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)

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)

The compound semiconductor market has been flourishing in recent years thanks to the strong demand from markets such as electric vehicles and renewable energy. This has led to an increase in M&A as companies race to establish their position in the industry.

The market has seen a significant surge in M&A deals over the last few years: from 2006 to 2017, there was only one deal every two years, but since 2018, there have been six deals annually, surpassing historical data.

While SiC and GaN are the top categories for M&A, 21 of the transactions are directly related to SiC. This is because after its development over 20 years, SiC has been able to be mass-produced for market demands, particularly in the automotive industry where SiC has become the mainstream technology.

Vertical Integration driven by Industry Titans

Industry leaders in the US and Europe, such as Wolfspeed, On Semi, II-VI, ST, and Infineon, have started accelerating vertical integration in recent years, as reflected in the frequency of M&A.

The United States has led 12 M&A deals, with only four of them occurring before 2018, and Wolfspeed contributed to three of them. Over the past three years, On-Semi, II-VI, and Macom have led several deals with a focus on SiC’s vertical integration to meet market demands.

In Europe, there were eight M&A deals in total, all of which took place in 2018 and beyond, with ST and Infineon being the major players. Both companies have been accumulating technical strength through strategic acquisition to maintain their leading ground in the SiC power device market.

In 2019 and 2020, ST acquired Norstel AB to bolster its SiC wafer manufacturing capabilities and Exgan to improve the GaN power device design expertise. Similarly, Infineon acquired Siltectra GMbH in 2018 to gain control of the crucial SiC wafer cold split process technology and recently acquired GaN Systems to reinforce its presence in the GaN market.

It’s evident from the cases that the high frequency of M&As in the US and Europe is mainly driven by leading companies in the industry, gradually defining the landscape of the market.

Wolfspeed, which has grown into a leading company after a long period of time, has accumulated enough capital for M&A and gradually been transforming into a platform-type company. Meanwhile, Onsemi, ST, and Infineon, which have traditionally been platform-type companies with established expertise in the field of compound semiconductors, are now ramping up their M&A activities to expand market presence and generate strong growth momentum.

Market Landscape Continues to Change

M&A deals among semiconductor equipment companies are also receiving attention. Recently, ASM and Veeco have successively acquired LPE and Epiluvac, indicating that equipment manufacturers have also realized the huge potential of the SiC market and are accelerating their investment.

Given the rapid technology breakthroughs, the overall SiC power device market is predicted to grow at an annual rate of 41.4% to reach $2.28 billion by 2023 and $5.33 billion by 2026 at 35% annual growth, according to TrendForce’s latest report.

However, with the current market boom comes a new challenge – the supply shortage. One of the biggest obstacles to industry growth is the scarcity of SiC substrate material, despite efforts from companies like STM and Onsemi to ramp up their production.

Manufacturers are now on the hunt for both internal and external sources to keep the supply flowing. While most of the SiC substrate suppliers are expanding, only a few, like Wolfspeed, are controlling the manufacturing capacity for high-end SiC substrates used in automotive main inverters, which worsens the bottleneck in SiC devices’ production for cars.

With that being said, major players must quickly address technology hurdles and supply issues to bridge the market gap. This will inevitably drive intense competition and industry consolidation, and only the ones that can adapt quickly will be thriving in the long run.

Read more:

• SiC vs. Silicon Debate: Will the Winner Take All?
• Chinese Players Rally for Demand Surge in MOSFET, IGBT, and SiC