Recently, the U.S. silicon carbide chip manufacturer Wolfspeed has drawn widespread attention due to its financial difficulties, with rumors even suggesting that the company is about to file for bankruptcy. Its stock price plummeted by over 60% in after-hours trading. However, the reality is not as simple as it seems.

Bankruptcy Protection, Not Liquidation

Wolfspeed is facing financial challenges, but what it is considering is not bankruptcy liquidation, but rather the filing for Chapter 11 bankruptcy protection under the U.S. Bankruptcy Code. The core of Chapter 11 is reorganization, not liquidation. It provides a legal framework for companies in financial distress to adjust their debts, optimize operations, and continue their business under court supervision. Through Chapter 11, a company can restructure its debts, terminate unfavorable contracts, sell non-core assets, cut costs, and obtain new financing to improve its financial situation and sustain its operations.

Financial Struggles and Market Challenges

Wolfspeed's financial difficulties mainly stem from the weakening demand for electric vehicles and the slowdown in the industrial market. In the third quarter of the 2025 fiscal year, the company's revenue was $185 million, lower than the previous quarter's $201 million. Moreover, the company projects its revenue for 2026 to be $850 million, significantly below the analysts' expectation of $958.7 million. The uncertainty of the chip bill funding and the failure of convertible bond refinancing led to a 50% plunge in the company's stock price at the end of March.

Proactive Measures for Self-Rescue and Restructuring

Despite these challenges, Wolfspeed is actively seeking ways to turn the situation around. The company has rejected several out-of-court debt restructuring proposals in favor of a more comprehensive restructuring plan. Currently, Wolfspeed is engaged in multiple rounds of negotiations with its creditors. A proposal from junior creditors includes providing approximately $600 million for the refinancing of the convertible bonds due in 2026 and injecting new working capital. Additionally, the company plans to convert some of its outstanding convertible bonds and a loan from its largest customer, Renesas Electronics, into equity.

To improve efficiency and reduce costs, Wolfspeed announced a 20% workforce reduction and the closure of several factories in November 2024. In early 2025, the company transferred its device business to its 200-millimeter silicon carbide wafer facility to scale up production and enhance efficiency. Furthermore, the company has appointed new management, including Robert Feurle as CEO on March 27, who brings extensive experience in factory operations and management. His expertise is expected to help turn the company's situation around.

Market Position and Potential Acquisition

Despite its financial troubles, Wolfspeed's technological advantages and market position in the silicon carbide field remain attractive. According to TrendForce, Wolfspeed still held a 33.7% market share in the global N-type SiC substrate market in 2024, ranking first. Its long-standing presence in the silicon carbide sector makes it a potential acquisition target. The market speculates that Texas Instruments, ON Semiconductor, and other major U.S. analog power chip manufacturers might consider acquiring Wolfspeed, with Texas Instruments being the most likely candidate due to its need to complete its product line with silicon carbide technology.

Conclusion

Wolfspeed is currently in a financial predicament, but its consideration of bankruptcy protection is not a sign of the company's end. Instead, it is an opportunity to reorganize and revive. Through debt restructuring, operational optimization, and potential external support, Wolfspeed has the potential to overcome its current challenges and maintain its leading position in the silicon carbide industry.

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