Recent reports reveal that German automotive parts supplier ZF Friedrichshafen AG (ZF) plans to withdraw from a 3 billion USD joint project with U.S. chipmaker Wolfspeed to build the world’s largest 8-inch SiC chip manufacturing plant. Industry speculation suggests the reasons behind ZF’s decision are Wolfspeed’s financial struggles, repeated construction delays, and the failure of the European Union to deliver on promised subsidies.

Delays in the Construction of Wolfspeed’s 8-inch SiC Chip Factory

In January 2023, Wolfspeed and ZF announced plans to build the world’s largest and most advanced 8-inch SiC device manufacturing facility in Saarland, Germany. ZF initially intended to invest 185 million USD in the project. The factory was expected to be co-owned by ZF and Wolfspeed, but the success of the project was contingent on the EU’s subsidy commitment, which was expected to cover a quarter of the total investment.

However, in June 2023, Wolfspeed announced a delay in the plant’s construction. A company spokesperson cited the weak electric vehicle markets in both Europe and the U.S. as reasons for reducing capital expenditures. Wolfspeed said it would prioritize increasing production at its New York facility instead. Although the German project has not been canceled entirely, Wolfspeed is still seeking additional financing. The company now expects to start construction in mid-2025, two years later than originally planned.

In October, Wolfspeed announced on its website that it had signed a non-binding preliminary term sheet with the U.S. Department of Commerce. Under the CHIPS and Science Act, the Department of Commerce plans to provide Wolfspeed with up to 750 million USD in funding to support the construction of the John Palmour SiC manufacturing facility in Siler City, North Carolina, and to expand Wolfspeed’s existing plant in Marcy, New York.

Additionally, an investment consortium led by Apollo, The Baupost Group, Fidelity Management & Research Company, and Capital Group has agreed to provide 750 million USD in new financing to Wolfspeed. This funding is expected to alleviate much of the financial pressure currently facing the company.

Delayed EU Chip Act Subsidies?

While the U.S. CHIPS Act subsidies have gradually started to materialize, the EU’s 2020 European Chips Act has faced significant roadblocks in securing funding. According to Reuters, the EU’s subsidy promises attracted several major companies, including Wolfspeed, Intel, TSMC, Infineon, STMicroelectronics, and GlobalFoundries, to announce plans for new plants in Europe. However, very few of these projects have actually broken ground.

In addition to the delays in Wolfspeed’s German plant, Intel has also postponed construction of its plant in Magdeburg, Germany. On September 16, Intel’s CEO informed employees that the chip factory’s construction would be delayed by two years. Over a year ago, Intel secured a 10 billion EUR subsidy commitment from the German government. Intel had initially planned to invest over 30 billion EUR to build two cutting-edge chip factories in Germany, marking the largest foreign investment in the country’s history. However, in August 2023, the German government expressed concerns about Intel’s project in Magdeburg and devised an emergency “Plan B” in case Intel pulls out.

Industry experts suggest that both Wolfspeed and Intel are under significant financial pressure, and the delay in receiving German government subsidies has only exacerbated their operational risks. Among the announced projects, even fewer have received formal EU approval. Infineon, for example, began construction on a 5 billion EUR power chip plant in Dresden in 2023, expecting completion by 2026, though it has not yet received EU funding approval. Similarly, onsemi’s 2 billion USD investment to expand its SiC operations in the Czech Republic is still awaiting EU approval.

(Photo credit: Intel)

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 the past two years, the semiconductor industry has experienced a market downturn, a recovery slower than expected, and a cash crunch. Major companies such as Intel, TSMC, and Samsung, while continuing to advance their expansion projects, have been constantly adjusting and slowing down the pace and schedule of their fab construction to better serve their long-term development goals. It’s found that seven fabs worldwide are projected to delay construction.

• Intel’s 1nm Chip Plant in Germany and Ohio Plant in the US Delay Construction

According to a report from global media outlet Volksstimme, the construction of Intel’s Fab 29.1 and Fab 29.2 near Magdeburg, Germany, has been postponed due to pending approval of EU subsidies and the need to remove and reuse black soil. The date of commencement has been pushed from summer 2024 to May 2025.

Earlier reports indicated that the construction of this chip planr was initially expected to begin in 1H23, but due to subsidy delays, construction was put off to summer 2024. Moreover, the topsoil at the construction site cannot be cleared until May 2025 at the earliest.

It is reported that Intel’s Fab 29.1 and Fab 29.2 were originally scheduled to start operations by late 2027 and were expected to employ advanced manufacturing processes, potentially Intel 14A (1.4nm) and Intel 10A (1nm) process nodes. However, Intel now estimates that it will take four to five years to build these two plants, and production is expected to commence between 2029 and 2030.

• Samsung’s Chip Plant in Pyeongtaek, South Korea and Fab in Taylor, US Delay Construction

In February 2024, Samsung revealed that it had partially halted the construction of its fifth semiconductor plant in Pyeongtaek, Gyeonggi Province. Samsung originally planned to build six semiconductor plants on an 855,000 square meter site in Pyeongtaek, creating the world’s largest semiconductor hub. Currently, the P1, P2, and P3 plants at the Pyeongtaek park house the most advanced DRAM, NAND flash memory, and foundry production lines, while the P4 and P5 plants are under construction.

Samsung stated that the halt was for further inspection. However, industry sources have revealed that Samsung’s adjustment of the new production lines for P4 and P5 fabs is to prioritize the construction of the PH2 production line at P4 fab. It is reported that P4 plant might build PH3 production line to produce high-end DRAM to meet market demands.

Besides, South Korean media Businesskorea also revealed Samsung has postponed the mass production timeline of the fab in Taylor, Texas, US from late 2024 to 2026, which is possibly due to a slowdown in the wafer foundry market growth, and the delay was attributed to U.S. government subsidies and issues related to the complexities in gaining permits.

• TSMC Postponed the Production of Two Plants in Arizona, US

On April 9, TSMC announced the plan to build a third fab in Arizona. Once completed, this fab will use 2nm process or even more advanced technologies to manufacture wafers for customers. With this addition, TSMC’s total capital expenditure in Phoenix, Arizona, will exceed USD 65 billion.

Meanwhile, TSMC disclosed that their first fab in Arizona will start production in 1H25, using 4nm process. The second fab, initially announced to use 3nm process, will also incorporate the more advanced 2nm process, with mass production set to begin in 2028. This fab was announced in December 2020, which was originally scheduled to start mass production using 3nm process in 2026, primarily, but the latest schedule represents a delay of nearly two years from the original one.

As to the third fab planned to set up in Arizona, TSMC has not yet disclosed the date for construction. However, they mentioned that it will use 2nm process or more advanced ones, with production expected to commence in the late 2030s.

• Wolfspeed’s 8-Inch SiC Fab might Delay Construction to 2025

Wolfspeed’s 8-inch SiC fab in Ensdorf, Saarland planned to invest about EUR 2.75 billion, but the construction has been postponed. The project has already secured subsidies of EUR 360 million from the German federal government and EUR155 million from the Saarland government. In addition, Wolfspeed is also seeking financial assistance from the European Chips Act. ZF will provide Wolfspeed with several hundred million dollars of financial investment in exchange for a minority stake in the plant.

Industry sources indicate that Wolfspeed aims to secure more funding before the groundbreaking ceremony. If it fails to gain financial assistance from the European Chips Act, the project is very likely to be delayed. The plant was initially scheduled to start construction in summer 2024, but Wolfspeed CEO Gregg Lowe revealed that it might now begin in 2025.

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(Photo credit: TSMC)

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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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)