Former silicon carbide giant Wolfspeed is preparing to file for bankruptcy, and U.S. stocks plunge 60% after the market

Source: Wall Street News

Semiconductor supplier Wolfspeed is preparing to file for bankruptcy protection, with its stock price plunging over 60% and record short put option trading.  

On the evening of May 20th (U.S. stock after-hours), media reported that U.S. chipmaker Wolfspeed is preparing to file for bankruptcy protection within weeks as it struggles with a debt crisis. After rejecting multiple out-of-court debt restructuring proposals from creditors, the company plans to file for Chapter 11 bankruptcy protection, an application that will be supported by most of its creditors.  

As a silicon carbide (SiC) chip manufacturer, Wolfspeed earlier this month expressed concerns about its ability to continue operations and forecast its annual revenue would fall below expectations. The company projects 2026 revenue to reach $850 million, far lower than analysts' expected $958.7 million. Previously, in late March, Wolfspeed's stock price plunged 50% due to pending Chip Act funding and受阻 (blocked) convertible bond refinancing. Following Tuesday's bankruptcy restructuring news, Wolfspeed's after-hours stock price plummeted 60%.  

According to reports, traders significantly increased bearish bets on Wolfspeed on Tuesday. Nearly 70,000 July-dated put option contracts (equivalent to 7 million shares) were actively traded, with most transactions occurring in the final half-hour before the market close. Total put option trading hit a record 363,000 contracts. If this price level holds on Wednesday, put option buyers could reap substantial profits.  

**The Once Silicon Carbide Giant Now Faces Imminent Bankruptcy**  

As the owner of the world's first 8-inch silicon carbide wafer factory, Wolfspeed was once highly renowned.  

Originally the third-generation compound semiconductor division of Cree, the company's technology was initially commercialized in the LED market, dedicated to driving innovations in LED lighting.  

Since 2017, Cree has strategically shifted its focus to the Wolfspeed division, providing development funds for its core power and radio frequency (RF) businesses. In October 2021, Cree officially renamed itself Wolfspeed, focusing on R&D and innovation in third-generation compound semiconductors.  

In recent years, demand for silicon carbide semiconductor applications in new energy vehicles, photovoltaics, energy storage, industrial control, and other fields has indeed brought enormous growth expectations to Wolfspeed. Particularly, the surging demand for silicon carbide in the new energy vehicle industry—now accounting for over 60% of global SiC demand—has boosted the sector's development.  

Driven by the global silicon carbide industry's capacity expansion wave and the U.S. CHIPS and Science Act, Wolfspeed took the lead in investing heavily in SiC, including capacity construction at its Mohawk Valley 8-inch SiC wafer factory, expansion at its 6-inch SiC wafer Durham factory, and construction of a new materials plant (JPSilerCity). Neil Reynolds once stated that the fiscal years 2021–2024 are the most critical investment period, with the company executing its capacity expansion plan.  

However, the new energy vehicle market—considered the largest market for silicon carbide—has not delivered the expected massive orders. Recent slowing demand for pure electric vehicles in Europe and the U.S. has caused many automakers to delay automotive-grade semiconductor orders. Yole analysis shows that short-to-medium-term demand slowdown in the EV market in 2024 has significantly impacted the SiC device market.  

Over the past year, Wolfspeed has fired its CEO, closed a factory, and laid off 20% of its workforce to address a stock price collapse of over 90% from its pandemic-era peak. On March 7 this year, Wolfspeed disclosed in an SEC filing that it would lay off an additional 180 employees, primarily at its Durham and Siler City, North Carolina factories.  

Investment firm Jana Partners believes management's missteps in capital allocation, execution, and strategy have caused severe operational issues and continuous stock price collapse at Wolfspeed.  

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