US military offers Wolfspeed up to $1.5bn conditional loan to secure radar chip supply

The Department of War has offered US chipmaker Wolfspeed a conditional commitment for a loan of up to $1.5 billion to strengthen domestic supply of materials used in radars and electronic warfare systems. The department's Office of Strategic Capital (OSC) announced the commitment on 7 October.

Wolfspeed makes silicon carbide (SiC) wafers and SiC power devices. It also makes gallium nitride (GaN) on silicon carbide wafers. The department described these as wide bandgap semiconductor materials with critical military and commercial uses.

The commitment is not yet a completed loan. The release said Wolfspeed must meet a range of financial and legal requirements before the financing can close. Technical and due diligence requirements also apply. The company said in a filing that there is no assurance that final agreements will be signed or that the money will be provided.

Wolfspeed said the financing would build on its manufacturing footprint in North Carolina, New York and Arkansas. The company listed several planned uses. One is upgrading its GaN technology for communications and electronic warfare. Another is building domestic production of GaN power devices. The company also plans to develop radiation-hardened versions of its chips.

Chief executive Robert Feurle said, "SiC and GaN have critical national security applications."

Why the military wants these chips

The War Department said the materials are used in high-performance propulsion systems and directed energy weapons. It said they also go into drones and electronic warfare systems. Radars and missile defence systems are on the list too. The department said SiC and GaN are used in next-generation power and radio frequency applications.

The department linked the move to the administration's push to bring semiconductor production back to the United States. It said the loan, combined with private capital, would help secure the US supply chain for these materials.

Emil Michael, the Under Secretary of War for Research and Engineering, said the office was advancing the president's priority of supporting the domestic semiconductor supply chain. David Lorch, the director of the Office of Strategic Capital, said the investment would help build a secure domestic supply chain for SiC and GaN. He said that would benefit the department and the wider US defence industrial base.

A company recently through bankruptcy

The commitment comes just over a year after Wolfspeed came out of Chapter 11 bankruptcy. The company filed for Chapter 11 on 30 June 2025. It emerged on 29 September 2025 after a court confirmed its prepackaged restructuring plan, according to its filings with the US Securities and Exchange Commission.

Wolfspeed's chief financial officer, Gregor van Issum, called the conditional commitment another milestone in reshaping the company's capital structure. The company is based in Durham, North Carolina, where it issued its own announcement on the same day.

In our assessment, the move shows the War Department is willing to use long-term credit to support a strategic supplier's US manufacturing base. Under the terms set out below, the department would also gain a potential stake in any recovery.

How the financing would work

The proposed loan would have a 30-year term. The initial $600 million tranche would refinance Wolfspeed's first-lien secured notes due in 2030 and cover transaction costs. Up to $900 million more would follow in later tranches to fund the production programme.

Under the proposed terms, Wolfspeed would have to contribute at least $750 million from qualifying sources, subject to OSC review. These could include new equity, excess cash and debt converted into equity. The department would receive warrants to purchase up to 7.5 per cent of Wolfspeed's fully diluted equity, issued proportionately as each tranche is funded. The company would also have to keep its headquarters in the United States, with a majority of US citizens on its board.

Delivering the production programme will depend on the financing closing. Wolfspeed must then meet the conditions for later drawdowns and carry out its manufacturing plans.