DENSO and Mitsubishi Electric Corporation will invest an aggregate $1 billion in Coherent Corp.’s silicon carbide business. Under the terms of the transaction, DENSO and Mitsubishi Electric will each invest $500 million in exchange for a 12.5% non-controlling ownership interest in the business, with Coherent owning the remaining 75%.
As vehicle electrification accelerates as part of the global effort to reduce CO2 emissions, semiconductor demand has also grown rapidly. SiC is a key material for devices that significantly contribute to reducing power loss, downsizing, and lightweighting of Battery Electric Vehicle (BEV) systems, owing to its superior performance in high-temperature, high-frequency and high-voltage environments compared to that of conventional silicon.
Prior to the completion of the transaction, Coherent will separate and contribute the business to a subsidiary. Coherent will control and operate the business, which will continue to be led by Sohail Khan, Coherent’s Executive Vice President, New Ventures & Wide-Bandgap Electronics Technologies.
In connection with the transaction, the business will enter into long-term supply arrangements with DENSO and Mitsubishi Electric that support their demand for 150 mm and 200 mm silicon carbide (SiC) substrates and epitaxial wafers.
Market estimates indicate that the SiC total addressable market will grow from $3 billion in 2022 to $21 billion in 2030, representing a 28% compound annual growth rate.
The transaction builds on Coherent’s more than two decades of demonstrated leadership in SiC materials. In recent years, the Company has aggressively invested to scale its manufacturing of 150 mm and 200 mm substrates to address this underserved market.
Over the past two years, Coherent has invested aggressively in capital and R&D for SiC as part of aits 10-year, $1 billion commitment announced in August 2021. The closing of this $1 billion combined investment into the business will accelerate the company’s capital plans in the coming years.
Specifically, the investment will fund the manufacturing expansion of the business’s substrates and epitaxial wafers and, in combination with the concurrent supply agreements, enhance its position in the market.
The transaction is expected to close in the first quarter of calendar year 2024