Wolfspeed Inc., a key player in the electric vehicle (EV) chip manufacturing arena, is set to receive a major financial boost totaling $1.5 billion to support its ambitious factory expansion plans. This funding includes $750 million in grants from the U.S. government under the 2022 Chips and Science Act, alongside an additional $750 million in financing led by Apollo Global Management Inc.
The grant is part of Wolfspeed’s overarching strategy to invest over $6 billion in new manufacturing facilities in North Carolina and New York. This expansion is expected to create more than 2,000 manufacturing jobs and an impressive 3,000 construction jobs, according to a recent statement from the Biden administration.
This significant government backing has catalyzed private investment from notable firms including Apollo, The Baupost Group, Fidelity Management & Research Co., and Capital Group. In addition to the grants, Wolfspeed is set to leverage 25% tax credits for these facilities, anticipating total refunds exceeding $1 billion. CEO Gregg Lowe highlighted that the company has already secured around $640 million in refunds.
Following the announcement, Wolfspeed’s stock surged by 17% in premarket trading, a welcome change after experiencing a staggering 74% decline earlier this year, closing at $11.38 on Monday.
The Chips Act, a landmark bipartisan initiative championed by President Biden, aims to revitalize semiconductor manufacturing in the U.S. after years of production moving overseas. With $39 billion allocated for grants, the program has begun awarding funds to various companies, including Wolfspeed. However, these grants remain preliminary until companies fulfill specific project benchmarks.
This influx of funding and support comes at a critical juncture for Wolfspeed, which has struggled to turn a profit in recent years, with the last annual profit reported a decade ago. The company has faced significant production challenges, particularly at its Mohawk Valley plant, a key site for silicon carbide wafers—essential components for its chips.
To overcome these hurdles, Wolfspeed plans to close its older, less efficient facility and transition production to its newer plant, which will benefit from the Chips Act grant. This shift is strategically timed, as demand surges for semiconductors that control power in EVs and other advanced technologies.
“As the world’s largest producer of silicon carbide material, we believe we present a strong case for a Chips grant,” said Lowe during an earnings call. “Silicon carbide is vital to national security and is designated as a critical material by the U.S. Department of Energy, playing an essential role in the electric vehicle ecosystem.”
With this monumental financial backing, Wolfspeed is poised to accelerate its production capabilities and solidify its position as a leader in the growing EV chip market. The future looks bright for this innovative chipmaker as it gears up to meet the soaring demand for advanced semiconductor technology!
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