Tesla's idea to reduce silicon carbide use ships some chipmakers' shares down

March 6, 2023: On Thursday, shares in some chipmakers dipped after electric vehicle maker Tesla stated that it plans to significantly reduce silicon carbide transistors’ use in its coming-generation vehicle powertrains.

On Wednesday, at Tesla’s 2023 Investor Day presentation, which primarily focused on efficiency and controlling prices, powertrain engineering head Colin Campbell took the stage to experience how the company plans to decrease the cost of their cars’ powertrains as maintaining increased performance and energy efficiency.

Campbell revealed, “In our next powertrain, the silicon carbide transistors that I mentioned are key components but expensive; we are stating a way to utilize 75% less without compromising the car’s performance or efficiency.”

The ON Semiconductor and ST Microelectronics each decreased about 2%, while Wolfspeed dropped nearly 7% as investors worried that Tesla’s move would be a precursor for the automotive industry.

Campbell also said Tesla’s new powertrains would feature motors built without rare earth metals. Raw material supplier, MP Materials, known for giving automakers neodymium, decreased by nearly 11% in response.

Campbell did not specify when the firm’s next-generation powertrain would start for high-volume production and use in its vehicles, nor did he determine how much it currently spends on these transistors. Executives at the event did not show Model 2.

Chips created with silicon carbide transistors are widely used in electric vehicles. Therefore, the Institute of Electrical and Electronic Engineers stated that they withstand more heat, have a longer life, and are more energy-related than semiconductors created with silicon power transistors.

Bank of America analysts noted Tesla’s claims as “notable but premature.”

Therefore, the analysts acknowledged, “If true, this technological advancement could be a huge risk for the SiC materials industry and devices (ON and European peers STMicro, Infineon covered by Didier Scemama).”

They added the possibility that “cheaper could drive up EV adoption internationally, so what vendors lose on content could be offset by greater EV volumes.”

On Thursday, New Street Research analysts agreed generally. They noted that the announcement from Tesla is a good thing for chipmakers as they expect demand to stay high throughout and after the EV industry.

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Tesla's idea to reduce silicon carbide use ships some chipmakers' shares down
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