Soitec SA

PAR:SOI

Earnings Call Analysis

Soitec Announces 23% YoY Revenue Decline but Expects H2 Recovery

In the first quarter of fiscal year 2025, Soitec reported a revenue of EUR 121 million, a 23% decline from EUR 157 million in the same period last year, largely due to a 46% drop in Mobile Communications revenue caused by inventory corrections in the RF-SOI supply chain. Automotive & Industrial revenue also fell by 31%, impacted by a slower automotive market. However, the Edge and Cloud AI segment experienced a 47% growth, reaching EUR 46 million. Soitec anticipates recovery in the latter half of the fiscal year, maintaining its full-year revenue guidance and projecting an EBITDA margin of around 35%.

Revenue Overview and Q1 Performance

Soitec reported Q1 FY25 revenues of EUR 121 million, reflecting a 23% decline compared to EUR 157 million in Q1 FY24. The decline was attributed to a 24% drop on an organic basis, despite a slight positive currency impact of 1%. The decline in revenue was primarily driven by a significant reduction in Mobile Communications, where RF-SOI volumes were lower due to ongoing inventory corrections in the smartphone supply chain.

Challenges in Mobile Communications and Automotive Markets

Mobile Communications accounted for only 40% of total revenue, with RF-SOI revenue plunging 46% year-over-year to EUR 48 million. The automotive sector also faced challenges, with revenues declining 31% to EUR 26 million, primarily due to reduced volumes of Power-SOI. Soitec remains optimistic about the long-term growth of the automotive market, driven by digitalization and electrification trends, despite the current slowdown.

Positive Developments in Edge and Cloud AI

One bright spot for Soitec was the strong performance in the newly rebranded Edge and Cloud AI segment, which generated EUR 46 million, marking a 47% increase compared to the previous year. This growth indicates a burgeoning demand for power-efficient solutions in edge computing and data centers, aligning with current technology trends. The demand for Photonics-SOI, crucial for high-speed optical interconnection in data centers, also showed significant growth.

Future Growth Outlook and Guidance

Soitec reiterated its full-year guidance, anticipating a stable revenue outlook at constant exchange rates, with a projected 15% year-over-year decline in the first half of FY25. However, the company expects a strong recovery in the second half, particularly in RF-SOI as smartphone market conditions improve and inventory levels normalize. The FY25 EBITDA margin is anticipated to reach around 35%.

Strategic Developments and Product Innovation

The company is actively strengthening its customer relationships and exploring innovative solutions, such as extending partnerships to integrate RF-SOI technology into 3D IC solutions. This is expected to create new opportunities in the high-frequency applications and enhance smartphone capabilities in the 5G era. Soitec also plans to further expand its customer base in POI technology, with the ambition to secure more significant design wins in the coming years.

Summary and Investment Considerations

While external factors like inventory depletion and market slowdowns have impacted Q1 revenues, Soitec's diversified product offerings and focus on technology leadership position the company well for future growth. The expected recovery in H2 FY25 and strong growth in Edge AI applications present potential upside for investors, especially as the company capitalizes on trends in digitalization and electrification in key markets.

Earnings Call Transcript 2025-Q1

[Operator]

Hello, and welcome to the Soitec Fiscal Year 2025 First Quarter Revenue Call. Please note, this call is being recorded. [Operator Instructions]

I will now hand you over to your host, Pierre Barnabe, CEO, to begin today's conference. Please go ahead.

[Pierre Barnabé, executive]

Hello, everyone, and welcome to Soitec's conference call dedicated to the publication of our fiscal year 2025 first quarter revenue. This is a quarter covering the period from April to June 2024.

I'm Pierre Barnabe, Soitec's CEO. Together with me on this call are Lea Alzingre, our CFO; and Steve Babureck, our EVP, Strategy.

As usual, we will start with a few comments on our figures, and after that, we'll open the floor to questions.

As we had announced in May, we hit in Q1 '25 our bottom after a very strong Q4 '24 and before the expected rebound foreseen in the second part of the fiscal year. Q1 revenue is in line with our expectations when we disclosed our guidance for the full fiscal year '25. As we shared with you, the RF-SOI inventory corrections across value chain has continued to weigh on our Mobile Communications revenue. This correction offsets another very strong performance in POI.

Meanwhile, after a long period of very strong growth in Automotive & Industrial, we faced in Q1 the impact of a slower automotive market. We are carefully monitoring the automotive market this year, and we remain confident that further digitalization and electrifications of the automotive industry will remain powerful drivers for the years to come.

Regarding silicon carbide, we continue to progress on our road map and to build an entire ecosystem around our cutting-edge SmartSiC technology. I will come back to it later.

To complete the overview of our Q1 performance, we achieved a very solid growth in Edge and Cloud AI. We have rebranded our Smart Device division, now called Edge and Cloud AI, to better reflect the two dynamic markets we are addressing: edge AI and cloud AI. There will be no change in perimeter and reporting.

All in all, we remain confident that the expected RF-SOI recovery will occur in the second part of the fiscal year on the back of a recovery in the smartphone market, and we therefore reiterate our fiscal year '25 guidance.

So let me now outline our Q1 figures. Revenue in Q1 '25 reached EUR 121 million. This compares to EUR 157 million achieved in Q1 '24. It represents a 23% decline on a reported basis, breaking down between a 24% decline on an organic basis and a slightly positive currency impact of 1%.

Let's look now in more details at our Q1 revenue by end market, starting with Mobile Communications. With a sharp drop in the volumes of RF-SOI delivered in Q1 '25, Mobile Communications accounted for only 40% of our revenue. Indeed, Mobile Communications revenue reached EUR 48 million. This represents a 46% decrease excluding currency impact against Q1 '24. As mentioned earlier, RF-SOI sales have continued to be impacted by the ongoing inventory absorption across the smartphone supply chain. We continue to see signs of recovery in the smartphone market as well as improving inventory levels at fabless and OEMs.

In the first quarter of fiscal year '25, RF-SOI activities were slower to let persisting inventories flow down the value chain, resulting in substantially lower volumes compared to the first quarter of fiscal year '24. In the context of a resilient smartphone market and healthier inventory level, we are confident that the RF-SOI inventory absorptions among our direct customers will soon come to an end, and that our RF-SOI sales will recover in the second half of fiscal year '25.

To add one more comment about RF-SOI. We continue to strengthen our customer intimacy and bring innovative products to the market. In that perspective, we announced in Q1 '25 an extension of our partnerships with UMC to bring to the market the industry's first 3D IC solution for RF-SOI technology. As we extend the domain of RF-SOI solutions to 3D integration, our customers will be able to integrate more RF front-end modules into a single device by vertically stacking dies and using wafer-to-wafer bonding technology. Future smartphones will accommodate new frequency bands and visions for the 5G advance and 5G era while making room for new features to come.

Moving on to POI. The very strong traction that we delivered in fiscal year '24 has continued into fiscal year '25, with sales increasing quarter after quarter since the beginning of fiscal year '24. We recorded a sharp growth in POI wafer compared to Q1 '24. We continue to see an increasing number of customers validating the POI technology as a standard for RF filters. After 3 new customers,who entered into productions in H2 '24, we added another one in Q1 '24. This brings to up to 9 of total number of active customers. And we still have more than 10 in qualification phase.

Our strong tractions on POI leverages. The increasing adoption in discrete filters for the Chinese market, the ongoing second adoption wave is supporting more filter integration in complex [ front-end ] modules. As for FD-SOI, sales were slightly below the level of Q1 '24, illustrating a phasing effect. FD-SOI will continue to benefit from greater millimeter wave penetration, increasingly more premium smartphones, growing Wi-Fi 6 and 7 penetration and new application beyond smartphones.

Overall, we are confident in both short- and long-term prospects for Mobile Communications business, with the confirmed sign of recovery in the global smartphone market, the expected end of the RF-SOI inventory absorptions among our customers, the very positive momentum for POI and the strong positioning of FD-SOI.

Let's move now to Automotive & Industrial, which was not as robust as a very strong year achieved in fiscal year '24. Automotive & Industrial revenue reached EUR 26 million. This is a 31% year-on-year revenue decline excluding currency impact compared to Q1 '24. After several quarters of continuous and significant growth, our Q1 revenue has been impacted by a slower automotive market. The decline in revenue is essentially due to a drop in volumes of Power-SOI after several quarters of significant year-on-year growth, which led to very strong Q4 '24. We remain confident in Power-SOI prospect. Power-SOI is supported by a growing number of foundries and IDMs worldwide. And it is a key component for battery management systems, gate drivers and in vehicle networking.

FD-SOI wafers recorded another strong performance, supported by an increasing adoption for automotive microcontrollers, imagers, radars and wireless connectivity. FD-SOI is the greenest technology choice for the development of zonal architectures, advanced driver assistance systems, high functional safety applications, wireless communication, radar and edge computing. By embracing FD-SOI technology, the automotive industry can significantly reduce its carbon footprint without sacrificing performances. We are delivering on a growing demand for 28 nanometers and 22 nanometers FD-SOI as a platform to drive automotive systems with zonal computing and the recent adoption of 18 nanometers FD-SOI is a strong endorsement of our product road map.

Finally, we continue to progress on our SmartSiC roadmap, building up an entire ecosystems around our cutting-edge SmartSiC technology. The number of samples and prototypes that we delivered to more than 25 prospects globally continues to increase for evaluation and qualification processes. SmartSiC device qualification and SmartSiC wafer productions ramp up in our plant will continue step-by-step, driven by customer demand and EV penetration.

Looking ahead, we are confident on our SmartSiC road map and our ability to make SmartSiC a standard in a growing EV market.

Finally, we recorded strong growth in Edge and Cloud AI. Edge and Cloud AI accounted for 38% of our total revenue in Q1 '25. Revenue reached EUR 46 million, a strong 47% increase excluding currency impact compared to Q1 '24. It reflects different dynamics across our diverse products. Sales of FD-SOI wafers were below the level of Q1 '24 due to a phasing effect on deliveries. They continue to be supported by edge computing devices and, in particular, by the need for ultra-low power edge AI applications.

Sales on Imager-SOI were particularly strong in Q1 '25 as we benefited from a phasing effect. Sales of Photonics-SOI wafers were much higher than in Q1 '24. They were driven by the growing appetite for more powerful and more energy-efficient data centers to sustain the exponential growth of AI-related computing power capabilities. Photonics-SOI is now a standard technology platform for high-speed and high-bandwidth optical interconnection in data centers, adopted in pluggable optical transfers and used for the development of CoPackaged Optics.

Turning now to our fiscal year '25 outlook. As indicated earlier, we reconfirm our fiscal year '25 guidance. We expect our fiscal year '25 revenues to be stable at constant exchange rate and perimeter versus fiscal year '24. After the low point reached in Q1, we are expecting Q2 to improve sequentially as we confirm that H1 is expected to be at around minus 15% year-on-year at constant exchange rate and perimeter. Our full year guidance implies a strong recovery in H2. This recovery will be led by a sharp rebound in our RF-SOI as the inventory absorptions among our customers comes to an end in the context of a stronger smartphone market. It will also benefit from our strong growth in POI and Photonics-SOI. In addition, we also confirmed expecting our fiscal year '25 EBITDA margin to reach around 35%.

So as a conclusion, let me highlight that we are leveraging diversification of our product portfolio. We can now rely on a much better balance between our 3 divisions. Within each of these divisions, we have developed a much more diverse range of products. We are strengthening our strong leadership in SOI products, RF, FD, Power, Photonics, Imager and are succeeding in expansions beyond SOI into compound semiconductors, in particular, with POI but also SmartSiC.

This ends my opening remarks. Thank you for your attention. We are now ready to take your questions.

[Operator]

Our first question comes from Aleksander Peterc from Bernstein.

[Aleksander Peterc, analyst]

I just have two. So the first one is just on what exactly is going on in terms of the moving parts of your revenue in the first quarter. It seems to me that edge AI had a bit of a one-off boost in Imager-SOI. So if you could maybe clarify what you mean exactly by the phasing effect here?

And we had the big decline in auto. So if that continues into the remainder of the year, it seems to me you no longer have the offset of very strong edge AI. That looks like a bit of a one-off. So just correct me if I'm growing there so just explain to us whether automotive declines will continue at this pace? Or will this soften remainder of the year in your view?

And my second question is really on the qualification of SmartSiC at STM. Can you reiterate that this is still a calendar 2024 event? Or could it slip into 2025, given the softness in automotive?

[Pierre Barnabé, executive]

Aleksander, yes, indeed several questions, more than two. Because there are many moving parts we need to describe a bit more. Then you're right to mention that there are moving parts, but the good news, very good news is the ability of the Soitec groups. I would like to say the new Soitec groups to face up and down within a quarter depending on market demand. And it's very good to see that in front of a softened, let's say, automotive market, we managed to develop more activities around the Edge and Cloud AI. Thanks to Photonics and Imager, then to enter more into details.

If we look at Edge and Cloud AI, we benefit from imager orders. That is also showing that in this type of applications, we are providing high-level products. We managed also to face very important demands in Photonics-SOI and more and more to sustain the AI adoptions and data centers and also at the edge level. And this is also the ability of our manufacturing and plans to be versatile and to be flexible in the way we need to produce our different SOI, we like to say, wafers. That's the first one.

Second point is on the automotive. There is a slowdown in the growth that is impacting our Q1 revenue this year. We see a market that's going to be more or less flattish for us this year, particularly because Power-SOI demand is a bit slowing down. We had a very good fiscal year '24, as you know, and we need to see our customers and customers and customers getting more and more, let's say, demand from automotive users. But we see this market more or less in a flattish zone for Power-SOI and FD-SOI.

Looking at SmartSiC. We are in a adoption phase, as you know. What is very important is, I believe we need to start with the original point. The original point is coming from us because we are creating this standard. And on SmartSiC, we are exactly on time as a company, as Soitec. We are on time with what we promised to the market in terms of technology. We are on time in what we promised to the market in terms of product and the features of the product for the 150 millimeters and then 200 millimeters. We are on time in the building up of the ecosystems with polySiC, monoSiC providers. We are on time by having a factory that is up and running to produce massively.

Now it's a question of SiC demand and SIC market, okay? Then in the range of fiscal year '24, some qualification events will occur. But in fiscal year '25, some qualification events will occur. In fiscal year '26 qualification events will occur. Fiscal year '28, qualification events will occur also. Then it's a question of timing across the different customers. Because as we explained already, the automotive market is a complex market. We need to be qualified through different models, through different IDM or integrators, then there are calendars of qualification across the 3, 4 years to come. Then it's where we are working on.

What is super important at the end of the day is to keep very strong relationships with our customers, the 3 customers we have today, the 25 prospect we are working on today. And you're going to see across the quarters that step-by-step, we're going to expand our commercial footprint and we're going to make SmartSiC a standard in the years to come. And that's very important for our customers and our prospects to feel that we are ready, product, technology, ecosystem and manufacturing point of view.

[Aleksander Peterc, analyst]

So just to clarify because we know of one named Tier 1 customer you have in SmartSiC, STM. You can no longer commit to the fact that it's actually going to be 2024 event, calendar '24? I mean, I'm just asking because that's the one we know about. So I understand you're going to have more qualifications and so on. But we just need to know where the STM qualification stands.

[Pierre Barnabé, executive]

First of all, we cannot talk on behalf of any of our customers. As you know, we are just talking about what we commit. We still expect one part of the qualification by the end of fiscal year '24, okay? But we'll have other steps, as I said already. It's a [ steppable ] qualification process. You have the 150, then the 200, then you have different types of models and so on. And then it's a [ steppable ] qualification process, but we expect the first one by the end of fiscal year '24 -- '25, sorry.

[Operator]

We will take our next question from Sébastien Sztabowicz from Kepler Cheuvreux.

[Sébastien Sztabowicz, analyst]

On RF-SOI, could you please comment a little bit more on the level of inventory among your large foundry partners. Where they are standing right now? What kind of visibility you have really on the RF-SOI inventory? Or are you sure that by September, it will be more or less completed? This is [ first ] question.

[Pierre Barnabé, executive]

Then as we said, we see a rebound in the second half of the fiscal year '25. We are observing and monitoring very cautiously for the information we're gathering. Of course, they are open. There are also discussions with customers, and it's aggregations of many data. At the end of the day, we clearly see at fabless and OEM levels, inventories are in a replenishment mode in many cases, not everywhere but in many cases, with a strong, let's say, dynamics in China and other parts of the world. A bit less timid in Western world, but let's say, waking up step by step.

Regarding at the foundries level, it's a diverse picture. Some foundries are already in a replenishment mode. Others are still in a depletion mode, okay? Then average, the rebound going to come in second half fiscal year '25. But it's, what is clear the depletion is ongoing. Looking at the level of RF-SOI we had in Q1, you can guess that we are in a depletion mode. In Q2, it's going to continue. And we see on H2 replenishment and some active orders coming from the foundries -- in coming from China, but also coming from the rest of the world.

[Sébastien Sztabowicz, analyst]

And coming back to SmartSiC. There is a significant capacity addition on SiC wafers in China with TanKeBlue, SICC building up a lot of capacity. There is maybe some risk of other capacities in China. Is this something that could affect the development of your SmartSiC business going forward? .

[Pierre Barnabé, executive]

Today, the real trigger point for SmartSiC business is the demand of electric vehicles for the coming years. That's really the point. Because we know already the monoSiC production capabilities in China for years. We know already the level of prices that's expected by calendar '28, calendar '29. And we are prepared for that by having a plan to be cost-effective because our SmartSiC is, by structure, cost-effective. And the real differentiations we are bringing is still totally active and accurate and we are proving it with our 25 prospects.

That means concentration of dies, better conductivity, lower CO2 consumptions for the production but also for the running. Then this is really the 3 differentiators, 4 differentiators that are committing for our SmartSiC conquest. The real trigger point is not overproduction in China, prices of the monoSiC. I would like to say we are benefiting from it because we are buying some monoSiC wafer, and we are benefiting from this effect. The real question is the reasons of, let's say, adoption of electric vehicles across the world that's going to give the tempo for the SmartSiC adoptions and deliveries. This is really the name of the game. But from a technology and economical point of view, what is happening today in China, it's not a surprise to us, and we are prepared for it.

[Operator]

Our next question comes from Francois Bouvignies from UBS.

[Francois-Xavier Bouvignies, analyst]

My first question is, you talk about H2 recovery, but you reiterated the 15% decline in the first half which, after minus 25% in Q1, that would suggest a very sharp recovery already in Q2, I mean, more than 80% quarter-on-quarter. So I was wondering if you could explain what is driving this sharp recovery on a quarter-on-quarter basis by business line would be helpful. And if there is anything we should be aware of.

[Pierre Barnabé, executive]

Yes. First of all, the seasonality of Q2 higher than the Q1, it's quite classical with Soitec. And last year, we had a 70%, I believe, increase between Q1 and Q2, then something very comparable. We're going to benefit from growth effect in many domains and many products. And we see RF-SOI growing significantly compared, of course, to Q1, obviously. We see also FD-SOI higher figures. We see photonics, that's going to continue of course to increase because the demand for photonics is higher and higher. And of course, POI, that you're going to continue to progress, taking into account that each month we are making some progresses in the yield and the production capacity of our Bernin III factories.

And with these 4 main line of products, you can guess the big rebound we're going to get between Q1 and Q2. That's going to be also the drivers for the full year, the 4 main products we mentioned is going to be going to fuel the big growth also between H2 and H1 because we're going to get also a very big growth between the 2 semesters.

[Francois-Xavier Bouvignies, analyst]

And my follow-up would be on POI. As you mentioned 10 customers under qualification. And I was wondering, is there any customer that could change the scale of this business line. I mean, because for now, you had these 9 customers that you said and is growing fast, but I guess from a low base and you still don't want to disclose the percentage of revenue at POIs. So I guess it's not a big portion yet. So I was wondering if among these 10 customers, if there is any that can move the needle a bit more in terms of the size of your customer.

[Pierre Barnabé, executive]

Of course, we will have more and more customers that are going to move the needle. But the ambition we have since the beginning on each product we put on the market is to become a standard. Then having 9 customers today, 10 under qualification. Meaning 20 at the end of the day, you can guess that among the 20, we have big elephants. And of course, if we manage to get these 20 customers qualified and in production, we're going to be very close to declare POI as a standard. And this is part of our plan. Then POI is going to continue to grow very fast in the coming 2 to 3 years at minimum. And of course, in this trajectory, 3 or 4 big customers is going to be going to be part of this trajectory and the growth, for sure.

[Operator]

We will take our next question from Olivia Honychurch from Jefferies.

[Olivia Honychurch, analyst]

My first is on the mobile business. So we're hearing quite a lot of positive news flow across the industry around the smartphone market. And you've mentioned it in your comments around seeing the early signs of a recovery. We're also hearing that Apple is expecting pretty healthy builds across its supply chain for the iPhone 16. Is it possible that those trends could help drive a faster depletion or are helping to drive a faster depletion of RF-SOI inventories than what you had previously expected, and I guess following on from that, as a result, a quicker or steeper recovery after we get to that bottom in the inventory cycle?

[Pierre Barnabé, executive]

Yes. Of course, the rebound of the smartphone market is confirming and strengthening our signals and our visibility to experience a rebound on the second half of fiscal year '25 and of course beyond. But of course, it is taking time for us because of inventory depletions we are experiencing right now really in the minutes we are talking. That means that H2 going to see a replenishment and, for sure, more and more RF-SOI wafers to be delivered.

Then come the acceleration of the rebound of the smartphone market that could fuel a bit better growth. But that should come in the next years. And if we take the example of AI introduction within the phone and the expectation that people going to get back to new materials, new devices, this will occur by end of calendar '24, early calendar '25. That means that we're going to benefit from this effect right after. Of course, it's a good news for Soitec midterm, and that's going to reinforcing our $2 billion midterm revenue target. But this is -- this will come later. But the good news is that, it gives a very strong signals of growth and maybe acceleration of this growth in the smartphone industry.

And second, it's going to also give us hopes that the footprints in RF, FD going to increase because we are targeting here premium and high-end phones that, as you know, is benefiting to Soitec.

[Olivia Honychurch, analyst]

Great. My second is on FD-SOI for millimeter wave. How much of the market are you penetrated with here today? And how do you see that growing going forward? Is there a chance that you see adoption at some point outside of the Android side of the market?

[Pierre Barnabé, executive]

For the moment, as you know, millimeter wave is in the range of 15% adoption rate because limited to 3 main countries, one of which being, The States. The block removal would be China. But for the moment, there is no clear signal that China is going to adapt to millimeter wave solutions or millimeter wave like solutions. And we stick to 15%. And our model is betting on 25%. But what we see is more and more FD-SOI needs towards sustain this millimeter wave, let's say, features.

If you take the Galaxy S24, we have [indiscernible] millimeter square RF-SOI for front-end modules, but we have also 50-millimeter square of FD-SOI to sustain the millimeter wave capabilities for the U.S. model. It is also fueling the development of FD-SOI. But FD-SOI is not only dedicated for millimeter wave. We have other applications like unblock trackers, satellite connectivity and so on, for which a millimeter wave is -- sorry, FD-SOI is necessary. And we see more and more features fueling, of course, the need for a better footprint in our -- in the smartphones from Soitec.

And the AI adoptions could also fuel the extensions of the footprint. We expect an increase by 10% of the footprint in the early days. Whatever it is Android, Apple and so on, coverage.

[Operator]

We will take our next question from Didier Scemama from Bank of America..

[Didier Scemama, analyst]

I just wanted to go back to your second quarter guide, I think you guide first half down about 15%. And obviously, there's been much debate in your question on 80% or 88% plus growth in Q2. So I just wanted to go back to what you mentioned, Pierre, which is that Automotive & Industrial will be sort of flattish from here. So a, did I understand correctly? Is that a guide for Q2 and for the rest of the year?

And implicitly, if that's the case, where is the growth coming from? Is it mobile and edge and cloud AI? Maybe just give us a bit of color on how do you see the trends for these two markets. I appreciate Q1 is a very depressed level, well below, in fact, where you have been in the past. And Q2 has happened this sort of very brutal sequential growth rate. But surely, there is a lot of concern in the market that you might not be able to deliver on that guide in Q2 and in the second half. So maybe just give us a bit of color. And I've got a quick follow-up on [ filters ].

[Pierre Barnabé, executive]

Of course. If you remember last year, the Q1, Q2 sequence was plus 70%. Then this year, it's plus 80%, and we are really in the same range. And the performance we're going to reiterate this year, fueled by a rebound in RF-SOI because really we have reached a lower -- the lowest point in RF-SOI in Q1. Then we're going to increase significantly between Q2 and Q1 in RF-SOI. We're going to continue to grow and to accelerate the growth in POI, to accelerate the growth in photonics. And we also see a good momentum on FD-SOI, whatever the applications, of course, for edge and cloud AI applications, for automotive application and also smartphones, mobile communication applications. And these are the 4 engines of growth, RF, POI, photonics, FD-SOI that are going to bring us to around minus 15% decline in H1 from minus 24% in Q1. This is really what we see.

And giving -- taking the last part of your question on flavors and the filters and POI. As we say, the fact that you remember, 9 months ago, I was talking about 5 customers. We have today 9 customers. We are in qualification with 10 new customers, amongst which you understood my answer. There are big, big customers, very significant, let's say, game changers. Then you can imagine that the filters POI activity is going to continue to fuel the growth, not only in Q1 -- in Q2, sorry.

[Didier Scemama, analyst]

That's helpful. Just to clarify, your flattish commentary for autos, is that from the Q1 level for the rest of the year, which implies obviously a very significant decline for the full year. Or is it flat for the full year, so compared to 163 in fiscal year '24?

[Pierre Barnabé, executive]

Flattish for the full year. Taking into account, if you remember, that there are 3 big lines of product now within automotive, Power, FD-SOI and SmartSiC.

[Didier Scemama, analyst]

Absolutely. And I think you sort of answered my follow-up on the filter business. But on the sort of 9 plus 1 customers you have, I know you've got ambition to get to 30% market share in filters over time. And obviously, you seem to be quite enthused about your design win momentum with the other sort of big elephants in the market, as you call them. .

If you look at your 10 customers, currently, how much market share do they have in our [ centers ]? And if you were to convert the additional 10, would that give you that sort of magic, more than 50% market share, at least in terms of you're talking to them, you're shipping to them. You've got technology designed in those guys over time. So can you maybe just clarify that, that would be lovely.

[Pierre Barnabé, executive]

Yes. Then indeed, the filters market is a quite big market. We are with our technologies targeting the sole segment and a part of the board and the surface acoustic wave layers and a bit of the [ bond ] also layers. And there are other technologies, of course, existing to, let's say, provide filtering capabilities in the phones. Then among this market, what we are targeting, but perhaps we could revise a bit this target, but today what we are targeting is 30% market shares in the filtering business. Thanks to our POI technology. Looking at the trend and the trajectory today, this is a reachable target, could be perhaps revised at. But for the moment, this is what we are looking for.

[Operator]

We will take our next question from Emmanuel Matot from ODDO BHF.

[Emmanuel Matot, analyst]

Emmanuel speaking from ODDO. Two questions on my side. First, what normative level will you with your customers decide to keep for RF-SOI inventories in this new positive cycle for smartphone. Will it be lower, in line or higher than what we have seen before COVID according to you, What are your customers telling you on that topic?

And second, you had your shareholder assembly yesterday. When will the Board decide on the next Chairman, what is the time table?

[Pierre Barnabé, executive]

Thank you, Emmanuel. Then for the first question, we do believe that the level of inventories expected in the foundries particularly, but also in the whole value chain, in the whole supply chain going to be comparable to, let's say, pre-COVID level, even higher. Because what we see -- first of all, keep in mind that this level of inventory is made on the consumptions as it is today. But the consumptions will accelerate.

That means that to be sure, nobody will miss new designs to come. They need to get to a high level of inventory. We said it several times, but this between the time design is won by foundries and it is delivered into the phones, it's between 12 to 6 months depending on the quality of the phones.

That means that you can guess the level of inventory you need to have, including a buffer. Because what's going to be the next battle for the smartphone business to come, particularly with the next generation of smartphone, embarking AI is going to be to hit and to win the deals and to be able to deliver. That to be sure they're going to be able to deliver, they need enough inventories to catch these new deals to come. That's the reason why we do believe that the level of inventories will be quite comparable to pre-COVID, post-COVID in the middle effect. But we will never see the pre-COVID level of inventory that were too low, way too low because they want absolutely all of them to take the wave because the market shares to be taken will be expensive, and it's now, battery is starting now.

Then regarding the General Assembly, we had a very good general assembly. And of course, with the change of Chairman with Christophe Gégout taking the interim. It's a very smooth. Eric also keeping the role of strategic adviser to me. We are -- the Board is looking at profiles who could take over the chairmanship. There is no, let's say, timing pressures particularly because, again, we have a very good interim Chairman, who knows the company by heart and accepted by everyone. Then let's say that in the course of 1 year, we're going to -- the Board is going to be in a position, but I'm not talking on their behalf. But they're going to be in a position to find a new Chairman for the group.

[Operator]

We will take our next question from Adithya Metuku from HSBC.

[Adithya Metuku, analyst]

Yes. So firstly, just on Imager-SOI. I'm not sure I understood the response on phasing. I just wondered if you could give us some additional clarity on what exactly happened with Imager-SOI in the quarter that drove the revenues to be so strong.

And secondly, I believe last quarter, you said autos and industrial will grow in the double digits for the year. So now if autos and industrial is going to be flat for the year, what is helping you keep your fiscal year '25 guidance unchanged. Where are you more optimistic on demand versus a few months ago to make up for the slower expectations in the Automotive & Industrial division?

[Pierre Barnabé, executive]

I will come back to imager, but let's start with your question on automotive. That's right that few quarter, 1 quarter ago, we were looking at forecast by our customers. That has been revised, reflecting automotive demands and markets, and we need to be [ adaptive ] and we need to reflect what we see on the market demands and what we hear from customers. The very good news is that we are not losing market share. I would like to say that we are gaining market shares. If I just look at Power-SOI, we are getting more and more qualifications in this market, in this product. And we are talking about 300 millimeters now with many customers. Then from 200 millimeter, we prepare the future for 300, but we need to be [ adaptive ] to our demand.

And it's where Soitec is becoming more and more resilient and more and more flexible, is that we are able to, let's say, compensate this, let's say, slowdown in the automotive market by better, let's say, better forecast coming from Edge and Cloud AI, particularly coming from Photonics but not only and also FD-SOI, also compensated by a better POI forecast as we can see. And RF-SOI that has been, starting with Q1, a bit better than we were expecting. And all in one, we see clearly a flattish fiscal year '25 because we are able looking at up and down in the demand, thanks to the diversification of our product and customers, to be in a position to compensate, if any.

Regarding the Imager, it's a business quite concentrated. We have a seasonality effect on Q1. We're going to continue to sell some imager, of course, along the years. But there are some peak and we had a peak in Q1. We're going to get other orders later in the years to come. But this is a particular application for a particular, let's say, type of customers, I cannot disclose.

[Adithya Metuku, analyst]

Understood. Maybe just a quick follow-up on the Automotive & Industrial side, would it be fair to assume that the slowdown is mainly due to Power-SOI and nothing else has changed in your expectations from a few months ago?

[Pierre Barnabé, executive]

Yes, it's a slowdown really in terms of demand, nothing else. It's really linked to the market because, again, when we look at the market shares we have in Power-SOI and the needs to come, it's intact. And I would like to say we have more and more tractions in terms of qualifications.

When I look at FD-SOI, we see more and more adoptions in FD-SOI, which was part of my speech introductions. The fact to introduce AI in the cars going to be an incredible driver, an incredible leverage for FD-SOI adoption in the cars for the coming years. Because you're going to need FD-SOI to support AI application, to support new type of safety, entertainment and so on. And you're going to get also a need, a particular need for reducing power consumption in the cars. Power-SOI being, of course, also particularly fitting with -- for the battery management system in reduction of power consumption.

And SmartSiC, the fact that we are working with 25 prospect today on top of the 3 customers we have, is also giving us a lot of confidence that this technology is going to be adopted as a standard in the coming 5 to 7 years.

[Adithya Metuku, analyst]

Got it. But my question was specifically for the [ shape ], the reduction in expectations on the Automotive & Industrial division driven by Power-SOI and not by the other bits of Automotive & Industrial. Is that -- is my understanding correct or?

[Pierre Barnabé, executive]

It's an overall view that the combination of the main 3 product lines giving us to flattish yearly view for automotive industry.

[Operator]

Our next question comes from Daniel Schafei from Citi.

[Daniel Schafei, analyst]

Yes. So just again on autos and industrials. So I thought, given that initially, you were thinking more of double-digit growth for the year, now it's more flattish growth. How do you see the pace of recovery for this sector going forward? And, yes.

[Pierre Barnabé, executive]

For the auto, well, what we see, we just listened to the supply chain and we listened to the main players in automotive industry. There is a slowdown in electric vehicles. The slowdown in the growth of the electric vehicles because there is still a growth. The market is supposed to get back to intense growth level in the coming years. Then we're going to follow this demand and we're going to anticipate also these demands. Again, what are the main drivers for the automotive transformation is whatever the model, EV, hybrid commission, is digitalization for every model and electrification for hybrid and EV. We are providing products that are enhancing, enabling digitalization and electrification.

Then our portfolio of products is exactly answering these 2 main growth drivers. Then this is, at the end of the day, the main point. And the fact that we are increasing our market shares and the adoption level, I cannot disclose any names, but we are in discussions with customers, very important customers in automotive industries that are not today using SOI solutions for the moment. Then this -- if these prospect are becoming customers, it's going to be an acceleration in our market share. Then we're going to be -- when the automotive market, we're going to grow steady again. We're going to benefit more from this growth. Because in the meantime, we are preparing the ground to increase our market shares In power, FD and of course, SmartSiC.

[Daniel Schafei, analyst]

Great. And if you could also give us a little bit more color on how much growth of this in the auto and industrial sector will be driven by demand from China?

[Pierre Barnabé, executive]

Well, China, of course, is a very important market for us. As you know, we are growing more and more in China overall, whatever our portfolio and POI has benefited at the beginning from a very active Chinese market that was kind of greenfield for new technology adoptions. We see this phenomenon everywhere. Then if we look at the automotive market, of course, the EV market in China is very important. It's the first one. But overall, we believe that for automotive, China should wait something like 30% of our automotive industrial business, let's say, midterm. This is what we expect, reflecting more or less, finally, the car manufacturers end market volumes and value.

[Operator]

We will take our next question from Robert Sanders from Deutsche Bank.

[Robert Sanders, analyst]

I guess on SOI, Power, I was just wondering what your split is between 200 and 300 at the moment. I guess the reason I'm asking is because some of the [ BCD ] SOI tech is moving to 300-millimeter. And I know NXP, which is your largest customer, I think, in SOI Power has just announced a large expansion in 300. I was just interested to know if that is potentially something you can benefit from. And I have a follow-up. .

[Pierre Barnabé, executive]

Your question is on Power only, yes?

[Robert Sanders, analyst]

Yes, BCD, SOI, power, yes.

[Pierre Barnabé, executive]

Okay. On power, for the moment, it's only 200 millimeters, okay? Then we are working on, let's say, qualifying this 300-millimeter solutions. That is ongoing amongst many customers, including the one you mentioned. But there are, let's say, a list of among 5 customers, more or less, in which we are in the qualification phase, 200 and 300 millimeters. But for the moment, the products we are commercially selling and that are equipping the cars, it's 200 millimeters based.

[Robert Sanders, analyst]

And the other thing is just on millimeter wave. I noticed the latest iPad doesn't actually support millimeter wave anymore, which does kind of worry me that Verizon is kind of losing interest in millimeter wave. They just -- because Apple just discontinued millimeter wave support on the iPad Pro. I mean, how meaningful would it be if Apple was to drop millimeter wave support altogether on the iPhones?

[Pierre Barnabé, executive]

Well, we keep going that the penetration is going to be around 15%. After all, some telecom service providers could have some specific strategy, let's say, reflections that is not really impacting this 15%. We sell FD-SOI more and more to support millimeter wave, let's say, handsets, deliveries, particularly in the U.S. And as I say, if we take the S24 Galaxy by Samsung dedicated for the U.S. market, [indiscernible] millimeter square is dedicated for FD-SOI in order to mainly support with several modules millimeter wave adoption. And this -- we don't see some softening or slowdown in FD-SOI sales and adoption within the handset regarding millimeter wave.

[Operator]

It appears there are no further questions, so I will hand back to Mr. Pierre for any additional or closing remarks. Please go ahead, sir.

[Pierre Barnabé, executive]

Then thank you. Thank you for your interest in Soitec and the dynamic exchange this morning. The next date in our agenda will be the combined release of our Q2 '25 revenue and our H1 results on the 20th of November after market close. This ends our call for today. Thank you again.

[Operator]

This concludes today's call. Thank you for your participation. You may now disconnect.