"Chip stocks lag behind" Wolfspeed soars more than 25% in pre-market trading! Receives $1.5 billion funding assistance

According to the financial news app Zhitong Finance, the stock price of the long-suffering silicon carbide (SiC) chip manufacturing giant Wolfspeed (WOLF.US) surged by more than 25% in pre-market trading on the US stock market after receiving a total of up to $1.5 billion in funding from the US "Chip Act" and asset management institutions such as Apollo Asset Management.

Focusing on the production of innovative silicon carbide (SiC) and gallium nitride (GaN) chips, Wolfspeed's products are widely used in industries such as electric vehicles, renewable energy systems, industrial equipment, and communications. However, under the backdrop of the Federal Reserve's interest rate hike cycle, sluggish demand for electric vehicles, and a series of internal manufacturing system issues affecting chip production capacity, Wolfspeed's stock price has been continuously plummeting since October 2022. It has been out of sync with the bullish trend in the US stock market during this period, consistently ranking at the bottom of the US chip sector, which is considered the "tail of the crane" driving the core strength of the US stock market bull run - the chip sector.

It is understood that the Biden-Harris administration announced plans to provide up to $750 million in direct funding to this 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 preliminary terms memorandum (PMT), providing funding support for Wolfspeed's chip factory expansion in North Carolina under the US "Chip and Science Act".

According to the revised and restated agreement between the two parties, the PMT includes Wolfspeed's obligation to raise up to $750 million in debt financing through the issuance of senior notes in three tranches.

In addition, an investment consortium led by alternative asset management giants Apollo Global Asset Management, Baupost Group, Fidelity Management & Research, and Capital Group, among other large US asset management institutions, has agreed to provide an additional $750 million in new financing support to Wolfspeed.

Wolfspeed also hopes to receive up to $1 billion in cash refunds from advanced manufacturing tax credits under the US "Chip Act" (Section 48D), bringing the total expected capital support to $2.5 billion, to help this struggling electric vehicle silicon carbide chip giant overcome its operational difficulties.

According to media reports, these proposed funds are expected to be fully received after achieving some milestone achievements in the coming years, enabling the electric vehicle chip company to complete its multi-billion-dollar US greenfield capacity expansion plan, including the world's largest and most advanced 200mm silicon carbide chip footprint.

In a statement, the company said that this multi-billion-dollar investment will support Wolfspeed's balance sheet and drive significant growth through cash generation and accelerating its long-term profitability goals.

The substantial funding support provided by the US "Chip Act" aims to increase domestic semiconductor industry manufacturing and research processes in the United States, particularly in the most advanced semiconductor manufacturing field, where many semiconductor giants including Intel (INTC.US), SK Hynix, Samsung Electronics, TSMC (TSM.US), Micron Technology (MU.US), and Texas Instruments (TXN.US) are receiving funding support under the act Why did the US government and major asset management institutions choose to support the struggling Wolfspeed?

Analysts believe that the core logic behind the US government and consortiums like Apollo providing liquidity support to the long-struggling Wolfspeed, as revealed in the latest Wolfspeed news updates, may lie in their optimism towards the new track of Silicon Carbide (SiC) chips. Wolfspeed has sufficient talent, platform resources, and research and development investment in this field, focusing on the manufacturing of SiC and GaN material chips for electric vehicles.

Silicon Carbide (SiC) and Gallium Nitride (GaN) are breakthrough Wide Bandgap (WBG) semiconductor materials with wider bandgaps than traditional silicon. This allows them to operate in high voltage, high frequency, and high-temperature environments with significantly lower energy losses compared to silicon-based devices. Specifically, the switch and conduction losses of SiC power devices in electric vehicles are significantly reduced, which is crucial in the inverters and motor drive systems of electric vehicles as it effectively reduces energy wastage due to thermal losses during the power conversion process.

The high-temperature resistance of SiC and GaN materials is much stronger than conventional silicon wafers, capable of stable operation at temperatures of 200°C or even higher, while traditional silicon-based power devices typically operate at around 150°C. Power electronic devices in electric vehicles often generate a large amount of heat under high-power conditions, and using these wide bandgap materials can reduce reliance on cooling systems, simplify heat dissipation design, and enhance system reliability and durability.

More importantly, due to the improved power conversion efficiency, electric vehicle core chips using SiC and GaN materials are more energy-efficient, directly translating into longer range for electric vehicles; by reducing energy losses, more power can be used to drive the electric motor, thereby extending the driving distance per charge of electric vehicles