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)

• The competitive advantage of automotive GaN components is becoming increasingly prominent.

Leveraging their exceptional material characteristics, SiC components are rapidly making inroads into sectors such as automotive, renewable energy, and power PFC. Similarly, GaN components are excelling in the field of rapid charging for terminal devices. Additionally, GaN components are gaining greater visibility in the automotive and networking sectors.

In traction inverters and onboard chargers for electric vehicles, SiC components have already become the mainstream alternative to Si components. Furthermore, the demand for SiC components in automotive DC/DC converters continues to rise. As for GaN components, their potential remains significant in onboard chargers for electric vehicles, and their competitive edge is increasingly evident in automotive electronic components, LiDAR, wireless communication modules, and audio systems. It is estimated that by 2025, in the GaN component application market share, the new energy vehicle sector will account for 21%, representing an approximately 9% growth from 2023.

• China’s Semiconductor Self-Sufficiency offer it’s domestic supply chain a chance to seize opportunities.

Considering China’s position as the world’s largest automobile market, domestic automakers in China are highly enthusiastic about adopting innovative technologies and applications. It is anticipated that the Chinese market will be a major driver of demand for automotive GaN components. On the other hand, in the context of ongoing tensions between China and the United States, semiconductor self-sufficiency has become China’s primary policy for breaking through technological barriers and sustaining technological development momentum. Compound semiconductor is a project actively promoted by both the Chinese government and private sector, making China’s GaN component supply chain even more worthy of attention.

Currently, China’s domestic major GaN substrate and epitaxy suppliers include Sino Nitride Group and Nanowin. Companies specializing in GaN epitaxy include SinoGaN, Enkris Semiconductor, Genettice, and Best Compound Semiconductor. IDM manufacturers in this field include Sanan Optoelectronics, Silan, Runxin, CorEnergy, Innoscience, and SMEI. As the demand for automotive GaN components in China continues to rise, these aforementioned companies may seize the opportunity.

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)

The global automotive industry is pouring billions of dollars into SiC semiconductors, hoping that they could be key to transforming vehicle power systems. This shift is rapidly changing the supply chain at all levels, from components to modules.

In the previous piece “SiC vs. Silicon Debate: Will the Winner Take All?,” we explored SiC’s unique physical properties. Its ability to facilitate high-frequency fast charging, increase range, and reduce vehicle weight has made it increasingly popular in the market of electric vehicles (EVs).

Research from TrendForce shows that the main inverter has become the first area for a substantial penetration of SiC modules. In 2022, nearly 90% of all SiC usage in conventional vehicles was in main inverters. As demand grows for longer range and quicker charging times, we’re seeing a shift in vehicle voltage platforms from 400V to 800V. This evolution makes SiC a strategic focus for automotive OEMs, likely making it a standard component in main inverters in the future.

However, it is common for now that SiC power component suppliers fail to meet capacity and yield expectations – a challenge that directly affects car production schedules. This has led to a struggle for SiC capacity that is impacting the entire market segment.

Device Level: Burgeoning Strategic Alliances

Given the long-term scarcity of SiC components, leading OEMs and Tier 1 companies are vying to forge strategic partnerships or joint ventures with key SiC semiconductor suppliers, aiming to secure a steady supply of SiC.

In terms of technology, Planar SiC MOSFETs currently offer more mature reliability guarantees. However, the future appears to lie in Trench technology due to its cost and performance advantages.

Infineon and ROHM are leaders in this technology, while Planar manufacturers like STM, Wolfspeed, and On Semi are gradually transitioning to this new structure in their next-generation products. The pace at which customers embrace this new technology is a trend to watch closely.

Module Level: Highly-customized Solutions

When it comes to key main inverter component modules, more automakers prefer to define their own SiC modules – they prefer semiconductor suppliers to provide only the bare die, allowing chips from various suppliers to be compatible with their custom packaging modules for supply stability.

For instance, Tesla’s TPAK SiC MOSFET module as a model case for achieving high design flexibility. The module employs multi-tube parallelism, allowing different numbers of TPAKs to be paralleled in the same package based on the power level in the EV drive system. The bare dies for each TPAK can be purchased from different suppliers and allow cross-material platform use (Si IGBT, SiC MOSFET, GaN HEMT), establishing a diversified supply ecosystem.

China’s Deep Dive into SiC Module Design

In the vibrant Chinese market, automakers are accelerating the investment in SiC power modules, and are collaborating with domestic packaging factories and international IDMs to build technical barriers.

• Li Auto has collaborated with San’an Semiconductor to jointly establish a SiC power module packaging production line, expected to go into production in 2024. 
• NIO is developing its own motor inverters and has signed a long-term supply agreement with SiC device suppliers like ON Semi.
• Great Wall Motor, amidst its transformation, has also focused on SiC technology as a key strategy. Not only have they set up their own packaging production line, but they’ve also tied up with SiC substrate manufacturers by investing in Tongguang Semiconductor.

Clearly, the rising demand for SiC is redrawing the map of the value chain. We anticipate an increase in automakers and Tier 1 companies creating their unique SiC power modules tailored for 800-900V high-voltage platforms. This push will likely catalyze an influx of innovative product solutions by 2025, thereby unlocking significant market potential and ushering in a comprehensive era of EVs.

Onsemi, a semiconductor manufacturer, announced at the end of April that it had signed a Long-Term Supply Agreement for SiC power components with Zeekr, a subsidiary of Geely Auto Group. Geely Automotive will use Onsemi’s EliteSiC power components to optimize energy conversion efficiency in its electric drive system. This move signals Onsemi’s aggressive expansion in the automotive SiC market, catching up to leading manufacturers STMicroelectronics and Infineon.

In the SiC semiconductor market for electric vehicles, STMicroelectronics and Infineon have maintained their market leadership by entering the market early, while Wolfspeed and ROHM have gained traction through their vertical integration technology for SiC. On the other hand, Onsemi still lags behind in terms of market share for SiC power semiconductors, even though it acquired GT Advanced Technologies in 2021 and mastered the most difficult wafer growth and production equipment technology in SiC manufacturing. Before 2023, Onsemi was only used in small and medium-sized vehicle models such as NIO and Lucid.

However, Onsemi’s benefits begin to materialize in 2023, thanks to the industry maturity built by early players such as Infineon and STM, combined with Onsemi’s early deployment of SiC-related technology. Onsemi’s SiC product EliteSiC has obtained LTSA from Zeekr, BMW, Hyundai and Volkswagen in the form of discrete and modules. Its CEO, Hassane El-Khoury, has stated that the SiC business will generate $4 billion in revenue over the next three years compared to the total revenue for the 2022 SiC market of approximately $1.1 billion. These factors have made Onsemi the most talked-about semiconductor company in the SiC market this year.

However, the intense competition in the SiC market will test the endurance of resource input sustainability. The rapid growth in SiC demand over the past five years is mainly due to high battery costs and the development of energy density having reached its limit. Car manufacturers have switched to using SiC chips in their electronic components to increase driving range without increasing the number of batteries.

As a result, car manufacturers are aggressively pushing semiconductor companies to accelerate their research and development of SiC technology. This has resulted in a significant reduction in R&D time, but also an increase in R&D costs. Coupled with the impact of intense market competition on profits, the ability to sustain R&D resource input and overall profitability performance will be the key indicators of semiconductor companies’ competitiveness.

Onsemi has successfully improved its profitability performance by streamlining its product lines over the past few years, ranking at the top with a 49% gross margin, according to the financial reports of various semiconductor companies in 2022. This profitability performance allows Onsemi to meet car manufacturers’ cost requirements and secure orders, thereby achieving economies of scale in SiC product growth.

However, in terms of R&D costs as a percentage of revenue, Onsemi ranks last at 7%, compared to its main competitors Wolfspeed (26%), Infineon (13%), STM (12%), and ROHM (8%). With semiconductor companies investing more in technologies such as reducing on-resistance and improving yield rates, how to maintain a balance between profitability performance and resource expenditure while achieving revenue goals through intense market competition will be an important challenge for Onsemi after securing orders from car manufacturers.

(Source: Zeekr)