In its Q3 FY2025 earnings call, Soitec (EPA:SOIT) reported a revenue decline of 6% year-on-year, totaling 226 million euros. The company anticipates a high single-digit decline in revenue for the full fiscal year. Despite the downturn, Soitec is focusing on strategic partnerships and innovation to bolster its market position. According to InvestingPro data, the stock has shown resilience with a 17.12% return over the past year and currently trades near its 52-week high. Analysis suggests the stock may be undervalued at current levels.
Key Takeaways
- Soitec's Q3 FY2025 revenue decreased by 6% YoY, with a nine-month decline of 12%.
- Strategic partnerships with UMC and GlobalFoundries (NASDAQ:GFS) aim to enhance technological offerings.
- Mobile Communications division grew by 11% YoY, while other sectors faced declines.
- Fiscal year 2025 EBITDA margin is expected to be between 32-34%.
Company Performance
Soitec's performance in Q3 FY2025 reflects ongoing challenges, with revenue decreasing by 6% compared to the previous year. Over the first nine months, revenue fell by 12%, indicating persistent market pressures. The company is navigating a complex landscape, with varied performance across its divisions. The Mobile Communications division showed resilience with an 11% year-on-year growth, contrasting sharply with the Automotive and Industrial division's 47% decline.
Financial Highlights
- Revenue: 226 million euros in Q3 FY2025, down 6% YoY.
- Nine-month revenue: 564 million euros, down 12% YoY.
- Expected FY2025 EBITDA margin: 32-34%.
Outlook & Guidance
Looking forward, Soitec anticipates limited growth for FY2026. The mobile market is expected to gradually improve, while the automotive sector may remain weak. The company projects its Silicon Photonics segment to achieve 100 million euros in revenue by FY2027, signaling a focus on emerging technologies.
Executive Commentary
CEO Pierre Van Roe emphasized the company's robust market position, stating, "There is no intrinsic or in-depth problem in this company." He also highlighted the growth potential in Silicon Photonics, projecting it to become a significant revenue contributor by FY2027.
Risks and Challenges
- The automotive market's continued weakness could impact revenue growth.
- High inventory levels, currently around 12 months, may affect cash flow.
- Fluctuations in the high-end smartphone market could influence demand for Soitec's products.
- Macro-economic pressures and supply chain issues remain ongoing concerns.
Q&A
During the earnings call, analysts questioned the company's inventory levels and market dynamics. Soitec addressed concerns about high inventory, noting efforts to normalize levels. The company also discussed its focus on architectural optimization to enhance product offerings without expanding content significantly.
Full transcript - Schroder Oriental Income Fund (SOI) Q3 2025:
Conference Moderator: Hello, and welcome to the Soitech Q3 twenty twenty five Revenue Call. Today's event is being recorded. For the duration of the call, your lines will be on listen only. However, you will have the opportunity to ask questions at the end. I will now hand you over to Pierre Barnaby, CEO, to begin today's conference.
Please go ahead.
Pierre Van Roe, CEO, Soitech: Welcome to Soitech's conference call dedicated to the publication of the third quarter revenue of our fiscal year 2025. This is a quarter covering the period from October to December 2024. I'm Pierre Van Roe, Soitec's CEO. Together with me on this call are Leal Zheng, our CFO and Steve Baburek, our EVP, Strategy. As usual, we will start with few comments on our figures.
And after that, we will open the floor to questions. After the strong rebound we achieved in the Q2 twenty twenty five, we maintained our Q3 revenue roughly in line on a second short basis, down 6% year on year. Our Mobile Communications division resumed growth on a year on year basis, a much better performance than in the previous quarter. This illustrates some seasonal restocking in our FFOI across value chain and a continued strong traction in POI for smartphone filters. Conversely, our Automotive and Industrial divisions continue to be impacted by the weak automotive market.
In Edge and Cloud AI, the momentum remains strong in cloud infrastructure as well as in AI driven IoT applications. That dynamic is punctually offset by a low performance in majors as we are about to phase out our product next year. Sales have hence been highly concentrated in Q1. Overall, our Q3 twenty twenty five revenue amounted to EUR $226,000,000, a 6% year on year decline, which breaks down between a 10% decline on an organic basis, a positive currency impact of 5% and a small negative scope effect of minus 1%, which is related to the divestment of Dolphin's designs mixed signal activities on early November. Let's now have a look at our Q3 revenue by end market, starting with Mobile Communication.
Our division was back to growth in Q3 twenty twenty five, leveraging the progressive recovery in the smartphone market, some seasonal RFSOI retocking and the continued strength in POI. The EUR 154,000,000 revenue was up 11% year on year. Our FSOI inventories across the overall supply chain are trending down overall, but some customers continue to optimize our FSOI inventory level based on seasonality and market conditions, which will keep driving fluctuations over the next few quarters. We are confident that we will achieve strong growth in our FSOI in Q4 twenty twenty five. In the meantime, we continue to leverage our state of the art R and D capabilities as well as our strategic relationships across the value chain to bring leading edge innovative products to market.
In Q1 twenty twenty five, we announced the extension of our partnerships with UMC to bring to market the industry's first three d IC solution for RFSY technology, a solution that enables the integration of more RF front end modules into a single device. In December, we announced our commitment to provide GlobalFoundries with our latest generation of RFSOI 300 millimeter wafers to support the most advanced 9SW platform. As you know, we have a long standing relationship with GF. GlobalFoundry's 9SW RFSOI platforms offers significant advantages and value for premium smartphones with enhanced RF performance, improved power efficiency and scalability. These features are critical to ensure a superior user experience in high end devices and evidence the strengthening of our strategic relationships with the key players in our industry.
Turning to POI. Sales continue to gain traction, increasing quarter after quarter since the beginning of fiscal year '20 '20 '4. In Q3, POI wafer sales were significantly higher than in Q2 twenty twenty five and Q3 twenty twenty four as the adoption of our product continued to accelerate. We now have 10 customers in volume productions and more than 10 others in qualification. And we are engaged with all leading U.
S. Fabless companies. Finally, FDSOI sales were also higher than in Q2 twenty twenty five and Q3 twenty twenty four. Let's switch now to automotive industrial. After a long period of sustained growth, we have been impacted by the weaker automotive market since the beginning of fiscal year twenty twenty five.
Overall, we continue to see increasing adoption of our products and growing content per car, driven by infotainment, autonomous driving, functional safety and electrification. Our division revenue reached EUR 25,000,000, a 47% decline year on year, reflecting different dynamics across our product portfolio. Sales of Power SOI reached a particularly low level in Q3 twenty twenty five, as the current weakness of the automotive market is leading to some inventories adjustment at customer level. Going forward, the strong outlook for battery management system support are products roadmaps towards 300 millimeter. Conversely, automotive FDSOI sales recorded a year on year growth as FDSY continues to be driven by adoption in microcontrollers, radar and wireless connectivity.
We continue to support our foundries and IBM (NYSE:IBM) customer design wins on FDSY, such as GlobalFoundries on the 22 FDX or STMicroelectronics recently on 18 nanometer adoptions, with production expected by H2 twenty twenty five. As for Smart SAIC, I'm very pleased to announce a fifth customer in qualification. This is a strong testimony of strong market appetite for very innovative products. We continue to deliver a growing number of samples and prototypes to our five customers in qualification and around 35 prospects in evaluation. The current weakness of the automotive market and the longer than initially anticipated customer qualification cycles confirm a delay in the expected wafer production ramp up by around two years, in line with what we already shared in 2024.
Beyond the short term challenges, in the automotive market, we remain highly confident that further digitization and electrification of the automotive industry will drive a rise in semiconductor content in the new generations of vehicles. Finally, we recorded a mixed performance in Edge and Cloud AI linked to seasonality effects. The momentum for our Ad and Cloud AI divisions remains very strong, driven by sustained investment in cloud infrastructures across the industry and growing appetite for low power computing devices and AGI applications. The division revenue down 30% year on year at EUR 45,000,000 to reflect a strong seasonality effect and mixed performance across our product portfolio. Photonics SOI wafers continue on their high growth trajectory, with revenue much stronger than in Q2 twenty twenty five and significantly higher than in Q3 twenty twenty four.
We are addressing the industry's requirements for new data centers architectures with better performance, lower energy consumption and lower cost. We are accelerating our partnerships with leading Edge Fabless to support AI, machine learning developments. And we are benefiting from high investment across the AI value chain as key industry players accelerate their co package optic roadmaps. Photonics SOI enables new data center architectures with better performance, energy consumption and lower cost, a critical challenge for the artificial intelligence value chain. Photonics SOI is becoming a standard for high speed and high bandwidth optical interconnections in data centers.
There is no new AI data centers without Soitech technology. Sales of FD SOI wafers remained as strong as in Q2 twenty twenty five, but were lower than Q3 twenty twenty four. FDSY technology is a key enabler for AI driven devices, both in the consumer and the industrial sector, with IoT application requiring ultra low power edge computing. Finally, sales of major SOI wafers remain lumpy from one quarter to the next, dragging the division's performance in Q3 twenty twenty five. In fiscal year twenty twenty five, the phasing of sales was very much concentrated in Q1, whereas last year, they were mostly recorded in H2 twenty twenty four.
That summarize our Q3 twenty twenty five performance. On a nine months basis, our revenue came at EUR $564,000,000, down 12% year on year. Turning now to our fiscal year twenty twenty five outlook. We continue to expect a strong recovery in Q4 twenty twenty five, supported by our backlog, progressive recovery in the mobile market, seasonal restocking in RF SOI and continued traction in both POI and Photonics SOI. However, in the context of the ongoing weakness in the automotive and consumer markets, a couple of customers have asked us to put deliveries on hold, which impacted our Q3 and will impact our Q4 twenty twenty five, as we are rigorous in matching our deliveries with customer requirements.
As a result, we are revising our fiscal year twenty twenty five revenue outlook to a high single digit percentage decline compared to flat previously at constant exchange rate and perimeter. As a result, fiscal year twenty twenty five EBITDA margin is now expected to be between 32% to 34 of revenue and we continue to be very disciplined on cost control to preserve our margin and enable our investment in R and D. Capital expenditures will be around million, in line with what we shared in November, reflecting a more moderated recovery in SOI and Smart SAC. Let's have few words on fiscal year twenty twenty six. For calendar year twenty twenty five, we continue to anticipate different dynamics across our three end markets.
The Mobile Communication market is anticipated to see gradual improvement. The weakness in the automotive market is likely to persist through the first half of the year and investment in cloud air infrastructures are expected to stay at high levels. With the lack of visibility on our end markets for now, it is also too early to provide specific guidance for fiscal year twenty twenty six. Given current market condition, we expect fiscal year twenty twenty six growth to be quite limited at this stage. Our fundamentals remain solid and will allow us to accelerate as end markets recover.
In the context of these temporary challenging market conditions, we continue to enhance our technology leadership everywhere to strengthen our SOI positioning with both existing and a lot of new customers to deploy our expansion into compound semiconductors with the acceleration of POI volumes and a fifth customers in qualification on SmartAsset2 and to carefully manage our profitability and cash generation profile. This ends my opening remarks. Thank you for your attention. We are now ready to take your questions.
Conference Moderator: Thank you. And up first, we have Emmanuel Mato from ODDO. Please go ahead.
Emmanuel Mato, Analyst, ODDO: Hello. Ivan Ometto from ODDO. I hope you can hear me well.
Pierre Van Roe, CEO, Soitech: Yes, yes. Hello, Manuel. We hear you very well. Thank you.
Emmanuel Mato, Analyst, ODDO: First, Kia, you are talking about limited sales growth for fiscal year twenty six. Could you give us some colors by division? It is disappointing for me knowing that your main division Mobile come. I was expecting it to grow double digit given that the smartphone market looks healthy that RFSOI is looking to be centrally behind us and that customer diversification is a success in POI. So why no more more growth than just limited what you said for next year?
Second, are the difficulties only due to the current uncertain microenvironment? Is Soitech experiencing specific problems with its technologies? And as a result of these difficulties, are you planning to reduce your R and D efforts and your CapEx budget next year? And if you can have also a word about your new customer for silicon carbide for the smart heat technology, is it a key player in this segment of business? Thank you.
Pierre Van Roe, CEO, Soitech: Thank you, Emmanuel. Then on your first question regarding fiscal year twenty six preview per division, I will recall what I already said on November on the market dynamics and that is reflecting this preview for fiscal year twenty twenty six. First of all, the mobile market is under recovery, but still low level of growth, first point. Second point, privileging more mid range, low range smartphones. And as you know, we are getting a higher footprint in high end, let's say, smartphones.
And this segment is more suffering even in more negative territories as it is today. That's the first point. The second point is that our content growth is more expecting in the range of plus 4%, plus 5%. Nothing to compare to the plus 15% we are expecting a few years ago because of shrinking models, because of new generation of our FSUI solution. And third, what we see is the phenomenon we have observing for a few years now then the customer are stopping our replenishing the inventory in their calendar Q1.
They are consuming to be sure that they're going to deliver the smartphone on time and then they replenish in Q1 and so on. This is the same cycle now for a set amount of time. And we don't see dramatically increasing the consumption rate. And that's for our FSOI. Of course, PY going to grow and going to continue to grow because we have customers.
But looking at the observation of RF that is soft and PY strong, we are cautious on the mobile communication market. And if you listen to peers, I mean, a lot of players in the value chain, we see softness and uncertainties. And we are reflecting what we hear and what we observe today on the market. If we look at Automotive, Automotive as we said also in November, H1 calendar are going to be weak and we see clearly uncertainties in this market. We were even believing a possible rebound in H2.
For the moment, it's unclear. A lot of big lack of visibility in this market. And it is clear that when you listen again to the peers and to the all the players in this market, calendar 2025 going to be difficult. And we expect this market to decline and going to reflect in our activities this type of trends. Looking at AgenClaudia, AgenClaudia continued to grow, thanks to photonics, silicon photonics and FBSOI to some extent.
But we got the confirmation that a major phase out is engaged and a major we're waiting around 5% of our fiscal year '20 '20 '5 revenue. That means that, of course, we will have to compensate this loss by a big strong in silicon photonics and NFV. Silicon photonics strong is confirmed and we have more and more traction that's for sure. Then this is really by the combinations of market trends and the preview on what we see. We are and looking at the market uncertainties and lack of EV that is obvious everywhere.
We are looking at this limited growth preview for fiscal year twenty six, but of course, we'll come back to you more precisely with more flavors and more details on May. On your second okay, earlier, I actually want to comment, yes, of course.
Leal Zheng, CFO, Soitech: Yes, maybe I can take one question. So good morning, yes, and then yes. So regarding the R and D and the CapEx for next year, so we want to we are going to continue to invest in R and D. This is very important for us to prepare for the future, both on our SOI product to prepare the new generation to improve the cost of our product and also to work on new products, new technology for new markets. But of course, we will adapt also at the level of the revenue, we want to protect margin.
So we are going to continue to invest, but keeping in mind our profitability and also our cash flow. We'll adapt our CapEx plan definitively based on the visibility we'll have on customer demand. We are going to continue to invest for Peru, and we are seeing big traction. And for the other technology, we'll see depending on customer visibility as we have always done.
Pierre Van Roe, CEO, Soitech: Then we will really drastically adapt our CapEx on the business needs. And of course, on R and D, we are keeping a very strong path, at 10% to 11% of our revenue going to be invested in R and D in many domains. We'll come back on it. But you know that we have launched some incubators to prepare the ground for next generation product that I'm saying. There were also a question in between you asked and I would like to come back on it is on the is there any specific problem in the I want to be super clear on it.
There is no intrinsic or I would like to say in-depth problem in this company, okay? Are we losing market share? No. We are not losing market share while we are ready, okay? Are we gaining market share?
Yes. We are gaining market share in the new products we are launching. We have never been so diversified, hopefully. And again, in the $400,000,000 club, we have four products today. We expect, as I say, the fifth one as soon as possible and you know that the candidate is silicon photonics to come.
Do we have any problems in quality? No. Do we have any problems with customers? No. From some blacklisted customer few years ago, today, we have strong relationships, strong contacts with customers at the highest level.
And also we are extremely attached to respect customers' reasons. I know we had two orders put orders put on hold by a couple of customers, okay? Suddenly, they came to us and said guys, there is a contract, but we cannot hold off this contract because we don't need looking at uncertainties and difficulties of the market, the orders because we don't need for the moment this project. They put on hold for further notice. We could have forced it.
We could have asked, okay, execute the contract now. I believe we need to respect and also we are building long term relationships with our customers. You know the fact that we have announced the 9SW with GlobalFoundries. The three gs packaging on RF with UMC. And you know how these guys are discrete in communicating particularly with suppliers.
They have accepted to do it and you will have other news flows to come, because they consider us as a very reliable and strong partners. Technology wise, business wise, competence wise. Then it's very important to keep in mind that if you look at the fundamentals of this company, they are intact in terms of positions, technological leaderships, competence of the people we are reinforcing, quality of our relationships with our customers and also strength of our balance sheet. Then when the markets the markets will get back on track and when we will get win in the sale, I can tell you that we have all the foundations to make strong growth coming through. Then that's very important to compare to it.
Then there is no and of course, you can check, Emmanuel, you can call any customers, any people you want to check. There is no interesting problem with this company. The fundamental are very strong for the growth story in the coming five years to come. It's a very strong conviction I have with all the team. We stabilized the governance totally.
We diversified like never. Now we have to navigate in uncertain geopolitics and lack of visibility markets. That's it. And we'll do it by keeping high level of disciplines on cost management and profitability management to be sure we continue to finance our R and D, the needed CapEx we're going to adapt and to generate cash for the future. That's really extremely important to recall it with strength.
On the new Smart SAC customers, this is of course very good news. This is a very important customer. This is a key customer. I will stop with the teasing here because I will never jeopardize. As you know, I'm obsessed by that customer relationship by giving more, let's say, indications or information for you to guess.
But this is very good news.
Emmanuel Mato, Analyst, ODDO: But how do you explain that you have those design wins from several customers in smart seats at the time? They don't need to order your products because the market the end market is very challenging, talking about electric cars in Europe and Americas?
Pierre Van Roe, CEO, Soitech: Yes. You have two elements. The first element is that the qualification phase is long. Okay. Then we have and we said it a few years ago, we have underestimated the qualification times.
Then it's two years plus two years. Two years to be qualified by the IBM integrators and so on and two years to be qualified within the car. Then it's a long tail, it's a long process and we have to accept this long process. That's the first point. Second, you're right to mention that the electric vehicles market is shaken very strongly.
And SIC promises in the futures are now back to reality, back to the ground, taking into account that also we have to follow the price war. And we are following the price war by being stringent on the cost structures. Then we made very active work in adapting our cost structures, including of course, efforts by the Mono SAC and Poly SAC suppliers to be in the race, to be in the race. And the fact we get a fifth qualification today, we are in the past, it's not something I promise for the next quarter, but we are today in the past of one qualification per quarter over the last year this year. Then it means that clearly we have something very narrative breakthrough that is cost effective for the customers in terms of CapEx, OpEx avoidance, features effective for the final customers and competitive from a price point of view.
This is a proof point. Taking the profile of these customers, these six customers, it's an add on and a tick in the box in the strength of the Smart SIC line of product.
Emmanuel Mato, Analyst, ODDO: Okay. Thank you very much for those comments.
Francois Bovignet, Analyst, UBS: Welcome, Emmanuel.
Conference Moderator: Thank you. And we're now moving on to our next questioner, which is Alexander Pieterck from Bernstein. Please go ahead.
Alexander Pieterck, Analyst, Bernstein: Yes, good morning and thank you for taking my question. I just have two. The first one is regarding the roll off of Immature SOI. So I'd just like to understand if the $450,000,000 that you referred to is rolling off in fiscal twenty twenty six or do you already see some effects of this phase out in the current year? And so if that's the case, what's the proportion of this roll off this year?
And how much remains for next year? Then the second question is regarding your comments on content growth. So you say that you expected a few years ago 10% to 15% and now we're around 54% to 5% content growth. So is this 10 percentage point drop in content growth a cyclical matter? So it's just the factor of the mix that we have currently, which is negative?
Or is there a structural drop in content growth and if that's the case, why? Thanks.
Pierre Van Roe, CEO, Soitech: Okay, Alex. Then on the first question on Image OSOI, the roll off going to be total. That means that next year fiscal year twenty six and we got recent confirmation. We are not expecting revenue coming from this image SOI first generation product. And let's be clear in fiscal year twenty twenty six, we need to compensate around 5% of revenue weight we had that we benefited in fiscal year twenty five.
As I said, we are working on next generation imaging systems, but they're going to generate first, let's say, revenue in two to three years from now. Then we'll have to compensate. That's the reason why the acceleration of photonics is helping a lot, particularly on agent Clodae to offset a part of this bigger drop and this big phase out that is quite rapid and brutal, but we need to also face reality and we need to tell you exactly what is the situation. Regarding the content growth, the 5% content growth is on RFSY. If you take of course, POI and so on, the content of Soitech in a smartphone is between 10% to 15% because you add BY, you add a bit of DSOI for some application like millimeter wave, envelope trackers and so on.
Then 5%, the limited 5% is on our FSOS, okay. Why? Because there are some and we are working with the customers also on this aspect. There are some adaptations of the architectures trying to shrink a bit the effect. And we have also some features that are taking more time to come.
If I take the Y5-seven, the Y5-seven is taking a longer ramp up than expected in terms of adoptions by first of all, the telecom service providers and the infrastructures. Then this content is also slowed down by the reasons of features we were expecting quicker. And that's the reason why. But in terms of expansion of Soitech Technologies within the smartphone, we're going to continue to expand, thanks to more POI and thanks to more LDSOI, even if for the moment millimeter wave, I would like to say, is stuck to around 11%, twelve % penetration rate and we don't see particularly a strong increase. And the last point to add is that if you remember the five gs adoptions compared to years ago, we see a slowdown in the growth just because the infrastructure, the five gs infrastructures are also taking time to be deployed.
Then it is, let's say, postponing a bit our ambition and our trajectory. But of course, the more five gs, the more side tech, the more new features, the more side tech. It is taking a bit more time. That's the reason why we have flattened a bit the content increase on our FSY in the different fronts. Plus, of course, as you know, the high end versus low range that is also waiting for us and the breakdown is very important to follow.
Alexander Pieterck, Analyst, Bernstein: Can I just have a quick follow-up on imagery SOI? So it's my understanding that Face ID isn't going anywhere. So did you miss a trick and that's why you're not in the current generation or the forthcoming generation and only in the one after? What exactly happened here? Why do we have this gap?
Thanks.
Pierre Van Roe, CEO, Soitech: No, it's in years ago, the customers of the customer decided to enter into a more integrated and simpler solution that is not using you don't need SOI product to proceed with this solution. And it's really something that going to a bit more simplification and integration on which SOI has no added value. But we need to think on the next generation of imaging systems for the phones. And not only for the phones, for IoT and devices generally speaking. Then today the imaging system is two d, is a superficial imaging recognitions, where you take some points on the surface.
The next generation imaging system going to go three d and they're going to use infrared millimeter waves to detect and to bring imaging across in the three d dimensions and sometimes across the skin. Then this next generation technologies, they're going to be very interested for SOI on anosome materials application. I don't want to disclose confidential roadmaps we are working with customers. But you will see that by using different materials, we're going to be in a position to also looking at crystal orientations to use waves to go into a three d imaging systems and for more than only smartphone face image recognition. And we are working with several customers for several applications today.
But again, we will come back on it during maybe the presentation on innovation during the CME.
Alexander Pieterck, Analyst, Bernstein: Great. Thank you very much.
Conference Moderator: Thank you. And up next we have Sebastian Stavovich from Kepler Cheuvreux. Please go ahead.
Sebastian Stavovich, Analyst, Kepler Cheuvreux: Yes. Hello, everyone, and thanks for taking my question. Sorry to beat on the level of inventory today, you mentioned that you are almost back to normal. Can you give a little bit more precise indication? Where are we standing right now versus the normal level?
And where do you see the inventories, I would say, ending maybe twelve months down the road in terms of level? So are we expecting further inventory correction on RF in the next twelve months? And the second question, we have seen these two orders cancellation affecting both photos and consumer. How do you see also the inventories in those market? Is there also a big inventory build ongoing that is likely to affect your demand over the next few quarters?
Thank you.
Pierre Van Roe, CEO, Soitech: Sebastien, then on the RFSO inventory today, then there is no change compared to what we said. We observe average the twelve months end to end inventories in supply chain with of course difference and it's a patchy view of course regarding the different customer, but this is what we see. And as we said already, compared to the observed inventory before COVID, we are, yes, two to three months above this level because the level was around nine months, then we have three months excess. And the question is, will the customers go to pre COVID view or metrics or will they continue to leave with twelve, eleven months? This is today unclear and we prefer to be cautious and to consider that some correction would continue between twelve to nine months.
But this is exactly what we already said on November. No big changes compared to what we said. Just the fact that the orders we expect to get are just replenishing the inventories in Q1 calendar to be consumed in order to provide the smartphone new models, particularly during H2. And then after the consumption, they will restock again in Q1 calendar and so on. And this cycle is now quite stabilized and there is a kind of aplasia in this model.
And then as long as we don't see more smartphones, high end, more content, of course, AI revolution, these reasons would last. But of course, we see a lot more and more innovation and technology to enter into the phones and we have hubs beyond fiscal year twenty six to see back growth in our SSOI territories. But for the moment, we need to be cautious looking at the uncertainty and the lack of visibility of our customers and the customer for customers. When you talk to them, when you look and you read the earnings, let's say, documentation by all these customers, they are also calling for, let's say, cautiousness and the lack of visibility in the end to end market. If we look at the inventories for auto, there are some building up of inventories.
But as you know, we are working with a few customers for the moment in Power SOI. Then we have a certain visibility with these customers, These customers clearly has to fight on a daily basis to confirm contract, gain contracts. We don't see the same phenomenon, but there are some inventory building up. That's the reason why also we are also very cautious on our automotive and industrial segments by forecasting for the market a decrease strong decrease in H1, talking about the market and maybe a continued decrease for H2. We'll see.
But lack of visibility is today, I would like to say, the keywords and we are expecting by before summertime, springtime, a bit more of visibility within the supply chain.
Sebastian Stavovich, Analyst, Kepler Cheuvreux: And for Consumer, what is happening there? Is it also an inventory build or?
Pierre Van Roe, CEO, Soitech: For consumer, we are less accurate directly on consumer market. Then it's we are too we like to say too small to tiny players to give you, let's say, any visibility on the pure consumer electronics markets. The markets where we see and we discuss a lot with supply chain and high end customers and of course customers to customers is smartphone, automotive and agent for the AI activities.
Sebastian Stavovich, Analyst, Kepler Cheuvreux: Okay. Thank you.
Conference Moderator: Thank you. And from UBS, we now have Francois Bovignet with our next question. Please go ahead.
Francois Bovignet, Analyst, UBS: Thank you very much. Just wanted to come back on this inventory comments of twelve months that you described that maybe will come down and you want to be cautious. I mean, last quarter, you said that it would be potentially the new normal, the twelve months, saying that you don't expect further down because it's a new normal level. And now you seem to suggest that you it could come down. I mean, what's changing since last quarter when you said about this twelve months, it looks like you expect it to come down.
I didn't have this impression last quarter, but maybe I'm wrong. Second is you talked about adaptation of architectures that would reduce the content for FFOI. Can you elaborate on that comment? I mean, what do you mean by adaptation of architecture? Would love to have some color on that.
And then finally, on POI, you had a strong year this year. Can you explain maybe the customers' roadmap? Do you expect more customers coming through? And should we expect for 2026 like a double digit percentage growth at least, is the momentum still there? Thank you.
Pierre Van Roe, CEO, Soitech: Okay, Francois. Then starting with RFSOI inventories, no changes except cautiousness within the value chain that is obvious now. Then twelve months is a new normal, but the normal we have experienced in the past is more nine months is exactly what we said. Then if we look at the readings by the different players in the mobile supply chain. We need to look at a bit of cautiousness.
Then some customers might be comfortable with twelve months, but others might ask for going down. We have no specific messages. Clearly, there is nothing new in the conversation we had with our customers, except the fact that when you look at fabless conversations and readings coming from the earnings, Yes, we need to look at cautiousness back to the lack of visibility in the market. If we look at the RFSOI architecture, this is an optimization of the architecture, because of course you have many, many features to run on our FSOI, let's say, footprints. And the idea is to manage the different features.
It's a part of the, let's say, deal and strategic relationships, technological relationships we developed with UMC, with the three d IC packaging for our FSOS. It's exactly this type of then we are on it. We are in
Emmanuel Mato, Analyst, ODDO: these
Pierre Van Roe, CEO, Soitech: changes. We need to have more compact phones because the phones are bringing more and more dice, more and more capabilities also to swallow AI revolution. We need less and less energy consumption. This is exactly what we are working on. But content reduction doesn't mean value reduction.
And maybe the content is to date plus 4% to 5% in our FSY as it is today. But we are bringing more and more value because also we are bringing more and more technology. The 9S WU product for GlobalFoundries is a revolutionary product for RF, where we are bringing one more value, okay? Then it means that, of course, we expect to increase step by step our footprint and also our value within this. Then it's not it's a natural trend in which we are in which we are investigating with our customers and in which we're going to bring more and more value because we're going to concentrate more features in a bit less footprint.
Then of course, it means more technology and it's going to also give us a better advance compared to any other competitions. And that's also a way to lead the pack and to continue to really run to be a frontrunners in these technologies. And it's a changes we are anticipating and we are working on very actively and creating values. Regarding PUI, on PUI, as we said, we have today 10 active in productions customers. So we have 10, a bit more than 10 now under evaluation customers.
The bigger shift is that these customers now are more in Western world, particularly in The U. S, where we have started in China. You know that China going to wait again on 20% of our revenue in fiscal year twenty six and we continue to wait that level in the years to come. But PY now is moving to Western world and we have more and more customers under evaluation or qualification in The U. S.
To sustain the filtering revolutions in these areas. And that's of course a very important trend. Expand our footprints in terms of customers and qualification, industrialization and evaluation.
Francois Bovignet, Analyst, UBS: Thank you very much. You're welcome, Francois Henri.
Conference Moderator: Thank you. And up next, we're moving to Olivia Honeychurch from Jefferies. Please go ahead.
Olivia Honeychurch, Analyst, Jefferies: Good morning. Thanks for taking the question. A couple from my side. I just wondered if you could talk about the visibility that you have in each of your end markets. It sounds from your comments like mobile is still low.
Clearly, also is still low given the inventory correction the whole market is seeing, not just you. Edge and cloud AI might be slightly better. But I'm just trying to get a sense of how you expect to gain confidence in building guidance for FY '20 '20 '6 in the context of that limited visibility, which I think you'll be giving us in three months' time. And then I have a follow-up. Thank you.
Pierre Van Roe, CEO, Soitech: As we say now, then visibility is quite low. It's quite low. It's lack of visibility to be clear and there is cautiousness in all the message surrounding us. We have a strong relationship with our customers. We review with them on a regular basis their view forecast and so on, even if they're also lacking of visibility.
I mean, we are lacking of visibility because they are lacking of visibility and their customers are lacking visibility. And it's not something we say out of the blue. It's just you read, let's say, the documentation around us for the last months. Then in this context, we are working step by step on building, of course, a business plan over five years as it is our regular process and a budget for fiscal year twenty twenty six. Then we're going to refine and revisit this exercise and we're going to come back to you with, let's say, more details on May.
And this is everything we can tell you. But I repeat, mobile soft, but PY growing. Automotive in decline in H1, I'm talking about the market, in decline H1 and risk of continued decline on H2. And agent Clodaei growing, thanks to LDSY, but mainly silicon photonics, offsetting a total phase out of a major SOI business, which is everything we already said and it's exactly what I said already on November.
Olivia Honeychurch, Analyst, Jefferies: Great. Thank you. Just my follow ups on Photonics SOI, which you mentioned that. Previously, you talked about that growing at around 60%. Can you remind me which year that rate relates to?
And maybe talk about how you see that growth progressing over the next few years given that the adoption of silicon photonics in AI data center is clearly very strong as you said? Thanks.
Pierre Van Roe, CEO, Soitech: Well, Silicon Photonics is today on a track that is of course very, very intense because they need to we need to deliver to many customers for equipping next generation data centers with transceivers. This is the mainstream today of activities for our silicon photonics business. Even if we are working on, of course, the next generation co package optics solutions that will come perhaps a bit earlier than we had scheduled with the key players. All in one, we believe that Silicon Photonics will enter into the club of the $100,000,000 revenue BU by fiscal year twenty twenty seven.
Olivia Honeychurch, Analyst, Jefferies: Great. Thank you.
Francois Bovignet, Analyst, UBS: Welcome.
Conference Moderator: Thank you. And from Deutsche Bank (ETR:DBKGn), we now have Robert Sanders with our next question. Please go ahead.
Robert Sanders, Analyst, Deutsche Bank: Yes, good morning. I've got three questions that I just want to squeeze through. One is, have you let any larger customers allow their LTAs to expire? I mean, have they chosen, I guess, is the right way of saying it, to let those LTAs expire? Obviously, it has kind of accentuated the problem given the minimums embedded in those contracts.
So I was just wondering if you've decided to maybe change the way you work with those largest customers. The second one is just for layer. On the H1 versus H2 seasonality, is that still roughly 40%, sixty % in terms of the split between first half and second half as it was in fiscal twenty twenty five? Just wanted to double check that. And then the last one on the China RF business, obviously quite a lot of new China RF players.
Can you just confirm that your share is higher in China versus companies like Corvo and Skyworks? Thanks a lot.
Pierre Van Roe, CEO, Soitech: Well, I probably is to take your second question. I will cover the question one and three, Robert.
Leal Zheng, CFO, Soitech: Yes. Good morning, Rob. Yes, we see an effect of the 2019. It's too early to know the exact trends. We are still working on our FY 2026 outlook.
But yes, we'll have a seasonality effect as at least at the same extent as this year.
Pierre Van Roe, CEO, Soitech: Okay. On your first question, Rob, on the LGA, then there is no LGA exploration coming or came recently. On the contrary, we signed a few LTS with customers running on over a few years, four to five years depending. And that is quite new. Of course, it's not generally speaking, but this year
Emmanuel Mato, Analyst, ODDO: we had
Pierre Van Roe, CEO, Soitech: LTAs after difficult years before in fiscal year twenty twenty four in this domain. Then we start seeing customers coming back with LTS. It's a beginning. It's soft, but there is something important coming up. Despite the difficulties of the market, despite the uncertainties, it's a very important signals to underline that.
But I believe that there are more buying Soitech technology than reliability. There are more betting on our ability to really run ahead the market and provide the best in class technologies. That's really for me a signal of trust and confidence in the long run, again despite the market uncertainty. Regarding the RF players or RF business in China, We are our technologies are today equipping 100% of the smartphone in the world, then we can suspect that it is the same for, let's say, RF or smartphone. It made it or made us solely in China.
This is everything I can tell you. And the overall SOI segment share for Citec is 70% as you know. Then we could imagine that through the way of the supply chain, we are experiencing more or less the same market share for all technologies and for Citec, but nothing more to tell you at this stage. Thanks a lot. Welcome.
Conference Moderator: Thank you. And we have one last question up for today's call,
Alexander Pieterck, Analyst, Bernstein: which comes from Daniel
Conference Moderator: Shaffai from Citi. Please go ahead. Citi. Please go ahead.
Francois Bovignet, Analyst, UBS: Yes. Thank you for taking my question. Just to ask on content in a different way maybe. So you mentioned that in the near future that there will be more mid range and low range phones versus premium ones, where Corvo commented something similar as a continuing trend. Do you see the possibility that this will be kind of not only the state in 2026, but also further out?
Pierre Van Roe, CEO, Soitech: Difficult to forecast. We need more to look at the dynamics and what are the criterias to bring, let's say, high end mobile phones in a better dynamics. First of all, the price is a bit disreasing. We had we experienced inflation in smartphone and particularly in high end smartphones. Second, the secondhand market continue to strive on.
And people in second hand market or repair market are buying high end phones. That is a bit cannibalizing the first hand high end smartphones. That's very important to understand the trend. And for me, the dynamics that are going to reshuffle the high end segments of the smartphone is going to be features, applications, surely based on AI that are going to make this smartphone unavoidable or let's say to get into pocket. This is for me the VAI revolution entering into the smartphone that's going to make these type of, let's say, devices different from phones and more a kind of personal assistant for your daily life.
In that case, we would see we would enter into a super cycle of for the smartphone industry. It should come, it should come when you listen to many things, articles and whatever, it should come. We don't know how, when and which magnitude, but that's going to be, of course, very important topics. And of course, at Soitech, we're going to benefit a lot from this super cycle, but it's not today at all in our model. I believe we covered all the subjects.
Okay. Thank you very much. Then this is a conclusion we can go forward. Thank you for the Q and A session. Thank you for your interest and for the dynamic of the exchange in-depth and your question.
And also very important to recall and to repeat strongly that the fundamentals of this group are totally intact. We manage successfully the governance crisis that is behind us. We manage successfully to diversify our activities with many products, many customers, many geographies going on. We are gaining shares, gaining marketplaces, gaining positions. We are developing a very strong technology leadership in all the domains we are investigating and more to come.
We didn't talk about in details about Smart GaN. We didn't talk about other products we are working on, but we're going to enter more into details. But already where we are, we are leading from a technical point of view and we have many, many new products in the card box, particularly through the betters we have created very recently to be ready for launching when the market is going to be ready. And we are working, of course, it's confidential with many customers for that. And talking about customers, we have developed in-depth and strong relationship with our customers on the long run.
I can tell you that we have today good, if not very good relationship with all our existing and also new customers we didn't know a few years or even months ago. And that's, of course, extremely important and very inspiring for the team, for the engineers, for the technicians, for the operators in this company. They see and they feel that they'll make part of the history of the semiconductor by bringing to the market next generation very innovative engineered substrate. Thank you very much for your attention again. And we'll have the next step of the agenda for the Q4 twenty twenty five revenue and our fiscal year twenty twenty five revenue on May 27 after market close.
And we'll be hosting our Capital Market Day in Paris the day after on May 28. And I'm looking forward to seeing you, many of you there. This ends our call for today. Thank you very much.
Conference Moderator: Thank you for joining today's call. Ladies and gentlemen, gentlemen, you may now disconnect.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.