Wolfspeed's Financial Turmoil and China's Chip Surge

The semiconductor industry’s ongoing structural realignment is being driven by internal financial instability as much as external geopolitical maneuvering. Recent reports of impending bankruptcy filings from Wolfspeed have thrown the SiC segment into turmoil, while sanctions meant to stem China’s chip industry growth appear to be catalyzing it.  

These aren’t isolated events, but symptoms of the collapse of assumed reliability in traditional chip supply channels. Whether due to supplier issues or state-imposed trade restrictions, once-stable sourcing models are proving brittle under myriad pressures. As evidenced by these developments, procurement leaders must now adapt to a market where resiliency outweighs efficiency.  

Bankruptcy threatens Renesas’ $2B SiC supply deal

According to recent reports from Reuters and TrendForce, American silicon carbide (SiC) chip manufacturer Wolfspeed is preparing to file for Chapter 11 bankruptcy under a mounting pile of debt and sagging demand. The firm, which pivoted aggressively into SiC wafer production in 2021 to meet growing demand for electric vehicles and industrial power systems, has accumulated approximately $6.4 billion in liabilities. Weakened demand, supply chain volatility, and a market being undercut by Chinese suppliers have compounded Wolfspeed’s challenges.  

Now, with bankruptcy looming, shockwaves are rolling through the power semiconductor sector. The development has left key customers exposed and raised questions about the fragility of single-source supplier strategies in high-growth segments like SiC.  

Foremost among the affected parties is Japan’s Renesas Electronics. In 2023, the firm signed a 10-year, $2 billion deal with Wolfspeed to secure high-quality 200mm SiC wafers. Renesas planned to begin volume production with the SiC chips at its Takasaki fab this year. TrendForce reports that this timeline has already been pushed back, potentially giving Renesas a lifeline for minimizing the impact.  

However, if Wolfspeed is unable to fulfill its wafer obligations, Renesas could face significant delays and will need to accelerate its contingency sourcing plans. In the worst-case scenario, the Japanese firm may be forced to recognize impairment losses related to the investment

Notably, Renesas isn’t the only player at risk. Germany’s largest chipmaker, Infineon, extended a long-term supply deal with Wolfspeed for 150mm SiC wafers in 2024. That deal included capacity reservations for multiple years, signaling potential trouble for Infineon if Wolfspeed’s bankruptcy plans go through.  

The situation highlights the vulnerabilities brought on by overdependence on a single vendor for critical materials. While long-term supply agreements like those made between Renesas and Wolfspeed are intended to mitigate risk and lock in capacity, they can become liabilities if the supplier falters financially or technologically.  

Procurement leaders navigating this volatile market, particularly in segments like SiC, should treat Wolfspeed’s collapse as a cautionary tale. Risk mitigation in today’s semiconductor industry demands a multi-sourcing strategy and diversified procurement channels. Sourceability can support these objectives by offering access to a broad global network of verified suppliers with transparent supply chain visibility. With real-time market intelligence and proactive buying tools, Sourceability helps ensure continuity and resilience in your supply chain.  

U.S. sanctions potentially accelerate China’s semiconductor ambitions

U.S. sanctions aimed at curbing China’s semiconductor advancement have dominated headlines for the last several years. However, experts warn these rules may yield unintended consequences, potentially speeding up China’s domestic chip production rather than slowing it.  

Despite reaching a 90-day agreement to stall the Trump administration’s highest tariffs, trade tensions between the U.S. and China are rising. Meanwhile, around the industry, there is a growing sense that the U.S. sanctions are already backfiring.  

One of the most revealing developments lies in the opposing fortunes of two major chip substrate suppliers operating in China. Unimicron, the world’s leading IC substrate producer, has reported depressed utilization at its China facilities thanks to new chip restrictions. While the company has benefitted from a rebound in Taiwan-based orders, executives are reportedly concerned that prolonged trade constraints could permanently reduce demand from China’s premium electronics segment.  

Zhen Ding Technology, on the other hand, is thriving in the current landscape. The firm posted a 30% year-over-year revenue increase in its substrate division, attributing the growth to its “China for China” strategy that focuses on meeting local demand with domestic production. According to Digitimes, continued strength in China’s internal market could even prompt Zhen Ding to shift additional output from its Taiwan Kaohsiung AI Park to serve Chinese customers.

Industry observers describe this divergence as a “critical paradox.” By forcing Chinese companies to localize supply chains and reduce reliance on the U.S. or allied technologies, recent sanctions appear to be catalyzing the growth of an independent ecosystem.  

Nvidia CEO Jensen Huang echoed this sentiment, labeling U.S. AI chip restrictions a “failure” that will ultimately bolster his firm’s rivals in China as they turn to local manufacturers for alternatives to Nvidia’s restricted H20 chips.  

Substrates aren’t the only segment seeing growth. China’s focus on legacy chip production has surged. TrendForce projects that China’s share of the market will surpass Taiwan as soon as 2027 despite being just 34% last year. Moreover, SEMI forecasts that nearly 59% of the 97 new fabs starting production between 2023 and 2025 are located in China.  

Financial investment is also driving China’s domestic chip sector forward. The “Big Fund” launched its third phase in 2024 with a registered capital of approximately $47.5 billion. The state investment aims to enhance Chinese semiconductor self-reliance, a goal it is moving quickly nearer. The third phase of investment also looks beyond silicon production to focus on chip-making equipment and easing other upstream bottlenecks.  

For supply chain and procurement leaders, monitoring geopolitical shifts and their potential impact on supply chains is a necessary, but never-ending responsibility. As developments in the U.S.-China battle for chip supremacy unfold, Sourceability offers real-time market intelligence and sourcing solutions to navigate the complexities, ensuring informed decision-making and supply chain agility.