Brief commentary by a Tesla executive that the electric-car maker plans to cut the amount of silicon carbide chips in its next-generation powertrain drove SiC chipmakers lower on Thursday. Semiconductor stocks ON Semiconductor, STMicroelectronics and Wolfspeed fell on the news. Tesla stock also retreated.
At Tesla's investor day on Wednesday, Colin Campbell, vice president of powertrain engineering, announced that the company's new drivetrain platform will use 75% less silicon carbide. The move is part of a larger plan to lower manufacturing costs by 50% for its next-generation vehicle platform. But details were sparse.
Tesla stock dropped 5.9% to close at 190.90 on the stock market today. Analysts griped that Tesla didn't show off any new vehicles or provide any surprises.
The news also hammered semiconductor stocks tied to making silicon carbide power chips.
Semiconductor Stocks Drop After Tesla News
Meanwhile, shares of ON Semiconductor, also known as Onsemi, ended the day down 1.9% to 76.75, though it pared greater losses from earlier in the session. STMicro, the primary supplier of silicon carbide chips to Tesla, watched its shares retreat 2.4% to 47.78. Wolfspeed stock tumbled 7% to 69.58.
Aehr Test Systems, which makes semiconductor test and reliability qualification equipment, saw its stock tank 15.3% to 30.50.
"Tesla reducing SiC area is not unexpected and the 75% number is largely a red herring," semiconductor stocks analyst Jed Dorsheimer with William Blair said in a note to clients. "Tesla provided one data point without the proper context, and when this is understood, we believe this announcement will provide an opportunity for investors."
Tesla's current inverter is its original design from 2017, Dorsheimer said. Significant progress has been made in silicon carbide device design since then and fewer components are needed per unit now, he said.
Dorsheimer rates Aehr and Wolfspeed as outperform, or buy, and Onsemi and STMicro as market perform, or neutral.
Silicon Carbide Chip Stocks On IBD Lists
Onsemi and STMicro are two semiconductor stocks on the IBD Tech Leaders list. Aehr Test Systems also is on the Tech Leaders list.
Further, STMicro is on the IBD 50 and Global Leaders stock lists.
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.
Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
