U.S. silicon carbide (SiC) power semiconductor corporation Wolfspeed is preparing for bankruptcy as it falls behind Chinese corporations in competition, making the restructuring of the global power semiconductor supply chain inevitable.
According to the industry on the 27th, Wolfspeed mentioned in a report submitted to the U.S. Securities and Exchange Commission (SEC) earlier this month that "there are significant doubts about the company's ability to continue operations going forward." It acknowledged that it is in a difficult situation to overcome its management crisis on its own.
Founded in 1987 in North Carolina, Wolfspeed is a leading company in the market that produces wafers (semiconductor substrates) using SiC, which is more resilient to high heat and high voltage environments than traditional silicon (Si). SiC wafers are used as key materials in power semiconductors for electric vehicles, where energy efficiency is critical, as well as in renewable energy.
One of the reasons for the downfall of Wolfspeed, which was responsible for the core supply chain of power semiconductors, is the intensified competition with Chinese manufacturers. China has actively invested in technology development and production line investments with the goal of localizing SiC materials and wafers. As a result, Chinese SiC manufacturers are threatening established players with lower prices and faster delivery times. Chinese corporations have begun supplying SiC wafers to global power semiconductor giant Infineon from Germany. The technology gap that Wolfspeed had led has narrowed, exacerbating profitability.
As the growth of the electric vehicle market continues to slow, Wolfspeed’s business has deteriorated. With electric vehicles not selling as expected, automakers have taken a cautious stance on the transition to high-voltage electric vehicle systems this semester, delaying the procurement of next-generation parts. Orders have decreased, and Wolfspeed's finances, which had invested huge capital in expanding the production capacity of next-generation 200mm (8-inch) SiC wafers and developing high-voltage products, have rapidly worsened. Wolfspeed viewed the approximately $750 million (about 1 trillion won) subsidy from the CHIPs Act promised during the Biden administration as a final lifeline, but with the advent of the Trump administration's second term, the availability of these funds has become uncertain, leading to a liquidity crisis.
As Wolfspeed was unable to overcome its financial difficulties, the businesses of global power semiconductor companies that placed orders have also faced inevitable disruptions. Japanese power semiconductor company Renesas had contracted with Wolfspeed two years ago to supply SiC wafers for 10 years, prepaying $2 billion (approximately 2.7 trillion won). Nikkei reported that if Wolfspeed undergoes bankruptcy proceedings, Renesas will face significant accounting losses because it will likely struggle to recover the advance payment.
Global power semiconductor companies, concerned about potential disruptions in the supply of SiC wafers, are urgently seeking alternative suppliers. A semiconductor industry official said, "Some orders previously handled by Wolfspeed have already begun to shift to alternative suppliers," and added, "Starting this year, many corporations plan to either enter the 8-inch SiC wafer market or expand their production volume, so the restructuring of the supply chain will accelerate." In fact, several global companies, including SK Siltron and ON Semiconductor, are aiming to produce 8-inch SiC wafers starting this year.
Some analysts suggest that Wolfspeed's crisis could serve as a stepping stone for the Chinese SiC industry. If Wolfspeed were to file for bankruptcy or undergo a business sale process, there is a possibility that the company’s key patents, SiC manufacturing technologies, and research and development personnel could enter the market. A semiconductor industry official noted, "For Chinese corporations receiving extensive government support, this could indeed be an opportune moment for a technological 'quantum leap,'" adding that if they were to acquire Wolfspeed's core assets, they would quickly close the technology gap with the leading group and establish a critical foothold to strengthen their dominance in the global SiC market.