Gregg Lowe: Yes. Thanks a lot. So essentially, what’s happening — we’re not sort of pulling back to Durham. We currently are — we are shipping product in automotive out of our Durham facility. And the idea would be that we were transitioning it to the New York or Mohawk Valley fab, and that transition is just happening slower is what that is. So, it isn’t a pulling back to or what have you. And then essentially, on the nonautomotive customers, we’ve already shipped our first product out of Mohawk Valley to a nonautomotive customer. We have several of them that are ramping — and excuse me, that’s out of Mohawk Valley, and we have several of them that are ramping out of that. So basically, it’s going to create a situation where we’ve got a supply-and-demand situation that’s going to be tight.
We’re working with customers. Neill and I had personally a meeting with the customer last night talking about this. So, we’re working with customers. But again, they see a light at the end of the tunnel. They see that we’ve got this giant fab coming online and they’re working with us to prioritize getting their products out of that fab in New York.
Operator: We now have Sam Chatterjee from JPMorgan. Your line open now.
Samik Chatterjee: Thanks, for taking my questions. I guess just to start on the delay here in ramp of Mohawk, I think what you’re talking about is more of a 6-month delay relative to earlier sort of your own expectations. And I just I’m wondering with the more methodical approach you’re taking to ramping, the materials capacity, as we think about sort of the flow-through of this into the future years, does this sort of mean there’s a 6-month delay to all the sort of ramp projections that you had? Or does the more methodical approach really drive a greater delay? Or do you sort of pass the Scurve at some point where you say, okay, this is the inflection point, we can catch up to some of our earlier targets because we are now more confident about not having to go slow in terms of this ramp? And I have a follow-up.
Neill Reynolds: Yes, sure. I think it’s very much a second one. I think we’re seeing a delay now in terms of bringing this on. We want to do it methodically for the exact purpose you just mentioned. So, when we get to a certain level of volumes, both in materials and through the fab from a utilization perspective, we’ll have the right level of confidence to ramp it faster as time goes on. So, I wouldn’t say this is a onetime pushout of everything, but I think this is a thoughtful approach to making sure we can underpin the capability of our factories. Remember, we’re doing something for the first time in many places, our first 200-millimeter silicon carbide fab and we’re ramping 200-millimeter volume all at the same time. So now what we want to do is just make sure we get that right.
And once we get that to certain levels of volume, as Gregg said, we feel good about the fab and where adept from a capability perspective, we feel good about the crystals and the yields and everything else we’re seeing from that perspective. So, once we have enough volume under our belt, I think we’ll be able to accelerate that faster kind of later in the time frame of that kind of outlook.
Samik Chatterjee: Okay. Got it. And just as a follow-up, I think the cash burn in the quarter itself was higher than the last couple of quarters with now sort of forecast for next year being similar gross margin and probably OpEx does go up into that time frame. How should we think about cash burn next year, any sort of guidance on that?
Neill Reynolds: Yes. So overall, look, right now, we have $2.25 billion on the balance sheet. As I talked about in the prepared remarks, we’re looking to fund another $1 billion this year, and we’ve got $2 billion CapEx plan next year. So, I think we’ll be in pretty good shape. It probably pushes out the operating cash flow capability out by maybe that same type of time frame until we can accelerate. But I don’t see that as moving the needle substantially versus what I just talked about. So, I think about it as $2.25 billion on the balance sheet, with a $2 billion CapEx plan next year, and we’ve raised some money between now and the end of the year, and I think we’re right on schedule from a funding perspective. And then I think the operating cash flow will get pushed out a bit. But I don’t see that being a significant factor in terms of building out what we’re trying to do. I think that just keeps us on schedule.
Operator: We now have Edward Snyder of Charter Equity Research.
Edward Snyder: Neill, you kind of warned about the delicate process of getting new material fab up and running last quarter, I think, even if it’s just across the street from the existing fab. I guess, we shouldn’t be surprised by this. But if you’re having that kind of a problem with the 200-millimeter expansion in Building 10, why will we see a similar greater issues with the massive expansion you’re playing for Siler City, which is not across the street from the existing fab? But I know approximately it doesn’t have that much to do with it. But from all that you said and all that JP had told us, et cetera, this is obviously very slight changes and a number of different metrics can cause big deviations in what you’re actually putting out in terms of wafers. So why shouldn’t we expect Siler City to see similar delays? And I have a follow-up.
Neill Reynolds: Thanks, Ed. And let’s just back up a little bit. So, what we’re seeing here is the major delay we’re seeing is not really related to the crystal grow technology or the 200-millimeter technology really at all. That was really related to electrical infrastructure and building out the facility. That’s really what’s causing the first stage of the play. After that, it’s really about bringing on this thing, like we said methodically, but again, the crystals, the quality, the yields and everything else, all look very, very solid from the first production out of that facility and we anticipate that going forward. So, I think once we prove out kind of Building 10, I think we’ll be in good shape to transport that over to Siler City over in time.
But I think what we’re talking about here is in that same type methodical approach, we’ll ramp this up, and we’ll do the same thing as we move over to Siler city. We’ll bring that also in the same fashion for the exact reason you mentioned. It is a tricky technology, and you want to make sure, we’re watching it very, very closely with the right team overseeing it. And I think that’s what the plan we’re laying out is designed to do.
Edward Snyder: And then we talked at length last quarter about the capacity issues at both RTP and Durham, and it sounds like none of that has changed. I can want revisit the previous question. I mean you’re running — is it fair to assume that the $100 million a quarter is about the limit for Durham, plus or minus a bit, I’m assuming that’s still a valid estimate. And if it is, and you’re now ramping more automotive there, it’s necessarily the case that you’re shipping less to nonautomotive customers. Or am I reading that wrong? And if that’s the case, is that going to lead to share loss? Is it — I mean because a lot of industrial customers have a much surer design cycle time so they would be able to maybe go someplace else and redesign the product versus automotive is much longer tail.
So, I’m just trying to get my head around the dynamics of occurring at Durham and power devices because you just don’t have the capacity anymore to even address the customers you were last quarter. Thanks.
Gregg Lowe: Yes. Thanks, Ed. So, one of the key things we’re obviously doing is staying very, very close to all of our customers. In fact, we just had 60, I think, industrial customers at the Mohawk Valley last quarter, I believe, taking a look at where we’re at in terms of that perspective. And what I would say is, of course, they want more now. But when they look out at the landscape of what’s coming down the pipe in terms of capacity, all the eyes keep coming back to the world’s largest 200-millimeter silicon carbide fab that is turning on as we speak. We shipped initial product out of its last quarter. We’ll do a couple of million dollars this quarter. We’re going to get to 20% utilization out of that fab in the end of fiscal ’24, which will have pretty significant output.
So, if we didn’t have anything as close to turning on as Mohawk Valley, I think it would be a much bigger issue. But quite frankly, I think when they look around the world and scout for alternatives, I don’t think they see anything quite like what we’re doing in Mohawk Valley. So, the customers are sticking with us. And the best testament of that is we just delivered $1.7 billion worth of design-ins in the quarter and over the year — over the first two, three quarters of this year, $700 million of that has transitioned to — actually $1.7 billion has transitioned to a design win. And finally, I would say, Ed, this quarter was a record quarter for nonautomotive design-ins. So, we’re not happy that we’re not shipping everything that they’re looking for.
But I think at the same time, we’re also very proud that we — four years ago, we made a decision to build a factory and it’s coming online now because the, have we not done that, we’d have nothing to show them.
Edward Snyder: So, it sounds like really basically, it’s growing pains in an industry that’s very tight on capacity all the way around.
Gregg Lowe: That’s right.
Operator: We now have Colin Rusch from Oppenheimer. Please go ahead.
Colin Rusch: Just given the dynamic you’re just talking about here around tightness is supply and scale, can you talk about how mature the conversations are with incremental customers that may help support some of the CapEx here? Obviously, you guys have had some success with that. But how robust are those conversations at this point?
Gregg Lowe: I would say, quite robust. We’ve had a lot of discussions. We’ve had a lot of wins where customers have put upfront money to help us with our capital needs and the expansion needs, and they see a huge benefit from that. So those are pretty good conversations. They continue to this day. And I think it’s something that’s probably going to continue for the foreseeable future.
Colin Rusch: Okay. And then just turning to OpEx, as you guys look to optimize cash here over the next, call it, six to eight quarters, can you talk a little bit about what you’re going to need to spend to support the work that you’re doing both with customers and with multiple facilities ramping here and how we should think about that OpEx spend growing?
Neill Reynolds: Yes. Good question. I’m glad you touched on that. Because I think as you think about the expansion activity that we have going on and bringing on this focus on — especially on the 200-millimeter wafer on Mohawk Valley, et cetera, we have expanded our R&D cost. You saw that reflected in the quarter. We’re really investing more in our — both our products and in ramping Mohawk Valley as fast as we can. So, what you’re seeing right now are a lot of charge-outs from the fabs on kind of new products. We’re going to see — expect this to pick up again as we move into next quarter and even the next couple of quarters. As you get into Q1, we’ll see kind of our kind of annual merit increases and those types of things, so we’ll see kind of a larger step-up as you get into the Q1 quarter and then start to accrete again kind of as we have been as you go out to the end of ’24.
So that’s the way I think about the OpEx as you’re thinking about both Q4 and you start to work into ’24.
Operator: We now have Vivek Arya of Bank of America.
