Long-term implications of Tesla news remain unclear for ON Semi, says Stifel

After Tesla (TSLA) announced plans for a 75% reduction in silicon carbide component usage for its next powertrain, Stifel noted that ON Semiconductor’s (ON) growth forecasts are bolstered by legally-binding long-term supply agreements, with silicon carbide revenues on track to hit a $1B milestone in 2023. While the long-term implications for ON from the Tesla news remain less clear, the firm notes that ON’s Tesla engagement covers more than silicon carbide; that the announcement is exclusive to Tesla’s next-generation powertrain; and that potential content losses could be offset by unit volume growth due to lower electric vehicle pricing enabled by the design. Stifel maintains a Hold rating and $78 price target on ON Semiconductor.