Japan’s Denso, Mitsubishi Electric to invest $1 bln in Coherent’s silicon carbide unit

Coherent, a leading U.S. supplier of materials crucial for automotive chip manufacturing, has secured a significant investment in its silicon carbide business. The company announced on Tuesday that Japan’s Denso and Mitsubishi Electric will jointly invest a whopping $1 billion in Coherent’s unit, marking a major milestone for the company.

Under the agreement, Denso and Mitsubishi Electric will each contribute $500 million, acquiring a 12.5% non-controlling ownership interest in Coherent’s silicon carbide business. This strategic move not only strengthens Coherent’s financial position but also highlights the confidence that these prominent Japanese companies have in the potential of silicon carbide technology.

Coherent, renowned for its production of lasers and switches for circuits, currently holds a market value of $4.69 billion. However, the company also carries a substantial debt of $4.4 billion as of fiscal 2023. This investment from Denso and Mitsubishi Electric will undoubtedly alleviate this financial burden, providing Coherent with the necessary resources to further expand its silicon carbide wafer production.

The timing of this investment aligns perfectly with Coherent’s long-term vision to invest $1 billion over the next decade in expanding its silicon carbide production. These wafers play a crucial role in enhancing the range of electric vehicles, surpassing the capabilities of traditional silicon chips. As the global market for electric vehicles continues to grow, the demand for silicon carbide power semiconductors is expected to skyrocket.

Masayoshi Takemi, a representative from Mitsubishi Electric, emphasized the exponential growth potential of SiC power semiconductors, particularly in the context of the world’s transition to a decarbonized future. With electric vehicles becoming increasingly popular, the need for power conversion applications, such as inverters and drivetrains, is on the rise. Chips made with silicon carbide offer unparalleled power conversion capabilities, making them an indispensable component in the electric vehicle industry.

Coherent’s silicon carbide business has garnered significant attention in recent months. In fact, Reuters reported last month that four Japanese conglomerates, including Hitachi Ltd and Sumitomo Electric Industries Inc, expressed interest in acquiring a minority stake in the business. This demonstrates the widespread recognition of Coherent’s expertise and potential within the industry.

Overall, this substantial investment from Denso and Mitsubishi Electric not only strengthens Coherent’s financial position but also solidifies its position as a key player in the silicon carbide market. With the support of these influential Japanese companies, Coherent is well-positioned to capitalize on the growing demand for silicon carbide wafers and contribute to the advancement of electric vehicle technology.