碳化硅行业海外观察系列一：从wolfspeed发展看碳化硅国产化-东吴证券（香港）

Equity Research·Industry Research·SemiconductorSemiconductor Industry Research1 / 32东吴证券（香港）请务必阅读正文之后的免责声明部分[Table_Main]Overseas Observation Series 1：Reference to thelocalization of SIC from Wolfspeed developmentOutperform (Maintain)Investment Thesis Wolfspeed is the worldwide third-generation semiconductor leader. The company isdedicated to its core business silicon carbide(SIC) materials and devices, with thesubstrate size expanding from 4 inches to 8 inches. In 2023, the company plans toexpand its capacity to around 100,000 6-inch SIC wafers per month. Wolfspeed’sexpansion and pricing strategy, profitability, valuation are all important references forSIC R&D. Demand side: Because SIC has properties of resisting high pressure, hightemperature and high frequency, its market is huge regarding application in electricvehicles. We believe that silicon carbide has large growth potential in the application ofelectric vehicles/ photovoltaics/ railway/ charing piles and others. Supply side: The technical barriers are high, and the domestic supply chainscontinue to expand production capacity. It is believed that closely tracking theverification of downstream customers and judging the effective production capacity isnecessary. Cost reduction: The cost reduction speed of SIC is highly correlated with thepenetration rate, and the cost reduction speed of substrate is faster than that of the device.Based on our to our calculations, the improvement of crystal growth efficiency is themost important factor. Profitability: Decomposing the industry chain, we find that the number of SIC wafersproduced in a single furnace and the overall yield are the core factors that affectprofitability. As far as domestic manufacturers are concerned, with the increase in yield,it is expected to achieve a gross profit margin of 30%-40% in the long run. Market competition: The SIC industry is similar to the first-generation semiconductorindustry. CR5 indicates the top five takes a large market share, but the overall trend isdeclining. The localization rate is expected to increase, and the long-term share isexpected to increase by more than 10%. A large number of mergers and acquisitions isexpected to hapen at the later stages of industry development. Market value’s room of growth: Reviewing Wolfspeed’s stock price, it is noticed thatthe industry demand continued to improve and the performance exceeded expectations,driving the company's stock price to record highs. Based on the benchmarking of analogchips and semiconductor equipment, we found that PE and PS valuation multiples ofdomestic companies are more than 4 times of their overseas peers. Higher valuationlevels indicate optimistic expectations for growth. Investment Recommendation: We are optimistic about the incremental opportunitiesthanks to the expansion of domestic effective production capacity and downstreamdevelopment such as automotive grade. We recommend Times Electric (688187.SH)/Jingsheng Mechanical & Electric