Wolfspeed, the leading U.S. silicon carbide (SiC) chipmaker, is reportedly preparing to file for Chapter 11 bankruptcy protection in the coming weeks, according to The Wall Street Journal and Reuters. The news sent its shares plummeting more than 57% in after-hours trading on May 21, wiping out hundreds of millions in market value and triggering shockwaves across the semiconductor industry.

Once valued at over $16 billion in late 2021, Wolfspeed now has a market cap of less than $600 million. The company is saddled with $6.5 billion in debt and continues to burn through around $800 million annually, while its latest quarterly revenue dropped to just $185 million—a 7% year-over-year decline. Its gross margin sank to -12%, and losses widened to $1.86 per share.

Wolfspeed's newly built 200mm SiC wafer fab in Mohawk Valley, New York—central to its scaling strategy—generated $78 million in revenue last quarter but is operating at only 20% utilization. In a recent filing, the company acknowledged “substantial doubt” about its ability to continue as a going concern.

Weak electric vehicle demand and a slowdown in industrial investment have contributed to the crisis. Key clients General Motors and Mercedes-Benz have either lowered or withdrawn profit forecasts, leading to widespread order delays. Meanwhile, U.S. tariff uncertainties and a volatile global supply chain have pushed customers to delay procurement decisions.

Despite holding the largest share (33.7%) of the global SiC substrate market in 2024, Wolfspeed has struggled to compete with rising Chinese players such as TanKeBlue and SICC, which now collectively hold 34.4% of the market. Their cost advantage is striking—Chinese-made 6-inch SiC wafers sell for $500 or less, compared to Wolfspeed's production cost of around $1,700 per wafer. Analysts warn that the company's legacy fabs are caught in a vicious cycle of high costs and low output, where “the more it produces, the more it loses.”

TrendForce reports a 9% year-over-year decline in global N-type SiC substrate revenue in 2024, driven by oversupply and demand softness—further squeezing Wolfspeed's margins.

The company has already cut 25% of its workforce, shuttered older facilities, and appointed a new CEO, Robert Ferrell, in a last-ditch effort to restructure. Talks with major creditors including Apollo and Renesas failed to yield an out-of-court solution, prompting Wolfspeed to move ahead with a court-led restructuring.

Although Wolfspeed previously received $192 million in tax credits under the CHIPS Act, the $750 million in expected grants remain uncertain amid shifting political winds in Washington. With few lifelines left, the company is now betting on bankruptcy protection to force creditor concessions and buy time for a turnaround.

Wolfspeed's collapse signals a critical moment for the global SiC market, as technological leadership alone appears insufficient in the face of rising costs, weak demand, and fierce geopolitical and price competition. Whether the company can emerge from reorganization stronger or fades into irrelevance remains to be seen.