💸 A Japanese chipmaker just admitted, in unusually plain language, that it bet too big. Rohm posted a $1 billion net loss—its worst ever—after a $1.23 billion writedown on power chips it built factories for years to ship. The buyers, electric vehicles, didn't arrive fast enough. The competitors, Chinese rivals, undercut prices by two-thirds. And the company CEO chose the Japanese idiom "we've cleared out the pus."

A $1 billion confession, in six characters

On May 12, 2026, Rohm Co. — a Kyoto-based maker of power semiconductors that has been around since 1958 — released earnings that closed a chapter on what now reads as a strategic miscalculation. The headline number: a 158.4 billion yen (about $1 billion) net loss for the fiscal year ending March 2026, the largest in the company's history and its second consecutive annual loss.

The cause was concentrated in a single line item: 193.6 billion yen ($1.23 billion) of impairment charges on power semiconductor manufacturing equipment, almost all of it tied to silicon carbide (SiC) — the wide-bandgap material that was supposed to be the chip industry's next gold rush, especially for electric vehicles.

What made the press conference unusual was the language CEO Katsumi Azuma chose. He used the Japanese phrase "uminoshikitta" (膿み出し切った), which literally means "we have squeezed out the pus." It is the sort of vivid, almost medical idiom you use when you want to be heard saying that the bad news ends here. He paired it with an explicit admission: in the previous five-year plan, when "there was wind in our sails," Rohm "did simply too much investment." That kind of self-criticism is rare from Japanese executives, who tend to default to softer phrasing.

The bet that didn't pay off

To understand the loss, it helps to back up to roughly 2021–2022, when nearly every power semiconductor company on the planet was racing to expand SiC capacity. The story automakers were telling was straightforward: EV powertrains would migrate from silicon-based chips to silicon carbide, which can handle higher voltages with less heat loss, extending range by single-digit percentages and making fast charging more efficient. Tesla had already adopted SiC in the Model 3. European and Chinese automakers were following. Demand projections from market research firms looked vertical.

Rohm responded the way Japanese manufacturers historically respond to a perceived once-in-a-generation opportunity — it built. Between fiscal 2021 and fiscal 2025, the company spent a cumulative 608.2 billion yen ($3.85 billion) on capital expenditure, a substantial portion of it on SiC. New cleanrooms went up at the Chikugo plant in Fukuoka Prefecture for 200-millimeter SiC wafer production. In April 2026, Rohm announced it had achieved 200mm SiC MOSFET mass production technology two years ahead of its original schedule — a genuine engineering achievement.

The problem was that by the time the factories were ready, the market was no longer.

Three things broke at once

EV demand stopped accelerating. Through 2023 and into 2024, European and U.S. EV growth visibly decelerated. Tier-1 automotive suppliers started pushing out delivery schedules. Tesla cut prices and slowed its capacity additions. Volkswagen and General Motors trimmed EV production targets. For SiC suppliers, this translated into the brutal arithmetic of expensive fabs running below planned utilization.

China industrialized SiC faster than expected. According to market research firm TrendForce, Wolfspeed held the top spot in the SiC market with a 33.7% share in 2024. However, Chinese-based TanKeBlue and SICC are rising quickly with 17.3% and 17.1% shares, respectively — good enough for second and third place. Pricing pressure followed. Wolfspeed's 6-inch SiC wafers once sold for $1,500 each. Chinese rivals are offering them for as little as $500 or less. A three-fold price collapse on the underlying substrate makes it very hard for anyone running a Western or Japanese cost structure to recover invested capital on schedule.

Wolfspeed cracked first. The U.S.-based SiC pioneer, which had been the loudest investor in the new generation of 200mm wafer fabs, filed for Chapter 11 bankruptcy in June 2025. It emerged in late summer after cutting debt by roughly 70% — about $4.6 billion — and reducing headcount by 20%. The bankruptcy was a clarifying event for the rest of the industry: it confirmed in legal documents what spreadsheets had been hinting at, which is that the timing assumptions on SiC capacity build-outs had been wrong.

Rohm's writedown is, in essence, the Japanese version of that same recognition, taken through impairment accounting rather than Chapter 11.

What the numbers actually say

Underneath the headline loss is a more nuanced story. Rohm's operating profit — the result of its actual business activities before one-time writedowns — was 10.9 billion yen ($69 million) in fiscal 2026, a swing from a 40.1 billion yen operating loss the year prior. Sales rose 7.3% to 481.1 billion yen ($3.05 billion). EBITDA, which strips out depreciation, rose 56.6% to 67.9 billion yen.

In other words, the underlying business is recovering. What the impairment does is acknowledge that some of the SiC capacity Rohm built will not generate the cash flow originally projected — at least not on the original timeline — and so its accounting value has to be written down to match reality.

For fiscal 2026 (ending March 2027), Rohm forecasts sales of 510 billion yen, operating profit of 30 billion yen (nearly triple the previous year), and a return to net profit of 29 billion yen. Critically, having written down the assets, depreciation expense drops sharply, mechanically improving reported profitability even if revenue grows only modestly.

The strategic reversal: from "build" to "live within means"

The most consequential disclosure was not the loss itself but the capital expenditure plan that goes with it. After spending 608.2 billion yen over the previous five-year plan, Rohm now intends to spend approximately 150 billion yen ($950 million) over the first three years of the next plan — a roughly 75% reduction in pace.

This is a different company than the one that broke ground in Chikugo. Azuma's framing was that Rohm will return to being "a company that, after letting go of what's not working, generates large improvement and profit again." The mechanism is straightforward: stop building capacity ahead of demand, run the existing fabs harder as orders return, and let depreciation declines do the rest.

It is also a tacit admission that the era of Japanese semiconductor companies trying to win SiC market share through unilateral capacity investment is over.

The bigger reshuffle: three Japanese players, one combined company?

Rohm's earnings sit in the middle of a remarkable industrial reorganization that has been moving fast in Japan over the past year. In March 2026, Rohm, Toshiba, and Mitsubishi Electric publicly disclosed that they were in talks to combine their power semiconductor businesses. The three companies bring different strengths: Rohm leads in SiC, Toshiba in silicon MOSFETs, Mitsubishi Electric in IGBTs and power modules. Together they would form a Japanese power semiconductor combine large enough to rank second globally behind Germany's Infineon Technologies.

Separately, Denso — the Toyota-affiliated tier-1 supplier — has been pursuing its own roughly 1.3 trillion yen ($8.2 billion) tender offer for Rohm, motivated by securing automotive chip supply. How these two parallel processes resolve will shape the structure of Japanese power semiconductors for a decade.

In that context, the impairment is doing political work as well as accounting work. By taking the writedown now, Rohm enters any consolidation talks with cleaner financials and the moral authority of having confronted its mistakes. It is easier to negotiate the terms of a merger when you've already written down your own balance sheet.

The contrast with Wolfspeed is instructive

The two companies took roughly the same bet at roughly the same time. Both built ahead of demand. Both got caught when EV growth softened and Chinese supply scaled. But the resolutions diverge.

Wolfspeed went through Chapter 11, restructured its debt, and emerged smaller. It also lost CHIPS Act funding under the new U.S. administration, leaving its long-term capital position fragile. Renesas Electronics, which had paid Wolfspeed roughly $2 billion as prepayment on a 10-year wafer supply contract, ended up converting some of that exposure into Wolfspeed equity and seating a director on the board — an awkward bailout for a Japanese chipmaker that had hoped Wolfspeed would simply ship wafers.

Rohm did not need bankruptcy court because it had a healthier balance sheet to begin with — operating profit was already positive, EBITDA was strongly positive, and the underlying business kept generating cash. The impairment is painful but voluntary, and it leaves the company free to focus on integration rather than restructuring negotiations with creditors.

The two paths illustrate the same lesson with different intensities: in SiC, being first did not protect you, and scale alone did not protect you.

What to watch from here

A few things will determine whether Azuma's "we've cleared out the pus" reads, in a year, as honest reckoning or as wishful thinking.

The first is whether EV demand actually recovers on the timeline Rohm now assumes. If Chinese EV exports continue to displace Japanese and European production, the addressable market for SiC outside of China may remain structurally smaller than 2022's projections.

The second is whether the three-way merger with Toshiba and Mitsubishi Electric actually closes — and on what terms. A combined entity needs to be more than the sum of its current shares; it needs to make integrated design wins at the inverter level, where automakers and industrial buyers are increasingly making purchase decisions on multi-chip systems rather than individual MOSFETs.

The third is whether Denso's tender offer for Rohm advances. A Rohm that becomes part of Toyota's industrial group has different incentives than a Rohm operating as an independent merchant supplier. Both paths are coherent. They are not the same path.

Finally, there is the question of gallium nitride (GaN). Some analysts now argue GaN will take share from SiC in the lower voltage segments (consumer chargers, data center power supplies, some EV applications). If that view proves right, Japan's SiC consolidation will need to make room for a GaN strategy too — and Rohm, having just written down a generation of SiC capacity, will face the question of how aggressively to invest in the next material before it has fully digested the last one.

For now, the headline is straightforward. The Japanese power semiconductor industry is reorganizing under financial pressure, the SiC gold rush is over for at least this cycle, and Rohm has chosen — in a culturally noteworthy way — to say the hard parts out loud.

In your country, how is your domestic chip industry handling the EV slowdown and Chinese competition? Are companies still investing aggressively, or pulling back?

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