“Chip Stock Crane Tail” Wolfspeed (WOLF.US) soared more than 25% before the market! Received US$1.5 billion in financial aid

The Zhitong Finance App learned that the stock price of silicon carbide (SiC) chip manufacturing giant Wolfspeed (WOLF.US), which has been sluggish for a long time, soared more than 25% before the US stock market after receiving a total of 1.5 billion US dollars in financial aid from asset management agencies such as the US “Chip Act” and Apollo Asset Management.

Focusing on producing innovative silicon carbide (SiC) and gallium nitride (GaN) chips, Wolfspeed's products are widely used in electric vehicles, renewable energy systems, industrial equipment and communications industries. However, weak demand for electric vehicles under the Federal Reserve's interest rate hike cycle and Wolfspeed's own manufacturing system problems have affected chip production capacity. Wolfspeed's stock price has continued to plummet since October 2022, which can be described as being out of step with the US stock bull market since then. Stock performance continued to rank first in the bottom of the US chip sector during this period, which can be called the “end of the crane” of the chip sector, which is the core force driving US stock market growth.

According to information, the Biden-Harris administration announced plans to provide up to 750 million US dollars in direct capital to the electric vehicle chip manufacturer to support the expansion of the US silicon carbide chip manufacturing industry. The US Department of Commerce and Wolfspeed have signed a non-binding Memorandum of Preliminary Terms (PMT) to fund Wolfspeed's expansion of its chip plant in North Carolina, US, in accordance with the US Chip and Science Act.

According to the revised and reaffirmed mutual agreement, PMT includes obligations relating to Wolfspeed raising a total of up to US$750 million in debt financing in three batches through the issuance of senior notes.

Additionally, an investment fund consortium co-led by major US asset management institutions such as alternative asset management giants Apollo Global Asset Management, Baupost Group, Fidelity Management & Research, and Capital Group has agreed to provide an additional US$750 million in new financing support to Wolfspeed.

Wolfspeed also hopes to receive up to 1 billion US dollars in cash rebates from advanced manufacturing tax credits under the US Chip Act (Section 48D), so that the company can receive a total of up to 2.5 billion US dollars in expected capital support to help the electric vehicle silicon carbide chip giant, which is in trouble with its operations, get out of trouble.

According to media reports, the proposed funding is expected to be fully paid after achieving some milestones in the next few years, which will enable the electric vehicle chip company to complete its multi-billion dollar US greenfield capacity expansion plan, which includes the world's largest and most advanced 200mm silicon carbide chip footprint.

The company said in a statement that this multi-billion dollar investment will support Wolfspeed's balance sheet and will drive significant growth through cash generation and acceleration of its long-term profit goals.

The huge financial support provided by the US “Chip Act” aims to increase manufacturing and research processes in the semiconductor industry in the US, especially in the field of cutting-edge semiconductor manufacturing. Many semiconductor giants, including Intel (INTC.US), SK Hynix, Samsung Electronics, TSM.US (TSM.US), Micron Technology (MU.US), and Texas Instruments (TXN.US), are receiving financial support under the Act.

Why did the US government and large asset management institutions choose to support the troubled Wolfspeed?

After the release of the latest Wolfspeed news updates, some analysts said that the core logic of the US government and consortiums providing liquidity support to Wolfspeed, which has been in business trouble for a long time, is probably because they are all optimistic about the new silicon carbide (SiC) chip circuit, and Wolfspeed has sufficient talent, platform resources, and R&D investment on this racetrack, and continues to focus on manufacturing SiC and GaN chips for electric vehicles.

Silicon carbide (SiC) and gallium nitride (GaN) are groundbreaking wide bandgap (WBG) semiconductor materials, and their bandwidths are larger than traditional silicon. This allows them to operate in high voltage, high frequency, and high temperature environments with far lower energy losses than silicon-based devices. Specifically, the switching loss and conduction loss of SiC power devices in electric vehicles are significantly reduced. This mechanism is critical in electric vehicle inverters and motor drive systems because it can effectively reduce energy wasted due to heat loss during power conversion.

The high temperature resistance of SiC and GaN materials is also much better than ordinary silicon wafers, and can work stably at temperatures of 200°C or higher, while the operating temperature of traditional silicon-based power devices is generally around 150°C. Electric vehicle power electronics often generate large amounts of heat under high power conditions. Using these wide bandgap materials can reduce dependence on cooling systems, simplify heat dissipation design, and improve system reliability and durability.

More importantly, due to improved power conversion efficiency, electric vehicle core chips using SiC and GaN materials are more efficient in terms of energy utilization, which directly translates into a longer range of electric vehicles; by reducing energy loss, more electricity can be used to drive motors, thereby extending the driving distance of electric vehicles after each charge.