The production of power silicon wafers is shifting from 200mm to 300mm, while silicon carbide (SiC) wafers, crucial for efficient power conversion, are expanding from 150mm to 200mm to support the production of next-generation devices. 

Both expansions increase yield and reduce the cost per device, accelerating the replacement of traditional diodes and transistors by silicon carbide MOSFETs in numerous applications for more efficient systems.

This production shift is influenced by regional dynamics, with Chinese manufacturers moving faster than power device manufacturers in other regions, particularly in building or upgrading production facilities, thanks to strong government support.

In fact, over the past few years, China has strategically closed the gap in bare chip manufacturing, expanded its packaging capabilities, and increased the global market share of domestic IDMs (Integrated Device Manufacturers). 

The results are evident: China has transformed from a system integrator into a competitor in the fields of silicon-based and wide-bandgap power device technology.

Why should we discuss vertical integration?

Over the past few years, collaborative projects have proliferated. By integrating wafer fabrication, device manufacturing, and packaging, companies are competing on cost and technology levels, often narrowing the gap between Chinese companies and established global suppliers. This has exacerbated cost pressures on global power electronics manufacturers.

However, not all power electronics sub-markets are equally complex or have the same profit margins. Taking ULE Group as an example, we can cite two sub-markets: power modules and power management solutions.

The exponential growth of the power module market is closely linked to the production of electric vehicles. In 2018-2019, manufacturers consistently used the highest quality components and materials; now, with the gradual reduction in cost and quality trade-offs, manufacturers are striving to keep costs at a level that satisfies customers. The "good enough" strategy has reduced manufacturing costs but has also put significant pressure on profit margins.

On the other hand, in the power management solutions field, low-cost, low-functionality standard power management integrated circuits (PMICs) are still primarily manufactured by foundries, with design goals focused on scaling and improving efficiency. In contrast, multi-channel or multi-functional PMICs designed for niche, high-value applications with small production volumes require higher levels of integration, proprietary intellectual property, and specialized technology. These demands are increasingly being met by integrated device manufacturers (IDMs), who can selectively scale up their products while protecting their own intellectual property.

As China strives for self-sufficiency amid ongoing risks to global trade flows, its influence in the power electronics sector is growing: the technological capabilities of Chinese companies are remarkable.

All of this indicates that China is not merely chasing commodity components; it is consciously moving into more technologically advanced and intellectual property-sensitive areas where competitive advantages are harder to replicate.

Geopolitics reshapes the competitive landscape

The current geopolitical environment has introduced additional volatility into the power electronics market. Cross-border mergers and acquisitions are becoming increasingly difficult when strategic technologies are involved. Even deals between EU and US companies can be blocked if they involve intellectual property related to any form of military application.

A notable example is the failed 2017 acquisition of Wolfspeed by Infineon Technologies of Germany. Due to the military relevance of Wolfspeed's SiC technology, US regulators halted the acquisition for national security reasons.

Another example is the ongoing Nexperia case (Chinese-owned, headquartered in the EU), in which the Dutch government only intervened last October.

However, cooperation remains possible within a controlled framework. Well-structured, regulatory-compliant strategic partnerships are increasingly becoming a viable path forward. For example, the alliance between US-based ON Semiconductor and Innoscience demonstrates that knowledge and capabilities can be securely shared, accelerating innovation while mitigating risk.

The impact on global supply chains is evident. Chinese investment reduces its reliance on traditional suppliers in Europe, Japan, and the US. With the increasing application of silicon carbide (SiC) in the automotive and industrial sectors, global companies need to rethink their procurement, risk management, and collaboration strategies.

China's rise also highlights a structural shift in the power electronics industry. Today, success no longer depends solely on competing on cost or scale, but on mastering advanced processes, protecting intellectual property, and navigating a complex geopolitical environment.

Source: Compiled from yole

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