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Wolf Speed (NYSE:WOLF) started with a Neutral rating at Mizuho Securities as the investment firm sees potential in silicon carbide, but concerns about competition and a slowing EV market raise concerns.
“WOLF is making the global automotive future possible and the renewable energy roadmap, and is an integral part of 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 CAGR of around 30%, competition from new and existing suppliers in the US, Europe and China could pressure supply, pricing and margins against a slowing EV market,” he added Rakesh.
Rakesh also set a $30 price target for Wolfspeed shares as he believes slowing demand for electric vehicles and increased capacity could negatively impact margins.
The silicon carbide market is expected to grow approximately 28% on a compound annual basis to reach approximately $7.5 billion by 2027, of which the automotive sector will account for nearly 36%, up from 12% today, Rakesh said.
Wolfspeed currently holds approximately 53% of the silicon carbide supply chain market and is a key supplier of substrates to other chip companies in the industry such as ON Semiconductor (ON), Infineon (OTCQX:IFNNY) (OTCQX:IFNNF), STMicroelectronics (STM), Rohm and diodes (DIOD), Rakesh said.
However, there are concerns that these companies may get supplies of silicon carbide from cheaper suppliers in China, Rakesh said.