rewrite this title Is Infineon Still the Best SiC Stock? – Nanalyze

During the gold rush, people didn’t just get rich by prospecting for gold in “them thar hills.” Others got rich by selling the picks and shovels used to support the rush. They profited whether the prospectors struck gold or not. In investing, a “picks and shovels” play is an investment in a company that supports a trend. Think of NVIDIA (NVDA) supplying the chips needed to power the AI revolution. We love pick and shovel plays because they provide us direct exposure to an exciting tech theme while diversifying their customer base across all key players.

That’s why we began to take an interest in the suppliers of power semiconductors that are used heavily in electric vehicles (EVs). After all, the EV market grew 25% in 2024 and is expected to grow at a double-digit compound annual growth rate over the next decade. Enter Silicon carbide (SiC), a key material used in electric vehicle chips as it’s energy efficient and supports faster charging and longer range for EVs. That’s where we started our search, and a report by Yole Group shows four companies commanding a majority of the current SiC market.

While the above chart appears tough to interpret at first glance, the concentric rings represent the progression of market share over each year (from 2021 to 2024). Let’s start with the one name on the list presently in the Nanalyze Tech Stock Catalog as a “like” – Infineon.

What’s New, Infineon?

After scouring a universe of SiC chip companies, we initially took an interest in Germany’s Infineon (IFX.DE). Originally spun off from Siemens, they’re now one of Europe’s largest chipmakers, and a leader in the automotive semiconductor market for things like safety and powertrain (getting the wheels to move.) They’re not necessarily a leader in SiC, but they’re a leader in power semiconductors for automobiles, and that includes EVs.

Last year we highlighted one major red flag that kept us from possibly starting a position in Infineon. Can you guess what it is? That’s right, little Johnny. No revenue growth. Companies in our Nanalyze Disruptive Tech Portfolio need to be showing double-digit revenue growth, or else they’re not really disrupting anything.

Looking at their most recent annual revenue guidance is disappointing to say the least. Infineon expects revenue for the full fiscal year to be around €14.6 billion, slightly down from the prior year, which means they’ll be on their second year of declining revenue growth. Revenues peaked in 2023 and have been downhill ever since.

It may be time for Infineon to play the old “macroeconomic headwinds” card. Their key market is automotive which makes up 56% of revenues, and the entire automotive sector has been in a cyclical downturn since roughly 2023. This lines up with Infineon’s peak. When your key market is automotive, you’re subject to the whims of fickle consumers, interest rates, and economic uncertainty (read: tariffs).

So, Infineon is off the table, at least for now. As SiC matures from premium to standard, their heavy investments in this space should result in an eventual leadership slot. That’s what management says anyways. But they’re not the only player in this space. Looking at the overall SiC market share, we can see two key players dominating with over half of total market share: STMicroelectronics (STM) at 29% share and On Semiconductor (ON), otherwise known as Onsemi, at 22% share.

STMicro Faces Competition

The leader, STMicro, has been consistently losing market share over time which boils down to rivals quickly scaling up production coupled with pricing pressures from China. Let’s start with that first point. STMicro used to boast a performance advantage in SiC chips which is measured by voltage. The higher the voltage, the greater efficiency in power handling. These days, they’re facing stiff competition. Wolfspeed’s (WOLF) best SiC chips clock in at 2,300 volts, followed by STMicro at 2,200, then Infineon at 2,000, and finally Onsemi at just 1,700.

Then there’s the giant panda in the room. China has rolled out huge subsidies for SiC companies, allowing them to undercut American and European peers. China hopes that by doing this, they’ll capture more market share and achieve domestic supply chain dominance. As a Swiss company, STMicro is having difficulty competing with a heavily subsidized Chinese product.

Looking at the ground truth for STMicro, they’re in the same boat as Infineon. Revenue peaked in 2023 and, based on the midpoint of guidance for Q4-2025, they’re on track to decline for a second year in a row.

Their “$20 billion ambition” has now been postponed to 2030 while an intermediate revenue target of $18 billion is slated for 2027-2028. While these growth targets represent more of a turnaround story, the SiC exposure you’re getting is questionably low. SiC products are included within the broader Power and Discrete (P&D) segment which made up 24% of total sales in 2024 (about $3.13 billion). Of that, $1.5 billion is said to be SiC revenues. This matches with Grok’s estimates of SiC contributing about 12% of total revenues for STMicro in 2025.

Onsemi’s Failed Acquisition

Hot on the heels of STMicro is U.S.-based On Semiconductor, which unlike STMicro, is steadily increasing their share of the SiC market over time. This can be explained by their large acquisition of GT Advanced Technologies back in 2021. GT was a producer of crystalline materials like SiC, and Onsemi bought them on a discount after they declared bankruptcy. This helped Onsemi secure a big supply of SiC, allowing them to ramp up production of chips during the height of the EV boom.

Speaking of acquisitions, On actually tried to acquire another EV chip company called Allegro Microsystems (ALGM) back in March but pulled their offer in April after Allegro’s board dragged their feet for too long. It’s a shame because Allegro’s leading position in magnetic sensors and specialized power management chips for automotive applications would have made a nice complementary addition to On’s portfolio. Onsemi’s revenue trajectory looks identical to Infineon and STMicro. Nothing to see here until they return to double-digit growth, though we like their expanding market share.

One company that offered pure play exposure with lots of promise recently imploded which shows just how risky “build it and they will come” business models can be.

The Wolfspeed Implosion

We can’t talk about SiC chips without mentioning the absolute mess that is Wolfspeed. We used to “like” the stock due to their exposure to both SiC chips as well as gallium nitride (GaN), which are said to be able to handle higher voltages and temperatures than traditional silicon chips. (Note that Infineon also offers exposure to both SiC and GaN.)

However, we quickly moved them to an “avoid” after the company took on way too much debt to fund a factory that was consistently underutilized. We expressed concerns with their growing pile of debt, mounting losses, falling gross margin, and inability to execute. That perfect storm led to Wolfspeed declaring Chapter 11 bankruptcy in June. The company was later bailed out in September after creditors agreed to forgive the majority of Wolfspeed’s debt in exchange for a majority equity stake in the company. Previous shareholders of Wolfspeed were massively diluted through a 120-1 reverse stock split and ended up owning less than 5% of the company post-bankruptcy. Despite much of their debt being cancelled, our concerns about the factory ramp-up remain. We wouldn’t touch this company with a 10-foot pole.

Investing in EV Chips

Besides being heavily cyclical, these companies are also IDMs, or integrated device manufacturers. That means they both design the chips and manufacture them. This means they control the entire SiC manufacturing process, from the base material to the final packaging. That’s the bright side. The downside is they’re subject to high capital expenditures to make sure their fabrication plants are up-to-date. That equates to a reduction in free cash flow versus a fabless “design only” model like NVIDIA has. It also puts a damper on gross margins. STMicro, Onsemi, and Infineon all have gross margins in 30% range. While low gross margins tend to come with lower valuations, we prefer to see stronger gross margins that imply a higher potential for profitability.

Another problem lies in the inherent nature of chip companies which often have multiple segments targeting numerous industries. While internal revenue diversification insulates these companies from industry downturns, it also mutes strong growth in a niche segment. Strong SiC revenue growth won’t move the needle much if all other segments are in decline. That’s why Wolfspeed was so attractive at one point. All their revenues came from providing SiC wafers which are the foundation of the entire thesis. Of course that didn’t pan out well for them, and other companies also produce wafers.

Aside from Wolfspeed, the other names discussed today all have seen revenues declining over time. Sure, automotive macroeconomic headwinds have impacted everyone across the board, but right now the SiC thesis is all about the promise of future growth. Our original thesis was to capitalize on the growth of electric vehicle chips, but since then we’ve invested in the world’s largest producer of electric vehicles. So perhaps it’s time to leave the entire SiC thesis alone until it shows some signs of life. By 2029 it’s expected to reach a $10 billion opportunity so it’s not even that large, though next year a “strong rebound” is anticipated.

Conclusion

Is the SiC thesis worth investing in? The question almost feels pointless now since none of the key players are showing any growth. One could argue Infineon is the best due to their leadership in overall automotive power chips. You could also point to STMicro and their market leadership in SiC. Or you could make the case for Onsemi, which appears to be stealing market share the fastest. Regardless of which is best, they’re all difficult to justify investing in without something that resembles consistent growth. And if we could look past that, it’s too hard to pinpoint a leader in this capital-intensive low-margin IDM space.