As efficiency gains become a primary lever for cost control in next-generation manufacturing, sourcing decisions are shifting. The focus is moving away from low unit price and toward the strategic value of components that enhance end-product performance. ON Semiconductor’s silicon carbide strategy shows how sourcing decisions are being pulled upstream into engineering-led conversations, and why supply chain leaders must adapt their models accordingly.
From Component Price to Cross-Functional Cost Advantage
In the electric vehicle sector, ON Semiconductor has earned long-term positions with automakers not by offering the cheapest components, but by helping reduce overall vehicle costs. Its silicon carbide technology improves power efficiency by roughly 10%. That boost allows automakers to reduce battery size, a significant cost driver, while maintaining performance. The higher-priced component ultimately enables a lower total cost of the vehicle.
This kind of trade-off only works when procurement and supply chain functions are fully aligned with engineering and product teams. In companies where battery and powertrain decisions are handled independently, these efficiencies are harder to quantify and even harder to unlock. But where teams can model system-level impacts together, premium-priced components that deliver broader savings become viable sourcing decisions.
This shift highlights a growing requirement that supply chain teams must be able to assess total cost beyond the component level. That includes factoring in energy savings, downstream margin protection, and performance-led market differentiation, all of which are increasingly essential in capital-intensive product categories.
Supply Chain Design as a Strategic Asset
ON’s supply chain model reinforces this sourcing logic. By vertically integrating the manufacturing of silicon carbide substrates and device packaging, the company reduces reliance on third-party suppliers and maintains tighter control over delivery timelines and performance standards.
This also translates into stronger business continuity. With production capacity in the U.S., Europe, Japan, Southeast Asia, and China, ON can help customers adapt quickly to geopolitical shifts, such as export restrictions or trade barriers. For automakers exporting vehicles from China to the U.S. or EU, this flexibility in fulfillment strategy can determine whether a program stays on schedule or slips into risk.
Supply chains that integrate engineering insight, regional agility, and supplier control aren’t just more efficient. They are more competitive. But to build and run such systems, companies need to shift how value is modeled, negotiated, and managed.
Elevating Supply Chain Influence
It’s no longer enough to track landed cost. Businesses must surface the hidden value embedded in high-performance components, and communicate it with precision. That means investing in the tools, metrics, and supplier relationships required to measure how a part contributes to overall product cost, speed to market, and long-term resilience.
This also requires earlier involvement in engineering roadmaps and design discussions. The traditional handoff model, where procurement enters after specifications are fixed, limits opportunity and locks in avoidable cost. The silicon carbide example is just one case. But the larger pattern is clear: supply chain strategy is being redefined at the product architecture level. Leaders who embrace that shift will be positioned not just to reduce cost, but to shape how their companies compete.
