side. I dare to say silicon carbide will remain on the component level, more expensive, more pricey for the foreseeable future. The value proposition kicks in if, for example, for an EV charging system, you increase the power you can use, the rated power by 30%.
That's massive, right? Same enclosure, 30% more power or the other way around, same power. You shrink the whole system by 30%, saving again material, being more efficient. Most recent automotive SiC design wins. I think that's, of course, kudos to our colleagues on the automotive front. Very prominent names, Stellantis, then also some U.S. OEMs where we're not allowed yet to disclose the names. The hidden car in red. Genesis, for example, overall 20 OEMs and roughly 10 tier ones are already won. It's now, of course, a huge challenge for manufacturing to ramp up capacities, but Peter will comment on it in a minute. As I see design wins on the industrial side, that is typically the infrastructure topic.
Here you see also very well-known names, Bloom and ChargePoint, Bloom Energy, Delta, SolarEdge, where I would like to highlight also the topic of Bloom Energy. The next big thing which we already see, it's not yet there, but everybody's preparing for it, is of course, since you cannot electrify everything, you still need high power density fuels. That is, for example, hydrogen. To replace other CO2 emitting energy sources, the hydrogen and the hydrogen industry, the hydrogen environment will become the big thing for the remainder of this decade, but of course also for the years to come thereafter. The topic of electrolyzers, megawatts, up to gigawatt electrolyzers for realizing very cost-efficient hydrogen is a topic where I expect also the markets will grow with a high exponent looking forward.
To be a bit more specific, here an example it looks for EV charger example is here. Thanks to ChargePoint. You see on the left-hand side also the CAGR. These are not our market numbers, but from the estimation of Yole for DC charging for automotive. If you ask me, I would say, the light green area being the SiC MOSFET is here slightly underestimated. Also due to this huge growth globally, actually each and every semiconductor is needed to fulfill here the demand forward looking. Very nice example, you see here from a block diagram perspective, the different stages. You see, of course, our product portfolio, which simply fits very nicely to this application.
Depending on the power rating, a couple of these easy modules are inside such a power wall. Let me briefly comment on gallium nitride. The gallium nitride topic is not the priority one for GIP, but it's extremely important topic for Infineon. We, why we are engaged already there since almost a decade, we thought it would be really good to add competency and to complement our knowledge and our team. We were very happy now a couple of weeks ago to announce the agreement between GaN Systems and Infineon. It's of course still subject to the final closure and the granting of the political authorities, but we're very positive and optimistic that this will be successful executed in the second half of this calendar year. Again, we are addressing the fast-growing applications.
I think it's not a need to reiterate this topic. It provides us with a unique know-how in, on top of the know-how we already had and have, simply increasing our knowledge base and the economy of scale. We completely focus here not only on the switch, but on the whole semiconductor value chain based on system understanding that we derive together with our customers. We want to provide a total solution to the customer, where software algorithms are included thanks to control, drive, and then of course, also switch. That is true, by the way, not only for gallium nitride, but for silicon carbide as well. Also here to quantify it a bit in a graphical way, where we stand today and where, how we see the evolution until tomorrow, we realize this chart.
That's now the outlook from last year where we have the numbers, 2023, not yet fully completed, and how we see the growth momentum looking forward. Not only we, but here the sources are given on the slide in the lower right corner. You see, of course, the big area, which is silicon. It's very important also to realize and recognize that silicon continues to grow. That's the clear assumption, and that's the solid green area. With the assumed CAGR of 4%, it increases into this shaded green area for the next 6 years. You have silicon carbide and gallium nitride. Of course, here the starting points are significantly lower from where the market stands today.
Of course, you see the well-known double-digit CAGRs estimated for silicon carbide here for 30% and gallium nitride from a lower base even more than 50%. You see how this will evolve until end of this decade, 2028. The message here is, of course, huge growth potential. That is nothing new. Also important to say and to see how silicon still will dominate the power arena until the end of this decade. While the growth numbers are remarkable, it's not so easy to catch up 20 years or 30 years of silicon power history. With that, I come to my very last slide. We are rather frequently, of course, asked about our strategy on wafer sourcing and silicon carbide, now focusing on silicon carbide. You know that we had a missed attempt a couple of years ago to acquire Wolfspeed.
We then decided, okay, what are the alternatives? We thought it would be in a good alternative to of course, generate know-how and competence because the material topic plays a very crucial role regarding yields, performance of the devices. We want to understand and know how material quality interacts with device manufacturing. Of course, we want to also understand levers to reduce costs. Therefore, we acquired Siltectra a couple of years ago. Regarding crystal growth, like in the silicon area, we then finally came to the conclusion that it's also a good idea to follow here a multi-sourcing strategy on the wafer supply side. As it's publicly known, very important suppliers of us is Wolfspeed and Coherent, formerly known as II-VI from the U.S.
We announced the agreement of long-term supply with Resonac, the Germany supplier, formerly known as SDK. Very recently, we added two very important suppliers, new suppliers for silicon carbide, raw wafers, namely SICC and TanKeBlue from China. With that, we are very well set regarding supply security globally but also locally. Basically from all major regions in the world, we have now secured significant amounts of silicon carbide raw material looking forward. What's also interesting to see is, of course, that the environment gets more competitive. Of course, at the moment, I wouldn't say that there is already an oversupply on the silicon carbide wafer side. I would consider this a bit balanced, but you see here, normalized, of course, the variations between suppliers and supplier pricing.
Here you see that the competitive pressure really increases, as you can guess from the numbers, since supplier A is normalized to 100%, that the delta between supplier A and C in price is more than 30%. That gives a competitive environment. For us, of course, a comfortable situation. Since we have very ambitious growth plans, we count on the strategic players that are named on the slides. Maybe more to come looking forward. Let's see. Also important topic I would like to highlight, we only qualify suppliers if they reach a certain performance level. Prerequisite for qualification and for appearing here on this slide, the names left, and of course, the numbers A, B, C, are that yield and performance targets are met.
It's not that, for example, supplier A and C differ very much in price, but also in performance. That's not the case. If we compare these suppliers and if we qualify these suppliers, they are plus-minus on a par level regarding performance, meaning defect density and overall re-reliability, the relevant KPIs that usually apply for suppliers. That is a topic which is of course, very positive from our perspective. With that, I think I'm done, and I'm gonna hand over to you, Peter, going a bit into the meat on the technical side.
Thank you very much, Peter. As we have shown, basically the big question of substrate material, we believe, is on a very good way, and therefore, we can concentrate on the following steps. What is our core know-how at Infineon? Basically, that's the device technology plus, I will add also a few information about that, the ecosystem around the actual chip. Let's start with the device technology. There is this magic question in silicon carbide still not completely solved, whether the planar or trench-based concept is the one to go for if it comes into a MOSFET.
We have decided at Infineon to focus on the trench, I would like to give you a few explanations which hopefully also convince you that this is basically the right path, especially the one which has the future outlook for further improvements, huh? Yeah, why we believe that the classical planar MOSFET has some limitations. It's actually indicated by the arrows here on the left picture. You have to reserve some space on the surface of the wafer or the chip for critical parameters like channel length. We need to turn the current, which starts to flow at the surface and down to the backside of the device. All those things require a certain space. We are limited basically in the ability to make chips smaller.
This is a magic, basically in semiconductors, not just in power. We know it from memories. We talk about smaller nodes, and then a similar thing is taking place in power semiconductors. We always want to shrink our devices in form of the cell size, and this is basically somehow limited in case of the planar concept. For that reason, also driven by the fact that we have a lot of experience in silicon at Infineon, with respect to trench-based devices from low voltages up to very high voltages, we decided from the beginning to address our MOSFET product by a trench-based technology. Here you see those dimensions which define more or less the limit regarding shrink, and the planar concepts now are in the vertical direction.
We need much less space to generate what we call unit cell. That means, in the end, the valuable silicon carbide material can be more effectively utilized for current flow. For the customer, it means we have a smaller die, giving you the same performance in the application. That helps us to reduce cost to basically reduce the number of required wafers. Eventually then it turns out also to be a technical advantage. If you look to the benchmark studies done by external groups, here always the trench-based concepts are the top ones with respect to performance. Eventually, also, we are very proud to say this trench-based concept is a very reliable one.
All the rumors that the planar is favored because of reliability aspects, we can definitely not confirm up to now, and we are in the field for more than six years meanwhile. We have not a single device returned from any of our customers showing a field failure or reliability problem. We believe we are here on the right path. What is crucial to achieve such a very high reliability? One of the most critical parts in the device, in the power MOSFET, is the sensitive gate oxide. That's a very thin layer being more or less the key element to turn on and off a semiconductor-based power switch. This very thin insulating layer sees permanently in operation a certain electrical stress, no?
As long as the layer is perfect, what is indicated here on the left-hand side under the name bulk, so that is basically a well-designed, well-structured gate oxide. We are able to design the device in a way that it has a very high lifetime, which is indicated by here in the lifetime curve. The last part, there's a steep increase, which is always more or less the intrinsic life a device can achieve. However, especially in the case of silicon carbide, also triggered due to the still higher defect density in the material compared to silicon, we have to take into account that there might be distortions in this very thin insulating layer. Those distortions basically electrically act as so-called thinning.
That means with an applied electric field for the bulk material, typically at such an imperfection, the electric field is much higher, so every electric field-triggered destruction is accelerated. That's basically also then depicted here in this lifetime curve under the label unscreened. Unscreened means you take the devices as they are basically coming out of the production. The problem you're facing is that initially, that's the Y-axis here, initially, you have an extremely high failure rate, much higher than people are able to accept today for applications. We have to address this topic, and we do that at Infineon by a process which allows us to detect those small imperfections and to sort out those devices. What that statistically means, basically, you drop down the failure rate, which is very high initially, to a low level.
This is a couple of orders of magnitude what we can achieve here with respect to the reduction of a failure rate, and this allows us to give even with the danger of such an imperfection, a device to the field which is basically reliable as the silicon technology is. You can imagine this is a lot about understanding mechanisms, statistics, models to extrapolate from accelerated testings. Here, this graph just shows you what is necessary to do in order to develop those models, in order to predict the lifetime under certain mission profiles. We did here the so-called marathon test. This is a methodology also being applied historically in silicon. Large groups with thousands of devices are stressed under relatively high electric stress. In this case here, it's a 30 volt for a device which typically is operated with 18 volt or 15 volt.
Based on the failure statistics you achieve with that, you can develop an extrapolation model, which gives you a lifetime under the operating conditions by this linear Eyring model. That helps us to extrapolate from our lab tests with thousands of devices to the behavior of our population with millions of devices in the field. The key aspect now in order to achieve low FIT rates is the fact that the screening process I've described needs to be very effective. We come from a relatively high failure level. We have to drop it down by some orders of magnitude in order to be comparable with silicon. Here again, the beauty of the trench technology steps in. The trench technology allows us to have a screening procedure with an extreme high failure reduction factor.
We can achieve here close to a factor of 1,000, so three orders of magnitude reduction by screening compared to the best follower, which is a planar technology, which is only close to 100. Basically an order of magnitude higher failure rate reduction is possible by using the trench technology. Most of the other technologies are even worse, huh. What does it mean now for the real device? If there's a 10x higher FIT rate because you cannot drop down the failure rate as good as we can do it with a planar, that means on device level, your failure rate is also 10x higher, and in the final product, the same story, huh. Therefore, it's an enabling factor here to get a very high reliability as people expect in especially also automotive applications, but also in industrial applications.
It's enabled by the fact that the screening capability of trench devices with a thicker gate oxide is substantially higher than in planar technologies. Regarding an outlook for the chip technology, we just recently introduced our generation two technology, where we are able to shrink the area specific on-resistance by 25%, and we are already in an advanced stage with upcoming generations. Concept phases are nearly finished. We can foresee next substantial steps down in the area specific on-resistance, all enabled by certain shrink combined with more refined cell structures. Even what we have today, more or less already sketched, is not yet the end of the roadmap. The material itself allows for even better performance, which is indicated here by gen five. It's still dashed.
That is something where we are looking into the various concepts, how to achieve it, but should just indicate we are not yet at the end of the roadmap, huh. That's about the chip technology. However, with all those shrinks, we are confronted with a challenge which we also have to address in order to enable our customers to use this technology. We have to combine the chip with a very powerful package, huh, in order to connect the performance from the semiconductor to the outside world. For that, we need, again, smart technologies which address the challenges we have with wide bandgap technologies. One aspect is thermal performance. The chips are very small, huh. Yes, we can reduce the losses in absolute numbers, but the remaining losses are concentrated on a very small area only. We have to handle very high power densities.
We have to remove heat from a very small area. For that, we have invented a couple of nice technologies on the packaging side. One is shown here. We call it also .XT. It's for a discrete device, a little bit different approach, like in the power modules, but giving you a similar result. What we are doing is we replace a so-called solder, which typically connects a chip to its package on the backside by a diffusion solder process. You see already then directly here, the transition layer is much smaller, and it comes along with a very nice additional aspect, and this is a significant reduction in the thermal resistance.
That means we can allow to shrink our chips, but still due to the improved thermal performance, the customer can fully utilize also this shrink potential in his application. A similar story we do also have available for power modules. In power modules, it's very important to understand the total picture of the thermal path from the chip to the heat sink. If you make a breakdown, this is shown here on the right-hand side, of the contributions to the total thermal resistance, you will see that the so-called thermal paste, which you have to apply between the heat sink and the power module, has by far the biggest contribution. It's not so much about the ceramics itself or the chip, et cetera, but the dominating part is the thermal paste.
With this picture in mind, a smart solution is, of course, to work on both an improved ceramic, but taking also into account improved mechanical properties. That is shown here on the left-hand side. You see, in a colored way, more or less the flatness of a ceramic on its backside. The standard ceramics has a relatively wide variation in total thickness, which you have to compensate then in the final assembly by the thermal grease. That means you have different thicknesses of thermal grease to more or less generate a smooth and fixed connection between the ceramics and the heat sink. On the left-hand side, our Infineon ceramics comes with a better thermal conductivity, but also with a significantly better flatness. We address both.
Here, this contribution from the ceramics, to a large extent, also the contribution from the thermal paste, because we can now shrink the thickness of the thermal paste significantly. In total, we can offer now again, especially important for silicon carbide, a very smart thermal solution in combination with wide bandgap chips. Of course, there's always a question after our acquisition in 2018, where we are with our Cold Split technology, which gives us the opportunity to significantly reduce the waste in the production of semiconductor or silicon carbide wafers from booths, which is done typically in most of the fabs today by wire sawing, very high material loss of 50%. We can do here significant reduction down to 20%.
That also then gives us more material from the same original boule, of course, so more wafers out of a given boule, but also, of course, it's a cost at a cost factor. Yeah, we are very proud to say we made it. Also, we went out of the startup phase and we're able to generate a production-ready technology, which is ramping right now. For that, I would like to share with you a very brand-new video from our new pilot site in Dresden. The race for the energy transition is happening now. A greener future isn't just about a better technology. It relies on us to make more from less. At Infineon, we have proven that innovation can lead to less consumption, but also to less waste and less uncertainty.
Silicon carbide is one way we have been able to get more power out of less material, but we have taken this one step further through the development of Cold Split technology. This patented production technique revolutionizes the way we are using the valuable silicon carbide material, helping us make more from less. Today, silicon carbide boules are cut into wafers by using a wire saw. A wire saw is common practice in industry today, but unfortunately, this process generates a lot of waste. Only 50% of the boule can be used later on as a wafer.
Here at our R&D site in Dresden, we've optimized the splitting process with Cold Split technology. The process utilizes precise lasers and liquid nitrogen to split silicon carbide boules more efficiently with less waste. First, the laser prepares the boule by creating a split plane, similar to perforations on notebook paper. Afterwards, a special polymer is temporarily applied to the boule surface. During the Cold Split process, the heart of our production, the wafer is split by the force generated by the contraction of the polymer at liquid nitrogen temperatures. Finally, the polymer is removed. The wafer and the boule are prepared for further processing. With Cold Split, we can more than double the number of wafers produced by the same boule.
We roll out this technology now in our high-volume manufacturing site in Kulim, in Malaysia, we will further strengthen our supply chain, become less dependent on our suppliers, and we are able to provide the needed silicon carbide to power the energy transition. This is just the beginning. Cold Split is just one way how we are making more out of less. Find out more how we are empowering a world of unlimited green energy by innovation. Okay. Yeah, I hope you enjoyed this short clip. As mentioned, of course, we have to continue our path of innovation, of driving up the capabilities enabled by wide bandgap. Of course, we have to cover the question of supply and volume. Just to give you an update where we are here.
At the moment, we are transitioning our existing power fab in Austria, in Villach, in the 150-millimeter and 200-millimeter part, completely to wide bandgap, which should give us end of 2025 revenue potential of about EUR 1 billion, which is approximately three times where we are today. The next step is already in construction. You see here on the upper picture our site in Kulim, and on the right, this is the third module of our Kulim fab being completely dedicated to wide bandgap production, enabling further EUR 2 billion of production capacities. With this move, basically, in 2027, we have 10 times higher capacity installed compared to what we have basically right now today. There is still some upside, taking into account potential coming from 200-millimeter.
This is something we will finalize and fine-tune during the upcoming calendar year. Therefore, we are very happy to share with you the message: We walk the ramp at Infineon. We keep our promises. With that, thank you very much. We are, I think, both ready for question and answers, Peter. Okay. Thank you. I will join you here on the podium. First question comes from Alexand er Petach from SocGen. Just a second.
We heard yesterday from Coherent, formerly II-VI, that they are exploring strategic options for their silicon wafer substrate and epi business. Given their roughly 20% SiC wafer market share and the partnerships with both yourselves and with Resonac, that is also your supplier partner, and given the substantial move to deeper vertical integration in the SiC industry with your key SiC device competitors, including STM, Wolfspeed, and onsemi, isn't this a perfect opportunity for Infineon to join this industry verticalization trend by striking a deal with Coherent?
Is this a perfect opportunity? I truly don't know. Since I was yesterday also at PCIM, this news did not reach me so far. As I presented or we presented, I think we're pretty happy with the current setup. If there are opportunities come across, we definitely will have a look at it. From today's perspective, we feel confident with the setup that we have, that's our plan A.
Different question from Gianmarco Bonacina. What will be the impact for Infineon from opening the new facility in Kulim in 2024 in terms of revenues and in terms of cost?
Overall, that is now the very long-awaited, upside, capacity upside that we will be able to provide to our customers. For GIP, we were growing now with a 50% CAGR for the last five years. Of course, starting on the lower level revenue-wise. Now we talk about substantial three-digit revenues. You know that we announced that we intend to achieve the EUR 1 billion overall for Infineon, EUR 1 billion revenue of silicon carbide in around 2025. I think, Kulim, output of Kulim is prerequisite to achieve this target. Of course, if we execute as ambitious as we now plan, then maybe there's a chance to even pull in the timeline a bit. It's not a question of demand. The demand is there.
It's simply a question of supply. We would love to have this output one year earlier. I think already next year and also with the ongoing ramp that still comes out of Villach, we are nicely set up to support this growth, massive double-digit growth for the years to come.
Yeah. His second question is on what is the contribution of GaN Systems in 2024? I think since we haven't closed yet that acquisition, the question is a bit premature, and I'm not sure whether you want to comment on that any further.
Yeah. I don't know how many questions are still to come, but very brief comment. I think, of course, assuming now that the deal closes in the next couple of months, as expected, the contribution will be know-how, right? Not to be underestimated, they provide a lot of know-how, also a very knowledgeable, experienced team. The primary contribution for us will be know-how on the application, on the tech-technology, and also on the product side. It's up then to the both teams combined to make something more out of it. Well, I'm pretty sure that this will be the case. Maybe also to comment it from a GIP perspective, of course, we have a certain overlap in the area of 600 volts , 650 volts devices and, of course, applications.
For us, it's very important and interesting to learn how the GaN Systems perspective looks on the industrial market. Our focus, as I said, is IGBT and silicon carbide, but we have already prototypes, module prototypes based on gallium nitride at our customers. We have a couple of R&D projects. Nothing productive yet, but extremely relevant and extremely interesting for us.
Okay. I have another couple of questions from Stefan Priebsch from Rondol. Can you please summarize all the SiC wafer supply contracts that you have right now? I think we've did already on the slide. How much they cover of the forecasted chip demand you see by 2027? I think the second part is the new topic.
That's a good one. I think I would have to ask procurement, sorry for the second part of the question. The ones were on the slide, right?
Yeah. Yeah, yeah.
Just to go through.
The question came in before you presented the slide.
Oh, okay. Okay. Yeah, maybe just to repeat, right? It's Wolfspeed, it's Resonac, it's Coherent, it's SICC, it's TanKeBlue. Did I forget somebody, Peter?
These are the ones which are publicly known. There's a few more. Maybe to comment on the reach of those contacts. Of course, all of them have a different term. You know, some of them end before 2027. That means we're going to renegotiate the next phases. This is ongoing, huh? The discussions today indicates that we are well covered, so we don't expect really that the material is going to slow us down.
Okay. About the two SiC supply contracts you announced, they are going to cover only Chinese client demand, or is it also being useful for other customers?
Well, first of all, front up is that we don't distinguish in the material selection according to a customer, except the customer requires that.
Yeah.
We can do that. It's not the front-up solution. We are pretty sure that there's also outside China willingness to accept Chinese material. Again, we can react if this is not the case, if there are any restrictions coming up. For that, we have this multi-sourcing opportunity. It's not just China for China, I would say. It's more.
Okay. One question that is, I'm not sure whether-
Can you do an update on the ramp of the different 300 millimeter plants you ramped in Villach, Kulim, Dresden?
Maybe I can very briefly step in. Well, yeah, Kulim, we I think we just discussed, and that is what we are ramping there is a 200-millimeter or the wide bandgap fab.
Only EUR 200. Also EUR 200.
Yes, absolutely. In Dresden, the first 300-millimeter plant is I think two-thirds, I think, or even more three-quarters full. The remaining clean room will be used in the next one year or two years. In Villach, there is more room for build-up of capacity. I think here we are at around maybe 30% of the clean room capacity, so there is more space to fill it. At the moment, all fabs are running in a high utilization rate.
We ramp with the highest speed.
We ramp with the highest speed, of course. Now a question more back to you. Can you update us on the pace of the ramp of SiC revenues from 2023 to 2024 already for the next year? I mean, we've gave a guidance for this fiscal year.
The challenge for us is very clear to simply keep the ramp rate. As said, looking back now in average 50%, speaking for GIP per year, the bigger the number gets, the harder it becomes to keep this growth. Definitely if you have looked at the slides, if we now assume overall market growth with 30%, definitely our ramp rate will be higher. Assuming that these 30% are somehow realistic, then we will continue to gain market share because we significantly, for this period considered 2023, 2024, we will be able to increase our output at a higher rate, so higher CAGR.
Since we are here on the power fair, what kind of revenues do we expect in GaN in the coming three years?
Okay, that's a good one because to be honest, I would have to ask my Publikumsjoker, so to say, the PSS guys. It's definitely something in their range of double-digit EUR. Do you have any numbers?
Yeah. I think this, they go into the double-digit revenues this year and the CAGRs we have shown, so it's still not yet at the level of silicon carbide, but especially the last year was extremely successful.
Yeah.
also for our gallium nitride guys. This is starting to make a lot of fun.
Yeah. Okay. Yeah. From our official perspective, we didn't hand out a guidance on that material, but for sure it's ramping fast and, yeah, I think the whole technology is just a couple of years behind silicon carbide and in some ways it is going to be the same story, I think. Yeah.
Yeah.
Yes.
Important to understand that it's not competing against each other, right?
Yeah.
We have an overlap at the many time already mentioned 650 thing. It's always competition, silicon or gallium nitride, silicon or silicon carbide. There's a good argument to have silicon carbide and gallium nitride in the portfolio.
Absolutely.
Okay. Next question comes from Andrew Gardiner from Citi. First one on, again, on an SiC substrate sourcing. You have highlighted the cost benefit of the newer low price SiC substrate suppliers. How does Infineon plan on using that substrate cost advantage? Will you be more aggressive on device pricing to gain share more quickly, or will you try to hold pricing and drive higher margins?
Guess what? I mean, first of all, of course, we are in a competitive environment, so the pricing is set via competition, by demand supply. That's the usual game in semiconductors, so we have to adapt our pricing strategy to the competitive nature. Of course, if you're able now, with the help of lower pricing on the material side, then you have more freedom to operate. First of all, we have to achieve the target operating model, which is communicated from the Infineon board. If we have more room to improve profitability while we of course continue to grow with or above the market, then we go for more profitability for sure.
Okay. I was switching back to that slide because the next question is concerning that. Ten, 10% -20% GIP growth range from slide six. Your assumption seems to be that you will grow at the same rate of the market or you go on to roughly 30% market share. In SiC, however, you're targeting share gain from your current level through the end of the decade. Are you therefore assuming any decline of share in silicon? Putting the question another way, it feels like the competitive dynamics are more intense in the new growth areas of SiC and GaN while it is less in SiC if competitors are less focused on SiC, less in silicon, sorry. If competitors are less focused on silicon while Infineon continues to innovate, why shouldn't you gain share over time? Very long question.
Yeah. Why shouldn't you gain share over time? In which direction? In silicon or silicon carbide?
I think in silicon.
Okay.
One is the assumption, yes, we improve our share in silicon carbide. Yeah. Today we are around, give or take, 20%, and then the target is to become 30%. I think that that is communicated. We didn't communicate a target for silicon-based stuff.
Yeah. I mean, from the market research, we see that for IGBT and industrial area, our market share is in the range of 30-something%, depending on the precision of these market research numbers. 30 something is somehow reasonable, I would say. Since the silicon market continues to grow, we simply want to keep our market share. That is meaning at least growing with the market. If there's the opportunity regarding supply, demand, and also performance, why not also grabbing one or the other percentage point on market share? I will not refuse for sure if the profitability and the margin is accordingly. Also the silicon innovation roadmap is not yet completely at the end. I mean, it definitely is flattening, but as shown today, the IGBT7 is now into the market. Very well received, we must say.
Also here we could do even more revenue, therefore we need to ramp the already mentioned facilities with the highest speed, while we still have also the IGBT8, now approaching the market, being in the final phase of development. Definitely what we want to keep, or if there's the opportunity, even expand the share in silicon, while at the same time, of course, we have more room for growth and also more room for market share on wide bandgap.
Okay. I have another one from Janardhan Menon from Jefferies. "Infineon seems to be many generations ahead of its competition in SiC technology, especially on trench. This does not seem to be resulting in any clear market share advantage in the automotive market in terms of design wins and revenues, even excluding Tesla. Why is it customers are not recognizing the significant cost and/or quality advantages of Infineon's SiC by awarding a higher design win market share? Is this mainly because of capacity constraints? Will you expect your market share to increase once capacity constraints reduce?
To put the answer simply, I would say yes. Indeed, at the moment, the design wins rolling in this one slide I've shown are very relevant. We are internally fighting for capacity, so we of course, have an agreement how to allocate the volume. Also in the automotive area, we are supply limited. Meaning, if now, with the activities operations is undertaking, if we are able to increase the ramp speed substantially, I expect increasing market share not only for industrial space but also for automotive.
Within the overall longer term growth of 10%-20% for GIP that you are now guiding to, what will be the growth rate of only the renewable energy portion?
Here I would say, ballpark number, of course, it's a bit the crystal ball, but I would expect something like 20%.
Okay.
Of course, now you have to differentiate a bit. Again, there's competition out there, which we take very serious. PV is really booming, and it will continue to boom. That's very clear what I hear also from the customers here during the fair and elsewhere. While wind has, of course, always longer lead times, right? The investments for wind, especially than also the, the granting the permission to build, the wind power park onshore, but even more complicated and challenging technically also offshore, that takes time. Typically, we discuss about years. We realized in Europe, especially also in German, that these lead times for getting those permissions, of course, massively need to be reduced. There's a lot of activity coming. There are other areas in the world where these lead times are anyhow very shorter.
We see this kind of a demand, really getting prepared, so to say. Right? It's continuously growing, but there will be more boom also coming from wind that is clearly visible in the next 1 to 3 years. We are preparing for it the best place we can, the best way we can.
Okay. Here's one directly fitting to you from Sebastien Sztabowicz from Kepler Cheuvreux. "Do you see any opportunity for silicon carbide within electric drives, or do you think IGBTs will remain the main technology there in the coming years?
I suppose if it's about the traditional motor drives, industrial motor drives, yes, definitely. We do have already a substantial revenue contribution today from certain segments in industrial drives. Peter showed this very innovative new motor solution, so there's a couple of very nice projects stepping in. Yes, of course, if you look to the, what we call general purpose drives, so the absolutely low cost, standard performing, things, it will take some more time. In the high-end side, a lot of designs are going in or taking place right now. Not to forget, with silicon carbide, we are enabling the reinverterization of non-inverterized motors. That's a huge potential for future energy reduction for operators of such a system. This is something what also slowly starts to develop right now. Therefore, clear, yes.
We expect also drives to be penetrated by silicon carbide.
Okay. Being a layman, I think, robotics and server drives is an area where silicon carbide is fitting, especially well.
Absolutely. Yeah. That's where we have today already our very nice first revenue contributions. Again, the value proposition coming along with the MOSFET compared to an IGBT is so substantial in those applications that it's more or less a no-brainer to go for SiC. Again, we can shrink the system, we can save on cooling, save materials. It's a lot of very strong arguments here.
Okay, great. I have a follow-up from Alexander Foltin. What is your assessment of Soitec Smart Cut technology? Are you still evaluating it? Do you think it has a place? Can it be game-changing if it delivers on its promises?
Before Peter takes over, I would say that should be asked to Soitec. As we are an innovative company, of course, we look into all kind of interesting innovations. Right?
Right. Absolutely. It's still ongoing, to be very honest. Still, there's a couple of things to look into because it's very important. It's a different material. You know, it's not like every other silicon carbide, and therefore, we have to check various additional things. It's not like another supplier, which we easily can list up here. This approach has a lot of potential, but we have to be sure that we don't, yeah, bring in any, let's say, hidden problem for the rollout in high volume. We want to be sure on that side before we really comment on this with the final assessment.
Okay. Yeah, that's again a bit difficult for us. Could you outline what are the difficulties at the 200-millimeter SiC that the industry is experiencing? What is Infineon's plan in terms of timing for the migration from 150 to 200? I think the second part is easier to answer.
Yeah. We are starting the conversion project as we speak. We have eight-inch wafers. We meanwhile also get 8-inch wafers from more than one supplier. That is very good news. Of course, it's in the very early stage, being also cost or price per square millimeter, still innovation style. The timeline, maybe I already mentioned this, we assume that this conversion will take roughly two years, meaning we expect production readiness around 2025. Regarding the technical challenges.
Yeah. I think we see the similar thing what we all experience with each and every transition from a smaller diameter to a larger one with silicon carbide. At Infineon, we experienced it starting from two-inch and exactly the same problems we see. Of course, it was always at a smaller scale compared to now, where of course the total volumes are much higher. This is a typical transition phase where initially yields and crystal grows are not where they are with the smaller diameters. It's simply a learning curve, which is also a little bit bound to the technology itself. It's not a surprise for us, I would say.
Okay.
What also steps in here is that, of course, at the moment, the focus is on ramping 150-millimeter. That's where the volume is, today, where also the suppliers have to deliver. Once more effort is spent to 200-millimeter, those problems will also go away.
I like the recent quote of Jean-Marc Chery from ST very much. He said, "200-millimeter is not a piece of cake." We agree.
Absolutely.
With that, I have no further open questions. Yeah. Thank you very much for you joining us in this call. Any follow-ups, always happy to take it in investor relations. Peter and Peter, thank you very much for your contribution and for the insightful presentation. Yeah.
Thanks, Alexander, for the moderation, preparation, and thanks also to the team and the audience. Thank you.
Thank you very much.
Thank you.