Major European OEMs are redesigning their procurement architecture with the goal of securing a stable SiC supply and strengthening their pricing leverage. After Tesla pioneered direct device procurement — establishing a business model in which OEMs purchase devices directly from suppliers and consign them to Tier 1s — VW, BMW, and Stellantis are also considering and implementing similar approaches. This shift has structural implications for the business models of Japanese Tier 1 suppliers. It is not merely a change in component sourcing policy; it represents a value chain restructuring centered on the allocation of profits from high-value SiC devices.
The backdrop is the economic weight of SiC modules, which account for 30–50% of the cost of an automotive inverter. This ratio is higher than it was in the IGBT era, making direct device procurement an issue OEMs cannot afford to ignore from a cost management perspective. Following the EV demand slowdown and inventory adjustment period of 2023–2024, OEMs have intensified their efforts to understand and manage the cost structure of SiC devices more directly.
The Cost Structure of SiC Modules — Why OEMs Are Intervening
The cost composition of automotive inverters (electric drive modules) for EVs has changed significantly from the era of IGBT modules. The transition to SiC MOSFETs has raised device unit prices, and in some cases the die cost as a share of total module cost reaches 40–55%. In concrete terms, the SiC device cost per main inverter in an 800V-class EV has reached approximately 20,000–40,000 yen (as of 2024, varying by vehicle model and output), making it a substantial line item — representing several percent of total manufacturing cost even in premium EVs priced in the millions of yen.
This composition creates a potential cost reduction effect when OEMs procure SiC devices directly, bypassing the markup charged by Tier 1s. Tier 1 markup rates vary by product and contract, but figures of 10–25% of the device price are discussed within the industry. On a device procurement volume of 1 billion yen, this represents a cost differential of 100–250 million yen, giving OEMs a clear incentive to negotiate or pursue direct procurement.
Three Procurement Approaches Adopted by European OEMs
Direct Device Procurement (Tesla Model)
The OEM signs long-term contracts directly with Wolfspeed, STMicro, and others, then consigns devices to Tier 1s. This allows the OEM to negotiate device prices directly, compressing Tier 1 margin structures. VW Group is considering partial adoption, with models emerging in which Tier 1s are commissioned only for module assembly and thermal design in exchange for device consignment.
Long-Term Multi-Source Contracts (BMW Model)
While leaving device selection to Tier 1s, the OEM simultaneously establishes long-term framework agreements with SiC suppliers. This distributes supply risk while maintaining the Tier 1 relationship. The impact on existing relationships with Japanese Tier 1s is relatively limited, and Tier 1s retain their own device selection authority. However, in cases where the OEM pre-approves the Approved Manufacturer List (AML), the freedom to choose devices may be constrained.
In-House Production and Vertical Integration (Stellantis Model)
Pursuing in-house production of SiC wafers and devices through a joint venture with STMicroelectronics. The goal is long-term price stability and securing a technological edge, but this involves enormous capital investment and ramp-up risk. Stellantis has plans for SiC production at its Sicily facility, aiming to complete the supply chain within Europe.
Diverging Strategies by OEM — Mercedes, Hyundai, and BMW
SiC procurement strategies vary even among European OEMs. Mercedes-Benz has adopted STMicro devices in the SiC inverters of its EQ series and has established a framework for direct technical discussions with the device maker, bypassing Tier 1s. However, assembly and module integration continue to be entrusted to Tier 1s, making it closer to a hybrid model.
The Hyundai Motor Group (Hyundai, Kia, Genesis) has adopted SiC at scale on the E-GMP platform and is pursuing a multi-source strategy with Rohm and onsemi. Its ties to Korean Tier 1 suppliers (LS Electric, etc.) are strong, and Japanese Tier 1s seeking to participate in this flow will need to clearly articulate their added value.
BMW is a representative example of the long-term multi-source approach: its inverters rely on Bosch and Vitesco as primary Tier 1s, while the OEM manages its own SiC device AML. Wolfspeed, Rohm, and STMicro are maintained as approved suppliers, distributing supply risk.
Impact on Japanese Tier 1 Suppliers — What Changes?
Japanese Tier 1 suppliers such as Denso, Aisin, and JTEKT have historically controlled the full inverter design — including device selection. In this model, the spread between device procurement prices and prices charged to customers was one source of Tier 1 margin. As OEM direct procurement advances, this margin will be compressed.
An even more significant impact is the shift in design authority. In cases where OEMs specify "use this device we are supplying, and design an inverter around it," Tier 1s must perform optimized design (gate drive, thermal design, EMC design) based on the specified device's characteristics. In other words, the ability to optimize designs for a given device becomes the evaluation criterion, and "design skills optimized for specific devices" carry greater weight.
Building Multi-Device Design Capability
Given that OEM-supplied device types will diversify, the ability to design and evaluate modules compatible with multiple devices — from Wolfspeed, STMicro, Rohm, and others — becomes a competitive differentiator. Accumulated expertise in thermal design and gate drive design for each device type will be the source of competitive advantage.
Focusing on Thermal Design and Packaging Value
As device procurement margins shrink, the added value in module architecture — encapsulation, heat sink design, bus bar design, and cooling structures — becomes the Tier 1's competitive edge. Design capability for double-sided cooling and liquid-cooled modules is the next-generation differentiator.
Building Technical Relationships with European and US SiC Suppliers
Before OEM direct procurement becomes entrenched, Tier 1s that proactively establish technical and commercial relationships with European and US SiC suppliers will be positioned as preferred design partners. Early access to supplier technology roadmaps translates directly into design competitiveness.
Design Challenges in the Device Consignment Model
Tier 1s receiving OEM-consigned devices face design challenges. If the performance parameters of the supplied device (short-circuit withstand capability, gate threshold voltage, parasitic capacitance) differ from the previously used device, the protection circuit and gate drive will need to be redesigned. This redesign effort is likely to fall on the Tier 1, making it important to clarify in OEM contracts which party bears the cost of design changes.
The allocation of responsibility when quality issues arise with consigned devices also becomes complicated. When Tier 1s were procuring devices themselves, they could take responsibility for device quality. Under the consignment model, responsibility for device-related defects must be clearly allocated among the OEM, device maker, and Tier 1. This legal and commercial complexity is one of the factors that makes the transition to the consignment model practically difficult.
Competition with Korean Tier 1s — Pressure Faced by Denso and Aisin
Another structural change facing Japanese Tier 1s in European OEM SiC-related business is the rise of Korean Tier 1s (Hyundai Mobis, Hanon Systems, etc.). Korean Tier 1s, backed by strong ties to Hyundai and Kia OEMs, are rapidly advancing in-house production of SiC inverters and power modules, and are intensifying their outreach to European OEMs.
The primary competitive axes are cost and development speed. Korean manufacturers can offer competitive pricing on the back of lower labor costs and government support. Japanese Tier 1s' strengths, by contrast, lie in their reliability track record and expertise in complex thermal and EMC design. Demonstrating this advantage to European OEMs with concrete data is the foundational strategy for retaining orders.
Speed of Transition to 8-Inch Wafers
Mass production of SiC on 8-inch wafers is accelerating toward 2028, and the transition to module design using 8-inch devices will become a competitive axis among Tier 1s. Tier 1s that begin design collaboration with 8-inch device suppliers early will gain a head start in cost competitiveness.
Design Adaptability to OEM Direct Procurement
To adapt to models in which OEMs directly specify devices, Tier 1s will be evaluated on the speed with which they can optimize designs for the specified device. Tier 1s with a device-agnostic design platform (standardized current sensors, gate drives) will have an advantage.
Software-Defined Vehicle (SDV) Compatibility
As SDVs proliferate, inverter control software is becoming more sophisticated, and firmware and AUTOSAR-compatible software development capability is being added to the Tier 1 competitive equation alongside hardware design. Japanese Tier 1s still hold strengths in this area, but competitors are beginning to close the gap.
The structural shift in SiC procurement is not merely a parts sourcing issue — it demands a transformation of Tier 1 business models. For Japanese Tier 1s to capture this change as an opportunity, building device-agnostic system design capability and establishing relationships with European device suppliers are prerequisite conditions. Given the speed of change, the time to act is now: the next generation of EV designs targeting 2026–2027 will not wait.