The recent news regarding the bankruptcy proceedings of Beijing Century Jinguang Semiconductor Co., Ltdhas shed light on the current challenges facing China's semiconductor industry, particularly in the realm of silicon carbide (SiC) technologyThe Beijing First Intermediate People's Court has accepted the case for bankruptcy liquidation filed by the company, appointing Beijing Huaxin Liquidation Service Co., Ltdas the administratorAs of September 2024, reports indicated that the company held total assets amounting to 512 million yuan against liabilities of 528 million yuan, leading to a negative owner's equity of 15.76 million yuan, highlighting a significant struggle to meet its financial obligations.

Founded in December 2010 and originating from the Central Plains Semiconductor Research Institute, Century Jinguang positions itself as a national-level high-tech enterprise committed to the research and production of third-generation semiconductor materials and power devices

By 2021, the company had gained considerable market traction, successfully completing a financing round of 257 million yuanAt that time, its 6-inch conductive silicon carbide single crystal achieved industry-leading status in small-scale productionThe firm also pioneered the development of N-type conductive silicon carbide and MOSFETs, which found applications in the power electronics sector.

However, the decline of this once-celebrated enterprise underscores a broader crisis within the silicon carbide market and the third-generation semiconductor industry as a wholeThe concept of third-generation semiconductors—primarily encompassing GaN and SiC—gained immense attention in the financial marketsThese wide-bandgap materials are reputed for their ability to withstand high voltages and temperatures, making them suitable for cutting-edge applications like 5G technology and electric vehicles.

On one hand, silicon carbide is lauded as a revolutionary semiconductor material, boasting exceptional physical and chemical properties that lead to improved device performance

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It not only significantly reduces energy consumption—by over 20% in some applications—but also minimizes the physical size and weight of devices by up to 50%. For both medium- and high-voltage power devices, SiC stands out as the material of choice.

On the other hand, China has explicitly committed to advancing its semiconductor sector in its national development plansSince the 13th Five-Year Plan, the emphasis on developing new semiconductor materials, particularly silicon carbide, has intensified, culminating in numerous policies that foster investment, tax incentives, and R&D subsidies to enhance market activities in this areaThis regulatory environment has generally fueled investor confidence and led to a surge in companies exploring silicon carbide technologies, including significant players from industries like BYD and Gree.

Market forecasts are optimistic, predicting a market size for silicon carbide power devices to reach approximately $6.297 billion by 2027. The projected compound annual growth rate from 2021 to 2027 stands at around 34%. Investments poured into this sector have facilitated technological advancements, fast-tracked industrialization, and attracted a talent pool, fortifying China's global competitiveness in semiconductor technologies

Between 2021 and 2023, the number of SiC invention patents disclosed by Chinese entities increased by about 60%, marking the fastest growth among major countries.

Nevertheless, the appeal of concept stocks tied to this industry has also resulted in drastic fluctuations, exposing investors to considerable market risksThe volatility of stock prices in such companies indicates underlying instability in business performanceMany firms may struggle with profitability, and should investors follow trends without due diligence, they may suffer significant financial losses due to unsustained market enthusiasm.

The rush to seize market opportunities has led to a saturated silicon carbide marketWith robust demand driving expansion, China's silicon carbide substrate production capacity has surgedBy the end of June 2024, production capacity is projected to reach around 3.48 million substrates (equivalent to six inches) and potentially rise to 4 million by year’s end.

Noteworthy advancements include Tianyue Advanced's Shanghai Lingang factory, which boasted an annual capacity of 300,000 conductive substrates by the first quarter of 2024. Additionally, the Tianjin-based Tianhe HeDa semiconductor company has commenced a significant expansion project worth 830 million yuan, planned to yield 160,000 silicon carbide substrates annually upon completion.

Moreover, domestic manufacturers like Jingxuan Jiadi have successfully expanded into 6-8 inch silicon carbide substrates, achieving competitive critical parameters in the industry

Such rapid scaling indicates that multiple companies are surpassing their projected production timelines, and with already over 650 existing pieces of 6-inch epitaxy equipment, manufacturing capabilities are set to intensify.

However, as the silicon carbide landscape becomes increasingly crowded, it faces fierce competition from established international players like Infineon, STMicroelectronics, and Rohm, which maintain substantial market shares internationallyAdditionally, the industry must navigate competition among various semiconductor types, including silicon-based, silicon carbide, and gallium nitride semiconductors, further complicating market dynamics.

The increasing number of domestic silicon carbide producers, now exceeding 100, intensifies competitive pressuresDisparities in technology levels and product quality mean that these companies are vying for market share through price reductions and performance enhancements, leading to significant “market Darwinism.”

Amidst recent developments, the price of silicon carbide has plummeted due to excessive investment in production and the aggressive pricing strategies adopted in the electric vehicle sector

Reports indicate that prices have dropped by over 50% for several products in the silicon carbide supply chain, despite heightened volumes of production.

Furthermore, the car manufacturing sector has put immense pressure on suppliers, often leveraging their bulk purchasing power to negotiate lower prices, risking the profitability of smaller companies in the processFor instance, BYD has been advocating for a 10% decrease in supplier pricing starting January 2025 as a measure to reduce supply chain costs.

The trajectory of the silicon carbide industry suggests a future resembling that of the photovoltaic sector, wherein numerous players may find themselves unable to survive the intense competition and may be forced to exit the market.

Despite uncertainties, financing activity within the silicon carbide sector remains robustThe year 2023 saw an array of funding events across the entire silicon carbide supply chain, evidencing the sector's growth momentum