01

SiC production capacity continues to expand

According to incomplete statistics, there are more than 20 SiC substrate enterprises in Chinese Mainland, including Tianyue Advanced, Tianke Heda, Tony Electronics, Shuoke Crystal, Tongguang Crystal, Century Jinguang, Luxiao Technology, etc.

Tianyue Advanced Shanghai Lingang New Factory has started delivering 6-inch conductive SiC substrates in May 2023, and its production capacity and output are currently continuously increasing. Based on current progress, Tianyue Advanced is expected to achieve production ahead of schedule. On this basis, Tianyue Advanced has decided to expand the production scale of 6-inch SiC substrates to 960000 pieces per year in the second half of 2023. After the Shanghai Lingang factory reaches production capacity, it will become the main production base for Tianyue's advanced conductive SiC substrates.

The second phase of Tianke Heda Xuzhou SiC chip project started construction in August last year, with a total investment of 830 million yuan. After reaching production capacity, it can achieve an annual output of 160000 SiC substrates. On December 28, 2023, the project was fully capped and is expected to start production this year. On February 27, 2024, the third-generation semiconductor SiC material production base operated by Shenzhen Heavy Investment Tianke, a subsidiary of Tianke Heda, was also launched in Bao'an District, Shenzhen. It is expected that the substrate and epitaxial production capacity will reach 250000 pieces this year.

The Phase II SiC project of Shuoke Crystal has successfully passed the completion acceptance this year. The completion of the Phase II project is expected to bring an annual production capacity of 200000 pieces of 6-8 inch SiC substrates to Shuoke Crystal, including 200000 pieces/year of N-type SiC single crystal substrates, 25000 pieces/year of high-purity substrates, and 1.3 tons/year of Moissan crystals. The "Annual Production of 120000 SiC Semiconductor Materials" project of Tony Electronics will be completed in the first half of 2023. In March of this year, the Ecological Environment Bureau of Huzhou City announced the approval opinions on the environmental impact assessment documents for the expansion of the SiC project by Tony Electronics. The project announced this time is a further expansion of the fundraising project. According to the announcement, Tony Semiconductor plans to utilize the Tony Phase V factory building to implement an expansion project with an annual output of 200000 6-inch SiC substrate materials.

Sanan Optoelectronics stated in an investor Q&A session at the end of last year that its SiC production capacity is gradually being released. It is expected that the company will expand its 6-inch SiC production capacity to 18000 to 20000 pieces per month by the end of 2023 to early 2024.

The third-generation semiconductor materials industrial park, which has been invested in the construction and operation of Tianke, was officially unveiled at the beginning of this year. The park focuses on the production of basic materials for manufacturing chips such as substrates and epitaxy, and has laid out 6-inch SiC single crystal substrates and epitaxy production lines. It is expected that the substrate and epitaxy production capacity will reach 250000 pieces by 2024.

02

SiC prices continue to decline

With the release of global 6-inch SiC wafer production capacity and the temporary suspension of demand for electric vehicles, this has put downward pressure on SiC prices this year.

It is reported that by mid-2024, the price of 6-inch SiC substrates has fallen below $500, approaching the production cost line of Chinese manufacturers. However, by the fourth quarter, prices will further drop to $450 or even $400, putting heavy financial pressure on most manufacturers. It is worth noting that the quotes from international suppliers will still be as high as $850 by the end of 2023. Some frontline suppliers are already seeking to sell their businesses to avoid the continued expansion of huge losses.

Industry analysts attribute the decline in prices to oversupply and intensified market competition. The price war initiated by first-line Chinese suppliers to seize market share is becoming increasingly fierce, and small manufacturers are also joining the competition, leading to market instability. Despite the rapid growth of domestic SiC substrate production capacity, there are significant differences in yield rates among different suppliers, and some enterprises face severe challenges in order fulfillment. The fierce competition among suppliers has led to a continuous decrease in prices, forcing many manufacturers to sell at a loss.

This competitive environment has strengthened the negotiating position of global buyers, with major international IDMs such as Bosch and Infineon receiving increasingly favorable price agreements.

At the same time, the main application areas of SiC substrates - electric vehicles and photovoltaic power generation markets (the largest markets for SiC devices) - have made customers particularly cautious when choosing suppliers due to the 6-month to 1-year verification period, fearing that the suppliers may go bankrupt after the verification period ends. This situation further hinders the liquidity of the supply chain.

Industry insiders predict that the consolidation wave in the SiC substrate industry, which was originally expected to arrive around 2026, may be pushed forward to mid-2025 due to the intensification of the price war.

At a recent performance meeting, an investor asked Tianyue Advanced, "Is there any further room for price reductions for traditional SiC substrate products such as 4-inch and 6-inch

Zong Yanmin, Chairman and General Manager of Tianyue Advanced, stated that the price of SiC substrates will decrease, partly due to technological advancements and economies of scale, which will drive down substrate costs; On the other hand, the current price of SiC substrates is higher than that of silicon substrates, and the decrease in price helps to expand downstream applications and promote a wider range of SiC penetration applications.

The rapid expansion of production and significant price reductions by Chinese suppliers have caught international competitors off guard, and the global industry situation is quietly changing.

03

SiC giants are also affected

Industry giants face challenges

Recently, Wolfspeed, headquartered in Durham, has had multiple bad news reports.

Wolfspeed was once the world's first 8-inch (200mm) SiC wafer manufacturing plant, which took 7 years from project release in 2015 to completion and mass production in 2022. In 2023, in order to accelerate its transformation, Wolfspeed sold its RF business to MACOM, and thereafter focused on its SiC business.

However, as competition in the SiC market continues to intensify, Wolfspeed's performance continues to suffer losses and is deeply mired in a 'financial crisis'. According to Wolfspeed's Q1 2025 financial report, revenue for the quarter decreased by 1.37% year-on-year to $195 million, and although the net loss narrowed by 28.68% year-on-year, it still amounted to a loss of $282 million.

Affected by sustained losses in performance, Wolfspeed recently announced the launch of a $450 million facility closure and integration plan, which involves closing its 150mm SiC factory in Durham, North Carolina, while reducing approximately 20% of its workforce. Currently, the company has 5000 employees, which means it needs to lay off 1000 jobs. Looking ahead to the second quarter of fiscal year 2025, Wolfspeed expects its non GAAP net loss to be between $145 million and $114 million.

On November 18th, Wolfspeed announced that its board of directors has decided to approve Gregg Lowe's resignation as Wolfspeed President, CEO, and board member this month. Although neither Gregg Lowe nor the Wolfspeed board of directors have explained the reasons for his resignation, it is speculated that this is closely related to Wolfspeed's performance in recent quarters.

ROHM's SiC business has undergone significant adjustments

While Wolfspeed is facing headwinds, another SiC giant, Rohm Semiconductor, is also struggling.

On November 7th, ROHM Semiconductor released its performance report for the first half of the 2024 fiscal year (April to September 2024). During this period, ROHM Semiconductor achieved a revenue of 232 billion yen (approximately 10.904 billion yuan), a year-on-year decrease of 3%. The next day, Rom held a financial performance conference and revealed the progress and future plans of SiC business.

Firstly, there is a reduction in investment amount. ROHM Semiconductor originally planned to invest 510 billion yen (approximately RMB 23.97 billion) in SiC business from 2021 to 2027, but now it will be reduced to 470 billion to 480 billion yen (approximately RMB 22.09 billion to 22.56 billion). Specifically, the investment amount for the 2024 fiscal year will be reduced to 150 billion yen (approximately RMB 7.05 billion), and for the 2025 fiscal year, it will be reduced to below 100 billion yen (approximately RMB 4.7 billion).

Secondly, the growth plan has slowed down. Previously, Rohm Semiconductor set a sales target of 110 billion yen (approximately 5.17 billion yuan) for its SiC business in the fiscal year 2025. However, due to the slowdown in the industrial equipment and electric vehicle markets, the target has been postponed to 2026-2027.

Finally, there is a capacity adjustment. ROHM Semiconductor is promoting the mass production of 8-inch SiC, with the Chikugo factory planning to start large-scale production in 2025 and the Miyazaki Second Factory expected to start production in 2025. On the other hand, ROHM Semiconductor originally planned to increase the production capacity of SiC power semiconductors to 6.5 times that of the 2021 fiscal year in the 2025 fiscal year, but this goal will be delayed by one year.

04

SiC， Start the second half!

At present, the price of 6-inch SiC wafers continues to be trapped in an internal competition, and a large number of manufacturers are turning their attention to larger SiC substrates in an attempt to explore new development opportunities and breakthrough directions.

Currently, 8 inches is the second half of the SiC campaign.

According to the Wolfspeed report, taking a 32mm ² die (chip) as an example, 448 chips can be cut out of a 6-inch chip and 845 chips can be cut out of an 8-inch chip. The number of chips on an 8-inch SiC substrate increases by nearly 90% compared to a 6-inch chip; Due to the lower yield of edge chips, the proportion of 6-inch edge die will reach 14%, while the proportion of 8-inch die will decrease to 7%. The utilization rate of 8-inch substrate has increased by 7% compared to 6-inch. According to calculations by SiC substrate manufacturer Tianke Heda, increasing from 6 inches to 8 inches is expected to reduce unit costs by 35%.

As of 2023, an industrial chain layout from 8-inch substrates to wafer manufacturing has been formed overseas, and the development and product research and development of 8-inch SiC substrate technology by top overseas manufacturers have significantly accelerated in the past two years. In addition to Wolfspeed, which has already achieved mass production, seven SiC substrate, epitaxial, and device factories are expected to achieve mass production of 8-inch substrates in the next 1-2 years. Among them, Wolfspeed's 8-inch substrates and MOSFETs have been mass-produced, and they continue to build the John Palmour SiC substrate factory to promote substrate capacity expansion and meet the expansion needs of their 8-inch wafer fab; ST STMicroelectronics is also investing in the 8-inch field. It has partnered with Hunan Sanan Semiconductor to build an 8-inch SiC wafer factory, and Sanan has built an 8-inch SiC substrate factory to ensure the stability of material supply for the joint venture factory.

According to the YOLE report, it is predicted that 8-inch SiC substrates will enter the market in large quantities by 2024. The industry expects that from 2026 to 2027, all current 6-inch SiC products will be replaced by 8-inch products. According to data from Jibang Consulting, the current market share of 8-inch products is less than 2%, and it is expected to grow to around 15% by 2026.

The pace of breakthroughs in mass production by domestic manufacturers is also accelerating. At present, more than 10 companies have entered the stage of sample delivery and small-scale production of 8-inch SiC substrates, including Shuoke Crystal, Jingsheng Electromechanical, Tianyue Advanced, Nansha Wafer, Tianke Heda, Keyou Semiconductor, Hunan Sanan Semiconductor, Chaoxinxing, Yuehaijin, etc. In terms of investment, Shuoke Crystal, Nansha Wafer, Tianyue Advanced, Tianke Heda, Keyou Semiconductor, Sanan Optoelectronics and other companies have plans to expand their production of 8-inch substrates, aiming to prepare for material capacity supply to downstream customers in advance.

Recently, Tianyue Advanced announced that it is steadily advancing the 8-inch SiC substrate expansion plan for the second phase of the Lingang factory. The overall production capacity plan for 8-inch SiC at its Lingang factory is about 600000 pieces, which will be implemented in stages. At the same time, Tianyue Advanced also launched its first 12 inch (300mm) SiC substrate product at the 2024 Munich Semiconductor Exhibition in Germany, officially marking the beginning of the era of ultra large SiC substrates.

In June of this year, Shilan Microelectronics' 8-inch SiC power device chip manufacturing production line project (Shilan Jihong) officially started construction in Haicang District, Xiamen City. The total investment of the project is 12 billion yuan, and it will be constructed in two phases. After the completion of the two phases, it will form a production capacity of 720000 pieces (60000 pieces/month) of 8-inch SiC power device chips per year. The total investment for the first phase of the project is 7 billion yuan, and it is expected to achieve initial production by the end of the third quarter of 2025. The goal is to conduct trial production in the fourth quarter of 2025 and achieve an output of 20000 pieces; We will continue to ramp up production capacity from 2026 to 2028, and ultimately achieve an annual production capacity of 420000 8-inch SiC power device chips.

After the first phase of the Hunan Sanan SiC project is fully put into operation, in order to comply with the trend of transitioning from 6 inches to 8 inches, the second phase of the project will introduce all 8-inch production equipment and processes. In the middle of this year, Hunan Sanan's 8-inch SiC production line made positive progress. In July, Sanan Optoelectronics announced on the investor interaction platform that the Hunan Sanan project will continue to expand production and produce 8-inch SiC products. Currently, trial production of 8-inch SiC substrates has begun, and 8-inch SiC chips are expected to be put into production in December.

On the same day, according to the official WeChat account of Xiyong Microelectronics Park, Chongqing Sanan Semiconductor SiC substrate factory has completed the main equipment entry ceremony. According to the person in charge of Chongqing Sanan Infrastructure, the overall construction progress of the project has been completed by over 95% and is currently in a critical stage of equipment installation and commissioning. It is expected that the substrate factory will be lit up and connected by the end of August.

According to the data, the total planned investment for Chongqing Sanan Yifa SiC project is about 30 billion yuan. After the project is completed, it will build the country's first 8-inch SiC substrate and wafer manufacturing line, with the ability to produce 480000 8-inch SiC substrates and automotive grade MOSFET power chips annually. The expected revenue is 17 billion yuan.