"75 percent fewer SiC chips" Tesla plans to significantly reduce the use of silicon carbide chips

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Tesla surprises once again: With its statement to use 75 percent fewer SiC chips than previously planned in its cars, the trouble kid of the automotive industry is unsettling the manufacturers of power semiconductors in Asia.

Tesla's move away from SiC chips is sending shockwaves through the semiconductor industry in China and Asia. Silicon carbide-based semiconductors had been regarded as the undisputed growth drivers of the industry until Tesla's recent Investor Day on March 1st, with many companies in the region currently investing billions in their production. Now, SiC has suddenly become a growth driver with a question mark.

Tony Electronics, a publicly traded manufacturer of SiC products in the People's Republic, saw the need for a press release stating that they had just received a new major order at the beginning of the year. Previously, the stock price of Tony Electronics – within two days after the Tesla statement – had temporarily dropped by 19 percent.

"75 percent fewer SiC chips without compromises"

For its planned mass model, Tesla will greatly reduce the use of silicon carbide, said Colin Campbell, head of the Powertrain Business Unit at Tesla, at the annual event in Austin, Texas. "In our next powertrain, we have found a way to use 75 percent fewer silicon carbide transistors without compromising the car's performance or efficiency," Campbell stated. SiC chips are key components, but they are also expensive.

The shockwaves of this "75 percent less" triggered a moderate stock market quake, causing the share prices of major manufacturers of SiC chips and their raw materials to drop worldwide for a short time, not only of corresponding companies in China but also those of Rohm in Japan, Infineon in Germany, and STMicroelectronics in France and Italy.

Overall situation surrounding SiC in China unclear

In China, there was initially confusion. The information was incomplete. The Tesla manager had not stated which technology would replace SiC in the affordable mass model. Only that SiC was expensive and that it would be a "big win" for Tesla to use less of it.

It is neither clear what Tesla wants to replace SiC with, nor whether Chinese car manufacturers will follow the example, said a company spokesperson of Sanan Optoelectronic to the Chinese stock market newspaper Kechuangban Ribao.

Some analysts explained that Tesla would only be making a "compromise," thus planning a hybrid architecture for the inverter of its new Edrive, where more older IGBTs and fewer SiC-MOSFETs would be used, but only as long as the costs for SiC remain relatively high. Also, part of the industry in Asia tried to reassure itself that Tesla's move away from SiC was planned only for its affordable mass model and not for the existing models S, X, 3, Y, or the Cybertruck.

However, the general uncertainty was palpable everywhere. Once again, the trendsetter Tesla, which, similar to Toyota in Japan previously, rarely jumps on existing technology trends but always conducts its own research and makes independent decisions, surprised an entire industry. Tesla was the first car manufacturer to experiment with SiC chips in 2018. Now, it is the first to look for new ways due to cost reasons.

Chinese car manufacturers invest directly in SiC chip developers

Because they are, in simplified terms, more heat-resistant, longer-lasting, and more energy-efficient than chips of the previous generation, SiC chips have just in the past one or two years made a considerable breakthrough in large parts of the Chinese automotive industry, but also in photovoltaics and 5G networks. The role model Tesla played a significant part in this.

The Tesla competitor BYD not only uses the new technology but has also invested in SiC manufacturers like Inventchip, Tianyu Semiconductor, or AMTE together with SAIC Motor. GAC Capital participated in BASiC, Geely Holdings in AccoPower. And the global leader in car batteries, the Chinese company CATL, has invested in MiTK, a manufacturer of SiC substrates.

"So far, no better alternative to SiC"

Despite the recent shock from Tesla's Gigafactory in Austin, many market observers in China remain optimistic about the future of the semiconductor industry's SiC sector. "So far, we have not seen a better alternative to silicon carbide for mass production when it comes to higher currents," said analyst Zhang Jinwei of Jing Capital to the financial newspaper.

GaN could indeed be such an alternative, but it currently costs even more than SiC and is gaining traction mainly in high-frequency fields such as optoelectronics, radio frequency communication, or in very powerful semiconductors for aerospace and the military.

It was probably just a temporal coincidence, but in Asia, it did not go unnoticed that Infineon announced its acquisition of GaN Systems for 830 million US dollars on the exact same day Tesla announced its shift away from SiC. "Is GaN the new hope after SiC?," asked the Chinese economic agency Cailian She. (me)