1、 Current situation of silicon carbide industry: fierce competition and severe internal competition

     The current situation of the silicon carbide industry can be described as extremely competitive. The rise of new energy vehicles in China has made silicon carbide a high-quality track, attracting a large influx of capital and enterprises. As of 2024, although more than 5000 companies have exited the market, there are still over 4000 silicon carbide companies remaining, indicating the degree of industry competition.

     At present, domestic silicon carbide manufacturing mainly relies on 6-inch wafer lines, with nearly 20 companies participating. However, in addition to the 6-inch line, the 8-inch line is also gradually expanding, with huge production capacity. Although there are no large-scale wafer fabs in China that produce 8-inch products, major companies such as Anyifa, Silan Microelectronics, and Xinlian Integration are actively expanding their 8-inch production lines. According to estimates, the demand for a single 8-inch silicon carbide wafer is sufficient to support 10 new energy vehicles. Only the 8-inch planned production capacity of Anyifa and Shilanwei can meet the annual demand for 12 million new energy vehicles.

     Despite the enormous competitive pressure currently faced by the industry, silicon carbide, as a widely used material, still has broad market prospects in the future. In addition to automobiles, silicon carbide is also actively applied in fields such as photovoltaics, data centers, State Grid, and rail transit. According to predictions, the global silicon carbide power device market is expected to grow from 1.09 billion US dollars to 6.297 billion US dollars from 2021 to 2027, with a compound annual growth rate of 34%.

2、 Short term market pressure: intensifying low price competition and intensifying elimination rounds

     Although the long-term prospects are bright, the competition in the silicon carbide market will become increasingly fierce in the short term. In 2024, the industry will enter a stage of low price competition. On the one hand, with the increase of production capacity, technological progress is relatively slow, and the market is gradually saturated. Enterprises have to compete for market share by lowering prices; On the other hand, the downstream electric vehicle industry has also entered a stage of price competition, with the decline in vehicle prices directly transmitted to the silicon carbide market. Affected by these factors, the price of 6-inch silicon carbide has dropped from 6000 yuan per piece to around 1500 yuan, and some companies have fallen into losses. The entire market has entered a "clearing" stage.

3、 The survival strategy of winning enterprises: vehicle resources and technological advantages are crucial

     In such fierce market competition, which companies can stand out and become the ultimate winners? At present, automotive applications dominate the silicon carbide market, accounting for over 75% of the entire power silicon carbide device market. Enterprises with complete vehicle resources are relatively smooth, especially with the arrival of the 800V architecture era, where the penetration rate of silicon carbide is accelerating. Compared to IGBT, silicon carbide has more obvious performance advantages in high-voltage environments and has become the preferred material in high-voltage power drive systems. Therefore, silicon carbide has almost become an essential component of electric drive systems for new energy vehicles.

     However, from a global market perspective, the dominant position of silicon carbide is still held by foreign manufacturers. Global giants such as STMicroelectronics, Infineon, Wolfspeed (USA), Anson, ROHM, and Bosch have already occupied over 85% of the silicon carbide product market. The domestic market also presents the advantage of large factories, such as Sanan Yifa, Silan Microelectronics, Xinlian Integration, Xinyue Energy and other enterprises, relying on strong industrial layout and technological advantages, occupying a dominant position in the market.

      To find a place among these strong domestic and foreign players, it not only requires the postnatal efforts of the enterprise, but also a strong innate endowment. These leading companies usually have a common characteristic - they have deep cooperation or direct supporting relationships with car companies. Since their establishment, these enterprises have focused on providing supporting services for specific car companies, closely cooperating with them in the research and development and production stages, and directly connecting with the existing market after mass production. Therefore, the implementation of major projects, especially industrial chain collaboration at the local level, is crucial. Without this, the survival of the enterprise will face great challenges.

4、 The way to survive: technological barriers and financing difficulties

    The threshold for silicon carbide technology is extremely high, and although many companies are able to mass produce, the competitiveness of their products is still insufficient. Enterprises lacking differentiation advantages or with low product yield rates find it difficult to maintain stable cash flow. At the same time, with the tightening of the industry's financing environment, many struggling businesses will find it difficult to obtain financial support.      Companies facing difficulties may only be able to overcome them through mergers and acquisitions.

    Given that many silicon carbide projects have local investments behind them, local governments may become the last "lifeline" for these struggling enterprises. However, local finances are tight, and there are not many local governments that can sustain the "blood transfusion". A more realistic choice may be to promote industry mergers and acquisitions integration. However, mergers and acquisitions in the semiconductor industry have always been challenging, involving not only integration issues between companies, but also policy considerations. The investment in semiconductor projects is enormous, often in the billions. How to revitalize assets without causing loss of state-owned assets is a huge challenge faced by local governments.

5、 Solution: Government Responsibility and Industrial Integration

     Based on past experience, the key to resolving such difficult and complicated projects lies in the determination and wisdom of local governments. In the past, the Xinmou research team has successfully participated in the restart of multiple troubled projects and accumulated certain experience. The key points to solving these problems include: firstly, conducting in-depth analysis of the strengths and weaknesses of the project, understanding industry needs, knowing oneself and others, and having the right mindset as the foundation for success; The second is to find suitable partners, who not only have the willingness to cooperate, but also have a common goal and temperament;     The third is to do a lot of follow-up coordination work. Once a cooperation intention is reached, there are still many arduous preparations to be made before signing the contract.

     In the face of the upcoming "elimination round", we should approach the market's survival of the fittest with a calm mindset. The industrial laws of manufacturing determine that this process is inevitable, and in the face of challenges, we must firmly believe in the possibility of solving problems. With the continuous growth of the industry, opportunities for enterprise expansion plans and mergers and acquisitions integration will continue to emerge. The key lies in where to seize these short-term opportunities and embrace the trend of industry development.

epilogue

    The elimination round of the silicon carbide industry has begun, and all parties in the industry must actively respond to the upcoming market clearing and difficulties. This industrial challenge is not only a trial for enterprises, but also a test for local governments. With the transformation and upgrading of the Chinese economy, resolving difficulties and integrating mergers and acquisitions will become routine tasks in various regions. Only those enterprises and governments that dare to take responsibility and are good at solving problems can stand out in this turbulent era and embrace a brighter future.