THE COWEN INSIGHT
Efficient high-voltage power conversion/transmission is a gating factor to clean energy adoption in multiple industries. Compound semiconductors will capture and create value by both accelerating adoption of these applications and disrupting the current analog/mixed signal ecosystem. We examine the burgeoning compound semiconductor market, in particular Silicon Carbide (SiC) and Gallium Nitride (GaN).
THE IMPACT OF ENERGY TRANSITION ON THE POWER SEMIS MARKET
The intersection of increasingly stringent CO2 emission regulations, consumer awareness, and acceptance of electric vehicles, coupled with demand for economical renewable energy, is changing the landscape in the power semis market. Instead of being stored in fossil fuels and generated from their combustion, energy is being created, transmitted, and stored in ways that require more advanced technology solutions. This would include silicon and compound semiconductors. We argue that many of these applications are being inhibited by inefficient and expensive high voltage power transmission and conversion. Wide bandgap compound semiconductors, SiC and GaN, can help solve these challenges.
Though silicon-based innovation continues, we see silicon-based power devices approaching the theoretical operating limits of power density as power demands continue to rise. We forecast the market for silicon (IGBT and medium voltage MOSFETs) still growing through the decade, serving a critical role due to its reliability, scale and cost advantages. That said, we see a larger incremental opportunity for wide bandgap compound semis in high-growth and emerging power conversion applications.
THE COMPOUND & POWER SEMICONDUCTOR SUPPLY/DEMAND ECOSYSTEM
We collaborated with seven Cowen senior analyst teams across semis, mobility, energy, networking, and ESG/policy to form a comprehensive view of the compound and power semis supply/demand ecosystem. Using conservative assumptions, we believe current water shipment projections will be insufficient to service demand, and the industry will remain constrained well into the latter half of the decade.
We untangle an intermingled supply chain that is seeing competition collide due to widespread vertical integration. In particular, a tipping point in EV adoption driving material power semiconductor growth for at least the next decade is anticipated. We anticipate burgeoning compound semis content growth in a broad group of industrial applications, including EV charging stations, inverters for renewables, aviation, data center power, and 5G infrastructure.
WHAT TO WATCH
- The battle between materials providers and device manufacturers as both look to vertically integrate
- Design win announcements from automotive OEMs
- Capacity and CapEx investment plans
- Regulatory-driven EV and renewables adoption
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