The silicon carbide (SiC) industry, once buoyed by substrate shortages, is experiencing a dramatic shift. In 2024, Chinese manufacturers aggressively ramped up production, causing prices for mainstream 6-inch substrates to plummet and pushing 8-inch prices significantly lower. This surge in production has led to a market flooded with affordable SiC materials, a situation with both opportunities and challenges for Taiwanese companies.
China’s dominance in the two major SiC application areas—electric vehicles (EVs) and solar panels—has solidified its position as a key player in the semiconductor landscape. Their drive for semiconductor self-sufficiency has raised concerns about the future of non-Chinese systems. While Taiwanese companies, known for their stable quality and reliability, may face a crisis of excess SiC materials, they also have the potential to navigate these turbulent waters.
Doris Hsu, chairperson of Sino-American Silicon Products (SAS) and GlobalWafers, acknowledged the unexpected changes in the SiC industry, particularly the significant price drops driven by Chinese manufacturers. Hsu analyzed the situation through two lenses: geopolitics and the inherent characteristics of the SiC industry.
From a geopolitical standpoint, the US, Europe, and Japan are actively seeking to reduce their reliance on Chinese suppliers, making it less likely that SiC will follow the trajectory of solar energy. These regions are actively searching for allies to create a more balanced ecosystem and see Taiwan as a potential partner. Taiwanese companies have established a global reputation for their rigorous manufacturing standards in silicon-based (Si) semiconductors, which can be applied to SiC. Additionally, in terms of product performance and cost-effectiveness, Taiwanese firms generally outperform their European, American, and Japanese counterparts, though the latter maintain advantages in specific applications, suggesting a complementary approach could be beneficial.
From an industrial perspective, Hsu highlighted that the SiC sector differs from solar energy and LED sapphire. Unlike solar modules, where a malfunctioning cell reduces power output without compromising the entire system, SiC primarily serves medium- to high-voltage power demands. This makes its role crucial as power grids adapt to increasingly volatile electricity inputs.
Safety is paramount in automotive applications, and any compromises are unacceptable. Errors in industrial-grade power networks can lead to significant economic losses due to sudden outages, while automotive standards prioritize driver and pedestrian safety, exposing Tier 1 suppliers and automakers to substantial liabilities. Consequently, many mid to high-end Chinese electric vehicles continue to rely on SiC components from international integrated device manufacturers (IDMs), even while adhering to government policies. These manufacturers prioritize safety and reliability, requiring rigorous testing and validation before integrating SiC components into vehicles. No automaker or utility would willingly accept the substantial risks associated with a single SiC component jeopardizing their operations.
The SiC industry must prioritize meeting customer expectations for quality and reliability alongside material prices. While SiC substrates are currently experiencing temporarily low prices due to supply-demand imbalances, Hsu acknowledges the scale and cost-competitive strengths of Chinese SiC manufacturers, predicting that other supply chains, including Taiwan’s, will face challenges in matching their cost-effectiveness. As SiC substrate prices continue to fall, the range of applications is set to expand, moving beyond electric vehicles and solar modules.
