US chip manufacturer Wolfspeed will file for bankruptcy protection as part of a restructuring agreement following months of speculation about how it could address its growing debt.
The North Carolina-based silicon carbide (SiC) maker announced a range of agreements to reduce its $6.5 billion debts by 70%, or $4.6 billion, with new financing and loan deals built around plans to emerge from the process by Q3 2025.
Wolfspeed CEO Robert Feurle said the “strategic step” to voluntarily file petitions under the US’ Chapter 11 Bankruptcy Code would put the company "in the best position possible” to focus on long-term growth.
Debt had been mounting for the company, which recorded $181m in revenue for Q2 FY25, after it borrowed billions to support construction of three news fabs in the US during a pivot , including the world’s only 200mm SiC fab in New York and a “mega material factory expansion” at its headquarters.
Despite the restructuring, Wolfspeed said it would continue to serve customers and pay vendors “in the ordinary course of business” while sorting its finances, though it had previously announced closures of two fabs.
Drawn out negotiations
The company had been looking for a fix to its problems for months, with drawn out debt negotiations likely causing it to lose out on $750 million in funding through the US Chips Act after signing a deal with the Biden Administration dependent on settling certain payments due next year.
It had recently claimed to "remain on track" to receive the first part of funding in mid-2025 but the cash was not mentioned in the restructuring announcement.
The Restructuring Support Agreement includes significant backing from the US subsidiary of Japan’s Renesas, which will take a $1.6 billion hit from the restructuring and take on around 38.7% of Wolfspeed’s stock, with equity for most existing investors cancelled out and returned at a pro rata share of 3% or 5%.
Renesas had handed over a $2 billion deposit to Wolfspeed in 2023 for the supply of wafers over a ten-year contract for its own SiC plans, recently shelved in the face of growing competition in China, but said it now “expects to record a loss” related to the deposit.
An unsure environment
Wolfspeed’s restructuring comes despite significant pushes to boost the US chip industry by both the Biden and Trump administrations, though recently the government has been pushing for greater domestic investments in exchange for funding through the CHIPS act.
While some larger manufacturers have been eager to benefit from the renewed push, with Taiwan’s TSMC claiming an additional $100 billion in US investments in March, the US industry still faces an uphill battle to compete with its better prepared rivals in Asia.
As a result, lawmakers are currently pushing through an increase in tax credits for semiconductor manufacturers from 25% to 30% before the tax breaks in the $280 billion expire in 2026.
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