Industry reports indicate that since the beginning of this year, the price of mainstream 6-inch SiC substrates has been consistently declining, with a drop of nearly 30%.

As of mid-2024, industry insiders in China reveal that the price of 6-inch SiC substrates has fallen below USD 500, approaching the production cost of Chinese manufacturers. By the fourth quarter of this year, prices have further dropped to USD 450 or even USD 400, creating financial pressure for most manufacturers.

There are currently three main concerns regarding the changes in silicon carbide prices within the industry:

1. In 2024, the global production capacity for SiC crystal growth and substrate materials will see a significant increase. Some industry insiders are concerned that this may lead to a short-term oversupply in the market.

2. The growth of electric vehicles (EVs), the largest target application for SiC materials, has shown signs of slowing down over the past two years, raising doubts about the long-term sustainability of the EV market and whether there are new growth drivers to support continued breakthroughs in third-generation semiconductors.

3. The price war that has erupted in the silicon carbide (SiC) market since the beginning of this year has impacted SiC pricing, making corporate transition and growth key considerations for the present.

This article will explore the concerns mentioned above by examining perspectives from various industry stakeholders and provide insights to address these issues.

SiC Industry Faces New Wave of Mergers

Regarding production capacity, incomplete statistics from DRAMeXchange show that in 2024, a total of 14 new 8-inch silicon carbide plants will be constructed globally (12 under construction, 2 about to start). In the short term, only Wolfspeed’s Mohawk Valley plant will be able to provide 8-inch SiC wafers, with other manufacturers expected to gradually supply 8-inch SiC wafers starting next year.

In China, over 50 SiC-related expansion projects were initiated in 2023, with a total investment exceeding 90 billion RMB. In 2024, more than 100 companies in China are expected to enter the SiC sector, and over 50 SiC projects are making significant progress.

Regarding the sustainability of capacity expansion, some industry insiders have expressed concerns. While investments in the silicon carbide industry are enormous and some suppliers are actively expanding, the key question is whether they can continue to operate under lower pricing conditions, as oversupply remains uncertain.

In this environment, the SiC substrate industry is expected to undergo a wave of mergers and acquisitions, further reshaping the SiC industry’s landscape.

AI Data Centers: A New Growth Driver for Third-Gen Semiconductors

Although the electric vehicle market appears to have weakened recently, many major SiC manufacturers and automakers have indicated that SiC-powered electric vehicle models continue to grow, and 8-inch silicon carbide may present new opportunities. As of now, 800V models account for about 8.7% of China’s new energy passenger car market, with 800V silicon carbide penetration rates increasing to 72%.

In discussions about new growth drivers for third-generation semiconductors, the global wave of artificial intelligence (AI) and the growing demand for computing power in data centers are seen as key factors in unlocking the potential of third-generation semiconductors.

Price Wars Signal Turning Point for SiC Commercial Applications

Regarding price competition, some industry insiders suggest that while price wars may pressure profit margins for some manufacturers, in the long term, this could drive the entire industry towards more efficient and cost-effective solutions. This would also help SiC technology penetrate further into electric vehicles, photovoltaics, and industrial sectors.

In China’s market, the rapid decline in prices is directly related to an increasing number of local manufacturers gaining electric vehicle certification and expanding their production capabilities. Industry experts predict that as 8-inch SiC production capacity gradually ramps up, the cost of individual SiC devices or unit current density will further decrease, potentially marking a turning point for large-scale commercial applications of SiC.

(Photo Credit: Wolfspeed)

According to a report from Commercial Times, the increase in production capacity has resulted in an oversupply of 6-inch SiC substrates, leading to a decline in prices.

The report indicated that by mid-2024, each piece was priced at less than USD 500 (approximately the manufacturing cost in China). By the fourth quarter, prices have fallen to as low as USD 400, or even lower.

According to the report, industry insiders indicate that the price collapse has forced most businesses to sell at a loss. However, despite the low prices, buyers remain hesitant to make purchases, as they anticipate that prices will continue to decline.

As for 8-inch SiC substrates, the report noted that though mass production has not yet been achieved, prices have rapidly declined in 2024, particularly in China.

According to the report, there is currently no standard price for 8-inch SiC substrates, as they remain in the trial production stage with very limited supply. However, prices have begun to decline.

At the end of 2023, the average quotation of 8-inch SiC substrates in China was approximately USD 3,000 to USD 4,000 per piece. By the second quarter of 2024, the price had dropped to just USD 2,000, representing a downward revision of around 50% within just six months.

The report indicated that currently the market quotation for 8-inch SiC substrates has plummeted to around USD 1,500. The decline in the first three quarters of 2024 has exceeded 60%, and it is estimated that by the first quarter of 2025, the price will drop to just USD 1,000.

Regarding the progress of mass production for 8-inch SiC, Wolfspeed remains dominant, currently operating at a capacity utilization rate of 25%. The report noted that Wolfspeed’s stock price has declined by more than 60% since the beginning of the year, primarily due to disappointing financial results linked to a slowdown in demand for electric vehicles.

According to its press release, Wolfspeed is set to receive USD 750 million from the U.S. Department of Commerce’s CHIPS and Science Act funding. Additionally, the company has secured another USD 750 million in financing from Apollo Global Management, The Baupost Group, Fidelity Management & Research Company, and the Capital Group.

The report noted that SiC pricing is currently chaotic. While the decline in upstream materials should benefit downstream applications, buyers expect prices to continue falling, which makes them hesitant to make purchases. This, in turn, contributes to an even more rapid decline in prices.

According to the report, the SiC market continues to rely on major IDM factories. The decline in raw material prices and component costs is expected to benefit terminal applications, which will not be limited to electric vehicles or solar modules.

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(Photo credit: Wolfspeed)

In recent years, with the continuous surge in demand for Silicon Carbide (SiC) substrates, the call for cost reduction in SiC has been growing stronger, as the ultimate product price remains the key determinant for consumers. The cost of SiC substrates accounts for the highest proportion in the entire cost structure, reaching around 50%.

This means that cost reduction and utilization rate improvement in the substrate segment are particularly crucial. Therefore, large-size substrates, due to their cost advantages, are gradually being placed with high expectations.

According to the calculation by Chinese SiC substrate manufacturer TankeBlue Semiconductor, upgrading from 4 inches to 6 inches is expected to reduce costs by 50% per unit; from 6 inches to 8 inches, costs are expected to decrease by an additional 35% on top of that.

Meanwhile, 8-inch substrates can yield more chips, resulting in lower edge wastage. In simple terms, 8-inch substrates offer higher utilization rate, which is the main reason why major manufacturers are actively developing them.

Currently, 6-inch SiC substrates are still dominant, but 8-inch substrates are beginning to penetrate the market. For instance, in July 2023, Wolfspeed announced that its 8-inch fab had begun shipping SiC MOSFETs to Chinese customers, indicating its bulk shipment of 8-inch SiC substrates. TankeBlue Semiconductor has also started small-scale shipments of 8-inch substrates, with plans to achieve medium-scale shipments by 2024.

Accelerated Advancement of 8-Inch SiC Substrate Lineup

Since Wolfspeed first showcased samples in 2015, the 8-inch SiC substrate has undergone a development history of 7-8 years, with significant acceleration in technology and product development in the past two years.

Looking at international manufacturers, aside from Wolfspeed, which has achieved mass production, there are seven SiC substrate, epitaxial, expected to achieve mass production of 8-inch substrates this year or in the next 1-2 years.

In terms of investment, Wolfspeed continues to construct the John Palmour Silicon Carbide Manufacturing Center (SiC substrate facility) in North Carolina, USA. This facility will further drive the expansion of substrate production capacity to meet the increasing demand for 8-inch wafers.

Coherent also announced plans last year to expand its production of 8-inch substrates and epitaxial wafers, with large-scale expansion projects in the United States and Sweden. In terms of product export channels, Coherent has received a USD 1 billion investment from Mitsubishi Electric and Denso to provide long-term 6/8-inch SiC substrates and epitaxial wafers to both companies.

STMicroelectronics also invested in the 8-inch domain last year by partnering with Hunan Sanan Semiconductor to construct an 8-inch SiC fab. The latter will accompany it by establishing an 8-inch SiC substrate plant, ensuring stable material supply for the joint venture. Simultaneously, ST is developing its own substrates and previously collaborated with Soitec to achieve mass production of 8-inch SiC substrates.

Turning to Chinese manufacturers, currently, over 10 enterprises have entered the sampling and small-scale production stages for 8-inch SiC substrates. These include companies such as Semisic Crystal Co., Jingsheng Mechanical & Electrical Co., SICC Co., Summit Crystal Semiconductor Co., Synlight Semiconductor Co., TanKeBlue Semiconductor Co., Harbin KY Semiconductor, IV Semitec, Sanan Semiconductor, Hypersics, and Yuehaijin Semiconductor Materials Co.

In addition to the mentioned companies, there are many other Chinese manufacturers currently researching 8-inch substrates, such as GlobalWafers, Dongni Electronics, Hesheng Silicon Industry, Tiancheng Semiconductor.

At present, the gap between Chinese substrate manufacturers and international giants has narrowed significantly. Companies like Infineon have established long-term partnerships with Chinese manufacturers such as SICC Co. and TanKeBlue Semiconductor Co.. From a technological standpoint, this narrowing gap reflects the overall improvement in substrate technology globally. Moving forward, concerted efforts from various manufacturers are expected to drive the development of 8-inch substrate technology.

Overall, there is a growing momentum in the overall development of 8-inch SiC substrates, with significant breakthroughs in both quantity and quality.

Global 8-Inch SiC Fabs Accelerate Expansion

As substrate materials continue to break through technological ceilings, the expansion scale of global 8-inch SiC fabs reached new heights in 2023.

As per TrendForce, approximately 12 expansion projects related to 8-inch wafers were implemented in 2023. Among them, 8 projects were led by global manufacturers such as Wolfspeed, Onsemi, STMicroelectronics, Infineon, Rohm, and others. STMicroelectronics also collaborated with Sanan Semiconductor on one project. Additionally, 3 projects were spearheaded by Chinese manufacturers such as Global Power Technology, United Nova Technology Co., and J2 Semiconductor.

From a regional perspective, significant investments in new 8-inch SiC fabs are expected in key regions such as Europe, America, Japan, South Korea, China, and Southeast Asia. As of now, there are approximately 11 8-inch fabs either under construction or planned globally (with clearer details).

These include 2 facilities by Wolfspeed (in Mohawk, USA, and Saarland, Germany), 1 by Bosch (in Roseville, USA), 1 self-built by STMicroelectronics (in Catania, Italy), 1 joint venture with Sanan (in Chongqing, China), 1 by Infineon (in Kulim, Malaysia), 1 by Mitsubishi Electric (in Kumamoto, Japan), 2 by Rohm (in Chikugo, Japan, and Kunitomi, Japan), 1 by ON Semiconductor (in Bucheon, South Korea), and 1 by Fuji Electric (in Matsumoto, Japan).

Regarding the expansion directions of manufacturers, Bosch and ON Semiconductor’s investments in 2023 are directly aimed at the automotive SiC market. STMicroelectronics’s planned 8-inch SiC chip factory in Italy also targets the electric vehicle market. While other manufacturers have not explicitly stated the application direction of future production capacity, electric vehicles are the primary growth engine for SiC both currently and in the future, making it a focal point for expansion among major manufacturers.

In the electric vehicle sector, the 800V high-voltage platform has emerged as a clear development trend. The 800V platform requires higher-voltage power semiconductor components, prompting manufacturers to begin developing 1200V SiC power devices.

From a cost perspective, although 6-inch wafers are currently mainstream in the short term, the trend towards larger sizes like 8-inch is inevitable for cost reduction and efficiency improvement purposes. Therefore, the electric vehicle market is expected to drive continuous growth in demand for 8-inch wafers in the future.

From a supply chain perspective, transitioning to 8-inch wafers represents a breakthrough for SiC manufacturers. Per industry insights, the 6-inch SiC device market has entered a phase of intense competition, particularly in the SiC JBD. For smaller-scale and less competitive enterprises, profit margins are increasingly squeezed, indicating an impending round of consolidation and restructuring in the future.

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SiC industry giant Wolfspeed issued a press release on December 4th, formally selling its radio frequency business (Wolfspeed RF).

Back to August 22nd of this year, Wolfspeed had announced the sale of Wolfspeed RF to the U.S. semiconductor company MACOM Technology Solutions Holdings, Inc.

Under the transaction terms, Wolfspeed received approximately USD 75 million in cash, subject to a customary purchase price adjustment, and 711,528 shares of MACOM common stock, which shares had a market value of approximately USD 60.8 million based on the closing price for MACOM’s common stock on December 1st, 2023 as reported on the Nasdaq Global Select Market.

MACOM specializes in designing and producing high-performance semiconductor products. Their product range spans radio frequency, microwave, analog and mixed-signal, and optical semiconductor technologies, catering to industries such as telecommunications, industrial applications, defense, and data centers. Headquartered in Lowell, Massachusetts, USA, MACOM’s business footprint extends across the United States, Europe, Asia, and beyond. With the successful completion of this business acquisition, the company’s impact in the radio frequency domain is poised to experience notable reinforcement.

President of CEO of Wolfspeed Gregg Lowe said, “The completed sale of Wolfspeed RF is the final step in our transformation, and we’re happy to say Wolfspeed is now the only pure-play silicon carbide semiconductor manufacturer in the industry. As demand continues to accelerate across the automotive, industrial and renewable energy markets, we can now focus on innovation and capacity for our materials and power device businesses.”

TrendForce reveals a future landscape for the SiC power device market, projected to reach USD 5.33 billion by 2026, driven by robust demand in downstream applications, particularly in electric vehicles and renewable energy. Despite this positive outlook, the SiC industry faces constraints due to supply issues in SiC substrates.

Wolfspeed’s recent decision to divest its radio frequency business further underscores the company’s commitment to maintaining a leading role in the SiC substrate market, where it currently stands as the sole producer capable of mass-producing 8-inch SiC substrates.

Current situation of the SiC substrate industry         

Considering the SiC substrate industry dominated by few players, Wolfspeed stands out as a notable example. More and more companies are opting to enhance their production capacity for high-quality SiC substrates used in automotive main inverters.

The SiC substrate industry is actively addressing challenges of low demands and high cost, making various companies to expand from 6-inch to 8-inch SiC substrates. While Wolfspeed is ahead in the production of 8-inch SiC substrates, other industry leaders are also making notable progress:

• Rohm has established an 8-inch SiC wafer fab in Japan, scheduled to commence 8-inch substrate production next year.
• Coherent’s SiC subsidiary secured a substantial USD 1 billion investment from Japan’s Denso and Mitsubishi Electric to produce 6/8-inch substrates.
• STMicroelectronics and Sanan Optoelectronics are collaborating on an 8-inch SiC wafer fab in Chongqing, with gradual production expected to start from 2025. Concurrently, Sanan will establish an 8-inch SiC substrate fab.

Moreover, several Chinese companies, including SEMISiC, Jingsheng, Summit Crystal, Synlight, KY Semiconductor, and IV-SemiteC, are actively advancing the development of 8-inch SiC substrates, contributing to the overall progress in the SiC substrate industry.

Wolfspeed’s Optimism Amid Industry Upgrades

In the face of industry upgrades and competitive pressures, Wolfspeed’s leadership remains optimistic. Looking into its result in second quarter of fiscal 2024, Wolfspeed targets revenue from continuing operations in a range of USD 192 million to USD 222 million. GAAP net loss from continuing operations is targeted at USD 131 million to USD 153 million. Non-GAAP net loss from continuing operations is targeted to be in a range of USD 71 million to USD 88 million. Based on the result, Wolfspeed aim to meet 20% utilization goal at the Mohawk Valley Fab in next quarter. The company predicts the revenue of the fab will rise from USD 4 million to USD 10~15 million. The third quarter revenue will grow significantly as well.

Being the only front runner in the global market solely dedicated to SiC business, Wolfspeed can channel all its focus and resources into SiC materials and power device operations. As Wolfspeed enhances the capacity of its fabs, there is potential for a further increase in its market share for SiC materials and power devices. In response to this evolving landscape, other companies are likely to expedite the research and production of 8-inch SiC substrates, aiming to enhance their market presence and actively contribute to the overall advancement of the SiC industry chain.
(Image: Wolfspeed, MACOM)

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On November 4th, the “Annual Production of 250k 6-inch and 50k 8-inch SiC Substrate Project” was officially initiated by China Jingsheng Mechanical & Electrical Co., Ltd. (JSG). It is driven by the objective of advancing crucial core technologies in semiconductor material development, ultimately leading to the establishment of a domestically produced alternative for China.

The total investment for this agreement reached an impressive 2.1 billion CNY. During the launch ceremony, Dr. Jianwei Cao, Chairman of JSG, underscored the pivotal role of this project in the company’s growth strategy.

JSG, founded in 2006 and headquartered in Zhejiang, China, made its debut on the Shenzhen Stock Exchange in 2012. The company specializes in developing essential semiconductor materials, including silicon, sapphire, and SiC. It provides equipment and services to the semiconductor and photovoltaic industries.

Since 2017, JSG has been deeply engaged in SiC ingot growth equipment and process development, achieving the successful production of 6-inch and 8-inch SiC ingots and substrates. The company is among the select few capable of supplying 8-inch substrates in China. They have successfully established a pilot line for the growth, slicing, and polishing of 6-8-inch SiC ingots. The 6-inch substrates have received validation from several downstream companies and are rapidly progressing, while the 8-inch substrates are in the small-scale trial production phase.SiC, as an iconic material for third-generation semiconductors, is renowned for its outstanding physical properties, rendering it suitable for various applications such as new energy vehicles, photovoltaic energy storage, data centers, 5G communication, and ultra-high-voltage (UHV). In recent years, there has been a sustained surge in demand for SiC due to its remarkable properties. However, the widespread commercialization of SiC has been hampered by cost-related challenges.

A cost analysis of the SiC industry reveals that substrate expenses account for approximately 40% of the overall costs, making it a pivotal aspect of cost reduction. The interest of leading companies in large-sized substrates is attributed to their higher utilization rates, contributing significantly to cost reduction.

GlobalWafers, the world’s third-largest silicon wafer manufacturer, plans to embark on large-scale production of advanced SiC substrates in 2025 to meet the surging demand for power semiconductors in the automotive sector. Doris Hsu, Chairman and CEO of GlobalWafers, recently announced that the company is set to commence qualification and test production of 8-inch SiC substrates in the upcoming year, with large-scale production slated for 2025.

On the other hand, SICC, a company also engaged in SiC substrates development, has expedited its capacity expansion in Shanghai Lin-gang Special Area, augmenting the production capacity for conductive substrates since 2022. They have been delivering products since May this year and anticipate a further rise in production capacity during the fourth quarter of 2023. The company is poised to achieve mass production ahead of schedule for the first-phase 300,000-piece capacity and has initiated plans for the second-phase 960,000-piece capacity for 6-inch SiC ingot.

While 6-inch conductive SiC substrate products dominate the market, 8-inch substrates are yet to become ubiquitous. However, SICC announced the development of high-quality 8-inch substrates in 2022. The company is now equipped for mass production of 8-inch products. Notably, during the 2023 Semicon, Dr. Chao Gao, CTO of SICC, disclosed the successful creation of low-defect-density 8-inch ingots using a liquid-phase method.

(Image: SICC)