US CHIPS financing gives much-needed boost to Wolfspeed’s power SiC device play

Wolfspeed’s announcement that it will receive a total of $2.5 billion in funding to expand its silicon carbide (SiC) manufacturing capacity comes at the right time, as liquidity will now not be an issue for the company for the next two years as it transitions its business into the power device sector.

Today, Industry Insights proposes an analysis based on Yole Group’s collection of reports focused on SiC technologies and markets. Including the annual report, Power SiC – Manufacturing 2024, Power SiC 2024, and many more, Yole Group’s analysts offer a special focus on the leading SiC player, Wolfspeed, and its strategy. Take a coffee and get ready to deep dive into the SiC industry.

Wolfspeed has secured a proposal for $750 million in financing from the US Department of Commerce under the CHIPS and Science Act, and an additional $750 million in funding from an investment group led by Apollo, The Baupost Group, Fidelity Management & Research Company and the Capital Group. The company also expects to receive $1 billion in cash tax refunds from the Internal Revenue Service (IRS) over the next few years.

The funding will effectively solve a short-term liquidity issue for the company, which has come under pressure from a cash crunch, notes Poshun Chiu, Senior Technology & Market Analyst, Compound Semiconductors, at Yole Group. Wolfspeed has a parallel strategy, to optimize its operational cost by focusing on the current Mohawk Valley fab (MHV) ramp-up and closing its 150mm Durham fab, as well as trimming CapEx for the coming fiscal year dramatically.

The value in the SiC market has shifted in recent years from wafers to devices. With competition increasing in the silicon carbide materials, wafer and epiwafer market segments where Wolfspeed is the global leader, the company is looking to tap into the device segment for future revenue growth.

Yole Group forecasts that the global power SiC device market will reach nearly $10 billion by 2029, a CAGR of 24% from 2023, with continuing penetration of SiC in automotive, along with industrial applications.

Despite the growth of the overall revenue, Wolfspeed has seen its share in the SiC wafer and epiwafer segments shrink from close to 50% in 2021 to around 33% for wafers and 37% for epiwafers in 2023 owing to the rise of Chinese players. Power electronics supplier Infineon has signed multiple new long-term agreements for SiC wafers, with TankeBlue, SICC and SK siltron css. This reflects that SiC wafer supply is not the major concern. In 2023, Wolfspeed was ranked in fourth position by market share in the devices segment with a share of around 12%.

According to Yole Group’s analysis, SiC device CapEx will continue growing globally until 2026, higher than the size of the SiC device market. Starting in 2027, CapEx will peak and be surpassed by the total SiC device market. Wolfspeed expects a similar pattern of business growth, by injecting CapEx to ramp up the world’s first 8-inch (200mm) SiC wafer fab, the MHV in New York. In its 2024 fiscal year, the company allocated CapEx of more than $2.2 billion, which is critical for making the transition towards device manufacturing on the 8-inch platform. But it’s also the cost of being the first mover.

In 2024, the slowdown in the EV market and weak demand for industrial applications are not the best scenarios for a company allocating large financial resources to make the transition, such as Wolfspeed. The company conducted the following actions earlier this year: trimming down its CapEx for the coming years—around $1.2 billion and less than $600 million in its FY25 and FY26; focusing on the current 8-inch MHV ramp-up and optimizing its operation; postponing of its planned German fab with ZF; and closing its 6-inch Durham fab. The company has also shown interest in selling 8-inch wafers to the open market, which could increase its total revenue. Finally, and above all, with the announced funding of $750 million from the CHIPS Act and the rest, Wolfspeed would have much less of an issue with liquidity in the next two years.

As of 2024, Wolfspeed remains the leader in SiC wafer and epiwafer producrion, and also one of the top SiC device players for power electronics. The company has sold off its businesses in other segments, such as LED and RF GaN-on-SiC device production in the past years. The company continues to produce SiC wafers and epiwafers for power SiC and RF GaN. Now is the time to chase the next business transition towards 8-inch SiC device manufacturing.

Poshun Chiu is Senior Technology & Market Analyst, Compound Semiconductors at Yole Group.

Poshun is engaged in the development of technology and market products and is involved in custom projects.

Before joining Yole Group, Poshun had 9 years’ experience in R&D and product management at Epistar (TW & CHN). He is the author or co-author of more than 10 patents in solid-state-lighting. Poshun was also engaged in the development and evaluation of novel applications of process technology and components based on relevant semiconductor material systems.

Poshun received an MSc degree in microelectronics from National Cheng Kung University (TW) and an MBA from IESEG School of Management (FR).

This article has been done in collaboration with Ezgi Dogmus, Activity Manager, Compound Semiconductors and Taguhi Yeghoyan, Senior Technology & Market Analyst, Semiconductor Equipment at Yole Group.

Source: www.yolegroup.com