TOKYO -- Materials group Showa Denko has signed a two-year contract with Infineon Technologies to supply the German chipmaker with silicon carbide wafers, a crucial input for power semiconductor devices used in electric vehicle chargers and solar power generation, the Japanese company said Thursday.
The deal gives Showa Denko -- the world leader silicon carbide (SiC) wafer sales -- a clearer picture of demand for its investment plans through Infineon's commitment to yearly minimum purchase. For Infineon, the world's top maker of power semiconductors, the agreement addresses procurement constraints by giving it an assurance of supply volume.
The supply deal comes amid rising global demand for power semiconductors as a key component in technologies for reducing global dependence on fossil fuels.
The two companies will also collaborate in developing SiC materials. With Infineon, Showa Denko expects to "accelerate improvement in quality of products by bringing together the two companies' knowledge," it said in a news release.
Power semiconductors handle large currents of electricity. The market for such devices will grow 40% between 2020 and 2025 to reach $24.3 billion, according to a forecast from the Yano Research Institute.
Infineon holds a roughly 20% global market share in power semiconductor devices, well ahead of the 5% or so held by Japanese rivals Mitsubishi Electric and Toshiba.
SiC wafers offer higher heat dissipation properties than conventional silicon wafers, so they have lower cooling requirements. This contributes to making equipment smaller.
"The expansion of our supplier base with Showa Denko for wafers in this growth market marks an important step in our multi-sourcing strategy," Peter Wawer, president of Infineon's industrial power control division, said in a statement. "It will support us to reliably meet the growing demand mid to long term."