Tesla's disclosure of intention to reduce use of SiC in its electric vehicles (EV) by 75% has sent shock waves across the supply chain, with many companies assessing all possible scenarios and solutions. But there has also been skepticism about whether Tesla can achieve the goal and what it really is aiming at.
Industry observers have pointed out that judging from Tesla's usual procurement strategies, it is unlikely that it will commit itself to long-term contracts for buying automotive chips. Neither will it be willing to do so for SiC components, and this may be the real reason for Tesla to have made its announcement about cutting SiC use.
EV applications have replaced PV inverters as the biggest market segment for SiC components. Tesla was an early adopter of SiC components in the EV industry.
There are three possible ways for Tesla to reduce use of SiC.
First, it can shrink the size of the SiC dies. The bottleneck of SiC supply comes mainly from the difficulty in improving the yield rates for crystal growth, although the backend manufacturing and design sectors have made significant progresses. That means SiC substrate prices will stay on high levels in the foreseeable future. however, if more dies can be produced from a substrate, the cost of SiC components will drop.
Tesla sources SiC components mainly from STMicroelectronics, which has been making efforts to shrink the size of its SiC MOSFETs. Industry sources said the surface area of ST's third-generation SiC MOSFETs is 25% of its second-generation ones -- which means a 75% reduction. There has been speculation that Tesla was really referring to the tech advancements at ST when announcing its SiC use reductions.
Second, GaN components may catch up. There have been considerable improvements in GaN-on-Si output and many expect it will dominate the on-board charger (OBC) segment in the future. In the mainstream 800V automotive applications, GaN shows better heat dissipation for OBC than traditional Si products, and much better switching frequency than SiC and Si ones.
More importantly, GaN-on-Si is much cheaper. A combination of GaN-based OBC and transition inverters using smaller SiC components, or other combinations of GaN and SiC components could reduce the use of SiC in cars. Shortly after Tesla's disclosure about SiC use, Infineon announced a US$830 million deal to acquire GaN Systems, a specialist in GaN power devices for automotive and datacenter applications.
GaN may not be as good as SiC as far as heat dissipation is concerned, but car models in different price and market segments may need different component support. GaN can be a good choice for cars targeting price-conscious consumers.
Third, it could combine SiC with IGBT. IGBT can be used in OBC, and many automotive transition inverters also use IGBT though its heat dissipation is not as good as SiC. A combination of SiC and IGBT could also allow Tesla to achieve the 75% reduction.
But skeptics have pointed out that it remains to be seen what exactly Tesla intends to achieve, as weaker heat dissipation could result in the rise of other costs. And it remains unclear which direction Tesla is heading towards except that it is keen on cutting the sale prices of its EVs.
Tesla has set a goal of achieving an annual 50% sales growth. But as competition grows, Tesla's market share is dropping. In 2022, Tesla saw intense competition from BYD in the Chinese market. Ccompetition from other major US, European, Japanese, and Korean automakers has been intensifying worldwide.
BYD has adopted SiC for its motors, and other carmakers are also following suit. The carmakers have signed long-term contracts with suppliers to secure SiC supply.
SiC substrate vendor Wolfspeed has struck deals with Volkswagen, GM, Lucid Motors, Jaguar Land Rover, and Mercedes-Benz.
ST in 2021 acquired Norstel AB and in 2022 started producing SiC substrates. It supplies SiC to Hyundai Motor and Kia. In 2021, ST teamed up with Renault to develop SiC technology.
Infineon in 2022 signed a pact with Stellantis with shipments to start in the second half of 2023. Rohm Semiconductor teamed up with Astemo in 2022 to supply Honda with SiC MOSFETs. It also signed supply contracts with Mazda and Imasen.
Onsemi runs production bases for SiC wafers and in 2021 it acquired SiC crystal growth firm GTAT. So far in 2023, Onsemi has formed a strategic partnership with VW, and is set to ship SiC modules for Kia's EV6 GT. Onsemi is also a supplier of SiC products for NIO.
Denso, a tier-1 supplier for Toyota, is also well-versed in SiC technology. It is a supplier of SiC modules for some Toyota car models.
Sanan in 2022 disclosed it had obtained orders from a certain new-energy carmaker, and will ship SiC chips to the customer from 2024 to 2027.
Carmakers and their suppliers who have signed long-term SiC supply contracts are deeply concerned by Tesla's latest move. Such long-term contracts have been a major source of financial support for IDMs' development of SiC components, and other third-generation semiconductors.
Thus far, Tesla is not known to have signed any long-term contracts with SiC suppliers.
