In March, shares of the silicon carbide chip manufacturer Wolfspeed experienced a significant decline, dropping by 47.1% according to S&P Global Market Intelligence. The company is navigating a challenging landscape, having invested heavily in building U.S.-based silicon carbide production facilities and incurring substantial debt in the process.
Wolfspeed faces a downturn in its key automotive and industrial markets, exacerbated by tariff uncertainties that could further impact automotive demand. Several company-specific developments added to these challenges in March.
During the month, Wolfspeed made several announcements. On March 6, the company revealed plans to lay off 180 employees as part of its cost-reduction strategy and indicated intentions to decrease its capital expenditures by $150 million to $200 million in fiscal 2026, with additional cuts of $30 million to $50 million planned for fiscal 2027. Despite these measures, which are aimed at achieving positive free cash flow by 2027, Wolfspeed’s stock experienced a brief rally in response to the news.
Later, on March 27, Wolfspeed appointed Robert Feurle as CEO, succeeding interim CEO Thomas Werner. However, the impact of this leadership change on the stock was overshadowed the next day when rumors emerged that the company might not receive $750 million in CHIPS Act funding promised by the previous administration. The CHIPS Act, though passed under the Biden administration, has seen delayed disbursement of funds.
Wolfspeed’s financial situation is pressing, with approximately $6.4 billion in debt, $1.4 billion in cash, and $1.15 billion in cash burned in the past six months.
The slowdown in the electric vehicle market, coupled with tariff threats on autos and industrial investments, presents further challenges for Wolfspeed. While the company’s U.S. manufacturing expansion aligns with governmental goals, uncertainty remains about the CHIPS Act subsidy. The market’s response on March 28 suggested skepticism about Wolfspeed receiving the promised funds. Although higher semiconductor tariffs might increase demand for domestically produced silicon carbide wafers and chips, demand must also grow for such a shift to be beneficial.
Wolfspeed might face potential restructuring or bankruptcy, wherein debt holders could assume control or sell assets to maintain domestic production, likely wiping out current equity value.
Given the market’s landscape, various stocks present more favorable risk-reward profiles. Investors are advised to exercise caution regarding Wolfspeed.
