|One more comment that I thought was important.|
Sixteen months ago (April 29th 2020), Lowe said that they were targeting margins higher than 50% in all three businesses (RF, power, materials).
Maybe that is no longer true, but if it is, then the market certainly doesn't believe that is the case.
Also, in Nov '19, Lowe said that they would shut the Durham fab down after they ramped up Mohawk.
• Goldman Sachs Group Inc., Research Division
• VP & Senior Clean Energy Analyst
Okay. Yes, fair enough. That's all very helpful. Maybe moving to more of a longer-term question, because hopefully, all of this does normalize sooner rather than later. But as we think about the longer-term margin targets, I would assume they're not changed here. But how should we think about some of the mix implications? So as the $9 billion device pipeline as you start to see more of the mix of power devices in sales, what are the margins -- or I guess, the implications on margins from that increasing mix?
The reason I ask being, if you look at other power semis categories, those peers tend to have margins that are more in the 30s and 40s, and you guys are obviously targeting a much higher margin profile in the long-term time frame. So just wondering how the increasing mix of silicon carbide power devices should impact the Wolfspeed gross margins and why they'd be higher than traditional power semis, if that's your view?
Gregg A. Lowe
• Cree, Inc.
• President, CEO & Director
Yes. Maybe I'll kick it off and then turn it over to Neill for some additional color and so forth. I guess what I would say is, number one, our long-term view and the goal that we have of running this business north of 50% hasn't changed at all. I think we've got pretty good line of sight to get there, and we've got a pretty good -- I think we have got a pretty solid plan in place, that is, I don't want to say mix independent, but all 3 of the businesses are targeting at that or higher margins. So the mix over a longer period of time shouldn't be an issue. Obviously, in the near term, we've got all of these issues that we're dealing with, but it really hasn't changed the longer-term target. Maybe I'll hand it over to Neill for a little bit more color.