(Reuters) – Coherent, a major U.S. supplier of materials used to make chips for the automotive industry, said on Tuesday Japan’s Denso and Mitsubishi Electric will invest $1 billion in the company’s silicon carbide business.
Denso and Mitsubishi Electric will invest $500 million each in exchange for a 12.5% non-controlling ownership interest in Coherent’s unit, as per the agreement.
Coherent, which makes lasers and switches for circuits, has a market value of $4.69 billion and carries $4.4 billion in total debt as of fiscal 2023, according to LSEG data.
The investment would alleviate the financial burden for Coherent, which had explored strategic review of its silicon carbide business in May.
The agreement is in line with the company’s plans to invest $1 billion over the next 10 years to expand its production of silicon carbide wafers, which help boost the range of electric vehicles more than chips made with traditional silicon.
Chips made with silicon carbide are used in applications that require massive quantity of power conversion such as inverters and drivetrains in electric vehicles.
“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,” Mitsubishi Electric’s Masayoshi Takemi said in the release.
Last month, Reuters reported that the Pittsburgh, Pennsylvania-based company has attracted interest from four Japanese conglomerates including Hitachi Ltd and Sumitomo Electric Industries Inc to acquire a minority stake in the business.
(Reporting by Priyamvada C in Bengaluru; Editing by Sherry Jacob-Phillips)