Wolfspeed Forecasts Lower Revenue Amidst Slowdown in the EV Market
Silicon carbide chip manufacturer Wolfspeed (NYSE:WOLF) reported a revenue forecast that fell short of analysts' expectations, citing a decline in demand from automotive customers. Following the announcement, the company's stock dropped 15% in after-hours trading.
The chip maker, which supplies major automotive companies like General Motors (NYSE:GM) and Mercedes-Benz (OTC:MBGAF), is struggling with a slowdown in electric vehicle (EV) sales that has led to decreased demand for its products. Wolfspeed's silicon carbide chips are known for their higher energy efficiency compared to traditional silicon chips.
In response to market conditions, Wolfspeed recently halted plans to build a new factory in Ensdorf, Germany. This decision was made last month due to the underwhelming expectations for EV adoption in Europe. This move reflects a broader industry trend, with competitor ON Semiconductor (NASDAQ:ON) also forecasting revenue and profit below market estimates for the fourth quarter.
Wolfspeed expects revenue from continuing operations for the second quarter to be between $160 million and $200 million. Analysts had estimated revenue to be around $214.6 million. The company also anticipates an adjusted quarterly loss per share of between 89 cents and $1.14, in line with the 90-cent loss estimate per share.
Wolfspeed is facing rising costs as it transitions from its 150mm chip production facility in Durham to a more advanced 200mm chip facility in Mohawk Valley. This transition is part of the company’s strategy to focus on more efficient manufacturing plants. As a result, Wolfspeed will incur $174 million in restructuring costs this quarter, following similar costs of $87.1 million recorded in the financial first quarter ending September 29, which also included severance expenses.
The company’s first-quarter revenue also fell short of expectations, with the Mohawk Valley facility contributing approximately $49 million, consistent with the previous quarter's performance. The facility has yet to reach full capacity.
Last month, Wolfspeed announced it would receive up to $750 million in funding under the CHIPS and Science Act. This federal support aims to assist in the expansion of its chip factory in North Carolina and the Mohawk Valley facility, demonstrating ongoing investment in operational capabilities despite current market challenges.