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Wolfspeed (NYSE:WOLF) was initiated with a Neutral rating at Mizuho Securities as the investment firm sees the potential for silicon carbide, but worries about competition and a slowing electric vehicle market raise concerns.
“WOLF is enabling the future global automotive and renewable energy roadmap, and is integral to the high power management market,” analyst Vijay Rakesh wrote in an investor note.
“However, with the (silicon carbide total addressable market) growing at an estimated ~30% CAGR, competition from new and existing suppliers in the U.S., Europe and China could pressure supply, pricing and margins against a slowing EV market,” Rakesh added.
Rakesh also put a $30 price target on Wolfspeed shares as he believes slowing EV demand and capacity ramps are likely to negatively impact margins.
The silicon carbide market is expected to grow roughly 28% on a compound annual basis to be approximately $7.5B by 2027, with automotive accounting for nearly 36% of that, up from 12% today, Rakesh said.
Wolfspeed has approximately 53% of the silicon carbide supply chain market currently and is a key substrate supplier to other chip companies in the space such as ON Semiconductor (ON), Infineon (OTCQX:IFNNY) (OTCQX:IFNNF), STMicroelectronics (STM), Rohm and Diodes (DIOD), Rakesh said.
However, there is concern that these companies could get silicon carbide supplies from cheaper suppliers in China, Rakesh said.
