wolfspeed emerges as top pick in us semiconductors market

Companies are working their way into being benefitted by the so-called CHIPS Act in the United States to get a piece of the $52 billion earmarked for businesses that expand the country’s chip manufacturing capacity.

Among the crowd of well-established companies and mature projects that have applied to the program, Wolfspeed, a company based in Durham, North Carolina that manufactures silicon carbide materials that are essential to the production of electric vehicles now has a chance to get a piece of the pie.

The US Department of Commerce is now broadening the scope of the program to incorporate firms that produce this kind of material. It seems that the letter sent by the company’s General Counsel, Bradley Kohn, asking the Biden administration to reconsider the phrasing of the bill has had a positive impact as his company is now eligible to receive some funding.

Wolfspeed Secures $1.25 Billion from Apollo to Build its Chatham Facility

The money comes at a great time for Wolfspeed as it will provide a portion of the resources required to fully build its Chatham County plant, a project that should create approximately 1,800 jobs and that will boost the company’s installed capacity by as much as 10 times.

Meanwhile, the company announced this morning that it secured $1.25 billion in the form of secured notes during a financing round led by Apollo. In addition, there is an option to expand the credit facility by adding $750 million more.

Our agreement with Apollo and its capital partners achieves our near-term funding targets while prioritizing our shareholders with a new, non-dilutive source of financing,” commented Neill Reynolds, Wolfspeed’s Chief Financial Officer.

Also read: CHIPS Act-Funded US Chipmakers Want to Maintain Presence in China

The construction of the Chatham facility was announced in September 2022 and was touted as the company’s “long-term growth strategy” to unlock a “new era of energy efficiency” by providing companies with access to top-notch materials.

The first stage of the project is expected to be completed next year with a total investment of $1.3 billion. The state’s Department of Commerce in conjunction with other local pro-business agencies and institutions provided a total of nearly $1 billion in incentives to Wolfspeed to entice it to pick that location for its project.

Meanwhile, in March this year, US President Joe Biden visited Wolfspeed’s headquarters as part of his “Invest in America” tour. The company reportedly produces as much as 60% of the world’s total silicon carbide supply.

China’s Dominance in the Semiconductor Industry May Keep Increasing Despite These Efforts

china poised to dominate global semiconductors market in 2030

Silicon wafers are thin disks of silicon material that are used as substrates for making integrated circuits (ICs) like computer chips and microprocessors.

Data from the Semiconductor Industry Association (SIA) indicates that China currently dominates the global supply of semiconductors accounting for around 15% of the total output. Estimates from the association point to the fact that China’s dominance in this particular industry will keep growing over the next seven years until harnessing at least a quarter of the global production.

It is the Biden administration’s intention to push companies in the country to build manufacturing plants on US soil to achieve a high level of sovereignty as more and more industries become heavily dependent on semiconductors to operate appropriately and manufacture goods.

The pandemic made it clear that the global supply chain of semiconductors is fragile and geopolitical tensions may exacerbate this reality as China has a grip on countries with a heavy footprint on this market such as Taiwan, the location where the world’s most important manufacturer of semiconductors, TSMC, is located.

During the first nine months of its 2023 fiscal year, Wolfspeed generated total revenues of $686 million and a net loss of $217 million. During this same period, the firm invested over $500 million in property, plant, and equipment and reported total liquid reserves of $2.25 billion.