Tesla's plan to slash silicon carbide use sends some chipmakers' shares down

Shares successful immoderate chipmakers dipped connected Thursday aft electrical conveyance shaper Tesla said it plans to greatly trim the usage of silicon carbide transistors successful its next-generation conveyance powertrains.

At Tesla's 2023 Investor Day presentation connected Wednesday, which mostly focused connected ratio and controlling costs, powertrain engineering person Colin Campbell took the signifier to amusement however the institution plans to trim the outgo of their cars' powertrains, portion maintaining precocious show and vigor efficiency.

Campbell revealed that, "In our adjacent powertrain, the silicon carbide transistors that I mentioned, that are cardinal component[s] but expensive, we figured retired a mode to usage 75% little without compromising the show oregon the ratio of the car."

Shares of ON Semiconductor and ST Microelectronics were each down much than 4%, portion Wolfspeed dropped much than 9% and MP Materials much than 12% successful mid-day trading, arsenic investors disquieted that Tesla's moves would beryllium a harbinger for the automotive industry.

Campbell did not accidental erstwhile the company's next-generation powertrain would beryllium acceptable for high-volume accumulation and usage successful the company's vehicles, nor did helium specify however overmuch it presently spends connected these transistors. Executives astatine the lawsuit did not uncover immoderate steadfast details astir the "next gen" Tesla, which immoderate analysts notation to arsenic the Model 2.

Chips made with silicon carbide transistors are wide utilized successful electrical vehicles. Generally, they withstand much heat, person a longer beingness and are much energy-efficient than semiconductors made with silicon powerfulness transistors, according to the Institute of Electrical and Electronic Engineers.

Bank of America analysts called Tesla's claims "notable but premature."

However, the analysts acknowledged, "If true, this technological advancement could beryllium a large hazard for the SiC materials manufacture (WOLF, COHR, Rohm) and devices (ON and European peers STMicro, Infineon – covered by Didier Scemama)."

They added the anticipation that "cheaper [silicon carbide chips] could thrust up EV adoption globally truthful what vendors suffer connected contented could beryllium partially offset by greater EV volumes."

New Street Research analysts agreed generally, and wrote successful a enactment connected Thursday that the announcement from Tesla is really a bully happening for chipmakers arsenic they expect request to stay precocious passim and beyond the EV industry.

They wrote of Tesla's announcement: "The inverter of the caller drivetrain volition usage a hybrid architecture," that mixes silicon and silicon carbide transistors, with some types of transistors moving unneurotic to grip highest loads successful a Tesla vehicle, chiefly during the vehicle's acceleration. "This hybrid architecture is for the caller level only, i.e. a low-cost, small, lower-performance car, and volition not beryllium adopted for existing models (S, X, 3, Y), oregon the Cybertruck."

New Street does not expect a lower-priced, adjacent procreation Tesla conveyance to "ramp successful volumes earlier 2025 oregon 2026."

Wells Fargo analysts are maintaining an overweight standing connected shares of some Wolfspeed and OnSemi with a terms people for Wolfspeed of $110 and a terms people for OnSemi of $95.

Citing Yole Group successful a enactment connected Thursday, Wells Fargo analysts said successful the adjacent word the silicon carbide spot proviso concatenation volition stay choky owed to beardown request from automakers crossed the board. Every increasing EV shaper volition question to standard up portion controlling costs but successful the adjacent term, they volition beryllium much acrophobic astir securing a proviso of silicon carbide chips for their caller models, galore of which are acceptable to motorboat this twelvemonth and next, they said.

— Michael Bloom contributed to this report.