X-FAB Silicon Foundries Stock

Ladies and gentlemen, welcome to the X-FAB Second Quarter 2026 Results Conference Call. The speakers will be Damien Macq, CEO; and Alba Morganti, CFO. [Operator Instructions] I will now hand the conference over to Damien Macq, CEO. The floor is yours. Please go ahead.

Thank you, Gaia. Thank you, everyone. Good evening, everyone, and thank you for joining us today. The second quarter of 2026 showed another quarter of disciplined execution in a market environment that remains mixed. The revenue came in at USD 199.8 million, down 7% year-over-year and up 2% sequentially. Excluding revenue recognized over time, revenue was USD 196 million, within the guidance. Bookings reached USD 173.3 million up 2% quarter-on-quarter, while backlog ended at $291.8 million. Importantly, excluding the temporary impact of the Erfurt end-of-life program, our underlying book-to-bill ratio returned above for the first time since Q2 2024, providing an engaging sign that demand conditions are gradually improving.

Our core markets of automotive, industrial and medical represented 93% of revenue totaling USD 182.1 million. Automotive revenue was USD 116 million, down 19% year-over-year and 5% sequentially, reflecting continued inventory normalization. However, booking improved significantly and automotive book-to-bill reached its highest level in almost 2 years. Combined with a growing number of design wins, this support our view that the market is gradually recovering. Industrial revenue was USD 45.2 million down 4% year-over-year and 13% quarter-on-quarter, primarily due to temporary order volatility from a major silicon carbide customer.

Medical continued to perform strongly, reaching USD 21 million, up 39% year-over-year and 9% sequentially. This is driven by pacemaker and ultrasound applications. In Smart CMOS and SOI, revenue reached USD 156.7 million. During the quarter, we saw a significant increase of a new automotive opportunity, particularly in Europe. And one of our top 10 customers renewed and extended its long-term commitment in pressure sensing. We continue to see healthy demand in battery management system in China, while opportunities like linked to robotics are becoming increasingly visible. We are also seeing growing demand from AI-enabled infrastructure where our technology address power management, sensing, infrastructure control, cooling and connectivity applications.

The broader manufacturing landscape is also evolving. AI-related demand is driving the reallocation of capacity at several 8-inch fabs in Asia while supply resilience and geographic diversification have become increasingly important for customers. With the completion of our Malaysia expansion and availability capacity across Europe, the U.S. and Asia, X-FAB is well positioned to benefit from these trends. In Microsystem and Photonics, revenue amounted to USD 28.7 million up 14% year-over-year. We secured a new high-volume microfluidics application for blood analysis, we continue to see healthy MEMS demand and expanded opportunity for our aluminum nitride platform.

Photonics remain a particularly exciting area. We are making progress in copackage optics, data communication, augmented reality, virtual reality and quantum computing-related applications. Through our collaboration with Ligantech, we have established advanced business interaction with emerging photonics and quantum computing leaders in Europe and the United States. We continue to expect photonics volume production to start in 2028. A major milestone during the quarter was the award of EUR 127.4 million under the European Chip Act to support the expansion of microsystems and photonics manufacturing in airport. Together with the launch of -- together with the launch of -- Micro, this investment reinforce our specialization strategy and positions Erfurt as a key growth engine for MEMS, microfluidics and photonics.

Turning to wideband GAAP. Revenue was USD 10.6 billion, up 34% year-over-year, while quarterly demand remained somewhat volatile, we secured 3 new silicon carbide design wins, expanded our opportunity pipeline and continue to advance customer programs towards future production. Execution of our gallium nitride road map remains on track, and customer interest continues to increase. Looking ahead, one of the most exciting opportunity for X-FAB is the rapid growth of AI-driven data center infrastructure. We see opportunities across all 3 business units including power conversion, sensing photonic connectivity, silicon carbide and gallium nitride technologies. Based on today's pipeline and customers' engagement, we estimate a long-term revenue potential of approximately USD 300 million annually for data center applications.

Finally, the Erfurt end-of-life program remains fully on track and we continue to expect substantial completion during the first half of 2027. Together with FAB for Micro, this transformation support our specialization strategy and creates the foundation for future growth. At the same time, we continue to execute our cost control and productivity initiatives with discipline across the group. And now I will hand over to Alba for financial updates.

Thank you, Damien. Good evening, ladies and gentlemen. We will now continue with the financial update. From a financial point of view, Q2 was a quarter of disciplined execution in a still challenging market environment, which weighed on revenue development and capacity utilization. Nevertheless, we delivered revenue within our guided range. Our EBITDA was of $33.6 million with an EBITDA margin of 16.8%. If we exclude the impact of revenue recognized over time, the EBITDA margin would have reached 17.6% within the guided range of 17% to 20%. Our second quarter profitability mainly reflected the softness in the automotive end market, which limited our capacity utilization. As already mentioned by Damien, our cost savings program is progressing as planned with expected positive effects towards the end of the year. .

We also continue to manage our cash carefully with cash and cash equivalents of $163.6 million at the end of the quarter. In the second quarter, we recorded a noncash tax impact of $11 million related to the derecognition of deferred tax assets in Malaysia, which affected our net result but had no impact on our cash. Overall, our financial priorities remain unchanged. Preserving liquidity, improving operational efficiency and supporting the group's long-term growth opportunity in automotive recovery, data centers, microsystems, photonics and wideband gap technologies. Looking ahead, I can only repeat what Damien said. We remain focused on cost efficiency, cash discipline and on growth opportunity that support our long-term strategy.

Our business continued to be naturally hedged and our profitability remains unaffected by exchange rate fluctuations. At a constant U.S. dollar euro exchange rate of 113, as experienced in the previous year's quarter, the EBITDA margin would have been 0.1 percentage points higher. Our capital expenditures in the second quarter amounted to $24.2 million, bringing first half '26 CapEx to $50.2 million. Cash and cash equivalents totaled $163.6 million at the end of the quarter, while our net debt amounted to $312.3 million, which is an increase of $20.9 million from the previous quarter. And to conclude this financial section, I would like to share our next guidance.

For Q3 2026, our revenue is expected to come in within the range of $195 million to $205 million, with an EBITDA margin in the range of 17% to 20%. This guidance is based on an average exchange rate of USD 114 to euro and does not take into account the impact of IFRS 15. I would like to conclude this financial section by saying that we remain confident in the medium-term outlook and our strong operating leverages, diversified technology portfolio and long-term customer relationship position us very well to benefit from a recovery in the demand. And now I would like to give the Board back to Damien.

Thank you, Alba. As we step back from quarterly fluctuations, 4 messages stand out. The first one is our demand is stabilizing. We reached the bottom with underlying book-to-bill returning above 1.0 for the first time since Q2 2024. The second is data center opportunities are accelerating across CMOS photonics, silicon carbide and gallium nitride. Third, our specialization strategy continues to gain momentum, supported by FAB for Micro, Erfurt transformation and our growing photonic position. And fourth, execution remains strong, demonstrated by the new silicon carbide design wins, our progress in gallium nitride and the successful cost control initiative. And last but not least, the EUR 127.4 million Chips Act funding award that we confirmed. Taken together, this development reinforce our confidence that its fab is increasingly well positioned for the next growth cycle and for sustainable long-term value creation. Thank you, and we are now happy to take any of your questions.

[Operator Instructions] We have no questions at the moment. [Operator Instructions] The first question is coming from Luke [indiscernible] Luke, we cannot hear you, you can maybe try again later. In the meantime, we will take the question from Narahari Narsapur.

Thank you so much for wonderful call -- wonderful updates. My question is, I think we are still not using 100% capacity of the fab. When do you expect to go, I think the full capacity is like [ 1.3 billion ]. When do you expect this to go up. And second question is, recently because of some social media posts fixed stock has seen a lot of iterating units. How does the management see this and can the company benefit from this somehow?

Okay. Thank you, Narahari, for the question. So on your first question, when do we see a full utilization at this stage, end of Q2, the utilization was at the 60% level. So we anticipate a gradual increase of this capacity utilization. The model that we are developing for the company goes for a steady capacity increase, and we want to reach levels in the region, 85% to 90%, 85% will be a good capacity level. The question is about when I think it's all about the market conditions and how fast is the market evolves. We have seen in the past some substantial evolutions. You know that we are on a relatively long supply chain, particularly, for example, in automotive, we have a set of tiers and -- between ourselves and the OEM. And this can create swings in the demand. My anticipation at this stage and from all the KPI that we have, we see that the demand is recovering.

Now how fast this recovery takes place, it's difficult to predict. If you look at our model and based on the growth that you see on our markets, we believe that we have enough capacity for the next 2 to 3 years. and we continuously monitor how the demand is evolving. And based on that, we see how we need to take into consideration possible next capacity increase. But I would say, for the next 2 to 3 years, the capacity that we have in hand is sufficient.

Regarding the question about social media, yes, we were -- I must say this, this is a sudden interest of -- that the post created was a big surprise to us. Reading the post, there was a lot of information that was in fact not totally new. The post created some combination and some yes, it was a compilation of a lot of news that were already on the market. And this has created maybe a significant interest in our company. We see that, to some extent, positively because we are working on the different areas that were covered by the post regarding photonic regarding wide-band gap also the interest for some of our high voltage and CMOS technologies that could also be relevant for a growing application like in data center. That's why here, we provided a bit of an update. And if you look at the PowerPoint material that is provided for this call, there is a bit of more data on this. the feedback that we provided to the post was from our side, no specific new news and I think it's up to the market to make their own conclusion on how to utilize a different information.

You could say that some of the information was maybe created some shortcut between certain actions that we are taking, for example, in the context of the photonics fab and certain large companies. but nothing was fundamentally wrong in the statement that we have posted altogether in one shot in one single post. So that's my comment about this specific post on -- does that answer your question?

He disconnected. But he can enter the queue again if he has some more questions.

So maybe we can try with Luke now.

Yes. The next one is coming from Luke Deserta. Yes. In the meantime, we have another question is coming from Trion Reid from Berenberg.

It's Trion here from Berenberg. I just had a couple of questions. The first was just on the data center opportunity that you highlighted. You talked about $300 million long-term opportunity. Obvious question would be, could you give us a bit more detail on the timing. Is there any particular area you said a few of any particular area which is going to be a bigger contributor and how much revenue do you have today? So what does that $300 million compared to today? And then the second question was just on the robotics opportunities that you mentioned are becoming a bit more real. Just be interesting to get a view on that? Is that essentially via Melexis or is it other customers? And if you could help us to quantify the opportunity that would be, that would be great.

Okay. So today, our estimate on the data center is that we have a relatively modest revenue, mostly coming from what we do silicon carbide also an area that we have in photonics and some business that we run on CMOS estimate is in the range of $20 million to $30 million. It's a relatively large range. But if you look at it compared to the global revenue of its fab, it stays relatively modest. The $300 million is based on the number of opportunities that we tag and that we flagged that are directly connected with data center evolution. How fast and how quick could we get to this $300 million. That's a good question, and I will not be able to answer today. It is significantly linked to also the success of some of the customers we are interacting with in this domain.

And also, we know that the data center deployment is particularly the new architecture of data center is driven by multiple dynamics that we do not control directly from an perspective. So that's the reason why we stay relatively prudent about providing more accurate view within our different business units and in terms of timing. But as soon as we get some substantial and significant news on this, we will definitely be able to provide you more insight on this. So that's the answer on the data center.

On robotics, it's not only Melexis. So we see multiple customers in automotive, but also in the industrial area reporting the interest in robotics for the device that we are producing. So we produce sensors, we produce a position sensor, we produce also our customer produce with our technologies, activators and so we have also customers on the industrial sector, we are also reporting a nice growth in robotics. And it's a global growth. So it's also happening in China, but it's also a global growth that we've seen in robotics. So it's difficult to size this at this point trend. But likewise, as soon as we get a bit of more visibility, we will share that with you. It's only -- we thought it was worth mentioning that we see some of these traditional automotive players. I think Melexis gave also some insight on what they see in robotics, but we see also the same feedback from industrial customers. Hope that answers your question.

[Operator Instructions] We have the next question coming from Arnaud.

Get on to the other question?

[Operator Instructions]

Do you hear me now?

Yes.

Okay. So I do have a question around the financing. I think the uptick in the sector is a bit later than anticipated regarding the announcement of the initial $1 billion investments and the prepayments of the long-term agreements are -- paid. And the first bank financing of $200 million is, I think, is due at the latest -- at the end of next year. What do you see as the best way to finance this gap? I think that will be there in the coming 1 to 2 years.

Okay. So I will take first long-term agreement repayment, so we are gradually repaying the long-term agreements, prepayments. We still have a portion which will be repaid this year and another 1 next year. So it's not all done. And then regarding your question on the first revolving credit facility of 2021 of EUR 200 million. Yes, it's correct. Well, actually, the maturity is scheduled for November this year, and we already asked for an extension of it by 1 year as per contract. We had that clause in the contract, which we activated and this will help us already to extend by 1 year.

Now you are also correct by saying that we -- only with the extension of that line, we want our financial indebtedness won't be sufficient. I mean, we won't have enough capacity on credit lines to -- for the future. But we already gained 1 year, and this gives us some room for maneuver to see what would be the best options to either go for a new revolving credit facility as of next year when this one will expire or another way. There are a few things that we are looking at -- well, some alternatives as well. And we, as every time, we'll take the best option from a financial point of view. So we are working on it. That's the conclusion.

Yes. There is appetite in the market from the banks to.

Yes. Yes. Even for the extension of this line, we had really a lot of appetite from the lenders. .

The next question is coming from Luke [indiscernible]

I see that you are raising the outlook modestly, let's say, from EUR 195 million and then from EUR 200 million to EUR 205 million. As you say, the order intake is now accelerating. Would you expect that for, let's say, the fourth quarter that we would and once again, would it be about the same level?

Yes. We don't provide guidance for the fourth quarter. But yes, as I mentioned earlier, we reached the bottom, we believe we reached the bottom in Q2. And the way we look at the business right now for the second half as we said already a quarter ago is that second half will be strong than first half. So anticipation is that there will be a prolongation of the recovery, how fast and how high we are still a bit cautious to see what our customers are planning to do. Talking to our main customer, they seem quite optimistic about Q2 -- Q3 and Q4, sorry. And this will be -- this will likely be reflected in our numbers as well. But so far, we don't -- we are not in a stage to provide guidance for Q4. Just a reminder or cycle time are quite short.

And we want to be cautious also, as I mentioned earlier, in the automotive industry when the cycle are long the supply chain is long, you can have really significant swings that can hit. So we want to make sure we get the full visibility on how the year will go before giving a guidance for Q4. But I'm quite optimistic about the fact that the recovery is not just a single shot for Q3.

And then I have a second question. Are you also in a position to be able to start increasing prices?

Yes, that's a good question. So I think right now, in general, we are following how the market evolves from a supply perspective. So we see that on the wafer supply, there might be some risk intention coming in our way. So we see that there is a high demand for SOI wafer. We see there is, in general, demand in a 200-millimeter wafer. So any price increase that comes there will be gated to our customers. At the same time, we want to make sure our customers are gaining market share and winning new markets. So it's always a trade-off that we need to make. And it's done on a case-by-case basis opportunity for opportunity. So at this point, we are not in a position to announce a global price increase. But clearly, new demand is coming in Norway, and that will place us in a different situation compared to what we have seen over the past 6 to 9 months.

There are no further questions at this time, so I hand the conference back to the speakers for any closing remarks.

Thank you, Gaia. Thank you, everyone, for participating to this call, and we remain available for any subsequent questions that you might have, and we need to give you an appointment for the next conference call, which is -- let me -- I'm sorry, I'm a bit -- with the notes here. So we want to give you an appointment for the next conference call, which is planned on the October 29, 2026 where we publish our Q3 2026 results. Thank you for your time. And with this, I wish you a great day and a great evening. Bye-bye.

Thank you. Goodbye. .

Thank you for joining today's call. You may now disconnect.

Ladies and gentlemen, welcome to the X-FAB First Quarter 2026 Results Conference Call. [Operator Instructions]

I will hand the conference over to Damien Macq, CEO. The floor is yours. Please go ahead.

Thank you, operator. Ladies and gentlemen, welcome to this quarterly conference call of X-FAB. Representing X-FAB in this call are Alba Morganti, CFO of the group; and myself.

In the first quarter of 2026, X-FAB generated revenues of $195.6 million, down 4% year-on-year and 12% quarter-on-quarter. Excluding revenue recognized over time, quarterly revenue was $205.8 million, above the guided range. Our core markets, automotive, industrial and medical represented 94% of the total revenue, reaching $192.9 million. Order intake amounted to $169.4 million, up 3% sequentially, while backlog stood at $308.4 million, reflecting the continued cautious ordering behavior in automotive rather than underlying end market demand.

Automotive revenue came in at $121.6 million, down 10% year-on-year. Inventory adjustment and limited short-term visibility persisted, but the structural trend towards electrification, customization and ADAS remains intact. Semiconductor content per vehicle continues to rise, driven by applications such as battery management, thermal regulation and advanced sensing.

During the quarter, we secured multiple sensor element design wins, particularly in Asia and China, including gas pressure and acceleration sensor as well as a new road noise cancellation application for electric vehicles.

Our industrial business delivered $52 million, up 32% year-on-year, supported by strong silicon carbide demand and growing momentum in data center power management.

Medical revenue reached $19.2 million, up 39% year-on-year with solid contribution from pacemaker, ultrasound, DNA sequencing and contactless sensing alongside new medical ultrasound opportunity from our 110-nanometer BCD on SOI technology.

From a technology perspective, CMOS revenue was $156.9 million, impacted by automotive softness. Nevertheless, we achieved design wins on our 180-nanometer and 110-nanometer BCD on SOI platform, spanning data center and medical ultrasound applications.

Our SPAD technology continued to gain traction across industrial, medical and mobile markets and interest in our next-generation 110-nanometer DCD platform for automotive sensors is confirmed from design wins by our top customer.

Our Microsystem and Photonics business delivered a record $33.7 million, up 42% year-on-year, driven by strong customer traction in diverse applications. For example, we successfully established aluminum scandium nitride-based piezo-MEMS production for inkjet printheads and saw growing customer engagement in MEMS resonator and ultrasonic transducers.

Finally, wide bandgap revenue reached $15.1 million, up 152% year-on-year. Silicon carbide wafer shipments increased to 14,300 units, nearly tripling year-on-year. This confirms the strong customer pull in this technology. In GaN, we delivered the first 1,200-volt prototype on a 200-millimeter substrate and initiated a vertical GaN customer project supporting increased prototyping activity in 2026. Overall, our technology pipeline, design win momentum and diversification progress clearly position X-FAB for growth as market conditions normalize.

And now I will pass the word to Alba for the financial section.

Good evening, ladies and gentlemen. And now let's walk through the financial section. In the first quarter, our EBITDA was $34.2 million with an EBITDA margin of 17.5%. Excluding the impact of revenue recognized over time, the EBITDA margin would have reached 18.4%, which was -- which would have been then within the guided range of 18% to 21%.

As you could see, we had a significant reduction of the net sales due to an impact coming from the IFRS 15 revenue recognition over time in the first quarter of minus $10.3 million. This is the natural consequence of the expiration of most of our long-term agreements with some of our customers at the end of 2025. So from 1st of January this year, we are now back to the usual business free of LTAs, with these customers. But the expiration of these contracts triggered according to the IFRS 15 rules, a significant reduction of the quarterly sales.

Our net debt went from $285 million as of the end of Q4 2025 to $291 million at the end of Q1 this year, so rather stable. Meanwhile, we reimbursed $26.4 million prepayment of the LTAs in the first quarter, and our total net debt decreased from $480.4 million as of the end of Q4 2025 to $436.1 million at the end of Q1 2026.

In terms of profitability, our first quarter was primarily affected by softness in the automotive end market, which impacted on the overall revenue. Given the substantial share of fixed costs, expenses could not reduce proportionately. The positive effect from the ongoing cost savings programs are not yet visible, but we anticipate them to become tangible by the end of 2026, including a headcount reduction in the high single-digit percentage range and a gradual decrease in operational expenditures. Additionally, increased research and development activities during the first quarter led to higher-than-usual R&D costs.

Cost structure is actively managed to protect profitability in the short term while maintaining the capabilities required to support future growth when volumes recover. As you know, our business is naturally hedged, which keeps our profitability unaffected by exchange rate fluctuations. At a constant U.S. dollar-euro exchange rate of $1.05 as experienced in the previous year's quarter, the EBITDA margin would have been 0.9 percentage points lower.

Our CapEx in Q1 were well in line with expectations and totalized $26 million. CapEx has significantly moderated as we move past the peak of our investment cycle, supporting cash generation and preserving financial flexibility.

Cash and balance sheet discipline remain top priorities. Cash and cash equivalents at the end of the first quarter totalized $144.7 million.

And to conclude this financial section, I would like to share our next quarter's guidance. As automotive [ visibility ] remains limited in the near term, we reinforce our prudent guidance approach. We expect our Q2 2026 revenue to come in within the range of $190 million to $200 million with an EBITDA margin in the range of 17% to 20%. We anticipate a steady recovery of our automotive business in the second half of 2026. This guidance is based on an average exchange rate of 1.15 USD/Euro does not take into account the impact of IFRS 15.

I would like to conclude the financial section by saying that we remain confident in the medium-term outlook. Our strong operating leverage, diversified technology portfolio and long-term customer relationship position us well to benefit from a recovery in demand.

And now I would like to give the word back to Damien.

Thank you, Alba. Let me start by reaffirming the 3 pillars that continue to guide X-FAB's strategy and execution. Specialization, diversification and disciplined execution. These are not new priorities for us. But over the past quarter, we have taken several decisive steps to reinforce them structurally, operationally and commercially. On specialization and diversification, these are the heart of the transformation we have just completed.

During the past quarter, we finalized a global reorganization of X-FAB around 3 dedicated business units, each focused on one of our core technology families. We have a Smart CMOS and SOI BU, a microsystem and [ photonics ] and a wide bandgap technology, including silicon carbide and gallium nitride.

These moves reflect a clear strategic intent. First, it allows us to accelerate the specialization of our technology portfolio by bringing development engineer, technology road maps and business development much closer to our customers. This proximity is critical to enable true co-creation, developing differentiated technologies together with customers and accelerating product ramp-up from R&D to volume manufacturing. In parallel, it strengthens accountability and focus within each technology family, ensuring that innovation is both market-driven and execution-oriented.

Second, this structure supports our ambition to further diversify our markets and customer portfolio. By aligning our organization around fast-growing end markets such as electrification, digital health care, industrial automation and AI-enabled infrastructure, we are better positioned to capture growth beyond traditional cycles and to serve customers with very different applications, needs and life cycles. This diversification is already visible in an important customer mix evolution.

During the past quarter, our top 20 customers ranking, representing around 75% of our revenues changed meaningfully. The share of our largest customer to our total revenue declined from 41% to 35% due to inventory corrections, but also due to the significant increase of sales generated by customers ranked from #2 through #20. Altogether, they increased their revenue by 21% from Q4 '25 to Q1 '26. This evolution is strategically important for X-FAB. It reflects the diversification of our business and the larger growth of our silicon carbide and microsystem businesses as well as the continued success of highly differentiated X-FAB technologies in automotive applications such as lighting and sensing.

We are also seeing continued momentum from our Chinese customers, particularly in the automotive segment, MEMS, battery monitoring systems, silicon carbide and also for new applications like technologies for noise cancellation within the cabin.

Turning to disciplined execution. Operational excellence remains a top priority. We continue to improve cycle times, yield and quality, ensuring that our fabs remain competitive, resilient and reliable partner for our customers, particularly in automotive, medical and industrial applications where quality and supply security are paramount.

Finally, let me highlight the ongoing transformation of our Erfurt site, where we are accelerating the deployment of microsystems technologies. This site plays a central role in our microsystem and photonics road map and is critical to supporting growth in medical, sensing and next-generation industrial applications.

To conclude, our commitment to innovation, strategic business development and disciplined execution remain unwavering as we continue to build the sustainable long-term success of X-FAB for all stakeholders.

This concludes our Q1 results presentation. Operator, please open the lines for questions.

The first question is coming from Aleksander Peterc from Bernstein.

I just have a few. The first one is on automotive where you seem to be in a double-dip configuration now with the second quarter of roughly minus 10% declines in your revenue year-on-year. And this seems to track quite closely your #1 client, Melexis. So I'd just like to know if you see a broad-based weakness in automotive? Or is it primarily your #1 client there?

And then the second question is, do you see any signs in your order intake patterns that would highlight any potential inflection in the coming quarters? We have book-to-bill that remains quite low and your backlog keeps reducing. It's now 40% below peak. I'm just wondering if you can give us any hints on how this would bottom out? And I have a very quick follow-up, housekeeping one afterwards.

All right. Thank you for the question. On the first question, yes, as I mentioned in the presentation, it is correct to say that the #1 automotive customer reduced their demand quite a bit in Q1, and this is linked to somehow inventory management on their side. At the same time, we saw for the other customers, stabilization of -- in general in automotive.

If you look -- if you zoom in on certain applications, we see some good strength, as I mentioned in, for example, battery monitoring systems. And we see also some good strength in front lighting applications. So I would say there is a kind of quarter correction from our #1 customer managing their inventory, and there is some good stabilization and slight increase in certain applications for automotive.

Regarding the forecast from discussions with our customers, we see a recovery expected in the second half of the year. So it's not going to be visible in Q2. That's why we remain cautious in Q2, but we see some sign of recovery in the second half of the year.

Regarding the backlog, you have to remember that our backlog is also impacted by the End of Life that we made on our site in Erfurt. So this End of Life continues to trigger orders on our side. But yes, the visibility that we get from this End of Life is directly there, but it is not generating some good evolution of the booking overall because all this business was already booked in the past. Does that answer the question?

Yes, it does, yes. That's great. Just a quick housekeeping one for Alba. Can you help us understand where your G&A is going to track for the remainder of the year and into next year, given your CapEx plans as they are presently, where do you see G&A?

G&A, you said? Sorry?

Yes.

Well, G&A is a bit of a tricky one, especially this year because we are implementing a new ERP. So yes, these years G&A is also impacted by the implementation of the new ERP SAP in our system. So of course, the G&A costs are going up. So we are facing some years of increased G&A. If you looked at the evolution, you might have seen that already. And this should go down then after the implementation of SAP. We should be running in 2028 -- early '28, we should start with our new ERP. And then, of course, the cost will significantly go down. This is...

Towards '28 and then go down onwards.

Yes, yes, of course, the cost will fluctuate a bit over the years. Now we have quite a lot of external costs that are normal in this space.

The next question is coming from Ruben Devos from Kepler Cheuvreux.

I just had one on utilization across your footprint. Curious whether you could give us a bit more sense around what that might be, the loading, either by site or by technology? Yes, I think that's the first question will be very helpful already.

Okay. Utilization globally is in the low 60%. We don't provide utilization per site. So -- but yes, we have -- I think that was also linked to some messages that we provided in the past. We have established additional capacity for the upcoming future. So we are ready for the growth of our business. But the low 60% is also an explanation on some levels that you see today in terms of cautiousness on profitability.

What I want to highlight is also that linked to this reduced loading that we see today in our factories. We are taking these actions to continuously monitor the necessary capacity, and we are [ idling ] some tools. We are making sure that the cost control in the factory is aligned with this limited utilization at this moment. So low 60% is the number.

Okay. All right. And I believe you talked about the utilization for silicon carbide back in the Capital Markets Day in September. That was then at a rather lower level. But of course, you've seen quite -- you've reported strong growth now in Q1. Would you mind disclosing what -- how that now is?

Yes. So we have built quite some capacity in silicon carbide. So we can run up to 10,000 wafer a month. And at this moment, we are right at the 60%. Also in the low 60%, we load around 6,000 wafers of silicon carbide in this available corridor. And there, we want to make sure we are ready for the growth that we see quarter-over-quarter. So it's a bit...

And on, let's say, AI-related data center power management. I was wondering what is really pulling you into that opportunity? Is that like sort of the higher voltage and power density angle or is it more of a push for localized supply? Is it simply a shortage of specialty capacity out there? Or yes, a bit more color here would be great.

Yes. I think it's a lot linked to the silicon carbide technology. So we have engaged very, very early with different companies on silicon carbide. I think Navitas is a publicly known customer of X-FAB. And we see really a renewal of the interest of silicon carbide going from applications like power switch for solid-state breakers, but also utilizing energy conversions from 800 volt to system voltage down to 48, 12 or 6-volt. So it's silicon carbide drives a lot of this in terms of production.

Also the interest on GaN is for a portion linked to data center. I want to highlight also that the data center on our side is also -- the growth on data center is driving also some additional growth for other technologies like, for example, our technology is used for timing clock to synchronize GPU in racks. So the idea is to reach really atomic precision with the technology, and this is driven from a chip that was built out of [ X-FAB ] technology.

And moving forward, we also some design wins regarding high-voltage driver ICs to drive the power transistors. So there are multiple applications that are driving some growth on the data center, mostly for energy management, thermal management, but also timing management. The reason why we talk about AI is also and data center is also that we have also an activity on photonics. And in the photonics space, we see also some interest for application of our technologies. But there, we are more in the development phase than in the revenue phase.

All right. And then just a final question. I think we've been reading about some foundries pushing further into power and specialty, right, and not only in China, but also outside China. Also have been reading about some IDMs adding some analog capacity. Is that showing to some degree in your pricing or actually on the contrary, I mean, we've also been reading about pricing actually being increased, right, in certain mature node areas. So yes, how do you think about that?

Yes. We read the same press. We have seen also these articles about price increases in this area. I think there is still a strong push on automation and silicon carbide for automation where probably the price pressure is extreme. We try to stay on applications where the high voltage and the customization that our customers are able to execute on our technology give us a certain advantage.

So there is price pressure always everywhere, but I would say we try to get -- to stay in applications where this pressure is sustainable. So I would not see any specific abnormal push towards price down or price up. We see that more from an end application perspective, probably more pressure on automotive and a bit less pressure in industrial, data center, renewable where we like to play.

The next question is coming from Emmanuel Matot from ODDO BHF.

Some of my questions have already been answered, but I have 3 questions to ask you. First, should we expect a reversal in demand for the industrial business as the positive effects of introduction of certain legacy technologies come to an end?

Second, can you confirm savings of $6 million by the fourth quarter [indiscernible] from the Q4 '25 earnings release? And could you repeat what happens to R&D in Q1 [ it was up ] significantly and I've been disconnected at the time for the call. Is that structural the new level of R&D spending or just something specific to Q1?

Thank you for the question. So first question, reversal in demand in industrial. No, we do -- in fact, we see significant increase in industrial for certain segments. So data center is the biggest one. But I think across the industrial business in general, we see some growth that we have not seen in the past. So basically, the industrial business, if you look at it from a global perspective, is nicely recovery across the board, but with significant growth on data center.

I will answer the R&D question and let Alba answer the other question on the $6 million. On R&D, so what we have done in Q1 is a specific effort to improve the quality and the robustness of certain technologies. So that has additional cost of mask and wafers. We are also in the process of creating a second phase of 110-nanometer technology, BCD-on-SOI in France and BCD in Malaysia. And this development -- this joint development that we have in France and Malaysia are creating a phase of additional wafer requirements to qualify these phases. So this is not something that should prolong. It's more linked to some specific effort that we made regarding the improvement of the robustness of our technologies. Do you want to take that?

Yes. And yes, Emmanuel, indeed, we had a softening of the cost reduction effect or results visible. That's clear because, we are just at the end of Q1, and we put some measures that will take a bit longer to be visible, but we still -- we remain confident that our cost savings plan will materialize as expected by the end of the year.

The next question is coming from [indiscernible].

First of all, I see that, of course, in different parts of the business [indiscernible] good to see. However, if we look at the prototyping in automotive, it stays always at the same level or it even weakens. Are we having some design missing? Or are we not able to get to the customers to business there because we still have to take into account after the big investments, we normally should be able to double the volume and double the sales figure. But I see that prototyping is lagging behind a one-to-one relationship between prototyping and the sales of automotive. But if it is in the long run low, then I'm very concerned.

Yes, that's a good comment, and thank you for the question. So if you look at our historical prototyping, there was a period where the levels were extremely high. The years were the year '22, '23 -- yes, '23 let's say. And that is linked to different effects. [Technical Difficulty] So there was this effect of allocation, but also that during this phase, some of the preproduction that we had in microsystem and also in silicon carbide were assigned as prototype. So we were doing preproduction. In reality, it was production of conditionally qualified material and this was [indiscernible] prototype.

So if you look at the long-term curve, there is an anomaly. I think that was already flagged in earlier calls. If you look at more the recent time, the last 6 quarters or 5 quarters, there has been some steady growth after a low level in Q1 2025. But since then, the prototyping, the NREs of our CMOS kept increasing quarter-over-quarter. And Q1 this time is a bit lower versus Q4 last year.

But if you compare quarter-over-quarter, the growth is there. So this is definitely a KPI that we continue to monitor. The fact that customers are coming back to us because they see that we have capacity, they see also operational performance improvement is a good sign. What I would like -- I would love to see that this translates into a true quarter-over-quarter growth.

The point is if you compare Q1 '26 with Q1 '25 from the NRE on the CMOS side, there is a significant growth. So we will continue to monitor these things. I think overall, the effort that we are doing in sales and the effort that we have done by the creation of the business unit will pay off. And my anticipation is that the level of prototyping will continue to increase. And this is linked also to the interest that we see in our technology.

So the BCD over SOI that we have in 180 and 110-nanometer is really gaining traction. The new technology that we are developing a BCD standard BCD on 110-nanometer is also getting some interest from our major customer. So I would say it's a very good point. It's a very good KPI to monitor. But so far, if I look at the plan that we have for 2026, the Q1 results that we have on our prototype are according to our plan. So it's an important KPI. Thank you for asking the question. I hope it answers your question, by the way.

What is also a little bit of concern, of course, is the gross margin is also going down or at least that's the impression that I have. Is there anything happening on that? Or is that just due to the fact of the elimination of the [ $10 million ]?

No, it's mostly driven by capacity and utilization, right? So right now, as I mentioned earlier, our utilization is the low 60%. We would be better to have a higher level of utilization. So we are taking the actions to look at the loading of our factories and that will naturally increase the gross margin of our products.

If I may complement, our cost base is rather a very high fixed cost base. And for the moment, we are rather 70% fixed cost versus 30% only variable cost. Therefore, yes, our leverage is really with -- as Damien mentioned, is really with a higher utilization rate.

It can only be solved if the top line is improving it.

Yes...

That's what we need to get...

It can be mitigated. Alba mentioned the cost optimization effort that we are doing. So on all the sites. We are taking actions to adjust the different breakeven points and the profitability at lower utilization. But as Alba mentioned, these actions, they take time, right? So we should see some positive results in the second half of this year from this cost optimization, but the major effort is on loading.

Okay. So of course, first on getting all the new equipment in and getting all those things done. Now the focus really has to be on getting volume at the right margin and so on so that we can benefit from the big investments.

Absolutely.

Next question is coming from Trion Reid from Berenberg.

It's Trion from Berenberg. yes, I just have 2 last questions to ask. The first is just on the microsystems and photonics division, which you renamed from the previous MEMS. Obviously, that's growing strongly. I just wondered if you could give us an idea of how much of that division is photonics rather than microsystems and how much that might be contributing to growth?

And then the second question was just on the working capital. It was a small outflow despite the fact you mentioned, I think, about $26 million of repayments to Melexis. So that sort of seems to suggest an underlying working capital improvement. I wonder if you could comment on that and whether that's sustainable going forward.

Thank you,. I will take the first question. So today, photonics is mostly development. So on the revenue, it's all about NREs. We mentioned at the end of last year, the importance of NREs that we got for photonics. So microsystem without photonics broke end of last year, the ceiling of $100 million. And yes, with photonics, I think we were in the range of in the range of $5 million to $6 million NRE end of last year. Sorry, photonics...

Photonics was $7 million.

$7 million...

Sorry, 7% of the total NRE of the group.

Okay. That's -- yes, that's 5.5% to 6%. So that was -- so photonics is mostly and we anticipate product revenues from photonics to hit more around end of '27, '28. So not yet visible outside of NRE at this moment. And the second question, I will let Alba answer on working capital.

So first of all, Trion, good to hear you. For the repayment of the LTA repayment, it was not only Melexis. Of course, largely, they brought a large portion, but it was not only Melexis. Anyway, yes, this is indeed the repayment we made in Q1. And if you look at working capital, yes, it improves indeed. The fact that we reduced the CapEx significantly because we ended up with [ $0.25 million ], so to say, only compared to the high numbers we had in the last 3 years, of course, helps a lot the working capital needs to get back to a normalized level.

There are no more questions at this time. So I hand the conference back to the speakers for any closing remarks.

All right. So I wanted to thank the audience. I want to thank you for participating in this press conference to this Q1 results. And I wanted to give you also an appointment for our second quarter results that are planned for July 30, 2026. So thank you, everyone. Have a good day, a good evening, and speak to you soon.

Thank you. Goodbye.

Bye-bye.

Thanks for participating in today's call. You may now disconnect.

Welcome to the X-FAB Full Year and Fourth Quarter 2025 Results Conference Call. [Operator Instructions]

I will hand the conference over to Rudi De Winter, CEO. The floor is yours. Please go ahead.

Thank you, and welcome, everyone. We have today in the conference call with me Alba Morganti, CFO; and Damien Macq, my successor and CEO.

In the fourth quarter in 2025, we recorded revenues of $222 million, up 18% year-on-year and down 3% quarter-on-quarter. The fourth quarter revenue in our core markets was $204 million, up 13% year-on-year and down 5% quarter-on-quarter. The core business represented 94% of our total revenue. Full year revenue amounted to $870 million, up 7% year-on-year. and within the guided range.

In the full year of 2025, our core business was $814 million which is 7% growth compared to the previous year, and our core business represented also 94% of the total revenue. Our order intake in the fourth quarter came in at $164 million, and it understates actual underlying demand by approximately $30 million to $40 million as first of all, we have shorter cycle times resulting in customers ordering later. Secondly, we have higher wafer yields resulting in order -- reduced order quantities. And third, because of the absence of new bookings in the 0.6um CMOS technologies that we are terminating in early 2027. Customers already placed these orders following the last time by announcement more than a year ago. The backlog at the end of the quarter was $318 million, down to -- from $347 million and at the end of the quarter. The backlog relative to our revenue is still high compared to history and pre-COVID situation.

In the fourth quarter, automotive revenues came in at $133 million, up 3% year-on-year and down 10% quarter-on-quarter. The sequential decline was mainly due to inventory corrections in various channels of the supply chain and also influenced by the end of major LTAs and the underlying end market. This trend is also evident in the full year automotive revenue, which recorded only a slight increase of 1%. Although the shift to full electric mobility in 2025 advanced at a slower pace, it remains an important megatrend, underpinning our automotive business. Key automotive applications driving the growth in 2025 included battery and thermal management systems as well as on-board chargers for electric vehicles.

In the industrial end market, we recorded a quarterly revenue of $50 million. This was up 40% year-on-year and 6% quarter-on-quarter. The strong growth was driven by the recovery of the SiC business, the recovery of the fragmented industrial market and the prototyping revenue for Photonics, while an elevated level of production in last-time-buy technologies, also contributed. The fourth quarter medical revenue amounted to $21 million up 28% year-on-year and flat sequentially. The demand for DNA sequencing, ultrasound applications as well as contactless temperature sensors was strong in the past quarter.

In the total of 2025, our medical business achieved a record revenue of $71 million marking 26% increase over previous year.

For a further update, I would like to pass the word now to Damien.

Thank you, Rudi. Good morning, good afternoon, everyone. Let's start with CMOS and SOI revenue. In the fourth quarter, this revenue was up 7% year-on-year and down 5% quarter-on-quarter. For the full year, revenue grew 8% compared to the previous year. Quarterly microsystem revenue was up 24% year-on-year and down 9% sequentially. In 2025, X-FAB microsystem business achieved revenue exceeding USD 100 million for the first time, representing an 11% increase compared to 2024. X-FAB silicon carbide business demonstrated a remarkable recovery, achieving robust growth in the fourth quarter, driven by solid demand for data centers, electric vehicles and renewable energy applications. Revenue increased by 77% year-on-year and 6% quarter-on-quarter. Silicon carbide wafer starts raised 60% sequentially. This was the largest ever silicon carbide wafer start in the quarter. The weaker quarter-over-quarter revenue growth reflects the much higher share of customer-supplied silicon carbide wafers, which carried lower billings due to the less pass-through of substrate costs. For the full year, silicon carbide revenue reached USD 33.8 million, which constitute a 34% decrease against 2024 when the first quarter was still exceptionally strong.

Quarterly prototyping revenue was USD 20.3 million, down 14% year-on-year and up 3% quarter-on-quarter. Over the past 3 quarters, its fab recorded a notable increase in CMOS and SOI prototyping revenue reflecting renewed customer confidence after capacity constraints were resolved with last year completion of it's fab capacity expansion program, and from significant operational improvement in terms of product yield and cycle times.

Let's now zoom in specific products and development highlights achieved in 2025. In Q4, we secured a major design win for 110-nanometer CMOS technology, particularly in sensing application, which should contribute to revenue growth from 2028 onward. For our 110-nanometer SOI platform, we see confirmation of the strong ramp-up for motor control and automotive LED drivers, and we booked an important design win for new ultrasonic applications.

In microsystem, interest in our through-silicon via technology continues to grow, especially for photon-counting CT scanners. On top of the technology capability of its fab, another key factor in this engagement is our customers' ability to establish a fully localized supply chain for this next-generation scanner platform. In MEMS, we achieved the first design win for our next-generation inertial sensors. For power application, we launched as well an innovative snubber technology, this device is integrated inside silicon carbide inverters to review the switching losses by up to 70% and therefore, improving the electrical vehicle range. This solution has already been adopted by 1 OEM and is under evaluation by several orders.

In the photonic space, we teamed up with LIGENTEC on the lowest lost silicon nitride platform for various applications, main one being quantum computing. This already contributed to 7% of our total NRE in 2025. In GaN, we secured several major NRE. A first one for the development of industrial protection devices. 2 additional protraction inverters for small and medium EVs and a fourth one for 800-volt data center applications.

In silicon carbide, we continue to make excellent progress with a major Asian Tier 1 in EV traction inverter, achieving record-setting electrical performance. Our latest XSICM03 platform has also enabled multiple customers to reach leading-edge electrical performances, driving further design wins across renewable energy, automotive, data center and circuit breaker applications. Its fab technology portfolio with the emphasis on power sensing and microsystem technologies is strategically aligned with global mega trends, including the electrification of everything with worldwide decarbonization initiative and advancement in health care for aging populations. This alignment creates substantial opportunities within X-FAB key end markets, automotive, industrial and medical, driving sustainable growth in the long term. The short-term visibility remains limited, primarily due to continued inventory adjustment by automotive customers and persistent geopolitical uncertainties.

Let's now go through the short operation update. By mid-2025, X-FAB concluded its major 3 years $1 billion capacity expansion program. In September, we celebrated the grand opening of our new facilities in Malaysia, following the launch of our production in this new cleanroom. All equipment related to this expansion have been installed and qualified. Production in X-FAB popular 180-nanometer technology is being ramped up gradually there. The site's target capacity of 40,000 wafer start per month will be fully operational by the end of 2026. The increased capacity and reduced cycle time enable X-FAB to become much more attractive for new business opportunities and to respond more quickly to market opportunity when they arise.

In the fourth quarter, significant progress was made in securing financial support under the EU Chip Act for the growth of X-FAB's microsystem business. The funding will be used to further advance the MEMS and microsystem offering and more specifically to support the ongoing transition of the site in Erfurt Germany, to the microsystem hub of X-FAB Group.

Capital expenditure in the fourth quarter reached USD 25.2 million, bringing the total CapEx for the year to USD 204.1 million. This is lower than the initially projected USD 250 million as some expenditures were postponed to the current year. New capital expenditure in 2026 are projected to come in at around USD 100 million. This CapEx will be allocated to enhance our process capabilities, to facilitate the transition of the Erfurt Germany and Lubock Texas sites to microsystem and silicon carbide, respectively, and to support necessary maintenance and further autoimmune activities across all sites.

In response to the short-term challenge and limited visibility, we are also introducing further cost efficiency measures. This initiative includes a planned headcount return in the high single-digit percentage range for 2026, as well as a gradual reduction of operational costs. By the fourth quarter of 2026, cost savings are estimated to reach USD 6 million per quarter. Concurrently, we remain well positioned to respond swiftly to increasing customers' requirements and growing demand.

I will now pass it over to Alba Morganti, CFO of X-FAB for the financial update.

Thank you, Damien. Good evening, ladies and gentlemen. We will now go to the financial update. I would like to start this financial section by highlighting that in 2025, we totalized $870.3 million sales, meeting the yearly guidance of $840 million to $870 million. This represented an increase of 7% compared to 2024. The sales in the fourth quarter totalized $222.3 million, which is an increase of 18% year-on-year, also in the guided range of $215 million to $225 million.

In the fourth quarter, our EBITDA was -- of $42.3 million with an EBITDA margin of 19%. If we exclude the impact from revenues recognized over time, our EBITDA margin would have been of 19.2%, which is still below the guided range of 22.5% to 25.5%. The main reason for that is the miss -- that we missed, our guidance is that the fourth quarter profitability was impacted by a one-off item totalizing $9.3 million, out of which $6 million resulted from the renegotiation of a long-term agreement for the SiC raw wafers while $3 million were due to the reevaluation of our silicon carbide substrates inventory in Lubock and we had renegotiated lower prices. If we exclude these exceptional items, the EBITDA margin would have been of 23.6%. I would like to add that with the productivity improvement plan Damien was referring to, we are in a trajectory to achieve a 30% of EBITDA margin with a quarterly revenue level of $240 million. Since a few years now, our business is naturally hedged and our profitability remains unaffected by exchange rate fluctuations. At a constant USD/Euro exchange rate of USD/EURO 1.07 as experienced in the previous year's quarter the EBITDA margin would have been up 19.3%.

Cash and cash equivalents at the end of the fourth quarter amounted to $194.3 million, up $20.1 million compared to the previous quarter, while our net debt decreased by $4.5 million quarter-on-quarter. Our cash position improved despite the fact that in 2025, we repaid several bank loans for more than $75 million as well as leasings for more than $24 million and we also repaid some prepayment that we received from customers, including LTA contracts for about $43 million.

And to conclude the financial section, I would like to share our next year's guidance -- next quarter, sorry. Our Q1 '26 revenue is expected to come in within a range of $190 million to $200 million with an EBITDA margin in the range of 18% to 21%. This guidance is based on an average exchange rate of 1.17 USD/Euro and does not take into account the impact of IFRS 15. For the time being, we are not providing a full year 2026 guidance due to the limited visibility and the current macroeconomic environment.

And now I would like to give the word back to Rudi.

Thank you, Alba. While we remain cautious about the near term, we are observing encouraging developments across our business. Momentum in our CMOS and SOI prototyping revenues is building as our operational improvements make us again more attractive. We see a high level of interest in our microsystem capabilities that is opening substantial new opportunities. Our silicon carbide business is on track for recovery. And we see strong traction for our photonics on the one hand and the gallium nitride on the other hand, demonstrated by several new contracts. I firmly believe X-FAB is excellently positioned for robust growth. The fundamentals of our business remain strong, and I'm confident of X-FAB's long-term sustainable growth. X-FAB is ready for what's next.

With that, I'm very pleased to hand over the leadership of X-FAB to Damien Macq, who will succeed me as CEO of the group. And with that, we close the opening, and we are opening for questions.

[Operator Instructions] The first question is coming from Robert Sanders from Deutsche Bank.

Can I just get a bit of better understanding of the trends by end market? It looks like industrial, medical is performing well, auto clearly soft. Is that what you expect to be the story of the year as it were, even if you can't give specific guidance. Is there any reason to think that that's not the story of the year.

And then the second question would just be around your lack of 300-millimeter footprint and your largest customer's business in China, they seem to be under big pressure to use local foundries. What can you do to mitigate the risk that they have to source locally as opposed from you?

Yes. I think your understanding of the end market -- this is Damien speaking -- is aligned with what we see right now. We see uncertainty on the automotive. So -- but strong industrial. So I think the industrial will stay strong, medical -- was a good year in Medical and likely this will be prolonged as well with important design wins as well in the pipe.

Regarding the 300-millimeter footprint. At this point in time, we still see customers coming from China to look for our product. So basically, we being a high voltage, being a automotive qualification. And right now, we do not see the absence of 300-millimeter in our site as a handicap. So we keep seeing strong business coming out of companies that are headquartered in China, and we will need to monitor the evolution over the coming quarters to see where other situation are evolving there. Does that answer your question?

Operator are we still...

Yes. I think 0- Robert Sanders, I was looking for a feedback, but I guess, this replies to his question. So we have the next question coming now from [ Luke DeSoto ].

First of all, I would like to thank Rudi De Winter for the huge investments which you have done with X-FAB, and this without any dilution for the shareholders. I think this is an incredible good job and how that has been managed financially. I see that there are now a lot of platforms and technologies available at X-FAB. What are the actions? That would be my first question. What are the actions to increase actually the sales because that is still a little bit lagging behind?

Yes. So that's a very good point. Maybe this was not disclosed in this presentation, but we are reorganizing ourselves also across 3 business units. So we have moved some people closer to end customers, and we want to reinforce our co-design capabilities with customers. So business development is and was along 2025, a critical topic that is going to be prolonged in 2026. And if you see some of the results for 2025, so we observed quarter-over-quarter an improvement of our design win in the CMOS technology. So this is something that we need to [ prolonged ]. You have also to realize that we are coming out of a period of allocation with a lot of stress and a lot of stretch with our customers. This period is now over, and it's really time to go hand and [ try ] to collect additional business. And I think the items that were described also in this call, also in regard with microsystem are a good demonstration of the result that this can provide. So it's a very good point, deploying now the technologies and all the good deals that we have in hands to our customer is essential.

Also I want to repeat what I said earlier regarding photonics. So photonics is also a technology where we see a lot of traction from our customers. I want to repeat that 7% of the total NRE of the company was realized on photonic -- with photonic technologies.

Okay. My second question is more towards finance. I see that the current liabilities are very high, $700 million, $702 million, while the current assets are at $648 million. Are we going to have some stress on a financial basis?

Look, no, we have credit lines available to support the working capital needs. We have our first revolving credit facility of EUR 200 million, which will expire end of this year, but we are in renegotiation with the banks of the syndication to use the clause of -- which is included in the contract to extend it by 1 year, and we will still have the other one running until -- well, it's of -- we have another 3 years for the other one. And so for the time being, we see rather a decrease of the net debt, thanks to the fact that our major CapEx expansion plan is now over. Therefore, we see a relaxation actually is the other way around of our indebtedness. We have been able to repay several debts which were due, so absolutely in line with expectations in 2025, and we will continue to do so in the future.

Okay. So overall, actually, we just need to focus now on getting more sales and then everything will leverage out, and we will get the benefit of the investments.

That's clear...

Yes. It will be marvelous company.

Thank you for this lovely compliment. But yes, you're absolutely right. Thank you.

[Operator Instructions] There are no further questions at this time. So I hand the conference back to the speakers for any closing remarks.

Thank you. Damien speaking. Before closing the call, I wanted to take a moment to acknowledge the leadership and instrumental contribution of Rudi, as it was already mentioned in this call. I'm grateful for the strong foundation that we have built under his tenure over the past 15 years and for the support from the Board and from our global team as I step into the CEO role. My focus will be on further specialization through continuous innovation, offering unique capabilities on market and customer diversification and on disciplined execution in our operations to serve our customers with the level of performance and quality required to make them successful. For the past 3 years spent within X-FAB as COO, I had the opportunity to interact with our global teams. I trust we are already and committed to building and delivering our robust growth on the momentum already in place. Uta, Alba and myself remain available for any follow-up, and we look forward to speaking with you for our next quarterly conference call on the results of the first quarter 2026. This call is scheduled on the 30th of April. Thank you very much to everyone. Bye-bye.

Thank you.

Thank you.

Thanks for participating to today's call. You may now disconnect.

Hello, and welcome to the X-FAB Third Quarter 2025 Results Conference Call. My name is George. I'll be your coordinator for today's event. Please note, this conference is being recorded. [Operator Instructions]. I'd like to hand the call over to your host, Mr. Rudi De Winter, CEO, to begin this conference. Please go ahead, sir.

Thank you. Welcome, everyone. In the conference call today, we also have Alba Morganti, CFO.

In the third quarter of 2025, we recorded revenues of $229 million, up 11% year-on-year and 6% quarter-on-quarter, which is well above the guidance of $215 million to $225 million. We also progressed well in our core markets: automotive, industrial, medical with a revenue of $216 million, up 14% year-on-year and 5% quarter-on-quarter. Our core business now represents a share of 94% of the total revenue.

Now breaking it down by end markets. In the third quarter, the automotive revenue was $147 million, up 1% year-on-year and 2% quarter-on-quarter. The third quarter industrial revenue was $48 million, up 51% year-on-year and 1% sequentially, reflecting the overall recovery of our industrial end markets. The gradual recovery of the silicon carbide business contributed to this positive evolution.

Now for the medical business, the revenue in the third quarter hit a record high of $21 million, up 74% year-on-year and 40% quarter-on-quarter. The growth was mainly driven by contactless temperature sensor, DNA sequencing and echography applications that altogether did very well in the past quarter.

Now looking at it by technology. In the third quarter, the CMOS revenue recorded a growth of 10% year-on-year and 4% quarter-on-quarter, mainly due to the extra capacity that came online for the 180-nanometer BCD-on-SOI and 35-nanometer CMOS node demand was weaker.

Microsystems revenue was up 27% year-on-year and 9% sequentially. This is based on a broad set of customer-specific microsystem technologies that we co-created with our customers. Also, demand for new developments in the micro systems remain strong, and this is an area where we will continue to see above-average growth.

Our silicon carbide business continued to recover and revenue grew strongly by 30% year-on-year and 20% -- 21% quarter-on-quarter. The number of wafers produced in the third quarter more than doubled compared to a year ago. The revenue did not follow the same way due to the product mix and also the ratio of consigned substrates that was much, much higher last quarter than a year ago.

The positive trend in the evolution of our silicon carbide business is underpinned by increasing bookings attributed to sustained demand from data center, electric vehicles and renewable energy applications. We also see good traction on our new technology platforms that we released at the end of 2024. Many customers are developing their new generation products based on this platform that will give improved performance and lower system cost.

The fact that we offer full supply chain for silicon carbide in the U.S. is well perceived by our U.S. customers that are designing in products for high value-added assets such as data centers, industrial equipment and electric energy systems. Quarterly prototyping for the past quarter was $20 million, down 16% year-on-year and 6% down quarter-on-quarter.

The order intake for the third quarter amounted to $163 million, down 25% year-on-year and down 21% compared to the previous quarter. The booking in the industrial segment was good. The weakness is primarily due to inventory corrections by automotive customers as well as broader macroeconomic uncertainties resulting from geopolitical tensions and trade disputes.

These factors have led to a more cautious ordering patterns while customers also take advantage of shorter cycle times, placing orders later than usual and with reduced lead time. As a result, feasibility is still restricted. The backlog for the third quarter came in at $347 million compared to $413 million at the end of the previous quarter.

Let's now move to the operations update. In September, we had the inauguration of the new cleanroom in Malaysia, which will increase the site's manufacturing capacity from 30,000 to 40,000 wafer starts per month. Production at the new facility is being scaled up progressively with the full increase in capacity anticipated by the fourth quarter of 2026.

The expansion will effectively double our capacity for the popular 180-nanometer BCD-on-SOI technology, which is particularly suited for applications such as smart motor drivers various drivers such as piezo actuators, LED drivers and battery management systems. The recovery of the silicon carbide business is supported by the existing capacity at our Texas facility.

The current installed capacity will enable us to do more than double the wafer starts. The capital expenditure for the third quarter was $23 million, bringing total year-to-date CapEx to $179 million, and the full year capital expenditure is projected to be less than $250 million. Let me now pass the word to Alba for the financials.

Thank you, Rudi. Good evening, ladies and gentlemen. We will now go through the financial update. I would like to start this section by highlighting that the third quarter, we succeeded in increasing our sales by 6% quarter-on-quarter, which were the highest since almost 2 years, totalizing USD 228.6 million and which is well above the guided $215 million to $225 million.

Our EBITDA grew by 4% quarter-on-quarter and 7% year-on-year, being the highest this year. Our EBIT was almost $24 million, down 5% year-on-year, but increasing by 10% if we compare it to Q3 last year.

Third quarter EBITDA was almost $354 million with an EBITDA margin of 23.6%. If we exclude the impact from revenues recognized over time, the EBITDA margin would have been 24.2%, within the guided range of 22.5% to 25.5%. Our profitability remains unaffected by exchange rate fluctuations as we continue to be naturally hedged.

At a constant U.S. dollar euro exchange rate of 1.10 as experienced in the previous year's quarter, the EBITDA margin would have been unchanged at 23.6%. In the third quarter, we reported a financial result of minus $5.6 million, mainly due to interest result of $4.3 million and realized foreign exchange losses arising from the reevaluation of the euro-denominated debt amounted to $800,000, but of course, it's a noncash item.

Cash and cash equivalents at the end of the third quarter amounted to $174.2 million, which means an increase of $16.5 million compared to the previous quarter while net debt decreased by $21.1 million quarter-on-quarter. Despite the peak of CapEx expenditures payments in the first half of '25, our financial situations remain solid.

As anticipated and now visible, our CapEx are now significantly decreasing which translates into an improvement of our net debt position, which trend is inversely for the first time since a while. Especially in the current context of uncertainties and geopolitical tensions, it's important to keep our financials strong.

And to conclude this financial section, I would like to share our next quarter's guidance. Our revenue is expected to come in within the range of $215 million to $225 million with an EBITDA margin in the range of 22.5% and 25.5%. This corresponds to a full year revenue in the range of $863 million to $873 million for the full year 2025. This guidance is based on an average exchange rate of USD 117 to euro, and does not take into account the impact of the IFRS 15. And now I would like to give the back -- the word back to Rudi.

Thank you, Alba. I'm glad about the solid increase in revenue for the third consecutive quarter amid a challenging macroeconomic environment. This is a significant interest or there is significant interest in our specialty technologies.

Our silicon carbide business has made measurable progress with growing design activity on our latest silicon carbide technology platform. Additionally, our microsystems division continues to advance with collaborative co-creation projects enhancing our growth pipeline, while visibly continues to be limited, I'm confident in X-FAB position that supports sustained long-term business expense.

Besides the third quarter results, I announced today that I will be passing on the CEO role to Damien Macq, today, COO; on the 6th of February 2026 after the full year results call. Damian is very well prepared and the Board of Directors and myself have full trust. He is the right person to lead X-FAB. I will make sure there is a smooth transition. I will be supporting him in my role as a member of the Board and of course, further future. Operator, we are now ready for taking questions.

[Operator Instructions]. Our first question this afternoon or this evening, will be coming from Mr. Michael Roeg of Degroof Petercam.

Yes, Well, first of all, congratulations on taking the next step and well, spending a bit more time in the Board of Directors, looking down on your successor and guiding him. But of course, I will leave you with a couple of tough questions.

So the first one, bookings have come down strongly, and prototyping sales has also come down based on the chart in your PowerPoint presentation. So should we expect a slow start in 2026?

Well, first of all, the prototyping is something that fluctuates. There are milestones on projects and so forth that -- so I think the prototyping is at a good level. Remember, this is discussed from 0 every quarter, and it's all about new contracts and new activities. So it's still a substantial business development activity ongoing, so on. Quite happy about that.

The production bookings, they indeed are weak, that we still have quite a good backlog. That represents roughly almost to our 2 quarters. So it's a bit less -- it is, of course, too early to say, but it's a sign of weakness in the market. So our guidance for the Q4 is still good. It's in the range of where we were now Beyond that, visibility is low. And yes, so we could see maybe a weaker start from next year.

Okay. And is there a decent amount of backlog for way deep into 2026? Or is most of it typically scheduled for Q1, Q2?

This backlog is -- so customers, they order now typically, when they need the goods. So typically, all this backlog is mostly to execute on deliveries in the quarters to come.

Okay. That's reassuring at least. Then I have a question. If I compare your sales in Q3 with those of Q2, then they've grown by $13 million, yet the sequential trend in gross profit is minus $2 million. And this is not explained by depreciation and amortization because that was the same in the 2 quarters. So something was in your cost of sales, something strange. Can you explain that?

Yes, there is an effect that -- of inventory. So the work in progress, I mentioned we have shorter cycle times because we have improved capacity. The cycle times come down in the -- in the fab that is very much appreciated by our customers, so we can deliver faster. But as a result, the work in progress is lower and that has -- in the quarters where we decreased this WIP as a negative effect on the profitability.

Is that something that only hits your P&L wants to the lower work in progress level and then if it remains at that level in Q4, and then you will not have that cushion?

Yes. yes. So this is -- this is an effect that we have when the WIP -- so this is a typical effect when the activity in the factory decreases or the cycle times as short and the valuation of the WIP decreases when the valuation is -- when we come back to a steady state, then this effect is not there.

But you can also have the opposite effect if bookings go up, loading in the fab goes up, you have the opposite effect where the revenue is not yet there, but the WIP increases and the WIP is valued and therefore, it has a positive effect -- could have a positive effect on the margins.

And if I do the calculations, it's around $4.5 million to $5 million impact in the quarter. This is above average, I guess, normal trends, correct?

Yes. So this is -- if we look at the full year, it's even bigger. So we also have inventory or WIP corrections in the previous quarter. I think it is coming to a stabilization in -- by the end of the year.

Okay. Then my next question is about Texas. You mentioned in the press release that there will be capacity expansion in 2026 towards the end of the year. How much CapEx is there involved with this particular expansion program?

There is no CapEx involved. What is mentioned there that these equipments that are already delivered and paid for that will be qualified and will be added to the operating and the production lines.

Okay. So this is part of the existing program that has just been completed. So there is no additional expansion program currently planned?

For now, there is no expansion with additional cash out planned.

Okay. And during the Capital Markets Day, you mentioned that there would be discussions about further automation of 4 of the 6 fabs. Is there anything that came out of that or a midterm plan for that?

Well, this is an ongoing process that we're working on more automation. This is mostly labor and IT and that kind of thanks to a lesser extent, related to CapEx. There might be some CapEx that is minus compared to the equipment investments.

Okay. Then my final question, a very quick one. There was $2 million of other income in the OpEx. Can you explain what that was for?

There was a sale of $2 million.

Next question coming from Emmanuel Matot of ODDO BHF.

I have 3 questions. First, already, could you comment about your decision to step down from your role of CEO, what are the motivation behind that very important decision for you?

Second, too early to guide for next year, for sure. But with the churn you have and the ramp-up of significant production capacities, are you confident at this stage for further sales growth next year? And third, I wanted to know if you compete in some spaces with GlobalFoundries because it has just announced a significant capacity expansion in Germany, and I wanted to have your view on that.

Yes. So first of all, with respect to the organizational change and me stepping down as CEO. So as we as a manager or as the founders of the company, we always, yes, have in mind that, yes, it's important to grow succession and then move on. I think while the team is very well prepared and Damien Macq is ready to take that role in my view. And therefore, I decided or started thinking about this a while ago. And I think now it's the right moment to for him to take over. And I think this is very well placed to do it.

Second question, so I didn't -- now the question was GlobalFoundries. It was a question on GlobalFoundries Dresden. So GlobalFoundries Dresden, they're in different -- I don't see this as a competition to X-FAB. They're maybe also doing automotive first, but that's more into ECU type processors and FD SOI for further applications. It's a different type of SOI. So X-FAB is also doing a lot of SOI and we are very successful in SOI, but it's high voltage SOI. That's different characteristics and FD SOI is more used for lower voltage systems and lower power applications. And the third question was?

It's about the visibility you have now, which seems to be limited, but also we can expect significant production capacity next year on products, you are fully loaded. So growth next year or Gary, you don't want to comment at all.

Well, today, the capacity, we are not in allocation anymore as compared to a year ago. So the revenue, the output is mainly driven by the demand in the market that we are following 1:1 now. And so if demand is there, we'll be growing if -- so we will follow the demand. So we're able to -- if demand is there, we're able to anticipate only take advantage and grow. If it's not there, of course. So we are now dependent on the market and, of course, all the new projects that we are in the pipeline, and we gradually rolling out.

We'll now move to Robert Sanders of Deutsche Bank.

Best of luck with your next role and welcome to Damian. I just had a question about Nexperia. So you're in the European automotive supply chain. There's been a lot of warnings around line stoppages from both European and non-European OEMs talking about significant risk weeks of inventory. Can you just give us your take on how severe and serious the situation is based on what you can pick up? And then I have a few follow-up questions.

Yes. I'll following this, of course, also closely, but I also -- most of it is what I also pick up in the press. So what I know is that Nexperia is indeed in it's more -- seems like low tech components, but they're very good at it, and they're producing that in very high quantities. And so they're having some areas of significant market share.

And I think for most of those components, there are replacements, but ask the question whether these -- if there are shortages, whether the replacements can be ramped up quickly enough. I have no to my knowledge, it is not yet line stops, but I cannot tell how far it is of.

Yes. I mean, based on your experience, I mean, what they do is they do small signal logic components like diodes and BJTs and stuff like that, but they are used in like body, comfort, lighting, BMS, interfaces, sensors, safety, just a lot of low-value components. As you say, they have very high market share. I mean based on what you've seen in your previous job, I assume you would be looking at 6 to 9 months to requalify on a competitor. Is that the sort of time line?

Well, I think that also, if you look back at the COVID situation, normal -- the market is normal, then all these things take time. However, if there is a threatening line stop things can -- things can change quickly, and there is a lot of agility and creativity.

So I think it is more -- I think it's not so much a matter of qualifying it. I think there is -- most of the cases, people are very agile and flexible to move if it's really needed. But it's more a matter of the components in sufficient quantity there from alternative sources.

Now I also typically see there have been cases in the past also when Sumitomo plant was blown up years ago. That was producing 50% of these particular chemicals that were absolutely needed everywhere in the semiconductor industry. We had 50% market share. But -- also there, the dynamics, the agility of the whole market, then that came in motion. And finally, it's sourced it out. So let's see how this will turn out.

Right. And then just a question about China. Obviously, since we last spoke China has turned downwards. There's been production cuts at BYD and Li Auto and all these other guys, too much unsold inventory. How have you seen that manifest in your business, whether it's direct with Chinese customers or indirect through Melexis?

I think that's too early, too early to say with somewhat further in the supply chain. It's difficult. We don't have a good visibility, except that we see our bookings in the third quarter that were lower than the previous quarter, in particularly in the automotive segment a bit across the board. As I mentioned, the bookings in industrial, they were good. Yes. So it seems to be more on the automotive side, as I see the weakness.

And just one last one on OpEx. How should we think about the impact on OpEx of all these various different expansions, whether it's on G&A or just on your cost base more generally?

That we do not expect an effect except to the fact that once these expansions are active and producing, then they come into the depreciation. So it will have an effect on our depreciation.

[Operator Instructions]. We will now go to Guy Sips of KBC Securities.

Most of my questions were already answered. There were also experience-related. I have one question on the data center. Do you see there the positive trend, you see that accelerating? Or is it just on a continuous pace as it was over the last quarters? Or do you see a real improvement since, let's say, the Capital Market Day?

Well, I think it's -- in the revenues, we see a gradual progress. So in the beginning of the year, we saw strong activity in data center that continues, but it is complemented now also with better demand for industrial and renewable so inverters for renewables and also a bit of automotive.

So it's the silicon carbide activity is broadening. And I think that a lot of the data center -- yes, growth still has to come. So it's not yet -- so first of all, the architectures architectural change that uses more silicon carbide in data centers still is coming. And I think also all the announcements on CapEx and so forth start to build buildings and they're not yet installing the infrastructure yet.

And can you put a kind of a time frame on this?

No, I cannot answer. It's -- I think some of the customers of us who have announced activities with the data center companies on 800-volt architectures and so are rather talking about 20 -- real ramps in '27.

Next question will be coming from Mr. [indiscernible] who is a private investor.

My question is actually the following. If AI is applied, let's say, on the development of prototypes, is it possible to substantially reduce the throughput time for the development and the prototyping.

It's a good question. I don't -- not really -- that's not really the case. So there is -- in digital -- in the digital world, there is more activity on automating design environments and so forth. So I think there, it could have an effect on the analog mixed signal design that we're doing so far, there are people looking at it at research institutes, but nothing that is practically usable to my knowledge.

Okay. And then I've got a second question. Is it the automotive business part of it? Is it coming to end of life, and that has to be replaced by new products, new components or in which stage are we?

Not particularly. So we -- there is, of course, a continuous flow of innovation, but we have existing products that are -- that exist already a couple of years that will -- that are also being designed in, in electric vehicles in certain functions. So that continues.

But -- it's not that there is an abrupt end of life of certain components. Of course, if combustion engines are used to a lesser extent, if you have like applications like lambda sonda or pressure sensors that go into an exhaust system of a combustion car, that will gradually phase out. But yes, as you hear, there is push in Germany to extend lifetime of combustion engines and so forth. So I do not see an abrupt change in the next cities rather as a gradual change over the next 10 years.

Okay. And could you elaborate a little bit more on the Chinese market for our business?

Yes. So as X-FAB, we have direct Chinese business. It's around 10% of our business. But indirectly, we have also customers are selling into China. So I think the direct and indirect business of X-FAB, it's maybe closer to 35% or so of our revenue that goes into China.

Now what our customers do have less that's a bit further away, as I would have to refer to the conference call of our customers. What we sell directly in China are predominantly technologies that are, to a lesser extent, available in China. So that's typically our BCD on SOI for high-voltage smart systems, like motor drivers, battery monitoring systems and so forth. And there, we see continued interest also for new designs with our customers because this technologies are not immediately available in foundries in China.

[Operator Instructions] We'll now move to Trion Reid of Berenberg.

Trion Reid from Berenberg. Just also wanted to add to my best wishes really for whatever you're going to do in the future. I had 2 questions on the results. The first was just around the fact that you talked about the results being strong, but the order intake weak. I'd be interested if you have any comments around the pattern of orders through Q3.

You saw a sort of any trend or you're just seeing more lumpiness or short-term ordering? Just be interested to get any more color on that. And then my second question was just on the CapEx, which was pretty low in Q3, but your Q4 guidance seems to suggest it will actually ramp up quite significantly in Q4, just to understand why that is and what that sort of implies for next year as well.

Yes. So your first question with respect to the bookings yes. So the -- yes, that is what it was in the third quarter. So far, if you ask what happened in October, yes, that's somewhat a continuation of the Q3. The peak or the low amount of CapEx in Q3 is indeed less than what we forecasted.

This has to do rather with -- we're not pushing the throttle on our expansions in Malaysia. So the -- this is just a delay. So the cap -- we have not canceled anything. It's just that there is a slower rollout and therefore, also the invoices come in slower and so the cash out is also somewhat less.

So the -- in Q4, we expect that it will increase. This is not new CapEx, but it's just a shift of things from Q3 and Q4, we'll have to see maybe there will be some shift from Q4 into Q1 next year. But the increase that you -- that we can expect in Q4 is not a sign for next year. It is just the balance from Q3 that shifted in Q4.

Okay. Great. And just to follow up on the order intake. You're suggesting that there was not a decline through the quarter that the quarter was weak for order intake in all 3 months.

No, it was somewhat flat over the quarter. It's not that there was a sudden effect at the end or so. It was somewhat flat over the 3 months.

We have a follow-up question. This one coming from Mr. Robert Sanders of Deutsche Bank.

Just on the Kuching ramp and the EUR 1 billion expansion that you've done. Is the idea to continue to push that ramp, even though the demand is not really there just to sort of get the economics going because of -- right now, it's a lot of tools but not a lot of revenue? Or is the idea to basically free that plan until the demand is there?

The plan is to continue with the rollout of the equipment and to install it, qualify it to be ready for demand that can come. So the -- the equipment is mainly for our 180-nanometer BCD-on-SOI and there, we have good design wins. We have a unique position in the market. So we have -- we feel confident that this will pick up, and we want to be ready.

Got it. And is there any plan to reduce or exit any legacy facilities? I think you've already said you're going to end-of-life effort by the end of '26. So I'm just trying to understand how much of your capacity that's quite old now is sort of going to get wound down as part of this upgrade.

Well, this is an effort we're making the transition from already for many years, we're transitioning to more micro systems business. and gradually exiting the CMOS there. The end of life that we announced there was for 0.6 micron CMOS signal. CMOS is also a in there and that will run until end '26, a little bit in '27 and then there will be one cleanroom there that we -- there are 3 cleanrooms on the site there, and there will be one cleanroom that will be closed.

Got it. And maybe a question for Alba. What is the France run rate annualized at the moment for revenue in just Corbeil?

So yes, Corbeil is currently at $54 million per quarter at the moment. So yes, it was the highest quarter that we recorded now in Q3. So it's ramping up significantly. We also invested there in additional tools, as you know, and we are now running only X-FAB technologies since a while. So the efforts start to pay off.

Got it. And what's the EBITDA of that facility?

We don't give EBITDA breakdown, as you know, because we don't produce everything on one side. Some of the products are shifted from one side to the other. And -- so it's quite difficult to -- it's misleading to give EBITDA breakdown by site. You know that we start -- some products we start in one factory, then we continue in other factories and so on and so forth. So yes, as I said, it's misleading.

Got it. And just last question. If Melexis is able to get BCD-on-SOI processes from 8-inch Grays in China. What does that mean for you? Does that mean that you will lose 30% of Melexis business? Or is that something you don't think is a likelihood?

Yes. I don't know if grays has BCD-on-SOI, I think definitely not in the quality and the features that we are offering. Anyhow, it's this -- if a customer designed a new product in another fab, it takes a lot of time to qualify and transition. In the meantime, all the existing business typically stays until the products are really end of life. So I don't see an immediate effect.

As we have no further questions at this time. Mr. De Winter, I'd like to turn the call back over to you for any additional or closing remarks. Thank you.

Yes. Thank you very much, everyone. So I'm looking forward to hearing you again on the 6th of February for the Q4 results. That will then be together with Damien and I will be then handing over to Damien. Yes. Thank you very much, and have a nice evening.

Thank you. Goodbye.

Thank you. Ladies and gentlemen, that will conclude today's conference. Thank you for your attendance. You may now disconnect. Have a good day and a good night.

Welcome, everyone. And the team of today is ready for what's next, and this will become clear throughout the presentations that we'll do today. Today, I have brought with me Jorg Doblaski, who is our CTO, who will talk about powering the future. [ Luigi De Capua ], who is VP Product Marketing, we will talk about sensing the real world. And then [ Volker Herve ], Business Unit Manager Microsystems, who will talk about all the exciting heterogeneous, integrating systems, which is the new trend.

And then this afternoon, we'll have Damien Macq, our COO, who will explain how this all transforms into operations and production. And then at the closing, Alba Morganti, our CFO, who will explain how this all translates in numbers.

So the theme of today is X-FAB is ready for what's next. So I'll walk over on the one hand, the megatrends that drive our business. And this is with great purpose, and this is really something that doesn't change us, going for over a long term. We also, in the company decided to really focus on three technology pillars where we will be focusing on. And that is the theme of the three presentations this morning. And we'll also explain that this drives the demand that the demand is there, in combination of our technologies and the megatrends.

We have the right capacity in place. We have invested a lot, and it's now all coming online. Damien will talk about that. And we have the big picture. There's a lot of things that are changing in our in the world. So every day, there are new things that we need to take into account and how X-FAB is prepared for that.

So let's first talk about the megatrends. So as X-FAB, we are focused on two mega trends. On the one hand, the decarbonization and climate change. This drives electrification of everything. And this is an important thing for our society, for the next 30 to 40 years. The mission is to come to zero CO2 emissions, and that's still a long way to go and there will be a lot of electrification, a lot of new things that will have to happen. And we are part of powering the future and Jorg will talk about that. But also the aging population. This is something which is very important to take into account that the population is getting older, needs more medical care. We need to improve the efficiency of medical care. And this -- all this service of medical care is falling on the shoulders of an ever decreasing younger population. So there's a lot of challenges in front of that, and we are part of that.

There is also a technology trend that we cannot neglect in the last couple of years. It's all about smart everywhere. AI, the age of AI we're in. And this has -- plays out in two ways for itself. On the one hand, AI creates new opportunities. We're into -- everybody heard it, AI comes with a lot of power management, consumes a lot of electricity, we're into this power management of data centers, and Jorg will explain about that. But on the other hand, we are very complex factories, very sophisticated systems that also with AI, it allows us to further improve productivity and Damien will talk about that.

We're playing on our strength -- and there are many exciting opportunities where customers come to X-FAB because of the unique offerings that we have. And this is -- there are several specs to it. First of all, we have a very broad combination of capabilities. We have CMOS factories with also unique abilities in the CMOS factories, but also our Microsystems, and we are combining in Microsystems and MEMS processing. And we're combining those two technologies into the micro systems, what [ Volker ] will talk about. And this is kind of a unique offering, for -- in the semiconductor market.

We are also giving a high level of flexibility. We are adapting to our customers. We co-create with customers, customers have dreams in their mind, we help realize their dreams with our technologies. And on top of that, we install robust supply chains, making innovative products or samples, people, start-ups can also do with institutes like IMEC, [indiscernible] and so forth. However, when it comes to industrialization. That's another thing. That's where X-FAB comes in then with our years of expertise in producing large volume of specialties we mature those technologies and bring that -- bring reliable supply chains for that, that allow our customers to produce these products for 10, 15, 20, 25 years. We have products that we are producing already for 25 years.

And we have looked at, okay, where our strengths are, and we decided to play on three pillars. And the semiconductor industry is very -- it's a very large industry. It's very wide. So we can't play everywhere, and we have decided to play on these three pillars.

Let me walk over. Of these three pillars. First is powering the future. So as X-FAB, we have a history of making technologies for higher voltages, started off with automotive products where batteries of a car are different than the batteries of a mobile phone, and the environment is very harsh. And so we have a history of making things mature for high-voltage processes. And we are building on that strength. And now the whole world is moving into higher voltages, 48-volt, 400-volt 800-volt 800-volt will come in the data centers. So and this is where we have a particular expertise and Jorg will talk about that.

Then the second pillar is about sensors, sensors everywhere. We have been working for years on sensors and sensors is a very big portion of our business. And there is a trend of making things smart. So in order to make things smart you need sensors. Also, the whole AI is based on data. This data comes from sensors. And so the whole -- all these trends, they will drive further requirements and needs for more sensors in everything around us for robot, for smart cities, smart homes and smart everything. Already today, also, many of our customers, also our largest customer, the leader in magnetic sensors. But also beyond that, we have a lot of sensor products already that we're dealing with.

And then third is all about the next level of integration. So what I explained is so we are the CMOS and we have the Microsystems, we're combining that to integrate systems micro systems on wafer scale. And this is a new trend, and we see there a lot of demand, things that were not possible years ago because of this combination of technologies, new materials and so forth become possible and create new demand that comes to X-FAB and [indiscernible] will talk about that. So what we see, there is great demand for what we are offering. And the megatrends, they drive these long-term demand across all the end markets that we serve.

As X-FAB, we're also the sole supplier to our customers. So typically, our customers do develop a product with a foundry to do this only once. And so they are all the customers of X-FAB, they source their products that they develop with X-FAB only from X-FAB. And that means that we have a very sticky relationship with our customers, but that puts also a very high level of responsibility on X-FAB,and we need to make sure that we have the capacities in place to serve our customers. So therefore, also, we decided to invest in capacities going forward. We have, over the years, accumulated a very large pipeline of different products. And although there might be short-term headwinds because of uncertainties, politics, tariffs and so forth. The long term doesn't change the purpose and the needs for products that we produce and the technologies that our offering are not changing.

So as I explained, we need to have the capacities in place. And therefore, we decided 3 years ago to invest $1 billion expansion throughout our different factories. And we progressed very well. Our -- Damien will talk about that. 2 years ago, our capacities or 1 year ago, our capacities were fully utilized. Our customers were in allocation. And this also created a big headwind for X-FAB to develop new business. In the meantime, capacities have come online, and we have caught up with the demand we have now sufficient capacity in place to serve the demand that is out there and that gives new possibilities to develop business.

Another important element though, as I explained through AI, we will also be able to further improve our efficiency in our factories and that will also have another effect of productivity improvement. The biggest expansion that we did is in our factory in Malaysia that is now completed. This Friday, there will be the official opening with the Prime Minister of Malaysia. And that's from there on, the factory will have increased capacity and will further grow its output. Another important thing is that semiconductor is a strategic technology and more and more all the large industrial states they have programs to stimulate semiconductor industry. And as [indiscernible] we're in the midst of this. And although -- well, the market is global, there are trends to try to localize it. However, in my view, it will stay really a global market.

And as a European supplier, we are somewhat seen neutral in this geopolitics, and that will help that supports our business. Also an important factor, we have manufacturing capacities also in the U.S. We are one of the very few producing silicon carbide in the U.S. and that will also help us with the tariffs. Another important geographical region is China. China has grown a lot, so has driven the EV deployment is an important region for electric cars. And we, as X-FAB, we are supporting those needs with specific technologies, and Jorg will talk about that.

What we also see is that China is different from the rest of the market. In China, you have -- in the rest of the market, you have typically IDMs who serve a lot of the automotive needs, like Infineon, ST, [indiscernible], Texas Instruments, Analog Devices and so forth. They're all serving the China market with their analog and mixed signal products. There is two trends because of the China for China policy, we see the two trends. On the one hand, the IDMs were trying to put Chinese supply chains in place. Still, they are Western companies. On the other hand, there is a lot of fabless companies in China who develop new products for those applications and they need foundries. And if they need specialty technologies, they come to X-FAB.

Now there's another trend or also China in particular is that the -- in the rest of the world in the mixed-signal world, there is a lot of IDMs. In China, the market -- the business model is foundry and fabless. So there is virtually no IDM in China. And that means that as for X-FAB very big market. There is also competition, of course. And that's mixed up with all our technologies. We're serving these needs.

Let me also explain about one particularity because I get very often the question is, yes, what about all the new fabs that are built in China? Well, there is, in fact, if you see this on this slide on the different phases of the supply chain or development of a semiconductor product from process to IC sales. In the cooperation model where X-FAB is running where we're developing technologies for customers to design products and bring those to the market. That's one business model. There is a lot of the foundries in China, they run a contract manufacturing model. That means they have good factories. They have employees. They can operate the fab, but they don't have a pipeline, they don't have technologies. So they solicitate companies around the world and say, come to us, we'll produce for you. And that is typically attractive for like IDMs, who want to set up a supply chain in China. They go to such contract manufacturers and have produced in China. So these are two different models.

And the first model, of course, is also much more sticky because it's based on unique technologies of this -- of the corporation model as opposed to this outsourcing business. So with this introduction, I would like now to go to the next step and have our three speakers explain about the pillars of strength, and we would like to pass the word now to Jorg, who will start with the power in the future.

All right. Also from my side, welcome to all of you to our Capital Markets Day 2025. I'm happy to have all of you here. My name is Jorg Doblaski, I'm the CTO and as Rudi said, the next 25 minutes will be all about power and power efficiency. So how do our technologies help powering the future and help enabling that big mega trends we are all experiencing, which is the electrification of everything. So more and more applications and whole industries are moving away from, let's say, fossil fuels to electrical energy. So there is a huge demand for not only more electric energy but also more efficiency. This is coming from, let's say, applications like the electrification of transport, electro mobility, for sure, is a very prominent example, but it's also driven by the need to use more let's say, renewable energy, wind and solar power that come online and they a need a very efficient energy generation, energy conversion energy storage, and all of this has to be enabled. And there are new applications like artificial intelligence.

You heard from Rudy the age of AI, does needs data center needs a lot of power and a lot of power efficiency to make that possible. As X-FAB we have already in the past, I think, made the right choice and invested in the right technologies to serve these markets. And I will explain about two major technologies here, which is our BCD on SOI platforms for smart power, I would say, and our [indiscernible] and [indiscernible] technologies for efficiency in real high power.

And let's first move into that first section smart power PCD on SOI. We are the foundry leader in BCD on SOI. So we have believed in that technology already 15 years ago or even more than that and believe that this is the right energy for automotive for industrial and for medical applications. Specifically, when you need to handle higher voltages when you need to handle very robust isolation. Our PCD and SOI has built-in features that enable really a much easier design for our customers. So customers can implement the design at the right performance, achieving the right reliability criteria, and they are enabled by the process features to do this in a very area efficient manner. So our customers can achieve smaller trips at a better performance compared to bulk CMOS, which is the, let's say, what most other foundries offer as a project architecture.

Before I go more into the applications, I think it's worth to explain a bit what is actually the difference between these products. CMOS our PCD on SOI. So let's look at CMOS wafer and as we are microelectronics, we have to maybe cut and have to zoom in really and zoom in until we really see the semiconductor devices in the wafer. So this is for sure a schematic, but it's just to show the principle. And let's really zoom in until we see an individual device. So this is a very basic structure, maybe a transistor pair that forms an inverter, maybe some digital analog function and there will be really millions and millions of these devices on the wafer to build the different functions of the integrated circuit.

Now these different building blocks need to be isolated from each other for the real -- for their proper function. And in the bulk CMOS, the classical way of doing this is using these deep implanted wells for that. This is, let's say, just a process feature to enable the isolation. And there are multiple disadvantages in this approach. And first of all, there has to be spacing in between those different isolated islands. And depending on the voltage level, the larger the voltage difference is, the larger the spacing has to be. So it can really be significant. Designers can't place any electrical component there. This is just overhead wasted space. But this is not the only problem. Those wells are never, let's say, perfectly isolating. There's always a bit of leakage, always a bit of current flowing into the substrate. There's always some coupling through parasitic devices in the substrate.

Designers need to find solutions for that, and this is usually expensive in terms of area. And there are issues like ESD, electrostatic discharge and EMI, electromagnetic interference, where it's pretty hard to design a robust solution in a bulk CMOS process. Also this cost area and sometimes the requirements can't even met. Now the trick in a PCD on SOI, these leaky [indiscernible] are replaced by what I would call the gold standard for isolation in a semiconductor process, which is oxide, oxide-based isolation with a buried oxide towards the wafer and the deep trench in between the different devices. This removes the coupling through parasitics completely. This achieves a much lower leakage, so much easier to design for very low power, and it also enables designers to find much easier and much smaller solutions for proper ESD and EMI performance.

But most importantly, you can space all these devices much closer together, which means much smaller chips are possible, much less area is wasted. And this is really what makes it very interesting for our customers. So we see -- or if we look at the die size shrink potential this application brings, and we just look what our customers achieve up to 45% smaller chips on the same process node, I have to say, can be achieved when moving from a bike CMOS to our PCD on SOI, which means effectively 1.8x the number of chips on the wafer. And especially applications where a lot of high voltage is needed or really significant isolation capability between different voltage levels, we can see this really being achieved in that scale. And some examples from automotive here are, for instance, smart motor drivers, smart actuators, or smart LED drivers where this level of scaling is seen or also battery management systems is a very critical application for achieving the electro-mobility and also the move to renewable energies.

I will speak in detail about that application later on. So this is scaling, but I mentioned there are many other, let's say, goodies that you get when you move to a BCD or SOI process. And in many applications, these process features really make the difference. So it's really hard to design those applications in other processes. And to give some examples from medical applications really enabled by BCD and SOI, we have a lot of implantables or wearable applications, hearing aids, cochlear implants, pacemakers, for instance, that need really low power as they run on a battery and have to run a very long time. But often they -- or usually, they also need some level of high voltage. So this combination, high voltage, low power is a sweet spot for BCD and SOI. And there is, for instance, medical ultrasound where you really have to go very high voltage and still need to sense very low voltage levels. [ Luigi ] in his presentation will go more in detail about that one.

And if I look on industrial, there are industrial gate drivers that need a proper ESD protection and the combination with smart logic. There is industrial power conversion, industrial test equipment that benefits from the high voltage and from the isolation. And there's also a nice application [ Volker ] will spend later on a bit time on, which is inkjet printers, really a tough job to miniaturize that and a very good application to demonstrate the Microsystems approach, all based on BCD on SOI.

For now, I would move into battery management systems as really a critical application for EV, but also for, let's say, energy storage. There's a huge growth in the need for battery management system ICs coming from the electrification of transport, electromobility and the growth of data -- of energy storage, battery energy storage. Already in 2 years from now, 2027, more than 50% of the cars worldwide will be some level of electric cars from a mild hybrid to a fully battery electric. They will all need battery management. And in a full electric car, you will see or you have already 12 to 20 of these battery management system ICs integrated. And this is growing why we go forward. So really a large volume. Now battery energy storage is growing even faster. So there's a huge requirement for more battery storage. You may all know some area where another storage facility is built, doesn't even need to be funded anymore. So this really pays off. if people want to sell the power to the grid at a time where it makes most sense. And it's really a requirement if we want to make more efficient use of wind and solar. So there's really a significant growth projected over the next years to come. All of this needs battery management.

Why does it need that? If you look how a battery pack or a battery that is in the car is assembled, it starts with battery cells, which are not so much different from the cells you may have in your, let's say, notebook or, let's say, such mobile devices. These cells are -- several of those are assembled into modules, modules are assembled into battery packs. Now if we look at an example, I took the ID4 here as from VW, this car runs on a 350-volt battery with 77 kilowatt hours of energy. But still the cells, these are lithium-ion cells with just 3.65 volts at their nominal voltage. Those cells are kind of stacked into modules, 24 cells per module to reach the right voltage level for the car and then those modules are combined in a pack, 12 modules per pack. There will be one battery management system per module, so 12 per car. For sure, it is of utmost importance that these single cells do not see a higher voltage than this 3.65 volt nominal. So they really have to be controlled in the right manner.

So let's say, the most critical function for the battery management system is protect the battery cells from being operated outside of their safe operating area, really critical for safety. No one wants to see an unreliable battery or a battery that is exploding or catching fire, something like that. The other important area, I think, as important is battery optimization. All these many cells in that battery management -- in the battery need to be, let's say, operated in a way that their capacity, that their energy that is stored is used most efficiently and to make sure also that there is no unnecessary wear out that the battery life is, let's say, as long as it can be. There's no problem with the battery over lifetime and very important for an EV that the battery capacity is used efficiently to extend the driving range.

Now while this is important for cars, I would say if you look at such storage facilities like I took this one as an example from Scotland, this [indiscernible] was for a time, the largest battery storage in Europe, 600 megawatts. This will be operated 24/7 all year around. At the end, the basic component is the same as in the car battery. So this has to be absolutely reliable all the time. So even more challenging requirements for the battery management system. As X-FAB, we have been working with leaders in battery management system IC design for more than 10 years. And we have been supporting them over their product road map for many years. So you see here, let's say, the product road map of one of our customers. We brought the first product to the market in 2016 with a battery management system managing 8 of these single battery cells. And as you see, the trend goes to larger number of cells managed per battery management system IC, which means also higher voltages that need to be managed by that component and a better isolation capability even. In last year, already, we were supplying 10% of the global battery management system, let's say, IC market share to the industry, serving major car vendors with our technologies.

Now this is not only automotive, I mentioned storage. So the same customer also supplies to battery storage, not only the big storages I have shown, but also all these, let's say, storages that are put in the -- as a solar storage in your house and so on. This all needs battery management systems. And here, the trend is very similar, going to larger number of cells, higher voltages. And this is just the start, I would say. There's alternative mobility, which needs battery management. There is the whole new thing like robotics, all operates on battery, all needs battery management. So really a growth driver. Coming to growth. So how does this relate now to our revenue?

This slide shows our BCD on SOI revenue overall. And for sure, BMS is one of the drivers here, but there are many other applications in automotive, in medical and industrial that show a similar growth path. So we had first prototypes in those technologies in 2012. And already last year achieved 14% of our overall revenue in BCD on SOI. And this is projected to grow by a factor of 2.5 over the next 5 years. So it's really one of our major volume drivers, BCD on SOI for smart power.

Now moving from smart power, BCD on SOI and voltages of maybe 48, 100, 200 volts to really high voltage, several hundred, several thousands, several kilovolts with silicon carbide and gallium nitride. So efficiency in really high power. Also here also in SiC and in GaN, we are a leading foundry, and we are pioneers in both technologies with our silicon carbide technologies in Lubbock and our gallium nitride on silicon in [indiscernible]. And both technologies, SiC and GaN enable higher power and better efficiency compared to silicon-based solutions, silicon MOSFET, silicon IGBTs, which are still kind of the mainstream technology at these voltage levels.

As X-FAB, we have enabled a unique engagement model with fabless companies to open up these technologies for their designs. So this is really making the difference and helping to -- helping them to compete with IDMs that are very strong in that area. And this helps really our customers to design solutions for automotive, for infrastructure and other applications like data center. And in the next slides, I will mainly also focus on data center as this is really a growing application as we see. Data center really has again changed the picture a bit in terms of power demand. So this is really one of the applications where at least I had not expected that this is growing so fast. So this is showing here the data center power demand last year. This reached already the level of France. So the whole electrical power in France, the same amount was used for data center worldwide with AI as a big driver for that. And the projection until 2030 is this amount will more than double.

This amount of energy just for one application. And the problem is, I mean, still with all the advantages that AI brings, this is still a huge carbon footprint. At 2030, we will not yet be fully carbon neutral. So a lot of this is still CO2 emissions. And I think we all have seen announcement like the one from Microsoft with this 3-mile Island old nuclear plant being switched on again for supplying the data centers. I think there is a huge need for not only a fast transition to renewables, but also to really more innovation and power efficiency to make this growth really sustainable.

Let's look a bit how to get to sustainable data centers. And we have to keep in mind, data centers nowadays, these need hundreds of megawatts up to even gigawatts of power. This power comes from the grid from voltage levels, AC 10,000, 20,000 volts -- but the AI workloads at the GPU, CPU level, this needs a very stable voltage in the range of 1 volt. So there's a lot of power conversion in all between all these steps from the very high level down to the 1 volt from the grid or the transformers, the UPS, the power supply units and so on and so forth. And while this is still mainly done on silicon with silicon MOSFET, silicon IGBTs, there's a lot of this energy that kind of enters the data center is lost for conversion, is lost for distribution, is lost in the protection circuits. And these losses are effectively generating heat. So you need more energy even for cooling of these data centers. So from the energy that's entering the data center, a large part is going into losses and reducing significantly what is actually reaching the AI workloads at the end.

Now if silicon carbide and gallium nitride replace silicon at the different voltage levels where their sweet spot is, these losses can largely be reduced. It's really a significant reduction possible. And the critical parameter why this is possible is on resistance. So for such a power switch, when it's switched on, let's say, in a theory, the resistance should be zero. But this is a theoretical switch, which is not physically possible. Nevertheless, silicon carbide and gallium nitride both bring on resistance -- sorry, significantly down compared to silicon-based solutions, which enable higher power and higher power density, a faster switching and also smaller form factors compared to silicon based on the material characteristics of both SiC and GaN. So it's really a huge potential by changing the technology here.

Now why are not more, let's say, fabless companies moving into that? Why is it still, let's say, dominated by IDM? The -- let's say, one reason behind that, we have to understand to innovate in SiC and GaN, customers need to innovate on the process and on the product. So in the classical way, what happened, a customer comes with a process and the foundry in its, let's say, classical way, contract manufacturing way that would implement the process in the fab for one application, so one process, one product. Next customer comes, next product, next process. and so on and so forth. So this is adding a complexity in the fab, which is very difficult to manage, and it's also slow, I have to say, for each of these products. It's also not really possible to invest in any level of design support to improve, accelerate and so on because all different processes and no obstruction layer in between. And it effectively does not really create a scalable approach.

So maybe this is one reason why many foundries stay away from that are not really successful. Now what we have done, we have invested in what we call the co-creation model. We take the customer-specific processes and map those to predefined process blocks that we have in X-FAB that still can be parameterized. And this, let's say, process integration kit that creates that level of obstruction that we then later on need to invest in a bit of design support to make silicon carbide and gallium nitride as easy to design as CMOS. And with that, we can really come to scaling. We can come to many different applications that can be, let's say, enabled faster with a faster onboarding from bringing the process into having the first samples out and having a robust and stable manufacturing.

And it still keeps the high level of customization also on the process level that is still important to innovate in second gun. This really makes the difference. And with that, we have seen a very good adoption by our customers. So this chart shows the application areas of SiC and of GaN compared with the classical silicon-based technologies. And we can see in the different voltage levels for silicon carbide and gallium nitride, all these blue areas or blue dots show applications we are engaging with customers. We are in the different stages with our customers from the grid, grid power to wind and solar, charging applications, data center and the different, let's say, voltage levels, 400, 800 volt for the EV. And in a similar manner for gallium nitride, we have applications that benefit from the small [indiscernible], low audience on values and the higher frequency capabilities that are possible for medical sensors, again, data centers, space applications, EV again and also protection circuits for the grid.

So this is really a huge and the fast adoption we are seeing. Now fast adoption and time to market is one thing, but you also need to achieve a good performance. And this chart is coming back to performance. So leading performance in the SiC and GaN applications. I'm showing you an example from silicon carbide. So this graph shows 1,200-volt SiC MOSFET. So this is what people would use for an 800-volt car, let's say, for the drivetrain. And the Y-axis shows this critical parameter on resistance. So the lower, the better, you have to remember. The blue dots is what our customers can achieve already on our generation 2 of the SiC platform. And you can see this plays already in the same ballpark as the competitor planar technologies. Now with Generation 3, we enabled our customers to bring this on-resistance significantly down, now achieving the smallest form factor for silicon carbide planar MOSFETs with lowest on-resistance and for best efficiency. It's really, I would say, showing the -- what can be done with that cooperation model together with our customers.

Now I would like to end that part with a customer statement. So we are engaging with many different customers in automotive and infrastructure and in data center. And what I can mention is one application out of the data center with one of our clients here. You will all have seen the announcements around the NVIDIA new 800-volt architecture. And as X-FAB, we are very proud to support one of the few fabless companies that was nominated for that new architecture, which is [indiscernible]. So -- and I'm very happy that they mentioned us as their supplier for silicon carbide to achieve this.

To summarize, powering the future with our technologies, BCD on SOI, gallium nitride and silicon carbide, we have the right technologies in place. in automotive from the drivetrain to the battery management systems, in infrastructure or industrial applications from the grid down to the data center and in many, many other applications in automotive, in industrial and medical. And some of those you will later on see and hear about in the following presentations. Thank you.

So thank you very much, Jorg, and good morning to all of you. So I'm very pleased to be here today. My name is [indiscernible]. I'm VP of Product Marketing. So today, my presentation will focus on sensing the real world. So a key strategic technology pillar for X-FAB. Sensors and smart sensors are everywhere today. So in automotive to enable safe driving, in medical, for health care monitoring, in manufacturing, for automation and in consumer in smart devices.

So megatrends like, for instance, digital health care, electrification of everything are driving the need for more sensors. Specific sensors require specific technology. And this is why over time, we have developed a comprehensive technology portfolio for sensing applications. So we started with CMOS and MEMS. We continue to enrich our offering, and we continue to innovate. And today, I'm very pleased to introduce our new emerging technology for sensing application. It's called silicon photonics. Sensing in the real world is our core business. So we have become a leading supplier for sensing applications by developing or co-developing our technology with some of our lead customers, and this has been highly successful. So as you can see on the chart here, in 2024, our revenue for sensing application accounted for about 51% of X-FAB production revenue, and we expect to further increase this revenue now with silicon photonics.

Now I would like to explain you what the sensor is and what it does. So sensors are, in fact, the bridge between the analog world and the digital world. The sensor is a device that can detect changes in its environment like speed, acceleration, force, pressure, sound, whatever, and convert them into an electrical signals that can be analyzed and processed. The smart sensors not only detect changes, but also process the data locally before they are transmitted and smart sensors are really crucial for real-time monitoring. Today, our technology portfolio for sensors can enable a large variety of applications, not only in our 3 core markets, automotive, medical and industrial, but also across the communication, consumer and computer sectors. Now I would like to introduce our technology offering for sensing applications, starting with CMOS.

So we have developed four main CMOS technology for sensing applications. So with photodiode, CMOS image sensors, single [indiscernible] diode [indiscernible], I will use PAT in the next slide to make it simple. Our magnetic and hold sensors. And now I will cover all of them briefly in the next slide, starting with photodiodes. So the photodiode is an optical devices that converts light energy into an electrical current. A typical application using photodiode is an [indiscernible] sensor. I'm pretty sure that you're all familiar with this application. So [indiscernible] sensors are used in mobile phones to adjust the brightness of the display based on the surrounding conditions. So you all know this button. When you push it, then when it's in the dark, the display will get darker or brighter if you are under, let's say, sunny conditions.

Our CMOS image sensors are widely used in medical imaging, including X-ray systems used in hospital, dental offices or for computed tomography. Wafers for X-ray imaging and just a few chips per wafer or even up to only one chip per wafer. So you have a lot of wafers put there on the showroom. You will see that there are many, many chips on the left there. There are many, many chips on the wafer. For dental, it's totally different world. For dental X-ray or medical imaging, it's a totally different world. So let me show you an example. So the picture on this slide shows a comparison between two wafers manufactured at X-FAB. So on the right, a wafer for automotive.

On the left, a wafer for dental X-ray. On average, a wafer for automotive manufactured at X-FAB is about 5,000 chips. In this case, in this application is an example, in fact, this wafer for dental X-ray has only 24 chips. So really, really huge tie. Manufacturing large chips is highly complex, and we have developed special capabilities to produce large chips with excellent yield results. So moving on to pads. So spas are highly sensitive optical devices that are capable of detecting and counting single photons. SPAs are used in 3D sensing applications.

Today, our SPA, are used in drones, industrial or consumer drones, not military ones and more precisely in time-of-flight cameras used in drones. Finally, all sensors. So all sensors enable to sense the position and the movement of an object into a system. Our all sensors are widely used for automotive applications. And since 2016, we have shipped over 1 million wafers for all sensors. Our BCDO-SOI can also enable some sensing application, and I will talk about it soon. Moving on to MEMS technologies.

So we have been developing MEMS technologies for sensing applications for over 25 years. MEMS technologies can enable additional sensing that the CMOS technology alone cannot achieve. For instance, sensing motion, acceleration speed or pressure MEMS sensors can be either a discrete solution or they can be combined with CMOS chips for smart tenting solutions. Our MEMS technology portfolio address for main types of sensors. So pressure, inertial gas and fluid sensors and temperature centers. So I will show some application on the next slide.

Our MEMS technologies are widely used in automotive, for instance, tire pressure monitoring systems. So you will see 1 product over there in the room. They are also used, for instance, in -- for airbag control units or to control the air intake into vehicles. And our technologies can also be used in consumer applications. So to stay in line with the trend of wellness, our technology can, for instance, be used in smart watches to measure body temperature. Now I would like to introduce silicon photonics who are new emerging technology for sensing applications.

So what is silicon photonics? So silicon photonics is a technology that uses silicon as a platform to engineer and process lights to transport information or for sensing. At X-FAB, we have been developing silicon photonics for more than 5 years. And we plan to be in mass production in 2028. Our ambition is really to become the European foundry of choice in this field. Currently, we have 3 technologies under development on technologies, mainly intended for biosensing application, the technology transfer from [indiscernible] and the technology codevelopment with our partner, Lagentech, a Swiss company. The pictures shows on this slide shows an example of structure used for -- to process the like. It's called weight guy, sorry. And in fact, it -- these are 4 pictures. But in fact, the -- so those 3 ones are just zoomed in from the first one on the top left. Now I would like to show you that real work is ongoing. It's not just development.

So this slide shows the made application enabled by silicon photonics. Applications highlighted in blue colors are ongoing customer projects. We expect the main revenue to -- for silicon photonics to come from the major markets, which are on the left. So datacom, AI and telecom and Quantum. The 5 other markets that address sensing applications. So just to give you some figures. So last year, our prototyping revenue for silicon photonics was about 4% of our total prototyping revenue. And we expect to see this figure to increase to 6% this year. Last year, we shipped 60 prototypes for silicon photonics out of roughly 1,000, let's say, prototypes at the group level. And 50% of this revenue for silicon photonics prototypes were coming from Quantum computing applications.

Okay. So now I would like to spend a moment to showcase 2 examples. So the first application is the current -- the first example, sorry, is the current application medical ultrasound I think you just mentioned about it briefly, and I will have to dive into it. So medical ultrasound is a current application in the business success story for extent. The second example, look is an application which look to the future, it's called embodied AI robots. And this is a trend that will create a high opportunity growth for X-FAB.

So let's start with medical ultrasound. So how do we contribute to medical ultrasound? You just heard from Jorg our BCD on SOI success story in automotive. And our BCD on SOI technology is also very well suited for medical trust applications. So why is that? As you can see from the picture on the left, so during a scan, the transmission of the sand wives requires a very high voltage up to 200 volts or even higher. In contrast, the received echo signal is very tiny, just a few [indiscernible] or even less. So thanks to excellent noise and [indiscernible] isolation of BCD on SOI technology enable the integration of both the transmitter and the receiver in 1 chip solution allowing to reduce the cost and the size of the full system medical ultrasound is a business success story for X-FAB.

So we started this business more than 10 years ago. In 2012, we shipped the first 180-nanometer BCD on SOI prototypes. Now we are developing and promoting the next generation so 100-nanometer BCD on SOI technology, and we expect to ship the first prototype by end of this year. In 2025, the projected revenue for medical retracing will account for about 25% of our total medical revenue, and we expect this figure to almost double in the next 5 years. So why is this business sustainable? So we keep innovating to enable the evolution of the medical ultrasound market. And our -- and many of our customers already selected our 110-nanometer BCD on SOI ultrasound technology for the next-generation product.

So as you can see from the slide, the evolution of the medical ultrasound market is clearly moving -- sorry, is clearly moving to mutualization to enable more portability for point-of-care application or home use applications. Our BCD on SOI technology 110-nanometer has already been selected by some customers to be used for new applications like the ultrasound patches. So the picture on the right. And this new application will drive further revenue growth for X-FAB.

Let me switch to the second example on application of the future bond body AI robots. So the future of robotics will see the rise of humanoid or embody the robots that will have a physical presence and directly interact with a real work through sensors and actuators. So an iterator is a device that converts energy into motion. So you already start to see in Japan, for instance, of the robots used as companion robots to care for older people. And companies like Tesla or Amazon are really early adopters of humanoid robot.

So why are we so excited about AI robot? So the rise of -- and evolution of AI robots will drive the need for more advanced sensors and not actuators And this will create a high opportunity growth for X-FAB. Morgan Stanley carried out a beat of material analysis on the Tesla Optimus robot generation 2 and quantify the number of sensors and actuators used in this robot. So as you can see from the picture, and we just hear, let's say, picture or redraw just for the other part, I can tell you the bottom part is as complex as the top one. And you can see from this picture that the Tesla robot is highly sophisticated and its pool of sensors and actuators. So about 100 sensors and about 40 actuators.

Our growth opportunity will not just be limited to sensors. I just talked about sensors up to now, but -- in fact, X-FAB is also a major supplier for actuators. And in 2024, our revenue for actuators account for about 14% of our total production revenue. Finally, our credibility, reputation and expertise position X-FAB really a trusted supplier for AI robot. Now I would like to summarize my presentation with 3 key points. So sensing the real world is our core business, representing about 50% of our total production revenue in 2024, and we expect to see the same figure and matched same figure in 2025. We continue to drive innovation in sensing technologies and silicon photonics is now a new emerging technology for sensing applications. We are the cutting edge of enabling the development of emerging trends and the trends like AI robots will expand our market reach.

And now with that, I would like to hand over to [ Volker ] that will talk about our next strategic technology pillar. Thank you very much for your attention.

Thank you, Luigi, for her nice introduction. Before I dive in, in my topic, the next level of integration, I'd like to take you back a brief moment about 10 years ago. 10 years ago, I was running product marketing at X-FAB, and I spotted an opportunity, and there was a global sales workshop when I was organizing some presentations and about a topic of adding a few but high-value men's layers on top of the next web CMOS back then, 0.6, 0.35, 180-nanometer. And since then, exactly 3 things happened. A year later -- oh, by the way, I framed this, I said we are putting fairy dust on top of that, fairy dust, I had small kids spectrum and they're like it. Back then, exactly 3 things happened. A year later, Rudi asked me and told me, this is a great idea, go and get it done, run the MEMS business, take the resources.

Second, this concept got traction with an exam or even better traction with our customers. And that's why it's standing now in front of you. And this concept -- now the third thing is the concept got traction in the industry. You're all aware of that. I mean -- and that's the story. What I'm going to tell you today. That's my story. My name is [ Volker Herbig ] and I'm running the microsystems business at X-FAB. Welcome.

Advances in the semiconductor industry are happening in 2 directions. One is called [ Momo ]. And this is about a race, a race to ever smaller geometries. Right now, the industry is at 1.4 nanometer and just a handful, just a handful of companies is able to follow this race into Samsung, TSMC, you know them. The auto track is called Momo, and this is the integration of features into a CMOS process, and features, these are passive devices. These are nonvolatile memory devices, high voltage up to 300, 400-volt lasers biochemical sensors, photonics devices. This is obviously the track where X-Fab is on. But now there has been a new playing field emerged between those tracks. This is about integrating best-in-class features and best-in-class means no compromises at all means high performance computing trials, chiplets. It's called chiplets. You heard about that. It's about integrating high bandwidth memories. These are chiplets or computing triplets and the memories.

These are the AI accelerators done by NVIDIA, for example. It's about integration of lasers. It's about the integration of sensors. And the integration is done in a 3D fashion. It's going up vertically. And it's either done on wafers or an substrate, and it's called doing either a system on a chip or a system in a package. And what we see now that we experienced significant market pull from our customers. They're pulling us in this direction. We are engaging with existing and new customers. And also, I mean, this has traction in the industry. And now we have chosen actively chosen to play in this arena.

Okay. Let me dive in a little bit deeper, what exactly we do. It's all about wafer-level chip scale microsystem. What does it mean? Imagine that you don't cut a wafer into pieces, and there was 5,000, 7,000 individual pieces and don't build a system. That's what the industry does, building up systems individually with each of those cut ICs and devices. What is happening now that we are building with 3D integration methods, a system on this value wafer. And that's why it's called wafer level. And the size of the system -- it's more or less the size of the chip. And that's why it's called chip scale.

And here, you have a cleanse what type of features we are integrating. We are integrating platinum or gold layers, we have microfluidic. We're integrating lasers, modulators. We are integrating Tier 3s -- so silicon [ vias ] to have a backside contact, yes? This is the things we are integrating. And again, no compromises means also we need to integrate a lot of new materials, which provide a no-compromise approach to certain performance envelopes. Why does it matter? We can do much, much, much smaller systems and I show you and you can see it by your own eye some examples. Systems are also similar. Those systems have a higher performance higher performance in many instances, translates in the lower power consumption.

You have a lower system cost, also the wafer with CMOS plus the 3D integration is quite expensive for our customers. And the number of parts in the end to do such a system will go down significantly. That means you achieve a high availability. I already talked about this now compromise approach, integrating best-in-class features. Now we all talk about silicon. The semiconductor industry is based on silicon. It's a good material. However, for certain applications, silicon is not the best material. You are familiar, you heard today already, Jorg was talking about silicon carbide, gallium nitride, those materials push the envelope for power. But now what you need to understand, getting those materials into a semiconductor fab comes with a price.

And this is really a nightmare for the fab because -- these new materials are coming on, smaller wafer sometimes larger wafer, sinner sicker, more brittle, they are transparent. Processing sometimes takes longer and it's getting worse. Those wafer could contaminate a tool, No, they could contaminate a whole fab. You need a dedicated fab. That means introducing such a new material is a big deal. And you just do it when you get a significant benefit if you achieve a breakthrough performance increase.

And that's what we do in microsystems as well. In my introduction, I talked about that there is market for. And the best market pool you can think about that customers come to you and ask you, can you do that? By the way, it's much better than they ask how much is it? If the question is how much is it the first question I mean, they come to us and ask, Can you do that? And there's another evidence for our market for momentum for microsystems.

You're all familar with the European chipset. EUR 43 billion are set aside for subsidies and EUR 3.6 billion of those EUR 43 billion are set aside for Pillar 1, which is, in essence, pilot lines for the research and technology organizations across Europe. There are 5 pilot lines, 1 is called nano IC. This is IMEC, chasing the ever small geometries. One is for white band gap, silicon carbide, gallium nitride, One is for -- it's called fames. This is about fully depleted SOI. This is the laty ST cluster and [ crenoble ]. There is a photonics pilot line in Spain, and there is a pilot line in Germany, where I'm really excited about it. In Germany, there is a cluster of RTOs, institutes, frown over, light nits, scattered across Germany working on semiconductor topics, and they are getting funded EUR 730 million to implement technologies for 3D integration for chiplet architectures for heterogeneous integration and system in a package.

And I told you that we started to work on those technologies much earlier because development time lines in the semiconductor industry are long. And we have exactly those 3D integration technologies, chiplets architectures, heterogeneous integration, advanced packaging, we have a head start on those. And compared to the RTO community, where the output are demonstrators. That means they show in principle, it's possible and they can do a wafer or 2 wafers or 10 wafers or a couple of chips and show in principle, you can implement such a technology, we create for our customers, high volume supply chains. And this is really exciting. I mean this creates a huge business opportunity for fab. And this is exactly the reason why we are teaming up with the frown hovers in Germany right now.

Talking about supply chains. We heard about the co-creation model, and this is the typical model in the micro system space. It creates a lot of sense value for us and for the customer. The customer can innovate in 2 dimensions on the product, our translation is designed but he also can innovate on the process axes on the process vector, gives him [ 2 ] direction where he can differentiate in a highly competitive semiconductor market. For us, working with those customers, creates a significant amount of commitment, and we can measure the commitment in NRE dollars, yes. We can measure the commitment and commitments to help us to finance the new capabilities we need to put in place.

But there is also an intangible benefit of working with our customers, yes. they provide us deep insights in their application in their market. And this is helping us in the medium and long run. This is the corporation model, we have heard Rudi and Jorg talking about it. That is where the technology is conceived. But we heard we create supply chain. And what is the meaning of a supply chain. We have this technology conceived together with the customer, then we need to make wafers not only on, not only 10, we need to make thousands wafers per month. We need to have a high volume capability. We deliver those wafers on time according to schedule.

We agree with the customer every Monday, we deliver the wafers, every Tuesday, whatever, we agree with the customer. We deliver according quantity specification. We commit to quality, and it has commercial or financial implications if we don't deliver quality, they trust hurts us. We agree on the price roadmap or we agree on price, on the price roadmap in many instances, means we need to have our costs under control. And we agree to do this, in essence, forever. And forever means 5 years, 10 years, 15 years, 20 years. This is the true meaning what X-FAB does.

We are a tech company, and we develop supply chains for the technology. We either develop on our own or with our customer. This is our true purpose, developing those supply chains. Now we talked about the why, the what and the how a little bit. Now let's dive in and try to understand how the business impact is of what we are doing, why we are so excited. I talked about the beginning that we are applying those few but high-value MEMS sales on top of a CMOS. From a marketing perspective, what it is, it's a reframing.

We are trying a new frame around our business. We are using the very same technologies. We're reusing them, which we use for a pressure sensor for a microphone for accelerometer or a terminal pile, we are reusing those technology and pushing the envelope a bit to do micro systems, they do 3D integration. And as a result, we have at least by an order of 10 magnitude of order increase of the total addressable market. We are able to engage more customers and other customers and we dive in, in much more applications outside of the MEMS space.

And this is the good thing. I mean, by adding those few but high-value layers on top, we are able to increase the ASP significantly. Let's have a take a look at it in a moment. From a revenue perspective, from a revenue perspective, that's what happens if you do that. We have we show or we have proven that we can increase revenue or we have increased revenue by about 20% compound annual growth rate over the last years. And looking at our pipeline, seeing our pipeline, we estimate that we can maintain this growth at least for the next 5 years, at least for the next 5 years. And therefore, Microsystems business will be 1 of the growth engines for the Expert Group.

Talking about ASP. This is the concept. This is the concept. We have a CMOS wafer and adding a MEMS layer, adding a system integration layer, adding a heterogeneous system integration, they are on top of that. And this will increase the ASP up to 4x. Let's have a look at a real world example, 2 real-world examples. One is an optical sensor, and we have it over there. This is a contactless temperature medical-grade temperature sensor. It's based on the 0.35 CMOS right now. And by adding just a MEMS release layer, we were able to increase the wafer price by 30% by -- having those release layer, but by adding a packaging layer by adding a TSV, by having a dicing process where we open up some pads, we are able to increase the wafer price up to 3.3x. And it's a win-win situation.

I invite you to take a look at those dies over there. I mean if you don't have a good eyesight, you won't see them anymore. It's an expensive wafer, but there are so many dies on a wafer. The overall system price a significant low. It's a win-win situation for us and for our customers. Second example is a medical sensor where by adding a platinum pad and an interface layer, 2 main steps. We can, in essence, double the wafer price for 0.18 layer or 0.18 process we do in [indiscernible]

Let me comment -- this is obviously a marketing slide, right? And let me do 3 comments. I mean it's a marketing slide for me. It has the added benefit of being through everything what is in there, I believe in it. But I just want to make 2 comments for you here. We talked about the new applications and Luigi was talking about silicon-based photonic. Why is this so important? Why are we so optimistic about silicon-based photonics.

Our claim to fame or what will set us apart and we are developing this right now is what we call a heterogeneous integration layer on top of a silicon photonic circuit coming either our core coming out of Kuching. We heard about the X-FAB offering, but also from sources outside of X-FAB, perhaps some IMAC, perhaps some tower, perhaps from Sotera. And why is this so important? In particular, in the photonics, the performance envelope for silicon-based photonics is next out.

The next step in performance can only be achieved by system integration by integrating new generation of photodiodes, high-performance photodiode by integrating quantum dot, light sources by integrating laser or VCSELs by integrating modulates based on lithium niobate, integrating modulators based on BTO, [ biomtitenat ]. Only this heterogeneous integration layer will enable silicon photonics to go to the next level. And they are just a few companies in the world actually who are able, and this is a race to what's going on right now. And just a few companies in the world are able to setting up the high volume supply chains for those technologies. And fab, my team is part of that.

The second comment I want to make is I really embrace the approach from Jeff Bezoz for Amazon. He told his shareholder, his team. It is still day 1 even if Amazon was really wage. What is behind. This is the enjoyment of innovation working on cool stuff, working with our customers, absolutely customer-centric and in an extremely agile environment. That is what is meant it's still day 1. And I keep telling my team, they want needs to and will remain for a very long time.

Now I talked about the exciting stuff we are doing. I have brought 4 application examples with me. I want to show 2 of those I showed and mentioned 2 years ago, if we -- if you had a chance to see my presentation there. But the difference between now and 2 years ago is that 2 years ago, those applications were in NRE stage in the development stage. Now there are a high volume production and make a difference for my top line and for my bottom line. And 2 applications are in development. Let's start with this automotive headlight application. Coming, by the way, coming out of the brown over environment, but the German Future award, which is quite prestigious by the way, in Germany.

And this is about an automotive headlight. And I'm not sure who has a newer car. In those new accounts, you have typically an LED metrics headlight with 16, 32, 64 LEDs. Here, you integrate gallium it gallium nitride LED array on top of an except CMOS wafers. And this gallium nitride LED array has 26,000 LEDs. This is not a headlight anymore. This is a projector and you have 2 headlights. You have at least 2 projectors than in your car, and you can project guidance for your car at night, you can project traffic lights. If it's not would be forbidden, you can project a movie, a plag-on-white movie. I mean it's highly regulated this market. It's not allowed. But you can do a lot of fancy things, yes? This is a high-volume business is one of my largest customer now, super exciting.

The other one is, again, a wafer-level chip scale microsystem for infrared sensor. This is the contactless body temperature measurement. And here, and I invite you to check this out over there. What we have done by creating a micro system, we were able to bring the volume, the volume of the sensor down by almost 2 orders of magnitude. You see the first generation and the second generation here.

The third generation is over there and you can barely can see it anymore. And we increased the performance. And what it does is now enabling in your personal health devices, whether it's a wrist band or it's a watch or it's integrated in the phone to enable a body core temperature. The core temperature is a super important vital sign if you're in a hospital or if you go with your kids to a doctor, the first thing they do, they measure the body care temperature, the body sensors. Having this at your risk having this on your phone, it's not available yet, but it's super important, yes. What does it do? Is enables for us a huge untapped market application space for us. Again, all the features, the benefits are on the slide. I mean even it's a super expensive wafer, we lower the system cost for our customers.

Next application is a wafer-level chip scale microsystem for inkjet. Why is this so interesting? Many things I have talked about come together in this application. It needs to start with a BCD on SOI wafer. York has described this technology. for -- and we use a voltage above 200 volt. Then we put a microfluid declare on top of that. We integrate an actuator based on a new material, aluminum nitride, and we have some MEMS processes to integrate that. Why does it matter? For our customer, it creates high-resolution printed, much higher resolution. The next one, it sounds not impressive for somebody who is not an inkjet guy. I mean, this inkjet will be capable printing everything on anything. It's not a bubble check where you heat up the ink and it's exploding, then you're pushing out the chocolate. You have some limitations there, just water-based inks. Here, you can print almost independent from the physical properties of the ink anything on any substrate.

The [indiscernible] guys are super excited about that. It reduce system costs massively. And for us, again, it's an expansion in an untapped market, long lifetime market also some sort of consumables in printheads need to be placed. It's super exciting for us from a technology perspective, from a business perspective. Last application I want to show, it's about wafer level chip scale microsystem for footincounting computer tomography. It's a CT, right? It's a CT. And here, we -- it's also got the German future award, Deutsche [indiscernible] Our customer is Siemens [ Housenier ] I'm allowed to mention the name. And we are working with Siemens, [ Housenier ] on the next generation of this of CT. It's about photon-counting computer thermography.

And what it is, it has 2 main features. It's increasing the resolution by a magnitude of order. It means you can go from a more or less plant or we can go from a plc and white picture to a 4K color TV experience. It makes a huge difference for the medical community. Everybody wants to have this. Everybody wants to have this and the rural CT world will migrate to this technology in the next 10 years. This is going to happen. And this migration will accelerate. And on top of that, there is a market expansion happening for our customer because this technology can now be used for screening. So far, if you had an indication, you needed to have a CT, there need to be an indication because you've got an x-ray exposure.

And this is something you don't want to have too much. This technology brings down the exposure dose to 30%, a 70% decrease of exposure dose. And this enables screening if you have a problem with your lung, do a city screening. It's impossible right now. This is the technology. If you have a problem with your heart, do a CT with this technology. It's super exciting. And again, long lifetime business, medical business, we are super excited about that. Now let's close out I mean I mentioned that there are significant public investment in micro systems in Europe, across Europe, which creates significant a huge business opportunity for us by reframing our MEMS business using the technologies of our MEMS business and expanding a bit on that.

We could expand our total addressable market by an order of magnitude. I foresee that based on our current development pipeline and production pipeline, and I gave you a clips, we will maintain our growth rate.

Our -- we will maintain a 20% growth rate year-over-year over the next 5 years. We started early, quite early, and we believe that -- this gives us a leg up in terms of competition. We also have the infrastructure in place for this already, those dedicated clean rooms and tools and so on. We have already achieved a robust profitability and by scaling this up. This will improve significantly. NVIDIA, TSMC is my guidance there, by the way. I lost it very much. And we have a lot of good applications we are serving. This really makes us awake at night. I mean serving the application, generating purpose. It's still day 1. Thank you very much for your attention.

I hope this video gave you a taste of what is it fact about, what we do, why we do it. My name is Damien Macq. I'm the COO of X-FAB. And I want to give you an update on our capacity expansion that we announced here like a bit more than 2 years ago. So we came here to talk about a $1 billion investment plan in the different factories of its fab. And my ambition today is to explain you how we deploy this plan and how successful we are with offering the capacity that our customers want to see.

So I'll start with the slide presented by Volker earlier today. So Volker explained that its fab is capable to produce and to build and develop supply chains. If you look at this slide, you can connect most of the dots to commitment from the operation team, its commitment about managing the diversity of process that we have there, its commitment about innovation, its commitment about long lifetime support and quality and commitment about price and delivery on time. The investment plan that we spoke about 2 years ago and that we have implemented since then, talks about the delivering of enough capacity at the right level of flexibility. So moving forward, what I can say, as I said in my introduction, the $1 billion investment is done. Basically, we have installed in our factories all the equipment that were supposed to be installed and hooked up.

We have built from ground up new factory in Kuching. We will talk about it in a few minutes. And we have built also additional clean room in existing factory like in Lubbock and in resin. Now this is done. What is to be done is the qualification of the tools. So the tools are qualified one after the other. I will also explain the dynamics there. And once the tool are qualified, the capacity in terms of output wafers per month becomes available.

So by Q3 2026, the full capacity of the $1 billion expansion plan will be available. But as of today, the whole investment that we wanted to have on our factory and our tools is done. Now we talk about flexibility, and that was an interesting question this morning as well. Flexibility is about flexibility on the site. Flexibility on the site means once we want to enable a new technology, we have a park of tools running, for example, a mature CMOS process by adding a set of new tools, just a few new tools we can utilize this fully depreciated set of equipment and offer new technologies capability. So our investment is not about replacing all tools by new tools.

Our investment in this case is about adding capability by adding specific tools that are missing here and there. So that creates flexibility because that allows us also to manage the transition between some technologies that are somehow ending their life and some technology that we see are more attractive for our customer and so attractive for us. That's the flexibility that we have on the site, and I will come back on this.

Besides this, there is also flexibility between sites -- and there we talk about second sources. Second source is and was a feature that was a kind of luxury in the past when you have high-runner products, people wanted to have the possibility to manage their supply chain by sourcing this high runner from different factories. What we see now more and more is that customers want second source for any product. Why is that -- why is that new situation? Why you can really press the geopolitical tensions are serving the instability in the supply chain, and we want to make sure that we can offer a solution for this instability.

So sometimes you will see that we are doing source in Asia and in Europe, and that is 1 level of confidence. And this needs to be complemented by the statement made by Red earlier that for many of our products, we are single source. So if we don't deliver, the machine cannot be built, the car cannot be built and the medical equipment will not be available for customers. So flexibility within the site flexibility between the sites, quite important. Now we will continue to improve our operational performance. This doesn't deserve -- this doesn't require a lot of CapEx, but require some CapEx.

And here, we talk about automation. So automation, I will present 1 slide on where we stand on our automation journey. This has been a motor for the past few years, making sure that we can automate our process to get the maximum utilization of our assets. And last but not least, we manage actively our legacy processes. So every process has a cycle time -- sorry, as a lifetime to some extent. And this lifetime needs to be properly managed. So we can observe that for some process that are really there since 20 years. Some suppliers stop to supply essential features or essential chemicals. And then we have to manage the end of life of this process.

So we announced a year ago, more than a year ago. We announced already the end of life of our 0.6 micron process in using in Lubbock and in an [indiscernible] And this management is combined with a push also for our customer to help them to prepare their next product, preferably in its technology, but also to prepare enough material. So we see a kind of big increase of the volume in this technology to stock to store the necessary equipment and then the transition can take place. So this active management help us also in terms of cost. It helps us also in terms of preserving customers because in general, we want to make sure that our customers have solutions for this end of life.

Let's now zoom into the process that we have used to share the investment across sites. I think you have seen this morning a lot of technical and marketing presentations about the different area where we believe we have growth opportunity. So you can see on this table on the vertical side, the different technologies, the 180-nanometer 110-nanometer. This is the fundamental technology that is used also by micro system and photonics. So any investment in 180-nanometer or 110-nanometer helps also micro system and helps photonics. And we discussed also this morning about GAM and SIC.

Each of these technology is connected to 1 or 2 sites, in general, 2 sites. But for the emerging stuff, some like a power device, it could be 1 site. And you've seen also this morning how the technology pillars in powering in sensing and miniaturization is served by our technology. So we try to combine all these things together. This is a bit of a symbolic view on where the investment is going, but you can see that the share of the $1 billion, the lion's share of the $1 billion investment goes to our 180 and 110-nanometer. And just to repeat myself, the investment that we do there is helping also microsystem, photonics, but it's also helping the customers that today utilize the technology as is.

So in numbers, you saw the map in the movie and you have the same map of all our different sites. You can see where the technology is produced depending on the technology we spoke about. So you see microsystem in Isero and airport, you see the silicon carbide in Texas and the 2 big fabs doing CMOS and BCD also and I in Kuching, Malaysia [indiscernible]

Now the amount we presented there, this amount of dollar allow us to create capacity and it's really capacity corridors in terms of wafer per month, so W OPM on this chart means wafer per month. And you see at the end of the investment program, how many extra wafers we can produce per month on every site. To give you an order of magnitude, we will produce by the end of 2026, 50% additional wafer versus the start of the program. and we will add 50% more value to these wafers because these wafers become more complex. The process are more complex. So this 2x 50% is for us an opportunity to create additional value. Now where are we on this journey? This is shown on this slide. So you see that the execution is done is over on certain sites like in Dresden and [indiscernible]

On the other side, like in Kuching, for example, we barely started to create additional capacity. And the reason for that is that on certain sites, we were just installing an additional equipment, and we get the capacity once this equipment is qualified. While in Kuching, you have seen in the movie, we started from ground up. We had to build first a new clean room, and then we started to install equipment on the clean room, and now we are qualifying equipment. So the capacity in Kuching will become gradually available once the whole equipments are fully qualified.

Let's stay in Kuching for a second. So if you look at the Kucing side, we installed 6,000 square meter of additional clean room. I'm really proud to say that the team in Kuching did a tremendous job I mean, if you look at what it takes in general, to build a new fab from ground up and to produce material in this factory, the 2 years that is there is really a top leading edge. I would say they did really a fantastic job already mentioned later this week, in fact, for us, later today, we are flying to Kuching to congratulate our teams for the performance that they achieved there.

So if you go there, you saw the new clean home in the movie it's really fantastic. And in fact, they are running production material in this clean room already since March this year. So gradually, this will become available. It's also important to mention that so there all the tools are connected and hooked up. So basically, we have paid the bill we are paying the last bill [indiscernible] maybe we are getting close to that. The clean room is larger. We installed enough clean room for 50,000 wafer out per month on this side. But in terms of equipment, we limit ourselves to 40,000 wafer per month.

And there, the flexibility comes into the picture. You see that we offer flexibility for the 350-nanometer and we offer flexibility for the 180-nanometer between [indiscernible] and the [indiscernible] dressing and cooking and the fab in [indiscernible]. So this is really a differentiating element for many customers for the reason I explained earlier. I wanted to give a bit more details about the tools installation. So why does it take so long to have really the capacity? Why does it take years to get what we want.

I explained it to you we have to build a new clean room from ground up in 2 years. And you see that from Q3 2024, we started to move equipment was not really in the new building, it was in an existing building where we also get some additionality in room. But you see that the bulk of tool installation and in production, is really starting to pick up from the beginning of this year. You can see also there are 2 curves there. One curve is the plant, the other curve is execution. In fact, you don't see the difference between the 2 curves. The team has done really a fantastic job in executing the deployment of this tool on the factory.

And if you look at our capacity, you can take the same curve or similar curve and shift it by the few months that it takes for the material to move to the new tools because we count capacity in wafer [indiscernible] months.

Let's now go into France. France was a bit of a challenging situation over the past few years. So basically, in France, we achieved as of -- maybe 1 year ago, the full transformation on the site from the consumer side to side delivering core technologies for [indiscernible]. More than 95% of the technology delivered from France are now made out of it [indiscernible] Technologies. The transformation on this side is a bit more challenging than what I presented for Kuching because there every new piece of equipment has to be installed in a factory that is fully loaded. So basically, you have equipment in the factory and you have to insert a new piece of equipment in between where you see space, when you -- where you have opportunity. So it's a pretty challenging environment. And this was aggravated by the crisis that we had in the semiconductor for automotive. So between '21, '23, we were really at the peak of the prices and so there were constantly challenges between the priority and qualification of our tool or the priority on production.

And I wanted to show a similar curve as the one that was presented earlier. So you see here 2 zones. There is 1 zone where you see a difference between the plan and the execution and it's in red, and it's a place where we had some challenges because we had to make choices not that the people did a lousy job, but we made a choice, the contract choice to focus on production.

That means the qualification is delayed. And you can see on this curve, there was up to 1/4 delay from time to time. And that's doing an allocation situation, can be very problematic. Since then, we completely recovered, you see the top of the chart in blue. And you see there that we are now ahead of the plan. So basically, the whole plan was executed on time. But clearly, we are seeing 2 phases: a challenging phase still mid-'24 somehow and another phase where now that the site is delivering according to the plan and have the capacity that will allow us to move forward. Now on the site, we did -- on the site, we did other things. So basically, we installed on the site, the -- I don't know where to look now. We install on the site our 110-nanometer BCD over [indiscernible]. That's a technology that was already announced. So this was developed globally, but mostly only installed on this side in France, and this is now in full production. And we are presented this morning also the photonics.

So photonics is essentially today or [indiscernible] story. So we move to install their technology from IMAX. And on the site, we have, in fact, [indiscernible] which is our partner in photonic. They are nearby and are working in close partnership with our production team and our product development team to develop the next photonics technologies.

The [indiscernible] is a focus in France. I think it's a focus for all the fabs, so I will repeat that again and again. But this is something that is essential for us to get really the most capacity out of our existing assets. And the journey in France started a bit late. So we have really to accelerate the automation in France. In terms of flexibility, we have also flexibility. So the 118-nanometer from France is available in Kuching and vice versa. So that gives us really the opportunity for clinical product to offer dual source for our customers. The overall capacity, if I combine the 110, 180 nanometers from Kuching and from France, you see that from 2022 to 2026, we multiply this capacity by nearly 3%. So it's a substantial increase of capacity. And I repeat myself regarding the utilization of this capacity. So it's not only about providing light sensor or like drivers or things like that. It's also some wafers that will go that will receive some photonic additional step or that will also be utilized for some of the process that [indiscernible] described this morning.

So basically, the growth that is there will be eaten by some of the sensor products, will be eaten by some of the power products we talked about battery management this morning and will be eaten by microsystems. In terms of revenue contribution, if you look at this process overall, they occupy they utilize in the range of 42% of our revenue. So basically, it's really the main piece of our technology is moving forward. And within that piece at the BCD over SOI, which is 1 element presented this morning by Jorg is the one that is growing the most.

Let's go now to efforts and itself. So these are the micro system sites. Of course, they utilize wafers [indiscernible] coming from other sites, but they build on top of it features and capabilities for our customers. So on this side, we invested EUR 55 million CapEx. On this side, with this CapEx, we managed the transition from 150-millimeter wafers to 200-millimeter wafers. As Volker spoke about it this morning, the added value that this can generate in terms of value per wafer, but also in terms of value for our customers, because to some extent, there is additional material on every wafer that we sell.

In a fourth dimension, I mentioned, we are engaged in the end of life of our 0.6 micron technology. So this is a bit of a challenge because right now, we are really running in full steam to allow our customers to prepare the stock the stock that they need to have when the technology will be over. And we are helping also the same customer to migrate to our more advanced process like 0.25 or 0.18. And as presented by Volker this morning, so the capability that we have on the site will continue to be enhanced. It's in preparation with our CEOs to prepare proof of concept. Once we have something that works, we buy the equipment, we put it in effort. So all these are analyzed case by case, looking at Hawaii, looking at what makes sense and proceeding [indiscernible]. And also in terms of investment for this equipment in nearly all the case, the customer is co-investing in the machine. So basically, the customer, as Volker explained, can you do that and then we say, yes, and then the customer is ready to pay for us to do this. So the core investment goes together with co-operation or co-design with customers.

So in terms of capacity, you see that the growth is relatively modest, but you have to realize that behind the wafer that we produced in 2022 and the wafer that we produce in 2026. There is a world of difference. The value of every wafer that we produce, alter explained this morning, is multiplied by the fact that we can add additional layers on top of each wafer.

So the slide as to where we are with these investments, we will have 60% additional wafers. In terms of revenue contribution, we are in the range of 10% to 12% today on microsystems, but Volker explained, we have a double-digit, more than 20% growth in this area. So a lot of ambitions, a lot of trust also in the fact that we can execute this growth with a product that were presented this morning by worker.

Let's now go to Texas and later to [indiscernible] them. So these are the 2 sites where we develop power devices. Texas started quite earlier. So by adding a few machines to an existing technology park we can develop and offer silicon carbide technology, which means compared to people who want to invest from scratch in silicon carbide. The majority of our tool is depreciated, and we had just a set of equipment to create this silicon carbide capacity. So it was a great deal for us in terms of ROI because we could position ourselves as a leading factory in silicon carbide.

As a matter of fact, we are the only factory in the U.S. that is delivering silicon carbide and these attract these days a lot of focus and attention. I cannot disclose the details on this, but we see that the location in the U.S. is definitely an asset that will help us for the future. On this slide also presented this morning by Jorg, we have developed also next generation of our projects. So Jorg presented added value of the third generation of silicon carbide. So it's the technology that has to be the best-in-class [indiscernible]. So this is a technology that we -- this is a level that we can reach because we work hand-in-hand with multiple customers, and we take the best out of it to offer a generic flavor of this process to our customers and new customers can grow much faster in the integration and utilization of this performance.

In terms of capacity, these are the numbers. You see also some comments about the fact that the capacity today is not fully utilized. In fact, compared to what was announced in June 2023, we have delayed some of the investments that we are in to silicon carbide. So we were more ambitious in the past on silicon turbine. But I think everybody knows that SiC has seen a quite challenging last year. And right now, at this moment, we saw really from our side a bottom situation earlier this year. And since then, we see the gradual recovery of our SiC business. So for us, we adjust our investment to the business.

But we have, at this moment, enough capacity, we can produce 10,000 [indiscernible] months and we utilize a bit more than 3,000 wafer rooms. So we believe that with what we have in hand in terms of we are safe for a few years to come. Just to mention, there is an opportunity there to utilize the money from the CHIPS act. So we went quite far in the approval of a Chips Act file to the U.S. government. But right now, we are kind of posing these old efforts. We want to see how the stack market will continue to evolve. We see good indications. We don't see yet hottest what I mentioned earlier. It's not yet NVIDIA video from our perspective. But the press release that were announced this morning give us also a lot of hope that we will see some significant growth to come on the silicon carbide.

So we are ready for what's next. There is one last slide where similarly to Lubbock, we created also an opportunity to have flexibility between a CMOS process that we produce there, the 350-nanometer and the GaN process. The bond process is a bit less mature than the SiC process today in X-FAB. We have some customers that are working -- we are working with us since already many years to develop and come to the right level of performance on our GaN technology. And you see that with the flexibility that we have there we can activate corridors of GaN by exchanging the capacity to between GaN and 350-nanometer.

So this flexibility is absolutely an asset for us. Same story, we add a set of tools that allow us to prepare the future of GaN technology on the site, and we utilize the asset that were there present for the 350-nanometer. Capacity in [indiscernible]. So we have there a factory that we'll be able to produce a 200-millimeter GaN [indiscernible] TSMC was still in 150 millimeter. And in terms of capacity, if you look at it in a full 35-nanometer node, we can go from 10 to 11. But as I said, we can utilize the flexibility we have between 350-nanometer and GaN to produce the corridor that -- to offer the corridor that the market wants to see there.

So if you combine now what we do in resin and what we have in Lubbock, I think Jorg presented the value added of GaN and SiC, they are complementary technology and the profile really X-FAB as a supplier, a foundry supplier for this type of technology. So this is positioning it up in a very strong -- very strongly on the market.

Important to mention, I mentioned automotive -- sorry, automation. Automation is a critical item for us. So for our factory, I presented already this slide earlier. But for us, it's a journey. So basically, you see on this chart the different levels that the company could reach in terms of automation. You have seen in the movie some robots moving in a factory. This is not yet in its [indiscernible] these robots that you saw moving start with us. But we are getting there. So basically, we see so much progress so [indiscernible] -- so fast innovation in robotics that we believe we have to keep monitoring what's happening there because this will come faster than we think. But let's start with Level 1. So level 1 is about making sure we automate the next move of our material in the factory. Level 2 is about making sure all the equipments are automatically set up for the material that will come in front of them.

So these 2 levels are really the key focus for all our factories. We want to make sure that in all the factories, the systems decide on what should go next to which tool and making sure that each tool is automatically set up. The technologies exist, the deployment of this can be here and they are challenging because we are deploying this on legacy factories. And so what we want to make sure is that from every site, there is enough synergies in terms of baseline set of tools that are utilized from one site to the next. We don't want every site to come with their own solution. So that is a process that is ongoing, the right choice on MES, the right choice on scheduler. And these tools allow us to deploy the foundation of automation, which are level 1 and level 2. Right now, if you look at Kuching, for example, they are already at Level 3. And Level 3 is about making sure that you have automated transport equipment that will move your material from the place where the tool -- the step is finished to the next step. So you have storage plated, and you have automated transport between the storage plates in the factory.

And then the last step, you have something can be a robot today is a human. The 10-year robots can be machines, if you look at the 300-millimeter factory with all the tools nicely aligned, you can utilize very nice machines in a factory that is a, you need a bit more versatile robots, but the versatility of robots becomes super cheap now if you look at the evolution of robotics. But from our perspective, right now, Level 1, Level 2 is a priority everywhere.

In conclusion, I wanted to demonstrate that we are ready for the next step. We are ready for what's next. So I'm really glad to say that this $1 billion investment plan that we announced here that looked a bit ambitious compared to the size of the company, we see a company that is not yet doing $1 billion revenue, why the hell did they invest $1 billion. The reality is that we have done it. We have done it because we believe the markets are there. The demand is there for the technology that we need and by mixing some of the technologies by utilizing also the flexibility that we have within a factory, we can add value for every way so that we deliver.

So based on that, we believe we are now ready with our technology, especially if you look at BCG, [indiscernible] and SOI, it's a very demanding [indiscernible] and promising technology, but also in microsystems and wideband gap, silicon carbide GaN, we have the capacity we need, mission accomplished there. No need to further invest. We are ready for a couple of -- for a few years to come.

Moving forward, in microsystem, we'll continue to explore all the opportunities that will come in our way. So it's quite important to mention and to remind that this exploration comes with customers who are already ready to invest in capabilities in our facilities. And they come often with a proof of concept that they are tested in RTOs, et cetera. And so for us, this gradual increase of capability is making us also as a specialized foundry.

So this is something that will continue, of course, at a level that is affordable. And moving forward, we'll keep focusing on our operational efficiency. So automation, the foundation of automation, Level 1, Level 2 for sure, Level 3 when it makes sense when the ROI is there and robots in the factory, we are ready for that as well, but let's build further foundations. I want to thank you for your attention. I want to thank you for coming also from far away in this meeting. And with this, I conclude my presentation. Thank you.

Thank you, Daniel. And I hope you all enjoyed all the presentations that we've done so far. We -- last but not least, yes. I'm Alba Morganti, CFO of the group of X-FAB. And I will now, for the next 20 minutes for x amount of slides will talk about how all you have seen so far translates into financials. Since we met our last capital market update in December last year, we have continued to work hard, and we increased our capacities and capabilities as you have seen in Daniel's presentation, we have come a long way. As you can see in this graph, our revenue consistently grew through the various cycles with a compounded annual growth rate of 10.4% until last year. Alongside this top line growth, together with our strong operational leverage, we were able to also steadily improve our profitability. This is particularly visible in the down cycle in where we were at 6% in 2019 and where we are today at 23% of [ EBITDA ] margin and if we take the midpoint of the annual guidance, we should at least reach 25%. And now what's next? We are all set for top line growth. You have seen in different presentation how this will translate into future growth, in how capacities and capabilities are there to grow our business to an annual revenue of $1.2 billion.

Our core business reached a stable share of more than 90% of total revenue. And going forward, we will further increase the share of even more complex, higher value-add business. So we are all set for long-term growth.

However, the short term is more uncertain. Geopolitics, tariffs, a change in our customers' ordering behavior and ongoing beef stocking is reducing our visibility. Inventory corrections are taking longer than expected as a result of stockpiling that was partially related to the long-term agreement volumes customers had to commit to. But these long-term agreements will expire by end of this year.

So we are now returning to pre LTA ordering behavior that is more closely related to short-term needs. All this considered, how does the EUR 1.2 billion revenue that we can achieve with our current capacity compared with our long-term outlook from December last year when we were projecting reaching $1.5 billion. On the one hand, the $1.5 billion projection included $100 million of outsourced business. But this is not required anymore at this stage as we have enough capacity in-house. Anyhow, we keep the door open for this flexibility in case of need.

On the other hand, there is another $200 million deviation related to the SiC business due to 2 factors. Firstly, the recovery of the SiC business is taking more time and it's progressing much more slowly than anticipated. And secondly, the proportion of the confined wafers is -- has increased to more than 90% compared to the 50% that we budgeted. Of course, this reduces the top line growth. Now what are the growth drivers going forward -- sorry. Let's have a look now at our key technologies we invested in how they play in our strength and build our strategic pillars to deliver the future growth of the group.

On this slide, you can see how our technologies will contribute to in terms of revenues. Let's start with CMOS. We expected -- we expect our 118- and 110-nanometer CMOS technology to grow on an average range in a range of 7% to 9% until the end of this decade. As you have seen from also Volker's presentation, our microsystem and then our fixed revenue presented also today, both are projected to grow on an average of approximately 20% in the period from 2025 to 2030.

Overall, our larger node CMOS business is expected to remain flat because on the one hand, we expect a CAGR for the 3 -- of 3% for the 350-nanometer CMOS business whereas the CMOS business with geometries higher than 350-nanometer will decrease. This is mainly due to the termination of some 0.06 microns CMOS technologies in 2027. The end-of-life scenario for these technologies has been boosting demand as explained by Damien as customers were filling inventories to secure supply.

In 2025, this portion of our business will come in at roughly $90 million. And then it will phase out in [ 2030 ]. The affected sites being Erfurt in Germany and Lubbock in Texas are both in a transition phase. Erfurt will focus on X-FAB microsystem business, mainly explained by Volker, and Lubbock will focus more and more in the SiC business going forward. Today, [indiscernible] has 2 business that -- has 2 business. The 350-nanometer CMOS business, which will grow more slowly and the GaN business, which will further grow even if it's still on an early stage and will become onstream, we only recently announced -- I'm fighting with my mouth. We will -- yes, we only recently announced the introduction on GaN, on silicon foundry services at our platform in [indiscernible], after looking at the growth drivers and how the different portions of our business are expected to evolve, let's have a look at our profitability.

At X-FAB, we had 4 key drivers. First of all, the top line growth and the increase of utilization. Our business is characterized by a strong operational leverage, as you can see on the next slide. And now let's visualize where our strong operational leverage comes from. As you can see and already explained, our fixed costs account for 2/3 of our total cost, which gives us a strong operational leverage, especially with the important additional capacity we set up in the last years. In other words, by increasing capacity in the still high demanded products, we planted the seeds not only for future growth, but also for future improvement of our profitability. For every additional dollar sales, it will translate into EUR 60 going directly to the bottom line.

Secondly, our profitability will be driven by economies of scale from the increased capacity at our existing sites. These effects will become visible over time as more capacity will be online. We also aim to improve our efficiency through our automation initiatives largely explained also by Damien. While it's not yet possible to quantify the savings, yes, as we are still in the process of implementing them. In the long term, they will help to increase productivity and output without additional investor headcount. At this stage, it's all about cost control and reduced spending. And we are now at the point where the major CapEx program is finally behind us. As you can see in this graph, the major CapEx program has been completed. And going forward, we will return to a CapEx ratio of 10% to 15% of annual sales, so partially already responding to a previous question. Whereas CapEx in the next few years, starting in 2026 will be at a low of 10% before it will return to a normalized level of 15% of our revenue. CapEx is equally split into maintenance CapEx and capabilities per CapEx. And in addition, there will be leverage with the [indiscernible] fundings as explained already, other findings, but also some customer prepayments for specific projects.

Such a major CapEx expansion was driving significant financial needs, which we have been able to limit to about $375 million of new credit lines. Also thanks to the about $300 million prepayment we received from customers through the LTA and also thanks to the $425 million of operational cash flow. In other words, despite the high level of CapEx, we kept a good balance between -- in our financial structure using from financial leverage, but not abusing from them.

Let's now have a look at our financial liabilities. On this slide, you can see the evolution of the net -- the net debt in dark blue and the financial liability from the prepayments we have received from our customers under LTAs in light blue. The debt includes net debt includes our 2 revolving credit facilities each of an amount of EUR 200 million, which were required to support our CapEx expansion and which are now not still fully utilized and some also lease and sale and leaseback we also put in place recently.

The first credit facility will expire in 2026 and the second in 2029. We don't expect to repay these credit facilities before maturity date. Actually, both have the option of an expansion -- 1-year expansion, which we might use and which provides us even with more flexibility. Of course, should we decide to repay them earlier, of course, we will do. We still have the option. In terms of the customer prepayments under long-term agreements, we have already started to repay a small part of them and at the end of the second quarter, liabilities related to the customer prepayments were amounting to $276 million, which means that the portion of $16 million has been already repaid. The vast majority will be repaid from now on until 2027. It's a steady program. While we have a large amount of debt outstanding, we are in a good position to manage the repayment program of both the credit lines and the customer prepayments. Our business is naturally hedged. Revenues and costs match in terms of currency split, as shown in the slide with the revenues and cost by currency for the year 2024 Therefore, exchange rate fluctuation do not impact our EBITDA, which is extremely important to protect our margins. in particular, in light of the weakness of the fluctuation of the euro dollar.

As you have been -- have you seen already, we significantly increased our bank loans both in U.S. dollar and in Europe to support all the CapEx you have seen. As our balance sheet is stated in U.S. dollar, we need to reevaluate our euro-denominated debt. which had an impact on our financial results. Due to this reevaluation of the euro-denominated debt, we reported an unrealized foreign exchange loss of 17 million in the second quarter this year. However, it's important to note that these are unrealized noncash items. And we partially also hedged this risk via U.S. dollar euro hedging contracts. Any risk on the short term has then been hedged, while we are still having some flexibility for the long term.

Let me conclude this section by sharing our financial targets. Where are we today? 2025 is performing above expectations, which is good news. Our guidance for 2025 remains unchanged with revenue in the range of $840 million to $870 million and an EBITDA margin between 24% and 27%. However, given what is going on around us with global turmoil, economic crisis, the near term is looking more uncertain than we could have anticipated. Even if the long term is looking good, we have decided that we will not guide towards specific numbers as we prefer to remain cautious.

Our long-term ambition is to achieve an average revenue growth across cycles in the high-single-digit range. We also want to grow our profitability, our EBITDA margin is expected to gradually increase to more than 30% over the long term, driven by our strong operational leverage, increasing utilization and economies of scale. We invested a significant amount of money, not doing so would have been a mistake as already explained by my colleagues, because we would have lost our customers, and we would have also lost market peers.

So we are very well pleased with how we have set ourselves up for future growth. Clearly, we are at a challenging point in this cycle, but we have made a strategic decision to focus on our key technology pillars, all of which have a high value and we believe we will deliver the growth for our group. In my 8 years journey with X-FAB has seen a lot of market cycles already and faced quite a nice number of challenges. But I have the feeling that we did the right thing so far. And we have prepared ourselves for future growth, allowing our customers to grow as well. And we remain a strong, stable and committed group.

My role as CFO is to make sure that we remain financially stable and strong also during down cycles and also that we remain an employer of choice for our teams and to enable our group improving quality and security of life by producing terrific products you have seen in many other presentations today, life-saving devices such as chips enabling, for example, liquid [indiscernible]. It's a keen work to get there.

So I take this opportunity to thank our teams, but also our banks, our investors, shareholders, customers, suppliers for contributing to our successful journey and of course, to all of you being here for your interest and for your presence here today. And by this, I pass the word back to Rudi.

Thank you, Alba. So what you heard today is that Azixa were mainly focusing on 2 megatrends. So the global warning and electrification of everything, the aging population and improving medical care, but also service and so forth for the elderly people. And this falls very nicely with, on the one hand, the markets we know very well. Automotive, Industrial and Medical. These are markets that we have familiar with. We know how to play with. We have a -- our customers know us, they recognize for what we are doing in these markets. And then we have the 3 pillars that were presented today. These are our strengths. We want to play further on this and investor where we are at our best and these 3 things, they fall fantastically together for the megatrends, the end markets and our strengths and I feel very strongly about the future and what I see is that also our customers. They recognize that they come to it up for the specialty technologies, the service and the customization and the co-creation that we do.

So what we see, finally, we have good demand and interest for what we are doing, and it gives us a lot of confidence in the future. Damien explained, and we are very glad we took the decision to invest in capacity because we were in a location. It was really hindering our business development. Now we are ready for growth. And when there is a yes, we're actually in a downturn. We are ready for growth. So when it turns around, we are ready to respond immediately and grow with our customers, but also widely with all the new applications that we're working on. We also talked about the geopolitics as the #1 European foundry. We are well placed in the whole geopolitics were somewhat seen as a neutral to supply of all geographies in the world. We're progressing well in automotive applications in China where the electric vehicle growth is the strongest in the world. And so we have the right technologies to serve that. And the ecosystem there is in need of specialty foundry technologies.

So all these elements, they fit very well together. And all they explained with when the growth is coming or CapEx program has come to an end. Our spending will drop significantly. The leverage -- so with every dollar that we -- extra revenue that we generate, we generate 16% of [indiscernible] to the bottom line. So we are very well place for the future.

And with this, I would like to thank everyone and open for the final round of questions. Our world from on electronics and electronics run on semiconductors, and we made down work in the real world where failure is not an option and precision is everything. For example, electric vehicles, smart factories, medical diagnostics, for decades, we've built that expertise, and now demand is catching up. The markets we serve aren't emerging, they are here, and they are growing. We prepared for this moment. We are ready for what's next.

[indiscernible] we must know what is important for us. So we sharpen our focus. We must understand that we don't compete about after all smaller ships as the others in the industry on. Instead, we follow different goals. Our customers build systems that sense, control and protect sales sheet translate the real world like cheap, pressure motion and some into digital signal. That is why for us, performance means something different. Stability, reliability and endurance even under the tougher condition. Our customer shipment for toll rate systems, [indiscernible] life saving device. In these applications, failure is not an option and [indiscernible] chip is [indiscernible]. So that is why X-FAB is not competing with digital giant processes, we serve a different purpose, we specialize in chips that handle the real world, not just data, but pressure, power, motion. This is the performance in the future depends on.

[indiscernible] performance is only growing. Tomorrow's markets need reliable and smart solutions. We help connect digital systems to physical reality through sensors, converters and driver ICs that make machines see here and response. We've spent years improving these technologies. Now demand is catching up. And the systems that will define the next decade depend on exactly what we do best.

Let's take a closer look. The way we move is changing fast, driven by electrification and autonomy. X-FAB chips help manage battery performance. So electric vehicles can drive farther and live longer. They help monitor surroundings and activate safety systems in milliseconds. X-FAB ship vehicles something essential since it helps us understand with higher watering down to an impact mentioning. What matters is the chips deliver the right signal at the right time in every condition, under heat, under pressure, under vibration. That's how we help all car brands around the world, improve their vehicles reach, drive more autonomously and become safer than ever before.

In industrial world, automation becoming the new standard factories will be smarter, more adeptness and energy rare. Except ships are part of the transformation. In the future, human-like robots will work in production [indiscernible] around the world. That will bring investor automation to a whole new level. These global run AI software. Our chips provide total contracts, enabling them to understand the [indiscernible], temperature and [indiscernible] material can handle because even the smartest algorithm need data from the real world and beyond sensing, we also manage power from energy conversion and saw information to flow control and wind turbines and smart grids or ships ensure that wherever activity is generated, transported or store, it happens with efficiency, safety.

We improve the daily lives of people we care about by powering devices that supports their urine, monitor their health and detect [indiscernible] early. With the chips we produce, our clients manufacturer during implants, ultrasound devices and lab on-chip solution for rapid test these applications demand high precision, low power and absolute reliability. And here we are, we don't just keep up there the technology that defines what's next? As the global population continues to age, the demand for compact intelligence and personalized medical solutions will accelerate. We build the technology to meet this growing need today and for the future.

It's amazing to see our development pay off in our core markets, meeting that demand doesn't happen by chance. Achieving success requires strategic planning, smart investment and robust infrastructure. Our latest expansion in Cushing is built for exactly that; to meet growing demand with high quality and reliability we are known for. Let's take a look.

[Presentation]

At X-FAB, each customer brings a new challenge, a new specification. We're able to adapt production in accordance to customer needs freely and with precision. We do so across 6 manufacturing sites we share quality systems, smart automation and big process know-how over the world. But to deliver this kind of flexibility, you need to know the complexity of the chip. Every single [indiscernible] up to 60 layers are structured [indiscernible] chop, measured, clean, over and over again. Every layer must align with nanometer precision. Every step must be controlled to is finance detail across hundreds of cycles across [indiscernible] of machines. All of this happened in the space thousands of times cleaner than in an operating room. This is not mass manufacturing, this is high mix, high-reliability production achieved may be measured in microns, but behind all these lies mountains of engineering. That's what we do every day.

We make complexity manufacturable to meet growing demand need more than capacity. You need the ability to scale without losing precision. That's why we've invested in expanding exactly what makes us strong. Flexibility, quality and process control. We have taken an important set of format with our new production lines in Kuching, Malaysia. It's the first facility we've developed from the ground and that represents over $600 million invested in capability, control and long-term growth insights, a new generation of tools enables automated wafer transport across the line. Integrated systems only for every step of the process in real time. This expansion is aligned with what our markets demand more speed, more flexibility and more volume.

This year, our production network has grown in capability in scale and efficiency. Our new line in Kuching adds to that strength. It expands on what we have already built; a system designed to handle complexity without delay or compromise. We are now able to run more product lines in parallel with dedicated process close, customized [indiscernible] and precise planning. This means better availability, reliable deliveries, and the confidence the quality and speed go hand in hand. For our customers, it is the assurance that even ambitious designs can scale and we delivered on time. For investors, it is a structure that is ready, not just for more volume, but for more opportunities from prototype to production from custom designs to industrial volume. X-FAB delivers the foundation that future applications will rely on.

We heard a lot of good news today. We've seen how demand is growing in mobility, industry and health care. We've shown how X-FAB technologies enable real-world applications in places that matter most. And we've seen how years of focused investments have turned into scalable, high-precision manufacturing with our new sites in Kuching now up and running. This isn't just growth, its preparation. We've built a structure that's ready to meet customers' needs to deliver reliably and to unlock new opportunities across the industries of tomorrow. That's what X-FAB stands for.