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Silicon Carbide & The Electric Future: Coherent's Strategic Leap with Denso and Mitsubishi Electric

In the evolving landscape of technological advancements and electric propulsion, there's one element rising to prominence: Silicon Carbide (SiC). Today, we announce a strategic collaboration between Coherent, a leading US supplier of automotive chip materials, and giants of Japanese innovation - Denso and Mitsubishi Electric. This partnership not only illuminates the path ahead but provides tangible insights into the broader implications of such a pivotal move.

Understanding the Agreement:

Coherent is set to receive an investment of one billion dollars, split evenly between Denso and Mitsubishi Electric. This monumental injection will be in exchange for a 12.5% non-controlling ownership interest in Coherent's freshly minted subsidiary: Silicon Carbide LLC. The partnership solidifies long-term supply commitments, underscoring Denso’s and Mitsubishi’s growing substrate and epitaxial wafer needs. At the heart of this agreement lies Coherent’s ambitious plan to channel $1 billion over the next decade into the expansion of its silicon carbide wafer production. These wafers are the unsung heroes behind the increased range in electric vehicles, showcasing superior efficiency and range enhancement compared to traditional silicon.

Breaking Down the Technical:

SiC semiconductors have distinguished themselves with enhanced conductivity and switching frequencies. In layman's terms? Energy losses are halved, heat emission is minimized, and electric vehicle range gets a significant boost. This not only allows for smaller, more efficient cooling systems but also lightens the overall vehicle, cutting costs in the process.

Market Implications:

  1. Enhanced Electric Vehicle Range: As electric vehicles become the de facto mode of transport, range and efficiency will dominate consumer choice. The SiC wafers amplify both, placing manufacturers with access to this technology at an advantage.

  2. Stabilized Procurement & Production: With this collaboration, Denso and Mitsubishi Electric bolster their procurement strategy. They're not just purchasing wafers; they're investing in a stabilized future supply, ensuring competitive advantage in the electric vehicle market.

  3. Positioning for a Decarbonized World: As industries pivot towards sustainable solutions, SiC power semiconductors will play an integral role. With their increased efficiency and energy conservation, they align perfectly with the world's march towards decarbonization.

Three Investor Insights:

  1. The EV Market Momentum: The electric vehicle market is surging, and with it, the demand for efficient, longer-range solutions. This collaboration underlines the burgeoning opportunities within the EV supply chain.

  2. Strategic Supply Chain Investments: The intertwined futures of Denso, Mitsubishi Electric, and Coherent underscore a trend: securing critical supply chains will define industry leaders.

  3. Aligning with Decarbonization: As global efforts intensify to combat climate change, technologies that align with sustainability goals will see exponential growth. SiC wafers are a prime example.

In conclusion, this isn't merely an investment or a partnership; it's a strategic forecast of where the future lies. It encapsulates vision, ambition, and a roadmap to the electric future. For those seeking to stay ahead of market trends and capitalize on emergent opportunities, this collaboration between Coherent, Denso, and Mitsubishi Electric is one to watch.

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