Tesla keeps shaking up the EV industry, and not only because it has produced 4 million cars to keep a slate of global competitors on their toes.
To that point, technology innovation at Tesla was the focus of the company’s Masterplan Part 3 on March 1 in Austin, including one explosive nugget that sent some semiconductor supplier stocks tumbling—although perhaps temporarily.
Powertrain engineering chief Colin Campbell took the stage to reveal Tesla has figured out a way to use 75% less silicon carbide (SiC) transistors in its next-generation power train. He said it would be done “without compromising the performance or efficiency of the car.”
Campbell also said new Tesla powertrains will use motors built without any rare earth metals.
That brief announcement alone sent ON Semiconductor and ST Microelectronics shares down 2% each, with Wolfspeed down 7% and Infineon down 3%. The shares largely recouped four days later, however. MP Materials, a supplier of rare earth neodymium saw its shares drop 11% on the news, which regained some of those losses four days later.
The day after Campbell’s comments, Aehr Test Systems issued a lengthy and unusual statement saying that despite Tesla’s planned use of a DC to AC power inverter based on a 75% reduction in silicon carbide that “Aehr does not expect a 75% reduction in the total market for silicon carbide wafers. We believe the announcement by Tesla does not impact the market significantly.”
Aehr said new chips used in lower cost Tesla models will have double the amps per device and likely will be 50% or more larger in surface area. “Therefore the number of wafers required will be less impacted.”
Tesla has not provided details on when the next powertrain technology will be available, but Dylan Patel at SemiAnalysis said it could be 2024, while other analysts said lower-priced Teslas will be in volume in 2025 or 2026. Initially, Patel tweeted the 75% silicon carbide reduction could be “bad bad bad” for several schipmakers, but he and many other analysts moderated their concerns later.
"Tesla in their silicon carbide inverters for their vehicles has a huge amount of margin built in," Patel explained in comments to Fierce Electronics. "Part of that is because this was an immature technology when they first designed it in. The other part is it enables them to do some of their ludicrous performance stuff. Now between advancements in the silicon carbide device technology, the optimizations they can do on the amount of extra inverter power and redundancy, and moving to a higher Amp device (fewer dies but they are larger), Tesla's able to significantly reduce the silicon carbide content."
Patel added four days after Tesla's announcement that the SiC industry "does not need to be concerned at all" by Tesla's news. "Tesla made an announcement that everyone considered was bad immediately but then after some further thought, it's not really surprising or bad for the industry."
He said that "STMicroelectronics' roadmap and historical performance shows they've reduced silicon carbide content by 60% just from generation 1 to generation 4. You can think of it as Moore's law for power electronics. Every shrink halved cost and doubled transistor counts, but the industry consumed more than double the transistors. In the same way, the silicon carbide industry is getting more and more efficient which enables adoption of silicon carbide more broadly and in more applications.The silicon carbide companies have been reducing the amount of total chip area required to drive these purposes. They're also scaling up manufacturing and moving to more efficient ways of manufacturing it."
Another observer offered a slightly different take. “So whilst the headline of ‘Tesla reducing SiC content by 75%’ sounds ominous, I would propose that it’s more of a comment on how far the industry has come in recent years and how Tesla’s ability to do this means that SiC is here to stay, and even be dominant, in automotive drivetrains moving forward,” wrote Stephen Lambert, head of electrification at McLaren Applied on LinkedIn. McLaren Applied chose ST Microelectronics on March 1 as a key supplier or SiC power modules for its next-generation 800 volt inverter.
Bank of America analysts came out with commentary that Tesla’s SiC claims could be premature, but if true “could be a major risk” for the SiC materials and device industry. However, they said cheaper SiC chips could drive up EV adoption so that what vendors lose on content revenues could be offset by greater EV volumes.
Despite the market reaction to Tesla’s comments on SiC, the company’s comments on sustainable energy generation and Tesla’s role in that effort were broad, lasting over a three-hour presentation to investors.
“There is a clear path to a fully sustainable energy Earth, with abundance,” Tesla CEO Elon Musk told the investor audience in opening comments on March 1. “It doesn’t require destroying natural habitats, it doesn’t require us to be austere and stop using electricity and sort of being in the cold or anything.
"In fact you could support a civilization much bigger than Earth, than the 8 billion humans. I’m often shocked and surprised how few people realize this…The thing that is needed…is a vast amount of battery energy storage.”