Silicon carbide suppliers are leveraging partnerships with customers and regional bodies to gain leverage in a roaring war for market share and dominance of the hot sector
The silicon carbide (SiC) market is not for the faint of heart. The first skirmishes for control of the market began decades ago, long before anyone could imagine it would eventually become a multi-billion-dollar business offering great advantages to power electronics and automotive semiconductor designers. Today, those early battles to establish defensive positions in the fledgling SiC business have turned into a full-blown but still low-intensity war.
The top manufacturers, raw material and ingot suppliers and customers are jostling for control of the SiC market and pouring billions of dollars into new fabs and creating supply alliances and technology innovation partnerships to advance their interests. This is a war being fought on numerous fronts, from the boardroom to the fabs and government regulatory offices. The court has been dragged in and even social media platforms have hosted part of the muscle flexing with supplier executives directly laying out SiC strategies, investment plans and commitment objectives for their varied audiences.
“Exciting news,” declared Jochen Hanebeck, CEO of German chipmaker Infineon Technologies AG, on his LinkedIn page early last month. “We are building by far the world’s largest 200mm production facility for silicon carbide chips at our site in Kulim, Malaysia. This way, we are further strengthening our leadership in power systems and create the conditions for Infineon Technologies’ sustainable profitable growth.”
Demand for SiC has skyrocketed from multiple industry segments, including power for automobiles—especially electric vehicles—other transportation modes such as trains and aviation, electrification projects, industrial machinery, medical equipment, 5G, cloud and other communication infrastructure, and other electronic applications requiring high hardiness, strong wearing and thermal resistance. Suppliers and their OEM customers have also been successful in resolving technological and higher cost challenges that initially plagued the product. By accelerating innovations and extending its application across multiple market segments, SiC suppliers have also made it an attractive option for many OEMs that now consider it a viable option to regular silicon, according to industry executives and observers.
With demand surging, SiC suppliers have raised their market share and sales projections. All the leading players, including Wolfspeed, Infineon, STMicroelectronics and On Semiconductor, now say they want a larger share of the SiC pie. STMicroelectronics says it wants to boost sales of SiC to more than $5 billion yearly by 2030; Infineon is shooting for $7 billion plus in SiC revenue over the next years; The targets are not mere wishful thinking on the part of these companies. Steps taken over the last few years to shore up supplies, build alliances, popularize the use of SiC and fund the construction of new or expansion of existing facilities have helped to raise the products’ profile globally. These actions are also assuring OEMs that components for their designs incorporating SiCs would be available in sufficient quantities.
SiC manufacturers have reached a stage now where convincing OEMs to adopt the device has become much easier than 5 or 10 years ago. The advantages of SiC over regular silicon semiconductors in several applications are considered so obvious that it is no longer necessary to lay out a raft of reasons why it should be used. The challenge suppliers now face is different. They must assure customers that they will be able to meet their needs and that efforts are being made to reduce average selling prices. Suppliers have been swift to respond. They are pouring billions into new SiC facilities and taking steps to secure raw material supplies. They have gone as far as bringing OEMs into direct discussions about their supply strategies and opened negotiations on financing transactions and partnerships. The alliances with customers are critical to the achievement of sales objectives, industry executives said.
STMicroelectronics, for example, recently announced plans to build a 200mm silicon carbide fab with Sanan Optoelectronics in China. The two companies said they will form a $3.2 billion joint venture that would own the fab, which would be constructed at a cost of $2.4 billion over 5 years. Both companies will jointly finance the new fab in addition to support from the local Chinese government and loans from ST. Production at the new fab is expected to commence late in 2024. The site will primarily address sales opportunities in China, they said. To ensure adequate supply of raw materials, Sanan will also build a new 200mm SiC substrate plant that would service the joint venture.
“The new joint venture silicon carbide fab is … an important step to further scale our global silicon carbide manufacturing operations, coming in addition to our continuing significant investment in Italy and Singapore,” said Jean-Marc Chery, president and CEO of STMicroelectronics, while discussing the company’s second quarter financial results. “The capacity at the full buildout will be 10,000 wafer per week of 200 millimeter in 2028. The confidence level on 200 millimeters is very high, because [Sanan] has a process we know very well. It will be one of the key enablers of the opportunity we see to reach above $5 billion silicon carbide yearly revenues by 2030.”
Other partnerships aimed at ensuring adequate supplies of SiC to customers have been announced by all the leading suppliers. Most of the transactions announced run into billions of dollars, showing the industry is at the early stages in the SiC capacity enhancement and investment campaign. The announcement of so many SiC deals should not cause any concerns about oversupply. The market is far from being saturated and demand continues to increase strongly, according to observers. In addition to the existing applications, new ones are constantly being added as more OEMs explore the use of SiC in the design of devices that are used in hardy and power sensitive environments, they noted.
“SiC enables particularly powerful, fast-switching, and compact system solutions with lower power consumption—for example in electromobility, but also for applications like solar, energy storage systems and EV charging,” said Infineon’s Hanebeck, in his LinkedIn post. “As the energy transition continues to accelerate, the SiC market is following suit and developing clearly above projections. We want to leverage this development and drive decarbonization together with our customers who have signaled us their long-term need with an incremental design-win volume of over €5 billion in automotive and industrial applications as well as around €1 billion of related pre-payments.”
Hassane El-Khoury, president and CEO of On Semiconductor, another major player in the SiC market, does not post comments on LinkedIn as frequently as his Infineon counterpart but even he is not averse to using the medium to tout his company’s activities in the segment. Three months ago, El-Khoury used the platform to announce a new agreement his company had just signed. On Semi and Vitesco Technologies, a supplier of “electric drives, electronic controls, sensors and actuators, and exhaust gas treatment solutions,” in May struck a $1.9 billion, 10-year supply agreement under which the American chipmaker would provide SiC products to the German enterprise. In addition, Vitesco also agreed to invest $250 million in On Semi “for new equipment for SiC boule growth, wafer production and epitaxy to secure access to SiC capacity,” the companies said, in a statement. “Big news indeed,” said El-Khoury, on his LinkedIn page after the transaction was announced.
“Energy-efficient silicon carbide power semiconductors are at the beginning of a big surge in demand,” said Andreas Wolf, CEO of Vitesco Technologies, in the statement announcing Vitesco’s agreement with On Semiconductor. “That is why it is imperative for us to get access to the complete SiC value chain together with Onsemi. With this investment we have a secure supply of a key technology over the next ten years and beyond.”
Many such news and contracts on SiC have been announced in the last couple of years as companies began realizing the potential of the SiC market. For example, in July, Renesas Electronics Corp. said it would extend a loan of $2 billion to Wolfspeed Inc. to secure a 10-year agreement for the supply of silicon carbide bare and epitaxial wafers. Renesas, which had been exploring ways to strengthen its presence in the SiC power market, struck the agreement with Wolfspeed “to scale production of silicon carbide semiconductors starting in 2025,” the company said, in a statement announcing the transaction. “The wafer supply agreement with Wolfspeed will provide Renesas with a stable, long-term supply base of high-quality silicon carbide wafers,” said Hidetoshi Shibata, President and CEO of Renesas. “This empowers Renesas to scale our power semiconductor offerings to better serve customers’ vast array of applications. We are now poised to elevate ourselves as a key player in the accelerating silicon carbide market.”
Wolfspeed, in turn, gained the financial resources it required for the massive SiC fab expansion activities it had just embarked upon, reducing pressures on the company’s cash position. The Renesas deal adds to other strategic financial and supply agreements Wolfspeed has arranged with other industry players. Earlier this year, it announced a partnership with ZF to create a “joint innovation lab to drive advances in silicon carbide systems and devices for mobility, industrial and energy applications.” The term of the engagement includes a substantial investment by ZF “to support the planned construction of the world’s most advanced and largest 200mm silicon carbide device fab in Ensdorf, Germany,” the companies said.
“Together, Wolfspeed and ZF combine expertise in power electronics and systems with a know-how in applications that is unparalleled in the industry,” said Stephan von Schuckmann, Member of the ZF Board of Management. “At ZF we have a unique understanding of the overall systems across all sectors—from passenger cars and commercial vehicles to construction machinery, wind power and industrial applications. The close cooperation between fab and R&D center will enable us to develop breakthrough innovations beyond state of the art for the benefit of our customers.”
In May, ZF and Wolfspeed followed up their initial partnership with an agreement to create a joint European R&D center for SiC in Nuremberg. The facility, which is partly funded by the German government as part of the European Union’s Common European Interest scheme, would focus on developing technological and product breakthroughs to enhance the region’s position in the SiC market, they said. Leveraging financial and technology partnerships gives Wolfspeed the breathing room it needs to pursue the larger objectives of keeping ahead of the competition and assuring suppliers it will be able to meet their future needs. The company has been expanding its existing facilities in the US and adding new ones worldwide. In June, it raised $1.25 billion from investors — with options for an additional $750 million — to fund a massive $6.5 billion capacity expansion plan previously announced. In addition to the 200mm wafer fab the company plans to establish in Saarland, Germany, it opened in 2022 a 200mm fab in Mohawk Valley and began construction on a new SiC manufacturing center in North Carolina.
Once all the new facilities come online over the next years, the industry would be in a better position to more accurately determine the amount of supply capacity it has built to serve the growing demand and assess which of the suppliers achieved their market share objectives and won the SiC war. This will take years, however. Until then, the industry will remain locked in a competitive manufacturing capacity buildout phase.