Electric vehicle suppliers are banking that buyers will demand variety, spurring growth for suppliers like chipmaker Onsemi even as EV stocks hit a speed bump.
"If you look at it, there is not as much choice, especially regionally," Simon Keeton, executive vice president and general manager, Power Solutions Group at Onsemi, told Investor's Business Daily at CES 2024.
Onsemi, formerly known as On Semiconductor, specializes in industrial and automotive microchip manufacturing. Keeton said the higher EV adoption rate in countries like China is in part due to the wide variety and price points of electric vehicles available to consumers.
"That breadth of range of vehicles really needs to come to the U.S. and Europe," he said. "And I think with that diversification, you're going to see more adoption."
Automakers And Suppliers Slump As Demand Chills
Electric vehicle adoption in the U.S. unexpectedly faltered in 2023, creating reverberations from automakers to suppliers like Onsemi stock and other EV stocks. Auto manufacturers like General Motors have scaled back plans to ramp up EV manufacturing. Meanwhile, Ford Motor has reduced the size of a battery factory expected to supply parts for its next generation of electric vehicles.
Even EV behemoth Tesla slashed prices across its product lines in the U.S. several times in 2023 to help boost sales. The cuts spurred a small price war among U.S. electric vehicle manufacturers.
Onsemi stock gapped down in November as reports of an industrywide slowdown became prominent on the back of softening EV demand. Shares have since pared some of those losses, although the EV stock is trading more than 30% below its all-time high from August 2023.
Onsemi is ranked No. 15 in the Electric-Semiconductor Manufacturing Group, according to IBD Research. It has an IBD Composite Rating of 46 out of 99.
Keeton attributes lukewarm EV demand in part to a lack of charging infrastructure and the high cost of existing EVs, and says Onsemi stock will benefit as more vehicle models hit the market. "Top priority is execution," said Keeton in reference to delivering on its customer agreements. "We have to be there when they need us to be there."
Onsemi Stock Pins Hopes On Widespread EV Adoption
Rising electric vehicle adoption will likely have a knock-on effect on key auto suppliers like Onsemi stock. The company is continuing to develop fast charging for EVs with silicon carbide technology, and expects demand to increase as consumers warm up to the new cars.
"We're talking about secular hypergrowth, not only for the electric vehicle itself, but also the charging infrastructure," Keeton said. "We're moving that barrier of people's ideas of what it means to have an electric vehicle."
For its part, Onsemi stock is pinning its hopes on educating customers about available fast-charging options. "We've got to make sure that we service those end customers when they need the product," said Keeton.
Onsemi also says its move to in-house production gives Onsemi stock future security as automakers streamline manufacturing to lure buyers with cheaper vehicles. "We are still committed to a vertical supply chain," said Keeton. "That way we can guarantee supply to the end customer."
"Not everyone can afford this very high-end vehicle," said Keeton. "People want to have choice."
For insight into Onsemi's plans for vertical integration and why it remains focused on silicon carbide technology, watch IBD's full interview with Simon Keeton.
