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Recently, with the recovery of the stock market, there is a sector that has sprung up, that is, silicon carbide, and the sector index has hit a new high in three years.

Silicon carbide sector gains

You must know that the current silicon semiconductor is approaching the physical limit, and the third-generation semiconductor represented by silicon carbide has become one of the key directions for the development of the semiconductor industry in the post-Moore era, so players from all walks of life have increased their weight in this field.

For example, Tianyue Advanced (688234) said that 8-inch conductive silicon carbide has formed a large-scale and entered the mass production stage, and the product is continuously delivered. In terms of performance, the operating income in the first three quarters increased by 55.3% year-on-year, and the year-on-year turnaround is a very positive message, and Huawei is also optimistic about the company's development prospects (the company's third largest circulating shareholder).

Coincidentally, like San'an Optoelectronics (600703) is optimistic about the cost advantage and application prospects of silicon carbide, and its Chongqing San'an project, which mainly produces 8-inch silicon carbide substrates, has realized the lighting of the substrate factory.

So, can the silicon carbide market really stand at the top of the pyramid in the future, and what is the truth of the industry? The author will take you to find out today.

First, penetration began to accelerate

Once upon a time, almost all of China's on-board power devices were silicon-based IGBTs, and with Tesla's application of silicon carbide MOSFET power modules in its Model 3 models six years ago, it officially opened the prelude to the rapid development of the silicon carbide semiconductor industry.

To put it simply, the field of new energy vehicles and photovoltaic power generation is the main application scenario of silicon carbide devices. Taking new energy vehicles as an example, silicon carbide is mainly used in PCU (power control unit, such as on-board DC/DC) and OBC (charging unit), compared with silicon devices, it can significantly reduce the weight and volume of PCU equipment, and reduce switching losses.

According to the estimation of professional institutions, the global market size of conductive silicon carbide power devices can exceed 6 billion US dollars in three years, of which the proportion of new energy vehicles can reach 80%, which can imagine the importance of this market.

The current situation of the silicon carbide device market size

In recent years, with the 800V high-voltage fast charging of new energy vehicles, automotive-grade silicon carbide is also expected to usher in accelerated penetration. For example, in the second half of last year, the proportion of silicon carbide models in 800V models increased from 15% to 45%, and in December, a number of silicon carbide models such as M9 and Ideal MEGA were launched, which shows the importance that players attach to this field.

Domestic auto players are also actively deploying to the upstream of the industrial chain, such as Geely's investment in Xinyue Neng Company recently announced the completion of a series A financing of about one billion yuan to accelerate the production capacity increase. The company mainly produces 6-inch silicon carbide wafers, which can be foundry for other enterprises. In addition, FAW Hongqi also announced that the silicon carbide power chip independently designed by the R&D Institute has completed the first tape-out, and the silicon carbide module of Zhixin Semiconductor, a subsidiary of Dongfeng Group, has been installed on related models last year.

Therefore, from this point of view, OEMs do not want to be "manipulated" by silicon carbide players, and their own layout is the most assured.

After all, the high-voltage system equipped with silicon carbide power devices can generally charge the battery from 10% to 80% in more than ten minutes, which is perfect for solving the charging anxiety of car owners.

2. Ice and fire

Since the beginning of this year, although the market size of silicon carbide is still growing, with the gradual release of production capacity by manufacturers in the past two years, the "involution" of the market is also intensifying.

For example, from the perspective of Wolfspeed, a silicon carbide wafer giant in the United States, its revenue has decreased by 12% compared with fiscal year 2023, and its loss has expanded by 74% compared with fiscal year 2023. Even more frighteningly, the company plans to shut down a silicon carbide wafer production facility in Durham, USA, to reduce costs. In addition, ZF has waived its €170 million investment in US chipmaker Wolfspeed to support its investment in a silicon carbide wafer factory in Germany.

As a pioneer of silicon carbide products, a series of recent events that happened to Wolfspeed were undoubtedly 10,000 critical hits for it.

According to the author's understanding, since the beginning of this year, the price of silicon carbide products has indeed dropped sharply. Since the beginning of this year, the price of mainstream 6-inch silicon carbide substrates has fallen by nearly 30%.

However, compared with Wolfspeed, the performance of domestic silicon carbide players is still acceptable.

In addition to the Tianyue advanced mentioned at the beginning, silicon carbide equipment manufacturer Jingsheng Co., Ltd. (688478) achieved a significant increase in operating income and net profit attributable to the parent company in the first half of the year. For example, the operating income of Xinlian Integration (688469) in the first three quarters reached 4.5 billion yuan, a year-on-year increase of 19%, and the EBITDA was 1.66 billion yuan, a significant increase of 93% year-on-year.

3. Make breakthroughs independently, without stopping

However, objectively speaking, due to the faster pace of overseas manufacturers in new energy vehicles, charging piles and other fields with strict requirements for certification, the silicon carbide produced by domestic players is still slightly behind. Overseas suppliers such as Infineon, Bosch, and STMicroelectronics have basically monopolized the automotive silicon carbide market. However, the author believes that with the completion of verification and product introduction by domestic companies, the growth potential in the future is still worth looking forward to.

Taking silicon carbide substrate as an example, China shipped 894,000 pieces of silicon carbide substrate materials (equivalent to 6 inches) last year, an increase of 297.9% from 300,000 pieces in 2022.

According to estimates from professional institutions, it is expected that the global effective silicon carbide production capacity substrate is 3 million pieces, and the demand is also close to 3 million pieces, and the supply and demand will return to a balanced state.

Looking forward to the future, it is foreseeable that the growth of silicon carbide business depends on the new energy vehicle market, and China will still be the core country of the rapid growth of new energy vehicles. Therefore, there are still great opportunities for domestic players to develop.

Note: This article does not constitute any investment advice. The stock market is risky, and you need to be cautious when entering the market. There is no harm in buying and selling.

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