U.S.-based silicon carbide (SiC) semiconductor manufacturer Wolfspeed is reportedly preparing to file for Chapter 11 bankruptcy protection in the coming weeks, according to multiple sources. Once valued at over $13 billion, the company is now burdened with approximately $6.5 billion in debt, while holding just $1.3 billion in cash as of March 31.

The implications of Wolfspeed's collapse are particularly serious for Japanese chipmaker Renesas Electronics, which in 2023 prepaid $2 billion under a 10-year SiC wafer supply agreement with Wolfspeed. If the U.S. firm proceeds with its bankruptcy filing, Renesas may face a significant impairment loss, putting further pressure on its SiC strategy.

Wolfspeed's downfall marks a stunning reversal for a company once hailed as the "TSMC of SiC." Founded in 1987 as Cree by researchers at North Carolina State University, Wolfspeed was a pioneer in wide-bandgap semiconductors and introduced the world's first commercial blue LED in 1989. Over the decades, it evolved from an LED lighting innovator into a SiC materials and device specialist, rebranding to Wolfspeed Inc. in 2021 after divesting its legacy businesses.

Under then-CEO Gregg Lowe—a former Freescale CEO—Wolfspeed bet big on the future of electric vehicles (EVs). Encouraged by adoption from Tesla and growing interest from automakers like Mercedes-Benz and GM, Lowe initiated massive investments: an 8-inch SiC wafer fab in Marcy, New York (one of the world's largest), and a $5 billion vertically integrated SiC materials megafactory in Chatham County, North Carolina. Wolfspeed signed long-term supply deals with multiple EV giants and aimed to dominate the SiC value chain.

However, the execution faltered. The Marcy fab struggled with poor yields and underutilization—reportedly operating at just 25% capacity in 2024. The Chatham plant faced construction delays. Meanwhile, Wolfspeed's vertically integrated model left it with wafer inventory and fluctuating customer demand. As EV sales softened globally, automakers increasingly opted for cheaper silicon-based solutions like IGBTs. Companies like Honda and Hyundai openly stated their preference for cost-effective alternatives over expensive SiC components.

Wolfspeed's aggressive growth strategy turned into a cash drain. Between 2022 and 2024, the company missed revenue targets almost every quarter. Its stock plummeted from a 2021 peak of $140 to just $11 in early 2025, a 92% collapse that wiped out nearly $13 billion in market value.

In the past year, Wolfspeed dismissed its CEO, closed a plant, and laid off over 1,000 employees. It rejected multiple out-of-court restructuring proposals. Despite a promised $750 million CHIPS Act grant, the U.S. Commerce Department has yet to release the funds, reportedly awaiting a credible financial plan. Wolfspeed's financial instability and missed milestones have raised concerns over its long-term viability.

Industry analysts point to rising pressure from Chinese SiC players like TanKeBlue and SICC, which have gained global share with lower-cost wafers. These firms now hold the No. 2 and No. 3 positions globally, and their pricing—roughly 30% of Wolfspeed's—has eroded the U.S. firm's competitiveness.

For Renesas, the looming bankruptcy presents immediate financial risk. The Japanese chipmaker had planned to launch mass production of SiC power devices at its Takasaki plant in 2025 using Wolfspeed's wafers. Although it delayed initial procurement in 2024 due to soft market conditions, the long-term reliability of its SiC wafer supply chain is now in question.

Wolfspeed's dramatic fall—from pioneering SiC to teetering on the edge of collapse—offers a cautionary tale for the industry: technology leadership alone isn't enough without execution, timing, and adaptability in a rapidly shifting global market.