BofA keeps Buy on ON, says supply agreements offset premature Tesla SiC claims

BofA analyst Vivek Arya believes notes that at its analyst day Tesla (TSLA) suggested that its upcoming power electronics platform would be able to use 75% lower Silicon Carbide, or SiC – key tech used in EV power/inverters. If true, this technological advancement could be a major risk for the SiC materials industry — Wolfspeed (WOLF) and Coherent (COHR), and to devices — ON Semiconductor (ON) and European peers STMicroelectronics (STM), Infineon (IFNNY), BofA adds. However, the firm points out that in the absence of any actual product, timeline, data or independent verification it is unclear how seriously to take this claim; it’s also unclear whether the 75% improvement is from Tesla’s Gen-1 baseline or current product line-up; and if true, cheaper SiC could drive up global EV adoption globally so what vendors lose on content could be partially offset by greater EV volumes. BofA believes ON is supplying Tesla with both SiC and silicon-based conventional technology. The firm maintains a Buy rating on ON with a price target of $90.