Hello, and welcome to the Vicor Corporation Annual Stockholders Meeting. Please note today's meeting is being recorded. Also note all parties will be in a listen only mode for the entirety of the meeting. During the meeting, we'll have 2 Q and A session. One after the formal business meeting and the second at the conclusion of the management's presentation.
Stockholders who have earlier registered for Management reserves the right to consolidate certain questions and its sole discretion if those questions cover similar or overlapping topics. Management also reserves the right not to respond to questions it considers also in its sole discretion, inappropriate for the purposes of Annual Stockholders Meeting. It is now my pleasure to turn today's meeting over to James Ed Smith, Chief Financial Officer of Vicor Corporation. Mr. Schmidt, the floor is yours.
Thank you. Good morning. The Board of Directors of Vicor Corporation welcomes you to the 2021 Annual Shareholders Meeting. In response to the continued public health precautions associated with the COVID-nineteen pandemic. This year's meeting is being conducted over the Internet as a webcast of our presentation material accompanied by an audio feed.
There is no live feed. Vicor expects to hold future stockholder meetings in person, absent extenuating circumstances, including the ongoing impact of COVID-nineteen. I'm Jim Schmidt, Chief Financial Officer, Secretary and Treasurer of Vicor. As provided for under Article 1, Section 8 of the corporation's bylaws, I will serve as Chairman of this meeting as well as recording secretary. Proxy materials and invitations to attend today's meeting in person were mailed to stockholders of record as of April 30, 2021.
Most proxy materials disclosed this meeting would be held in virtual format only. As set forth in the proxy materials, A stockholder, whether a direct holder of record or a beneficial holder through his or her broker, who intended to vote his instructions therein to register for full access to the meeting via the Internet. Any stockholder proposals to be considered at this meeting should have been submitted earlier following Procedure set forth in our bylaws. At this time, I have not received any such proposal.
We
will be providing 2 opportunities for Q and A. Related to the formal business purpose of the meeting. The second opportunity will occur at the conclusion of management's presentations. As the operator stated, submissions of questions by registered stockholders may be made by clicking on the message icon on your screen. Registered stockholders will be asked to identify themselves when submitting a question, and I will identify the stockholder when reading the questions received so that my colleagues may answer the question.
On the screen before you, All participants will see hyperlinks to our proxy materials and annual report on Form 10 ks. On the screen is Comprehensive Safe Harbor statement comparable to the language we include in our other public statements regarding the company's financial or operational performance, such as our filings, press releases and our quarterly earnings calls. I will not recite the full text, but I remind you Various remarks we may make today may constitute forward looking statements for purposes of the Safe Harbor provisions under the Private Quarter of 2021 and as such, we will not comment on specific elements of financial or operational performance for the Q2 or any forward period. 2nd quarter performance will be addressed during our upcoming earnings call, which we anticipate will be taking place on Thursday, July 22nd. On the screen is the agenda for today's webcast.
As shown, we'll conduct a formal business meeting reviewing the one proposal before After we take care of formal business, Phil Davies will provide an overview on the company's growth strategy, followed by Robert Gendron and Patrick Wadden, who will provide updates on our high performance computing and automotive markets, respectively. The sales and marketing team will be followed by Mike McNamara, Head of Operations, who will briefly comment on the expansion progress of our Andover Regarding the company's business and products. Again, we cannot answer questions regarding our financial or operational performance for the Q2 of 2021. As has been the case in the past, we'll be posting the audio portion of today's meeting on the Investor Relations page of our website. The slides also will be posted separately on that page.
I'll now introduce the 8 members of the corporation's Board of Directors and 1 nominee. Our 5 independent directors and 1 nominee are in alphabetical order. Sam Anderson, CEO of Icemoss Technology Limited, a supplier of high quality thick film bonded silicon on insulator wafers, Based in Belfast, Northern Ireland, Sam is the former CEO of Great Wall Semiconductor, an important component supplier to Vicor, in which Vicor held And non voting convertible preferred stock. Great Wall was acquired in September 2015 by Intersil Corporation. Michael Ansoor, the nominee to the Board is a managing partner of March Partners LLC, an event driven investment firm based in New York, New York.
Michael is also a Director of the Hertz Foundation, a non profit organization He also serves as Chairman of the Foundation's Investment Committee. Michael previously served on Vicor's Board of Directors from 1993 to 2,007. Jason Carlson, CEO of Congatec AG, headquartered in Deggendorf, Germany. Congatec Litchi joined in 2015 as a leader in the industrial embedded computing field. He is the former President of Semtech Corporation, A leader in analog and mixed signal semiconductors as well as holding other positions of leadership in the electronics industry.
Jason chairs both our audit committee and compensation committee. Andrew Damico has been in the role of Counsel for intellectual property matters for Vicor since 2006. Prior to his engagement with Vicor, Andrew had 18 years of private practice And diverse technological areas, well with Rich Fish and Richardson PC. Estia Eichten He is an original investor in the company and has been since 1989, a senior scientist at the Fermi National Accelerator Laboratory in Batavia, Illinois, outside Chicago, which he joined in 1981, the same year he joined our Board. Based on the assumed results of the shareholder vote to occur at this meeting and a meeting of the Board of Directors immediately following this annual meeting of stockholders, our employee directors for the forward term will be Phil Davies, who has served as our Corporate Vice President, Global Sales and marketing since February 2011.
He was appointed to the Board in 2019. Mike McNamara, who has served as our Corporate Vice President, General Manager, Since 2015. He also was appointed to the Board in 2019. Claudio Tuzzolo, Who has been with Vicor since 2,001, serves in a leadership role spending R and D and sales and marketing, Claudio has been a Director since 2007. Patrizio Vinciarelli, Chairman of the Board, President and CEO, who founded the company in 1981 And myself, I recently joined Vicor on June 1 this year as Chief Financial Officer, Secretary and Treasurer, and will be appointed as a Director at a meeting of the Board of Directors immediately following this annual meeting.
Prior to joining Vicor, I had a 35 year career with Analog Devices, which I have a BS in Chemical Engineering and an MBA. My areas of expertise include financial management, cost accounting and pricing, business processes, systems integration, semiconductor manufacturing and distribution. My initial focus areas will be scaling the business, cost and pricing, business models And go to market strategy and execution. We're joined today by our outside counsel, Gabor Gerai, who chairs Foley and Lardner's Private Equity and Venture Capital practice, among other responsibilities with the firm. On the line is Harold Murphy, representing Computershare Trust Company, the corporation's transfer agent.
Harold has been appointed to act as Inspector of Election, also known as the teller for the formal business portion of the meeting. Also attending by telephone is John Murphy, a partner from KPMG LLP, our independent registered public accounting firm. Portion of the agenda. I now call the 2021 Annual Meeting of Stockholders to order. On the screen is the agenda for the official business portion of today's meeting.
As stated, proxy materials and an invitation to the meeting were sent to all stockholders recorded as of the close of business on April 30, 2021, the record date. Only stockholders of record on that date are entitled to vote at this meeting, either by proxy or by in person ballot, subject to the registration process discussed earlier. The affidavit of mailing the notice of meeting has been delivered by the teller to me and will be filed The minutes and records of today's meeting. Our proxy materials our proxy statement was filed with the SEC on April 30, 2021 and mailed to stockholders shortly thereafter and sets forth the proposal for 1 stockholder vote here today. The Board recommends stockholders vote in favor of the proposal.
While Rule 14A-eight under the Exchange Act provides for the inclusion in our proxy statement of appropriately submitted proposals from eligible shareholders In my capacity as Corporate Secretary, I confirm we did not receive any such proposals to be included in our proxy statement. This slide sets forth the number of shares of common stock and shares of Class B stock as of the prior 2 year ends and the record date. These figures are presented on a basic basis, reflecting only the shares outstanding eligible to vote. Said another way, the dilutive impact of any options exercisable within 60 days of the date shown has been excluded. As shown, as of the record date, April 30, 2021, our outstanding shares consisted of 31,776,000 960 shares of common stock and 11,758,218 shares of Class B stock.
I remind you our outstanding Class B shares possess 10 votes per share, although they are exchangeable only on a one for one basis for shares of common stock. As shown holders of our Class B shares of which there are 13 possess as of the record date 78.7% of the cumulative voting power 149,359,140
votes, how much will as of
the record date? Also as of the record date on a basic share basis, Doctor. Vince Iarelli owns 31.4% of common stock shares outstanding At 93.8 percent of Class B shares outstanding, representing 80.4 percent of total voting power, giving him control over all governance matters. Assuming full conversion of Doctor. Vinceiarelli's Class B shares on a one for one basis, as of the record date, his holdings represented 49 3% of shares ownership on a basic share basis.
Because of Doctor. Vince Iarelli's voting control under the corporate governance requirements of NASDAQ Rule 5,600, We are considered a controlled company, which is defined as a listed entity for which more than 50% of the voting power for the election of directors from independent director oversight of executive compensation, but instead maintain a compensation committee comprised solely of independent directors. Of course, there is no exemption for maintaining an audit committee comprised solely of independent directors, which we do. Directors Anderson, Carlson and Eichten will be the sole members of our Board's Compensation and Audit Committees for the 2021 term. Returning to procedure, our first order of business shall be determined whether the shares represented I earlier introduced Computershare's Harold Murphy, who has been appointed to serve as Inspector of Having pledged to perform those duties under Delaware law to support me in the conduct of this meeting.
This pledge will be filed with
the minutes and records of this meeting. According to information I see on the Computershare website at the present time and confirmed by Harold Murphy in his capacity as Inspector of Elections, It appears there are no stockholders seeking to submit a vote or change an existing vote. As such, I now ask the Inspector of Elections to inform us whether a quorum is present.
Mr. Chairman, I can report as of the record date, April 30, 2021,000,007 6,960 shares of common stock and 11,758,218 shares of Class B stock were outstanding, Representing eligible total of 149,359,140 possible votes as shown. Given our receipt of Doctor. Vince Iarelli's proxy representing 80.4% of eligible votes,
far more than
the simple majority of eligible votes required for a quorum All represented here today. As you have just indicated, we have received no new ballots nor any instructions to withdraw or change an existing proxy. So the numbers previously reported and shown on your slide are accurate. A complete list of stockholders as of the record date compiled and certified by Computershare
Thank you. I therefore declare a quorum. The polls are now open and will remain open We will now proceed with discussion and voting on the proposal set forth in the proxy statement. Since the proposal was addressed in detail in the proxy statement and since 93.1% of the shares eligible to vote are represented by proxy at this meeting, We will dispense with the formal motions and validating for the proposal. Further, as mentioned, Doctor.
Vinceiarelli's proxy, Representing 80.4 percent of eligible votes has been received and voted in favor of each of the nominees and fixing the number of directors at 9. Therefore, the proposal received prior to today's meeting more than enough votes for approval. Each stockholder was entitled to vote for a maximum 9 nominees. Cumulative voting was not permitted. I now will offer a final opportunity for registered stockholders to electronically submit a question regarding the size of the Board and the election of the nominees.
I see no questions regarding the size of the Board and the election of the nominees have been submitted by registered stockholders via the Computershare website. Accordingly, I now formally close the polls. Based on the vote totals previously provided by Computershare and seeing no additional votes reported by Inspector of Elections, the next slide sets forth the voting results indicating the passage of the proposal. As shown, all 9 directors standing for reelection or election received an affirmative vote of at least 95.4% of the total amount of representing at least 93.1 percent of shares entitled to vote. Therefore, all 9 nominees are hereby elected.
The final results of today's ballot will be reported in detail on or before Thursday, July 1, via filing of Form 8 ks with the SEC. There being no other business to come before the formal business meeting, I will entertain a motion to adjourn. So moved. Thank you. Given the virtual nature of this meeting, the impracticality electronic voice vote of all registered stockholders listening and the presence of Doctor.
Vince Iarelli, who holds 80.4% of voting control, I ask Tim If he is in favor of adjournment. I'm in favor. Vote is in favor of adjournment. This concludes the formal portion of our meeting. At this time, I turn the virtual podium over to Phil Davies, who will offer remarks on strategy.
Phil?
Thank you, Jim. Good morning, everyone. I'd like to add my welcome to our 2021 shareholders meeting. And along with the Team here, we will provide an update on our 5 layers of growth strategy. Before I get to that, let me say the following.
For decades, we've been investing in a better way to deliver power, Innovating way ahead of our competition, recognizing that markets, applications and customers would finally reach an inflection point That investment is now paying off and several major markets are finally catching up to us. We are uniquely positioned in the high performance computing and automotive markets with a combined available market of over $20,000,000,000 Because of our proprietary technology focused on delivering high density modular power systems, additional new growth markets Our entry into AC to DC applications later this year will continue to expand our SAM. At my first FICO Annual Shareholders Meeting in 2012, I introduced a 5 layer growth strategy for the company that continues to drive the structure and processes for the front end of our business. Layer 1 and Layer Our broad market or standard products business. Layer 1 is made up of our existing 10,000 plus customers who have been long time loyal customers For our legacy BRICS, layer 2 is our objective of adding 10,000 new customers to this global franchise.
Layer 3 is entering new high growth markets and developing long term partnerships with major global OEMs. Layer 4 focused us on processes that are critical elements of our strategy and structure, and Layer 5 is our brand and represented at that time the major task of repositioning Vicor to be viewed as a high performance power management semiconductor company Albeit at an initial slower pace than anticipated,
but in
the last 4 years that pace has significantly increased as major technology disruptions Such as broad AI adoption in data centers for high performance computing and electrification of automobiles Have driven significantly increased system power levels and created significant power delivery challenges, which by the way are also happening across a broad set of markets and new applications. Vico's high density modular power approach Design is taking hold in increasing numbers of major OEMs and also importantly within the broad industrial market on its large expanding global base of customers. The 5 layer strategy is the cornerstone of our sales and marketing efforts is still an important contributor to our business and will remain so for the next 5 years. However, the contribution Makes to our top and bottom line will significantly reduce as our advanced products begin to dominate our business. This transition has already begun.
Many of the customers that have been using DCDC Bricks over the past 30 plus years are being offered new solutions With higher density and performance, many of them are already beginning to transition to our chip DCM, DC to DC family strategy of adding 10,000 new customers has been supported by a major transition in our distribution channel strategy over the past 10 years. Once a large regional structure of almost 30 distributors, the channel now mainly consists of a global partner Consisting of ARO, Future, Digi Key and Mousa. ARO became a global franchise partner in September of 2020, and I expect them We become a significant force multiplier in our Layer 1 and 2 growth objectives in the coming years, which as you can see here is on a great trajectory. The gestation and time to revenue in the industrial, defense and aerospace markets are long, but are important to our overall business growth. Growing a standard products business in Layer 1 and 2 will add important stability and higher margins to our overall business portfolio.
A major part of our Layer 2 strategy is to also identify new growth markets. In that endeavor, we have excellent early positions For our high performance power modules in several new markets, all of which require more efficient power delivery solutions. We estimate that these markets represent an expansion of SAM in the order of $1,000,000,000 in 5 years. Our Layer 3 has seen the expansion of our data center business into a major growth driver for Vicor. To discuss this Layer 3 Growth Market strategy in more detail, I'm going to hand off to Robert Gendron, our Corporate Vice President of Product Marketing.
Robert?
Thank you, Phil. So let's begin by breaking down the market into its various segments. If we look at what we call the AI computing space today and where Vicor is focused, we begin with the e commerce and cloud service providers. This would be Google, Apple, Facebook, Amazon and Microsoft in the USA and Baidu, Alibaba, Tencent in China. AI is now clearly established in the cloud and is continuing to increase, consuming more merchant AI accelerators along with internally developed processors Video streaming, image recognition, so on.
Next, we have high performance or supercomputing where companies such as Cray, HPE and IBM are creating leading edge high performance systems. Their system installations typically set new benchmarks in Which are developed from either the traditional CPU, GPU houses like Intel, AMD and NVIDIA, Along with numerous AI startups, including Cerebras, Graphcore, Preferred Networks, Esperanto, SambaNova, Cambricon and the list goes on. Next, our AI pods, where companies are creating high density, dedicated AI systems. Recent public examples include the Cerebras CS2 system and the NVIDIA DGX system. Last but not least are the 5 gs systems that are creating edge computing high density cabinets placed in close Computing space continues on its trajectory of rapidly increasing power consumption with form factor constraints.
Vicor is in a leadership position providing innovative high performance solutions to our customers' significant challenges of Higher power delivery to maximizing computational performance. We continue to advance our product power density, current density and efficiency performance across the entire power delivery chain from the grid to the point of load with a focus on what we call conversion, Bridging and Current Delivery. This high growth Layer 3 market has a projected SAM of $2,500,000,000 in 2025 with $1,000,000,000 in conversion, dollars 500,000,000 in bridging and $1,000,000,000 in current delivery. Let's look at these in further detail. For conversion, The traditional rack mounted silver box AC converter no longer meets the needs of high density supercomputing and AI pod systems.
We are engaged with several customers on AC and high voltage DC solutions. These new system designs require higher power density, Higher operating performance and power module packaging technology adapt to advanced cooling methods. Power delivery is also being decentralized or Redistributed within systems. Our BCM-six thousand one hundred and thirty five is enabling 380 volt power distribution Within a supercomputer rack. By distributing 380 volts and converting to 40 volts closer to the server tray, supercomputers can deliver the Distributing power at a lower voltage is not feasible given the efficiency losses and increased cable sizes required in these 150 kilowatt systems.
As an example of our continued product innovation, Our BCM6,135 also represents a 30% increase in power density versus its previous generation. Moving from conversion, we have what we call bridging, which is the need to have 48 Coexist with 12 volt in rack systems today. Our NVM-two thousand three hundred and seventeen provides bidirectional conversion, meaning either 48 to 12 volt conversion or 12 volt to 48 volt conversion in a high density form factor, Allowing it to be placed within the most space constrained applications. Our most recent MBM-two thousand three hundred and 17 has a 70% increase in power density versus the previous generation, highlighting again our continued efforts on Product innovation. Now moving to what we call current delivery, which is all about powering High current processor or XPU.
We have numerous design ins and wins With AI, networking and host XPU customers, all of these designs face space constraint challenges in addition to High current, low operating voltage needs and our proprietary factories power architecture point of load solutions are meeting these challenges. Let's look at some of them. High point of load current delivery needs to be placed Near the XPU to maximize efficiency and performance. There are an increasing number of new space constraints that limit displacement. For example, AI accelerated card form factors limit the available board area for current delivery.
There are also connector keep outs and large onboard memory ICs that can block the path from the current delivery origin to the XPU. In another application, advanced network switch processors are utilizing high speed transceivers that can surround the XPU, again blocking Current delivery. And in AI clustered computing applications where processes are placed adjacent to each other, Today's leading XPUs require over 600 amps of continuous current with peak currents approaching 2,000 amps. As XPUs move to the latest silicon technology nodes, their operating voltages are also decreasing. These higher
current
and lower voltage requirements call for the current delivery to be located as close to the XPU as possible. Voltage regulation, efficiency and performance will all degrade as the distance from the current delivery to the XPU increases. Most importantly, the XPU will not be able to operate at maximum performance. To summarize, the Challenge for current delivery is delivering higher and higher currents in a space that is becoming smaller and smaller. Our Factorized Power solutions solve this problem better than any of our competitors.
Our solutions support lateral current delivery, typical and current OEM car designs, lateral vertical And vertical current delivery supporting the highest density designs, including advanced XPU cluster applications. We are winning these designs because of the combination of density, efficiency, transient performance and low noise generation. I have 2 public examples of some recent design ins. The first is from China AI startup, Cambricon, We introduced their MOU290 AL Accelerator in an OEM card format. Our MCD MCM solution is visible adjacent to the XPU.
The second example is also from China company called Elevator, their big island training in a PCIe format. In addition to our MCD MCM solution, Elevator also uses our NBM Trans systems pushing higher current and lower operating voltages. Both designs also show that our solutions are In summary, we have a global effort targeting cloud, supercomputer, AI accelerator, AI pod and 5 Our power delivery is focused on conversion, bridging and current delivery. We continue to innovate and advance our product power density and efficiency performance. We maintain a performance lead over our With our proprietary architectures, including factorized power, silicon integration And proprietary high density package technologies.
Thank you. And Phil, I'll hand it back to you now.
Thank you, Robert. In 2018, we recognized the large emerging opportunity for Vicor In the automotive market as electrification began to take hold and the need for power dense and lightweight DCDC converter solutions became critical to new vehicle performance. Patrick Wharton leads our global business development efforts and will now provide an update on our progress And this new layer 3 business. Patrick?
Thank you, Phil. Good morning. My name is Patrick Wadden and welcome. This image would not have been dreamed of 3 years ago. For many years, electric vehicle production volumes were less than 1% of the overall vehicle production output worldwide.
While emissions, compliance and government incentives started this ball rolling, it is consumer desire that It's really building the steep demand as OEMs are moving the electric vehicle from niche to mainstream. These OEMs are now making bold commitments and gearing up for a very exciting decade of new high performance EV vehicle platforms. OEMs are now electrifying some of the most popular and favorite vehicles. We are seeing the GM Hummer, Ford's new Mach E, the electrified Mustang, and now their flagship F-one hundred and fifty light duty truck, the Lightning, Being electrified, these models are drawing attention from the masses because of the impressive performance enhancements and sleek designs. OEMs have shifted to not only meet environmental standards, but are introducing electric vehicle platforms That offer high performance and functionality never seen with combustion vehicles, making them even more attractive to consumers.
New high performance stylish vehicles with improved fast charging technology, lower maintenance costs and repair costs Are the catalysts driving consumer demand and increasing the development and adoption of electric vehicles. Exciting decade ahead of us with an expanding global opportunity forecasted now to be even higher than it was just a year ago. Consumer demand and the need to meet lower CO2 emission standards are accelerating the market and competition to be first is heating up. The number of vehicles, consumer options, varying powertrain architectures and choice of battery and charging configurations All add to the complexity designers have to address as they work to electrify their fleets in a short amount of time. According to Credit Suisse Global Auto Research Team, analysts now predict electric vehicle production to exceed 10,000,000 units by 2025 and close to 29,000,000 units by 2,030.
The combination of all electrified vehicles will soar from 11% in 2020 to as high as 62% In 2030, topping out at 63,000,000 vehicles. Combustion vehicle production, according to some market experts, Could fall from 97% in 2020 to as low as 10% in 2,040 as new environmental friendly platforms are expected to grow. CO2 emissions compliance standards are driving OEMs to reconsider How to power the automobile. Internal combustion engine cars typically operate with power levels of 600 watts 3,000 watts of electric power, whereas new electrified XEV platforms require electrification levels Of 3,000 watts to over 60,000 watts, more than 5 to 20 times the power. In its basic form, electrification is about changing the power source in a vehicle from Canacol belt driven system to an electrical power delivery network.
This major shift Not only refers to electric vehicles, but also includes mild hybrids, hybrids and plug in hybrids, All very rich in product content for Vicor ranging from $50 to 7 $20 per vehicle and in some cases as high as $1600 per vehicle, all based on the vehicle power delivery network And architecture. We entered the automotive market in late 2018 With a 3 pronged strategy based on our highly differentiated modular power solutions that enable OEMs to not only significantly reduce the size and weight of their vehicles, but also reap the added benefits of Reusability, flexibility and scalability brought about by the inherent benefits of designing power systems With modular power building blocks, we believed that this value proposition would resonate first With the OEMs themselves and what we call a directed supplier model, where we work closely with the OEMs engineering team To define, develop and build the power system. The second prong in our strategy is to partner with Tier 1 The 3rd prong is to target Tier 1 Auxiliary subsystem suppliers to help facilitate their adoption of higher power delivery For air conditioning condensers, engine fuel pumps, heated windshields, actuators and High power comfort systems in the vehicle.
This high level strategy has launched us deep into the automotive industry With a robust pipeline of design wins and opportunities to solve complex challenges associated with 800 volt, 400 volt To achieve their aggressive electrification goals, OEMs have to reconsider their approach to power delivery architectures. Bicore's modular power system design approach offers 3 compelling advantages. Power density It's critical in reducing size and weight for lower CO2 for higher performing vehicles to go faster, lighter and further. Density is especially important in 800 volt and 400 volt vehicle systems to further extend range and acceleration Or allow for larger battery packs. Whether it's a fast sports car, a light duty truck or a family car, OEMs need to pack as much power as possible in a constrained space.
Reusability With Ficor's modular solutions can save time and development costs. The qualification of a component Could take up to 2 to 3 years for a single device. With Vicor's modular approach, automakers can achieve over 300 Combinations of power delivery for using just 3 to 4 scalable building block type modules and reconfiguring them differently. OEMs need to be able to reuse designs across different platforms to speed time to market. Automakers look for ways to reuse what they have to save deployment and to save development and qualification time, Conserving valuable resources.
The 3rd advantage is flexibility and scalability. The unique Ficor Modular Approach allows automakers to implement standardized solutions across a wide variety of powertrain platforms Such as SUV, minivan or light duty truck with the same family of products, engineers can easily add or remove Pre qualified parts to the array to scale power delivery up or down. OEMs are working aggressively to reduce the size and weight of their power electronics 25 kilograms. This has an enormous value for an OEM and it's achievable when implementing a Vicor modular power approach. Our new BCM-six thousand one hundred and thirty five, for example, converts high voltage from 800 volts or 400 volts Down to 48 Divolts delivering 2.5 kilowatts of power at 98% efficient in a package We have made significant progress this past year and are actively engaged with 20 customers.
These range from OEM design wins with confirmed start up production dates to collaboration projects with OEMs in Tier 1s that we expect to convert to design wins this year. Automotive is the biggest market opportunity for Vicor and to see the Trend of electrification accelerating and our value proposition of high density modular power systems gaining momentum It's very exciting. I am pleased to say that our development timeline on track with our directed OEM strategy leading to design wins with 2 OEMs based in Europe And Japan. These 2 key OEM partners have worked closely with us as teaching customers in a reciprocal relationship With auto grade material later this year, while developing our internal automotive manufacturing quality management system. We expect continued growth with customer engagements, completing design validation and PPAP qualification in late 2022, Follow the production ramps for Vicor before the end of 2022 for OEMs who are starting production in mid 2023.
In closing, We strive to advance our technology and continually improve our products, processes and services by reviewing performance metrics, Implementing appropriate actions and empowering our employees for continuous improvement. Vicor is an ISO nine 2015 certified manufacturer, we are implementing an APQP automotive quality management system with expectations to ship auto grade material in 2021 and complete PPAP qualifications on several automotive products by the end of 2022. We expect to be IATF16949 certified by the end of this year and are driving the company towards a 0 defects mindset. Thank you for your time today. I look forward to updating you in person at next year's shareholder meeting.
Back to you, Phil.
Thanks, Patrick. I think it's safe to say that our brand, layer 5, has undergone a major change. We are no longer recognized as a power supply company. Our competition now comes from ADI, TI, RENASYS and other semiconductor companies. Over the next 5 years, the Vicor brand will be firmly established as the high performance power module company.
FICO is also at an inflection point, where we have to Transition from not just being known for innovation, but also achieving the operational excellence that our customers demand. Our focus on operational excellence must happen across the entire company and fully encompass all aspects of our 5 layers of growth strategy. Patrizio has made this a top priority and we are now embarking on a company wide set of initiatives to make that happen. The next 5 years will be exciting. We're at the right place at the right time as many high growth markets and customers seek out the highest performance Power delivery solutions to achieve a competitive advantage, and that road leads to Vicor.
I'd like to thank you for your continued support, and I hope you enjoy the journey with us over the coming years. I will now hand over to Mike Kamara, who leads our operations team, and he'll discuss the progress being made in expanding capacity to meet our highly anticipated demand. Mike?
Thank you, Phil. At this time, I would like to provide an update on our factory expansion. With this being integrated into our Andover operation, we'll realize significant sorry, The facility expansion at our Andover location was brought about to enable vertical integration of our critical packaging step needed for our advanced products. With this being integrated into our Andover operations, we will realize significant reduction in manufacturing cycle times, Address the need to increase capacity to catch up and meet long term capacity needs. Additionally, by bringing it in house, we will benefit by leveraging Operations existing overhead and infrastructure in Andover.
Overall, this will provide Vicor the needed scalability and operational efficiency The completion of the facility's new 90,000 The upper floor of the new wing will house the processes for vertical integration. The remaining 45,000 square feet on the ground floor is reserved for additional advanced product capacity. The construction scheduled to be completed in October of this year, it remains on schedule and on budget. All equipment for the vertical integration is on order. In fact, some equipment to support the infrastructure The vertical integration is now being installed in parallel with the construction activity.
The operations team has a transition plan to move Key work sales into Andover starting in early Q4 and completing 100% integration in the first half of twenty twenty two. In summary, Vicor has and will continue to make the needed investments in equipment to meet capacity ramps of our advanced products. The strategy to vertically integrate will enable Vicor to catch up with the demand and provide the needed capacity for future growth In leveraging the existing operational overhead and infrastructure in Andover, we expect gross margins to further improve. As we complete the factory expansion at our 400 Federal Street, we are now shifting focus on selecting an additional campus to support ongoing growth. In conclusion, we are at an inflection point where Advanced Products will be greater than Brick Products starting in Q3.
And with this investment made, our factory is ready Thank you, and I'll turn it back over to Jim.
Thanks, Mike.
Now we'll turn to our long term financial model. Our long term model is to grow sales at double digit rates, while managing the shift in product mix from brick to advanced products. Additionally, we intend to expand gross margin to approximately 65%, hold the high rate of R and D investment at approximately 15% of sales and grow SG and A expense slower than sales and thereby reduce SG and A to approximately 15% of sales. We expect our long term model to yield operating profits of approximately 35% of sales. At this time, management will take your questions.
I again remind everyone We are in our Q2 quiet period and accordingly, we will not be commenting on current operational or financial performance. Please keep in mind Vicor is targeting Thursday, July 22nd, for releasing its Q2 results And holding our quarterly conference call with investors. During the Q and A portion of that call, investors will have direct access to management for asking questions. As stated by the operator at the beginning of the meeting, management reserves the right to consolidate certain questions or comments it considers also in its sole discretion inappropriate for the purposes of the Annual Stockholders Meeting. We've already received several questions.
So I'll proceed with reading these questions to my colleagues For Patricio from John Dillon. Can you give us an update as to how the GCM is progressing? And are you Developing building block solutions for a variety of high current processors. And there's a follow-up question as well.
So GCM is an example of A vertical power delivery component. We're working closely with one of the customers that was referenced As earlier by Robert Gendron, Cerberus, another potentially Larger customer with a similar vertical power delivery system requirement. These are wafer scale type of applications that will become more leveraged as Computing takes on the next several challenges. The GCM itself is a building block for a solution, Not on a wafer scale basis, but at the level of a Sure. Consuming cars in the realm of 800 and 100 amps.
With all vertical part delivery products, including the ones I referenced earlier and the GCM itself and the ones I referenced Earlier, our for wafer scale applications, through vertical power delivery in the sense that The power path in 3-dimensional space involves delivery of power At 48 volt, from the phase opposing a Wafer scale silicon, a wafer. In the case of GCM, It's vertical power delivery, but not in effect as extreme as The wafer scale example, these advances are progressing. We're at different stages So with different customers, the number of customers involved is still relatively small, but expanding. We have recently embarked on a bridging initiative where GCMs or DCMs that are in effect building blocks of a complete vertical power delivery system Can be simplified for uses where the current demands In a range somewhere in between the realm of lateral power delivery And vertical power delivery. And as mentioned by Robert in his prepared remarks, we're focusing On what we call a lateral vertical methodology that in effect combines The simplicity of lateral power with a vertical element that Captures about 70% of the benefits of vertical power delivery for applications that are not quite We're for scale.
So as you can surmise from those comments, It's a complex landscape, and we're progressing on a number of different fronts to address different Current requirements are different levels ranging from what have become relatively mundane, Laval Power Delivery Solutions, the ones that you've seen again referenced and shown By Robert earlier,
to
At Onexstream, full vertical power delivery, involving again a multiplicity of Devices that can individually supply the better part of 1,000 amps 2 radical within a wafer, 2 intermediate in between type of solutions. And I would say We're making good progress. Stacking chips, which is an essential element Of a complete vertical power delivery system is a complex task that's engaged Our packaging team for now a significant timeframe, but I would say that In the appropriate perspective, which is in the silicon adapter industry, the stacking Of silicon chips, I think in a shorter timeframe, we made considerably more progress And we're getting close to having the level of process maturity and capability that we need to scale these capabilities So into high volume manufacturing.
There's a follow-up on that Patrizio from John. As a follow-up question with Patents and the technology that you have, is it possible for a competitor to come up with a competing solution?
Well, that's a very significant question. I will answer it this way. We believe we have very comprehensive, intellectual property coverage for Vertical, a lot of vertical, power delivery, we also have comprehensive IP coverage for power package solutions such as the Golden power components that have been shown in a number of Customer engagements. So we think we have a unique position having been there 5, 10 years ahead of any competitor and We believe our IT position will continue to provide an effective Barrier mode against Ascorvo's competitors.
Thank you. Here's a question from Richard Shannon of Craig Hallum. Can you detail the content opportunities in auto by EV type and battery size? And which ones are you seeing earlier demand and engagement on? Yes.
Thank you. What we're seeing and I posted some estimates on what we See as a range, it really is difficult to put an exact number on it because a lot of the vehicles are different. We're seeing a couple of areas, especially that are very strong. High voltage 800 volts down to 48 It has been a very, very strong leading trend, especially with the cost of 800 volt batteries coming down. We're seeing quite a few significant opportunities in the charging area, where we're able to provide Compatibility between the vehicle and the roadside charger based on a 400 to 800 volt bidirectional converter.
We're now working directly with customers on solutions that are up to 30 kilowatts in a single device. So we're getting a lot of attention out there. We're getting a lot of interest in partnering. To put an exact number on each individual vehicle is difficult because of the because every vehicle is different with different requirements. And but I can say that in extreme cases, like in a Class 8 truck Architecture or in some vehicle architectures with power levels of 10 kilowatts up to 20 kilowatts To see content north of $1,000 per vehicle is not unheard of.
Okay. Here's a question maybe for Mike, Greg Wilson, Investor. Is there confidence to bring plating engineering capability in house to vertically integrate Manufacturing. It appears some plating job openings have been difficult to fill.
Hello. Actually, we have Staff, the plating organization, they are at our on-site subcontractor being trained on the equipment, They will be transitioned down with the equipment starting in early Q4. We will additionally be hiring other talent as well. So We've been very fortunate to be able to secure the needed talent and the resources that support this process.
Okay. I've got to read one from Quinn Bolton. I believe Quinn is with Needham. Competitors this is fairly technical question. Competitors Addressing the 48 volt AI Processor XPU market are proposing a 2 stage approach, using a bus converter to convert the 48 volt bus to a
5 volt, 6 volt bus and
then using high frequency POL switches up to 5 megahertz to reduce the size of required capacitors and power inductors and allowing for placement closer to the processor. What does Vicor think of this approach? Will it be a lower cost solution than Vicor's current multipliers? I think Cord might be an engineer.
Okay. So the approach that has been Described is not a new approach. It's an old approach. It's being fine tuned. It's a 2 stage approach.
It Volts was called an intermediate stage. Once upon a time, the intermediate stage It was typically 12 volts. In some of the comps, It has been trimmed down to 9 0.6 volts, more recently there's been initiative to further bring it down to 5 volts. But to be clear, without getting too technical, the intermediate bus voltage As or presents an immediate conflict between 2 laws of physics, each one of which in effect needs We expect it for the solution to have the requisite performance attributes and fundamentally lowering The intermediate bus voltage to 5 volts in order to facilitate higher switching frequency and smaller Component size next to, let's say, AI chips comes at the expense of Power losses related to Ormslow or the power distribution network to the 5 volt node. And when we're looking at it, there is no free lunch to be had In resolving the conflict between these two conflicting requirements, efficient power distribution requires high voltage, which We have when we distribute 48 or 54 volts, small Small regulation or high density regulation close to the point of load As its own implications that with a 2 stage approach suggested Require a low voltage power delivery to facilitate the last Conversion staff close to the load.
With factorized power, we can have the best of both worlds in that We can make power distribution very efficient, 16 times more efficient than It can be at 12 volts and another 4 times More efficient than it can be at 5 volts, while at the same time being able to, in effect, multiply The current very close to point of load either laterally or laterally vertically or fully vertically With current density Fabion that which can be supported by Multi phase regulator using a 2 stage approach. So 2 stage can be summarized to be The only viable competitive alternative It is a common that we may have a competitive alternative in that every competitor It's availing itself of that competitive alternative. Over the years, it has been refined, It's really up against some fundamental barriers that relate to those of physics and I think fundamentally insurmountable in competing with a current multiplier solution.
Thanks, Patrizio. And one more here for Bill, from John Dillon. In the last conference call, you referenced Something about how the auto industry is changing regarding their supply chain and this should benefit Vicor. Can you elaborate on this and how will this help Vicor?
Sure. Maybe, Padman can help me a little bit here, but what I was referring to there was the fact that, the traditional Tier 1 suppliers to The industry don't really have the technology with regards to power density performance basically that are needed by the OEMs To meet their new electrified platform requirements, and so the OEMs are actually looking to different suppliers to provide that level of density that they and low weight that they actually need. So that's where, you know, Vicor, when we Talk to OEMs, we're getting a great reception because we've got the technology to meet their needs. And Patrick outlined A 3 pronged strategy where some of the OEMs can design with vehicle their own power systems, and we have 2 early customers doing that, But there are also Tier 1s that see the fact that they're going to start to be challenged, maybe lose some market share that are also looking to work with Vicor To use our modules in their package with their packaging technology and we're working closely with those guys as well. So I think it's a very much a changing landscape, but it's clear the density and low weight is paramount in High power, electrified vehicles as Patrick covered.
Thanks, Phil.
As it appears there are no more questions, I will adjourn the 20