US Spurs Semiconductor Production with Wolfspeed Chips Act Funding
US chip manufacturer, Wolfspeed Inc. is set to receive $1.5 billion to boost its operations. Out of this amount, $750 million is in the form of a government grant under the 2022 Chips and Science Act.
Yahoo Finance reported that Wolfspeed’s Chips Act funding triggered an additional $750 million financing from other investors including Apollo, Fidelity Management, the Baupost Group, and Capital Group.
In September 2024, Apollo Global offered to invest up to $5 billion in Intel after the tech company’s financial position captured its attention. Apollo has an ongoing working relationship with Intel having invested $11 billion in Intel’s Fab 34 factory in Ireland for a 49% stake.
Efficient EV Chips
With the new funding, Wolfspeed will expand its North Carolina and New York factories at an estimated cost of $6 billion. The company manufactures wafers that are used in advanced computer chips in its North Carolina and New York factories.
Wolfspeed uses silicon carbide to make computer chips that are used in electric vehicles and other advanced technologies. Silicon carbide makes the Wolfspeed EV chips more efficient. With the new expansion plan, the company’s projects are expected to create about 3000 construction jobs and 2,000 manufacturing jobs.
“Artificial intelligence, electric vehicles, and clean energy are all technologies that will define the 21st century. Thanks to proposed investments in companies like Wolfspeed, the Biden-Harris administration is taking a meaningful step towards reigniting U.S. manufacturing of the chips that underpin these important technologies,” US Commerce Secretary Gina Raimondo said in a statement.
The new Apollo investment and government funding provides Wolfspeed with the financial resources it needs to generate new chip productions. Wolfspeed executives say this kind of production will give the chip maker a better future.
Wolfspeed’s Production Challenge
As a leader in Wolfspeed EV chip manufacturing, the company has been going through a rough patch financially having posted an annual profit a decade ago. The last quarter the company posted a positive net income was in 2018. Wolfspeed stocks dipped 74% this year, closing at $11.38 on October 14, 2024.
Wolfspeed’s problems are caused by tangled production in its plants. As one of the biggest manufacturers of silicon carbide wafers, the company has been experiencing a wafer shortage. This shortage has stifled production at its New York chip plant and pushed the company into using older factories that increase cost.
Wolfspeed’s funding provided under the Chips Act will now enable the company to shift production to a new factory and close the old one. The company is now positioning itself to grow demand for Wolfspeed chips – the semiconductors that control power in electric vehicles and other devices.
“As the world’s largest producer of silicon carbide material, we believe we have a compelling proposition for a Chips grant because silicon carbide is considered a matter of national security, is designated a critical material by the US Department of Energy, and is essential to the electric vehicle ecosystem,” Wolfspeed CEO Gregg Lowe said in August during an earnings presentation.
Focus on Local Production
The Biden administration has been keen on spurring production of semiconductors within the US. The Chips Act is among the bipartisan laws championed by the administration to revert semiconductor manufacturing to the US following decades of production in Asia.
The US government has also given huge grants to leading chip manufacturers like Intel, which signed a preliminary non-binding agreement with the U.S. Department of Commerce in March 2024. Under this agreement, Intel expects to receive direct funding amounting up to $8.5 billion under the Chips and Science Act.
This funding will enable the chip maker to advance its commercial semiconductor projects across four states. Intel will also be making Intel AI chips for Amazon Web Services through its Foundry business after it signed a deal in September 2024.
Wolfspeed is at the preliminary stage of acquiring the grant. The company will be subjected to due diligence and more negotiation. Once companies sign the final agreements, they are required to meet specific milestones to receive reimbursements from the program.
