Updated February 3 at 7:05 p.m. to add response from Cree.
Cree reported a disappointing quarter for its Wolfspeed business, which was hurt by delays in 5G infrastructure, an $8 million write-off of inventory for Huawei and soft electric vehicle (EV) sales in China.
The inventory write-off was precipitated by the U.S. Commerce Department denying Wolfspeed’s export license for shipments to Huawei.
Referring to the denial, Neil Reynolds, Cree CFO, said, “Considering this development and the fact that it has been eight months since the ban has gone into effect, we don't see any opportunity at this time where we will resume shipping any product we currently have on hand to the customer.”
Wolfspeed does not expect any RF revenue from Huawei for at least the remainder of the fiscal year.
Cree CEO, Gregg Lowe, said, “For the near term, they're out of the equation. Will that change in the future? Maybe. I think that if trade relations between the countries normalize again and things get into a better situation, we have technology that they're very interested in putting into their systems. But for all intents and purposes right now we're not counting on that.”
Microwave Journal asked Wolfspeed whether the export license denial was only for GaN power devices or included LDMOS transistors and whether the Department of Commerce has targeted 5G systems.
Wolfspeed has not responded to our inquiry. The company responded to our request with the statement, “At this time, we cannot provide anything beyond what has already been publicly shared.”
Various industry reports say Sumitomo is the primary GaN supplier to Huawei.
For the second fiscal quarter ending December 29, Wolfspeed’s revenue was $120.7 million, a drop of $7 million (4.5 percent) from the prior quarter and almost $15 million (11 percent) from the prior year’s quarter.
While RF and power product revenue was down, Reynolds said the materials business supporting the power and RF markets did grow during the quarter.
Wolfspeed gross profit, including the Huawei write-off, was $41.8 million (34.6 percent), down 35 percent from the $64.7 million generated in the prior year’s quarter.
Looking to the third quarter, Wolfspeed’s revenue is expected to be between $116 million to $120 million, slightly down sequentially. Wolfspeed expects product demand from the 5G and EV markets to remain soft.
Accelerating New Wafer Fab
Despite the near-term softness in the market, Cree is accelerating its capital investment in a new wafer fab in Mohawk Valley, New York. Lowe said several power device customers have said their production ramp schedules may be earlier than forecast.
“In the last 60 days, we've met with several important customers and discussed their production time lines, which has led us to make these additional investments now. This is a positive development and speaks to the growing demand for silicon carbide,” Lowe said.
To support the pull-in, Cree expects to invest $230 million in capital this fiscal year, up from the prior plan of $200 million.