The rapid ascent of the electric vehicle (EV) industry has ushered in a new era for semiconductor technology, particularly through the advancements seen in silicon carbide (SiC) chipsIn recent years, the SiC chip market has witnessed remarkable growth, positioning it as one of the few resilient segments within a broader automotive chip market that is grappling with rising costs and demand fluctuations.

This flourishing environment has not gone unnoticed, prompting an influx of manufacturers eager to stake their claims in this burgeoning sectorConsequently, experts anticipate that the year 2024 will see intense price competition and increased mergers and acquisitions as companies seek to consolidate their positions and innovate to remain competitive within the market.

As we transition into the era of 8-inch wafer technology, a broad array of SiC chip production capabilities is set to flood the market

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The collaboration between leading overseas SiC manufacturers and Chinese firms is becoming increasingly prominent, suggesting that competition within the SiC market will intensify dramatically over the coming years.

One of the most significant trends affecting this sector is price competitionHistorically, the costs associated with SiC manufacturing have been relatively high, which has limited adoptionHowever, as more electric vehicles integrate SiC technology and substantial production capabilities come online, the market dynamics are shifting towards a more competitive environment.

According to Yi-Ran Yu, the Executive Director of CIC Consulting, 2024 has already seen a substantial price reevaluation in the SiC substrate market, with reductions nearing 30%. She noted that by mid-2024, the price for 6-inch SiC substrates had dropped below $500—approaching the production cost for many Chinese manufacturers

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By the last quarter, prices further declined to approximately $450 per substrate.

Analysts from TrendForce corroborate this assessment, indicating that the price of conductive 6-inch SiC substrates decreased by over 20% due to the rapid release of production capacity alongside intensifying market competition.

Yu attributes these price drops to a complex interplay of factorsNotably, the swift expansion of global 6-inch SiC wafer production, matched with a temporary slowdown in demand from the electric vehicle sector, has resulted in an oversupplyThis condition creates downward pressure on SiC wafer prices, as suppliers aggressively engage in price wars to claim greater market sharesCompounding this challenge is the fact that many manufacturers are, in some instances, forced to sell at a loss to remain competitive.

Another crucial factor in this evolving landscape is the impact exerted by auto manufacturers on the supply chain

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Tesla emerged as a pioneer in the adoption of SiC modules within its electric vehicles, yet CEO Elon Musk has indicated a desire to reduce dependency on SiC components, suggesting that earlier concerns about costs may have influenced this strategy.

Thus far, the imposing presence of electric vehicle manufacturers is reshaping how SiC suppliers approach their operationsIn an environment where cost-cutting is paramount, it is essential for SiC manufacturers to adapt to these new demands, especially given that the EV sector prioritizes reductions in supply chain costs.

Additionally, foreign manufacturers are actively exploring opportunities within the Chinese market for SiC applicationsAccording to industry observers, while the global automotive chip market continues to face inventory pressures, the Chinese sector stands in stark contrast, demonstrating growth potential.

Several industry analysts pointed out that overseas sales of fully electric vehicles have not met initial expectations, whereas hybrid models are surging in popularity, leading to a phase of adjustment in the broader market

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This phenomenon places increasing pressure on international semiconductor manufacturers.

Contrarily, reports show that China remains the only substantial market generating additional revenue in these challenging times, prompting rapid alliances between foreign and Chinese firmsOne notable collaboration is between STMicroelectronics and Sanan Optoelectronics, as the two companies announced plans to build a SiC manufacturing plant in Chongqing, with a focus on automotive applications.

Yu further explains that this joint venture aims for an annual production capacity of 480,000 automotive-grade MOSFET chips, marking China’s first 8-inch SiC substrate and wafer manufacturing lineFull production is anticipated to begin by late 2025, with an expected weekly output of 10,000 wafers when fully operational.

STMicroelectronics' strategic choice to expand within China not only allows the company to better serve the local market but also underscores the necessity of a highly autonomous supply chain within the EV industry

This collaboration effectively blends STMicroelectronics’ technological expertise with Sanan's established market reach in a bid to enhance competitive positioning within the SiC landscape.

However, while these advancements signal growth and innovation in the industry, they simultaneously pose threats to smaller manufacturers in China that may not be equipped to contend with the ensuing market pressuresThe emergence of new production lines will increase the supply of SiC products, driver of price competitions that could ultimately lower retailer costs.

As increased adoption of SiC technology continues, its integration into the EV market may just be the catalyst needed to propagate a wider array of applications in various sectorsRecent figures suggest a pivotal shift, with some suppliers reporting a decline in profits and revenue due to price pressures and competition.

For instance, Dongguan Tianyu Semiconductor disclosed in a recent IPO filing that its revenue for the first half of 2024 fell to $36.1 million from $42.4 million in 2023, reflecting a nearly 15% decrease

Moreover, the company transitioned from profitability to losses of approximately $14.1 million in the first half of 2024, attributable in part to dropping prices for SiC wafers and the ongoing international trade tensions.

In response to these challenges, Dongguan Tianyu is looking to expand its customer base, enhance operational efficiency, and boost its technological capabilitiesYet, this adjustment process comes amid a backdrop where the prevailing production is still largely based on 4-inch and 6-inch wafer sizes, reflecting only a marginal phase in the emerging 8-inch SiC wafer landscape.

Both domestic and international industry leaders like Wolfspeed and Infineon are ramping up production capacity for 8-inch SiC wafersYet, as production facilities surge, the risk of oversupply looms, as supply may outpace demand due to a general slowdown in the automotive semiconductor market.

On a broader scale, the increasing tendency toward mergers and acquisitions has become a necessary response to competitive pressures in the SiC industry

In December 2024, for instance, Onsemi announced an agreement to acquire Qorvo’s SiC JFET technology business for $115 million, aiming to complement its power product portfolio for critical applications.

Moreover, with the strategic acquisition by MinebeaMitsumi of Hitachi’s Power Semiconductor Devices and overseas sales businesses, the company anticipates capitalizing on synergy in its product offerings, which may transform its operational landscape significantly.

Yet, even as the SiC market pivots towards EVs, other verticals like data centers and innovative energy storage solutions are increasingly harnessing SiC devices for their operational needsThere is a growing trend towards integrating SiC technology into renewable energy infrastructures, industrial machinery, and even advanced medical devices.

In their assessments of the evolving sector, analysts predict that 2024 may witness heightened merger and acquisition activities, driven by escalating cost pressures, competitive market demands, and the insatiable demand for urgent technological advancements