Tesla’s plan to slash silicon carbide use sends some chipmakers’ shares down
Model Y cars are pictured during the opening ceremony of the new Tesla Gigafactory for electric cars in Gruenheide, Germany, March 22, 2022.
Patrick Pleu | Pool | via Reuters
Shares in some chipmakers dipped on Thursday after electric vehicle maker Tesla said it plans to greatly reduce the use of silicon carbide transistors in its next-generation vehicle powertrains.
At Tesla’s 2023 Investor Day presentation on Wednesday, which largely focused on efficiency and controlling costs, powertrain engineering leader Colin Campbell took the stage to show how the company plans to reduce the cost of their cars’ powertrains, while maintaining high performance and energy efficiency.
Campbell revealed that, “In our next powertrain, the silicon carbide transistors that I mentioned, that are key component[s] but expensive, we figured out a way to use 75% less without compromising the performance or the efficiency of the car.”
Shares of ON Semiconductor and ST Microelectronics were each down more than 4%, while Wolfspeed dropped more than 9% and MP Materials more than 12% in mid-day trading, as investors worried that Tesla’s moves would be a harbinger for the automotive industry.
Campbell did not say when the company’s next-generation powertrain would be ready for high-volume production and use in the company’s vehicles, nor did he specify how much it currently spends on these transistors. Executives at the event did not reveal any firm details about the “next gen” Tesla, which some analysts refer to as the Model 2.
Chips made with silicon carbide transistors are widely used in electric vehicles. Generally, they withstand more heat, have a longer life and are more energy-efficient than semiconductors made with silicon power 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 be a major risk for the SiC materials industry (WOLF, COHR, Rohm) and devices (ON and European peers STMicro, Infineon – covered by Didier Scemama).”
They added the possibility that “cheaper [silicon carbide chips] could drive up EV adoption globally so what vendors lose on content could be partially offset by greater EV volumes.”
New Street Research analysts agreed generally, and wrote in a note on Thursday that the announcement from Tesla is actually a good thing for chipmakers as they expect demand to remain high throughout and beyond the EV industry.
They wrote of Tesla’s announcement: “The inverter of the new drivetrain will use a hybrid architecture,” that mixes silicon and silicon carbide transistors, with both types of transistors working together to handle peak loads in a Tesla vehicle, primarily during the vehicle’s acceleration. “This hybrid architecture is for the new platform only, i.e. a low-cost, small, lower-performance car, and will not be adopted for existing models (S, X, 3, Y), or the Cybertruck.”
New Street does not expect a lower-priced, next generation Tesla vehicle to “ramp in volumes before 2025 or 2026.”
Wells Fargo analysts are maintaining an overweight rating on shares of both Wolfspeed and OnSemi with a price target for Wolfspeed of $110 and a price target for OnSemi of $95.
Citing Yole Group in a note on Thursday, Wells Fargo analysts said in the near term the silicon carbide chip supply chain will remain tight due to strong demand from automakers across the board. Every growing EV maker will seek to scale up while controlling costs but in the near term, they will be more concerned about securing a supply of silicon carbide chips for their new models, many of which are set to launch this year and next, they said.
— Michael Bloom contributed to this report.
A silicon wafer with chips etched into is seen as U.S. Vice President Kamala Harris tours a site where Applied Materials plans to build a research facility, in Sunnyvale, California, U.S., May 22, 2023.
Pool | Reuters
The U.S. will increase tariffs on Chinese semiconductor imports in June 2027, at a rate to be determined at least a month in advance, the Trump administration said in a Federal Register filing on Tuesday.
But in the meantime, the initial tariff rate on semiconductor imports from China will be zero for 18 months, according to the filing from the Office of the U.S. Trade Representative.
As part of an investigation that kicked off a year ago, the agency found that China is engaging in unfair trade practices in the industry.
“For decades, China has targeted the semiconductor industry for dominance and has employed increasingly aggressive and sweeping non-market policies and practices in pursuing dominance of the sector,” the office said in the filing.
The decision to delay new tariffs for at least 18 months signals that the Trump administration is seeking to cool any trade hostilities between the U.S. and China.
Additional tariffs could also become a bargaining chip if future talks break down.
U.S. President Donald Trump and Chinese President Xi Jinping reached a truce in the so-called trade war in October, as part of a deal that included the U.S. slashing some tariffs and China allowing exports of rare earth metals.
The USTR’s Tuesday filing states that tariffs will increase on June 23, 2027.
The notice is the next step in a process focusing on older chips that started during the Biden administration under Section 301 of the Trade Act.
The new 2027 date gives clarity to American firms that have said they are closely watching how U.S. tariffs could affect their businesses or supply chains.
The tariffs are separate from other duties threatened by the Trump administration on Chinese chip imports under Section 232 of the law.
Technology
The next AI pivot will be toward efficiency and lowering costs, ex-Facebook privacy chief says
Former Facebook Chief Privacy Officer Chris Kelly said Tuesday that the next phase of the artificial intelligence boom will focus on becoming more efficient.
As major AI players race to churn out the infrastructure needed to support AI workloads, Kelly told CNBC’s “Squawk Box” that the industry will need to streamline these power-intensive buildouts.
“We run our brains on 20 watts. We don’t need gigawatt power centers to reason,” Kelly said. “I think that finding efficiency is going to be one of the key things that the big AI players look to.”
Kelly, who was also general counsel at Facebook, added that the companies able to reach a breakthrough in lowering data center costs will emerge as AI winners.
The data center market has accumulated over $61 billion in infrastructure dealmaking in 2025 as hyperscalers have rushed into a global construction craze, according to S&P Global.
OpenAI alone has made over $1.4 trillion in AI commitments over the next several years, including massive partnerships with GPU leader Nvidia and infrastructure giants Oracle and Coreweave.
But the data center frenzy has garnered growing concerns about where the power to support these buildouts is coming from, with an already strained electric grid.
Nvidia and OpenAI announced in September a project that included at least 10 gigawatts of data centers, which is roughly the equivalent of the annual power consumption of 8 million U.S. households.
Ten gigawatts is also around the same amount of power as New York City’s peak summer demand in 2024, according to the New York Independent System Operator.
Cost concerns were further fueled after DeepSeek launched a free, open-source large language model in December 2024 for under $6 million, the company claimed, significantly lower than U.S. competitors.
Kelly said he expects to see “a number of Chinese players come to the fore,” especially following President Donald Trump’s recent decision to approve the sale of Nvidia’s H200 chips to the country.
Open-source models, especially out of China, will provide people access to “basic levels of compute” and generative and agentic AI, Kelly added.
-
Sports2 years agoStory injured on diving stop, exits Red Sox game
-
Sports3 years ago‘Storybook stuff’: Inside the night Bryce Harper sent the Phillies to the World Series
-
Sports2 years agoGame 1 of WS least-watched in recorded history
-
Sports3 years agoButton battles heat exhaustion in NASCAR debut
-
Sports3 years agoMLB Rank 2023: Ranking baseball’s top 100 players
-
Sports4 years ago
Team Europe easily wins 4th straight Laver Cup
-
Environment3 years agoJapan and South Korea have a lot at stake in a free and open South China Sea
-
Environment1 year agoHere are the best electric bikes you can buy at every price level in October 2024