Silicon Carbide Wafer Factory to Boost U.S. Chipmaking Capabilities
Wolfspeed, a leading producer of silicon carbide chips, has been awarded a $750 million grant by the U.S. Commerce Department to support its new manufacturing facility in North Carolina. The government funding will help Wolfspeed enhance its wafer production, driving a 30% surge in the company’s stock following the announcement. The grant, part of the U.S. semiconductor subsidy program, requires Wolfspeed to strengthen its balance sheet to safeguard taxpayer investment.
In addition to the federal grant, investment funds led by Apollo Global Management, the Baupost Group, Fidelity Management & Research Company, and Capital Group have committed an extra $750 million to Wolfspeed’s growth.
Expanding Production and Strategic Growth Plans
Wolfspeed’s silicon carbide chips, which are used in electric vehicles (EVs) and renewable energy systems, are critical for more energy-efficient power transmission. The company serves major automotive clients like General Motors and Mercedes-Benz. With plans to expand its Marcy, New York manufacturing facility and boost production capacity by nearly 30%, Wolfspeed is executing a $6 billion expansion plan to meet growing demand.
The company expects to receive an additional $1 billion in cash tax refunds through the advanced manufacturing tax credit under the Chips and Science Act, further supporting its long-term growth strategy.
Financing and Future Prospects
Wolfspeed is working with the Commerce Department and its lenders to restructure or refinance convertible notes maturing in 2026, 2028, and 2029. As part of its financial strategy, Wolfspeed will defer $120 million in cash interest payments due before June 2024 and raise up to $300 million from non-debt sources over the next year.
Despite facing a tough year with a sharp decline in EV demand, Wolfspeed’s new 2 million-square-foot facility in North Carolina, first announced in 2022, is expected to begin delivering wafers by summer 2025. While the semiconductor grant is subject to final approval, Wolfspeed’s CEO, Gregg Lowe, emphasized the importance of the company’s products to U.S. economic and national security interests.
