Nowadays, 6-inch wafers have become the mainstream of global SiC/GaN companies, and leading companies have gradually entered the 8-inch wafer era. Compared with international SiC/GaN giants that have been working for many years, Chinese SiC/GaN companies, as rising stars, are also rapidly joining the fierce competition. How is the development of SiC/GaN in various regions by the third quarter of 2024?

Since the commercialization of silicon carbide (SiC) and gallium nitride (GaN), they have been the "star" materials that have attracted much attention in the semiconductor field. Until now, global SiC/GaN companies are still focusing on "increasing production capacity" and "reducing costs". However, due to the different degrees of SiC/GaN industrialization in the world, the commercial progress of these two types of materials in various countries is also different, and the completion of "increasing production capacity" and "reducing costs" of different companies is also different.

Nowadays, 6-inch wafers have become the mainstream of global SiC/GaN companies, and leading companies have gradually entered the 8-inch wafer era. Compared with the international SiC/GaN giants that have been working for many years, Chinese SiC/GaN companies, as rising stars, have also quickly joined the fierce competition. By the third quarter of 2024, what will be the development status of SiC/GaN in various regions?

01 Global Development Status of SiC and GaN

As third-generation semiconductor materials, SiC and GaN have significant advantages in the fields of electronics and optoelectronics due to their unique physical and chemical properties. Since their commercialization a few years ago, the advantages of SiC/GaN in the field of power/RF devices have been fully verified in various markets.

SiC power devices are suitable for new energy vehicles, charging equipment, portable power supplies, communication equipment, robotic arms and aircraft, while GaN power devices are suitable for high-efficiency electric vehicle onboard chargers and mild hybrid DC-DC converters at low voltage, motor drives and solar inverters, smart grid power regulation and other scenarios.

At the same time, the application areas of SiC and GaN are also expanding to the RF device market. For example, the high-frequency characteristics of GaN RF devices allow them to play an important role in wireless communications (5G communications, satellite communication systems) and radar systems, while the application of SiC in the RF field mainly involves silicon carbide-based gallium nitride RF devices, which are expected to be widely used as technology upgrades.

In terms of market performance, the overall commercialization process of SiC is slightly faster than that of GaN. In July this year, Qiu Boshun, senior analyst of compound semiconductors at Yole Group, shared the latest data at the forum of the "Munich Shanghai Electronics Show": By 2029, wide bandgap semiconductors (WBG) are expected to account for about 33% of the global power electronics market, of which SiC and GaN will account for 26.8% and 6.3% respectively - the market capacity of GaN will reach US$2.2 billion in 2029, with a compound growth rate of 29% in the next five years. The growth of these demands is driven by consumer electronics, data centers, and new energy vehicles; the market capacity of SiC will reach US$10 billion in 2029, driven by industrial and automotive applications.

02 Countries usher in a wave of SiC production expansion

In 2018, Tesla replaced the IGBT module in the main drive inverter with a SiC module for the first time in its Model 3 model. This is the world's first mass-produced car using SiC chips. The adjustment of the power module of the on-board main drive inverter has brought lower switching losses, significantly improved system efficiency, and extended the single-charge range by about 6%. Tesla has promoted the widespread application of SiC power devices in the field of new energy vehicles and led a new direction for the development of industry technology.

The industry expects that with the reduction of SiC chip costs and the increase of production capacity, its application in the automotive field will increase further. Today, the application of automotive-grade SiC power devices in main drive inverters, on-board chargers, charging piles and other components has become an important trend in the industry. With the mass production of models such as BYD Han, Zeekr 001, and Hyundai IONIQ 5, we see that SiC modules are gradually landing in mid-to-high-end models.

Against this background, some international power device manufacturers have repeatedly refreshed historical data in terms of SiC revenue. Thanks to strong demand in the automotive and industrial sectors, STMicroelectronics' SiC-related revenue reached US$1.14 billion last year, a year-on-year increase of more than 60%. ON Semiconductor's SiC business revenue in 2023 increased fourfold year-on-year. According to TrendForce, STMicroelectronics, ON Semiconductor, Infineon, Wolfspeed, and Rohm alone accounted for 91.9% of SiC power device revenue in 2023.

The remaining 8.1% of the SiC power device market share is also facing fierce competition. Take China's local SiC industry as an example: In terms of supply, China's SiC wafer substrate/epitaxial market has grown strongly in recent years, and the large-scale expansion of production capacity is about to reach full capacity. In terms of demand, the growth rate of new energy vehicles around the world has begun to slow down in recent years, especially the demand for new energy vehicles in Europe and the United States has declined significantly. Changes in supply and demand have made everyone worry that there is a crisis of overcapacity in the market.

03 Is China's SiC substrates starting a "price war"?

Since the first half of this year, there have been frequent reports in the industry that "China's domestic silicon carbide substrate prices have dropped". Some industry insiders even revealed that China's SiC chip prices will drop by up to 30% in the next two years. Since many Chinese SiC manufacturers have obtained automotive certification and increased production capacity, it is expected that Chinese SiC chips will begin to penetrate the electric vehicle market on a large scale by the end of 2025.

• In this regard, many Chinese local SiC companies have made statements - Dongni Electronics said that when the production capacity of SiC substrates is increased, a significant price reduction is possible;

• Sanan Optoelectronics' Secretary's Office said that in the short term, it is not ruled out that some second- and third-tier SiC manufacturers will use "price wars" to exchange price for volume to obtain a higher market share;

• GlobalWafers Chairman Xu Xiulan said that the release of global 6-inch SiC substrate production capacity, coupled with the temporary suspension of demand for electric vehicles, will put pressure on SiC substrate prices to decline in 2024;

• Tianyue Advanced pointed out in its investor record sheet that technological improvements and scale effects have driven down the cost of SiC substrates.

China's 8-inch SiC is about to be mass-produced

In recent years, Chinese SiC companies have announced many layout dynamics, and these projects will gradually reach full production in the next five years.

For example, Tianyu Semiconductor's SiC epitaxial material research and development and industrialization project is expected to reach full production by 2028, with a planned production capacity of 1 million pieces/year.

Suzhou Sike Semiconductor, a joint venture between Hunan Sanan and Ideal, plans to produce 2.4 million silicon carbide half-bridge power modules annually and has entered the trial production stage;

The 8-inch silicon carbide wafer foundry jointly owned by Hunan Sanan and STMicroelectronics has a planned production capacity of 10,000 pieces/week, and plans to complete phased construction and gradually put into production in 2025, and will reach full production in 2028;

Tianke Heda's silicon carbide wafer phase II expansion project was officially put into production in August this year. After full production, it will add an annual production capacity of 160,000 silicon carbide substrates, bringing the company's total production capacity to 230,000 pieces.

Tek Tianrun's Beijing 8-inch wafer line is expected to be put into production in 2025, and will produce 100,000 wafers per year after the project is completed.

China's local third-generation semiconductor companies are also stepping up their efforts in 8-inch SiC wafers. According to incomplete statistics, as of now, more than 10 companies in China have developed 8-inch SiC substrates, and these newly added 8-inch substrates will gradually enter mass production this year. However, due to the late start of Chinese manufacturers, China's automotive SiC chips still need to work hard to catch up with international brands. SiC used in Chinese cars still relies on imports, and this situation is difficult to reverse in the short term.

04 International SiC

Manufacturer international expands production to 8 inches

International SiC manufacturers are also actively expanding the production of 8-inch wafers. According to the latest plans of various manufacturers, more international manufacturers will reach full production of 8-inch SiC wafers in the next few years.

For example, Wolfspeed plans to invest 2.75 billion euros in an 8-inch SiC wafer factory in Saarland, Germany, which will start production in 2027;

In addition to its joint venture with Sanan in Chongqing, STMicroelectronics also plans to build a new 8-inch silicon carbide manufacturing plant in Catania, Italy with a total investment of 5 billion euros. The plant will start production in 2026 and is expected to achieve full production by 2033, with a weekly production capacity of 15,000 wafers;

Infineon invested 2 billion euros in the first phase of the third plant in Kulim, Malaysia, which was put into operation in August this year Production, production of silicon carbide and gallium nitride power semiconductor products, in addition to the construction of its second phase factory by 2028, to increase the production capacity of 8-inch SiC power wafers;

ON Semiconductor plans to invest $2 billion to expand SiC production capacity in the Czech Republic to build its full silicon carbide production chain, producing chip modules for the automotive and renewable energy fields, and the new production line will be put into production in 2027;

Bosch acquired the key assets of TSI Semiconductor and invested another $1.5 billion to transform it, planning to produce 8-inch silicon carbide wafers in 2026.

The 8-inch SiC wafer expansion projects of these international giants reflect their positive expectations for the development of SiC technology and their confidence in the global SiC market. We firmly believe that the further development of industries such as new energy vehicles will drive the continued growth of market demand for SiC devices.

05 GaN commercialization is making a breakthrough

GaN devices can provide higher electron speeds than Si/SiC devices, and GaN transistors are suitable for high-frequency power switching circuits. The difficulties in its commercialization are reflected in many aspects: First, in terms of process, GaN materials face challenges such as device yield, consistency and reliability; second, in terms of packaging, GaN devices have large currents and high powers when working, and the temperature can reach 250°C, which requires very high heat dissipation design of the packaging structure; third, in terms of application, GaN has subverted the traditional power supply industry and put forward higher requirements for pulse width modulation control chips, transformer manufacturers, etc.

In terms of application, GaN was initially commercialized in the field of fast charging of consumer electronics. With the increasing demand of various technology giants for data centers, GaN has attracted attention for its potential in energy saving. It is expected that GaN will play a key role in power conversion, power management and renewable energy integration in data centers in the future. In addition, GaN devices can also perform well in applications such as industrial motor drive and power management, electronic systems in the aerospace field, on-board chargers and inverters.

The main business model of the GaN industry is the coexistence of IDM and foundry models for a long time. At present, the IDM model includes Innoscience, Infineon, TI, Nexperia, ST, Onsemi, China Resources Microelectronics, etc., and the foundry model includes Navitas Semiconductor, Power Integrations, EPC, VisIC, GaN Power, etc. However, some recent M&A cases have shown new changes in the industry's business model.

06 GaN enterprise 

mergers and acquisitions promote dual-mode integration

In the past 10 months, mergers and acquisitions between global GaN companies have been quite frequent. These mergers and acquisitions have not only enhanced the technical strength of the acquirers, but also accelerated their market expansion. Specific M&A cases include:

• In October 2023, Infineon completed the acquisition of GaN Systems for a transaction amount of US$830 million;

• In January 2024, Renesas Electronics announced the acquisition of Transphorm for approximately US$339 million, which will help Renesas Electronics develop new enhanced power solutions;

• In May 2024, Power Integrations announced an agreement to acquire the assets of Odyssey Semiconductor. The acquisition supports the former's continued development of PowiGaN technology and strengthens its GaN technology application in the power conversion field.

• In July 2024, Guerrilla RF acquired Gallium Semiconductor's GaN power amplifier and front-end module product portfolio to expand the former's GaN product line and accelerate the innovation of RF technology; In July 2024, GlobalFoundries announced the acquisition of Tagore Technology's power GaN technology and intellectual property portfolio, which will help GlobalFoundries accelerate the development of efficient power management solutions.

It is worth noting that the vertical integration trend in the mergers and acquisitions of the GaN industry is becoming increasingly obvious. Some IDM companies have integrated foundry companies into their own businesses through mergers and acquisitions. For example, GaN Systems and Transphorm were originally foundry companies, and their acquirers Infineon and Renesas Electronics are both IDM companies. In addition, there is also a way of integration from the side. Power Integrations, which is a foundry model, has a gallium nitride wafer factory through the acquisition of IDM Odyssey Semiconductor.

Regardless of the integration method, vertical integration in the GaN industry is beginning to form a trend. This model will help the rapid growth of the GaN market size, and we may see more similar mergers and acquisitions in the future.

07 China's "Sci-Tech Innovation Board Eight Measures" to Support Corporate Mergers

Although there have not been many M&A cases for Chinese GaN companies in the past year, China's latest favorable policies for corporate mergers and acquisitions are worth paying attention to. On June 19 this year, the China Securities Regulatory Commission issued the "Eight Measures on Deepening the Reform of the Science and Technology Innovation Board to Serve Technological Innovation and the Development of New Productivity" (hereinafter referred to as the "Eight Measures for the Science and Technology Innovation Board"), which will support mergers and acquisitions and restructuring at the policy level, and actively promote the Science and Technology Innovation Board listed companies to carry out mergers and acquisitions of upstream and downstream of the industrial chain to enhance industrial synergy.

Within just a few days after the release of the "Eight Measures for the Science and Technology Innovation Board", two Chinese local third-generation semiconductor companies have released merger and acquisition plans. On the evening of June 20, 2024, Xinlian Integrated announced that it plans to acquire the remaining 72.33% equity of its holding subsidiary Xinlian Yuezhou. It is reported that in April this year, the 8-inch SiC MOSFET project of Xinlian Yuezhou was successfully put into production and is expected to be mass-produced in 2025; on the evening of June 23, Naxin Micro announced that it plans to acquire 68.28% of the shares of Shanghai Magtron, and the total purchase price is approximately 683 million CNY.

I believe that with the support of the "Eight Measures for the Science and Technology Innovation Board", there will be more merger and integration cases of third-generation semiconductor manufacturers in China, and there may also be merger and integration cases in the GaN industry at that time.

Global SiC and GaN technologies are developing rapidly, and companies are focusing on increasing production capacity and reducing costs. The mainstream wafer size has developed to 6 inches, and leading companies have begun to produce 8-inch wafers. In this field, Chinese companies are emerging as an emerging force. At present, international manufacturers are actively expanding their footprint in the SiC and GaN markets through mergers and acquisitions and expansion strategies. At the same time, thanks to policy support, Chinese companies have also demonstrated strong growth momentum and M&A capabilities.

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