The global SiC (Silicon Carbide) industry is undergoing a transformative phase in 2024, driven by accelerated capacity expansion and significant performance improvements in domestically produced SiC devices. These advancements are enabling broader applications in electric vehicles (EVs), particularly in core areas such as electric drives and control systems. The push for self-reliance in technology, coupled with declining product prices, is expected to further democratize SiC adoption in more affordable vehicle models by 2025.
However, the sharp decline in product prices has triggered intense price competition, placing substantial profit pressures on SiC companies. Notably, the plummeting prices of mainstream 6-inch SiC products have already pushed some firms into losses. This situation has expedited efforts to mass-produce more cost-effective 8-inch SiC products. Yet, current gross margin trends suggest that the transition to 8-inch production may not significantly improve financial performance, potentially signaling an early onset of industry consolidation.
The shift from IGBT to SiC is fueled by the latter's superior efficiency, higher operating temperatures, faster switching speeds, and greater voltage tolerance, making it ideal for emerging sectors like EVs, renewable energy, and storage systems. High-end EV markets, less sensitive to price fluctuations, have embraced SiC for its enhanced driving experiences, serving as a key driver of the industry's growth.
In recent years, the SiC sector has seen a surge in investment, totaling RMB 70.8 billion from 2011 to 2024. A notable peak occurred in 2020 with investments reaching RMB 19.4 billion, followed by another record high in 2024 at RMB 21.4 billion. This wave of investment has led to a harvest period in 2024, marked by the completion or commencement of several major projects, including those by North Semi, Foundry Microelectronics, XJ Power, ShuoKe Crystals, and Silan Microelectronics, among others.
For instance, Foundry Microelectronics’ Fab 1 reached a monthly SiC production capacity of 14,000 wafers by the end of 2024, with plans to expand to an annual capacity of 168,000 car-grade SiC MOS units by 2025. Meanwhile, Fab 2 is set to come online by the same year, adding a monthly capacity of 60,000 8-inch SiC wafers.
China’s SiC substrate annual capacity surged from 460,000 units in 2022 to 1.17 million units in 2023, and is projected to reach 2.22 million and 3.9 million units in 2024 and 2025, respectively. By 2027, domestic capacity could double to 7.71 million units annually. Globally, total SiC substrate capacity is expected to rise from 790,000 units in 2022 to 6.57 million units by 2025, with effective capacity increasing from 950,000 units in 2023 to 3 million units in 2025.
Despite robust supply growth, global demand for SiC substrates is forecasted to grow slower than supply, shifting from a shortage in 2023 to an oversupply by 2025. This imbalance has intensified price wars, with average prices for 6-inch SiC epitaxial wafers dropping by 15.91% between 2023 and 2024. Prices for 8-inch products have fallen even more dramatically, with declines exceeding 60%.
Chinese manufacturers, releasing capacity faster than international peers, face fiercer domestic competition, leading to lower prices compared to global averages. For example, domestic SiC substrate prices are expected to remain RMB 900-1,000 cheaper per unit than global averages over the next few years.
To counteract these pressures, the industry is rapidly moving toward larger wafer sizes, exemplified by Tianyu Semiconductor’s increased focus on 6-inch products, which accounted for 98.62% of shipments in the first half of 2024. The race to dominate 8-inch SiC capacity is heating up, with 33 global companies achieving breakthroughs by early 2025. Chinese firms have shown rapid progress, with Tianyu Semiconductor boosting its 8-inch epitaxial wafer sales by over 20 times within six months.
While some companies aim to gain market share through aggressive pricing strategies, this approach has led to financial distress for others. Tianyu Semiconductor reported a steep drop in gross margins for both 6-inch and 8-inch products, resulting in overall losses. Industry analysts warn that the intensifying price war could accelerate the elimination of weaker players, with consolidation potentially occurring earlier than initially anticipated, possibly by mid-2025.
Recent developments highlight the challenges faced by the industry, including the bankruptcy of Beijing Century Golden Light Semiconductor, the termination of new projects by Wolfspeed due to financial strain, and operational crises at SK Powertech. Meanwhile, Qorvo has chosen to divest its SiC JFET business, underscoring the growing uncertainty in the sector.
As the industry navigates these challenges, the push for innovation and cost reduction remains paramount. Some insiders predict that certain SiC devices may achieve cost parity with IGBTs by 2025, potentially reshaping competitive dynamics. However, the ongoing price war and tightening margins will likely force a restructuring of the SiC landscape sooner rather than later.
