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Earnings Call Analysis
Q2-2024 Analysis
Siltronic AG
In Q2 2024, Siltronic reported sales of EUR 351 million, representing a 2.3% increase from the previous quarter. This growth was driven primarily by higher wafer area sold, despite a sequential decline in EBITDA due to unfavorable foreign exchange (FX) impacts, resulting in an EBITDA margin of 25.8%. The company's net income for the quarter stood at EUR 22 million, showing resilience amidst ongoing market challenges.
With a total asset value of approximately EUR 4.6 billion as of June 2024, Siltronic has maintained a healthy equity ratio of 47%. The company has continued to invest heavily in expanding its capabilities, particularly with a focus on a new fabrication facility in Singapore—a major project expected to enhance future profitability. For 2024, Siltronic has revised its capital expenditures (CapEx) guidance downward to between EUR 500 million and EUR 530 million, reflecting a decline from previous years' investments of EUR 600-700 million.
The wafer industry continues to experience soft demand due to elevated inventory levels among chip manufacturers. Siltronic's management noted that despite signs of market growth, this has yet to translate into improved order intake, leading to a cautious outlook for H2. They expect high-single-digit percentage declines in sales compared to 2023 levels, tempered by effective cost management measures.
As the year progresses, Siltronic has upgraded its guidance for 2024, now anticipating sales to be in the high-single-digit percentage range lower than 2023, and an EBITDA margin ranging between 23% to 25%. Notably, this adjustment follows a strong first half of the year where EBITDA margins hit 26.1%. However, they anticipate a margin decrease in the second half due to factors like ramp-up costs from the new fab and planned maintenance of production lines.
Looking ahead, artificial intelligence (AI) is expected to be a significant growth driver. AI servers require substantially more silicon than conventional servers, creating a robust demand for DRAM and NAND chips. Siltronic's strategy includes preparing for this increased demand, supporting future growth as inventory levels stabilize and production ramps up.
Siltronic's financial leverage has increased, with net debt standing at EUR 639 million, following significant CapEx commitments. Management has indicated a commitment to refinancing some of this debt and ensuring robust working capital management to maintain liquidity during this challenging market period. Importantly, they have clarified that there are no plans for a capital increase, aiming to manage their financial structure prudently.
Siltronic continues to monitor competition closely, particularly from entities in Japan. Management has indicated no anticipated changes in market share for Siltronic, despite varying customer dynamics and their concurrent analysis of sector trends. The expectation is that as inventory levels normalize, there may be improved pricing dynamics, particularly for long-term agreements (LTAs) which remain stable.
In conclusion, while Siltronic faces ongoing challenges in the wafer market characterized by soft demand and elevated inventories, their strategic investments in new production capabilities, a disciplined approach to CapEx, and a focus on AI-driven growth present a cautiously optimistic outlook for the company. The management's ability to navigate market uncertainties while protecting margins will be vital in the upcoming quarters.
Hello, everyone, and welcome to the presentation of the Siltronic's Q2 2024 results. Please note that this call is being recorded and streamed on Siltronic's website. The call will also be available as an on-demand version later today. Your participation in this call implies your consent with us.
At this time, I would now like to turn the conference over to Verena Stutze, Head of Investor Relations and Communications of Siltronic AG.
Thank you, Morris. Welcome, everybody, to our Q2 2024 results presentation. This call will also be webcast live on siltronic.com. A replay of the call will be available on our website shortly after the end of the call. Our CEO, Michael Heckmeier; and our CFO, Claudia Schmitt, will give you an overview of our financials, the current market development and our guidance. After the presentation, we will be happy to take your questions.
Please note that management comments during this call will include forward-looking statements that involve risks and uncertainties. For a discussion of risk factors, I encourage you to review the safe harbor statement contained in today's press release and presentation. All documents relating to our Q2 '24 reporting are available on our website.
I now turn the call over to Michael for his remarks.
Thank you, Verena, and a warm welcome also from my side. As usual, let's start with the key messages of today's call. There were no major surprises in the second quarter of 2024, which continued to reflect a challenging demand environment for wafer due to elevated inventory levels in the chip industry. Therefore, end market growth is not translating into our order intake yet this year. Despite these challenges, we are on track to meet our full year guidance for 2024 and can even slightly upgrade it today towards the upper ranges.
To bridge the period of weak demand in the wafer industry until growth resumes, we have implemented a package of measures focused on cost and liquidity management. We already transitioned our production from max output to high productivity and efficiency when the demand weakness started last year. Accordingly, our labor costs were adjusted to the lower output, for example, by using working time accounts, reducing the number of temporary employees and implementing a qualified hiring freeze.
Additionally, we are continuously working on strict and effective working capital management. Our CapEx has been further reduced compared to the previous guidance. As previously communicated, the dividend for 2023 was halved and we have an even more intensified cost management in place.
Now let's take a high-level look at our Q2 developments and Claudia will present a detailed overview in a minute. The operating figures are in line with expectations and we managed to slightly increase our sales quarter-on-quarter. Our profitability remains solid with an EBITDA margin of 25.8%.
Although we have passed the peak of our investments, the CapEx primarily required for the ramp of our new fab in Singapore has, as expected, led to a continued negative cash flow. On the positive side, prices were almost stable quarter-on-quarter.
Claudia will now give you a deep dive into our financial performance before I report back with updates on the market development and the guidance. Claudia, please.
Thank you, Michael. A warm welcome also from my side. Let's jump directly into the analysis of our results. Q2 developed largely as expected, affected by soft demand, but with resilience.
Our sales came in at EUR 351 million, marking a 2.3% increase quarter-on-quarter, mainly driven by a higher wafer area sold. 5% FX remained almost stable. Our Q2 EBITDA reached the same solid level as Q1, EUR 91 million. The EBITDA margin of 25.8% was marginally down compared to the previous quarter.
The effect of the small sales increase was offset by a negative FX result of minus EUR 1 million in Q2, meaning a sequential decline of EUR 6 million. As expected, the beneficial as exceptions that were concluded in 2022 have mostly expired by the end of Q1.
Our EBIT came in at EUR 33 million, affected by an increase in plant depreciation in Q2. The financial results in Q2 is clearly reflecting the high investments with lower interest income from our casual securities and higher interest expenses for our debt financing. Taking all these factors into account, we concluded Q2 with a net income of EUR 22 million.
Let us now turn to the most important developments on our balance sheet. At the end of June, total assets summed up to roughly EUR 4.6 billion after EUR 4.5 billion by the end of '23. This change is mainly driven by our ongoing investments, which increased fixed assets by EUR 242 million. Consequently, our cash and securities has decreased to less than EUR 350 million by the end of June.
The equity ratio remained resilient at a very healthy level of 47%. Financial liabilities in H1 increased as we've drawn the first EUR 50 million of our syndicated loan in Q1 and another EUR 100 million in Q2, bringing our total loans to EUR 960 million by the end of June.
You may recall that our working capital ratio at the end of '23 was at an all-time low, mainly due to a CapEx-related surge in trade payables. In the first half of '24, we saw the reversal of this. The spillover from Q4 was significantly reduced. Trade payables decreased as planned to EUR 317 million at the end of June. Customer prepayments summed up to EUR 600 million with EUR 28 million received and EUR 15 million refunded.
In H1, our CapEx amounted to EUR 314 million. While our investment level is still elevated, it has significantly declined compared to the 2 halves of '23, during which we invested between EUR 600 million and EUR 700 million each. Reflecting our intensified focus on CapEx management, we have revised our full year CapEx guidance downwards for the second time this year, now targeting in a range between EUR 500 million and EUR 530 million. The majority of this CapEx is allocated to our new fab in Singapore.
Speaking about our new fab, the official grand opening ceremony took place on June 12, with the Deputy Prime Minister of Singapore Heng as a guest of honor. This event was a significant milestone for us that we will remember for a long time to come.
While ramping the new capacities, our major focus this year is on customer qualifications. This is crucial to ensure that we are fully prepared when the labor demand returns to growth. Depreciation for the new fab will start in Q4. This path is expected to boost our sales and EBITDA margin in the medium term.
The high degree of automation and a favorable product mix combined with the scale effect of both the existing site in Singapore and the 300-millimeter ecosystem at Siltronic will significantly increase the future profitability of the Siltronic Group.
Let's take a closer look at our debt situation. As illustrated in the bridge on the left-hand side, Siltronic had a net financial debt of EUR 356 million at the end of '23. Higher CapEx payments exceeded our operating cash flow in the first half of the year, partly due to the previously mentioned CapEx liabilities overhang from '23. In H1, we've recorded investment ground of EUR 32 million, which positively impacted our cash flow. On the other hand, we had a cash outflow of EUR 36 million for the dividend payment. In total, our net financial debt amounted to EUR 639 million.
You are already familiar with this financing picture, so I'll just provide a brief update. As mentioned before, we've drawn EUR 150 million of the syndicated loan in H1. A total of EUR 230 million has not yet been called up. As previously announced, we will undertake refinancing this year and are currently preparing for it. Please understand that we cannot precise this at the moment. More details will follow later this year. However, I would like to reiterate that we currently have no plans for a capital increase.
With this, I hand back to Michael.
Thank you, Claudia. When looking at this slide, let's start with some encouraging news. The end markets are mostly growing. Our end market growth forecasts have been slightly raised to around 6% in '24. This is driven by a better-than-expected smartphone recovery, although I would still call it modest and AI is starting to slightly improve net content PCs on top of stable PC unit recovery.
As you see, the main contributor for 2024 is the server growth driven by artificial intelligence. However, the still elevated inventories need to be reduced and this takes time. This inventory situation overshadows the positive trend from the end markets and result in an overall negative labor demand in the mid-single-digit percentage range. Overall, this is a slightly more positive picture compared to our April communication.
At this point, I'd like to emphasize that we have some encouraging results from chip manufacturers and designers in recent months. This is very pleasing. However, please keep an eye on what is actually driven by volume versus price. In many cases, it's predominantly price-driven, which is not related to wafer demand.
Now let's take a closer look at the key driver for 2024, artificial intelligence. An AI server can contain up to 8x more silicon content than a conventional server. The most significant content growth in an AI server is driven by DRAM, including high-bandwidth memory. SAI drives as well as DRAM in PCs and smartphones, the demand for DRAM chips have increased overall.
NAND is considered a smaller component in AI servers and also PCs and smartphones. This explains the modest recovery in on-chip demand. We will need both continuous growth in DRAM and a strong NAND recovery to reduce wafer inventory significantly.
The processing power in a AI server comes from [ GPUs ] as they provide the performance for the AI tasks such as deep learning. So more 2 CPUs are included in an AI server. About 1/5 of the silicon area in an AI server is dedicated to logic. In general, we continue to see elevated inventory levels for logic, but this varies significantly from customer to customer. In addition, power chips are essentially in AI servers and in electricity management for the complete data center. However, across all end markets, power inventories have not yet improved.
Let's now turn to the guidance for the financial year 2024, which we slightly upgraded. We now expect 2024 sales to be in the high-single-digit percentage range below 2023 levels. This is primarily volume-driven, but we also expect small effects from FX at the U.S. and euro-U.S. rate of $1.10 as well as product mix and pricing.
We have clearly improved our EBITDA margin guidance to the upper end and now expect it to be in the range of 23% to 25%. Given that our H1 2024 EBITDA margin was 26.1%, it's evident that we expect a lower margin for the second half of this year. This is due to several factors. On the one hand, we expect slightly negative price, product mix and FX impacts, especially weighing on H2.
Additionally, in Q4, the ramp costs of our new fab will be visible for the first time in our profitability. On the other hand, there will be a planned maintenance in one of our product key lines. To avoid the sales impact, we will see an inventory impact, which will negatively affect our margin.
There's no change in depreciation, which is projected to be below EUR 300 million. This is a significant increase from the prior year's EUR 203 million. As previously communicated, we have a stringent CapEx management in place. Therefore, we expect to further reduce CapEx this year from the April guidance of slightly below EUR 550 million to range between EUR 500 million and EUR 530 million. Due to the steep decline in CapEx, we anticipate a pronounced improvement in net cash flow, although it will still remain significantly negative.
As demonstrated this year, even starting from a modest base, our industry's future growth will be driven by significant trends such as AI, digitalization and electromobility. Therefore, we would like to conclude this presentation confirming our midterm ambition for 2028. We expect a substantial sales growth to more than EUR 2.2 billion and an improvement of the EBITDA margin to the high 30%s by 2028.
Thank you very much for your attention. And with this, we close our presentation and Claudia and I are happy to take your questions. Morris, please open the Q&A session.
[Operator Instructions] And the first question comes from Harry Blaiklock from UBS.
Wondering whether you could give a bit more color around what you're seeing this quarter that's driven you to lift full year guide versus what you previously expected, both on the top line level and EBITDA margin as well?
Sorry, acoustically, this was very difficult to understand. May we ask you to repeat the question a bit slower, please?
Of course, I'll try and be a bit clearer. I'm just wondering whether you could give some more color around what you're seeing that's driven you to lift the full year guide versus what you previously expected, both on the top line and margin as well?
Okay. Harry, to be honest, we're not sure we understood you correctly. But I assume your question was how we look at revenue and EBITDA going forward into this year? And what were the reasons for the guidance upgrade?
Yes, that's right.
Okay. Yes. So actually, I mean, we are now 7 months in the year and we have, I think, much better visibility. So therefore, after the, let's say, very sluggish beginning of the year, we had the 2 ad hoc communications, as you know, we did set the margins and the ranges in a way that we were almost certain to achieve them.
And this has now been more precise as well deeper into the year, 7 months are almost gone. And that was the main reason why we, on the one side, upgraded the sales guidance a bit to the higher range, mid-single digit decrease compared to last year. And high-single-digit -- sorry, high-single-digit compared to last year. And on the EBITDA side, we also could drive the guidance to the upper range that has been communicated in April.
Got it. And I'll try and ask another question. Hopefully, it's clear. But you mentioned the stronger demand isn't yet reflected in your order situation due to the elevated inventories. So when do you expect those orders to start coming through? Are customers saying that they're going to start ordering in H2 and that's what gives you confidence?
So this is a very difficult question, and thank you, Harry. The question we understand is how long will it take until the end market growth will make its way through the inventories of our customers and the supply chain. The honest answer is we don't know. It's a bit the crystal ball thing we started to talk about already last year, but it will come, every day will help. But today, we are not in a situation to give you a clear time line when we see a clear recovery coming through to our order books and then eventually to our sales.
And the next question comes from Constantin Hesse from Jefferies.
So quickly, just a very quick question, just on the mix of growth. What drove this volume increase quarter-over-quarter? Was it 300? Was it mainly 200? Just maybe some color there?
And a second question then, if we can talk a little bit about the pricing dynamics. So when you say that price, you expect a slightly negative price in the second half, is that mostly on the spot side? Maybe you can comment a little bit as well on customer behavior around long-term agreements. Are you seeing any pressure there? Or are you very confident that the long-term agreements are currently being set at this price -- at the higher price levels that you had expected?
Yes. Thank you, Constantin. First question was whether we have any specific comments on quarterly volume dynamics. I think we cannot comment in great detail, but I would call it pretty unspectacular. So there's nothing particular to mention on the volume side on the quarter-to-quarter situation.
Pricing-wise, we said, overall, we have a small pricing effect this year. So what we can say is LTAs are coming as contracted. There's no change in that one. And as we already communicated, we see some price dynamics on the non-LTA space. And we can also say it's more pronounced in smaller diameters, yes. So -- but this is overall a small effect, as we said and what I just said is partly explaining a small effect. So it's really small effects here and there.
But Michael, do you expect...
LTA side, LTAs, as we said, as contracted, we also don't see major LTAs expiring this year or next year. So also we manage it as we always do as a portfolio, I wouldn't say there's anything spectacular we can report today on the LTA space.
That's good. And then last question, I need to follow [ Henry ] on the momentum around inventories and orders. I mean, if you look at the inventory decline momentum that you have visibility on and you look at the current utilization that you're running on, you must have some kind of a view in terms of when you believe the destocking should be done. If you look at the current level of inventories coming down every month, even though it's not a pronounced decline, I mean, that should give you some visibility in terms of how many months you still expect this destocking cycle to continue given the current demand, I would assume.
And then around that, I'd also like to understand a little bit what's happening to power inventories. Do you see the risk of another potential downgrade to volumes, so in terms of utilization for you? If you can comment a little bit on that, that would be great.
Yes. Thank you, Constantin. As I said already, we're really reluctant to give a overall time line of recovery here. The situation is that it's really a mixed picture and depends also strongly on different customers. If we went into any more details, it would be really also competitive information, which of course, are not able to discuss in such a [indiscernible]. So therefore, inventory are decreasing in memory and logic, but still, it will take some time, is what we can say.
The good news is really that end market demand did slightly increase. I think that's on the positive side. The power, we don't have a Q2 data yet, yes. But you saw, of course, the report for instance, some of the customers. So there is inventory increase to be assumed there more than a decrease currently.
Okay. Understood. But when you talk to your customers, are they comfortable with the current amount of wafers that you're supplying? Or do you see any kind of pushback currently from your customers on the power side in terms of supply levels?
We had and I think we communicated that we had volume shifts already in this year and it's continuing here and there. That's maybe as much as I can say.
And the next question comes from Daniel Schafei from Citi.
Yes. Maybe just to add on to the last comment you just mentioned on volume shifts. Given that we've seen this in the second half of this year, do you expect any more to come given that, especially in power inventories are continuing to rise?
Yes, I think we have volume shifts. It's part of the current situation. And today, we cannot declare victory on the end of this. There will be some here and some there. And you highlight the power segment, so that good one where we also will face like the industry some further discussions, yes.
Okay. And then on LTA agreements given that you said they're coming in line with what you had specified before, given during the last call, you've mentioned that you have usually a corridor in which kind of this LTA pricing falls, do you see customers putting pressure and kind of going towards the lower end of the corridor? Or how do you see the environment there?
Yes. [Indiscernible]. Overall, for the whole year, a small price effect, yes. So the whole portfolio sees a small price effect. And the major sub effect here, we would call the non-LTA space, yes, where we see particularly on the smaller diameters, the pricing situation coming in. I don't think we should discuss more timely sub effects of this overall small price effect.
And the next question comes from Gustav Froberg from Berenberg.
First one is around the topic of volume shifts within the LTAs, et cetera. Did you see any pull in of wafer orders in Q2, i.e., for example, orders that were pushed out that were brought forward again? Or were there any other temporary or kind of one-off reasons that drove volumes in Q2? That's my first question.
So I think the short answer is no. We have no particular volume effects between quarters we want to mention here. What I could say is it's a bit different dynamics in memory logic and power, yes, but no particular quarterly volume shift at this point in time.
Okay. And then given a large portion of your sales are based on these long-term agreements, gives you pretty good visibility, are there any other moving parts in the second half that might drive variance towards your now new full year sales guidance?
Yes. It's mainly -- maybe I'll start with a high-level statement. Claudia can add to maybe a few comments on the cost side. But the main driver for the change of the guidance is really the top line where we could slightly go to the upper range of our earlier guidance, high-single-digit decline versus last year compared to around 10% was the previous guidance. And of course, this is a better than expected top line development is driving some further implications into the P&L on the cost side.
Gustav, I think there's nothing more to add. I think we disclosed all the influencing factors on our H2 profitability in the speech. So nothing more to add from my side.
Okay. All clear. Last one for me. Just on, I guess, product exposure, if you will. Could you help update us on how you see Siltronic exposed to memory, logic, power, et cetera, maybe relative to the overall market?
Yes. I think there is no change. These fundamentals don't change on a quarterly or monthly basis. So we are almost equally represented in these 3 segments and it's unchanged true that we maybe have a slight overexposure in memory.
I'm sorry, I didn't catch the last one. Slight overexposure, was that in memory?
In memory. Yes.
[Operator Instructions] And the next question comes from Juergen Wagner from Stifel.
I have a question on cash flow. How should we model it in the second half? And then in your handout, you talk a bit about AI server driving wafer demand. And where would you benefit first or more than your peers looking at the 5 products you have shown us?
I'll take your question regarding cash flow. So coming from the top line, or let's say, EBITDA, you see that EBITDA profitability is declining in the second half of the year. So there will be a pressure on our cash flow. But when you have a look at our CapEx guidance, between EUR 500 million and EUR 530 million and you deduct our H1 investment, which is slightly above EUR 300 million, so you see that our investment level is declining in the second half of the year.
But nevertheless, we are going to reduce our trade payables, which are mainly so CapEx related a bit further in the second half of the year. And our -- let's say, TSO are expected roughly the same as in the first half of the year.
Yes, and Juergen, answering your second question is very difficult. Where would we benefit more than peers. So of course, our peers also would like to know this. What I can say is, of course, the high-level considerations here would be that we have a bit overexposure in memory and what we already said, but that would hold true for everybody and that the power situation is inflating slightly on the inventory side.
I think these are the comments you can maybe build into any assumption of this AI demand on the silicon space, but I would be reluctant to go into more, let's say, competitive intelligence in this.
And the next question comes from Robert Sanders from Deutsche Bank.
I guess the first question just on the balance sheet. You say you're refinancing at the second half of this year. Just what portion of your outstanding debt is being refinanced? I see you have an undrawn syndicated loan of EUR 230 million as well. But I'm also interested in what is the maximum level of leverage based on net debt to EBITDA that you're willing to go to?
Hi, Robert. This is Claudia. I'll take your questions. Yes, you are right. We still have EUR 230 million, which has not been drawn out of the syndicated loan in addition to our slightly below EUR 350 million existing cash and securities. So you can assume that we are still cash rich and we can take a calm approach to refinance. And we are now preparing for it. And as I mentioned before, at this point in time, we cannot comment further on this, not the amount, not the instrument, except for it's not a capital increase.
Got it. And can you remind me how much to go to full build-out until -- in Singapore because it does worry me the amount of capital that you still need to spend to fit out that line and you don't really have enough operational cash flow to pay for it. So I'm still struggling to really understand how you're going to avoid doing a capital raise next year, to be honest.
Yes. We didn't disclose the total project amount is EUR 2 billion until end of this year and this still holds true. And then we are going to ramp this fab over several years, as we mentioned during our Capital Markets Day. We don't expect the fab to be fully ramped in 2028. So you see there are years to come during which we will ramp the fab and during which we will spend CapEx on this. So it's a stretched approach of CapEx. So we feel very comfortable with our financing for FabNext.
But last question then, just on FabNext. Why not just delay the fab another year? Yes, I understand you've made the [indiscernible] and you've opened it. You want to get on with it, but it is going to dilute your financials. It's going to take a while to be justified by the environment. Your loading is probably only 75% at the moment on your existing footprint in 300. So why not just do another delay?
So, Robert, this is Michael. I'll take this question. It's maybe not only on the finance side of things. Our new fab, of course, the key target for this year and also next year is qualifying products with customers, yes. And that takes time. So therefore, just pausing or stopping it for a while wouldn't make sense at all, because we have to make this fab ready when the demand is picking up.
So therefore, the current operations is running. We have some first qualified products, major qualifications to come in the next couple of months. And this is something that is ongoing at the multiple customers and particularly with the big customers. So we need to go through this with the customers together to be ready, then they can be shipped out of this fab once demand is picking up.
And -- okay, maybe to finalize and relate back to the CapEx spending. The speed we're doing this, we can adjust as we did already in '24 and '25. And that, of course, is then also related to the needed CapEx. If market is lower, we can also further pull the brake there. And then, of course, if market is speeding up, we want to be ready and then we would be also happy to spend the money on the CapEx side to fuel the demand that is coming.
And the next question comes from Martin Jungfleisch from BNP Paribas.
Just 2 questions, please. The first one is just on the phasing of the revenues in Q3 and Q4. So the guidance, I think, now suggest flattish sales in the second half versus the first half. I think you're not guiding quarterly, but is the assumption that Q3 should be up versus Q2 and then Q4 down or vice versa? Or should both be flattish quarter-on-quarter in terms of revenues?
And then the second question is on LTAs again. I'm not sure if you have commented already, but is there any larger LTA expiring this year?
Martin, thanks for your questions. As you know, we don't give any quarterly phasing. So therefore, if you do your simple math model, you will be fine and we will not give any quarterly guidance, Q3, Q4. On the LTA side, you're absolutely right. No major LTA is expiring neither this year nor next year.
And we do have a follow-up question from Daniel Schafei from Citi.
Yes. I just wanted to ask about prudency. In terms of market share, given that we've now seen a slight more positive tone from peers, especially in Japan. How do you see market share evolving for you going forward now this year and maybe also onwards?
Yes. I mean, when you look -- I mean, we don't have a lot of Q2 news from the industry, from our peers. But when we are analyzing carefully the statements around -- occurring around Q1 and what is out already for the rest of the year, we don't see it's a lot more positive than we are. In terms of market share, we don't see any significant changes for the time being, also not for this year. And we always have to have in mind some customer phasing, customer mix topics, but this is more a general mark than anything that is really applying to the current discussion.
Okay. Understand. And just maybe on wafer inventories. If we look now at SUMCO's presentation and in general, would you say you echo this that we see a decreasing dynamic in memory and logic on wafer inventories?
So as usual, we don't comment on particular peer's statements. But yes, we see an overall decrease in trend. It's particularly pronounced different customers. There is a different picture, different customers. That's the thing I would like to emphasize.
And then it will depend on further end market dynamics, how long it will take until the end market and is working its way through the overall situation. And I gave some hints about DRAM and NAND in the speech, right, that will take some more demand on both ends to eventually come then on the memory side to more normal levels again.
And we have another follow-up question from Constantin Hesse from Jefferies.
Just very quickly a maintenance question. Anything out of China or competition from alternative products such as SiC, [ Organ ], anything that you'd like to comment there or nothing major still?
So thanks, Constantin. We don't see there are no unusual China dynamics or anything compared to what we commented earlier, so they're working their way up into the wafer space. Still [indiscernible] technical differences in the higher-end 200 millimeter, particularly in leading edge.
Geopolitics is healthy there as they -- in the, let's say, local China ecosystem have not access to leading-edge technology to the respective machines, et cetera, et cetera. So I think that's unchanged as a general situation.
We see in the current more soft demand that also new technologies are -- the enthusiasm went down a bit. When you read the news, the silicon carbide news, [ GAN ] also became a bit more and more quiet. So we don't think there is a particular dynamical situation with new ones right now.
From a strategic perspective, there is no change, yes. But for us, SiC is not a topic and will not be a topic anymore. GAN we're still evaluating on an R&D scale. We will do some customer sampling and we're looking into the business development into a business model. But both are not a threat to the silicon world, yes.
Key statement still, it's below 5% in 2030 compared to the silicon area. Overall, so my summary would be SiC is gone. GAN is a potential opportunity for us. And for sure, both are not a threat for the silicon space.
Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Verena Stutze for any closing remarks.
Thank you, Morris. This concludes our Q&A session. Thank you for joining us today. Our Q3 figures will be released on October 24. Stay healthy and let's talk again soon.