By John Doe and Jane Smith
WASHINGTON (Reuters) – A significant development in the semiconductor industry as Wolfspeed is poised to receive a substantial $750 million in government grants for its new silicon carbide wafer manufacturing plant in North Carolina. The U.S. Commerce Department announced this on Tuesday, causing the U.S. chipmaker’s shares to surge by 10% before market opening.
As per the preliminary funding agreement, Wolfspeed is required to strengthen its balance sheet in order to safeguard taxpayer funds effectively.
Notably, investment funds led by Apollo Global Management, the Baupost Group, Fidelity Management & Research Company, and Capital Group have committed to providing an additional $750 million in new financing.
Wolfspeed, a key supplier to companies like General Motors and Mercedes-Benz, specializes in manufacturing chips using silicon carbide, a more energy-efficient material compared to standard silicon. These chips are utilized in various applications such as power transmission in electric vehicles.
The Commerce Department highlighted that Wolfspeed’s devices play a crucial role in renewable energy systems, industrial applications, and artificial intelligence.
Looking ahead, Wolfspeed intends to expand its silicon carbide device manufacturing facility in Marcy, New York, and boost its production capacity by nearly 30%. These initiatives are part of the company’s previously announced $6 billion capacity expansion plan.
The company also anticipates receiving $1 billion in cash tax refunds through the “48D” advanced manufacturing tax credit under the Chips and Science Act.
In a statement, Wolfspeed CEO Gregg Lowe expressed confidence in the quality of their products and their significance to the U.S. economy and national security.
As part of the agreement with the Commerce Department and lenders, Wolfspeed will restructure or refinance its outstanding convertible notes and defer cash interest payments, among other financial measures.
Despite facing challenges due to a slowdown in electric vehicle demand, Wolfspeed remains committed to its growth plans.
The construction of Wolfspeed’s new multi-billion dollar silicon carbide wafer factory in North Carolina’s Chatham County is a major milestone for the company. The facility is expected to start delivering wafers for chip manufacturing by summer 2025.
The $750 million grant from the semiconductor subsidy program is subject to due diligence and is not finalized at this stage.
(Reporting by John Doe in Washington and Jane Smith in Bengaluru; Editing by Christopher Cushing)