Wolfspeed Semiconductor and Bankruptcy: What’s Happening
Current Status
• Wolfspeed, a leading U.S. silicon carbide (SiC) semiconductor manufacturer, is preparing to file for Chapter 11 bankruptcy within weeks due to an unsustainable debt load of around $6.5 billion.
• The company’s stock has collapsed, dropping over 70% in a single day after reports of the impending bankruptcy, and now trades below $1 per share, down from a peak of $140 in 2021.
Key Issues
• Wolfspeed’s financial troubles stem from:
• Heavy debt from building new manufacturing facilities in North Carolina and New York.
• Delays in receiving $750 million in federal CHIPS Act funding, which is contingent on refinancing existing debt.
• Slowing demand for SiC chips in electric vehicles and industrial markets, plus intense price competition from Chinese rivals.
• Operational delays and underutilization at new plants, leading to significant losses and layoffs (about 25% of workforce cut since late 2023).
Bankruptcy Plan
• Wolfspeed is pursuing a “prepackaged” Chapter 11 bankruptcy, aiming to reorganize its debt with the support of key creditors like Apollo Global and Renesas Electronics.
• The company rejected multiple out-of-court restructuring offers, including proposals for debt-to-equity swaps by major lenders.
Leadership Changes
• The CEO and CFO have both recently been replaced as part of efforts to stabilize the company.
Outlook
• Wolfspeed’s bankruptcy is intended to allow the company to continue operating while restructuring its finances, not to liquidate.
• The company still holds a leading share in the SiC substrate market but faces mounting pressure from global competitors and uncertain federal support.
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