A global supplier in materials, networking, and lasers, Coherent announced that DENSO  Corporation and Mitsubishi Electric Corporation have agreed to invest an aggregate $1 billion in its silicon carbide business (the “Business”). The transaction results from the strategic review process announced in May 2023 for the Business.

Under the terms of the transaction, DENSO and Mitsubishi Electric will each invest $500 million in exchange for a 12.5% non-controlling ownership interest in the Business, with Coherent owning the remaining 75%. Prior to the completion of the transaction, Coherent will separate and contribute the Business to a subsidiary. Coherent will control and operate the Business, which will continue to be led by Sohail Khan, Coherent’s Executive Vice President, New Ventures & Wide-Bandgap Electronics Technologies.

In connection with the transaction, the Business will enter into long-term supply arrangements with DENSO and Mitsubishi Electric that support their demand for 150 mm and 200 mm silicon carbide (“SiC”) substrates and epitaxial wafers.

“We are excited to expand our strategic relationships with DENSO and Mitsubishi Electric to capitalize on the significant demand for silicon carbide,” said Dr. Vincent D. Mattera, Jr., Chair and CEO, Coherent. “After a thorough review of strategic alternatives for our Silicon Carbide business, we determined that the creation of a separate subsidiary and the strategic investments from DENSO and Mitsubishi Electric, two leaders in SiC power devices and modules, is the best path forward to maximize shareholder value and position the Business for long-term growth. The investments from our strategic partners will be used to accelerate our capacity expansion plans and help sustain our leadership position, while ensuring the development of a robust and scalable supply for the rapidly growing market for SiC-based power electronics, largely driven by the explosive growth of the global electric vehicle market.”

“We are very pleased to establish a strategic relationship with Coherent, which has a world-class track record in SiC wafer manufacturing. Through this investment, we will secure a stable procurement of SiC wafers, which are critical for BEVs, and contribute to the realization of a carbon-neutral society by promoting the widespread adoption of BEVs,” said Shinnosuke Hayashi, President & COO, Representative Member of the Board at DENSO.

Dr. Masayoshi Takemi, Executive Officer, Group President, Semiconductor & Device of Mitsubishi Electric, said: “Demand for SiC power semiconductors is expected to grow exponentially as the global market for electric vehicles increases in line with the transition to a decarbonized world. To capitalize on this trend, we have decided to expand our SiC power semiconductor production capacity, including by constructing a 200 mm wafer plant in the Shisui area of Kumamoto Prefecture. We are delighted to strengthen our partnership with Coherent by investing in this new SiC company, which will provide us with a stable supply of high-quality SiC substrates essential for our increased supply capacity.”

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(Photo credit: Coherent)

In recent developments, an industry source revealed that Coherent, a leading chip material supplier in the U.S. automotive industry, has piqued the interest of four major Japanese corporate groups with regards to its silicon carbide (SiC) business, with a transaction amount potentially reaching $5 billion.

The four Japanese companies involved are DENSO, Hitachi, Mitsubishi Electric, and Sumitomo Electric, and discussions have been underway regarding the acquisition of minority stakes in Coherent’s SiC business.

Coherent had previously stated its intention to invest $1 billion over the next decade to expand the production of SiC wafers. Compared to traditional silicon chips, SiC wafers contribute to improved electric vehicle range. If this investment materializes, it would significantly ease the financial burden on the company. However, no concrete agreements have been reached at this stage.

Data indicates that Coherent is one of the few companies globally with complete and vertically integrated SiC manufacturing capabilities. It can produce SiC wafers and epitaxy materials, extending all the way to power devices. Furthermore, Coherent’s SiC materials are known for their exceptional quality, making it nearly the only supplier capable of transitioning from the current standard wafer diameter of 150 millimeters to 200 millimeters successfully. The production of larger diameter wafers can substantially reduce device costs. Additionally, Coherent’s SiC power devices demonstrate excellent heat resistance and conductivity.

Competition and Collaboration in the Japanese SiC Industry

According to TrendForce’s latest analysis, as collaborations between companies like Infineon and ON Semiconductor with automotive and energy sector stakeholders become more apparent, the overall SiC power device market is projected to reach $2.28 billion in 2023, growing at an annual rate of 41.4%.

Meanwhile, buoyed by robust demand in downstream application markets, TrendForce anticipates that the SiC power device market could reach $5.33 billion by 2026, with its primary applications continuing to center around electric vehicles and renewable energy.

In recent years, the new energy vehicle industry has been thriving, and Si power devices have gradually fallen short of meeting the demands of new energy vehicles. SiC, as its alternative, has shown remarkable performance in applications, making it highly sought after in the market. The SiC power device market still has considerable room for growth, prompting both automotive and SiC companies to invest in SiC power device production or enhancements.

Japan, being a leader in semiconductor power device manufacturing and production, has numerous companies actively expanding to broaden their market reach.

On October 4th last year, Nikkan reported that Hitachi Power Semiconductor Device would invest several billion yen, aiming to triple its SiC power semiconductor production capacity by fiscal year 2026.

On July 12th this year, ROHM announced its acquisition of the former Solar Frontier factory in Kunitomi, Miyazaki, to expand its SiC power semiconductor production capacity. The acquisition is set to conclude in October 2023 and is planned to become the company’s main factory, primarily producing SiC power semiconductors. It is expected to increase its silicon carbide capacity to 35 times that of the fiscal year 2021 by 2030.

With these competitive and cooperative scenarios unfolding, it’s evident that neither automotive nor SiC companies are holding back in their pursuit of SiC power device production or improvements.

In July this year, Renesas Electronics signed a 10-year agreement and paid $2 billion in advance to Wolfspeed for the supply of 150mm bare and epitaxial SiC wafers. Renesas Electronics also reached an agreement with Mitsubishi Electric, with Mitsubishi investing 260 billion yen in technology and expansion, including the construction of a new SiC factory in Japan.

As a technological leader in producing SiC substrates, epitaxy, and power devices, Coherent is not to be overlooked by these major corporations.

On May 26th this year, Coherent and Mitsubishi Electric announced that they had signed a MOU and reached a project collaboration agreement to jointly scale up the mass production of SiC power electronic products on a 200mm technology platform.

Mitsubishi Electric announced that it would invest approximately 260 billion yen over a five-year period ending in March 2026, with approximately 100 billion yen dedicated to constructing a new SiC power device factory based on a 200mm technology platform and strengthening related production facilities. According to the MOU, Coherent will develop 200mm n-type 4H SiC substrates for Mitsubishi Electric’s future SiC power devices to be produced at the new factory.

In the future, Mitsubishi Electric aims to produce large quantities of silicon carbide chips using Coherent’s 200mm wafer technology in the Japanese market.

In the 2023 fiscal third-quarter earnings conference call, Mary Jane Raymond, the Chief Financial Officer of Coherent Inc., mentioned that the revenue composition of the company’s four main markets is as follows, based on regional distribution: North America accounts for 53%, Europe accounts for 20%, Japan and Korea account for 14%, China accounts for 11%, and 3% goes to other regions worldwide.

For Coherent, capturing 14% of the sales in the Japanese and Korean markets is highly significant. If Coherent continues its collaboration with Japanese partners, it is highly probable that the production capacity of SiC power devices in Japanese-related companies will be increased. Additionally, this will allow Coherent to further expand its influence and presence in Japan.

(Photo credit: Coherent)

Last week, major power semiconductor manufacturer Infineon announced plans to invest up to 5 billion euros over the next five years to construct the world’s largest 8-inch SiC power wafer factory in Kulim, Malaysia. This expansion will raise the total investment in the Kulim plant from 2 billion euros to 7 billion euros.

Interestingly, in February of this year, Wolfspeed announced its own plans to build what is touted as the world’s largest 8-inch SiC factory in the Saarland region of Germany. Infineon’s significant investment in the Malaysian 8-inch SiC factory sets the stage for potential competition with Wolfspeed, sparking an impending battle for Silicon Carbide production capacity.

In fact, driven by the rapid growth of industries like electric vehicles, the space for SiC power devices is expanding, attracting both Chinese companies and international enterprises to ramp up production.

According to statistics from TrendForce, aside from Wolfspeed, the first half of this year saw numerous companies, including STMicroelectronics, Mitsubishi Electric, Rohm, Soitec, and ON Semiconductor, expanding their production capacities. STMicroelectronics, for instance, announced a $4 billion investment in January to expand 12-inch wafer production. In June, they partnered with San’an Optoelectronics to establish a joint venture for 8-inch SiC device manufacturing, with an estimated total investment of around $3.2 billion.

On the Chinese front, there have been seven expansion projects related to Silicon Carbide. CRRC is investing 11.12 billion yuan to establish a project for the industrialization of medium and low-voltage power devices. YASC is also planning to construct a Compound Semiconductor power device production project, encompassing epitaxial growth, wafer manufacturing, packaging, and testing lines. Upon completion, the facility will have an annual production capacity of 360,000 6-inch SiC wafers and 61 million power device modules.

Additionally, BYD plans to invest 200 million yuan to establish a SiC epitaxial trial production and mass production project at its automotive production base in Shenzhen. The expansion will add 6,000 SiC epitaxial wafers per year, bringing the total capacity to 18,000 wafers per year.

(Photo credit: Tesla)