Tesla’s plan to reduce the use of rare earths in future car production sends semiconductor stocks down

  • Tesla’s plan to cut its use of silicon carbide sent some semiconductor stocks down on Thursday.
  • Wolfspeed, ON Semiconductor and STMicroelectronics use the rare earth metal to manufacture semiconductors.
  • Tesla has said the next generation powertrain will use a magnetic motor that uses 75% less silicon carbide.

Tesla’s recent investor day revealed the company’s plans to significantly reduce the use of rare earths in its next-generation vehicles, and this is lowering many stocks associated with the sector.

Tesla said its next-generation powertrain will use a permanent magnet motor that will cut silicon carbide use by 75%, allowing for more efficient scaling of vehicle production.

“Silicon carbide is an amazing semiconductor, but it is also expensive and very difficult to scale. So using less of it is a big win for us,” said Colin Campbell, Tesla vice president of powertrain engineering.

Investors Wolfspeed, ON Semiconductor and STMicroelectronics took this as bad news – they are all silicon carbide semiconductor companies.

Shares of Wolfspeed fell 14% on Thursday, while shares of STMicroelectronics and On Semiconductor fell 7% and 8%, respectively.

But some investors are buying shares in these semiconductor companies, as Tesla hasn’t given a timeline for when its next-generation advances will be put into production, and the company has a history of future product announcements but hugely missed production dates (see: Cybertruck).

In Wolfspeed’s defense, Roth MKM analyst Craig Irwin said in a note, “Tesla has a history of overcharging in our opinion, so in all likelihood this claimed improvement in heat dissipation is accelerating industry adoption in favor of WOLF.”

Meanwhile, Bank of America analyst Vivek Arya defended ON Semiconductor and argued that if Tesla’s silicon carbide push does come to fruition, it could end up driving silicon carbide prices down and accelerating EV adoption. This development could help ON Semiconductor offset the decline in volumes by increasing the number of electric vehicles.

Bank of America maintained its Buy recommendation for On Semiconductor with a $90 target price, while Roth MKM retained its Buy recommendation and $95 target price for Wolfspeed.

Content Source

News Press Ohio – Latest News:
Columbus Local News || Cleveland Local News || Ohio State News || National News || Money and Economy News || Entertainment News || Tech News || Environment News

Related Articles

Back to top button