World’s No. 1 in Silicon Carbide (SiC) Semiconductor Wafers
Doubts Raised Over Survival Amid EV Market Gap and Intensifying Competition
Increased Possibility of China Absorbing Wolfspeed’s Assets and Technology

Wolfspeed, a U.S.-based silicon carbide (SiC) semiconductor manufacturer, is reportedly preparing to file for bankruptcy. The company faces mounting debt issues amid intensified competition with Chinese firms and tariff uncertainties within the U.S. As a key supplier in the power semiconductor supply chain, Wolfspeed’s downfall would inevitably lead to a restructuring of the global supply chain.

Bankruptcy Threat Due to Deadlocked Debt Restructuring

According to sources in the power semiconductor industry on the 28th, Wolfspeed stated in a report submitted earlier this month to the U.S. Securities and Exchange Commission (SEC) that "there are significant doubts about the company’s ability to continue operating." This acknowledges the difficulty the company faces in overcoming its financial troubles on its own.

Founded in 1987 in North Carolina, Wolfspeed leads the market by producing wafers (semiconductor substrates) using SiC, which is more resistant to high temperatures and voltages than conventional silicon (Si). SiC wafers are essential materials used in power semiconductors for electric vehicles, where energy efficiency is crucial, as well as in renewable energy.

Wolfspeed made proactive investments in power semiconductor manufacturing facilities during the early 2020s when the market outlook was optimistic. In December 2019, it invested USD 1.2 billion to build the Mohawk Valley fab in New York, and in 2022 announced plans for a USD 5 billion JP (John Palmour) fab in North Carolina. The Mohawk Valley fab is the world’s first fully automated next-generation 200mm (8-inch) power semiconductor plant, and the JP fab is the world’s largest 200mm SiC wafer production facility. Wolfspeed’s initial goal was to build a vertically integrated production system for SiC semiconductors.

Competition with Chinese Firms and EV Market Slowdown

However, as demand for electric vehicles slowed and the power semiconductor market stagnated, Wolfspeed, which invested heavily, faced the crisis first. Recently, automakers have been cautious about transitioning to high-voltage electric vehicle systems, as EV sales have underperformed expectations, delaying the procurement of next-generation parts. Consequently, Wolfspeed’s financial situation deteriorated rapidly. The company had regarded a USD 750 million subsidy promised under the Biden administration’s CHIPs Act as a lifeline, but this funding became uncertain after the start of the Trump administration’s second term, leading to a liquidity crisis.

Competition with Chinese manufacturers further pressured Wolfspeed. China aggressively pursued localization of SiC materials and wafers through technological development and production line investments. As a result, Chinese SiC manufacturers now threaten established players with low prices and fast delivery. According to market research firm Yole Development, as of last year, Chinese companies ranked 2nd (Tankeblue), 4th (SICC), and 6th (semiSiC) in global SiC wafer sales.

These companies had relatively low rankings in 2022 but saw rapid revenue growth within a year. Notably, SICC’s sales surged 804%, achieving significant progress in both technology and market presence. Chinese firms currently supply SiC wafers to global top power semiconductor companies such as the German firm Infineon. Meanwhile, the technology gap once led by Wolfspeed has narrowed, worsening its profitability.

SK Siltron Starts Sale Process

The situation is similar in South Korea. SK Siltron, which had also made significant investments in SiC and garnered attention, is now facing financial difficulties and is being considered for sale by the SK Group. This month, domestic and foreign private equity firms, including Hahn & Company, IMM Private Equity, STIC Investment, and Bain Capital, reportedly received investment memoranda (IMs) and completed due diligence and internal reviews.

SK Siltron is the only domestic wafer producer in South Korea and ranks 3rd globally in market share for 12-inch wafers. In 2017, SK acquired a 51% stake in LG Siltron from LG Group, along with 19.6% from financial investors, for around USD 575.6 million. The remaining 29.4% was acquired by SK Group chairman Chey Tae-won. As of September last year, SK Siltron’s debt ratio stood at 165.8%. This increase reflects investment burdens such as the new Gumi factory. Generally, a debt ratio below 100% is considered financially healthy, while above 150-200% signals financial risk.

Amid this, some analysts suggest that the crises facing global power semiconductor companies in Korea and the U.S. could become a stepping stone for China’s SiC industry. If bankruptcy or sales are finalized, the core patents, SiC manufacturing technology, and R&D personnel from these companies could enter the market. A semiconductor industry insider said, “For Chinese firms, which receive strong government support, this could be a golden opportunity for a technological ‘quantum jump.’ If they acquire Wolfspeed’s core assets, they could rapidly close the technology gap with leading groups and solidify their dominance in the global SiC market.”