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What changed in WOLFSPEED, INC.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of WOLFSPEED, INC.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+312 added−306 removedSource: 10-K (2023-08-23) vs 10-K (2022-08-22)

Top changes in WOLFSPEED, INC.'s 2023 10-K

312 paragraphs added · 306 removed · 227 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

38 edited+16 added−14 removed28 unchanged
Biggest changeWe also use contract manufacturers for certain products and aspects of product fabrication, assembly and packaging. We maintain captive lines at some of our contract manufacturers. Additionally, we recently opened a Silicon Carbide device fabrication facility in New York. We operate research and development facilities in North Carolina, California, Arkansas, Arizona and New York.
Biggest changeOur materials products and RF devices are used in military communications, radar, satellite and telecommunication applications. The majority of our products are manufactured at our production facilities located in North Carolina, California and Arkansas. We also use contract manufacturers for certain products and aspects of product fabrication, assembly and packaging. We maintain captive lines at some of our contract manufacturers.
Core to our ability to attract and retain talent is our high-performance culture, which is based on our three central values of (1) integrity and respect, (2) ownership and accountability, and (3) ingenuity and passion. We are committed to creating and sustaining a culture where all employees are engaged and can contribute to their full potential.
Core to our ability to attract and retain talent is our high-performance culture, which is based on our three central values of (1) safety, integrity and respect, (2) ownership and accountability, and (3) ingenuity and passion. We are committed to creating and sustaining a culture where all employees are engaged and can contribute to their full potential.
To further ensure that we can implement such standards, we are dedicated to: • providing a safe and healthy work environment for our employees; • complying with regulatory and other requirements; 7 Table of Contents • using natural resources, energy, and materials efficiently; • substituting sustainable resources in place of non-renewable resources; • reusing or recycling materials wherever technically possible and economically reasonable; • minimizing waste and disposing of waste safely and responsibly; • sourcing raw material responsibly; • implementing specific measures to prevent and minimize hazards to humans; and the environment including pollution prevention; and • consulting with and encouraging the participation of workers and workers’ representatives, as applicable.
To further ensure that we can implement such standards, we are dedicated to: • providing a safe and healthy work environment for our employees; • complying with regulatory and other requirements; • using natural resources, energy, and materials efficiently; • substituting sustainable resources in place of non-renewable resources; • reusing or recycling materials wherever technically possible and economically reasonable; • minimizing waste and disposing of waste safely and responsibly; • sourcing raw material responsibly; • implementing specific measures to prevent and minimize hazards to humans; and the environment including pollution prevention; and • consulting with and encouraging the participation of workers and workers’ representatives, as applicable.
We also have continued to make investments to promote and build market awareness of our Wolfspeed brand. Our sales, marketing and technical applications teams include personnel throughout North America, Asia and Europe. Customers In fiscal 2022, 2021 and 2020, we had two, three, and two customers that represented more than 10% of our consolidated revenue, respectively.
We also have continued to make investments to promote and build market awareness of our Wolfspeed brand. Our sales, marketing and technical applications teams include personnel throughout North America, Asia and Europe. Customers In fiscal 2023, 2022 and 2021, we had two, two, and three customers that represented more than 10% of our consolidated revenue, respectively.
We believe that the strength of our portfolio of patent rights is important in helping us resolve or avoid such disputes with other companies in our industry. Governmental Regulation We are subject to a variety of federal, state, local and foreign provisions regulating the discharge of materials into the environment or otherwise relating to the protection of the environment.
We believe that the strength of our portfolio of patent rights is important in helping us resolve or avoid such disputes with other companies in our industry. 7 Table of Contents Governmental Regulation We are subject to a variety of federal, state, local and foreign provisions regulating the discharge of materials into the environment or otherwise relating to the protection of the environment.
These controls, tariffs, regulations, and restrictions (including those related to, or affected by, United States-China relations, as discussed below in Item 1A of this Report) may have a material impact on our business, including our ability to sell products and to manufacture or source components.
These controls, tariffs, regulations, and restrictions (including those related to, or affected by, United States-China relations, as discussed below in Item 1A, "Risk Factors," of this Annual Report) may have a material impact on our business, including our ability to sell products and to manufacture or source components.
These customers, in the aggregate, accounted for 38%, 41%, and 33% of our total consolidated revenue in fiscal 2022, 2021 and 2020, respectively. For further discussion regarding customer concentration, please see Note 16, “Concentrations of Risk,” in our consolidated financial statements included in Item 8 of this Annual Report.
These customers, in the aggregate, accounted for 35%, 38%, and 41% of our total consolidated revenue in fiscal 2023, 2022 and 2021, respectively. For further discussion regarding customer concentration, please see Note 16, “Concentrations of Risk,” in our consolidated financial statements included in Item 8 of this Annual Report.
We aim to provide our employees with competitive compensation, as well as opportunities for equity ownership and developmental programs that enable continued learning and growth. We endeavor to utilize recruiting practices that yield qualified and dedicated employees who are driven to achieve our vision.
We aim to provide 8 Table of Contents our employees with competitive compensation, as well as opportunities for equity ownership and developmental programs that enable continued learning and growth. We endeavor to utilize recruiting practices that yield qualified and dedicated employees who are driven to achieve our vision.
Item 1. Business Overview Wolfspeed, Inc. (Wolfspeed, we, our, or us) formerly known as Cree, Inc., is an innovator of wide bandgap semiconductors, focused on Silicon Carbide and gallium nitride (GaN) materials and devices for power and radio-frequency (RF) applications.
Item 1. Business Overview Wolfspeed, Inc. (Wolfspeed, we, our, or us) is an innovator of wide bandgap semiconductors, focused on silicon carbide and gallium nitride (GaN) materials and devices for power and radio-frequency (RF) applications.
RF Devices Our RF devices compete with Ampleon Netherlands B.V., M/A-COM Technology Solutions Inc., BOWEI Integrated Circuits Co., Ltd., Mitsubishi, NXP Semiconductor N.V., RFHIC, Qorvo, Inc. and Sumitomo, which all offer competing RF products and solutions. Our products also compete with a variety of companies offering silicon and GaAs-based products.
RF Devices Our RF devices compete with Ampleon Netherlands B.V., MACOM Technology Solutions Inc., BOWEI Integrated Circuits Co., Ltd., Mitsubishi Electric Corporation, NXP Semiconductor N.V., RFHIC, Qorvo, Inc. and Sumitomo Corporation, which all offer competing RF products and solutions. Our products also compete with a variety of companies offering silicon and GaAs-based products.
Our research and development activity includes efforts to: • develop Silicon Carbide materials and fabrication technology for a 200mm platform; • develop higher performance power and RF devices; • increase the quality, performance and diameter of our substrate and epitaxial materials; and • continually improve our manufacturing processes.
Research and Development We invest significant resources in research and development. Our research and development activity includes efforts to: • develop silicon carbide materials and fabrication technology for a 200mm platform; • develop higher performance power and RF devices; • increase the quality, performance and diameter of our substrate and epitaxial materials; and • continually improve our manufacturing processes.
Our product families include Silicon Carbide and GaN materials, power devices and RF devices, and our products are targeted for various applications such as electric vehicles, fast charging, 5G, renewable energy and storage, and aerospace and defense.
Our product families include silicon carbide and GaN materials, power devices and RF devices, and our products are targeted for various applications such as electric vehicles, fast charging, 5G, renewable energy and storage, and aerospace and defense. Our materials products and power devices are used in electric vehicles, motor drives, power supplies, solar and transportation applications.
As market adoption of the technology grows with rapidly expanding power and RF device designs, we have experienced increased competition from companies such as II-VI Advanced Materials/Coherent, Inc., SiCrystal GmbH, IQE plc and Showa Denko K.K.
As market adoption of the technology grows with rapidly expanding power and RF device designs, we have experienced increased competition from companies such as Coherent, Inc., SiCrystal GmbH, IQE plc and Showa Denko K.K (now Resonac Holdings Corporation).
Because of changes in a number of factors, including manufacturing lead times and customer order patterns, we do not believe that our backlog, as of any particular date, is necessarily indicative of actual revenue for any future period. Significant amounts of our backlog relate to agreements that extend past one year.
Because of changes in a number of factors, including manufacturing lead times and customer order patterns, we do not believe that our backlog, as of any particular date, is necessarily indicative of actual revenue for any future period.
Working Capital For a discussion of our working capital practices, see “Liquidity and Capital Resources” in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations." Human Capital Employees As of June 26, 2022, we employed 4,017 regular full and part-time employees.
Working Capital For a discussion of our working capital practices, see “Liquidity and Capital Resources” in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations," of this Annual Report. Human Capital Employees As of June 25, 2023, we employed 4,802 regular full and part-time employees.
Compensation and Benefits We are focused on offering competitive compensation and comprehensive benefit packages designed to promote the physical and emotional well-being and financial health of our employees. Our total compensation package includes base pay, bonuses, stock-based compensation, employee stock purchase plans, employee referral bonuses, adoption assistance and a family care program.
Compensation and Benefits We are focused on offering competitive compensation and comprehensive benefit packages designed to promote the physical and emotional well-being and financial health of our employees. In addition to base pay, our total compensation package includes items such as bonuses, stock-based compensation, employee stock purchase plans and employee referral bonuses.
As of June 26, 2022, we owned or were the exclusive licensee of 675 issued U.S. patents and approximately 1,340 foreign patents with various expiration dates extending up to 2046, with certain patents expiring in the near term.
As of June 25, 2023, we owned or were the exclusive licensee of 703 issued U.S. patents and approximately 1,282 foreign patents with various expiration dates extending up to 2048, with certain patents expiring in the near term.
We believe our leading technology and leveraged production scale position us to reliably supply production volumes to the device manufacturers in the market. 6 Table of Contents Power Devices Our Silicon Carbide power devices compete with Silicon Carbide power semiconductor solutions offered by Infineon Technologies AG, ON Semiconductor Corporation, Rohm Co.
We believe our leading technology and leveraged production scale position us to reliably supply production volumes to the device manufacturers in the market. Power Devices Our silicon carbide power devices compete with silicon carbide power semiconductor solutions offered by Infineon Technologies AG, ON Semiconductor Corporation, Rohm Co. Ltd., and ST Microelectronics, as well as an increasing number of smaller competitors.
Ltd., and ST Microelectronics, as well as an increasing number of smaller competitors. Our Silicon Carbide products also compete with silicon semiconductor devices offered by a variety of manufacturers. Our power products compete in the power semiconductor market on the basis of performance, reliability and overall system price.
Our silicon carbide products also compete with silicon semiconductor devices offered by a variety of manufacturers. Our power products compete in the power semiconductor market on the basis of performance, reliability and overall system price.
Our substrate and wafer fab manufacturing facilities are certified to ISO 9001, IATF 16949 (automotive), and ISO 14001 (environmental). ISO 9001 is the international standard that specifies requirements for a quality management system and focuses on the ability to consistently provide products and services that meet customer requirements. IATF 16949 is the highest international quality standard for the automotive industry.
ISO 9001 is the international standard that specifies requirements for a quality management system and focuses on the ability to consistently provide products and services that meet customer requirements. IATF 16949 is the highest international quality standard for the automotive industry. ISO 14001 is an internationally agreed upon standard for an environmental management system.
Backlog Our backlog at June 26, 2022 was approximately $2.2 billion, compared with a backlog of approximately $763.9 million at June 27, 2021.
Backlog Our backlog at June 25, 2023 was approximately $2.9 billion, compared with a backlog of approximately $2.2 billion at June 26, 2022.
Back-end processes include the assembly, test and packaging of semiconductors to make them suitable for use and sale. Yields in our manufacturing process can vary and are dependent upon multiple factors including product complexity and performance requirements as well as the maturity of the process. In order to maximize both yield and quality, we maintain in-line process monitoring and testing.
Yields in our manufacturing process can vary and are dependent upon multiple factors including product complexity and performance requirements as well as the maturity of the process. In order to maximize both yield and quality, we maintain in-line process monitoring and testing.
We aim to provide a safe and healthy work environment through various measures, including accountability for health and safety performance with line management, setting acceptable levels of risk based on government regulation or industry best practice, and evaluating health and safety incidents to prevent recurrence, among other programs. 8 Table of Contents In response to the COVID-19 pandemic, we implemented safety protocols and new procedures to protect our employees, customers and suppliers.
We aim to provide a safe and healthy work environment through various measures, including accountability for health and safety performance with line management, setting acceptable levels of risk based on government regulation or industry best practice, and evaluating health and safety incidents to prevent recurrence, among other programs.
We are striving to build an environment where inclusivity is real and active, rather than theoretical and static. We celebrate our employees’ differences and authenticity, and understand that diverse ideas, perspectives, thinking styles, and backgrounds produce higher quality decisions, enabling us to solve problems other companies consider to be impossible.
We celebrate our employees’ differences and authenticity, and understand that diverse ideas, perspectives, thinking styles, and backgrounds produce higher quality decisions, enabling us to solve problems other companies consider to be impossible.
Our June 26, 2022 backlog contained $20.0 million of research contracts signed with the U.S. Government, all of which were appropriated as of the last day of fiscal 2022. Our June 27, 2021 backlog contained $12.6 million of research contracts signed with the U.S. Government, all of which were appropriated as of the last day of fiscal 2021.
Our June 26, 2022 backlog contained $20.0 million of research contracts signed with the U.S. Government, all of which were appropriated as of the last day of fiscal 2022. Our backlog could be adversely affected if the U.S. Government exercises its rights to terminate our government contracts.
For further information about our research and development costs, see “Research and Development” in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations." Sales and Marketing We have continued to make investments to expand our sales, marketing and technical applications support, as well as distribution capabilities to further enable new and existing customers to design and implement our Silicon Carbide and GaN materials, power, and RF technology into their products.
Sales and Marketing We have continued to make investments to expand our sales, marketing and technical applications support, as well as distribution capabilities to further enable new and existing customers to design and implement our silicon carbide and GaN materials, power, and RF technology into their products.
Our Silicon Carbide power products provide increased efficiency and faster switching speeds and as a result, reduced system size and weight over comparable silicon power devices.
Power Devices Our power device products consist of silicon carbide Schottky diodes, metal oxide semiconductor field effect transistors (MOSFETs) and power modules. Our silicon carbide power products provide increased efficiency and faster switching speeds and as a result, reduced system size and weight over comparable silicon power devices.
Power products are sold to customers and distributors for use in applications such as electric vehicles, including charging infrastructure, server power supplies, solar inverters, uninterruptible power supplies, industrial power supplies and other applications. 4 Table of Contents RF Devices Our RF devices consist of GaN-based die, high-electron mobility transistors (HEMTs), monolithic microwave integrated circuits (MMICs), and laterally diffused MOSFET (LDMOS) power transistors that are optimized for next generation telecommunications infrastructure, military and other commercial applications.
RF Devices Our RF devices consist of GaN-based die, high-electron mobility transistors (HEMTs), monolithic microwave integrated circuits (MMICs), and laterally diffused MOSFET (LDMOS) power transistors that are optimized for next generation telecommunications infrastructure, military and other commercial applications.
Competition Silicon Carbide and GaN Materials We have continued to maintain a well-established leadership position in the sale of Silicon Carbide wafer and Silicon Carbide and GaN epitaxy products.
We believe our operations are currently not materially impacted by our ability to source raw materials, components and equipment used in manufacturing our products. Competition Silicon Carbide and GaN Materials We have continued to maintain a well-established leadership position in the sale of silicon carbide wafer and silicon carbide and GaN epitaxy products.
In select cases, we have purchase contracts with suppliers in place to help insure our supply. In other cases, we purchase items pursuant to discrete purchase orders. Our suppliers are located around the world and can be subject to constraints beyond our control that may limit supply.
In other cases, we purchase items pursuant to discrete purchase orders. Our suppliers are located around the world and can be subject to constraints beyond our control that may limit supply. We believe our current supply of essential materials is sufficient to meet our needs. However, shortages have occurred from time to time and could occur again.
Products Silicon Carbide and GaN Materials Our Silicon Carbide materials products consist of Silicon Carbide bare wafers, epitaxial wafers, and GaN epitaxial layers on Silicon Carbide wafers. Our Silicon Carbide materials are targeted for customers who use them to manufacture products for RF, power and other applications.
Our silicon carbide materials are targeted for customers who use them to manufacture products for RF, power and other applications. Corporate, government and university customers also buy silicon carbide and GaN materials for research and development directed at RF and power devices.
ISO 14001 is an internationally agreed upon standard for an environmental management system. Sources of Raw Materials We depend on a number of suppliers for certain raw materials, components and equipment used in manufacturing our products, including certain key materials and equipment used in critical stages of our manufacturing processes.
Sources of Raw Materials We depend on a number of suppliers for certain raw materials, components and equipment used in manufacturing our products, including certain key materials and equipment used in critical stages of our manufacturing processes. In select cases, we have purchase contracts with suppliers in place to help ensure our supply.
We have focused on forecasting demand further out in time in order to secure raw materials that may have extended lead times and we have been working with suppliers to develop purchase agreements that provide supply over extended time periods.
We are focused on forecasting demand with sufficient time necessary to secure raw materials that may have extended lead times and we continue to work with suppliers to develop purchase and capacity agreements that secure supply over extended time periods, including accommodating our suppliers' need for capital investment when needed.
Wolfspeed, Inc. is a North Carolina corporation established in 1987, and our headquarters are in Durham, North Carolina. For further information about our consolidated revenue and earnings, please see our consolidated financial statements included in Item 8 of this Annual Report.
For further information about our consolidated revenue and earnings, please see our consolidated financial statements included in Item 8 of this Annual Report. Products Silicon Carbide and GaN Materials Our silicon carbide materials products consist of silicon carbide bare wafers, epitaxial wafers, and GaN epitaxial layers on silicon carbide wafers.
Silicon Carbide substrate manufacturing occurs in our highly complex materials factory and involves production of a bare wafer substrate with or without epitaxy. Our front-end processes occur in manufacturing facilities called "wafer fabs". These processes involve several hundred manufacturing steps required for imprinting silicon carbide wafers with the precise circuitry required for semiconductor devices to function.
Manufacturing assets are managed together through one centralized organization to ensure we leverage scale in asset utilization, purchasing volumes, and overhead costs across the business. Silicon carbide substrate manufacturing occurs in our highly complex materials factory and involves production of a bare wafer substrate with or without epitaxy. Our front-end processes occur in manufacturing facilities called "wafer fabs".
We are starting to experience higher prices on our raw materials as a result of inflation pressures, including base price increases and price surcharges. Additionally, we have continued to experience impacts with logistics, including increased freight costs and lower shipping capacities.
We continue to experience higher prices on our raw materials as a result of inflation pressures, including base price increases and price surcharges. We have mitigated these increases by leveraging our growth to negotiate efficiencies and productivity-based cost reductions.
We also provide custom die manufacturing for GaN HEMTs and MMICs that allow a customer to design its own custom RF circuits to be fabricated by us, or have us design and fabricate products that meet their specific requirements. Research and Development We invest significant resources in research and development.
We also provide custom die manufacturing for GaN HEMTs and MMICs that allow a customer to design its own custom RF circuits to be fabricated by us, or have us design and fabricate products that meet their specific requirements. 4 Table of Contents As discussed more fully in Note 17, “Subsequent Events,” in our consolidated financial statements included in Item 8 of this Annual Report, on August 22, 2023, we entered into a definitive agreement (the RF Purchase Agreement) to sell certain assets comprising our RF products line (the RF Business) to MACOM Technology Solutions Holdings, Inc.
Our backlog could be adversely affected if the U.S. Government exercises its rights to terminate our government contracts. 5 Table of Contents Manufacturing We manufacture Silicon Carbide substrates, Silicon Carbide MOSFETs, Schottky diodes and power modules as well as GaN on Silicon Carbide RF devices and LDMOS power transistors.
Manufacturing We manufacture silicon carbide substrates, silicon carbide MOSFETs, Schottky diodes and power modules as well as GaN on silicon carbide RF devices and LDMOS power transistors. We utilize manufacturing facilities located in the United States in combination with assembly and test subcontractors throughout Asia.
Removed
During and prior to fiscal 2021, we designed, manufactured and sold specialty lighting-class light emitting diode (LED) products targeted for use in indoor and outdoor lighting, electronic signs and signals and video displays. On March 1, 2021, we completed the sale of certain assets and subsidiaries comprising our former LED Products segment (the LED Business) to SMART Global Holdings, Inc.
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Additionally, we recently opened a silicon carbide device fabrication facility in New York and started construction on a new materials manufacturing facility in North Carolina. We operate research and development facilities in North Carolina, California, Arkansas, Arizona and New York. Wolfspeed, Inc. is a North Carolina corporation established in 1987, and our headquarters are in Durham, North Carolina.
Removed
(SGH) and its wholly owned subsidiary CreeLED, Inc. (CreeLED and collectively with SGH, SMART) (the LED Business Divestiture). As a result, we have classified the results and cash flows of our former LED Products segment as discontinued operations in our consolidated statements of operations and consolidated statements of cash flows for all periods presented.
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Power products are sold to customers and distributors for use in applications such as electric vehicles, including charging infrastructure, server power supplies, solar inverters, uninterruptible power supplies, industrial power supplies and other applications.
Removed
Unless otherwise noted, discussions within this Annual Report relate to our continuing operations. Our materials products and power devices are used in electric vehicles, motor drives, power supplies, solar and transportation applications. Our materials products and RF devices are used in military communications, radar, satellite and telecommunication applications.
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(MACOM) for approximately $75 million in cash, subject to a customary purchase price adjustment, and 711,528 shares of MACOM common stock (the Shares), valued at $50 million based on the trailing average closing price for MACOM’s common stock for the 30 trading days ending on August 21, 2023 (the RF Business Divestiture).
Removed
On October 4, 2021, we changed our corporate name from Cree, Inc. to Wolfspeed, Inc. In addition, we transferred the listing of our common stock to the New York Stock Exchange (NYSE) from The Nasdaq Global Select Market (Nasdaq).
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We will retain certain pre-closing liabilities associated with the RF Business. In connection with the RF Business Divestiture, MACOM will assume control of the Company’s 100mm gallium nitride wafer fabrication facility in Research Triangle Park, North Carolina (the RTP Fab) approximately two years following the closing of the transaction (the RTP Fab Transfer).
Removed
We ceased trading as a Nasdaq-listed company at the end of the day on October 1, 2021 and commenced trading as a NYSE-listed company at market open on October 4, 2021 under the new ticker symbol ‘WOLF’. The majority of our products are manufactured at our production facilities located in North Carolina, California and Arkansas.
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The Company will continue to operate the RTP Fab and supply MACOM with Epi-wafers and fabrication services pursuant to a Master Supply Agreement (the RF MSA) between the date of the Closing and the date on which the RTP Fab Transfer is complete (RTP Fab Transfer Date).
Removed
Corporate, government and university customers also buy Silicon Carbide and GaN materials for research and development directed at RF and power devices. Power Devices Our power device products consist of Silicon Carbide Schottky diodes, metal oxide semiconductor field effect transistors (MOSFETs) and power modules.
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Prior to the RTP Fab Transfer Date, the Shares will be subject to restrictions on transfer and we will forfeit one-quarter of the Shares if the RTP Fab Transfer has not occurred by the fourth anniversary of the closing. The Company expects to close the transaction by the end of calendar 2023.
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We utilize manufacturing facilities located in the United States in combination with assembly and test subcontractors throughout Asia. Manufacturing assets are managed together through one centralized organization to ensure we leverage scale in asset utilization, purchasing volumes, and overhead costs across the business.
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For further information about our research and development costs, see “Research and Development” in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations" of this Annual Report.
Removed
We believe our current supply of essential materials is sufficient to meet our needs. However, shortages have occurred from time to time and could occur again. For raw materials used in semiconductor production, the global semiconductor shortage has put pressure on the ability to obtain some raw materials.
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Significant amounts of our backlog relate to agreements that extend past one year. 5 Table of Contents Our June 25, 2023 backlog contained $18.4 million of research contracts signed with the U.S. Government, all of which were appropriated as of the last day of fiscal 2023.
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We are closely following logistical impacts as they happen and are working closely with suppliers to prepare shipping arrangements in advance of departure dates to ensure we secure logistics slots. We have and may continue to experience isolated issues with our suppliers related to the COVID-19 pandemic.
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Design-ins Design-ins for the fiscal year ended June 25, 2023 were $8.3 billion, compared with design-ins of approximately $6.4 billion for the fiscal year ended June 26, 2022. For further information about our design-ins, see “Research and Development” in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of this Annual Report.
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These issues usually relate to extensions of lead times or impacts due to work force restrictions imposed at a regional level. When these occur, we closely monitor deliveries with suppliers to help us have the opportunity to decrease or eliminate any future delays.
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These processes involve several hundred manufacturing steps required for imprinting silicon carbide wafers with the precise circuitry required for semiconductor devices to function. Back-end processes include the assembly, test and packaging of semiconductors to make them suitable for use and sale.
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We have been successful in managing through these issues and we believe our operations are currently not materially impacted by our ability to source raw materials, components and equipment used in manufacturing our products.
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Our substrate and wafer fab manufacturing facilities are certified to ISO 9001, IATF 16949 (automotive), and ISO 14001 (environmental). Our silicon carbide device fabrication facility in Marcy, New York is certified to ISO 9001 and is in the process of being certified for IATF 16949 and ISO 140001.
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In line with guidance from the World Health Organization, Center for Disease Control, local health authorities and other governmental authorities, we have implemented numerous preventative hygiene and safety measures at our facilities, and moved to a fully remote work model for employees who were able to perform their job duties from an off-campus location.
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China recently announced an export restriction of gallium and germanium, two metals mined from the earth and used in the manufacturing of semiconductors and electronics. We do not purchase these metals directly. While we do purchase two products containing gallium, these products are not within the current export restrictions.
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As the pandemic continues, the health and well-being of our workforce remains a top priority while we work to ensure productivity for those employees working from home.
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We will continue to monitor our exposure but at this time we do not expect to be materially affected by China's current export restriction. 6 Table of Contents We have continued to be successful in managing through these current issues and have shown the ability to navigate through significant supply challenges, including multiple COVID-19 pandemic supply chain constraints and natural gas supply limitations forced upon some of our European suppliers.
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Recently, some employees have returned to working in the office, however, we also offer a 'work where it works' arrangement that allows certain employees to continue to have the option of working remotely part-time or full-time. Diversity and Inclusion We believe diversity, equity, and inclusion drives better business results and makes all of us better employees and people.
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Our benefits package includes employee learnings, health and welfare, tuition reimbursement, student loan repayment, several wellness and emotional support options, adoption assistance and a family care program. Additionally, we sponsor a 401(k) employee benefit plan for our U.S. based employees and we match a defined percentage of employee contributions.
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We continue to maintain certain safety protocols and procedures put in place in response to the COVID-19 pandemic, including an extensively used 'work where it works' arrangement that allows employees who are able to perform their job duties from an off-campus location to continue to have the flexibility of working remotely full-time or part-time.
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Diversity, Equity and Inclusion We believe diversity, equity, and inclusion drives better business results and makes all of us better employees and people. We are striving to build an environment where inclusivity is real and active, rather than theoretical and static.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

90 edited+27 added−19 removed108 unchanged
Biggest changeIn order to manage our growth and business strategy effectively relative to the uncertain pace of adoption, we must continue to: 12 Table of Contents • maintain, expand, construct and purchase adequate manufacturing facilities and equipment, as well as secure sufficient third-party manufacturing resources, to meet customer demand, including specifically the expansion of our Silicon Carbide capacity with the opening of a state-of-the-art, automated 200mm capable Silicon Carbide device fabrication facility and an expansion of our materials factory; • manage an increasingly complex supply chain (including managing the impacts of ongoing supply constraints in the semiconductor industry) that has the ability to supply an increasing number of raw materials, subsystems and finished products with the required specifications and quality, and deliver on time to our manufacturing facilities, our third-party manufacturing facilities, our logistics operations, or our customers; • access capital markets to fund our growth initiatives, including our ongoing capacity expansions; • expand the capability of our information systems to support a more complex business, such as our current initiative to implement a new company-wide enterprise resource planning (ERP) system; • be successful in securing design-ins across our end markets, including automotive applications; • expand research and development, sales and marketing, technical support, distribution capabilities, manufacturing planning and administrative functions; • safeguard confidential information and protect our intellectual property; • manage organizational complexity and communication; • expand the skills and capabilities of our current management team; • add experienced senior level managers and executives; • attract and retain qualified employees; and • execute, maintain and adjust the operational and financial controls that support our business.
Biggest changeIn order to manage our growth and business strategy effectively relative to the uncertain pace of adoption, we must continue to: • maintain, expand, construct and purchase adequate manufacturing facilities and equipment, as well as secure sufficient third-party manufacturing resources, to meet customer demand, including specifically the expansion of our silicon carbide capacity with the opening and ramping of a state-of-the-art, automated 200mm capable silicon carbide device fabrication facility in New York, an expansion of our materials factory in Durham, North Carolina, the construction of a new materials manufacturing facility in Siler City, North Carolina, and the planned construction of a new 200mm capable silicon carbide device fabrication facility in Saarland, Germany; • meet our production capacity and delivery commitments to our customers, including those customers who provide us with capacity reservation deposits or similar payments; • manage an increasingly complex supply chain (including managing the impacts of ongoing supply constraints in the semiconductor industry and meeting purchase commitments under take-or-pay arrangements with certain suppliers) that has the ability to supply an increasing number of raw materials, subsystems and finished products with the required specifications and quality, and deliver on time to our manufacturing facilities, our third-party manufacturing facilities, our logistics operations, or our customers; • expand the skills and capabilities of our current management team; • add experienced senior level managers and executives; 12 Table of Contents • attract and retain qualified employees; • expand the capability of our information systems to support a more complex business, such as our current implementation of a new company-wide enterprise resource planning (ERP) system; • be successful in securing design-ins across our end markets, including automotive applications; • realize our expected local, state and federal government incentives, including capital investment reimbursements, property tax reimbursements and sales tax exemptions from state, county and local governments; • confirm our eligibility for and receive the expected benefits from refundable income tax credits and capital grants through the U.S.
The successful development, introduction and acceptance of new products depend on a number of factors, including the following: • qualification and acceptance of our new product and systems designs, specifically entering into automotive applications which require even more stringent levels of qualification and standards; • our ability to effectively transfer increasingly complex products and technology from development to manufacturing, including the transition to 200mm substrates; • our ability to introduce new products in a timely and cost-effective manner; • our ability to secure volume purchase orders related to new products; • achievement of technology breakthroughs required to make commercially viable products; • our ability to convert customer design-ins to sales of significant volume, and, if customer design-in activity does result in such sales, when such sales will ultimately occur and what the amount of such sales will be; • the accuracy of our predictions for market requirements; • our ability to predict, influence and/or react to evolving standards; • acceptance of new technology in certain markets; • our ability to protect intellectual property developed in new products; • the availability of qualified research and development personnel; • our timely completion of product designs and development; • our ability to develop repeatable processes to manufacture new products in sufficient quantities, with the desired specifications and at competitive costs; • our customers’ ability to develop competitive products incorporating our products; and • market acceptance of our products and our customers’ products.
The successful development, introduction and acceptance of new products depend on a number of factors, including the following: • qualification and acceptance of our new product and systems designs, specifically entering into automotive applications which require even more stringent levels of qualification and standards; • our ability to effectively transfer increasingly complex products and technology from development to manufacturing, including the transition to 200mm substrates; • our ability to introduce new products in a timely and cost-effective manner; • achievement of technology breakthroughs required to make commercially viable products; • our ability to convert customer design-ins to sales of significant volume, and, if customer design-in activity does result in such sales, when such sales will ultimately occur and what the amount of such sales will be; • the accuracy of our predictions for market requirements; • our ability to predict, influence and/or react to evolving standards; • acceptance of new technology in certain markets; • our ability to protect intellectual property developed in new products; • the availability of qualified research and development personnel; • our timely completion of product designs and development; • our ability to develop repeatable processes to manufacture new products in sufficient quantities, with the desired specifications and at competitive costs; • our ability to secure volume purchase orders related to new products; • our customers’ ability to develop competitive products incorporating our products; and • market acceptance of our products and our customers’ products.
The methods, estimates and judgments that we use in applying our accounting policies have a significant impact on our results (see “Critical Accounting Estimates” in Item 7, "Management’s Discussion and Analysis of Financial Condition and Results of Operations" in this Annual Report).
The methods, estimates and judgments that we use in applying our accounting policies have a significant impact on our results (see “Critical Accounting Estimates” in Item 7, "Management’s Discussion and Analysis of Financial Condition and Results of Operations" of this Annual Report).
Allocation and effective management of the resources necessary to successfully implement, integrate, train personnel and sustain our information technology platforms will remain critical to ensure that we are not subject to transaction errors, processing inefficiencies, loss of customers, business disruptions or loss of or damage to intellectual property through a security breach in the near term.
Allocation and effective management of the resources necessary to successfully implement, integrate, train personnel and sustain our information technology platforms will remain critical to ensure that we are not subject to transaction errors, processing inefficiencies, loss of customers or suppliers, business disruptions or loss of or damage to intellectual property through a security breach in the near term.
The capped call transactions are expected generally to reduce the potential dilution to our common stock upon any conversion of the 2028 Notes and/or offset any potential cash payments we are required to make in excess of the principal amount of the converted 2028 Notes, as the case may be, upon conversion of the 2028 Notes.
The capped call transactions are expected generally to reduce the potential dilution to our common stock upon any conversion of the 2028 Notes and 2029 Notes and/or offset any potential cash payments we are required to make in excess of the principal amount of the converted 2028 Notes and 2029 Notes, as the case may be, upon conversion of the 2028 Notes and 2029 Notes.
Additionally, Russia’s invasion of Ukraine in early 2022 triggered significant sanctions from U.S. and European countries. Resulting changes in U.S. trade policy could trigger retaliatory actions by Russia, its allies and other affected countries, including China, resulting in a potential trade war.
Additionally, Russia’s invasion of Ukraine in early 2022 triggered significant sanctions from the U.S. and European countries. Resulting changes in U.S. trade policy could trigger retaliatory actions by Russia, its allies and other affected countries, including China, resulting in a potential trade war.
The Indentures governing the Outstanding Notes require us to repurchase the Outstanding Notes upon certain fundamental changes relating to our common stock, and also prohibit our consolidation, merger, or sale of all or substantially all of our assets except with or to a successor entity assuming our obligations under the Indentures.
The Indentures governing the Outstanding Convertible Notes (the Convertible Notes Indentures) require us to repurchase the Outstanding Convertible Notes upon certain fundamental changes relating to our common stock, and also prohibit our consolidation, merger, or sale of all or substantially all of our assets except with or to a successor entity assuming our obligations under the Indentures.
Our amended and restated bylaws provide that, unless we consent in writing to the selection of an alternative forum, the sole and exclusive forum for all litigation relating to our internal affairs, including without limitation (i) any derivative action or proceeding brought on behalf of Wolfspeed, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee of Wolfspeed to Wolfspeed or our shareholders, (iii) any action asserting a claim arising pursuant to any provision of the North Carolina Business Corporation Act (the NCBCA), our restated articles of incorporation, as amended, or our amended and restated bylaws, (iv) any action to interpret, apply, enforce, or determine the validity of our restated articles of incorporation, as amended, or our amended and restated bylaws, or (v) any action asserting a claim governed by the internal affairs doctrine, shall be the state courts of North Carolina, or if such courts lack jurisdiction, a federal court located within the State of North Carolina, in all cases subject to the court’s having personal jurisdiction over the indispensable parties named as defendants.
Our amended and restated bylaws provide that, unless we consent in writing to the selection of an alternative forum, the sole and exclusive forum for all litigation relating to our internal affairs, including without limitation (i) any derivative action or 25 Table of Contents proceeding brought on behalf of Wolfspeed, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee of Wolfspeed to Wolfspeed or our shareholders, (iii) any action asserting a claim arising pursuant to any provision of the North Carolina Business Corporation Act (the NCBCA), our restated articles of incorporation, as amended, or our amended and restated bylaws, (iv) any action to interpret, apply, enforce, or determine the validity of our restated articles of incorporation, as amended, or our amended and restated bylaws, or (v) any action asserting a claim governed by the internal affairs doctrine, shall be the state courts of North Carolina, or if such courts lack jurisdiction, a federal court located within the State of North Carolina, in all cases subject to the court’s having personal jurisdiction over the indispensable parties named as defendants.
We are also subject to other types of risks, including the following: • protection of intellectual property and trade secrets; • tariffs, customs, trade sanctions, trade embargoes and other barriers to importing/exporting materials and products in a cost-effective and timely manner, or changes in applicable tariffs or custom rules; • the burden of complying with and changes in United States or international taxation policies; • timing and availability of export licenses; • rising labor costs; • disruptions in or inadequate infrastructure of the countries where we operate; • the impact of public health epidemics on employees and the global economy, such as COVID-19; • difficulties in collecting accounts receivable; • difficulties in staffing and managing international operations; and • the burden of complying with foreign and international laws and treaties.
We are also subject to other types of risks of doing business internationally, including the following: • protection of intellectual property and trade secrets; • tariffs, customs, trade sanctions, trade embargoes and other barriers to importing/exporting materials and products in a cost-effective and timely manner, or changes in applicable tariffs or custom rules; • the burden of complying with and changes in United States or international taxation policies; • timing and availability of export licenses; • rising labor costs; • disruptions in or inadequate infrastructure of the countries where we operate; • the impact of public health epidemics on employees and the global economy, such as COVID-19; • difficulties in collecting accounts receivable; • difficulties in staffing and managing international operations; and • the burden of complying with foreign and international laws and treaties.
The number of usable items, or yield, from our production processes may fluctuate as a result of many factors, including but not limited to the following: • variability in our process repeatability and control; • contamination of the manufacturing environment; • equipment failure, power outages, fires, flooding, information or other system failures or variations in the manufacturing process; • lack of consistency and adequate quality and quantity of piece parts, other raw materials and other bill of materials items; • inventory shrinkage or human errors; • defects in production processes (including system assembly) either within our facilities or at our suppliers; and • any transitions or changes in our production process, planned or unplanned.
The number of usable items, or yield, from our production processes may fluctuate as a result of many factors, including but not limited to the following: • variability in our process repeatability and control; • contamination of the manufacturing environment; • equipment failure, power outages, fires, flooding, information or other system failures or variations in the 13 Table of Contents manufacturing process; • lack of consistency and adequate quality and quantity of piece parts, other raw materials and other bill of materials items; • inventory shrinkage or human errors; • defects in production processes (including system assembly) either within our facilities or at our suppliers; and • any transitions or changes in our production process, planned or unplanned.
Various jurisdictions in which we do business have implemented, 21 Table of Contents or in the future could implement or amend, restrictions on emissions of carbon dioxide or other greenhouse gases, limitations or restrictions on water use, regulations on energy management and waste management, and other climate change-based rules and regulations, which may increase our expenses and adversely affect our operating results.
Various jurisdictions in which we do business have implemented, 22 Table of Contents or in the future could implement or amend, restrictions on emissions of carbon dioxide or other greenhouse gases, limitations or restrictions on water use, regulations on energy management and waste management, and other climate change-based rules and regulations, which may increase our expenses and adversely affect our operating results.
Similarly, we have the ability to add, consolidate, or remove distributors. We typically recognize revenue on products sold to distributors when the item is shipped and title passes to the distributor (sell-in method). Certain distributors have limited rights to return inventory under stock rotation programs and have limited price protection rights for which we make estimates.
Similarly, we have the ability to add, consolidate, or remove distributors. We typically recognize revenue on products sold to distributors when the item is shipped and title passes to the distributor (sell-in method). Certain distributors have limited rights to return inventory under stock rotation programs and have limited price adjustment rights for which we make estimates.
If we are unable to effectively develop, manage and expand our sales channels for our products, our operating results may suffer. We sell a portion of our products to distributors, including a distributor that represented more than 10% of our revenue in fiscal 2022.
If we are unable to effectively develop, manage and expand our sales channels for our products, our operating results may suffer. We sell a portion of our products to distributors, including a distributor that represented more than 10% of our revenue in fiscal 2023.
Even if we are successful in defending against these claims, litigation could result in substantial costs and be a distraction to management and other employees. Item 1B. Unresolved Staff Comments Not applicable. 24 Table of Contents
Even if we are successful in defending against these claims, litigation could result in substantial costs and be a distraction to management and other employees. Item 1B. Unresolved Staff Comments Not applicable. 26 Table of Contents
As inventory levels and product return trends change or we make changes to our distributor roster, we may have to revise our estimates and incur additional costs, and our gross margins and operating results could be adversely impacted. 17 Table of Contents As a result of our continued expansion into new markets, we may compete with existing customers who may reduce their orders.
As inventory levels and product return trends change or we make changes to our distributor roster, we may have to revise our estimates and incur additional costs, and our gross margins and operating results could be adversely impacted. As a result of our continued expansion into new markets, we may compete with existing customers who may reduce their orders.
We may not be able to engage in hedging transactions in the future, and, even if we do, foreign currency fluctuations may still have a material adverse effect on our results of operations. Our operations in foreign countries expose us to certain risks inherent in doing business internationally, which may adversely affect our business, results of operations or financial condition.
We may not be able to engage in hedging transactions in the future, and, even if we do, foreign currency fluctuations may still have a material adverse effect on our results of operations. 11 Table of Contents Our operations in foreign countries expose us to certain risks inherent in doing business internationally, which may adversely affect our business, results of operations or financial condition.
In the past, we have experienced decreases in our production yields when suppliers have varied from previously agreed upon specifications or made other modifications we do not specify, which impacted our cost of revenue. Additionally, the inability of our suppliers to access capital efficiently could cause disruptions in their businesses, thereby negatively impacting ours.
In the past, we have experienced decreases in our production yields when 15 Table of Contents suppliers have varied from previously agreed upon specifications or made other modifications we do not specify, which impacted our cost of revenue. Additionally, the inability of our suppliers to access capital efficiently could cause disruptions in their businesses, thereby negatively impacting ours.
The distributors’ internal target inventory levels vary depending on market cycles and a number of factors within each distributor over which we have very little, if any, control. Distributors also have the ability to shift business to different manufacturers within their product portfolio based on a number of factors, including new product availability and performance.
The distributors’ internal target inventory levels vary depending on market cycles and a number of factors within each distributor over which we have very little, if any, control. Distributors also have the ability to shift business to different manufacturers 17 Table of Contents within their product portfolio based on a number of factors, including new product availability and performance.
We rely on arrangements with independent shipping companies for the delivery of our products from vendors and to customers both in the United States and abroad. The failure or inability of these shipping companies to deliver products or the 15 Table of Contents unavailability of shipping or port services, even temporarily, could have a material adverse effect on our business.
We rely on arrangements with independent shipping companies for the delivery of our products from vendors and to customers both in the United States and abroad. The failure or inability of these shipping companies to deliver products or the unavailability of shipping or port services, even temporarily, could have a material adverse effect on our business.
If we are not able to increase our production capacity at our targeted rate, if there are unforeseen costs associated with increasing our capacity levels, or if we are unable to obtain advanced semiconductor manufacturing equipment in a timely manner, we may not be able to achieve our financial targets.
Currently, we are focusing on increasing production capacity. If we are not able to increase our production capacity at our targeted rate, if there are unforeseen costs associated with increasing our capacity levels, or if we are unable to obtain advanced semiconductor manufacturing equipment in a timely manner, we may not be able to achieve our financial targets.
Historically, our common stock has experienced substantial price volatility, particularly as a result of significant fluctuations in our revenue, earnings and margins over the past few years, and variations between our actual financial results and the published expectations of analysts.
Our stock price may be volatile. Historically, our common stock has experienced substantial price volatility, particularly as a result of significant fluctuations in our revenue, earnings and margins over the past few years, and variations between our actual financial results and the published expectations of analysts.
General trade tensions between the United States and China have been escalating, and any economic and political uncertainty caused by the United States tariffs imposed on goods from China, among other potential countries, and any corresponding tariffs or currency devaluations from China or such other countries in response, has negatively impacted, and may in the future, negatively impact, demand and/or increase the cost for our products.
General trade tensions between the United States and China continue, and any economic and political uncertainty caused by the United States tariffs imposed on goods from China, among other potential countries, and any corresponding tariffs or currency devaluations from China or such other countries in response, has negatively impacted, and may in the future negatively impact, demand and/or increase the cost for our products.
If the value of such awards does not appreciate, as measured by the performance of the price of our common stock or if our stock-based compensation otherwise ceases to be viewed as a valuable benefit, our ability to attract, retain and motivate employees could be weakened, which could harm our business and results of operations. 22 Table of Contents Our stock price may be volatile.
If the value of such awards does not appreciate, as measured by the performance of the price of our common stock or if our stock-based compensation otherwise ceases to be viewed as a valuable benefit, our ability to attract, retain and motivate employees could be weakened, which could harm our business and results of operations.
As a result, we may be unable to realize the anticipated benefits of the transaction. Our failure to realize the anticipated benefits of the transaction would adversely impact our financial condition and could limit our ability to pursue additional strategic transactions.
As a result of these risks, we may be unable to realize the anticipated benefits of the transaction. Our failure to realize the anticipated benefits of the transaction would adversely impact our operations, financial condition and business and could limit our ability to pursue additional strategic transactions.
If, however, the market price per share of our common stock, as measured under the terms of the capped call transactions, exceeds the cap price of the capped call transactions (currently $212.04), there would nevertheless be dilution and/or there would not be an offset of such potential cash payments, in each case, to the extent that such market price exceeds the cap price of the capped call transactions.
If, however, the market price per share of our common stock, as measured under the terms of the capped call transactions, exceeds the cap price of the capped call transactions (currently $212.04 for the 2028 Notes and $202.538 for the 2029 Notes), there would nevertheless be dilution and/or there would not be an offset of such potential cash payments, in each case, to the extent that such market price exceeds the cap price of the capped call transactions.
We have outstanding debt which could materially restrict our business and adversely affect our financial condition, liquidity and results of operations.
General risk factors We have outstanding debt which could materially restrict our business and adversely affect our financial condition, liquidity and results of operations.
Brand value could diminish significantly due to a number of factors, including adverse publicity about our products (whether valid or not), our corporate name change from "Cree, Inc." to "Wolfspeed, Inc.," a failure to maintain the quality of our products (whether perceived or real), the failure of our products to deliver consistently positive consumer experiences, the products becoming unavailable to consumers or consumer perception that we have acted in an irresponsible manner.
Brand value could diminish significantly due to a number of factors, including adverse publicity about our products (whether valid or not), a failure to maintain the quality of our products (whether perceived or real), the failure of our products to deliver consistently positive consumer experiences, the products becoming unavailable to consumers or consumer perception that we have acted in an irresponsible manner.
We are often involved in litigation, primarily patent litigation. Defending against existing and potential litigation will likely require significant attention and resources and, regardless of the outcome, result in significant legal expenses, which could adversely affect our results unless covered by insurance or recovered from third parties.
Defending against existing and potential litigation will likely require significant attention and resources and, regardless of the outcome, result in significant legal expenses, which could adversely affect our results unless covered by insurance or recovered from third parties.
The establishment and operation of a new manufacturing facility or expansion of an existing facility involves significant risks and challenges, including, but not limited to, the following: • design and construction delays and cost overruns; • issues in installing and qualifying new equipment and ramping production; • poor production process yields and reduced quality control; and • insufficient personnel with requisite expertise and experience to operate a Silicon Carbide device fabrication facility.
The establishment and operation of a new manufacturing facility or expansion of an existing facility involves significant risks and challenges, some of which we have experienced and may experience in the future, including, but not limited to, the following: • design and construction delays and cost overruns; • issues in installing and qualifying new equipment and ramping production; • poor production process yields and reduced quality control; and • insufficient personnel with requisite expertise and experience to operate an automated silicon carbide device fabrication facility and a materials manufacturing facility.
The inability to obtain adequate financing from debt or capital sources in the future could force us to self-fund strategic initiatives or even forego certain opportunities, which in turn could potentially harm our performance. 10 Table of Contents We are subject to risks related to international sales and purchases.
The potential inability to obtain adequate funding from debt or capital sources in the future could force us to self-fund strategic initiatives or even forego certain opportunities, which in turn could potentially harm our performance. We are subject to risks related to international sales and purchases.
We generally purchase these sole or limited source items with purchase orders, and we have limited guaranteed supply arrangements with such suppliers. Some of our sources can have variations in attributes and availability which can affect our ability to produce products in sufficient volume or quality.
We generally purchase these sole or limited source items with purchase orders, and we have limited guaranteed supply arrangements with such suppliers, including take-or-pay arrangements and capacity reserve deposit agreements. Some of our sources can have variations in attributes and availability which can affect our ability to produce products in sufficient volume or quality.
If we choose to enter into such strategic transactions, we face certain risks including: • the failure of an acquired business, investee or joint venture to meet our performance and financial expectations; • identification of additional liabilities relating to an acquired business; • loss of customers due to perceived conflicts or competition with such customers or due to regulatory actions taken by governmental agencies; • that we are not able to enter into acceptable contractual arrangements in connection with the transaction; • difficulty integrating an acquired business's operations, personnel and financial and operating systems into our current business; • that we are not able to develop and expand customer bases and accurately anticipate demand from end customers, which can result in increased inventory and reduced orders if we experience wide fluctuations in supply and demand; • diversion of management attention; • difficulty separating the operations, personnel and financial and operating systems of a spin-off or divestiture from our current business; • the possibility we are unable to complete the transaction and expend substantial resources without achieving the desired benefit; • the inability to obtain required regulatory agency approvals; • reliance on a transaction counterparty for transition services for an extended period of time, which may result in additional expenses and delay the integration of the acquired business and realization of the desired benefit of the transaction; • uncertainty of the financial markets or circumstances that cause conditions that are less favorable and/or different than expected; and • expenses incurred to complete a transaction may be significantly higher than anticipated.
If we choose to enter into such strategic transactions, we face certain risks including: • the inability to realize the expected benefits, both from a timing and amount perspective, from our ongoing and planned capacity expansions, including the construction of a new materials manufacturing facility in Siler City, North Carolina and the planned construction of a new 200mm capable silicon carbide device fabrication facility in Saarland, Germany; • the failure of an acquired business, investee or joint venture to meet our performance and financial expectations; • identification of additional liabilities relating to an acquired business; • loss of customers due to perceived conflicts or competition with such customers or due to regulatory actions taken by governmental agencies; • that we are not able to enter into acceptable contractual arrangements in connection with the transaction; • difficulty integrating an acquired business's operations, personnel and financial and operating systems into our current business; • that we are not able to develop and expand customer bases and accurately anticipate demand from end customers, which can result in increased inventory and reduced orders if we experience wide fluctuations in supply and demand; • diversion of management attention; • difficulty separating the operations, personnel and financial and operating systems of a spin-off or divestiture from our current business; • the possibility we are unable to complete the transaction and expend substantial resources without achieving the desired benefit; • the inability to obtain required regulatory agency approvals; • reliance on a transaction counterparty for transition services for an extended period of time, which may result in additional expenses and delay the integration of the acquired business and realization of the desired benefit of the transaction; • uncertainty of the financial markets or circumstances that cause conditions that are less favorable and/or different than expected; and • expenses incurred to complete a transaction may be significantly higher than anticipated.
The COVID-19 pandemic initially caused an economic slowdown, and the continued spread of COVID-19 and its variants could contribute to or exacerbate a global economic slowdown or recession, which could have a material adverse effect on demand for our products and on our financial condition and results of operations.
The COVID-19 pandemic initially caused an economic slowdown, and the continued spread of COVID-19 and its variants or future outbreaks of infectious diseases or similar public health events could contribute to or exacerbate a global economic slowdown or recession, which could have a material adverse effect on demand for our products and on our financial condition and results of operations.
Additionally, actions taken by the option counterparties in the capped call transactions entered into in connection with our 0.25% convertible senior notes due February 15, 2028 (the 2028 Notes) may affect our stock price, including the potential modifications of their hedge positions by entering into or unwinding various derivatives with respect to our common stock.
Additionally, actions taken by the option counterparties in the capped call transactions entered into in connection with the 2028 Notes and the 2029 Notes may affect our stock price, including the potential modifications of their hedge positions by entering into or unwinding various derivatives with respect to our common stock.
We cannot be sure that these efforts will be successful or that the confidentiality agreements will not be breached.
We cannot be sure that these efforts will be successful 20 Table of Contents or that the confidentiality agreements will not be breached.
In the fourth quarter of fiscal 2022, we opened a new Silicon Carbide device fabrication facility in Marcy, New York to complement the materials factory expansion underway at our United States campus headquarters in Durham, North Carolina.
In the fourth quarter of fiscal 2022, we opened a new silicon carbide device fabrication facility in Marcy, New York to complement the materials factory expansion underway at our United States campus headquarters in Durham, North Carolina. We also commenced work on our new materials manufacturing facility in Siler City, North Carolina in the first quarter of fiscal 2023.
Restrictions on access to our manufacturing facilities or on our support operations or workforce, or similar limitations for our vendors and suppliers, and restrictions or disruptions of transportation, such as reduced availability of air transport, port closures, and increased border controls or closures, could limit our ability to meet customer demand, lead to increased costs and have a material adverse effect on our financial condition and results of operations.
Restrictions on access to our manufacturing facilities or on our support operations or workforce, or similar limitations for our vendors and suppliers, and restrictions or disruptions of transportation, such as reduced availability of air transport, port closures, and increased border controls or closures in connection with the COVID-19 pandemic or future outbreaks of infectious diseases or similar public health events could limit our ability to meet customer demand, lead to increased costs and have a material adverse effect on our financial condition and results of operations.
These fluctuations have also been characterized by higher demand for key components and equipment used in, or in the manufacture of, our products resulting in longer lead times, supply delays and production disruptions.
These fluctuations have been characterized by lower product demand, production overcapacity, higher inventory levels and aggressive pricing actions by our competitors. These fluctuations have also been characterized by higher demand for key components and equipment used in, or in the manufacture of, our products resulting in longer lead times, supply delays and production disruptions.
We may face challenges with government regulators, our customers and our suppliers if we are unable to sufficiently verify that the metals used in our products are conflict free. Our most recent disclosure regarding our due diligence was filed on May 31, 2022 for calendar year 2021. General risk factors Catastrophic events and disaster recovery may disrupt business continuity.
We may face challenges with government regulators, our customers and our suppliers if we are unable to sufficiently verify that the metals used in our products are conflict free. Our most recent disclosure regarding our due diligence was filed on May 31, 2023 for calendar year 2022.
Also, because issuance of a valid patent does not prevent other companies from using alternative, non-infringing technology, we cannot be sure that any of our patents, or patents issued to others and licensed to us, will provide significant commercial protection, especially as new competitors enter the market. 19 Table of Contents We periodically discover products that are counterfeit reproductions of our products or that otherwise infringe on our intellectual property rights.
Also, because issuance of a valid patent does not prevent other companies from using alternative, non-infringing technology, we cannot be sure that any of our patents, or patents issued to others and licensed to us, will provide significant commercial protection, especially as new competitors enter the market.
We are subject to a number of risks associated with the sale of our former LED Products segment, and these risks could adversely impact our operations, financial condition and business. On March 1, 2021, we completed the sale of our former LED Products segment to SMART pursuant to the Asset Purchase Agreement dated October 18, 2020 (the LED Purchase Agreement).
We are subject to a number of risks associated with the sale of our former LED Products segment, and these risks could adversely impact our operations, financial condition and business. On March 1, 2021, we completed the sale of our former LED Products segment to SMART Global Holdings, Inc.
The adoption of or changes in government and/or industry policies, standards or regulations relating to the efficiency, performance, vehicle range or other aspects of our products and the products in which they are utilized or integrated may impact the demand for our products. For example, efforts to change, eliminate or reduce industry or regulatory standards could negatively impact our business.
The adoption of or changes in government and/or industry policies, standards or regulations relating to the efficiency, performance, vehicle range or other aspects of our products and the products in which they are utilized could impact the demand for our products. 21 Table of Contents The adoption of or changes in government and/or industry policies, standards or regulations relating to the efficiency, performance, vehicle range or other aspects of our products and the products in which they are utilized or integrated may impact the demand for our products.
Our future effective tax rates may be affected by a number of factors including: • the jurisdiction in which profits are determined to be earned and taxed; • potential changes in tax laws proposed by the Biden administration and Democratic controlled Congress or alterations in the interpretation of such tax laws and changes in generally accepted accounting principles, for example interpretations and U.S. regulations issued as a result of the significant changes to the U.S. tax law included within the Tax Cuts and Jobs Act of 2017 (the TCJA) and the Coronavirus Aid, Relief and Economic Security Act of 2020; • the imposition of the proposed global corporate minimum tax rate; • the resolution of issues arising from tax audits with various authorities; • changes in the valuation of our deferred tax assets and liabilities; • the ongoing restructuring of our existing legal entities, including the restructuring of our Luxembourg holding company; • adjustments to estimated taxes upon finalization of various tax returns; • increases in expenses not deductible for tax purposes, including impairment of goodwill in connection with acquisitions; • changes in available tax credits; • the recognition and measurement of uncertain tax positions; • variations in realized tax deductions for certain stock-based compensation awards (such as non-qualified stock options and restricted stock) from those originally anticipated; and • the repatriation of non-U.S. earnings for which we have not previously provided for taxes or any changes in legislation that may result in these earnings being taxed, regardless of our decision regarding repatriation of funds.
Our future effective tax rates and our ability to obtain future tax credits may affect our results and financial condition due to a number of factors, including: • the jurisdiction in which profits are determined to be earned and taxed; • potential changes in tax laws or alterations in the interpretation of such tax laws and changes in generally accepted accounting principles, for example interpretations and U.S. regulations issued as a result of the significant changes to the U.S. tax law included within the Tax Cuts and Jobs Act of 2017 (the TCJA), the Coronavirus Aid, Relief and Economic Security Act of 2020 and the Inflation Reduction Act (the IRA); • changes in available tax credits, including the eligibility for or the receipt of the expected benefits from refundable investment tax credits obtained through the CHIPS Act; • the implementation of international tax and profit shifting rules in countries in which we operate, as recommended by the Organization for Economic Co-operation and Development’s Base Erosion, including the establishment of a minimum tax of 15% on global income; • the resolution of issues arising from tax audits with various authorities; • changes in the valuation of our deferred tax assets and liabilities; • the ongoing restructuring of our existing legal entities, including the restructuring of our Luxembourg holding company; • adjustments to estimated taxes upon finalization of various tax returns; • increases in expenses not deductible for tax purposes, including impairment of goodwill in connection with acquisitions; • the recognition and measurement of uncertain tax positions; • variations in realized tax deductions for certain stock-based compensation awards (such as non-qualified stock options and restricted stock) from those originally anticipated; and • the repatriation of non-U.S. earnings for which we have not previously provided for taxes or any changes in legislation that may result in these earnings being taxed, regardless of our decision regarding repatriation of funds.
The tariffs imposed on Chinese goods, among other potential countries and any corresponding tariffs from China or such other countries in response has, and may in the future, negatively impact demand and/or increase the costs for our products.
For example, the United States has imposed significant tariffs on Chinese-made goods, which the Biden administration has largely left in place. The tariffs imposed on Chinese goods, among other potential countries and any corresponding tariffs from China or such other countries in response has, and may in the future, negatively impact demand and/or increase the costs for our products.
For example, current global financial markets continue to reflect uncertainty, which has been heightened by the COVID-19 pandemic and the ongoing military conflict between Russia and Ukraine. Given these uncertainties, there could be further disruptions to the global economy, financial markets and consumer confidence.
For example, current global financial markets continue to reflect uncertainty, including recent bank failures in the United States, the ongoing military conflict between Russia and Ukraine and the COVID-19 pandemic. Given these uncertainties, there could be further disruptions to the global economy, financial markets and consumer confidence.
Our ability to comply with our loan covenants and the provisions of the Indentures governing the Outstanding Notes may also be affected by events beyond our control and if any of these restrictions or terms is breached, it could lead to an event of default 23 Table of Contents under our line of credit or the Outstanding Notes.
Our ability to comply with the provisions of the 2030 Senior Notes Indenture, the Convertible Notes Indentures, and the CRD Agreement may also be affected by events beyond our control and if any of these restrictions or terms is breached, it could lead to an event of default under the 2030 Senior Notes, the Outstanding Convertible Notes, and the CRD Agreement.
If our customers alter their purchasing behavior, if our customers’ purchasing behavior does not match our expectations or if we encounter any problems collecting amounts due from them, our financial condition and results of operations could be negatively impacted.
If our customers alter their purchasing behavior, if our customers’ purchasing behavior does not match our expectations or if we encounter any problems collecting amounts due from them, our financial condition and results of operations could be negatively impacted. Our revenue is highly dependent on our customers’ ability to produce, market and sell more integrated products.
We expect that revenue from international sales will continue to represent a significant portion of our total revenue. As such, a significant slowdown or instability in relevant foreign economies or lower investments in new infrastructure, could have a negative impact on our sales. We also purchase a portion of the materials included in our products from overseas sources.
In fiscal 2023, 80% of our revenue was from outside the United States and we expect that revenue from international sales will continue to represent a significant portion of our total revenue. As such, a significant slowdown or instability in relevant foreign economies or lower investments in new infrastructure could have a negative impact on our sales.
These constraints may be eliminated or delayed by legislative action, which could have a negative impact on demand for our products. Our ability and the ability of our competitors to meet evolving government and/or industry requirements could impact competitive dynamics in the market. Changes in our effective tax rate may affect our results.
For example, efforts to change, eliminate or reduce industry or regulatory standards could negatively impact our business. These constraints may be eliminated or delayed by legislative action, which could have a negative impact on demand for our products. Our ability and the ability of our competitors to meet evolving government and/or industry requirements could impact competitive dynamics in the market.
Our line of credit requires us to maintain compliance with an asset coverage ratio. In addition, our line of credit contains certain restrictions that could limit our ability to, among other things: incur additional indebtedness, dispose of assets, create liens on assets, make acquisitions or engage in mergers or consolidations, and engage in certain transactions with our subsidiaries and affiliates.
In addition, the 2030 Senior Notes Indenture contains certain restrictions that could limit our ability to, among other things: incur additional indebtedness, dispose of assets, create liens on assets, make acquisitions or engage in mergers or consolidations, and engage in certain transactions with our subsidiaries and affiliates.
A default, if not cured or waived, may permit acceleration of our indebtedness. In addition, our lenders could terminate their commitments to make further extensions of credit under our line of credit.
A default, if not cured or waived, may permit acceleration of our indebtedness. In addition, our lenders could terminate their commitments to make further loans under the 2030 Senior Notes Indenture or the CRD Agreement.
We depend on a limited number of customers, including distributors, for a substantial portion of our revenue, and the loss of, or a significant reduction in purchases by, one or more of these customers could adversely affect our operating results.
We depend on a limited number of customers, including distributors, for a substantial portion of our revenue, and the loss of, or a significant reduction in purchases by, one or more of these customers could adversely affect our operating results. 16 Table of Contents We receive a significant amount of our revenue from a limited number of customers and distributors, two of which individually represented more than 10% of our consolidated revenue in fiscal 2023.
Additionally, outside parties may attempt to access our confidential information through other means, for example by fraudulently inducing our employees to disclose confidential information. We actively seek to prevent, detect and investigate any unauthorized access, which sometimes occurs. To date, we do not believe that such unauthorized access has caused us any material damage.
Additionally, outside parties may attempt to access our confidential information through other means, for example by fraudulently inducing our employees to disclose confidential information. We actively seek to prevent, detect and investigate any unauthorized access, which sometimes occurs and is usually not recognized until after it has occurred.
Risks related to sales, product development and manufacturing We face significant challenges managing our growth strategy. Our potential for growth depends significantly on the adoption of our products within the markets we serve and for other applications, and our ability to affect this rate of adoption.
Our potential for growth depends significantly on the adoption of our products within the markets we serve and for other applications, and our ability to affect this rate of adoption.
The restrictions imposed by our line of credit and by the Indentures governing the Outstanding Notes could limit our ability to plan for or react to changing business conditions, or could otherwise restrict our business activities and plans.
The restrictions imposed by the 2030 Senior Notes Indenture, the Convertible Notes Indentures, and the CRD Agreement could limit our ability to plan for or react to changing business conditions, or could otherwise restrict our business activities and plans.
Additionally, our large upfront investment in the facility to increase capacity does not guarantee we will need the capacity and we may experience lower than expected capacity once the facility is in production, which could result in further margin pressures. In addition, our efforts to improve quoted delivery lead-time performance may result in corresponding reductions in order backlog.
Additionally, our large upfront investment in the facility, or any other new facility, to increase capacity does not guarantee we will need the capacity and we may experience lower than expected capacity once the facility is in production, which could result in further margin pressures.
If our future operating results or margins are below the expectations of stock market analysts or our investors, our stock price will likely decline. Speculation and opinions in the press or investment community about our strategic position, financial condition, results of operations or significant transactions can also cause changes in our stock price.
Speculation and opinions in the press or investment community about our strategic position, financial condition, results of operations or significant transactions can also cause changes in our stock price.
If any of these or other similar factors becomes problematic, we may not be able to deliver and introduce new products in a timely or cost-effective manner. Variations in our production could impact our ability to reduce costs and could cause our margins to decline and our operating results to suffer.
If any of these or other similar factors becomes problematic, we may not be able to deliver and introduce new products in a timely or cost-effective manner.
If our indebtedness is accelerated, we cannot be certain that we will have sufficient funds to pay the accelerated indebtedness or that we will have the ability to refinance accelerated indebtedness on terms favorable to us or at all. The capped call transactions may not prevent dilution of our common stock upon conversion of the 2028 Notes.
If our indebtedness is accelerated, we cannot be certain that we will have sufficient funds to pay the accelerated indebtedness or that we will have the ability to refinance accelerated indebtedness on terms favorable to us or at all.
We also maintain compliance programs to address the potential applicability of restrictions against trading while in possession of material, nonpublic information generally and in connection with a cyber-security breach.
In addition, we are subject to data privacy, protection and security laws and regulations, including the European General Data Protection Act (GDPR) that governs personal information of European persons. We also maintain compliance programs to address the potential applicability of restrictions against trading while in possession of material, nonpublic information generally and in connection with a cyber-security breach.
Continued economic slowdowns or recessions and inflationary pressures could have a negative impact on our business, including decreased demand, increased costs, and other challenges. Government actions to address economic slowdowns and increased inflation, including increased interest rates, also could result in negative impacts to our growth.
Additionally, increased inflation around the world, including in the United States, applies pressure to our costs. Continued economic slowdowns or recessions and inflationary pressures could have a negative impact on our business, including decreased demand, increased costs, and other challenges.
Risks associated with cybersecurity, intellectual property and litigation We may be subject to confidential information theft or misuse, which could harm our business and results of operations.
Our failure to realize the anticipated benefits of the transaction would adversely impact our financial condition and could limit our ability to pursue additional strategic transactions. Risks associated with cybersecurity, intellectual property and litigation We may be subject to confidential information theft or misuse, which could harm our business and results of operations.
We may not be able to adequately address these risks or any other problems that arise from our prior or future acquisitions, investments, joint ventures, divestitures or spin-offs. Any failure to successfully evaluate strategic opportunities and address risks or other problems that arise related to any such business transaction could adversely affect our business, results of operations or financial condition.
We may not be able to adequately address these risks or any other problems that arise from our prior or future acquisitions, investments, joint ventures, divestitures or spin-offs.
We might be unaware of any such access or unable to determine its magnitude and effects. In addition, these threats are constantly evolving, thereby increasing the difficulty of successfully defending against them or implementing adequate preventative measures.
In addition, these threats are constantly evolving, thereby increasing the difficulty of successfully defending against them or implementing adequate preventative measures.
In connection with the pricing of the 2028 Notes, we entered into privately negotiated capped call transactions with the option counterparties.
The capped call transactions may not prevent dilution of our common stock upon conversion of the 2028 Notes or the 2029 Notes. In connection with the pricing of the 2028 Notes and the 2029 Notes, we entered into privately negotiated capped call transactions with the option counterparties.
We are subject to a number of risks associated with this transaction, including risks associated with: • the restrictions on and obligations with respect to our business set forth in the transition services agreement and the Wafer Supply and Fabrication Services Agreement (the Wafer Supply Agreement), in each case between us and CreeLED; • any required payments of indemnification obligations under the LED Purchase Agreement for retained liabilities and breaches of representations, warranties or covenants; and • the ability of SMART to pay the unsecured promissory note issued to us as the earnout payment. 18 Table of Contents As a result of these risks, we may be unable to realize the anticipated benefits of the transaction, including the total amount of cash we expect to receive.
We are subject to a number of risks associated with this transaction, including risks associated with: • the restrictions on and obligations with respect to our business set forth in the Wafer Supply Agreement between us and CreeLED; and • any required payments of indemnification obligations under the LED Purchase Agreement for retained liabilities and breaches of representations, warranties or covenants.
As customer demand for our products changes, we must be able to adjust our production capacity to meet demand. We are continually taking steps to address our manufacturing capacity needs for our products. Currently, we are focusing on increasing production capacity.
Our results of operations, financial condition and business could be harmed if we are unable to balance customer demand and capacity. As customer demand for our products changes, we must be able to adjust our production capacity to meet demand. We are continually taking steps to address our manufacturing capacity needs for our products.
As of June 26, 2022, our indebtedness consisted of $575.0 million aggregate principal amount of our 1.75% convertible senior notes due May 1, 2026 (the 2026 Notes and collectively with the 2028 Notes, the Outstanding Notes) and $750.0 million aggregate principal amount of the 2028 Notes and potential borrowings from our revolving line of credit.
As of June 25, 2023, our indebtedness consisted of $575.0 million aggregate principal amount of our 1.75% convertible senior notes due May 1, 2026 (the 2026 Notes), $750.0 million aggregate principal amount of our 0.25% convertible senior notes due February 15, 2028 (the 2028 Notes), $1,750.0 million aggregate principal amount of our 1.875% convertible senior notes due December 1, 2029 (the 2029 Notes) (collectively, the Outstanding Convertible Notes) and $1,250.0 million aggregate principal amount of senior secured notes due 2030 (the 2030 Senior Notes).
In addition, production could be disrupted by the unavailability of the resources used in production such as water, silicon, electricity and gases. Future environmental regulations could restrict supply or increase the cost of certain of those materials. We operate in industries that are subject to significant fluctuation in supply and demand and ultimately pricing, which affects our revenue and profitability.
Our operating margins could be significantly affected if we are not able to pass along price increases to our customers. In addition, production could be disrupted by the unavailability of the resources used in production such as water, silicon, electricity and gases. Future environmental regulations could restrict supply or increase the cost of certain of those materials.
Our failure to realize the anticipated benefits of the transaction would adversely impact our operations, financial condition and business and could limit our ability to pursue additional strategic transactions. We are subject to risks associated with the sale of our former Lighting Products business unit, and these risks could adversely impact our financial condition.
As a result of these risks, we may be unable to realize the anticipated benefits of the transaction, including the total amount of cash we expect to realize. Our failure to realize the anticipated benefits of the transaction would adversely impact our operations, financial condition and business and could limit our ability to pursue additional strategic transactions.
Abrupt political change, terrorist activity and armed conflict pose a risk of general economic disruption in affected countries, which could also result in an adverse effect on our business and results of operations. Risks related to the effects of COVID-19 and other potential future public health crises, pandemics or similar events.
Abrupt political change, terrorist activity and armed conflict pose a risk of general economic disruption in affected countries, which could also result in an adverse effect on our business and results of operations. Risks related to sales, product development and manufacturing We face significant challenges managing our growth strategy.
Additionally, we face these same risks if we fail to allocate and effectively manage the resources necessary to build, implement, upgrade, integrate and sustain appropriate technology infrastructure over the longer term. 13 Table of Contents Our operating results are substantially dependent on the acceptance of new products.
Additionally, we face these same risks if we fail to allocate and effectively manage the resources necessary to build, implement, upgrade, integrate and sustain appropriate technology infrastructure over the longer term. Variations in our production could impact our ability to reduce costs and could cause our margins to decline and our operating results to suffer.
On May 13, 2019, we closed the sale of our former Lighting Products business unit to IDEAL Industries, Inc. (IDEAL). We are subject to risks associated with this transaction, including risks associated with any required payments of indemnification obligations under the Purchase Agreement with IDEAL for retained liabilities and breaches of representations, warranties or covenants.
We are subject to risks associated with this transaction, including risks associated with any required payments of indemnification obligations under the Purchase Agreement with IDEAL for retained liabilities and breaches of representations, warranties or covenants. 19 Table of Contents As a result, we may be unable to realize the anticipated benefits of the transaction.
For example, we have current and prospective customers that create, or plan to create, power and RF products or systems using our substrates, die, components or modules.
Our revenue depends on getting our products designed into a larger number of our customers’ products and in turn, our customers’ ability to produce, market and sell their products. For example, we have current and prospective customers that create, or plan to create, power and RF products or systems using our substrates, die, components or modules.
Our ability to pay interest and repay the principal for any outstanding indebtedness under our line of credit and the Outstanding Notes is dependent upon our ability to manage our business operations and generate sufficient cash flows to service such debt. There can be no assurance that we will be able to manage any of these risks successfully.
Our ability to pay interest and repay the principal for any outstanding indebtedness under the Outstanding Convertible Notes, the 2030 Senior Notes and the CRD Agreement (if applicable) is dependent upon our ability to manage our business operations and generate sufficient cash flows to service such debt.
If economic conditions deteriorate unexpectedly, our business and results of operations could be materially and adversely affected. For example, our customers, including our distributors and their customers, may experience difficulty obtaining the working capital and other financing necessary to support historical or projected purchasing patterns, which could negatively affect our results of operations.
For example, our customers, including our distributors and their customers, may experience difficulty obtaining the working capital and other financing necessary to support historical or projected purchasing patterns, which could negatively affect our results of operations. 10 Table of Contents Recent global economic slowdowns could continue and potentially result in certain economies dipping into economic recessions, including in the United States.
In addition, as a result of the COVID-19 pandemic, the increased prevalence of employees working from home may exacerbate the aforementioned cybersecurity risks. Our business could be subject to significant disruption and we could suffer monetary or other losses.
In addition, the increased prevalence of employees working from home may exacerbate the aforementioned cybersecurity risks. Our business could be subject to significant disruption and we could suffer monetary or other losses. Our disclosure controls and procedures address cybersecurity and include elements intended to ensure that there is an analysis of potential disclosure obligations arising from security breaches.
The recognition of a significant charge to earnings in our consolidated financial statements resulting from any impairment of our goodwill or other assets could adversely impact our results of operations. 20 Table of Contents The adoption of or changes in government and/or industry policies, standards or regulations relating to the efficiency, performance, vehicle range or other aspects of our products and the products in which they are utilized could impact the demand for our products.
The recognition of a significant charge to earnings in our consolidated financial statements resulting from any impairment of our goodwill or other assets could adversely impact our results of operations.
In our fabrication process, we consume a number of precious metals and other commodities, which are subject to high price volatility and the potential impacts of increased inflation. Our operating margins could be significantly affected if we are not able to pass along price increases to our customers.
We may also be adversely affected by an increase in freight surcharges due to rising fuel costs, oil costs and added security. In our fabrication process, we consume a number of precious metals and other commodities, which are subject to high price volatility and the potential impacts of increased inflation.
We continue to prepare for production using 200mm substrates and if we are unable to make this transition in a timely or cost-effective manner, our results could be negatively impacted. 14 Table of Contents Our results of operations, financial condition and business could be harmed if we are unable to balance customer demand and capacity.
In addition, our ability to convert volume manufacturing to larger diameter substrates can be an important factor in providing a more cost-effective manufacturing process. We continue to prepare for production using 200mm substrates and if we are unable to make this transition in a timely or cost-effective manner, our results could be negatively impacted.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe also maintain sales and support offices in leased office premises in North America, Asia, and Europe.
Biggest changeSome of our products are also produced at contract manufacturing facilities throughout Asia. We maintain captive lines at some of our contract manufacturers. We also maintain sales and support offices in leased office premises in North America, Asia, and Europe.
Our products are also produced at our owned manufacturing facility located in Research Triangle Park (RTP), North Carolina, and at leased facilities in Morgan Hill, California and Fayetteville, Arkansas. Our RTP facility sits on 55 acres of owned land.
Our products are also produced at owned manufacturing facilities located in Research Triangle Park (RTP), North Carolina and Marcy, New York and at leased facilities in Morgan Hill, California and Fayetteville, Arkansas. Our RTP facility sits on 55 acres of owned land and our Marcy, New York facility sits on 55 acres of leased land.
Item 2. Properties Our corporate headquarters, primary research and development operations, and primary manufacturing operations are located within the Durham, North Carolina facilities that we own and sit on 141 acres of owned land.
Item 2. Properties Our corporate headquarters, primary research and development operations, and primary manufacturing operations are located within our Durham, North Carolina facilities that we own, which sits on 141 acres of owned land.
Details on our significant owned and leased facilities as of June 26, 2022 are as follows: Location Principal Use Approximate square footage Owned Facilities Durham, North Carolina Administrative, Production and R&D 995,000 Marcy, New York Production 557,000 Research Triangle Park, North Carolina Production 189,000 Leased Facilities Morgan Hill, California Production 84,000 Fayetteville, Arkansas R&D/Production 33,000
Details on our significant owned and leased facilities as of June 25, 2023 are as follows: Location Principal Use Approximate square footage Owned Facilities Durham, North Carolina - Silicon Drive Site Administrative, Production and R&D 1,054,000 Marcy, New York Production 560,000 Research Triangle Park, North Carolina Production 189,000 Leased Facilities Morgan Hill, California Production 84,000 Fayetteville, Arkansas R&D/Production 40,000
Removed
In addition, we recently opened a new Silicon Carbide device fabrication facility on 55 acres of leased land in Marcy, New York, to expand capacity for our Silicon Carbide device business. Some of our products are also produced at contract manufacturing facilities throughout Asia. We maintain captive lines at some of our contract manufacturers.
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In addition, we recently purchased an existing facility in Farmers Branch, Texas, which will be used for materials production, and are in the process of constructing two new materials manufacturing facilities in North Carolina, including our materials manufacturing facility in Siler City, North Carolina which sits on 446 acres of owned land.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings The information required by this item is set forth under Note 15, “Commitments and Contingencies,” in our consolidated financial statements included in Item 8 of this Annual Report and is incorporated herein by reference. Item 4. Mine Safety Disclosures Not applicable. 25 Table of Contents PART II
Biggest changeItem 3. Legal Proceedings The information required by this item is set forth under Note 15, “Commitments and Contingencies,” in our consolidated financial statements included in Item 8 of this Annual Report and is incorporated herein by reference. Item 4. Mine Safety Disclosures Not applicable. 27 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeDividends In the past, we have not declared or paid cash dividends on our common stock. We do not expect to pay dividends on our common stock for the foreseeable future. Instead, we anticipate that all of our earnings, if any, will be used for the operation and growth of our business.
Biggest changeWe do not expect to pay dividends on our common stock for the foreseeable future. Instead, we anticipate that all of our earnings, if any, will be used for the operation and growth of our business.
Stock Performance Graph The following information in this Item 5 of this Annual Report on Form 10-K is not deemed to be “soliciting material” or to be “filed” with the SEC or subject to Regulation 14A or 14C under the Exchange Act or to the liabilities of Section 18 of the Exchange Act, and will not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent we specifically incorporate it by reference into such filing.
Stock Performance Graph The following information in this Item 5 of this Annual Report is not deemed to be “soliciting material” or to be “filed” with the SEC or subject to Regulation 14A or 14C under the Exchange Act or to the liabilities of Section 18 of the Exchange Act, and will not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent we specifically incorporate it by reference into such filing.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Common Stock Market Information Our common stock is traded on the New York Stock Exchange under the trading symbol WOLF. There were 239 holders of record of our common stock as of August 17, 2022.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Common Stock Market Information Our common stock is traded on the New York Stock Exchange under the trading symbol WOLF. There were 231 holders of record of our common stock as of August 17, 2023.
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The following graph and related table compare the cumulative total return on our common stock with the cumulative total returns of the Nasdaq Composite Index, the Nasdaq Electronic Components Index, and the Philadelphia Semiconductor Index, assuming an investment of $100.00 on June 25, 2017 and the reinvestment of dividends.
Added
The following graph and related table compare the cumulative total return on our common stock with the cumulative total returns of the Nasdaq Composite Index and the Philadelphia Semiconductor Index, assuming an investment of $100.00 on June 24, 2018 and the reinvestment of dividends. 6/24/2018 6/30/2019 6/28/2020 6/27/2021 6/26/2022 6/25/2023 Wolfspeed, Inc. $100.00 $117.88 $121.15 $206.86 $149.81 $103.74 Nasdaq Composite Index 100.00 105.24 129.57 192.09 156.35 183.37 Philadelphia Semiconductor Index 100.00 108.74 145.86 249.32 211.77 277.14 Sale of Unregistered Securities Other than as previously reported in our Current Reports on Form 8-K, there were no unregistered securities sold during fiscal 2023. 28 Table of Contents Dividends In the past, we have not declared or paid cash dividends on our common stock.
Removed
The Philadelphia Semiconductor Index has replaced the Nasdaq Electronic Components Index in this analysis as data from the Nasdaq Electronic Components Index is no longer accessible. The use of the Philadelphia Semiconductor Index is aligned with Wolfspeed's transition to a more focused semiconductor company.
Removed
Data from the Nasdaq Electronic Components Index has been included through June 27, 2021. 6/25/2017 6/24/2018 6/30/2019 6/28/2020 6/27/2021 6/26/2022 Wolfspeed, Inc. $100.00 $188.01 $221.62 $227.77 $388.92 $281.66 Nasdaq Composite Index 100.00 124.09 130.59 160.79 238.37 194.02 Nasdaq Electronic Components Index 100.00 141.67 141.92 174.03 261.89 — Philadelphia Semiconductor Index 100.00 128.11 139.31 186.85 319.39 271.29 26 Table of Contents Sale of Unregistered Securities There were no unregistered securities sold during fiscal 2022.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

90 edited+40 added−42 removed68 unchanged
Biggest changeAs discussed further below, operating loss from continuing operations for fiscal 2021 includes a $73.9 million expense related to the modification of our long-range plan regarding a building site in Durham, North Carolina. • Diluted loss per share from continuing operations was $2.46 in fiscal 2022 compared to $3.04 in fiscal 2021. • Combined cash, cash equivalents and short-term investments increased to $1,198.8 million at June 26, 2022 from $1,154.6 million at June 27, 2021. • Convertible notes, net was $1,021.6 million at June 26, 2022 and $823.9 million at June 27, 2021. • Net cash used in operating activities of continuing operations was $154.2 million in fiscal 2022 compared to net cash used in operating activities of continuing operations of $112.5 million in fiscal 2021. • Purchases of property and equipment, net were $505.9 million (net of $139.0 million in reimbursements) in fiscal 2022 compared to $559.8 million (net of $10.7 million in reimbursements) in fiscal 2021. • Design-ins were $6.4 billion in fiscal 2022 compared to $2.9 billion in fiscal 2021.
Biggest changeGross profit increased to $279.5 million from $249.3 million. • Operating loss from continuing operations was $380.6 million in fiscal 2023 compared to $247.8 million in fiscal 2022. • Diluted loss per share from continuing operations was $2.65 in fiscal 2023 compared to $2.46 in fiscal 2022. • Combined cash, cash equivalents and short-term investments increased to $2,954.9 million at June 25, 2023 from $1,198.8 million at June 26, 2022. • Long-term debt, net, including convertible notes, was $4,175.1 million at June 25, 2023 and $1,021.6 million at June 26, 2022.
Our potential for growth depends significantly on the adoption of Silicon Carbide and GaN materials and device products in the power and RF markets, the continued use of silicon devices in the RF telecommunications market and our ability to win new designs for these applications.
Our potential for growth depends significantly on the continued adoption of silicon carbide and GaN materials and device products in the power and RF markets, the continued use of silicon devices in the RF telecommunications market and our ability to win new designs for these applications.
Accordingly, an expense of $73.9 million was recorded based upon an updated valuation of the property in connection with the preparation of our financial statements for the fiscal year ended June 27, 2021. 33 (Gain) loss on Disposal or Impairment of Other Assets We operate a capital-intensive business.
Accordingly, an expense of $73.9 million was recorded based upon an updated valuation of the property in connection with the preparation of our financial statements for the fiscal year ended June 27, 2021. Loss (gain) on Disposal or Impairment of Other Assets We operate a capital-intensive business.
Our distributors may be provided limited rights that allow them to return a portion of inventory (product exchange rights or stock rotation rights) and receive credits for changes in selling prices (price protection rights) or customer pricing arrangements under our “ship and debit” program or other targeted sales incentives.
Our distributors may be provided limited rights that allow them to return or scrap a portion of inventory (product exchange rights or stock rotation rights) and receive credits for changes in selling prices (price protection rights) or customer pricing arrangements under our “ship and debit” program or other targeted sales incentives.
Innovations and advancements in materials, power, and RF technologies continue to expand the potential commercial application for our products. However, new technologies or standards could emerge or improvements could be made in existing technologies that could reduce or limit the demand for our products in certain markets. • Intellectual Property Issues.
Innovations and advancements in materials, power, and RF technologies continue to expand the potential commercial application for our products. However, new technologies or standards could emerge or improvements could be made in existing technologies that could reduce or limit the demand for our products in certain markets. 30 • Intellectual Property Issues.
Additionally, the gain on disposal or impairment of other assets for the fiscal year ended June 26, 2022 includes a $0.7 million net gain related to consideration received from the early payment of the unsecured promissory note issued by SGH at the closing of the LED Business Divestiture (the Purchase Price Note), as discussed in Note 3, "Discontinued Operations," in our consolidated financial statements included in Item 8 of this Annual Report.
Additionally, the gain on disposal or impairment of other assets for the fiscal year ended June 26, 2022 includes a $0.7 million net gain related to consideration received from the early payment of the unsecured promissory note (the Purchase Price Note) issued by SGH at the closing of the LED Business Divestiture (as defined below), as discussed in Note 3, "Discontinued Operations," in our consolidated financial statements included in Item 8 of this Annual Report.
We adjust these unrecognized tax benefits, including any impact on the related interest and penalties, in light of changing facts and circumstances, such as the progress of a tax audit. 41 Table of Contents A number of years may elapse before a particular matter for which we have established an unrecognized tax benefit is audited and fully resolved.
We adjust these unrecognized tax benefits, including any impact on the related interest and penalties, in light of changing facts and circumstances, such as the progress of a tax audit. 43 Table of Contents A number of years may elapse before a particular matter for which we have established an unrecognized tax benefit is audited and fully resolved.
The additional consideration was based upon the revenue and gross profit performance of the LED Business in the first four full fiscal quarters following the closing.
The additional consideration was based upon the revenue and gross profit performance of the LED Products Business in the first four full fiscal quarters following the closing.
Net Loss from Discontinued Operations As discussed above, we have classified the results of our former LED Products segment as discontinued operations in our consolidated statements of operations for all periods presented. We ceased recording depreciation and amortization of long-lived assets of the LED Business upon classification as discontinued operations in October 2020.
Net Loss from Discontinued Operations We have classified the results of our former LED Products segment (the LED Business) as discontinued operations in our consolidated statements of operations for all periods presented. We ceased recording depreciation and amortization of long-lived assets of the LED Business upon classification as discontinued operations in October 2020.
Actual results may vary and could have a significant impact on our operating results. 40 Table of Contents Under the ship and debit program, products are sold to distributors at negotiated prices and the distributors are required to pay for the products purchased within our standard commercial terms.
Actual results may vary and could have a significant impact on our operating results. 42 Table of Contents Under the ship and debit program, products are sold to distributors at negotiated prices and the distributors are required to pay for the products purchased within our standard commercial terms.
Subsequent changes in facts and circumstances do not result in the reversal of a previously recognized impairment loss. 42 Table of Contents Goodwill We test goodwill for impairment at least annually as of the first day of the fiscal fourth quarter, or when indications of potential impairment exist.
Subsequent changes in facts and circumstances do not result in the reversal of a previously recognized impairment loss. 44 Table of Contents Goodwill We test goodwill for impairment at least annually as of the first day of the fiscal fourth quarter, or when indications of potential impairment exist.
Net income from discontinued operations in fiscal 2022 relates to the receipt of an unsecured promissory note from CreeLED as additional consideration to satisfy the earnout obligations pursuant to the Asset Purchase Agreement (the LED Purchase Agreement), dated October 18, 2020, as amended.
Net income from discontinued operations in fiscal 2022 related to the receipt of an unsecured promissory note from CreeLED as additional consideration to satisfy the earnout obligations pursuant to the Asset Purchase Agreement (the LED Purchase Agreement), dated October 18, 2020, as amended.
Net loss from discontinued operations in fiscal 2021 includes a $112.6 million goodwill impairment, a $19.5 million impairment to assets held for sale associated with the LED Business Divestiture and a $29.1 million loss on sale.
Net loss from discontinued operations in fiscal 2021 included a $112.6 million goodwill impairment, a $19.5 million impairment to assets held for sale associated with the LED Business Divestiture and a $29.1 million loss on sale.
Demand also fluctuates based on various market cycles, continuously evolving industry supply chains, trade and tariff terms, inflationary impacts, as well as evolving competitive dynamics in each of the respective markets. These uncertainties make demand difficult to forecast for us and our customers.
Demand also fluctuates based on various domestic and global economic and market cycles, continuously evolving industry supply chains, trade and tariff terms, and inflationary impacts, as well as evolving competitive dynamics in each of the respective markets. These uncertainties make demand difficult to forecast for us and our customers.
We are focused on investing in our business to expand the scale, further develop the technologies, and accelerate the growth opportunities of Silicon Carbide materials, Silicon Carbide power devices and modules, and GaN and silicon RF devices. We believe these efforts will support our goals of delivering higher revenue and shareholder returns over time.
We are primarily focused on investing in our business to expand the scale, further develop the technologies, and accelerate the growth opportunities of silicon carbide materials, silicon carbide power devices and modules. We believe these efforts will support our goals of delivering higher revenue and shareholder returns over time.
Revenue Recognition For the year ended June 26, 2022, approximately a third of our revenue was from sales to distributors. Distributors stock inventory and sell our products to their own customer base, which may include: value added resellers; manufacturers who incorporate our products into their own manufactured goods; or ultimate end users of our products.
Revenue Recognition For the year ended June 25, 2023, approximately a third of our revenue was from sales to distributors. Distributors stock inventory and sell our products to their own customer base, which may include: value added resellers; manufacturers who incorporate our products into their own manufactured goods; or ultimate end users of our products.
The increase in interest income in fiscal 2022 compared to fiscal 2021 was primarily due to interest income received on our previously held note receivable from SGH in connection with the LED Business Divestiture, partially offset by decreased investment returns from our short-term investment securities.
The increase in interest income in fiscal 2022 compared to fiscal 2021 was primarily due to interest income received on our previously held note receivable from SGH in connection with the LED Business Divestiture, partially offset by decreased investment returns from our short-term investment securities. Interest expense, net of capitalized interest.
Net cash provided by financing activities in fiscal 2021 primarily consisted of net proceeds of $503.5 million from issuances of common stock in connection with the ATM program in the third quarter of fiscal 2021 and issuances of common stock pursuant to the exercise of employee stock options.
Net cash provided by financing activities in fiscal 2021 primarily consisted of net proceeds of $503.5 million from issuances of common stock in connection with an at-the-market program in the third quarter of fiscal 2021 and issuances of common stock pursuant to the exercise of employee stock options.
In the third quarter of fiscal 2022, we issued and sold a total of $750.0 million aggregate principal amount of the 2028 Notes, as discussed in Note 10, “Long-term Debt,” in our consolidated financial statements included in Item 8 of this Annual Report.
In the third quarter of fiscal 2022, we issued and sold a total of $750.0 million aggregate principal amount of 2028 Notes, as discussed in Note 10, "Long-term Debt," to our consolidated financial statements in Item 8 of this Annual Report.
All of the potential changes noted below are based on sensitivity analysis performed on our financial positions at June 26, 2022 and June 27, 2021. Actual results may differ materially.
All of the potential changes noted below are based on sensitivity analysis performed on our financial positions at June 25, 2023 and June 26, 2022. Actual results may differ materially.
Based on past performance and current expectations, we believe our current working capital, availability under our line of credit and anticipated cash flows from operations will be adequate to meet our cash needs for our daily operations and capital expenditures for at least the next 12 months.
Based on past performance and current expectations, we believe our current working capital and anticipated cash flows from operations will be adequate to meet our cash needs for our daily operations and capital expenditures for at least the next 12 months.
We recorded net income from discontinued operations of $94.2 million, net loss from discontinued operations of $181.2 million and net income from discontinued operations of $7.0 million in fiscal 2022, 2021 and 2020, respectively.
We recorded net income from discontinued operations of $94.2 million and net loss from discontinued operations of $181.2 million in fiscal 2022 and 2021, respectively.
The decrease in interest expense resulting from the extinguishment of the 2023 Notes in the second quarter of fiscal 2022 was mostly offset by an increase in interest expense from the sale of the 2028 Notes in the third quarter of fiscal 2022.
The decrease in interest expense resulting from the extinguishment of the 2023 Notes in the second quarter of fiscal 2022 was mostly offset by an increase in interest expense from the sale of the 2028 Notes in the third quarter of fiscal 2022. Gain on arbitration proceedings .
Dollars) June 26, 2022 June 27, 2021 June 28, 2020 2021 to 2022 2020 to 2021 Research and development $196.4 $177.8 $152.0 $18.6 10 % $25.8 17 % Percent of revenue 26 % 34 % 32 % The increases in research and development expenses were primarily due to our continued investment in our Silicon Carbide and GaN technologies, including the development of existing Silicon Carbide materials and fabrication technology for next generation platforms and expansion of our power and RF product portfolio.
Dollars) June 25, 2023 June 26, 2022 June 27, 2021 2022 to 2023 2021 to 2022 Research and development $225.4 $196.4 $177.8 $29.0 15 % $18.6 10 % Percent of revenue 24 % 26 % 34 % The increases in research and development expenses were primarily due to our continued investment in our silicon carbide and GaN technologies, including the development of existing silicon carbide materials and fabrication technology for next generation platforms and expansion of our power and RF product portfolio.
Dollars) June 26, 2022 June 27, 2021 June 28, 2020 2021 to 2022 2020 to 2021 (Gain) loss on disposal or impairment of other assets ($0.3) $1.6 $1.5 ($1.9) (119) % $0.1 7 % (Gain) loss on disposal or impairment of other assets primarily relate to proceeds from asset sales offset by write-offs of fixed asset projects, as well as the write-offs of impaired or abandoned patents.
Dollars) June 25, 2023 June 26, 2022 June 27, 2021 2022 to 2023 2021 to 2022 Loss (gain) on disposal or impairment of other assets $2.0 ($0.3) $1.6 $2.3 (767) % ($1.9) (119) % Loss (gain) on disposal or impairment of other assets primarily relate to proceeds from asset sales offset by write-offs of fixed asset projects, as well as the write-offs of impaired or abandoned patents.
As of June 26, 2022, we have $82.3 million of unrecognized compensation cost related to nonvested awards, which is expected to be recognized over a weighted average period of 1.85 years. We estimate expected forfeitures at the time of grant and revise this estimate, if necessary, in subsequent periods if actual forfeitures differ from initial estimates.
As of June 25, 2023, we have $119.1 million of unrecognized compensation cost related to nonvested awards, which is expected to be recognized over a weighted average period of 2.19 years. We estimate expected forfeitures at the time of grant and revise this estimate, if necessary, in subsequent periods if actual forfeitures differ from initial estimates.
The gain on equity investment for fiscal 2021 and 2020 relates to changes in fair value of our previously held ENNOSTAR Inc. (ENNOSTAR) investment. In the fourth quarter of fiscal 2021, we liquidated our common stock ownership interest in ENNOSTAR. We no longer hold any equity interest in ENNOSTAR. Loss (gain) on debt extinguishment .
Gain on equity investment . The gain on equity investment for fiscal 2021 relates to changes in fair value of our previously held ENNOSTAR Inc. (ENNOSTAR) investment. In the fourth quarter of fiscal 2021, we liquidated our common stock ownership interest in ENNOSTAR. We no longer hold any equity interest in ENNOSTAR. 37 Loss on Wafer Supply Agreement .
No other significant acquisition-related intangible activity or impairments occurred in the periods reported.
No other significant acquisition-related intangible activity or impairments occurred between the periods.
We have determined that we operate as one operating and reportable seg ment. We may initiate goodwill impairment testing by considering qualitative factors to determine whether it is more likely than not that a reporting unit’s carrying value is greater than its fair value.
We have determined that we have one reporting unit. We may initiate goodwill impairment testing by considering qualitative factors to determine whether it is more likely than not that a reporting unit’s carrying value is greater than its fair value.
We evaluate our short-term investments for expected credit losses. We believe we are able to and we intend to hold each of the investments held with an unrealized loss as of June 26, 2022 until the investments fully recover in market value. No allowance for credit losses was recorded as of June 26, 2022.
We believe we are able to and we intend to hold each of the investments held with an unrealized loss as of June 25, 2023 until the investments fully recover in market value. No allowance for credit losses was recorded as of June 25, 2023.
Dollars) June 26, 2022 June 27, 2021 June 28, 2020 2021 to 2022 2020 to 2021 Income tax expense (benefit) $9.0 $1.1 ($8.0) 7.9 718 % 9.1 114 % Effective tax rate (3) % — % 4 % The change in the effective tax rate from 0% in fiscal 2021 to (3)% in fiscal 2022 was primarily due to $7.3 million of income tax expense recognized in the second quarter of fiscal 2022 related to the restructuring of our Luxembourg holding company.
Dollars) June 25, 2023 June 26, 2022 June 27, 2021 2022 to 2023 2021 to 2022 Income tax expense $1.4 $9.0 $1.1 (7.6) (84) % 7.9 718 % Effective tax rate — % (3) % — % The change in the effective tax rate from (3)% in fiscal 2022 as compared to 0% in fiscal 2023 and fiscal 2021 was primarily due to $7.3 million of income tax expense recognized in the second quarter of fiscal 2022 related to the restructuring of our Luxembourg holding company.
Dollars, except share data) Amount % of Revenue Amount % of Revenue Amount % of Revenue Revenue, net $746.2 100.0 % $525.6 100.0 % $470.7 100.0 % Cost of revenue, net 496.9 66.6 % 361.0 68.7 % 312.2 66.3 % Gross profit 249.3 33.4 % 164.6 31.3 % 158.5 33.7 % Research and development 196.4 26.3 % 177.8 33.8 % 152.0 32.3 % Sales, general and administrative 203.5 27.3 % 181.6 34.6 % 181.7 38.6 % Amortization or impairment of acquisition-related intangibles 13.6 1.8 % 14.5 2.8 % 14.5 3.1 % Abandonment of long-lived assets — — % 73.9 14.1 % — — % (Gain) loss on disposal or impairment of other assets (0.3) — % 1.6 0.3 % 1.5 0.3 % Other operating expense 83.9 11.2 % 29.1 5.5 % 32.9 7.0 % Operating loss (247.8) (33.2) % (313.9) (59.7) % (224.1) (47.6) % Non-operating expense (income), net 38.3 5.1 % 26.3 5.0 % (18.5) (3.9) % Loss before income taxes (286.1) (38.3) % (340.2) (64.7) % (205.6) (43.7) % Income tax expense (benefit) 9.0 1.2 % 1.1 0.2 % (8.0) (1.7) % Net loss from continuing operations (295.1) (39.5) % (341.3) (64.9) % (197.6) (42.0) % Net income (loss) from discontinued operations 94.2 12.6 % (181.2) (34.5) % 7.0 1.5 % Net loss (200.9) (26.9) % (522.5) (99.4) % (190.6) (40.5) % Net income attributable to noncontrolling interest — — % 1.4 0.3 % 1.1 0.2 % Net loss attributable to controlling interest ($200.9) (26.9) % ($523.9) (99.7) % ($191.7) (40.7) % Basic and diluted loss per share Continuing operations ($2.46) ($3.04) ($1.83) Net loss attributable to controlling interest ($1.67) ($4.66) ($1.78) 31 Table of Contents Revenue Revenue was comprised of the following: Fiscal Years Ended Year-Over-Year Change (in millions of U.S.
Dollars, except share data) Amount % of Revenue Amount % of Revenue Amount % of Revenue Revenue, net $921.9 100.0 % $746.2 100.0 % $525.6 100.0 % Cost of revenue, net 642.4 69.7 % 496.9 66.6 % 361.0 68.7 % Gross profit 279.5 30.3 % 249.3 33.4 % 164.6 31.3 % Research and development 225.4 24.4 % 196.4 26.3 % 177.8 33.8 % Sales, general and administrative 235.3 25.5 % 203.5 27.3 % 181.6 34.6 % Factory start-up costs 160.2 17.4 % 70.0 9.4 % 8.0 1.5 % Amortization or impairment of acquisition-related intangibles 10.9 1.2 % 13.6 1.8 % 14.5 2.8 % Abandonment of long-lived assets — — % — — % 73.9 14.1 % Loss (gain) on disposal or impairment of other assets 2.0 0.2 % (0.3) — % 1.6 0.3 % Other operating expense 26.3 2.9 % 13.9 1.9 % 21.1 4.0 % Operating loss (380.6) (41.3) % (247.8) (33.2) % (313.9) (59.7) % Non-operating (income) expense, net (52.1) (5.7) % 38.3 5.1 % 26.3 5.0 % Loss before income taxes (328.5) (35.6) % (286.1) (38.3) % (340.2) (64.7) % Income tax expense 1.4 0.2 % 9.0 1.2 % 1.1 0.2 % Net loss from continuing operations (329.9) (35.8) % (295.1) (39.5) % (341.3) (64.9) % Net income (loss) from discontinued operations — — % 94.2 12.6 % (181.2) (34.5) % Net loss (329.9) (35.8) % (200.9) (26.9) % (522.5) (99.4) % Net income attributable to noncontrolling interest — — % — — % 1.4 0.3 % Net loss attributable to controlling interest ($329.9) (35.8) % ($200.9) (26.9) % ($523.9) (99.7) % Basic and diluted loss per share Continuing operations ($2.65) ($2.46) ($3.04) Net loss attributable to controlling interest ($2.65) ($1.67) ($4.66) 32 Table of Contents Revenue Revenue was comprised of the following: Fiscal Years Ended Year-Over-Year Change (in millions of U.S.
We expect to invest approximately $2.0 billion, an increase from our previously expected $1.0 billion, in construction, equipment and other related costs for the new facility through fiscal 2024, of which approximately $500 million is expected to be reimbursed over time by the State of New York through a grant program administered by the State of New York Urban Development Corporation (doing business as Empire State Development).
We now expect to invest approximately $2.0 billion in construction, equipment and other related costs for the new facility, of which approximately $500 million is expected to be reimbursed over time by the State of New York Urban Development Corporation (doing business as Empire State Development) under a Grant Disbursement Agreement (the GDA).
Sales, general and administrative expenses were as follows: Fiscal Years Ended Year-Over-Year Change (in millions of U.S.
SG&A expenses were as follows: Fiscal Years Ended Year-Over-Year Change (in millions of U.S.
To enforce or protect intellectual property rights, litigation or threatened litigation is common. Fiscal 2022 Overview The following is a summary of our financial results for the year ended June 26, 2022: • Our year-over-year revenue increased by $220.6 million to $746.2 million. • Gross margin increased to 33.4% from 31.3%.
To enforce or protect intellectual property rights, litigation or threatened litigation is common. Fiscal 2023 Overview The following is a summary of our financial results for the year ended June 25, 2023: • Our year-over-year revenue increased by $175.7 million to $921.9 million. • Gross margin decreased to 30.3% from 33.4%.
As of June 26, 2022, we did not have any off-balance sheet arrangements, as defined in Item 303(b) of SEC Regulation S-K. Critical Accounting Estimates Our consolidated financial statements are prepared in accordance with U.S. GAAP. In the application of U.S.
Accordingly, our liquidity and capital resources are not subject to off-balance sheet risks from unconsolidated entities. As of June 25, 2023, we did not have any off-balance sheet arrangements, as defined in Item 303(b) of SEC Regulation S-K. Critical Accounting Estimates Our consolidated financial statements are prepared in accordance with U.S. GAAP. In the application of U.S.
If actual results are not consistent with our assumptions and judgments used in estimating future cash flows and asset fair values, we may be required to recognize additional impairment losses which could be material to our results of operations.
If actual results are not consistent with our assumptions and judgments used in estimating future cash flows and asset fair values, we may be required to recognize additional impairment losses which could be material to our results of operations. After an impairment loss is recognized, a new, lower cost basis for that long-lived asset is established.
With the strength of our working capital position, we believe that we have the ability to continue to invest in expansion of our production capacity, further development of our products and, when necessary or appropriate, make selective acquisitions or other strategic investments to strengthen our product portfolio or secure key intellectual properties. 36 Table of Contents Sources of Liquidity The following table sets forth our cash, cash equivalents and short-term investments: (in millions of U.S.
With the strength of our working capital position, we believe that we have the ability to continue to invest in the near-term expansion of our production capacity, further develop our product portfolio and, when necessary or appropriate, make selective acquisitions or other strategic investments to strengthen our product portfolio or secure key intellectual properties.
The semiconductor industry has experienced supply constraints for certain items. While we have successfully managed through challenges relating to obtaining certain necessary raw materials and production and processing equipment thus far, we expect the supply situation for these items to remain tight for at least the next few quarters.
While we have successfully managed through challenges relating to obtaining certain necessary raw materials and production and processing equipment thus far, and have continued to see supply availabilities and lead times stabilize across many direct materials, we expect the supply situation for certain items to remain tight for at least the next few quarters.
Dollars) June 26, 2022 June 27, 2021 Change Cash and cash equivalents $449.5 $379.0 $70.5 Short-term investments 749.3 775.6 (26.3) Total cash, cash equivalents and short-term investments $1,198.8 $1,154.6 $44.2 The significant components of our working capital are liquid assets such as cash and cash equivalents, short-term investments, accounts receivable and inventories reduced by trade accounts payable.
Dollars) June 25, 2023 June 26, 2022 Change Cash and cash equivalents $1,757.0 $449.5 $1,307.5 Short-term investments 1,197.9 749.3 448.6 Total cash, cash equivalents and short-term investments $2,954.9 $1,198.8 $1,756.1 The significant components of our working capital are liquid assets such as cash and cash equivalents, short-term investments, accounts receivable and inventories reduced by accounts payable and accrued expenses.
Dollars) June 26, 2022 June 27, 2021 June 28, 2020 2021 to 2022 2020 to 2021 Sales, general and administrative $203.5 $181.6 $181.7 $21.9 12 % ($0.1) — % Percent of revenue 27 % 35 % 39 % The increase in sales, general and administrative expenses in fiscal 2022 compared to fiscal 2021 was primarily due to increased salaries and benefits from increased headcount, including incentive based stock-based compensation, as well as increased consulting, legal and travel costs, partially offset by a decrease in costs related to transition services incurred in the first half of fiscal 2021 in connection with the sale of our former Lighting Products business unit.
The increase in SG&A expenses in fiscal 2022 compared to fiscal 2021 was primarily due to increased salaries and benefits from increased headcount, including incentive based stock-based compensation, as well as increased consulting, legal and travel costs, partially offset by a decrease in costs related to transition services incurred in the first half of fiscal 2021 in connection with the sale of our former Lighting Products business unit.
Our research and development expenses vary significantly from year to year based on a number of factors, including the timing of new product introductions and the number and nature of our ongoing research and development activities. 32 Sales, General and Administrative Sales, general and administrative expenses are comprised primarily of costs associated with our sales and marketing personnel and our executive and administrative personnel (for example, finance, human resources, information technology and legal) and consist of salaries and related compensation costs; consulting and other professional services (such as litigation and other outside legal counsel fees, audit and other compliance costs); marketing and advertising expenses; facilities and insurance costs; and travel and other costs.
Sales, General and Administrative Sales, general and administrative (SG&A) expenses are comprised primarily of costs associated with our sales and marketing personnel and our executive and administrative personnel (for example, finance, human resources, information technology and legal) and consist of salaries and related compensation costs; consulting and other professional services (such as litigation and other outside legal counsel fees, audit and other compliance costs); marketing and advertising expenses; facilities and insurance costs; and travel and other costs.
Cash Flows from Financing Activities Net cash provided by financing activities in fiscal 2022 primarily consisted of $732.3 million in net proceeds from issuing the 2028 Notes and $22.4 million of proceeds from the issuance of common stock, partially offset by $108.2 million in cash paid for the capped call transactions and $29.1 million in tax withholdings on vested equity awards.
Net cash provided by financing activities in fiscal 2022 primarily consisted of $732.3 million in net proceeds from issuing the 2028 Notes, partially offset by $108.2 million in cash paid for the capped call transactions.
Dollars) June 26, 2022 June 27, 2021 June 28, 2020 2021 to 2022 2020 to 2021 Revenue $746.2 $525.6 $470.7 $220.6 42 % $54.9 12 % The increase in revenue for fiscal 2022 compared to fiscal 2021 was primarily due to increased demand across all of our product lines, as well as increased production capacity for our power and materials product lines to meet the strong demand during the period.
The increase in revenue for fiscal 2022 compared to fiscal 2021 was primarily due to increased demand across all of our product lines, as well as increased production capacity for our power and materials product lines to meet the strong demand during the period.
Dollars) June 26, 2022 June 27, 2021 June 28, 2020 2021 to 2022 2020 to 2021 Gain on sale of investments, net ($0.3) ($0.4) ($1.5) $0.1 (25) % $1.1 73 % Gain on equity investment — (8.3) (14.2) 8.3 100 % 5.9 42 % Loss (gain) on debt extinguishment 24.8 — (11.0) 24.8 100 % 11.0 100 % Gain on arbitration proceedings — — (7.9) — — % 7.9 100 % Interest income (11.8) (10.1) (16.3) (1.7) (17) % 6.2 38 % Interest expense 25.1 45.4 34.9 (20.3) (45) % 10.5 30 % Other, net 0.5 (0.3) (2.5) 0.8 267 % 2.2 88 % Non-operating expense (income), net $38.3 $26.3 ($18.5) $12.0 46 % $44.8 242 % Gain on equity investment.
Dollars) June 25, 2023 June 26, 2022 June 27, 2021 2022 to 2023 2021 to 2022 Interest income ($58.2) ($11.8) ($10.1) ($46.4) 393 % ($1.7) (17) % Interest expense, net of capitalized interest 42.6 25.1 45.4 17.5 70 % (20.3) (45) % Gain on arbitration proceedings (50.3) — — (50.3) (100) % — — % Loss on debt extinguishment — 24.8 — (24.8) (100) % 24.8 100 % Gain on equity investment — — (8.3) — — % 8.3 100 % Loss on Wafer Supply Agreement 13.6 0.8 0.8 12.8 1,600 % — — % Gain on sale of investments, net — (0.3) (0.4) 0.3 100 % 0.1 25 % Other, net 0.2 (0.3) (1.1) 0.5 167 % 0.8 73 % Non-operating (income) expense, net ($52.1) $38.3 $26.3 ($90.4) (236) % $12.0 46 % Interest income.
This target is highly dependent on the timing and overall progress on our new Silicon Carbide fabrication facility in New York and is net of approximately $275 million of expected reimbursements from the State of New York Urban Development Corporation under the GDA during the fiscal year.
This target is highly dependent on the timing and overall progress on our new silicon carbide fabrication facility in New York and the construction of our new materials manufacturing facility in Siler City, North Carolina. Our target net capital investment figure is net of approximately $150 million of expected reimbursements from the GDA during the fiscal year.
To remain competitive, market participants must continuously increase product performance, reduce costs and develop improved ways to serve their customers. To address these competitive pressures, we have invested in research and development activities to support new product development, lower product costs and deliver higher levels of performance to differentiate our products in the market.
To address these competitive pressures, we have invested in new production facilities, as well as research and development activities to support new product development, lower product costs and deliver higher levels of performance to differentiate our products in the market.
Dollars) June 26, 2022 June 27, 2021 June 28, 2020 2021 to 2022 2020 to 2021 Gross profit $249.3 $164.6 $158.5 $84.7 51 % $6.1 4 % Gross margin 33 % 31 % 34 % The increase in gross profit for fiscal 2022 compared to fiscal 2021 was primarily due to increased revenues in the current period and lower manufacturing costs, including the impact of increasing the expected useful lives of certain machinery and equipment assets to more closely reflect the estimated economic lives of those assets.
The increase in gross profit for fiscal 2022 compared to fiscal 2021 was primarily due to increased revenues in the current period and lower production costs, including the impact of increasing the expected useful lives of certain machinery and equipment assets to more closely reflect the estimated economic lives of those assets.
All of our short-term investments had investment grade ratings, and any such investments that were in an unrealized loss position at June 26, 2022 were in such position due to interest rate changes, sector credit rating changes, company-specific rating changes or volatile market conditions related to the conflict in Ukraine and the ongoing COVID-19 pandemic.
All of our short-term investments had investment grade ratings, and any such investments that were in an unrealized loss position at June 25, 2023 were in such position due to interest rate changes, sector credit rating changes or company-specific rating changes. We evaluate our short-term investments for expected credit losses.
In the second quarter of fiscal 2022, all of our then-outstanding 2023 Notes were converted into shares of our common stock, which resulted in a loss on extinguishment of $24.8 million.
Loss on debt extinguishment . In the second quarter of fiscal 2022, all of our then-outstanding 2023 Notes were converted into shares of our common stock, which resulted in a loss on extinguishment of $24.8 million. See Note 10, "Long-term Debt," to our consolidated financial statements in Item 8 of this Annual Report for additional information.
In addition to ordinary operating expenses, our estimated future obligations consist of leases, debt, and interest on long-term debt. For a description of contractual obligations, including lease and debt obligations, see Note 5, "Leases," Note 10, "Long-term Debt," and Note 15, "Commitments and Contingencies," in our consolidated financial statements included in Item 8 of this Annual Report.
For a description of contractual obligations, including lease and debt obligations, see Note 5, "Leases," Note 10, "Long-term Debt," and Note 15, "Commitments and Contingencies," in our consolidated financial statements included in Item 8 of this Annual Report. Cash Flows In summary, our cash flows were as follows (in millions of U.S.
Dollars) June 26, 2022 June 27, 2021 June 28, 2020 2021 to 2022 2020 to 2021 Customer relationships $6.1 $6.1 $6.1 $— — % $— — % Developed technology 5.4 5.4 5.4 — — % — — % Non-compete agreements 2.1 3.0 3.0 (0.9) (30) % — — % Total $13.6 $14.5 $14.5 ($0.9) (6) % $— — % Amortization of acquisition-related intangible assets decreased in fiscal 2022 compared to fiscal 2021 due to an intangible asset relating to non-compete agreements reaching the end of its useful life during fiscal 2022.
Dollars) June 25, 2023 June 26, 2022 June 27, 2021 2022 to 2023 2021 to 2022 Customer relationships $6.1 $6.1 $6.1 $— — % $— — % Developed technology 4.8 5.4 5.4 (0.6) (11) % — — % Non-compete agreements — 2.1 3.0 (2.1) (100) % (0.9) (30) % Total $10.9 $13.6 $14.5 ($2.7) (20) % ($0.9) (6) % Amortization of acquisition-related intangible assets decreased in all periods presented due to certain intangible assets reaching the end of their useful lives.
As such, we dispose of a certain level of our equipment in the normal course of business as our production processes change due to production improvement initiatives or product mix changes. Due to the risk of technological obsolescence or changes in our production process, we regularly review our long-lived assets and capitalized patent costs for possible impairment.
As such, we dispose of a certain level of our equipment in the normal course of business as our production processes change due to production improvement initiatives or product mix changes.
Dollars): Fiscal Years Ended Year-Over-Year Change June 26, 2022 June 27, 2021 June 28, 2020 2021 to 2022 2020 to 2021 Cash used in operating activities ($154.2) ($125.5) ($29.0) ($28.7) ($96.5) Cash used in investing activities (391.0) (448.6) (486.9) 57.6 38.3 Cash provided by financing activities 615.9 504.1 464.3 111.8 39.8 Effect of foreign exchange changes (0.2) 0.2 (0.1) (0.4) 0.3 Net increase (decrease) in cash and cash equivalents $70.5 ($69.8) ($51.7) $140.3 ($18.1) Cash Flows from Operating Activities Net cash used in operating activities increased in fiscal 2022 compared to fiscal 2021 primarily due to decreased working capital as a result of inventory growth and increased receivables as a result of revenue growth.
Dollars): Fiscal Years Ended Year-Over-Year Change June 25, 2023 June 26, 2022 June 27, 2021 2022 to 2023 2021 to 2022 Cash used in operating activities ($142.6) ($154.2) ($125.5) $11.6 ($28.7) Cash used in investing activities (1,147.0) (391.0) (448.6) (756.0) 57.6 Cash provided by financing activities 2,597.1 615.9 504.1 1,981.2 111.8 Effect of foreign exchange changes — (0.2) 0.2 0.2 (0.4) Net increase (decrease) in cash and cash equivalents $1,307.5 $70.5 ($69.8) $1,237.0 $140.3 40 Table of Contents Cash Flows from Operating Activities Net cash used in operating activities decreased in fiscal 2023 compared to fiscal 2022 primarily due to a smaller increase in working capital in the current period compared to the prior period, which was primarily driven by increased customer reserve deposits received and a smaller increase in accounts receivable, net, both of which offset increased inventory growth.
Net cash used in operating activities increased in fiscal 2021 compared to fiscal 2020 primarily due to an increase in net loss during the period and decreased cash provided by operating activities of discontinued operations, as well as slightly decreased working capital.
This was partially offset by an increase in net loss during the period. Net cash used in operating activities increased in fiscal 2022 compared to fiscal 2021 primarily due to decreased working capital as a result of inventory growth and increased receivables as a result of revenue growth.
In addition, we invest in systems, people and new processes to 28 improve our ability to deliver a better overall experience for our customers. Market participants often undertake pricing strategies to gain or protect market share, increase the utilization of their production capacity and open new applications in the power and RF markets we serve. • Technological Innovation and Advancement.
Market participants often undertake pricing strategies to gain or protect market share, increase the utilization of their production capacity and open new applications in the power and RF markets we serve. • Governmental Trade and Regulatory Conditions .
Despite increased complexities in our manufacturing process, we believe we are in a position to improve yield levels to support our future growth, particularly as we transition to our new Silicon Carbide device fabrication facility in Marcy, New York. 29 We believe we have the ability to navigate the current environment while maintaining our capital expenditure plans to support future growth, including the completion and build out of our new facility in New York and additional production capacity in North Carolina.
Despite increased complexities in our manufacturing processes, we believe we are in a position to improve yield levels to support our future growth, particularly as we transition more production to our new silicon carbide device fabrication facility in Marcy, New York.
(Gain) loss on disposal or impairment of other assets were as follows: Fiscal Years Ended Year-Over-Year Change (in millions of U.S.
Gross Profit and Gross Margin Gross profit and gross margin were as follows: Fiscal Years Ended Year-Over-Year Change (in millions of U.S.
We expect to use the remainder of the net proceeds for general corporate purposes. In addition, during the third quarter of 2022, we received an early payment for the Purchase Price Note resulting in receipt of the principal amount of $125.0 million along with outstanding accrued and unpaid interest as of the payment date.
In the third quarter of fiscal 2022, we received an early payment in the amount of $125.0 million, along with outstanding accrued and unpaid interest as of the payment date, relating to the unsecured promissory note issued with the completion of the transaction.
As of June 26, 2022 and June 27, 2021, our cash equivalents and short-term investments had a fair value of $993.6 million and $979.8 million, respectively. If interest rates were to hypothetically increase by 100 basis points, the fair value of our short-term investments would decrease by $9.9 million at June 26, 2022 and $9.8 million at June 27, 2021.
If interest rates were to hypothetically increase by 100 basis points, the fair value of our short-term investments would decrease by $14.6 million at June 25, 2023 and $9.9 million at June 26, 2022. 41 Table of Contents Currency Rate and Price Risk All of our operations have a functional currency of the U.S. Dollar.
Fluctuations in exchange rates may adversely affect our expenses and results of operations as well as the value of our assets and liabilities. Commodities We utilize significant amounts of precious metals, gases and other commodities in our manufacturing processes. General economic conditions, market specific changes or other factors outside of our control may affect the pricing of these commodities.
However, we operate internationally and have transactions denominated in foreign currencies, and therefore we are exposed to currency exchange rate risks. Fluctuations in exchange rates may adversely affect our expenses and results of operations as well as the value of our assets and liabilities. Commodities We utilize significant amounts of precious metals, gases and other commodities in our manufacturing processes.
Cash Flows from Investing Activities Our investing activities primarily relate to short-term investment transactions, purchases of property and equipment, and property and equipment related reimbursements. 38 Table of Contents The decrease in net cash used in investing activities in fiscal 2022 compared to fiscal 2021 was primarily due to a $128.3 million increase in property and equipment related reimbursements from the State of New York Urban Development Corporation under a Grant Disbursement Agreement (the GDA) and a $81.3 million net increase in proceeds from the LED Business Divestiture.
The decrease in net cash used in investing activities in fiscal 2022 compared to fiscal 2021 was primarily due to a $53.9 million decrease in net property and equipment purchases and a $81.3 million net increase in proceeds from the LED Business Divestiture, partially offset by a $12.5 million increase in net purchases of short-term investments.
We do not use financial instruments to hedge commodity prices. Off-Balance Sheet Arrangements We do not use off-balance sheet arrangements with unconsolidated entities or related parties, nor do we use any other forms of off-balance sheet arrangements. Accordingly, our liquidity and capital resources are not subject to off-balance sheet risks from unconsolidated entities.
General economic conditions, market specific changes or other factors outside of our control may affect the pricing of these commodities. We do not use financial instruments to hedge commodity prices. Off-Balance Sheet Arrangements We do not use off-balance sheet arrangements with unconsolidated entities or related parties, nor do we use any other forms of off-balance sheet arrangements.
We may also access capital markets through the issuance of debt or equity, which we may use in connection with the acquisition of complementary businesses or other significant assets or for other strategic opportunities or general corporate purposes. 37 Table of Contents Expected Uses of Liquidity For fiscal 2023, we target approximately $550 million of net capital investment, which is primarily related to capacity and infrastructure projects to support longer-term growth and strategic priorities.
We may also access capital markets through the issuance of debt or equity, which we may use in connection with the acquisition of complementary businesses or other significant assets or for other strategic opportunities or general corporate purposes. 39 Table of Contents Expected Uses of Liquidity We recently opened our new silicon carbide device fabrication facility in Marcy, New York, to expand capacity for production of our silicon carbide devices.
Amortization of intangible assets related to our acquisitions was as follows: Fiscal Years Ended Year-Over-Year Change (in millions of U.S.
Amortization or Impairment of Acquisition-Related Intangibles As a result of our acquisitions, we have recognized various amortizable intangible assets, including customer relationships, developed technology and non-compete agreements. Amortization of intangible assets related to our acquisitions was as follows: Fiscal Years Ended Year-Over-Year Change (in millions of U.S.
Therefore management uses the design-in amount as a guide to forecast future demand but it should not be taken as an absolute indicator of future revenue. 30 Table of Contents Results of Operations Selected consolidated statement of operations data for the years ended June 26, 2022, June 27, 2021 and June 28, 2020 is as follows: Fiscal Years Ended June 26, 2022 June 27, 2021 June 28, 2020 (in millions of U.S.
Therefore, management uses the design-in amount as a guide to forecast future demand but it should not be taken as an absolute indicator of future revenue.
Total cash flows from operating activities in fiscal 2021 and 2020 includes ($13.0) million and $62.6 million of cash (used in) provided by operating activities of discontinued operations.
Total cash flows from operating activities in fiscal 2021 includes $13.0 million of cash used in operating activities of discontinued operations. Cash Flows from Investing Activities Our investing activities primarily relate to short-term investment transactions, purchases of property and equipment, and property and equipment related reimbursements.
Additionally, in the fourth quarter of fiscal 2020, we recognized a gain on partial debt extinguishment as a result of spending $144.3 million to repurchase $150.2 million of the principal amount held on our previously held 2023 Notes. See Note 10, "Long-term Debt," to our consolidated financial statements in Item 8 of this Annual Report for additional information.
In the fourth quarter of fiscal 2023, we sold $1,250 million aggregate principal amount of 2030 Senior Notes, as discussed in Note 10, "Long-term Debt," to our consolidated financial statements in Item 8 of this Annual Report. The total net proceeds of the 2030 Senior Notes was approximately $1,149.3 million.
Other, net, primarily includes (i) foreign currency (gain) loss, net resulting from remeasurement adjustments from our international subsidiaries, (ii) net losses on the Wafer Supply Agreement entered into in fiscal 2021, pursuant to which we supply CreeLED with certain Silicon Carbide materials and fabrication services for up to four years, and (iii) a loss related to receiving an early payment for the Purchase Price Note.
(CreeLED and collectively with SGH, SMART) in fiscal 2021, we entered into a Wafer Supply and Fabrication Services Agreement (the Wafer Supply Agreement), pursuant to which we supply CreeLED with certain silicon carbide materials and fabrication services for up to four years.
The total net proceeds of the 2028 Notes was $732.3 million, of which we used $108.2 million to fund the cost of entering into capped call transactions, which are expected generally to reduce the potential dilution to our common stock upon any conversion of the 2028 Notes and/or offset any potential cash payments we are required to make in excess of the principal amount of the converted 2028 Notes, as the case may be, upon conversion of the 2028 Notes.
The total net proceeds of the 2028 Notes was $732.3 million, of which we used $108.2 million to fund the cost of entering into capped call transactions.
The increase in gross margin for fiscal 2022 compared to fiscal 2021 was primarily due to the same factors as the increase to gross profit, partly offset by product mix. The increase in gross profit for fiscal 2021 compared to fiscal 2020 was primarily due to increased revenues in the current period.
The increase in gross margin for fiscal 2022 compared to fiscal 2021 was primarily due to the same factors as the increase to gross profit, partly offset by product mix. As explained further below, the operating costs of each of our new facilities will largely be reflected in cost of revenue, net once such facility reaches revenue generating production.
The strength of our balance sheet provides us the ability to invest in our business, as indicated by our new state-of-the-art, automated 200mm Silicon Carbide device fabrication facility in Marcy, New York, which started running qualification lots in the fourth quarter of fiscal 2022, and an expansion of our materials factory at our U.S campus headquarters in Durham, North Carolina, both of which will increase our production capacity.
Business Outlook We believe we are uniquely positioned as an innovator in the global semiconductor industry. The strength of our balance sheet provides us the ability to invest in our business, as indicated by our new state-of-the-art, automated 200mm silicon carbide device fabrication facility in Marcy, New York, where we recently started revenue generating production.
This change in estimate resulted in an improvement in year-to-date basic and diluted loss per share of $0.19 per share. Design-ins Design-ins are customer commitments to purchase our product and are one of the factors we use to forecast long-term demand and future revenue.
For fiscal 2024, we target approximately $2.0 billion of net capital investment. 31 Design-ins Design-ins are customer commitments to purchase our products and are one of the factors we use to forecast long-term demand and future revenue.
These increases in proceeds from investing activities were partially offset by a $74.4 million increase in purchases of property and equipment and a $12.5 million decrease in net proceeds from short-term investments. Additionally, we received $66.4 million in net proceeds from the liquidation of our ENNOSTAR equity investment in fiscal 2021.
Additionally, we received $66.4 million in net proceeds from the liquidation of our ENNOSTAR equity investment in fiscal 2021. Total cash used in investing activities in fiscal 2021 includes $0.3 million of cash used in investing activities of discontinued operations.
The decrease in other operating expense in fiscal 2021 compared to fiscal 2020 was primarily due to decreased project, transformation and transaction costs, partially offset by a slight increase in total restructuring costs. 34 Non-Operating Expense (Income), net Non-operating expense (income), net was comprised of the following: Fiscal Years Ended Year-Over-Year Change (in millions of U.S.
The factory optimization restructuring plan concluded in fiscal 2022. The increase in other operating expense in all periods is primarily due to increased professional service fees associated with completed and potential acquisitions and divestitures. 36 Non-Operating (Income) Expense, net Non-operating (income) expense, net was comprised of the following: Fiscal Years Ended Year-Over-Year Change (in millions of U.S.
The decrease in net cash used in investing activities in fiscal 2021 compared to fiscal 2020 was primarily due to an increase in net proceeds from short-term investments of $247.8 million, net proceeds from the sale of the LED Business of $43.7 million, net proceeds from the liquidation of our ENNOSTAR equity investment of $66.4 million and $10.7 million of property related reimbursements under the GDA, partially offset by an increase in property and equipment purchases of $340.6 million.
The increase in net cash used in investing activities in fiscal 2023 compared to fiscal 2022 was primarily due to an increase in net purchases of short-term investments of $436.2 million and an increase in net property and equipment purchases of $294.4 million.
Dollars) June 26, 2022 June 27, 2021 June 28, 2020 2021 to 2022 2020 to 2021 Factory optimization restructuring $6.1 $7.6 $8.5 ($1.5) (20) % ($0.9) (11) % Severance and other restructuring 1.2 3.4 0.6 (2.2) (65) % 2.8 467 % Total restructuring costs 7.3 11.0 9.1 (3.7) (34) % 1.9 21 % Project, transformation and transaction costs 6.6 7.3 12.2 (0.7) (10) % (4.9) (40) % Factory start-up costs 70.0 8.0 9.5 62.0 775 % (1.5) (16) % Non-restructuring related executive severance — 2.8 2.1 (2.8) (100) % 0.7 33 % Other operating expense $83.9 $29.1 $32.9 $54.8 188 % ($3.8) (12) % Factory optimization restructuring costs relate to facility consolidations as well as disposals on certain long-lived assets.
Dollars) June 25, 2023 June 26, 2022 June 27, 2021 2022 to 2023 2021 to 2022 Project, transformation and transaction costs 22.9 6.6 7.3 16.3 247 % (0.7) (10) % Factory optimization restructuring costs — 6.1 7.6 (6.1) (100) % (1.5) (20) % Severance costs 3.4 1.2 6.2 2.2 183 % (5.0) (81) % Other operating expense $26.3 $13.9 $21.1 $12.4 89 % ($7.2) (34) % Project, transformation and transaction costs primarily relate to professional services fees associated with completed and potential acquisitions and divestitures, as well as internal transformation programs focused on optimizing our administrative processes.
Changes in trade policy such as the imposition or extension of tariffs or export bans to specific customers or countries could reduce or limit demand for our products in certain markets. • Intense and Constantly Evolving Competitive Environment. Competition in the industries we serve is intense. Many companies have made significant investments in product development, production equipment and production facilities.
Changes in trade policy, such as the imposition or extension of tariffs or export bans to specific customers or countries, including China's recently announced export restriction of gallium and germanium, two metals used in the manufacturing of semiconductors and electronics, could reduce or limit demand, or increase the cost of production, of our products in certain markets. • Technological Innovation and Advancement.
We have taken steps to provide continuity to our customers, to the extent possible, although we expect that constraints may continue to limit our shipments in the near term. • Governmental Trade and Regulatory Conditions .
We have taken steps to provide continuity to our customers to the extent possible, including entering into purchase agreements and providing customer reserve deposits with our suppliers to secure future supply to us, although we expect that our production capacity constraints as we continue to bring additional capacity online may continue to limit our shipments to our customers in the near term. • Overall Demand for Products and Applications Using Our Wolfspeed Materials and Devices .
As of June 26, 2022, we had unrealized losses on our short-term investments of $23.0 million.
As of June 25, 2023 and June 26, 2022, our cash equivalents and short-term investments had a fair value of $1,456.0 million and $993.6 million, respectively.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeItem 7A. Quantitative and Qualitative Disclosures About Market Risk See the section entitled “Financial and Market Risks” included in Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7 of this Annual Report. 43 Table of Contents
Biggest changeItem 7A. Quantitative and Qualitative Disclosures About Market Risk See the section entitled “Financial and Market Risks” included in Item 7, "Management’s Discussion and Analysis of Financial Condition and Results of Operations" of this Annual Report. 45 Table of Contents

Other WOLF 10-K year-over-year comparisons