In the past two years, there has been a lot of discussion surrounding the excessive competition in SiC, which has also caused a series of chain reactions.
For example, according to an industry report released in October, the price of mainstream 6-inch SiC substrates has continued to decline this year, with a drop of nearly 30%. The report quoted industry insiders as saying that by mid-2024, the price of 6-inch SiC substrates had fallen below $500, approaching the production cost of manufacturers. By the fourth quarter of this year, the price further fell to $450 or even $400, bringing financial pressure to most manufacturers.
Although many of these discussions are centered around local SiC. But judging from recent industry developments, global industry giants have all suffered from this headwind.
01 WolfSpeed lays off employees, closes factory
Recently, Durham-based Wolfspeed announced a 20% layoff, most of which came from the Durham plant.
Wolfspeed is a leading wide-bandgap semiconductor that focuses on silicon carbide and gallium nitride materials, including microchips. General Motors and Mercedes-Benz are among its customers. Last quarter, the company's headcount was reduced by 10% due to natural attrition and voluntary early departures, and the remaining 10% came from current layoff notices.
The company said in its 2024 annual report that it has 5,013 full-time and part-time employees. The layoffs are part of the closure of a 150mm production plant in Durham and a plant in Farmers Branch, Texas, announced in August, and plans in Germany will also be suspended indefinitely.
Wolfspeed CEO Gregg Lowe said in a statement that the company took actions in fiscal 2025 to solidify its capital structure, simplify the business to accelerate structural profitability, and support the construction of its state-of-the-art silicon carbide facilities, including a 200mm silicon carbide plant in Mohawk Valley, New York, and a materials plant in North Carolina, which he said will generate about $3 billion in revenue annually.
“To drive operational improvements, we are taking actions to increase efficiencies, align our business with current market conditions, and become the first silicon carbide company to transition to pure-play 200mm,” he said. "Transitioning to a fully 200mm platform enables us to take further actions to simplify our cost structure, including closing our manual Durham 150mm fab, other manufacturing footprint rationalizations, and reducing our workforce. Combined, we expect these actions to generate approximately $200 million in cash savings annually."
Less than a month ago, the Biden-Harris Administration announced that it had signed a preliminary agreement to provide up to $750 million in federal funding under the CHIPS and Science Act to support the construction of a new silicon carbide wafer manufacturing facility in Siler City.
The CHIPS taxpayer-funded funding is expected to be a catalyst for Wolfspeed's North Carolina project, an expansion of its New York equipment manufacturing facility. The combined projects are expected to create more than 2,000 manufacturing jobs and 3,000 construction jobs as part of the company's $6 billion capacity expansion plan.
Greg Lowe revealed that Wolfspeed's automotive business grew 2.5 times year-over-year in the first quarter. They expect their EV revenue to continue to grow throughout 2025 as the total number of models using Wolfspeed's SiC solutions for powertrains increases fourfold between 2023 and 2024, with year-over-year growth expected to increase by another ~75% in 2025.
Despite this announcement, EV demand is still trending downward, especially in the US and Europe. This will undoubtedly cast a shadow over Wolfspeed's prospects.
02 ROHM suffers losses, SiC investment slows down
While Wolfspeed is suffering from headwinds, another SiC giant Rohm is not doing well either.
On November 7, 2024, Rohm held a press conference on its financial performance for the first half of fiscal year 2024 (April 2024 to September 2024). Regarding the full-year forecast for fiscal year 2024, sales will be 450 billion yen, 30 billion yen less than the initial forecast, operating income will be a deficit of 15 billion yen (initially forecast to be a surplus of 14 billion yen), and net profit will be 14 billion yen. Revenue will be a deficit of 6 billion yen (in the same year), and they announced that they would lower their profits to 14 billion yen (surplus of 14 billion yen).
In Rohm's view, the reasons for the decline in sales include the delay in the popularization of BEV (battery electric vehicles) and the weak sales of Japanese automakers in China.
In view of this situation, Rohm has significantly revised its investment plan. The company will make a capital investment of 186.7 billion yen in fiscal 2023, mainly for SiC business. The company had planned to invest an additional 165 billion yen in fiscal 2024, but this has now been reduced to 150 billion yen, 15 billion yen less than originally planned. In addition, the company plans to maintain investment below 100 billion yen in fiscal 2025, which was previously expected to be around 140 billion yen.
Rohm had originally planned to invest 510 billion yen in the SiC business alone between 2021 and 2027, but this will be reduced to 470 billion to 480 billion yen. Mr. Matsumoto said: "We have moved from the stage of upfront investment to the stage of strategic investment based on demand, with a focus on SiC."
ROHM set a sales target of 110 billion yen for its SiC business in fiscal 2025. However, due to the slowdown in the industrial machinery and electric vehicle markets, the target was postponed to 2026-2027. In addition, we plan to strengthen manufacturing capabilities to cope with future demand and postpone the adjustment of the previous announcement.
Meanwhile, ROHM is advancing the development of 8-inch SiC wafers, with plans to start mass production at the Chikugo Plant (Chikugo City, Fukuoka Prefecture) in 2025. In addition, the Miyazaki Second Plant (Kunitomi Town, Miyazaki Prefecture), acquired from Solar Frontier, was originally scheduled to start production of 8-inch SiC substrates in 2024, but the start date of substrate production has now been set for 2025.
According to ROHM's original plan, the company will increase the production capacity of SiC power semiconductors by 6.5 times by 2025 compared to 2021, and by 35 times by 2030. However, it has been revealed that this plan has changed.
Rohm also pointed out that the company's 8-inch version is progressing smoothly, saying, "If you go from 6 inches to 8 inches, the yield will increase by 1.78 times. We are actually doubling it because the yield has also improved "Since the yield is close, accelerating the shift to 8-inch wafers will greatly improve cost competitiveness. "He also talked about strengthening competitiveness in terms of performance by launching a new generation of products every two years, saying, "With SiC, we hope to make progress on these two pillars while monitoring demand."
No fear of involution, collectively roll to 8 inches
While Wolfspeed and Rohm made relevant adjustments, it did not hinder their migration to 8-inch SiC. At the same time, as the world's largest SiC supplier, ST is also accelerating its move to 200mm silicon carbide.
ST CEO said at an earlier earnings conference: "The company announced the launch of a new company-wide plan to reshape its manufacturing footprint, accelerate the transformation of wafer fab capacity to 300mm silicon and 200mm silicon carbide, and adjust the global cost base."
In June this year, ST announced that it would build a new high-volume 200mm silicon carbide (SiC) manufacturing plant in Catania, Italy, for power devices and modules as well as testing and packaging. These factories, combined with the SiC substrate manufacturing plant ready at the same location, will form STMicroelectronics' silicon carbide park, realizing the company's vision of a fully vertically integrated manufacturing plant for mass production of SiC in one place.
The SiC campus will become the center of STMicroelectronics' global SiC ecosystem, integrating all steps in the production process, including SiC substrate development, epitaxial growth processes, 200mm front-end wafer manufacturing and module back-end assembly, as well as process R&D, product design, advanced R&D laboratories for chips, power systems and modules, and complete packaging capabilities.
According to the plan, the new factory is scheduled to start production in 2026 and reach full capacity by 2033, with a weekly production capacity of up to 15,000 wafers at full capacity.
Infineon, another SiC international giant, also announced in August that the company's 200mm silicon carbide (SiC) wafer factory in Kulim, Malaysia has started production.
According to Infineon's announcement in 2023, Infineon will invest up to 5 billion euros in the second phase of the third phase of the Kulim module construction over the next five years. This investment will bring an annual SiC revenue potential of approximately 7 billion euros, plus the planned 200mm SiC conversions in Villach and Kulim. This competitive manufacturing base will support Infineon's goal of achieving a 30% SiC market share by 2020. Infineon is confident that the company's SiC revenue will exceed the 1 billion euro target in fiscal 2025.
Another SiC giant that continues to move towards eight inches is ON Semiconductor.
In Q2, Hassane El-Khoury, president and CEO of ON Semi, said: "We are still on track to achieve 8-inch certification this year, and by certification I mean the substrate all the way to the fab. So certification will be achieved this year and revenue next year will be in line with our expectations." But in Q3, ON Semiconductor revealed that SiC, the company's main product area, is expected to achieve low to mid-single-digit growth this year. Although total revenue fell by about 14%. The company's confidence in its market position and the growing popularity of SiC in new and existing applications remains strong. But analysts said they were somewhat surprised by ON Semiconductor's lower-than-expected revenue forecast for 2024, given Morgan Stanley's June forecast that the industry would grow 18% in 2024. The analyst pointed out that the company's poor performance could be due to overly optimistic industry forecasts or ON Semiconductor losing market share due to its customer mix, adding that the answer is somewhere in between. Additionally, the analyst said ON Semiconductor lowered the capital intensity of its 2027 financial model from 11% to a mid-single-digit percentage, citing lower capital expenditures due to manufacturing efficiencies and the shift from 6-inch SiC wafers to 8-inch wafers.
The analyst believes this is a reasonable decision as utilization is 65% and SiC revenue growth is lower than expected.
04 Last words
According to incomplete statistics from DRAMeXchange, a total of 14 8-inch SiC fabs will be built worldwide in 2024 (12 under construction and 2 about to start construction). In the short term, only Wolfspeed's Mohawk Valley fab will be able to supply 8-inch SiC wafers, and other manufacturers are expected to gradually supply 8-inch SiC wafers starting next year.
Coming to China, more than 50 SiC-related expansion projects will be launched in 2023. In 2024, it is expected that more than 100 companies in China will enter the SiC field, and more than 50 SiC projects are making significant progress.
For this reason, this SiC status quo has caused widespread concern.
The author of the public account "Silicon Carbide Chip Learning Notes" "Erbao Xianren" bluntly stated in a recent article that the global production capacity planning layout is already in excess, while car manufacturers are constantly optimizing new technologies to reduce the use of silicon carbide chips. In the next ten years, there will only be more volume. Without the support of technology-led stories, many companies will be like the LED era. The third-generation and a half industry has been in hundreds of cities, and small towns of the third and fourth levels are also full of flowers. But the changes in the next ten years will make it difficult for LPs to continue to follow the run without the blessing of technology leadership. Big brother Wolfspeed is still so embarrassed, let alone others!
"Logically speaking, six-inch silicon carbide wire equipment is cheap and has long been depreciated. A six-inch wafer is less than US$350 and is getting cheaper and cheaper. If you really want to make money, the six-inch wire is really a sweet point! Why has the current industrial logic suddenly changed?!"
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