Reportable Segments

The Company’s operating and reportable segments are:


•	Wolfspeed


•	LED Products


•	Lighting Products

The Company’s CODM reviews segment performance and allocates resources based upon segment revenue and segment gross profit.

Reportable Segments Description

Wolfspeed Segment

The Company’s Wolfspeed segment includes SiC materials, power devices and RF devices.

SiC Materials

The Company’s SiC materials products consist of crystals, bare and epitaxial wafers. The Company’s SiC materials are targeted for customers who use them to manufacture products for RF, power switching, gemstones and other applications. Corporate, government and university customers also buy SiC materials for research and development directed at RF and high-power devices.

Power Devices

The Company’s power device products consist of SiC Schottky diodes, metal oxide semiconductor field effect transistors (MOSFETs), power modules and gate driver boards. The Company's SiC power products provide increased efficiency, faster switching speeds and reduced system size and weight over comparable silicon-based power devices. Power products are sold primarily to customers and distributors for use in power supplies used in computer servers, solar inverters, uninterruptible power supplies, industrial power supplies and other applications.

RF Devices

The Company's RF devices consist of GaN 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. The Company's RF devices are made from Si, SiC and GaN and can provide improved efficiency, bandwidths and frequency of operation as compared to silicon or GaAs. The Company also provides custom die manufacturing for GaN HEMTs and MMICs that allow a customer to design its own custom RF circuits to be fabricated by the Company, or have the Company design and fabricate products that meet their specific requirements.

LED Products Segment

The Company’s LED Products segment includes LED chips and LED components.

LED Chips

The Company's LED chip products include blue and green LED chips based on GaN and related materials. LED chips or die are solid-state electronic components used in a number of applications and are currently available in a variety of brightness levels, wavelengths (color) and sizes. The Company uses LED chips internally in the manufacturing of its LED components. Customers use the blue and green LED chips in a variety of applications including video screens, gaming displays, function indicator lights, and automotive backlights, headlamps and directional indicators. Customers may also combine blue LED chips with phosphors to create white LEDs, which are used in various applications for indoor and outdoor illumination and backlighting, full-color display screens, liquid crystal displays (LCD) backlighting, white keypads and the camera flash function.

LED Components

The Company's LED components include a range of packaged LED products from the Company’s XLamp^® LED components and LED modules for lighting applications to the Company’s high-brightness LED components.

The Company’s XLamp LED components and LED modules are designed to meet a broad range of market needs for lighting applications including general illumination (both indoor and outdoor applications), portable, architectural, signal and transportation lighting. The Company uses XLamp LED components in its own lighting products. The Company also sells XLamp LED components externally to customers and distributors for use in a variety of products, primarily for lighting applications.

The Company’s high-brightness LED components consist of surface mount (SMD) and through-hole packaged LED products. The SMD LED component products are available in a full range of colors designed to meet a broad range of market needs, including video, signage, general illumination, transportation, gaming and specialty lighting. The Company's through-hole packaged LED component products are available in a full range of colors, primarily designed for the signage market and provide users with color and brightness consistency across a wide viewing area.

Lighting Products Segment

The Company’s Lighting Products segment primarily consists of LED lighting systems and lamps. The Company designs, manufactures and sells lighting systems for indoor and outdoor applications, with its primary focus on LED lighting systems for the commercial, industrial and consumer markets. Lighting products are sold to distributors, retailers and direct to customers. The Company's portfolio of lighting products is designed for use in settings such as office and retail space, restaurants and hospitality, schools and universities, manufacturing, healthcare, airports, municipal, residential, street lighting and parking structures, among other applications.

Financial Results by Reportable Segment

The table below reflects the results of the Company’s reportable segments as reviewed by the CODM for fiscal 2018, 2017 and 2016. The Company used the same accounting policies to derive the segment results reported below as those used in the Company’s consolidated financial statements.

The Company’s CODM does not review inter-segment transactions when evaluating segment performance and allocating resources to each segment, and inter-segment transactions are not included in the segment revenue presented in the table below. As such, total segment revenue in the table below is equal to the Company’s consolidated revenue.

The Company’s CODM reviews gross profit as the lowest and only level of segment profit. As such, all items below gross profit in the consolidated statements of loss must be included to reconcile the consolidated gross profit presented in the table below to the Company’s consolidated loss before income taxes.

In order to determine gross profit for each reportable segment, the Company allocates direct costs and indirect costs to each segment’s cost of revenue. The Company allocates indirect costs, such as employee benefits for manufacturing employees, shared facilities services, information technology, purchasing, and customer service, when the costs are identifiable and beneficial to the reportable segment. The Company allocates these indirect costs based on a reasonable measure of utilization that considers the specific facts and circumstances of the costs being allocated.

Unallocated costs in the table below consisted primarily of manufacturing employees’ stock-based compensation, expenses for profit sharing and quarterly or annual incentive plans, and matching contributions under the Company’s 401(k) plan. These costs were not allocated to the reportable segments' gross profit because the Company’s CODM does not review them regularly when evaluating segment performance and allocating resources.

The cost of goods sold (COGS) acquisition related cost adjustment includes inventory fair value amortization of the fair value increase to inventory recognized at the date of acquisition, and other RF Power acquisition costs, impacting cost of revenue for fiscal 2018. These costs were not allocated to the reportable segments’ gross profit for fiscal 2018 because they represent an adjustment which does not provide comparability to the corresponding prior period and therefore were not reviewed by the Company's CODM when evaluating segment performance and allocating resources.

Revenue, gross profit and gross margin for each of the Company's segments were as follows (in thousands, except percentages):



	Revenue						Gross Profit and Gross Margin
	Year Ended						Year Ended
	June 24, 2018		June 25, 2017		June 26, 2016		June 24, 2018			June 25, 2017			June 26, 2016
Wolfspeed		$328,638		$221,231		$176,338		$158,455			$103,465			$94,622
Wolfspeed gross margin							48		%	47		%	54		%
LED Products	596,284		550,302		551,156		157,914			151,675			173,814
LED Products gross margin							26		%	28		%	32		%
Lighting Products	568,758		701,467		889,133		108,919			196,218			238,242
Lighting Products gross margin							19		%	28		%	27		%
Total segment reporting		$1,493,680		$1,473,000		$1,616,627	425,288			451,358			506,678
Unallocated costs							(12,221		)	(16,786		)	(19,604		)
COGS acquisition related costs							(5,425		)	—			—
Consolidated gross profit								$407,642			$434,572			$487,074
Consolidated gross margin							27		%	30		%	30		%

Assets by Reportable Segment

Inventories are the only assets reviewed by the Company’s CODM when evaluating segment performance and allocating resources to the segments. The CODM reviews all of the Company's assets other than inventories on a consolidated basis. The following table sets forth the Company’s inventories by reportable segment for the fiscal years ended June 24, 2018 and June 25, 2017.

Unallocated inventories in the table below were not allocated to the reportable segments because the Company’s CODM does not review them when evaluating performance and allocating resources to each segment. Unallocated inventories consisted primarily of manufacturing employees’ stock-based compensation, profit sharing and quarterly or annual incentive compensation, matching contributions under the Company’s 401(k) plan, and acquisition related costs.

Inventories for each of the Company's segments were as follows (in thousands):



	June 24, 2018		June 25, 2017
Wolfspeed		$47,190		$26,453
LED Products	100,452		108,297
Lighting Products	144,193		145,710
Total segment inventories	291,835		280,460
Unallocated inventories	4,180		3,925
Consolidated inventories		$296,015		$284,385

Geographic Information

The Company conducts business in several geographic areas. Revenue is attributed to a particular geographic region based on the shipping address for the products. The following table sets forth the percentage of revenue from external customers by geographic area:



	For the Years Ended
	June 24, 2018		June 25, 2017		June 26, 2016
United States	46	%	56	%	59	%
China	26	%	22	%	20	%
Europe	14	%	10	%	8	%
South Korea	1	%	2	%	1	%
Japan	5	%	4	%	4	%
Malaysia	1	%	1	%	1	%
Taiwan	1	%	1	%	1	%
Other	6	%	4	%	6	%
Total percentage of revenue	100	%	100	%	100	%

The following table sets forth the Company’s tangible long-lived assets by country (in thousands):



	June 24, 2018		June 25, 2017
United States		$578,569		$483,953
China	76,386		94,022
Other	6,364		3,288
Total tangible long-lived assets		$661,319		$581,263