Wolfspeed incurring ‘significant’ start-up costs relating to new facilities

Wolfspeed (WOLF) said it is incurring “significant factory start-up costs relating to facilities the company is constructing or expanding that have not yet started revenue generating production. These factory start-up costs have been and will be expensed as operating expenses in the statement of operations. When a new facility begins revenue generating production, the operating costs of that facility that were previously expensed as start-up costs are instead primarily reflected as part of the cost of production within the cost of revenue, net line item in our statement of operations. For example, the Mohawk Valley Fab began revenue generating production at the end of fiscal 2023 and the costs of operating this facility in fiscal 2024 and going forward are primarily reflected in cost of revenue, net. During the period when production begins, but before the facility is at its expected utilization level, Wolfspeed expects some of the costs to operate the facility will not be absorbed into the cost of inventory. The costs incurred to operate the facility in excess of the costs absorbed into inventory are referred to as underutilization costs and are expensed as incurred to cost of revenue, net. These costs are expected to continue to be substantial as Wolfspeed ramps up the facility to the expected or normal utilization level. For the third quarter of fiscal 2025, operating expenses are expected to include approximately $26 million of factory start-up costs primarily in connection with materials expansion efforts. Cost of revenue, net, is expected to include approximately $31 million of underutilization costs in connection with the Mohawk Valley Fab.”