SiC will become the "diamond" of the chip industry

In the brutal semiconductor market, part of many companies' businesses may be hit.

For certain applications that involve large amounts of power conversion, such as inverters and drivetrains in electric vehicles, chips made with silicon carbide are better than chips made with regular silicon. It's also a challenging material, second only to diamond in terms of hardness, and in an in-depth report earlier this year, Matt Ramsay noted that simply cutting a typically 6-inch-wide wafer would take more than three Hour.

Nonetheless, the electric vehicle market alone has maintained strong demand for silicon carbide. The company, which makes silicon carbide wafers and chips using the material, reported last week that revenue in the September quarter rose 54% year over year to about $241 million. ON Semiconductor, as it is often called, now relies on silicon carbide for only a small part of its business, but said on Monday that its revenue from the unit in the September quarter was three times what it was at the beginning of the year.

These companies are working to rapidly expand their silicon carbide production capabilities. However, this shocked investors. Shares of both Wolfspeed and OnSemi were hammered on Monday on concerns about increased capital spending in a market that's seeing overall chip demand decline. At an analyst conference, Wolfspeed said it expects to invest about $1 billion in the current fiscal year that ends in June and more than $2 billion next year. This would exceed the company's projected total revenue during these periods. The company also expects to burn cash over the next three financial years while building new production facilities.

OnSemi's spending plans are more modest, but will still leave a mark. In its third-quarter conference call on Monday, the company said capital spending as a percentage of revenue is expected to rise to mid-to-high in the coming quarters after averaging 8% over the past five years.

Both companies remain in a strong position facing significant market opportunities. Mr. Ramsay expects revenue from silicon carbide products to grow at an average annual rate of 35% over the next five years. That's helped both stocks outperform most of their semiconductor peers this year. But some hype also played a role.

Wolfspeed's shares soared 32% after reporting fourth-quarter earnings in August, but fell just 18% after last week's report. The most recent one included disappointing near-term forecasts due to problems with the new production process. This should be a humbling reminder to investors about how difficult it is to scale silicon carbide; Wolfspeed has been working with the material for 35 years.

Meanwhile, OnSemi's stock price rose in July on rumors that the company had struck a major deal to supply silicon carbide chips to electric car maker Tesla. The company never confirmed those rumors, but even with Monday's decline, the stock never lost that boost; OnSemi is up 19% over the past six months, making it the top performer in the PHLX Semiconductor Index at the time. Investors expect OnSemi's automotive unit revenue to grow an average of 22% over the next four quarters, nearly double the growth expected by industry leader NXP's automotive unit during that period.

But as Wolfspeed just showed, no stock in this market is indestructible.

Qorvo, a leading global provider of connectivity and power solutions, and SK Siltron CSS, a semiconductor wafer manufacturer, today announced that they have completed a multi-year silicon carbide (SiC) die and epiwafer supply agreement.

The agreement will promote domestic semiconductor supply chain resiliency and greater capabilities to support rapidly growing demand for advanced silicon carbide solutions, particularly in the automotive market. The agreement will also provide end-user customers with a level of protection and confidence as they adopt Qorvo's industry-leading 4th generation SiC FET solutions.

SiC devices are more efficient at handling high power and conducting heat than traditional silicon. When used in electric vehicle (EV) system components, power can be transferred from the battery to the motor more efficiently, increasing the EV's driving range by 5% to 10%.

In 2021, Qorvo, a leading provider of RF solutions, announced that the company has acquired Princeton, New Jersey-based United SiliconCarbide (UnitedSiC), a leading manufacturer of silicon carbide (SiC) power semiconductors. According to reports, the acquisition of United Silicon Carbide will expand Qorvo's influence into the fast-growing electric vehicle (EV), industrial power, circuit protection, renewable energy and data center power markets.

Following the acquisition, UnitedSilicon Carbide will reportedly become part of Qorvo's Infrastructure and Defense Products (IDP) business, led by Dr. Chris Dries, formerly President and CEO of United Silicon Carbide and now Qorvo Power Device Solutions Program General Manager.

Philip Chesley, then president of Qorvo IDP, said: "The addition of UnitedSiC to our IDP business unit significantly expands our market opportunities in high-power applications. This acquisition enables Qorvo to provide high-value, best-in-class smart power solutions covering power supplies." switching, motion control and circuit protection applications.”

Dr. Dries said: "As part of Qorvo, our team is excited to expand our SiC product portfolio and continue to build the business at speed and scale in an effort to accelerate the adoption of SiC with the highest performance devices in the industry. Our SiC technology, coupled with "Qorvo's complementary programmable power management products and world-class supply chain capabilities enable us to deliver exceptional levels of power efficiency in advanced applications."

A press release at the time noted that United Silicon Carbide's product portfolio now includes more than 80 SiC FET, JFET and Schottky diode devices. Based on a unique cascode configuration, the recently released 4th generation SiC FETs feature an industry-leading voltage rating of 750V and 5.9 milliohms RDS(on), enabling applications in EV chargers, DC-DC converters and traction drives to Key to new levels of SiC efficiency and performance, as well as telecom/server power supplies, variable speed motor drives and solar photovoltaic (PV) inverters.