Silicon Carbide (SiC) regained attention in March this year when Tesla announced a 75% reduction in its per-vehicle usage. This move, driven by Tesla, had a significant impact as Elon Musk's statement almost caused a collapse, leading to a two-thirds drop in the stock price of global SiC leader, Wolfspeed, this year.
Wolfspeed's sharp decline and the slump in Silicon Carbide concept stocks are primarily attributed to Tesla's "betrayal," yet the market's pessimistic sentiment has also been fueled by misinterpretations. In reality, Tesla has only reduced the use of Silicon Carbide and has not entirely abandoned it.
Just a week after Tesla announced the reduction standard, they signed a long-term supply agreement with ON Semiconductor. The BMW 750V Elite Silicon Carbide module, announced last night, will be utilized in BMW's 400V electric powertrain system. Following suit, various automotive manufacturers such as Mercedes-Benz and Volkswagen are collaborating with Wolfspeed, Infineon, and others to ensure a stable supply of Silicon Carbide products. According to Dongwu Securities' estimate, from January to August this year, other automakers have contributed 25% to the Silicon Carbide market.
According to data from the French market research firm Yole, the global Silicon Carbide power generation market is projected to grow from $1.09 billion in 2021 to $6.297 billion in 2027, with a compound annual growth rate of 34%. Automotive applications contribute to over 75% of Silicon Carbide market share, dominating the entire power SiC device market.
However, despite the promising market outlook, the stock prices of Silicon Carbide have witnessed astonishing and notable growth, raising a significant concern: while Tesla is reducing its market share, other automotive companies are actively adopting Silicon Carbide.
Why choose Silicon Carbide? As a third-generation semiconductor material, Silicon Carbide is suitable for manufacturing high-temperature, high-frequency, radiation-resistant, and large-scale power devices, making it an ideal material in the field of new energy vehicles. In the automotive market, Tesla stands out as the pioneer in adopting Silicon Carbide.
In Tesla's fourth-generation Model 3 in 2018, the main inverter replaced the traditional silicon-based IGBT with Silicon Carbide MOSFET power modules produced by STMicroelectronics (ST). Following this, the replacement of the three-electric systems transformed the engine into the core of the car, making power electronics crucial. Silicon Carbide further enhances the efficiency of Silicon Carbide-based IGBT, improving power conversion efficiency, increasing the range of electric vehicles, and reducing battery costs. Silicon Carbide-based IGBTs also exhibit higher power conversion efficiency, leading to improved electric vehicle range and reduced battery costs. The high-frequency characteristics enable the downsizing of topology coil and capacitors, reducing iron losses in the motor and further decreasing noise. Silicon Carbide can withstand higher voltages, allowing for current reduction by increasing voltage, thereby lightening the wiring harness and saving installation space. Silicon inverters are compact and can accommodate more discreet cooling systems, reducing overall vehicle costs.
However, Silicon Carbide also faces some limitations. One of the main reasons for Tesla's production cut is the higher cost of Silicon Carbide, which doesn't align with Tesla's overall cost reduction strategy. Additionally, there are capacity issues. According to market indications, an average of one 6-inch SiC wafer is needed for every two Tesla electric vehicles. The estimated demand for 6-inch wafers by Tesla in a year is expected to exceed the global total capacity. The production technology of Silicon Carbide wafers is also a significant factor limiting capacity, especially in situations of high cost and technical complexity.
As the industry chain continues to upgrade, the price of Silicon Carbide is expected to recover in the coming years. One key factor is the large-scale production of 8-inch wafers. According to Wolfspeed's predictions, the cost of MOSFET chips produced using 8-inch wafers is expected to decrease by 63% by 2024 compared to the production using 6-inch wafers in 2022. The increase in capacity will also help address issues such as pricing. However, the technological upgrade and iteration of the Silicon Carbide industry chain still face challenges, particularly in the cost reduction of Silicon Carbide consumption in capacity preparation technology, requiring further research and innovation.