Recent reports suggest that a major Chinese new energy vehicle manufacturer took significant steps towards self-producing upstream materials for silicon carbide (SiC) semiconductors at the beginning of the year and placed substantial orders with certain international equipment manufacturers. However, after six months, the actual shipment volume has drastically fallen. The equipment manufacturers find themselves caught between sudden massive orders and the slashing of demand.
Could this situation lead to a scenario similar to what happened in the early days of the PV and sapphire substrate industries? A situation where equipment manufacturers face a sudden shift in their customer landscape overnight, even potentially facing financial pressure or exiting the market before their customers? There have been countless cases.
Applied Materials, for example, has rapidly shifted focus towards semiconductors and away from solar energy. GT Advanced, likewise, switched from solar energy to SiC crystal growth, and became a part of Onsemi.
Supply chain insiders note that in the early stages of the solar energy and sapphire substrate markets, orders shifted overnight, leading to industry reshuffling. Some international SiC equipment manufacturers, having experienced such challenges, have become more cautious despite receiving unexpected large orders at the beginning of the year.
After receiving these large orders, these equipment manufacturers assess various key elements of their customers' actual production needs. They refrain from allocating all their resources to cater to the major customers, fearing to be once again trapped in a situation where they have to sacrifice everything to accommodate a single client.
Unexpectedly, these huge orders haven't displaced the small and medium-sized orders that were already placed and in the queue, as predicted in the market at the beginning of the year. Rumors also suggest that the intention behind the car manufacturer's massive equipment orders might be to impede the entry speed of SiC competitors.
On the whole, while related international equipment manufacturers have had to adjust to these large orders and navigate small fluctuations, they have managed to avoid significant impacts on their regular operations. The equipment supply chain remains in a state similar to the beginning of the year, with supply shortages due to the rapid growth of the global SiC supply chain.
However, these international equipment manufacturers are not necessarily free from potential crises. As the Chinese SiC supply chain continues to mature, moving towards self-production of materials and equipment is an inevitable trend. The major reversal in the early solar energy equipment market was driven by the rapid rise of Chinese domestically-produced equipment, offered at highly competitive prices that international equipment manufacturers couldn't match.
Moreover, once Chinese equipment manufacturers establish themselves, they gain the upper hand in industry development, creating excellent equipment investment returns for downstream manufacturing customers. By offering low-priced, advanced equipment, they can quickly capture market share and help each other, leaving other supply chain participants behind. This is why China's solar energy products have a global market share of over 85%. Chinese equipment manufacturers continually attract newcomers by offering more efficient and advanced equipment at lower prices.
Supply chain insiders point out that the Chinese government provides substantial incentives to encourage domestic equipment production. This allows domestic manufacturers ample opportunities to develop and quickly improve equipment production efficiency and yield rates. While some Chinese SiC crystal growth manufacturers were involved in equipment sales in the early stages, with limited success, it is speculated that some Chinese equipment manufacturers might reverse the global equipment situation in 2023 and become industry leaders.
Rumors in the market suggest a dramatic turn of events, with a Chinese equipment manufacturer previousy involved in solar energy, sapphire, and semiconductor equipment, stepping into SiC crystal growth equipment. It decided to stop selling equipment and instead compete with its existing customers in the SiC crystal growth sector.
Insiders note that, in terms of SiC crystal growth, hot zone design is crucial, requiring cooperation between equipment suppliers and manufacturers to achieve optimal results. Many SiC crystal growth manufacturers have bought equipment and then made modifications to create their own niche know-how, resulting in areas of expertise that equipment manufacturers and other crystal growth competitors find challenging to understand.
