Wolfspeed’s Revenue Forecast Falls Short Amid Sluggish Demand
The chipmaker’s shares plummeted 15% in extended trading on Wednesday after announcing a quarterly revenue forecast that fell below market estimates. Wolfspeed, a leading supplier of silicon carbide chips to top automakers like General Motors and Mercedes-Benz, is grappling with soft demand from its automotive customers.
Slowing Electric Vehicle Sales Impact Chip Demand
The slowdown in electric vehicle sales has had a ripple effect on the demand for Wolfspeed’s chips, which are made using silicon carbide, a more energy-efficient material than standard silicon. This trend is likely to continue, as evidenced by the company’s decision to scrap plans for a new factory in Ensdorf, Germany, citing slower adoption of EVs in Europe.
Rival ON Semiconductor Also Feels the Pinch
Wolfspeed is not alone in its struggles. Rival ON Semiconductor also forecast fourth-quarter revenue and profit below market estimates in October, highlighting the broader challenges facing the industry.
Quarterly Revenue Forecast Disappoints
Wolfspeed expects second-quarter revenue from continuing operations to range between $160 million and $200 million, falling short of analysts’ estimates of $214.6 million. The company anticipates a quarterly adjusted loss per share of 89 cents to $1.14, compared with estimates of a 90 cent loss.
Restructuring Costs Weigh on Profitability
The company is incurring significant restructuring costs as it shuts down its 150mm chip fabrication plant in Durham to focus on the more efficient 200mm chip plant in Mohawk Valley. Wolfspeed expects to book $174 million in restructuring-related costs in the current quarter, adding to the $87.1 million in such costs recorded during its fiscal first quarter.
Mohawk Valley Facility Contributes Steadily
The Mohawk Valley facility in New York, which has yet to reach full utilization, contributed $49 million in revenue, matching the previous quarter’s performance. The company received a boost last month with the announcement of up to $750 million in funding under the CHIPS and Science Act to support the expansion of its North Carolina-based chip factory and the Mohawk Valley plant.
Challenges Ahead for Wolfspeed
As Wolfspeed navigates the current market downturn, it faces significant challenges in reviving demand and reducing costs. With its shares taking a hit, the company must regroup and refocus its efforts to regain investor confidence.
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