Mitsubishi Electric to Invest $1 Billion in its Supplier Coherent

Coherent, a key supplier of materials used to create chips for the automobile sector in the United States, announced on Oct 10 that Denso and Mitsubishi Electric of Japan will invest $1 billion in the company's silicon carbide division.

According to the agreement, Denso and Mitsubishi Electric would each contribute $500 million in exchange for a 12.5% non-controlling stake in Coherent's subsidiary. According to LSEG data, Coherent, which manufactures lasers and switches for circuits, has a market value of $4.69 billion and $4.4 billion in total debt as of fiscal 2023.

The investment would alleviate the financial burden for Coherent, which had explored a strategic review of its silicon carbide business in May. The agreement aligns with the company's plans to invest $1 billion over the next ten years to expand its production of silicon carbide wafers, which help boost the range of electric vehicles more than chips made with traditional silicon. Silicon carbide chips are utilised in applications that demand a large amount of power conversion, such as inverters and electric vehicle drivetrains.

"Demand for SiC power semiconductors is expected to grow exponentially as the global market for electric vehicles expands in line with the transition to a decarbonized world," stated Masayoshi Takemi of Mitsubishi Electric in the announcement.

According to Reuters, four Japanese corporations, including Hitachi Ltd and Sumitomo Electric Industries Inc, have expressed interest in acquiring a minority position in the Pittsburgh, Pennsylvania-based company.