STM - A 2025 SiC Glut Remains A Risk But onsemi Is In Better Shape Than In Past Cycles
2024-07-05 02:23:53 ET
Summary
- Weaker EV and industrial demand and increased wafer and chip capacity have hit SiC semiconductor companies like onsemi hard over the last nine months.
- There are valid reasons to be worried about a SiC glut in 2025, but onsemi has structurally improved its margins and has strong customer relationships and product designs.
- The outlook for demand in 2H'24 is still shaky; many of onsemi's customers are doing well and industrial customers could begin restocking, but weakness at Tesla remains a threat.
- With near-term worries about SiC oversupply pushing the shares down, this is worth a look from contrarian investors willing to let a longer-term story play out.
Between weaker than expected electric vehicles sales (at Tesla ( TSLA ) in particular) and rapid expansion of wafer and chip capacity, it’s been a rough stretch for semiconductors leveraged to silicon carbide (or SiC) power semiconductors. With auto demand looking weaker, industrial end-markets still correcting, and capacity still coming online in China, the near-term outlook is treacherous at best....
A 2025 SiC Glut Remains A Risk, But onsemi Is In Better Shape Than In Past Cycles