By Mauro Orru

Shares of European chip makers plunged in Thursday morning trading after Elon Musk's Tesla Inc. set out plans to significantly reduce the use of silicon carbide in its next generation of powertrains.

At 1020 GMT, STMicroelectronics NV shares traded 6% lower, while Infineon Technologies AG shares fell 2.5%.

Tesla's leadership said Wednesday at an investor event held at the company's factory near the Texan capital that while silicon carbide transistors are key components, "we've figured out a way to use 75% less without compromising the performance or the efficiency of the car."

Silicon carbide chips are more resistant and energy-efficient than traditional ones, and are a key growth driver for companies such as STMicroelectronics and Infineon over the next decade.

"We await further clarity from the supply chain, but our initial reaction is that this is a long-term risk rather than a short-term hit to numbers," Citi analysts wrote in a note to clients.

However, Equita Sim's Gianmarco Bonacina noted that the news is negative for the entire silicon carbide supply chain, in particular STM, which has Tesla among its top-10 customers.

A spokesman for STMicroelectronics said the company confirmed its current silicon carbide targets for 2023 and beyond, including more than $1 billion in sales this year.

Write to Mauro Orru at mauro.orru@wsj.com; @MauroOrru94

(END) Dow Jones Newswires

March 02, 2023 05:41 ET (10:41 GMT)

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