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On August 21, local time, Wolfspeed, a silicon carbide wafer manufacturer, announced its fourth-quarter financial report for 2024 ending June 30 after the U.S. stock market closed. The revenue for the quarter was approximately US$200.7 million, slightly lower than the analyst estimate of US$201.3 million compiled by FactSet;The company lost $174.9 million for the quarter, or $1.39 per share; its adjusted EPS loss was 89 cents per share, which was wider than analysts' estimate of 85 cents.

The consolidated revenue for the entire fiscal year 2024 is approximately US$807 million, a slight increase from US$759 million in the same period last year. However, the GAAP gross profit margin is 10%, far lower than 32% in the same period last year; the non-GAAP gross profit margin is 13%, also far lower than 35% in the same period last year; the full-year loss is US$864.2 million, and the loss per share is approximately US$6.88.

Although the overall performance was lower than expected, Wolfspeed expects that revenue from the electric vehicle market will triple this quarter, and the overall business will also be boosted by demand from AI data centers and solar energy. The news pushed Wolfspeed's stock price up nearly 6% to $14.31 per share in after-hours trading on the 21st. However, Wolfspeed's stock price has fallen 69% this year, making it the worst performing stock in the Philadelphia Semiconductor Index.

Wolfspeed CEO Gregg Lowe said at an analyst meeting that despite the decline in demand in the automotive semiconductor market, the company's electric vehicle business revenue has grown for three consecutive quarters because some automotive chip designs required for electric vehicles accumulated over the past 5-7 years are only now beginning to increase production.

Gregg Lowe also said that other important high-voltage power device industries and energy markets, such as AI and solar energy, will continue to turn to silicon carbide and increase the company's overall revenue. "We have only touched the surface of the possible uses of silicon carbide."

Regarding the company's performance loss, Gregg Lowe said:“We have two priorities: optimizing our short- and long-term capital structure and improving the performance of our state-of-the-art 200mm SiC wafer fab in the Mohawk Valley, and this quarter we made progress on both of those priorities.”“We achieved 20% utilization at our Mohawk Valley fab in June and continue to see strong revenue growth at the facility, contributing approximately $41 million of revenue in the quarter. Our 200mm fab is currently delivering solid results at a significantly lower cost than our 150mm fab in Durham. This improved profitability gives us the confidence to accelerate the transition of device manufacturing to Mohawk Valley fab while we evaluate the timing of closing the Durham 150mm fab. At JP, we also made great progress with the installation and activation of the initial furnace in the fourth quarter. We have processed the first batch of silicon carbide ingots from JP, and the quality is consistent with the high-quality material produced at Building 10.”

“At the same time, we are taking proactive steps to reduce capital expenditures by $200 million in fiscal 2025 and identifying areas across our business to reduce operating costs. We are also in constructive negotiations with the U.S. Department of Commerce’s ‘CHIPS Act’ Office on a preliminary memorandum of terms for subsidies. In addition to any potential capital grants under the ‘CHIPS Act’ program,Our long-term capital spending program is expected to generate more than $1 billion in cash refunds from IRS 48D tax credits, of which we have already accumulated approximately $640 million on our balance sheet.Gregg Lowe continued.

Looking ahead to this quarter (the first quarter of fiscal 2025), Wolfspeed expects a loss of $1.79 to $1.54 per share and revenue of $185 million to $215 million. Analysts surveyed by FactSet expected a loss of $1.17 per share and revenue of $210 million.

Regarding Wolfspeed's poor financial report, well-known analyst Lu Xingzhi said, "After seeing Wolfspeed's financial report numbers, I feel that this company may declare bankruptcy protection or be sold at a low price. It used to have a good hand, but now it has become a bad hand. I wonder how the company that takes over will find a way to turn around."

Lu Xingzhi also made the following observations:

1. Wolfspeed sells a silicon carbide wafer for $10,000, and the total cost is as high as $17,000, which is really not much different from the level of the PPT champion. Last time, I said that the PPT champion loses $6,550 for every $10,000 wafer sold, which means that the total cost of each wafer is $16,550 (TSMC sells each wafer for $10,000 and can still make $4,350, which means that the total manufacturing cost of each wafer is $5,650). It seems that the semiconductor manufacturing in the United States can only be supported by Texas Instruments (TI), Microchip, ADI, and On Semiconductor.

2. Wolfspeed currently has $2.2 billion in cash on hand. If capital expenditures of three times revenue remain unchanged, it will burn at least $600 million per quarter. Due to insufficient cash, the company continues to increase long-term debt, and its current net debt is 4.5 times its equity.

3. Wolfspeed has 6.7 months of inventory on hand. It is unknown how much of the finished product cost is above the market price, and it will recognize a loss on the depreciation in the future.

4. Wolfspeed plans to gradually replace the high-cost 6-inch factory with its 8-inch factory, which currently has a capacity utilization rate of only 20%. However, it feels that the market is clearly oversupplied, the expansion of electric vehicles in non-mainland markets has slowed down, and competitors continue to cut prices, which are the main problems.

5. The value of Wolfspeed is about to drop to zero. Why hasn’t the board of directors taken action against the CEO yet?