Chipmaker Wolfspeed secures up to $2B in debt financing from investor consortium

Wolfspeed Inc., a major supplier of silicon carbide chips, is raising up to $2 billion in debt financing to support its manufacturing expansion plans.

The transaction was announced this morning. 

The chipmaker is borrowing the funds from an investor consortium led by Apollo Global Management. The private equity firm, which is best known for buying publicly traded tech companies, is also active in the debt financing market. Apollo launched a dedicated credit unit earlier this year. 

Under the terms of the transaction, Wolfspeed is borrowing $1.25 billion with the option to raise another $750 million down the road. The financing is structured as a secured note, which is a loan backed by the borrower’s assets. The loan will mature in 2030, but Wolfspeed has the option to pay it back earlier.

The company will use the loan to ramp up production of SiC, or silicon carbide, chips. Silicon carbide is a compound consisting of silicon and carbon. Chips based on the material can operate at higher temperatures and voltage levels than traditional semiconductors.

Wolfspeed is a major producer of silicon carbide chips. Its products are used to build data center power supply modules, which are responsible for managing the flow of electricity to a server’s components. Wolfspeed hardware can also be found in electric vehicles, energy storage systems and a range of other products.

The company will use its new debt funding to finance a silicon carbide wafer plant it recently stated building in North Carolina. Once operational, the facility will increase Wolfspeed’s wafer production capacity tenfold. The company plans to start production next year and, from there onwards, will gradually expand the plant’s facility in an initiative set to run through the end of the decade.

The wafers made at the company’s North Carolina plant will be turned into chips at a fab it opened last year in Marcy, New York. Wolfspeed describes the fab as the first fully automated silicon carbide chip plant of its kind. The fab uses 200-millimeter wafers, which are more cost-efficient than the smaller 150-millimeter wafers used in previous-generation manufacturing processes.

“This important step in our financing provides significant capital to scale up near-term operations at our Mohawk Valley Fab and construction of our Siler City materials facility to help us capture the growing silicon carbide market opportunity,” said Wolfspeed Chief Executive Officer Gregg Lowe.

Besides silicon carbide products, Wolfspeed also makes chips based on gallium nitride. That’s another specialized material used as an alternative to silicon in systems with demanding requirements. Wolfspeed’s gallium nitride chips are used, among others, to build radar sensors and certain components of 5G cell towers. 

Photo: Wolfspeed