The world of silicon carbide (SiC) is undergoing a significant transformation, driven by a surge in production capacities and aggressive pricing strategies, particularly from Chinese manufacturers. The 6-inch SiC substrate pricing, a critical component in the rapidly growing electric vehicle (EV) and renewable energy sectors, has seen a remarkable decline throughout 2023, with expectations that this trend will persist well into 2024.

Currently, the prices of mainstream 6-inch SiC substrates have dipped below $500 each, a tipping point that traditionally aligns with the break-even production costs for manufacturers. Should prices fall further, dipping to levels like $450 or even $400 by the fourth quarter of this year, many suppliers risk operating at a loss. Such scenarios have led to an industry-wide cautiousness: potential buyers are hesitating to place orders, often preferring to wait for prices to plummet further.

The situation is exacerbated by varying yield rates among different suppliers. While the overall output of SiC substrates is increasing in China, the quality and reliability fluctuate entre suppliers. This intense competition has triggered not only price wars but also an environment where customers are actively delaying orders, fearing that they may miss the lowest possible price point.

Concerns about supply chain sustainability further complicate the landscape. In sectors like automotive applications, where SiC components are critical, the validation process for new suppliers can stretch from six months to a year. This extended timeline raises alarm among customers, who worry that by the time their chosen supplier meets quality benchmarks, they may no longer be operational due to financial strains.

This dilemma also affects top-tier suppliers in the industry. Even leading players, typically resistant to price drops, find themselves drawn into competitive pricing strategies to preserve their market share. This suggests that a significant portion of the current 6-inch SiC substrate supply is being sold at a loss—an unsustainable situation for the longer term.

Amidst all this turmoil, consolidation appears imminent, though industry insiders initially projected that significant mergers and acquisitions within the 6-inch SiC substrate market wouldn't occur until at least 2026. However, the intensity of existing price competition, amplified by the rapid scaling in electric vehicle and photovoltaic markets, has imposed tremendous pressure on all SiC suppliers.

As Chinese manufacturers ramp up production, they are anticipated to satisfy more than half of the global demand for SiC by 2024. Companies like Shandong Tianyue and Sanke Lanxun have already begun to supply power devices within international integrated device manufacturers’ (IDMs) supply chains. This rapid integration into global supply chains is set against a backdrop where international competitors, even with substantial market positions, struggle to lower their prices significantly. As of late 2023, many of the leading international suppliers are still quoting their 6-inch substrates at over $850 each.

Interestingly, some Chinese players, having faced two consecutive years of losses, are starting to turn a profit. For instance, Shandong Tianyue reported a profit in the first half of 2024, attributing this upward trend to robust demand for high-quality SiC products, particularly in the electric vehicle sector, where they are cementing partnerships with notable manufacturers.

At the recent SEMICON Taiwan 2024 event, Jinko Solar demonstrated its growing capabilities in SiC production. The company is set to transition its newly built annual capacity of 200,000 6-inch substrates into operation next year, while also ramping up its production of 8-inch SiC substrates. For instance, Jinko anticipates producing 2,000 8-inch substrates per month by now, aiming to boost this figure to 5,000 monthly by the end of 2024, reflecting a broader industry shift toward larger diameter wafers.

Moreover, collaboration with IDMs is becoming a strategic necessity for dominant suppliers like Tianyue and TianKe HeDa. Their efforts to obtain international IDM certifications will be vital in keeping their order flow consistent, even as competitive pressures escalate through 2024. The focus is also shifting towards the 8-inch substrate market, where the larger surface area enables better yield and cost-effectiveness, making it more appealing to IDMs. This transition represents a significant shift in manufacturing priorities among semiconductor companies.

As enhancing supply opportunities remains a goal, few suppliers in mainland China can currently produce 8-inch SiC substrates due to the technical complexities involved. This presents a unique opportunity for domestic SiC substrate providers to forge Allied relationships with IDMs, eager for 8-inch capabilities. Potential customers in this segment include tech giants such as MediaTek, Hongyang Semiconductor, and Episil Technologies, all of whom are on the lookout for robust suppliers to enhance their production capacities in this efficient substrate space.

In summary, the SiC substrate market is a potent indicator of the broader semiconductor industry's dynamic shifts. The drastic pricing pressures and evolving supply chain partnerships are shaping a landscape filled with both challenges and opportunities. With Chinese manufacturers at the forefront of this transformation, the next couple of years will be crucial in defining the global positions of these entities within the SiC industry. As they navigate the tumultuous waters of pricing wars and production expansions, one thing remains clear: the market will not return to status quo and innovative adaptation will be key to success.