US backs $1.5B conditional loan for chips used in drones, radar, missile defense

The US Department of War has offered semiconductor manufacturer Wolfspeed up to $1.5 billion in conditional financing to expand domestic production of advanced chips used in drones, radar, electronic warfare, and missile defense systems.

The proposed 30-year loan, announced through the department’s Office of Strategic Capital (OSC), would support the development and manufacturing of silicon carbide (SiC) and gallium nitride (GaN) semiconductor technologies. These materials are used in high-performance power systems and radio-frequency electronics.

The North Carolina-based company plans to use the financing to upgrade its GaN manufacturing capabilities for next-generation communications and electronic warfare systems. The company also aims to develop radiation-resistant versions of its existing SiC products and future GaN devices for demanding defense and aerospace applications.

Radiation hardening helps protect electronic components from damage or malfunction caused by radiation, making it particularly important for satellites, spacecraft and military systems operating in harsh environments.

Advanced chips strengthen defense

Unlike conventional silicon semiconductors, SiC and GaN are wide-bandgap materials that can operate under demanding electrical conditions. They are particularly useful in systems requiring high power, efficient energy conversion and high-frequency performance.

Silicon carbide can handle high voltages and temperatures while reducing energy losses, making it useful in power electronics. Gallium nitride, on the other hand, is suited to high-frequency applications, including communications equipment, radar and electronic warfare systems.

According to the Department of War, the proposed financing would strengthen domestic access to semiconductor materials used in propulsion systems, directed-energy weapons, drones, radar and missile defense.

The company also plans to advance GaN-on-SiC wafer technology, which combines gallium nitride‘s high-frequency performance with silicon carbide’s ability to dissipate heat. This makes the technology useful for powerful radar, communications and electronic warfare systems.

“SiC and GaN have critical national security applications,” said Robert Feurle, Wolfspeed’s CEO. “With this financing, the company would be well positioned to not only continue to serve the DoW but also expand its capabilities for the benefit of U.S. national security as a whole.”

Financing remains conditional

The proposed financing would support a multiyear manufacturing and technology development program across Wolfspeed’s domestic operations. The company has facilities in North Carolina, New York, and Arkansas.

The agreement also includes a potential equity component. Wolfspeed would issue warrants allowing the Department of War to purchase up to 7.5 percent of the company’s fully diluted equity, with the warrants issued proportionally as loan installments are funded.

The financing is structured as a senior secured loan facility, allowing Wolfspeed to draw funds in stages rather than receive the entire amount upfront.

The proposed investment aligns with the Trump administration’s efforts to expand domestic semiconductor manufacturing and reduce reliance on overseas supply chains for strategically important technologies.

However, Wolfspeed said the transaction remains subject to substantial due diligence, government authorizations, final agreements, and other closing conditions. The company cautioned that there is no guarantee the loan will be finalized or that any funding will ultimately be provided.