Coherent (COHR.N), a major U.S. supplier of materials that are used to produce chips for the automobile industry, announced on Tuesday that Japanese companies Denso (6902.T) and Mitsubishi Electric (6503.T) will each invest one billion dollars in the company’s silicon carbide business. Coherent is a provider of materials used to make chips for the automotive industry.
According to the terms of the deal, Denso and Mitsubishi Electric will each invest $500 million in exchange for a 12.5% non-controlling ownership stake in the unit owned by Coherent.
According to LSEG statistics, as of the end of the company’s fiscal 2023, Coherent had a market value of $4.69 billion and a total debt load of $4.4 billion. Coherent is a manufacturer of lasers and switches for circuits.
Coherent, which conducted a strategic evaluation of its silicon carbide business in May, would experience a reduction in its current level of financial strain due to the investment.
The arrangement is in keeping with the company’s ambitions to invest one billion dollars over the next ten years to grow its manufacturing of silicon carbide wafers. These wafers in increasing the range of electric cars more than chips created with ordinary silicon, so the partnership aligns with those objectives.
Chips produced with silicon carbide are utilized in applications that demand a large number of power conversions, such as inverters and drivetrains in electric cars. These applications make use of the chips for a variety of reasons.
“Demand for SiC power semiconductors is expected to grow exponentially as the global market for electric vehicles increases in line with the transition to a decarbonized world,” Masayoshi Takemi of Mitsubishi Electric said in the announcement. “This is in line with the transition to a world free of carbon.”
According to a story that was published by Reuters the previous month, a group of four Japanese companies, including Hitachi Ltd (6501.T) and Sumitomo Electric Industries Inc (5802.T), have expressed interest in purchasing a minority position in the company that is situated in Pittsburgh, Pennsylvania.
