How does SiC "save" car companies that cut prices?
Entering the year 2024, more than ten automobile manufacturers have successively announced price reductions. The pressure for price cuts from manufacturers to suppliers is even greater, with a general demand for a 20% reduction, whereas in the past it was usually a 3%-5% decrease annually.
Some argue that the price reduction in the car market is due to cost reductions brought about by new technologies. However, considering the broader context, the decline in sales in February may be an inevitable choice for more companies to join the price war. But from another perspective, the reduction in costs does indeed alleviate the pressure of price cuts. Could SiC (Silicon Carbide) be a way out?
01
The Beginning and End of the Price Reduction Wave
February 19th can be said to be the beginning of it all.
The wave of price reductions was initiated by BYD. From February 19th to March 6th, in the 17 days following the end of the Spring Festival holiday, BYD launched a dense series of 13 new models of its main models, the Glory Edition. Under the guise of new cars, they actually implemented price reductions. On February 9th, BYD announced the launch of two plug-in hybrid models, the Qin PLUS Glory Edition and the Destroyer 05 Glory Edition, with a starting price of 79,800 yuan, a decrease of 20,000 yuan compared to the previous champion model versions. Among them, the Qin PLUS DM-i Glory Edition is priced between 79,800 yuan and 125,800 yuan; the Qin PLUS EV Glory Edition is priced between 109,800 yuan and 139,800 yuan.
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On the same day, Wuling Guangxing announced a price reduction, with the Wuling Guangxing 150km Advanced Edition plug-in hybrid sedan reduced to 99,800 yuan, a decrease of 6,000 yuan from the original price of 105,800 yuan, almost the same price as the BYD Destroyer 05 120km version.
On the afternoon of the 19th, according to official news from Nio Automobile, it implemented a full-line price reduction strategy for several of its main models. Among them, the Nio X series was reduced by 22,000 yuan, the Nio AYA series by 8,000 yuan, and the Nio S series by 5,000 yuan. In addition, Nio Automobile also launched a value retention exchange policy. From now until March 31, 2024, consumers who purchase the Nio S and Nio GT models will be entitled to exchange for a new Nio Automobile series car at 70% of the purchase price within 2 years after buying.
Also on February 19th, Changan Qiyuan joined the price war, announcing a starting price of 78,900 yuan for the A05, a reduction of 11,000 yuan compared to the original guide price of 89,900 yuan, and promoted the slogan "Electricity is cheaper than oil." The main reason for the limited-time promotion of the Changan Qiyuan A05 is to provide users with more favorable prices, to give benefits to users, and to allow users to enjoy the value brought by new energy products at a price lower than that of fuel vehicles. On February 20th, the second generation of Changan X5 PLUS and X7 PLUS were officially launched. Changan introduced a limited-time preferential policy for the new cars, from February 19th to February 29th, with a maximum cash reduction of 18,000 yuan and 15,000 yuan, respectively. The starting prices for the X5 PLUS and X7 PLUS after the discount are 73,900 yuan and 83,900 yuan, respectively.Since March, GAC Group's two major brands, Aion and Trumpchi, have successively announced new launches and price cuts.
On March 6th, GAC Trumpchi announced significant price reductions for its M6Pro and GS3 models. The former saw a direct price drop of 20,000 yuan, with the new starting price at 99,800 yuan, pulling the price into the 100,000 yuan threshold. The latter experienced a price cut of 16,000 yuan, with the price now falling to less than 70,000 yuan, a reduction of nearly 20%.
Automotive companies hope that price reductions will help clear inventory and accelerate the pace of product updates and upgrades. For some models with higher inventory levels, selling at reduced prices can quickly recover funds, providing more financial support for the research and development and production of new products.
02
Can price reductions really "transfuse"?
In the short term, price reductions will certainly boost sales to some extent. High-quality products require high-quality guarantees, rather than merely attracting consumers with low prices. The behavior of bad money driving out good will become increasingly difficult in the automotive market. In the long term, the competitiveness of state-owned enterprises is gradually widening, with product innovation, technology updates, sales layouts, and the development of influence all facing challenges from private enterprises and new forces in car manufacturing.
Fuel vehicles and new energy vehicles are competing against each other, and most consumers have to choose one or the other. It is inevitable that each factory will compete through price reductions. The promotion of fuel vehicles in the short term solves the problem of inventory and turnover funds, but in the long term, it affects the brand and after-sales service. New energy vehicles, under this suppression, will obviously suffer in terms of price and customer base. The strategic impact of long-term losses is crucial. The first priority is to survive, and even more importantly, to survive longer. Price reductions obviously cannot solve the fundamental problems.
In this context, SiC is gaining more attention.
03
Why can SiC bring hope?Power devices, as an important incremental component in the electrification of automobiles, have seen rapid growth in recent years, benefiting from the prosperity of downstream markets. Among them, IGBT and SiC, as representatives of the second and third generations of power devices, respectively, have been in constant competition for adoption in vehicles. Compared to IGBT, SiC has distinct advantages in terms of wide bandgap, breakdown electric field, thermal conductivity, and operating temperature, making it seem to be the new trend that is replacing IGBT. Some capable vehicle manufacturers are already planning for both IGBT and SiC vehicle models. Industry insiders have indicated that SiC is now taking a large share of the automotive-grade IGBT module market, with significant market growth potential.
SiC, as one of the representatives of the third-generation semiconductors, has clear advantages over silicon-based materials in four key indicators: wide bandgap, breakdown electric field, thermal conductivity, and operating temperature. Infineon believes that the bandgap of SiC is three times larger than that of silicon, which can be translated into a tenfold increase in breakdown electric field. Its thermal conductivity is also three times that of silicon, supporting operation at high temperatures up to 200°C, compared to 150°C for silicon. This makes SiC more suitable for harsh environments such as automotive applications. Therefore, SiC is considered an excellent alternative material to silicon in power devices. Compared to IGBT, SiC devices can be reduced to more than one-third the volume of IGBT and can also reduce weight by more than 40%, with power consumption reductions of over 60% under different operating conditions. Industry insiders believe that replacing IGBT with SiC can increase inverter efficiency by 3-8%, and SiC is expected to replace IGBT in the future, which is a developmental trend.
Currently, several car manufacturers have achieved optimization of SiC main drive costs. For example, Nissan's new generation of SiC electric drive systems have reduced costs by 30%, Tesla's main drive SiC has been reduced by 75%, and Xiaopeng's new electric drive has reduced the cost of silicon carbide by 50%, among others. The upstream substrate, chip capacity, and yield are continuously improving, providing some room for price reduction of SiC modules.
Global SiC is evolving from 6-inch to 8-inch development, which is expected to drive down the unit price of chips. Just as silicon wafers evolved from 8-inch to 12-inch, SiC wafers are also currently transitioning from 6-inch to 8-inch. Larger wafer sizes can lead to an increase in the number of chips per wafer, improve yield, and reduce the proportion of edge chips, thereby enhancing wafer utilization. For instance, according to Wolfspeed, the proportion of edge chips in 6-inch SiC wafers is 14%, which is reduced to 7% in 8-inch wafers. With the global expansion of SiC wafer sizes, it is anticipated that the unit price of SiC chips will decrease, thereby opening up the application market.
The selling price of SiC substrates is gradually decreasing with increasing shipment volumes. In 2021, Tianyue Advanced's average selling price was 6,767 yuan per piece, a year-on-year decrease of 25% compared to 2020. Considering that domestic 6-inch substrates have not yet been mass-produced, there is expected to be room for further price reduction. On the other hand, semi-insulating SiC substrates currently have a higher selling price due to fewer market suppliers and some military equipment applications downstream. The current high price of SiC substrates is caused by multiple factors such as low yield levels, small wafer sizes, and low automation levels. As manufacturers improve their processes and develop larger SiC wafers, it is expected that the selling price of SiC substrates will gradually decrease.
The cost reduction of SiC depends on the increase in size, the increase in usable thickness, and the reduction in defect density. With the continuous increase in the proportion of large-diameter substrates, the growth cost per unit area of the substrate decreases. The usable thickness of single crystals is also continuously increasing. Taking a 100mm diameter single crystal as an example, before 2015, the average usable thickness prepared by most single crystal manufacturers was around 15mm, and by the end of 2017, it had reached around 20mm.
As the crystalline defect density of the substrate decreases, the complexity of the process increases. After most substrate suppliers have completed the development of low defect density single crystal growth processes and thick single crystal growth processes, the price per unit area of the substrate will experience a relatively rapid decrease.
04
New technologies can reduce the usage and cost of SiC chips in electric drives.
The price of SiC power electronic devices is further decreasing, narrowing the price gap with similar silicon devices. According to CASA and Mouser, from public quotes, at the end of 2020, the average price of 650V SiC SBD was 1.58 yuan/A, a year-on-year decrease of 13.2%, with a price difference of about 3.8 times compared to silicon devices; the average price of 1200V SiC SBD was 3.83 yuan/A, a year-on-year decrease of 8.6%, with a gap of about 4.5 times compared to silicon devices. According to CASA research, the actual transaction price is lower than the public quote, with the actual transaction price of 650V SiC SBD being about 0.7 yuan/A, and the price of 1200V SiC SBD being about 1.2 yuan/A, which is about 60%-70% of the public quote, and a year-on-year decrease of 20%-30%. The actual transaction price difference with silicon devices has already narrowed to between 2-2.5 times, reaching the sweet spot.According to this trend, the price of SiC is expected to decrease again in the future.
Market sources indicate that the domestic mainstream 6-inch silicon carbide (SiC) substrate quotes are rapidly declining, following the international market price of $750-800 per piece, with a price drop approaching 30%. Some supply chain practitioners have even stated that due to the numerous participants in domestic SiC crystal growth and substrate manufacturing, the first-tier manufacturers initiating a price reduction model may force second and third-tier manufacturers to passively follow suit, thus triggering a price war for SiC substrates.
There are differing opinions within the industry regarding the "price war" initiated by first-tier SiC manufacturers and the nearly 30% reduction in SiC substrate prices. With the increase in SiC production capacity by major domestic manufacturers, the price of SiC substrates has been in a slow downward trend, with an average annual reduction rate of about 5%-10%. For instance, at present, the price of domestic 6-inch SiC substrates is around 4000-5000 yuan per piece, and it is anticipated that by 2025, the price will further decrease, potentially reaching 4000 yuan per piece.
Drastic price reductions do not align with the current industry development patterns. For new entrants in the silicon carbide industry, there are two factors currently constraining industry development: one is the inability to keep up with production capacity; the other is the inability to improve yield rates. This also leads to small and medium-sized manufacturers resorting to price reductions to gain market share when competing against leading manufacturers. On the contrary, for leading SiC upstream manufacturers who have already partnered with global clients such as Infineon and Bosch, stable product performance and the ability to supply in bulk are the foundations for market presence, rather than relying on price reductions to "clear out" market followers.
As technology advances and costs decrease, the application of SiC substrates will become more widespread, which is beneficial for promoting rapid development in downstream applications. Once the production capacity of SiC substrates increases, significant price reductions are possible.
Entering the year 2024, more than ten automobile manufacturers have successively announced price reductions. The pressure for price cuts from manufacturers to suppliers is even greater, with a general demand for a 20% reduction, whereas in the past it was usually a 3%-5% decrease annually.
Some argue that the price reduction in the car market is due to cost reductions brought about by new technologies. However, considering the broader context, the decline in sales in February may be an inevitable choice for more companies to join the price war. But from another perspective, the reduction in costs does indeed alleviate the pressure of price cuts. Could SiC (Silicon Carbide) be a way out?
01
The Beginning and End of the Price Reduction Wave
February 19th can be said to be the beginning of it all.
The wave of price reductions was initiated by BYD. From February 19th to March 6th, in the 17 days following the end of the Spring Festival holiday, BYD launched a dense series of 13 new models of its main models, the Glory Edition. Under the guise of new cars, they actually implemented price reductions. On February 9th, BYD announced the launch of two plug-in hybrid models, the Qin PLUS Glory Edition and the Destroyer 05 Glory Edition, with a starting price of 79,800 yuan, a decrease of 20,000 yuan compared to the previous champion model versions. Among them, the Qin PLUS DM-i Glory Edition is priced between 79,800 yuan and 125,800 yuan; the Qin PLUS EV Glory Edition is priced between 109,800 yuan and 139,800 yuan.
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On the same day, Wuling Guangxing announced a price reduction, with the Wuling Guangxing 150km Advanced Edition plug-in hybrid sedan reduced to 99,800 yuan, a decrease of 6,000 yuan from the original price of 105,800 yuan, almost the same price as the BYD Destroyer 05 120km version.
On the afternoon of the 19th, according to official news from Nio Automobile, it implemented a full-line price reduction strategy for several of its main models. Among them, the Nio X series was reduced by 22,000 yuan, the Nio AYA series by 8,000 yuan, and the Nio S series by 5,000 yuan. In addition, Nio Automobile also launched a value retention exchange policy. From now until March 31, 2024, consumers who purchase the Nio S and Nio GT models will be entitled to exchange for a new Nio Automobile series car at 70% of the purchase price within 2 years after buying.
Also on February 19th, Changan Qiyuan joined the price war, announcing a starting price of 78,900 yuan for the A05, a reduction of 11,000 yuan compared to the original guide price of 89,900 yuan, and promoted the slogan "Electricity is cheaper than oil." The main reason for the limited-time promotion of the Changan Qiyuan A05 is to provide users with more favorable prices, to give benefits to users, and to allow users to enjoy the value brought by new energy products at a price lower than that of fuel vehicles. On February 20th, the second generation of Changan X5 PLUS and X7 PLUS were officially launched. Changan introduced a limited-time preferential policy for the new cars, from February 19th to February 29th, with a maximum cash reduction of 18,000 yuan and 15,000 yuan, respectively. The starting prices for the X5 PLUS and X7 PLUS after the discount are 73,900 yuan and 83,900 yuan, respectively.Since March, GAC Group's two major brands, Aion and Trumpchi, have successively announced new launches and price cuts.
On March 6th, GAC Trumpchi announced significant price reductions for its M6Pro and GS3 models. The former saw a direct price drop of 20,000 yuan, with the new starting price at 99,800 yuan, pulling the price into the 100,000 yuan threshold. The latter experienced a price cut of 16,000 yuan, with the price now falling to less than 70,000 yuan, a reduction of nearly 20%.
Automotive companies hope that price reductions will help clear inventory and accelerate the pace of product updates and upgrades. For some models with higher inventory levels, selling at reduced prices can quickly recover funds, providing more financial support for the research and development and production of new products.
02
Can price reductions really "transfuse"?
In the short term, price reductions will certainly boost sales to some extent. High-quality products require high-quality guarantees, rather than merely attracting consumers with low prices. The behavior of bad money driving out good will become increasingly difficult in the automotive market. In the long term, the competitiveness of state-owned enterprises is gradually widening, with product innovation, technology updates, sales layouts, and the development of influence all facing challenges from private enterprises and new forces in car manufacturing.
Fuel vehicles and new energy vehicles are competing against each other, and most consumers have to choose one or the other. It is inevitable that each factory will compete through price reductions. The promotion of fuel vehicles in the short term solves the problem of inventory and turnover funds, but in the long term, it affects the brand and after-sales service. New energy vehicles, under this suppression, will obviously suffer in terms of price and customer base. The strategic impact of long-term losses is crucial. The first priority is to survive, and even more importantly, to survive longer. Price reductions obviously cannot solve the fundamental problems.
In this context, SiC is gaining more attention.
03
Why can SiC bring hope?Power devices, as an important incremental component in the electrification of automobiles, have seen rapid growth in recent years, benefiting from the prosperity of downstream markets. Among them, IGBT and SiC, as representatives of the second and third generations of power devices, respectively, have been in constant competition for adoption in vehicles. Compared to IGBT, SiC has distinct advantages in terms of wide bandgap, breakdown electric field, thermal conductivity, and operating temperature, making it seem to be the new trend that is replacing IGBT. Some capable vehicle manufacturers are already planning for both IGBT and SiC vehicle models. Industry insiders have indicated that SiC is now taking a large share of the automotive-grade IGBT module market, with significant market growth potential.
SiC, as one of the representatives of the third-generation semiconductors, has clear advantages over silicon-based materials in four key indicators: wide bandgap, breakdown electric field, thermal conductivity, and operating temperature. Infineon believes that the bandgap of SiC is three times larger than that of silicon, which can be translated into a tenfold increase in breakdown electric field. Its thermal conductivity is also three times that of silicon, supporting operation at high temperatures up to 200°C, compared to 150°C for silicon. This makes SiC more suitable for harsh environments such as automotive applications. Therefore, SiC is considered an excellent alternative material to silicon in power devices. Compared to IGBT, SiC devices can be reduced to more than one-third the volume of IGBT and can also reduce weight by more than 40%, with power consumption reductions of over 60% under different operating conditions. Industry insiders believe that replacing IGBT with SiC can increase inverter efficiency by 3-8%, and SiC is expected to replace IGBT in the future, which is a developmental trend.
Currently, several car manufacturers have achieved optimization of SiC main drive costs. For example, Nissan's new generation of SiC electric drive systems have reduced costs by 30%, Tesla's main drive SiC has been reduced by 75%, and Xiaopeng's new electric drive has reduced the cost of silicon carbide by 50%, among others. The upstream substrate, chip capacity, and yield are continuously improving, providing some room for price reduction of SiC modules.
Global SiC is evolving from 6-inch to 8-inch development, which is expected to drive down the unit price of chips. Just as silicon wafers evolved from 8-inch to 12-inch, SiC wafers are also currently transitioning from 6-inch to 8-inch. Larger wafer sizes can lead to an increase in the number of chips per wafer, improve yield, and reduce the proportion of edge chips, thereby enhancing wafer utilization. For instance, according to Wolfspeed, the proportion of edge chips in 6-inch SiC wafers is 14%, which is reduced to 7% in 8-inch wafers. With the global expansion of SiC wafer sizes, it is anticipated that the unit price of SiC chips will decrease, thereby opening up the application market.
The selling price of SiC substrates is gradually decreasing with increasing shipment volumes. In 2021, Tianyue Advanced's average selling price was 6,767 yuan per piece, a year-on-year decrease of 25% compared to 2020. Considering that domestic 6-inch substrates have not yet been mass-produced, there is expected to be room for further price reduction. On the other hand, semi-insulating SiC substrates currently have a higher selling price due to fewer market suppliers and some military equipment applications downstream. The current high price of SiC substrates is caused by multiple factors such as low yield levels, small wafer sizes, and low automation levels. As manufacturers improve their processes and develop larger SiC wafers, it is expected that the selling price of SiC substrates will gradually decrease.
The cost reduction of SiC depends on the increase in size, the increase in usable thickness, and the reduction in defect density. With the continuous increase in the proportion of large-diameter substrates, the growth cost per unit area of the substrate decreases. The usable thickness of single crystals is also continuously increasing. Taking a 100mm diameter single crystal as an example, before 2015, the average usable thickness prepared by most single crystal manufacturers was around 15mm, and by the end of 2017, it had reached around 20mm.
As the crystalline defect density of the substrate decreases, the complexity of the process increases. After most substrate suppliers have completed the development of low defect density single crystal growth processes and thick single crystal growth processes, the price per unit area of the substrate will experience a relatively rapid decrease.
04
New technologies can reduce the usage and cost of SiC chips in electric drives.
The price of SiC power electronic devices is further decreasing, narrowing the price gap with similar silicon devices. According to CASA and Mouser, from public quotes, at the end of 2020, the average price of 650V SiC SBD was 1.58 yuan/A, a year-on-year decrease of 13.2%, with a price difference of about 3.8 times compared to silicon devices; the average price of 1200V SiC SBD was 3.83 yuan/A, a year-on-year decrease of 8.6%, with a gap of about 4.5 times compared to silicon devices. According to CASA research, the actual transaction price is lower than the public quote, with the actual transaction price of 650V SiC SBD being about 0.7 yuan/A, and the price of 1200V SiC SBD being about 1.2 yuan/A, which is about 60%-70% of the public quote, and a year-on-year decrease of 20%-30%. The actual transaction price difference with silicon devices has already narrowed to between 2-2.5 times, reaching the sweet spot.According to this trend, the price of SiC is expected to decrease again in the future.
Market sources indicate that the domestic mainstream 6-inch silicon carbide (SiC) substrate quotes are rapidly declining, following the international market price of $750-800 per piece, with a price drop approaching 30%. Some supply chain practitioners have even stated that due to the numerous participants in domestic SiC crystal growth and substrate manufacturing, the first-tier manufacturers initiating a price reduction model may force second and third-tier manufacturers to passively follow suit, thus triggering a price war for SiC substrates.
There are differing opinions within the industry regarding the "price war" initiated by first-tier SiC manufacturers and the nearly 30% reduction in SiC substrate prices. With the increase in SiC production capacity by major domestic manufacturers, the price of SiC substrates has been in a slow downward trend, with an average annual reduction rate of about 5%-10%. For instance, at present, the price of domestic 6-inch SiC substrates is around 4000-5000 yuan per piece, and it is anticipated that by 2025, the price will further decrease, potentially reaching 4000 yuan per piece.
Drastic price reductions do not align with the current industry development patterns. For new entrants in the silicon carbide industry, there are two factors currently constraining industry development: one is the inability to keep up with production capacity; the other is the inability to improve yield rates. This also leads to small and medium-sized manufacturers resorting to price reductions to gain market share when competing against leading manufacturers. On the contrary, for leading SiC upstream manufacturers who have already partnered with global clients such as Infineon and Bosch, stable product performance and the ability to supply in bulk are the foundations for market presence, rather than relying on price reductions to "clear out" market followers.
As technology advances and costs decrease, the application of SiC substrates will become more widespread, which is beneficial for promoting rapid development in downstream applications. Once the production capacity of SiC substrates increases, significant price reductions are possible.