While the market is declining, American silicon carbide wafer giant Wolfspeed recently released its financial report as of June 30, 2024: revenue of $807.2 million, a 12% decrease from the 2023 fiscal year; Net loss of 573.6 million US dollars, with the loss expanding by 74% compared to the 2023 fiscal year; A loss of $4.56 per share (currently approximately RMB 32.5), Further deterioration compared to the loss of $2.65 in the 2023 fiscal year. For the future market outlook, Wolfspeed expects revenue for the first quarter of fiscal year 2025 to be between $185 million and $215 million, with non GAAP earnings per share expected to be between $90 cents and $1.09. Wolfspeed executives tell investors that the company plans to shut down its operations in Daley, USA A silicon carbide wafer production facility in M, thereby reducing costs. Wolfspeed told foreign media Axios that it is unable to disclose how many employees will be affected by the closure and reiterated its commitment to opening a new factory that can provide 1800 job opportunities. You should know that Wolfspeed is a pioneer in silicon carbide products, having been in the market since 1824 J. Berzelius has a history of 200 years since the first discovery of silicon carbide materials. In 1987, Gree (Wolfspeed) established the first commercial production line for silicon carbide, ushering in the commercial era of silicon carbide. In 2020, Tesla announced that its electric drive system would use silicon carbide modules. With the rapid development of new energy vehicles, silicon carbide has become a popular concept, and this material has also become popular in the semiconductor industry. But since 2024, the prices of silicon carbide related products have indeed started to decline significantly. Industry insiders have stated that, The price war for 1200V silicon carbide epitaxial products is very fierce. At the same time, the silicon carbide industry chain is facing a short-term phase of declining demand and high inventory. Top players are losing money and market prices are falling. What's wrong with the silicon carbide market? The ice and fire of silicon carbide enterprises are two worlds apart! Firstly, let's talk about why Wolfspeed's days are not easy. Industry insiders say that Wolfspeed's 8-inch silicon carbide wafer production capacity has always had a low capacity utilization rate. Wolfspeed stated that its wafer utilization rate at the Mohawk Valley silicon carbide wafer fab has reached 20%; It is expected that by the end of 2024, Mohawk Valley wafer fabs can increase their wafer utilization rate to 25%. This number means that for a long time, Wolfspeed's capacity utilization rate was less than 20%. Another reason why Wolfspeed is not favored is that it is facing many challengers. At present, the largest application scenario of silicon carbide devices in the market is new energy vehicles, and the market with the largest global demand is in China. The silicon carbide industry chain in China is accelerating technologically, and as mentioned earlier, the prices of related domestic products are rapidly declining, leading to a decrease in Wolfspeed's product competitiveness. In other words, China's silicon carbide enterprise market is accelerating its catch-up. Here are some performance records of domestic silicon carbide companies. Tianyue Advanced achieved a revenue of 912 million yuan in the first half of 2024, a year-on-year increase of 108.27%; Net profit attributable to the parent company was 102 million yuan, turning losses into profits year-on-year; According to Yangjie Technology's 2024 semi annual report, In the first half of 2024, Yangjie Technology achieved a revenue of 2.865 billion yuan, a year-on-year increase of 9.16%; Net profit attributable to the parent company was 425 million yuan, a year-on-year increase of 3.43%; Non net profit attributable to shareholders was 422 million yuan, a year-on-year increase of 3.04%; In the first half of 2024, Naxin Microelectronics achieved a revenue of 849 million yuan, a year-on-year increase of 17.30%; Net profit attributable to the parent company -265 million yuan, Deducting non net profit attributable to the parent company of RMB 286 million; According to the semi annual report data of Hongwei Technology in 2024, in the first half of 2024, Hongwei Technology achieved a revenue of 637 million yuan, a year-on-year decrease of 16.72%; The net profit attributable to the parent company was 3 million yuan, a year-on-year decrease of 95.98%. Based on the performance of five silicon carbide related companies, four have seen an increase in performance, while one has experienced a decline; At the same time, four companies achieved profitability in the first half of the year. The significant decrease in market prices is an unavoidable fact. The silicon carbide market has slowly entered the stage of price war. But it's not just the silicon carbide industry that has this phenomenon. In the automotive industry where silicon carbide is located, many aspects have already begun to contract, such as autonomous driving in the automotive industry E/E architecture, etc. But the price war has to be fought, and without it, it will be impossible to improve technology. Demand determines price, and a decrease in price precisely reflects an increase in market demand. From a positive perspective, the downward pressure on prices is not faced by a single company, but by the entire industry. Faced with price drops, what manufacturers can do is Reduce costs through effective means. Industry insiders predict that the price of silicon carbide will gradually decline until it stabilizes in the future, rather than continuing to sharply decline or experiencing a cliff like decline. Compared to other industries, the semiconductor industry is a very challenging high threshold industry, with a large upfront investment amount and investment and return cycles An industry that is very long and cannot generate income through short-term investments. Therefore, the chaos of 'loss making sales' will not continue indefinitely. The attractiveness of the Chinese silicon carbide market. In the future, China will still be the main competitor for silicon carbide. With the growth of more and more Chinese new energy vehicle brands, the development momentum of silicon carbide in China is strong, which is expected to change the market pattern of silicon carbide. Tesla, BYD, Ideal, and Xiaomi have already equipped their popular electric vehicle models with silicon carbide components, and the demand for silicon carbide in the Chinese market will continue to increase. Data shows that globally in 2023 The production capacity of 6-inch conductive silicon carbide substrates has reached 2100Kpcs, a year-on-year increase of 96%. It is expected to increase to 5690Kpcs by 2026, with a CAGR of 39% from 2023 to 2026; In 2023, the equivalent sales volume of 6-inch silicon carbide substrates in China has exceeded 1 million pieces, and many manufacturers' production capacity is climbing faster than expected, accounting for 42% of global production capacity, It is expected that by 2026, China's 6-inch silicon carbide substrate production capacity will account for about 50% of the global production capacity. Foreign silicon carbide companies are also striving to enter the Chinese automotive market. ROHM Semiconductor has signed a long-term supply agreement for silicon carbide power devices with United Automotive Electronic Systems (UAES), a major tier one automotive supplier in China. Industry insiders also have a positive view on the Chinese silicon carbide market. Some viewpoints point out that from a long-term perspective, given China's accumulation of a deeper development foundation in the new energy vehicle industry chain, this field, as the most critical and widely used practical application market for silicon carbide, undoubtedly provides fertile soil for the vigorous growth of the domestic silicon carbide industry. At present, there is still a certain gap in the advanced level of silicon carbide technology between China and developed countries such as Europe and America. However, it is optimistic that with the continuous acceleration of the comprehensive verification process of technological reliability in China, there is reason to believe that this gap will quickly narrow, and the domestic silicon carbide industry will usher in a golden period of rapid development. From the perspective of materials science, the pricing mechanism of silicon carbide also has its rigidity. Although its market demand is expected to experience explosive growth and can effectively reduce the overall system cost, the price of silicon carbide chips is always higher than that of IGBT. This situation is rooted in the uniqueness of silicon carbide materials, and it is difficult to predict that its price will drop to a level comparable to IGBT. Although the current silicon carbide market is facing the challenge of price fluctuations and the profit path of new businesses is still unclear, the industry generally believes that through continuous technological innovation, costs can be gradually shared and long-term profits can be achieved. In this context, leading companies in the industry are actively investing in stable economic support to drive technological innovation and build stronger business moats. Specifically, the layout of the 8-inch silicon carbide wafer production line is considered a key factor in building business barriers. According to industry observations, silicon carbide technology is transitioning from 6 inches to 8 inches, and this transformation is expected to be completed within the next five years, becoming an inevitable trend in industry development. Some leading companies have taken the lead in providing customers with 8-inch silicon carbide samples. The iteration of 8-inch silicon carbide technology requires establishing long-term strategic partnerships with upstream core material suppliers to ensure supply chain stability. Real time communication and flexible development with downstream customers are also necessary. It can be said that in order to play well in the silicon carbide market in the second half, it is necessary to switch from 6-inch to 8-inch technology and be fully prepared for technological upgrades and market competition. Behind the Silicon Carbide Market: The Global Automotive Industry Competition The silicon carbide industry is facing another challenge in the transformation of the automotive supply chain model. According to observations, given the strategic position and core value of semiconductors (especially silicon carbide) in the transformation of new energy vehicles, a significant phenomenon is that many OEMs have started to bypass first tier suppliers and directly purchase silicon carbide devices. This was deeply reflected at the 2024 Beijing Auto Show, Many car manufacturers have shifted their external procurement to internal production, which indicates a profound adjustment of the future automotive supply chain structure and potential industry changes. The growth of silicon carbide business relies on the new energy vehicle market, and China is a core country for the rapid growth of new energy vehicles. Foreign brands are also optimistic about China's demand for automotive grade chips. The competition in the silicon carbide market, Behind it is still competition in the global automotive industry, especially in the new energy vehicle industry. With the rise of Chinese new energy brands, countries around the world are feeling pressure. Governments around the world are also using policies to enhance the competitiveness of their own enterprises. At a press conference after a cabinet meeting in September, Japanese Minister of Economy, Trade and Industry Saito revealed that the Japanese government has committed to providing Toyota and Nissan with Provide subsidies of up to 350 billion yen (approximately 17.44 billion yuan) for related power battery projects. Saito Ken stated that 12 power battery and related projects will receive government support, and the Japanese government hopes to strengthen the competitiveness of the domestic battery industry through this. Shortly thereafter, the Canadian government announced a 100% tariff on electric vehicles imported from China, with a final tax rate of 106.1%. According to a statement released by the Office of the United States Trade Representative, on September 13th local time, the Biden administration announced that the United States has finally decided to increase tariffs on certain Chinese made products. It will raise the tariff rate for electric vehicles made in China to 100%. How will the global pattern of the silicon carbide market develop? It not only depends on the technological development and breakthroughs of upstream companies in the industry chain, but also on how new energy vehicle manufacturers seize the market and how governments of various countries participate in this competition.