Funding in the USA SiC manufacturer Wolfspeed seeks multi-million dollar funding from the US government

To pave the way for the future of SiC technology, Wolfspeed is trying to secure $750 million in funding through the CHIPS and Science Act, and has also received commitments for $750 million from an investment group. These and additional funds promised are intended to promote domestic production of silicon carbide for clean energy systems and other power electronics technologies.

Silicon carbide (SiC) and gallium nitride (GaN) have stood out in the past as semiconductor materials for power electronics due to their efficiency, switching speeds, and thermal properties. SiC and GaN products are used in applications such as electric vehicles, solar energy, industrial motors, and energy storage systems, but are also used for high-frequency and LED technologies.

A manufacturer specializing in SiC and GaN semiconductors is the American company Wolfspeed. The responsible parties are pleased to announce that substantial financing is expected in the coming period. On October 15, 2024, the representatives from Wolfspeed and the U.S. Chamber of Commerce signed a non-binding preliminary letter of intent proposing funding of $750 million from the CHIPS and Science Act.

At the same time, the investor group The Baupost Group, led by Apollo, has agreed to provide Wolfspeed with an additional $750 million in financing funds. This is one of the requirements to qualify for the CHIPS funding. Additionally, Wolfspeed anticipates receiving about one billion dollars in tax credits for advanced electronics manufacturing in the coming years under the CHIPS and Science Act. In total, the company would have up to $2.5 billion in capital available to advance the production of silicon carbide in the USA.

Read the fine print

The letter of intent of course does not mean that everything must proceed as expected. Indeed, the people at Wolfspeed note the following clauses.

The letter of intent outlines the key conditions for a CHIPS grant, including the proposed amount and form of the award, and stipulates that the disbursement of funds will depend on the achievement of certain operational and construction milestones and other requirements. Wolfspeed commits to raising a total of $750 million in debt by issuing senior secured notes under an amended and restated promissory note in three tranches. Wolfspeed and its lenders, led by Apollo funds, have agreed on this additional financing, including $250 million to be available within ten business days.

Wolfspeed must take further actions regarding its capital structure, including (a) restructuring or refinancing its outstanding convertible bonds due in 2026, 2028, and 2029 at specific intervals before their respective maturity dates, (b) deferring a total of $120 million in cash interest payments due before June 30, 2025, under an unsecured agreement for refundable customer deposits, and (c) raising additional capital of up to $300 million from sources other than debt over the next twelve months. There is therefore quite a bit to be done for the U.S. government money. (sb)