Price competition

   Unlike the relatively high cost in the early development of the silicon carbide industry, with more and more new energy vehicles adopting silicon carbide technology and more silicon carbide wafer production capacity landing, the silicon carbide market is facing a new competitive environment.

   CIC Zhuoshi Consulting Executive Director Yu Yiran told 21st Century Business Herald reporters that the silicon carbide wafer market experienced significant price adjustments in 2024, with a price reduction of nearly 30%. Specifically, the price of 6-inch SiC substrates has fallen below $500 by mid-2024, approaching the production cost line of Chinese manufacturers, and by the fourth quarter, the price has further dropped to $450

   Research firm TrendForce consulting analyst Gong Ruijiao also told 21st Century Business Herald reporters that in 2024, the price reduction of 6-inch conductive silicon carbide substrates will exceed 20%, mainly due to the large-scale release of production capacity and intensified market competition.

   Yu Yiran analyzed that the reasons for the price decline are complex and diverse. Firstly, the rapid release of global 6-inch SiC wafer production capacity, coupled with the temporary suspension of demand in the electric vehicle market, has led to oversupply, which directly puts downward pressure on SiC wafer prices. Secondly, Chinese suppliers have launched a fierce price war in order to seize more market share in the fiercely competitive market, which not only makes the market unstable but also forces many manufacturers to sell at a loss to maintain competitiveness. In addition, with the improvement of technology and the emergence of economies of scale, the production cost of SiC substrates has been reduced, which has also driven down prices She pointed out.

    The impact of vehicle manufacturers on the supply chain cannot be ignored. Tesla is the world's earliest new energy vehicle manufacturer to adopt silicon carbide modules for vehicles, but shortly thereafter, Tesla CEO Elon Musk publicly mentioned his desire to reduce the use of silicon carbide content to a certain extent, which is believed to be related to the high cost of silicon carbide application earlier.

    Although the price of silicon carbide has decreased with the expansion of production capacity, it has become clear in recent years that new energy vehicle manufacturers are strictly controlling supply chain prices. Under this trend, silicon carbide supply chain manufacturers must also cooperate.

    In addition, overseas manufacturers are actively seeking opportunities to open up the application of silicon carbide in the Chinese market. The global automotive chip market is facing sustained inventory pressure in 2024, but the Chinese market is an exception.

   Several industry observers told 21st Century Business Herald reporters that due to the failure of overseas markets to achieve expected sales targets for pure electric vehicles, and instead the rapid growth of hybrid electric vehicles, the overseas electric vehicle market is currently in a period of shock and precipitation after explosive growth in previous years, which has also put pressure on the overall automotive chip market overseas.

   But the performance of overseas giants shows that China is the only market that brings incremental growth. This has become the background for overseas manufacturers to accelerate their cooperation with domestic manufacturers. STMicroelectronics is one of the fastest deploying manufacturers. In June 2023, it announced a joint venture with Sanan Optoelectronics to build a silicon carbide production plant in Chongqing, with priority given to empowering applications in the automotive industry.

   Yu Yiran analyzed to reporters that the planned annual production capacity of the cooperation project between STMicroelectronics and Sanan Optoelectronics is 480000 automotive grade MOSFET chips, which will become China's first 8-inch silicon carbide substrate and wafer manufacturing line. The joint venture factory is expected to start production in the fourth quarter of 2025, with a weekly production capacity of 10000 wafers after full completion in 2028.

    This will enhance the competitiveness of the new production line, but may cause market pressure on other smaller and less technologically advanced domestic manufacturers.

    In addition, the new production line will expand market supply, which may intensify price competition and drive down SiC chip prices. Nevertheless, a decrease in prices may promote its application in industries such as new energy vehicles.

Actively expanding production

   The impact of price competition has gradually been reflected in the performance of some supply chain manufacturers.

According to the prospectus released by Dongguan Tianyu Semiconductor, a supplier of silicon carbide epitaxial wafers, on the Hong Kong Stock Exchange, the company achieved a revenue of 424 million yuan in the first half of 2023, but the revenue for the first half of 2024 was 361 million yuan, a year-on-year decrease of 14.8%; In the first half of 2024, the company went from profit to loss of 141 million yuan, and in the same period of 2023, it made a profit of 21 million yuan; The gross profit has also significantly decreased from 82 million yuan in the first half of 2023 to 44 million yuan in the first half of 2024.

   The company analyzed in its prospectus that the factors contributing to the decline in financial performance include the drop in market prices for silicon carbide epitaxial wafers and substrates, as well as international trade tensions. In addition, there may be ongoing impacts, such as difficulties in entering into framework sales contracts with price or quantity commitments and expanding production capacity.

    Dongguan Tianyu pointed out that the company will respond by expanding its customer base, increasing sales, improving operational efficiency, and enhancing product technology capabilities.

   But this is only based on the premise that most products in the current market are mass-produced based on 4-inch or 6-inch wafers. With more 8-inch silicon carbide wafer production capacity landing globally, it also means that there will be a larger influx of products into the silicon carbide chip market.

   Regarding the potential challenges in the future, Dongguan Tianyu also mentioned in its prospectus that the global epitaxial wafer industry is experiencing significant capacity expansion, coupled with rapid technological progress. The selling price of the company's epitaxial wafer products may be adversely affected by the increase in production capacity, resulting in a downward trend in the selling price of epitaxial wafer products.

   Yu Yiran analyzed to reporters that top manufacturers such as Wolfspeed, Anson, and Infineon are actively expanding their production of 8-inch SiC wafers. For example, Wolfspeed plans to build a factory in the United States, Infineon's wafer fab in Malaysia is expected to scale up production by 2025, and domestic manufacturers Tianke Heda and Shandong Tianyue are also increasing production capacity.

   Despite the expansion of top manufacturers, the slowdown in global automotive semiconductor market growth may result in market demand not matching capacity growth, posing a risk of overcapacity. In 2023, the global SiC supply and demand gap is about 30%, but if capacity growth exceeds demand, there may be a threat of overcapacity, and market demand and technological development will be key factors determining whether overcapacity exists or not. "She further analyzed.

   Gong Ruijiao pointed out to 21st Century Business Herald reporters, "For markets with high entry barriers such as automobiles and high-end industries, there will not be excessive competition in the short term, so the risk of overcapacity is relatively small

  Integration acceleration

  Against the backdrop of intensified competition in the silicon carbide chip industry, industry chain integration has become an inevitable trend.

  Journalists have found that this integration includes both horizontal integration of business capabilities and vertical integration of industrial chain links, indicating that manufacturers in the silicon carbide field are continuously expanding their capabilities.

  For example, in December 2024, Onsemi, which is undergoing a comprehensive transformation in the field of silicon carbide, announced that it had reached an agreement with Qorvo to acquire the latter's silicon carbide junction field-effect transistor (SiC JFET) technology business, including a subsidiary of United Silicon Carbide, for $115 million. This acquisition will complement Anson's EliteSiC power product portfolio to meet the high energy efficiency and power density requirements of AC-DC power units in AI data centers. In addition, this move will accelerate Anson's preparation for new businesses such as electric vehicle battery circuit breakers and solid-state circuit breakers (SSCBs).

   In May 2024, MINEBEA MITSUMI Inc. announced the completion of the acquisition of all shares of Hitachi Power Semiconductor Devices Co., Ltd. and further acquired the overseas sales business of Hitachi Group's power device business from Hitachi.

  The company stated in a public statement that although it has been planning and promoting the expansion of its IGBT business, it only involves the chip business and lacks module manufacturing technology in its product portfolio. Once the acquisition of Hitachi's related assets and businesses is completed, the company will acquire backend process technology and production capabilities for packaging and module manufacturing. This will enable the company to deploy a vertically integrated power semiconductor business from development to production, thereby coordinating existing traditional chip manufacturing capabilities.

  In addition, through the integration of technical teams, Meibeiya Sanmei Co., Ltd. hopes to unleash synergies between its power device business and existing internal businesses, such as using silicon-based (Si) power devices to achieve performance close to SiC, and deepening its high-voltage SiC power device business.

  However, the silicon carbide market is also seeking new business growth directions. In addition to new energy vehicles, there is a trend of actively adopting silicon carbide devices in new energy storage, data centers, and even MR glasses.

Meibeiya Sanmei Co., Ltd. mentioned that the application scenarios of silicon carbide power semiconductors are gradually expanding to many fields, such as GX (green transformation including renewable energy applications such as wind and solar energy), power and grid, large-scale transportation equipment such as railways, data centers, heavy ion radiation therapy and MRI healthcare applications, industrial and mechanical equipment, etc.

   Yu Yiran analyzed to 21st Century Business Herald reporters that there will be frequent mergers and acquisitions in the silicon carbide (SiC) industry in 2024. The logic behind this is mainly to quickly acquire new technologies and market share through mergers and acquisitions, accelerate product development and market penetration, achieve vertical integration from chip development to packaging and module production, and strengthen the competitive advantage of leading enterprises.

   With the trend of silicon carbide price reduction, it is expected that industry mergers and integration may intensify in 2025. The reasons include increased cost pressure, the need to improve market competitiveness, and the demand for technological development. The price decline leads to a compression of profit margins, and companies may reduce costs and improve efficiency through mergers and integration. At the same time, in order to maintain market competitiveness and adapt to technological development, companies may seek to acquire key technologies and customer resources through acquisitions to maintain competitiveness in the market, "she concluded.