China's Subsidies Fuel SiC Price War, Sparking Further Cuts Amid Global Oversupply

Massive subsidies and policy funds from the Chinese government have dramatically increased the production of SiC (Silicon Carbide) semiconductor materials, leading to a global oversupply.

As the growth of the electric vehicle market slows and European trade regulations tighten, Chinese companies have begun to offload their surplus inventory overseas at low prices.

This has ultimately triggered a fierce price war, causing SiC substrate prices to plummet by two-thirds in two years and threatening the survival of companies in other countries.

A fierce price war is currently raging in the global market for a next-generation semiconductor material called Silicon Carbide (SiC). This isn't just a typical market fluctuation; it's a structural shift driven by a massive, state-funded expansion in China.

So, how did we get here? The story begins with China's ambitious industrial policy. The Chinese government, through massive state-backed investment vehicles like the 'Big Fund', has poured billions of dollars into its domestic semiconductor industry. A key target was 3rd-generation semiconductors, especially SiC, which is crucial for electric vehicles (EVs) and power electronics. This flood of capital enabled Chinese companies to rapidly build new factories and scale up production of SiC substrates, the foundational wafers upon which chips are built.

The result was predictable: a massive oversupply. With so many new Chinese suppliers entering the market, competition intensified dramatically. This led to a stunning price collapse. For instance, the price of a standard 6-inch SiC wafer, which was around $1,500 just two years ago, has been driven down to as low as $500 by Chinese vendors. This isn't just discounting; it's a fundamental reset of the price structure for the entire industry.

This oversupply problem was then amplified by two key factors. First, the once red-hot growth in China's EV market began to cool down, reducing domestic demand for SiC components. Second, new European trade policies, while aiming to protect their carmakers from cheap Chinese EV imports, don't apply to the raw materials like SiC. This created a perfect storm where Chinese SiC producers, facing weak demand at home, turned to the global market, offloading their excess inventory at rock-bottom prices.

Interestingly, while material prices are in a freefall, the stock prices of major global semiconductor companies that use SiC (like onsemi and STMicroelectronics) have soared. This 'divergence' happens because investors are betting that these companies will benefit from the AI boom and can sell high-value, sophisticated power chips, even if the raw material is cheap. However, this masks the severe pressure on the material suppliers who are at the front line of the price war. The entire value chain is being reshaped, forcing higher-cost producers to rethink their strategies or even exit the market.

Silicon Carbide (SiC): A compound of silicon and carbon that is used to make semiconductors that are more efficient and can handle higher power and temperatures than traditional silicon chips.
Substrate: A thin, circular slice of semiconductor material (like a wafer) that serves as the foundation for building integrated circuits, or chips.
Big Fund: China's state-backed investment fund, officially known as the China Integrated Circuit Industry Investment Fund, established to bolster the country's domestic semiconductor industry.

China's Subsidies Fuel SiC Price War, Sparking Further Cuts Amid Global Oversupply

Massive subsidies and policy funds from the Chinese government have dramatically increased the production of SiC (Silicon Carbide) semiconductor materials, leading to a global oversupply.

As the growth of the electric vehicle market slows and European trade regulations tighten, Chinese companies have begun to offload their surplus inventory overseas at low prices.

This has ultimately triggered a fierce price war, causing SiC substrate prices to plummet by two-thirds in two years and threatening the survival of companies in other countries.

Silicon Carbide (SiC): A compound of silicon and carbon that is used to make semiconductors that are more efficient and can handle higher power and temperatures than traditional silicon chips.
Substrate: A thin, circular slice of semiconductor material (like a wafer) that serves as the foundation for building integrated circuits, or chips.
Big Fund: China's state-backed investment fund, officially known as the China Integrated Circuit Industry Investment Fund, established to bolster the country's domestic semiconductor industry.