Wolfspeed (WOLF Quick QuoteWOLF - Free Report) and Infineon Technologies AG recently announced an extension and expansion of their long-term 150-millimeter (mm) silicon carbide wafer supply agreement, originally established in February 2018.

The strategic move will help address the escalating demand for silicon carbide (SiC) semiconductor products. The partnership also incorporates a multi-year capacity reservation agreement.

Silicon carbide, with its ability to enable smaller, lighter and more cost-effective designs, has become pivotal in supporting clean energy applications. The strategic importance of silicon carbide in fostering decarbonization cannot be overstated. The technology's ability to convert energy more efficiently aligns with global efforts to achieve cleaner and more sustainable energy solutions.

Wolfspeed, a global leader in silicon carbide technology and a key player in the industry transition to SiC, stands out as the world’s leader in silicon carbide production. The company's commitment to providing high-quality materials aligns seamlessly with the increasing demand for SiC devices, estimated to represent a $20 billion annual opportunity by 2030.

Wolfspeed’s Prospects Bright

Wolfspeed has evolved into a pure-play silicon carbide provider through portfolio optimization initiatives. It expects to be one of the top silicon carbide device suppliers over the next five years thanks to first-movers’ advantage in 200-mm (1.7 times larger than 150 mm) wafer volume production, which is the silicon carbide industry's most advanced technology.

Its expansion plans are noteworthy, with the Mohawk Valley fab expected to achieve 20% utilization by June this year. Wolfspeed anticipates roughly $10-$15 million of revenues to come from the Mohawk Valley fab in the fiscal second quarter.

Strong design-ins bode well for Wolfspeed with a robust automotive end-market. In first-quarter fiscal 2024, Wolfspeed recorded $2.2 billion of design-ins (customer commitments to purchase products) for power devices, the third largest amount of any quarter in its history, which represents more than 230 projects.

Wolfspeed is benefiting from an expanding clientele. Continued strong demand for high-quality substrates and its capacity expansion initiatives have been key catalysts. Demand for materials remains strong and Wolfspeed has extended some of its agreements with existing wafer customers and added new agreements, including Renesas.

In July 2023, Wolfspeed and Renesas Electronics entered into a ten-year wafer supply agreement. Per the agreement, Wolfspeed will supply Renesas with 150-mm silicon carbide wafers initially, with plans to scale up to 200-mm wafers in the future.

Zacks Rank & Stocks to Consider

Currently, Wolfspeed carries a Zacks Rank #4 (Sell).

BlackLine (BL Quick QuoteBL - Free Report) , NVIDIA (NVDA Quick QuoteNVDA - Free Report) and Pinterest (PINS Quick QuotePINS - Free Report) are some better-ranked stocks that investors can consider in the broader sector, each sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

NVDA and PINS shares have returned 210% and 41.5%, respectively, in the past 12 months. BL shares have declined 8.7%.

Long-term earnings growth rates for BlackLine, NVIDIA and Pinterest are pegged at 50.56%,13.5% and 35.87%, respectively.

Disclaimer: This article has been written with the assistance of Generative AI. However, the author has reviewed, revised, supplemented, and rewritten parts of this content to ensure its originality and the precision of the incorporated information.