Emerging Chips Chokepoint: The Battle for Silicon Carbide Base Wafers

China has long targeted the semiconductor industry for dominance and silicon carbide (SiC) base wafer (substrate) supply from China is a developing chokepoint that threatens U.S. SiC producers’ production and investments. SiC base wafers are critical for U.S. AI leadership as they are used to make semiconductors that convert electricity more efficiently, resulting in less energy use in data centers. They are also used in defense applications ranging from propulsion systems to missile defense systems. U.S. and likeminded partners’ policy interventions are urgently necessary to counteract China’s predatory practices in the silicon carbide industry.

Silverado’s new report, Emerging Chips Chokepoint: The Battle for Silicon Carbide Base Wafers, highlights the importance of SiC base wafers, covers the growth of the Chinese SiC base wafer industry, and discusses the challenges facing the U.S. base wafer industry as Chinese producers gain market share. Key findings from the report include:

• The SiC market is expected to rapidly expand in the coming years, with segments such as vehicles and charging, electricity generation and storage, data center products, and defense applications contributing to the market growth.
• Chinese SiC base wafer manufacturers significantly increased SiC capacity and production over the last five years and gained market share from U.S. producers.
• The Chinese base wafer industry receives significant government support.
• Overcapacity and government support led to significantly lower prices for Chinese base wafers, with Chinese producers selling at unprofitable prices in recent years.
• The growth of the Chinese industry has had significant negative impacts on U.S. producers, leading to plant closures and firm restructuring.

Secure and reliable SiC supply is essential for the semiconductor industry and across the U.S. industrial base. ​The United States must protect domestic producers from PRC predation through a balanced mix of import protection—both on direct imports of PRC-origin and PRC-linked SiC, plus SiC embedded in downstream goods—and build domestic production through targeted support for domestic producers.