Coherent (COHR) stock confirmed a double bottomThe double bottom chart pattern is a reversal pattern that indicates the exhaustion of a downward trend and the potential for an upward trend. More reversal on October 10, 2023, after the company announced a $1 billion investment from Denso and Mitsubishi Electric.
On October 10, 2023, Coherent announced that DENSO CORPORATION and Mitsubishi Electric Corporation have agreed to invest an aggregate $1 billion in its silicon carbide (SiC) business.
Silicon carbide, also known as SiC, is a compound composed of silicon and carbon. It has a wide range of applications due to its exceptional properties. Silicon carbide has unique electrical properties, making it a suitable material for semiconductor electronics. It is used in high-power electronics, such as power converters, high-voltage devices, and LEDs. SiC has excellent thermal conductivity and can withstand high temperatures, making it suitable for energy applications. It is used in solar energy systems, nuclear reactors, and as a heating element in furnaces. SiC is transparent in certain wavelengths of light and has a wide bandgap, making it suitable for optoelectronic applications. It is used in the production of ultraviolet LEDs, optical windows, and mirrors.
According to the agreement, DENSO and Mitsubishi Electric will each contribute $500 million in exchange for a 12.5 percent non-controlling ownership interest in the business, with Coherent holding the remaining 75% of the shares. Coherent will separate and contribute the Business to a subsidiary before the transaction is finished. The Business will continue to be managed by Sohail Khan, Coherent’s Executive Vice President for New Ventures and Wide-Bandgap Electronics Technologies, under the control and direction of Coherent.
To support their need for 150 mm and 200 mm silicon carbide (SiC) substrates and epitaxial wafers, DENSO and Mitsubishi Electric will receive long-term supply agreements from the Business as part of the transaction.
“We are excited to expand our strategic relationships with DENSO and Mitsubishi Electric to capitalize on the significant demand for silicon carbide,” said Dr. Vincent D. Mattera, Jr., Chair and CEO, Coherent. “After a thorough review of strategic alternatives for our Silicon Carbide business, we determined that the creation of a separate subsidiary and the strategic investments from DENSO and Mitsubishi Electric, two leaders in SiC power devices and modules, is the best path forward to maximize shareholder value and position the Business for long-term growth. The investments from our strategic partners will be used to accelerate our capacity expansion plans and help sustain our leadership position, while ensuring the development of a robust and scalable supply for the rapidly growing market for SiC-based power electronics, largely driven by the explosive growth of the global electric vehicle market.”
“We are very pleased to establish a strategic relationship with Coherent, which has a world-class track record in SiC wafer manufacturing. Through this investment, we will secure a stable procurement of SiC wafers, which are critical for BEVs, and contribute to the realization of a carbon-neutral society by promoting the widespread adoption of BEVs,” said Shinnosuke Hayashi, President & COO, Representative Member of the Board at DENSO.
Dr. Masayoshi Takemi, Executive Officer, Group President, Semiconductor & Device of Mitsubishi Electric, said: “Demand for SiC power semiconductors is expected to grow exponentially as the global market for electric vehicles increases in line with the transition to a decarbonized world. To capitalize on this trend, we have decided to expand our SiC power semiconductor production capacity, including by constructing a 200 mm wafer plant in the Shisui area of Kumamoto Prefecture. We are delighted to strengthen our partnership with Coherent by investing in this new SiC company, which will provide us with a stable supply of high-quality SiC substrates essential for our increased supply capacity.”
According to market projections, the total addressable market for SiC will increase from $3 billion in 2022 to $21 billion in 2030, or a 28 percent compound annual growth rateThe world of finance is replete with complex concepts, but one that stands as a cornerstone for investors seeking to gauge returns is the Compound Annual Growth Rate (CAGR). Often ....
The transaction expands on the more than 20 years of proven leadership in SiC materials by Coherent. In order to address this underserved market, the company has aggressively invested to scale its manufacturing of 150 mm and 200 mm substrates.
In order to fulfill its 10-year, $1 billion commitment announced in August 2021, Coherent has made significant investments in capital and R&D for SiC over the past two years. The completion of this combined $1 billion investment in the business will hasten the company’s capital plans in the upcoming years. In particular, the investment will support the business’s expansion of its substrate and epitaxial wafer manufacturing, which will strengthen its market position when combined with the concurrent supply agreements.
As a result of the transaction, Coherent will have more free cash flowThe cash flow statement provides a detailed overview of the cash inflows and outflows of a company over a specified period of time. It includes cash received from operations, inves... More available to it, giving it more financial and operational flexibility to carry out its capital allocation priorities. Coherent anticipates that the total investment of $1 billion will be used to meet the Business’s future capital expenditureIn the realm of corporate finance, Capital Expenditure (CapEx) play a crucial role in shaping the future trajectory of a company. From acquiring new assets to upgrading existing in... needs.
SiC-based power electronics have shown the potential to significantly reduce carbon dioxide emissions and hasten the transition to a cleaner and more energy-efficient world when integrated into electric vehicles and industrial infrastructure. Coherent, DENSO, and Mitsubishi Electric will hasten their contribution to sustainable energy consumption and the decarbonization of society through the quickly expanding demand for SiC power devices.
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