TLDR:
- Wolfspeed to receive $750 million in US CHIPS Act funding for silicon carbide manufacturing
- Additional $750 million in financing secured from investment group led by Apollo
- Company expects $1 billion in tax refunds from advanced manufacturing tax credit
- Funding supports expansion of facilities in North Carolina and New York
- Silicon carbide chips crucial for EVs, renewable energy, and AI applications
Wolfspeed, a leading manufacturer of silicon carbide semiconductors, is set to receive a significant boost in funding to expand its production capabilities in the United States.
The company announced on Tuesday, October 15, 2024, that it has secured a total of $2.5 billion in expected capital through various sources, including government grants and private investments.
The U.S. Department of Commerce has proposed $750 million in funding for Wolfspeed under the CHIPS and Science Act. This preliminary funding agreement is intended to support the company’s expansion plans in North Carolina and New York. The grant is part of the government’s efforts to strengthen domestic semiconductor production and reduce reliance on foreign suppliers.
In addition to the government funding, Wolfspeed has secured an additional $750 million in financing from a consortium of investment funds led by Apollo Global Management, The Baupost Group, Fidelity Management & Research Company, and Capital Group. This private investment demonstrates confidence in Wolfspeed’s growth potential and the increasing demand for silicon carbide technology.
Wolfspeed also expects to receive approximately $1 billion in cash tax refunds from the Internal Revenue Service over the next several years, thanks to the advanced manufacturing tax credit under Section 48D of the CHIPS and Science Act.
The company plans to use this combined funding to support its long-term growth strategy and expand its silicon carbide manufacturing capabilities
. Silicon carbide is a advanced semiconductor material that offers superior performance compared to traditional silicon in high-power applications, such as electric vehicle (EV) powertrains, renewable energy systems, and artificial intelligence data centers.
Wolfspeed CEO Gregg Lowe emphasized the significance of this funding, stating,
“This support galvanizes our ability to expand domestic manufacturing, accelerate innovation in next-generation semiconductor technology, and meet the increasing global demand for silicon carbide.”
The company’s expansion plans include the completion of its multi-billion-dollar greenfield capacity expansion, which will result in the largest and most advanced 200mm silicon carbide manufacturing footprint in the world.
This includes the John Palmour Manufacturing Center for Silicon Carbide in Siler City, North Carolina, and the expansion of the Mohawk Valley Fab M-Line West in Utica, New York.
The importance of silicon carbide technology has been recognized by multiple federal agencies. The Department of Energy has designated it as one of 17 “critical materials” integral to clean energy technologies, while the Department of Commerce acknowledges its importance to national security.
U.S. Secretary of Commerce Gina Raimondo highlighted the strategic importance of this investment, saying,
“Artificial intelligence, electric vehicles, and clean energy are all technologies that will define the 21st century, and thanks to proposed investments in companies like Wolfspeed, the Biden-Harris Administration is taking a meaningful step towards reigniting U.S. manufacturing of the chips that underpin these important technologies.”
The funding agreement comes with certain conditions and obligations for Wolfspeed. The company is required to take additional steps to strengthen its balance sheet, including restructuring or refinancing its outstanding convertible notes, deferring certain cash interest payments, and raising additional capital from non-debt sources over the next 12 months.
Wolfspeed’s stock, which had fallen nearly three-quarters over the past year due to a slowdown in EV demand, saw a 10% increase in pre-market trading following the announcement.
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