Semiconductor Practice New silicon carbide prospects emerge as market adapts to EV expansion Rising electric-vehicle adoption is boosting demand for crucial silicon carbide power electronics components. How can semiconductor players, automotive OEMs, and others create value amid disruption? This article is a collaborative effort by Albert Brothers, Ondrej Burkacky, Julia Dragon, Jo Kakarwada, Abhijit Mahindroo, Jwalit Patel, and Anupama Suryanarayanan, representing views from McKinsey??s Semiconductor Practice. October 2023 The electric-vehicle (EV) market is estimated to Extensive market growth projected for grow at a 20 percent CAGR through 2030, when EVs and SiC by 2030 sales of xEVs are estimated to reach 64 million?? Between 2018 and 2022, projections for EVs?? share four times the estimated EV sales volume in 2022.1 of the global light-vehicle market in 2030 increased Ensuring the EV component supply is sufficient to 3.8 times, from around 17 million to 64 million units meet this rapid rise in estimated demand is critical, (Exhibit 1). This growth has been fueled by the and the supply of silicon carbide (SiC) merits special expectation that EVs will reach total cost of owner- consideration. Our analysis shows that compared to ship (TCO) parity with internal-combustion vehicles their silicon-based counterparts,2 SiC metal-oxide- (ICEs) in many countries by 2024 or 2025,5 as well semiconductor field-effect-transistors (MOSFETs)3 as by the regulatory actions taken and invest-ments used in EV powertrains (primarily inverters, but also made in EVs and charging infrastructure as part of DC-DC converters and onboard chargers)4 provide the push to meet net-zero targets. higher switching frequency, thermal resistance, and breakdown voltage. These differences contribute The SiC device market, valued at around $2 billion to higher efficiency (extended vehicle range) and today, is projected to reach $11 billion to $14 billion lower total system cost (reduced battery capacity in 2030, growing at an estimated 26 percent CAGR and thermal management requirements) for the (Exhibit 2). Given the spike in EV sales and SiC??s powertrain. These benefits are amplified at the compelling suitability for inverters, 70 percent of SiC higher voltages needed for battery electric vehicles demand is expected to come from EVs. China, where (BEVs), which are expected to account for most EVs anticipated EV demand is highest, is projected to produced by 2030. drive around 40 percent of the overall demand for SiC in EV production. In this article, we will examine how SiC manufacturers, automotive OEMs, and others can seize the oppor- Across EVs, the type of powertrain??BEV, hybrid tunities inherent in the projected EV market growth electric vehicle (HEV), plug-in hybrid electric vehicle urge to create value and gain competitive advantages. (PHEV), 400-volt, or 800-volt??determines the Ensuring the EV component supply is sufficient to meet this rapid rise in estimated demand is critical, and the supply of silicon carbide merits special consideration. 1 Based on data from the McKinsey Center for Future Mobility. 2 That is, silicon insulated-gate bipolar transistors (IGBTs). 3 A MOSFET is an electronically controlled switch. 4 An inverter is a device that converts DC power from the EV battery to AC supply for the EV motor. 5 Excluding subsidies. With subsidies, TCO is already at parity between EVs and ICE vehicles. 2 New silicon carbide prospects emerge as market adapts to EV expansion Web <2023> Exhibit<SiC in EV 1 Revolution> Exhibit <1> of <8> The push to achieve net-zero objectives has accelerated the pace of electric-vehicle adoption. Global light-vehicle sales, million units (% share) Prior xEV1 market forecasts, million units xEV1 ICE2 95 Series64 1 Series 2 Total Current projection 92 82 2022 projection 32 (~58 million units) 16 (35%) 64 2021 projection (19%) (67%) (~42 million units) 2020 projection (~30 million units) 2019 projection 66 60 (~20 million units) (81%) (65%) 2018 projection 32 (~17 million units) (33%) 2022 2025 2030 2030 Note: Figures may not sum, because of rounding. 1xEV includes battery electric vehicles (BEVs), hybrid electric vehicles (HEVs), plug-in hybrid electric vehicles (PHEVs), and fuel-cell electric vehicles (FCEVs). 2Internal-combustion engine. Source: McKinsey Center for Future Mobility McKinsey & Company The SiC device market, valued at around $2 billion today, is projected to reach $11 billion to $14 billion in 2030, growing at an estimated 26 percent CAGR. New silicon carbide prospects emerge as market adapts to EV expansion 3 Web <2023> Exhibit<SiC in EV 2 Revolution> Exhibit <2> of <8> The silicon carbide device market is estimated to grow at a CAGR of 26 percent between 2022 and 2030. Annual silicon carbide power device revenue, $ billion CAGR, 2022?C30 11.414.4 Industrial and energy1 Series 1 Series 2 Total xEV2 2.83.9 +18% p.a.3 +26% p.a.3 6.47.4 1.82.2 4.15.0 8.610.5 +31% p.a.3 1.31.6 1.72.2 4.65.2 0.81.1 2.83.4 0.91.1 2022 2025 2027 2030 Note: Data is as of November 2022. 1Other applications as a share of industrial and energy include power supplies (23%), industrial applications (14%), commercial vehicles (12%), uninterruptable power supplies (12%), and military and aerospace (12%). 2xEV includes battery electric vehicles (BEVs), hybrid electric vehicles (HEVs), plug-in hybrid electric vehicles (PHEVs), and fuel-cell electric vehicles (FCEVs). 3Per annum. Source: McKinsey Center for Future Mobility, Current Trajectory Scenario McKinsey & Company ben-efits and relative uptake of SiC. Because of their Vertical integration: A compelling greater efficiency needs, 800-volt BEV powertrains business model in the SiC market are most likely to use SiC-based inverters.6 According The current SiC market is highly concentrated, with to our analysis, by 2030, BEVs are expected to only a few end-to-end leaders. Indeed, the top two account for 75 percent of EV production (up from 50 companies in the SiC wafer and device markets percent in 2022), while HEVs and PHEVs will make control around 60 to 65 percent of SiC market share up the other 25 percent. Furthermore, we anticipate (Exhibit 3). more than 50 percent