The growth of electric vehicles is fueling demand for next-generation power semiconductors, especially those made with silicon carbide. That's driving interest in makers of silicon carbide chips, such as ON Semiconductor and Wolfspeed.
Silicon carbide semiconductors can operate at much higher voltages, temperatures and frequencies than traditional silicon-based semiconductors. That makes them a better choice for electric vehicles, solar power conversion, 5G wireless, aerospace and other applications.
Additionally, the biggest initial market for silicon carbide, or SiC, chips is electric vehicles. Silicon carbide chips deliver faster charging and longer driving ranges for EVs.
Investment bank Canaccord Genuity estimates that silicon carbide wafer capacity will increase from 125,000 6-inch wafers in 2021 to more than 4 million 6-inch equivalent wafers in 2030 to meet the electric vehicle market alone.
Major silicon carbide chipmakers include Infineon, Onsemi (ON Semiconductor), Rohm Semiconductor, STMicroelectronics and Wolfspeed.
Silicon Carbide Chips Becoming Essential
Cowen analyst Matthew Ramsay recently raised his estimates for the silicon carbide chip market, noting "significant supply-side and demand momentum." He now expects silicon carbide device sales of $7.1 billion in 2026, vs. his prior estimate of $5.4 billion. Also, he estimates silicon carbide chip sales of $2.2 billion in 2022, up from $1.7 billion in 2021.
"Investor interest and focus on the nascent silicon carbide market continues to ramp nearly as quickly as the TAM (total addressable market)," Ramsay said in a note to clients. "Silicon carbide has gone from esoteric to essential seemingly overnight."
Demand for SiC chips is likely to outstrip supply until at least the second half of the decade, Ramsay said.
SiC Chip Market Accelerating
Silicon carbide has "the potential to revolutionize multiple markets," Needham analyst Rajvindra Gill said in a recent note to clients. He also points out that electric vehicles and the charging infrastructure are the megatrends driving the adoption of silicon carbide chips.
"The efficiency gains from smaller form factors (10% longer range) and higher voltages (50% faster charging) outweigh the higher cost of SiC wafers for companies like Tesla," Gill said. Tesla currently sources its SiC power chips from STMicro but might be adding Onsemi as a second source, he said.
Gill estimates that silicon carbide chip revenue from electric vehicles will reach $14.4 billion in 2030 from $1.2 billion this year.
"The market for silicon carbide and broader wide-bandgap materials is accelerating at breakneck speed, regardless of a pending economic downturn," Gill said.
Aehr Test Systems Gets Silicon Carbide Boost
On Oct. 6, semiconductor equipment maker Aehr Test Systems smashed estimates for its fiscal first quarter, citing sales of gear for testing and qualifying silicon carbide chips. Its sales jumped 89% year over year in the quarter ended Aug. 31.
On a conference call with analysts, Chief Executive Gayn Erickson said there's been an acceleration in the expected adoption rate for silicon carbide chips in electric vehicles.
Further, he adds that several electric vehicle companies now say EVs could account for 50% of all vehicles made in 2030, vs. prior estimates for 30%. Those EV companies include Toyota and Volkswagen, he said.
"It's clear there's a continued momentum in silicon carbide," he said.
New SiC Materials, Chip Plants Coming
Meanwhile, the major silicon carbide chipmakers are investing aggressively in new factories for making SiC wafers and devices.
In April, Wolfspeed opened the world's largest semiconductor fab for making silicon carbide chips from 200-millimeter wafers. The state-of-the-art, highly automated fabrication facility is in Marcy, N.Y.
Additionally, Wolfspeed announced plans on Sept. 9 to build a factory in Chatham County, N.C., to produce 200-millimeter silicon carbide wafers.
In August, Onsemi announced plans for a new silicon carbide materials factory in Hudson, N.H. Further, it kicked off the expansion of its silicon carbide chip fab in the Czech Republic on Sept. 21.
Onsemi is the top stock in IBD's semiconductor manufacturing industry group, according to IBD Stock Checkup. It has an IBD Composite Rating of 96 out of 99. Wolfspeed ranks No. 11 in the group. And STMicro ranks eighth.
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