AI-Driven Demand for SiC Remains Limited; Beware of Substrate Price Wars

Overview

This report provides an in-depth analysis of the latest developments in the silicon carbide (SiC) industry across two key application areas: artificial intelligence (AI) data centers and electric vehicles (EVs). JPMorgan notes that, while robust market sentiment driven by AI has boosted valuations of SiC‑related equities, the actual magnitude of their contribution may be overstated. By disaggregating the incremental demand arising from power‑architecture upgrades in data centers—specifically the shift from AC to HVDC—the report quantifies AI’s true impact on the total addressable market (TAM) for SiC. In addition, the report meticulously tracks price trends for SiC substrates and devices, highlighting supply‑demand imbalances and price differentials across various wafer sizes and application scenarios, while also assessing the operational outlook of leading SiC manufacturers in China, the United States, and Japan.

Core views

AI data centers are emerging as a new growth driver for SiC, though economies of scale will take time to materialize. As data center rack power density continues to increase and power architectures shift from AC to high‑voltage DC (HVDC), SiC has found applications in infrastructure systems—such as UPS and SST—and in server-side power supplies (PSUs) due to its high efficiency and compact design. Industry research indicates that the lead time for AI‑specific SiC MOSFETs has extended to 52 weeks, and at the same specifications, their prices are at least twice those of automotive inverters. However, JPMorgan estimates that even if we assume a 100% HVDC penetration rate among the 80 GW of new AI data center capacity installed by 2028, the contribution of SiC devices to TAM would only reach between USD 400 million and USD 480 million. Given the mixed deployment of AC and HVDC systems, the actual contribution is likely to be even lower, with the share rising from the current low single-digit percentage to a mid-to-high single-digit percentage—making it difficult to achieve the optimistic 20–30% target projected by some analysts. Electric vehicles remain the core business, while intensified competition in the Chinese market has driven price declines. Global SiC device TAM is primarily driven by EVs, with projections indicating it will reach USD 4–4.5 billion by 2026. In China, falling SiC prices have spurred adoption across models priced at RMB 150,000 or higher. By 2025, China’s SiC EV shipments—excluding Tesla—reached 2.5 million units, and are expected to grow by 60% to over 4 million units in 2026, with the penetration rate increasing from 10–15% in 2025 to around 20% in 2026. Meanwhile, the price of SiC MOSFETs used in automotive inverters continues to decline rapidly; international IDM manufacturers’ quotes are projected to fall from USD 6.0–6.5 in 2024 to USD 2.5 in 2027, with even lower prices offered by Chinese suppliers. Although increased demand for AI has squeezed production capacity, extending vehicle SiC lead times from 26 weeks to 39–52 weeks and reducing negotiation frequency, if more Chinese suppliers obtain automotive-grade certification, prices are still expected to remain under pressure through 2027. Substrate prices are showing significant divergence, with 8-inch substrates facing ongoing downward pressure. Since early 2026, 6-inch SiC substrates have remained stable at around RMB 1,500 per unit. Some suppliers have halted production due to prices below cash costs, while leading manufacturers operate close to full capacity. However, overall industry overcapacity has hindered any price recovery. In contrast, 8-inch SiC substrates have continued to decline in price, dropping from RMB 7,000 at the beginning of 2025 to around RMB 4,000 in mid-2026, and are expected to fall to RMB 3,000–4,000 by the end of 2026, further decreasing to RMB 2,500–3,500 in 2027. Customers are seeking to maintain a price gap of no more than 1.7 times between 6-inch and 8-inch substrates, based on wafer area differences; even accounting for improved production efficiency, the price margin should not exceed 2.0 times. Increased yields and the effective supply from Chinese suppliers are the primary drivers behind these price declines. The report notes that major suppliers are unlikely to succeed in raising prices.

Analysis framework

The report employs a combined top-down and bottom-up analytical framework. First, it examines AI data center construction trends from a macro perspective, employing a “quantity–price breakdown” approach. By integrating rack power density, HVDC penetration rates, and the value of SiC per watt, the report estimates AI’s specific contribution to SiC TAM, thereby correcting for overly optimistic market sentiment. Second, at the micro level, it tracks real-time pricing, delivery schedules, and utilization patterns for SiC substrates and devices through high-frequency industry surveys, distinguishing supply–demand dynamics across different sizes (6-inch vs. 8-inch) and different applications (AI vs. automotive). Finally, by integrating each company’s capacity planning, customer certification progress, and financial guidance, the report assesses the actual impact of price fluctuations on corporate profitability, ultimately arriving at differentiated individual stock views.

Methodology notes

• Industry/Industrial Analysis FrameworkVolume-price decomposition

  Volume-Price Decomposition

  By decomposing market size into “volume” (e.g., data center installed capacity in GW, EV sales) and “unit price” (e.g., value per MW of SiC, price per discrete device), we project the respective trends to more accurately estimate future market potential. In this report, these metrics are employed to quantify the actual contribution of AI‑driven data centers to the overall SiC total addressable market (TAM).

• Industry/Industrial Analysis FrameworkSupply-demand framework

  Supply-Demand Framework

  The analysis examines the alignment between supply-side factors—such as production capacity, yield rates, and the number of suppliers—and demand-side dynamics—including order urgency and the expansion of application markets—for specific products like SiC substrates and MOSFETs, thereby assessing price trends and industry sentiment. Based on this framework, the report explains why SiC prices are rising for AI applications while falling in automotive sectors, and it also highlights the downward pricing pressure facing 8-inch wafers.

• Event Games and Behavioral FinanceExpectation Gap/Expectations Management

  Expectation Gap/Expectations Management

  Compare the market's general expectations (such as AI contributing 20-30%) with the independent estimates from institutions (single-digit low, medium, and high ranges) to identify any existing expectation biases. The report advises investors to ground their expectations and avoid overlooking the limitations of the actual contribution scale due to excessive enthusiasm.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• United Nova (Tianyue Advanced, 688469.SS)

  Benefits: As a leading SiC MOS supplier in China, the company stands to directly benefit from the growing demand for SiC in AI and automotive applications.

  Strengths

  With large-scale production capacity, 8-inch SiC MOS is being sampled to international AI server customers; if it passes certification, it can ease supply tensions.

  Comparison

  Compared with substrate manufacturers, the device segment has been relatively less affected by price wars, and UNT maintains a solid position in the automotive-grade market.

  Risks

  If international customer certification is not obtained, or if price competition in the automotive industry further intensifies.

• SICC (Tianke Heda, 688234.SS)

  Underperform/Prudent: A leading Chinese SiC substrate supplier, facing sustained downward pressure on 8-inch product prices.

  Strengths

  8-inch substrate capacity could double this year, with long-term benefits from data center and advanced packaging demand.

  Weaknesses

  The price of 8-inch substrates is expected to continue declining through 2026–2027, and the market’s pricing expectations for these products remain misguided.

  Comparison

  Compared with UNT, SICC is more directly exposed to the risks associated with the substrate price war.

  Risks

  The price of 8-inch substrates has fallen more than expected, and industry overcapacity has led to a squeeze in profit margins.

• Rohm (6963.T)

  Benefits: As the global leader in SiC IDM, the company is seeing a rising share of revenue from SiC MOSFETs for AI servers.

  Strengths

  FY26 SiC device/module revenue is expected to grow by 55%, with mass production of 8-inch wafers now underway and ongoing technological advancements driving yield improvements.

  Weaknesses

  The impairment charges recognized in FY25 will not lead to a return to profitability until FY28.

  Comparison

  Compared with pure-play substrate or device manufacturers, the IDM model enjoys greater advantages in supply-chain control and cost optimization.

  Risks

  8-inch mass production yield fell short of expectations, leading to changes in regional structure due to the decline in the share of xEV sales in China.

Key data

• 2028 Data Center SiC TAM Contribution$400–500 million or lessThe share of global SiC device TAM is expected to be in the mid-to-high single digits, lower than the market's expectation of 20-30%.
• 2026 Global SiC Device TAM$4.0-4.5bnMainly driven by the migration to 800V platforms for electric vehicles, with a year-on-year increase of approximately 25%.
• AI SiC MOS lead time52 weeksDue to strong AI customer orders and limited qualified capacity, delivery times have been significantly extended.
• 8-inch SiC Substrate Price Forecast (2027)Rmb 2.5-3.5kContinued decline, with the mid-2026 target at approximately RMB 4,000, driven by improved yields and increased supply from Chinese suppliers.
• 2026 China SiC EV Shipment Volume>4.0mn unitsYear-on-year growth exceeded 60%, with penetration rising to around 20%.
• Automotive SiC MOS Price Forecast (2027)~$2.5International IDM manufacturers’ quoted prices have been on a steady decline since 2024, from $6.0–6.5.

Impact & implications

For A-share companies, Tianyue Advanced (UNT), as China's leading SiC MOS supplier, is expected to benefit from robust demand, with its 2026 SiC MOS revenue projected to double to RMB 3 billion. If its 8-inch SiC MOS passes certification by international AI server customers, it will ease supply tensions and improve capacity utilization. Tianke Heda (SICC), as the leader in substrates, although benefiting from long-term demand from data centers and advanced packaging—and potentially doubling its 8-inch capacity this year—remains cautious about its stock price due to sustained downward pressure on 8-inch substrate prices beyond 2026, suggesting that the market may have misjudged its pricing outlook. As for Rohm, FY26 revenue is forecast to grow by 30%, with SiC devices/modules increasing by 55%. The revenue share from SiC MOSFETs for AI servers is expected to rise to 10%. The company plans to boost yields through mass production of 8-inch wafers and fifth-generation MOS technology, aiming to return to profitability by FY28.

Risks

• The actual penetration rate and contribution scale of SiC in AI data centers have fallen short of expectations.
• The price decline of 8-inch SiC substrates has exceeded expectations, severely squeezing suppliers’ profit margins.
• The competition in China's automotive SiC MOS market is intensifying, leading to a price war that will continue beyond 2027.
• If SiC suppliers expand capacity too rapidly, it could lead to an overall oversupply in the industry.

What to watch

• Tianyue Advanced (UNT): Progress in the certification of its 8-inch SiC MOS devices by international AI server customers
• Price Trends for 8-Inch SiC Substrates and the Implementation of Pricing Strategies by Major Suppliers
• Actual Penetration Rate Data for AI Data Center HVDC Power Supply Architectures
• China’s Monthly SiC EV Shipment Volume and Penetration Rate Trends