Automotive Semiconductor

Coherent secures $1B investment from Denso & Mitsubishi Electric

PITTSBURGH, Oct. 10, 2023 (GLOBE NEWSWIRE) – Coherent Corp. announced that DENSO CORPORATION and Mitsubishi Electric Corporation have agreed to invest an aggregate $1 billion in its silicon carbide business. The transaction results from the strategic review process announced in May 2023 for the Business.

Under the terms of the transaction, DENSO and Mitsubishi Electric will each invest $500 million in exchange for a 12.5% non-controlling ownership interest in the Business. Coherent will own the remaining 75%. Prior to the completion of the transaction, Coherent will separate and contribute the Business to a subsidiary. Coherent will control and operate the Business. The Business will continue to be led by Sohail Khan, Coherent’s Executive Vice President, New Ventures & Wide-Bandgap Electronics Technologies.

In connection with the transaction, the Business will enter into long-term supply arrangements with DENSO and Mitsubishi Electric. Moreover, these arrangements will support their demand for 150 mm and 200 mm silicon carbide (“SiC”) substrates and epitaxial wafers.

“We are excited to expand our strategic relationships with DENSO. We are also excited to expand our strategic relationship with 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 is the best path forward. This will help maximize shareholder value and position the Business for long-term growth. Furthermore, the strategic investments from DENSO and Mitsubishi Electric, two leaders in SiC power devices and modules, will support our objectives. We designed this approach to maximize shareholder value and position the Business for long-term growth.”

He also added, “Our strategic partners will invest to accelerate our capacity expansion plans and help sustain our leadership position. This will ensure the development of a robust and scalable supply for the rapidly growing market for SiC-based power electronics. This market growth is largely driven by the explosive growth of the global electric vehicle market.”

“We are very pleased to establish a strategic relationship with Coherent. Coherent 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. Moreover, this will 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. Furthermore, the increasing global market for electric vehicles drives this growth, aligning with the transition to a decarbonized world. To capitalize on this trend, we have decided to expand our SiC power semiconductor production capacity. This expansion includes 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. Moreover, this company will provide us with a stable supply of high-quality SiC substrates essential for our increased supply capacity.”

Strategic Rationale

Market estimates indicate that the SiC total addressable market will grow from $3 billion in 2022 to $21 billion in 2030. It represents a 28% compound annual growth rate.

The transaction builds on Coherent’s more than two decades of demonstrated leadership in SiC materials. In recent years, the Company has aggressively invested to scale its manufacturing of 150 mm and 200 mm substrates. This aim to address this underserved market.

Over the past two years, Coherent has invested aggressively in capital and R&D for SiC. This investment is part of its 10-year, $1 billion commitment announced in August 2021. Furthermore, the closing of this $1 billion combined investment into the Business will accelerate the Company’s capital plans in the coming years. Specifically, the investment will fund the manufacturing expansion of the Business’s substrates and epitaxial wafers. In combination with the concurrent supply agreements, enhance its position in the market.

The transaction will enable Coherent to increase its available free cash flow, providing greater financial and operational flexibility. Furthermore, Coherent anticipates using the $1 billion aggregate investment to fund the Business’s future capital expenditure requirements. This will help Coherent execute its capital allocation priorities.

When incorporated into electric vehicles and industrial infrastructure, SiC-based power electronics have demonstrated the potential to significantly reduce carbon dioxide emissions. This can accelerate the transition to a cleaner and more energy-efficient world. Moreover, through the rapidly growing demand for SiC power devices, Coherent, DENSO, and Mitsubishi Electric will accelerate their contribution to sustainable energy consumption. They will also accelerate their contribution to the decarbonization of society.

Additional Transaction Details

It expect to close the transaction in the first quarter of the calendar year 2024.

BofA Securities and Allen & Company LLC served as financial advisors to Coherent. Wachtell, Lipton, Rosen & Katz, Covington & Burling, and Sherrard, German and Kelly served as legal advisors to Coherent.

Coherent will hold a webcast for investors, equity analysts, and the public on Tuesday, October 10, 2023, at 4:30 p.m. ET to discuss this transaction. Moreover, Individuals wishing to view the webcast can access the event at Coherent’s website by visiting or via this link. We will record the event and make a replay available for a limited time.

Coherent Revises First Quarter Fiscal 2024 Revenue Outlook

Also today, Coherent revised its first quarter fiscal 2024 revenue guidance to $1,050M – 1,055M. Moreover, this revision was made from the previously provided guidance on August 15, 2023, which was $1,000M – 1,100M.

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