Congrats on your new (to be) garage.
I think the wall covering is a matter of preference. I like OSB or Plywood on the walls because you can nail or screw into it for hanging tools, etc..
But, in my opinion, the sheetrock looks better. I would go with OSB because it's more practical.
Consider going with 3/4 inch plywood or OSB rather than 1/2 inch.
It costs a little more but makes a solid wall. JMO
You can always go back later and cover the OSB with sheetrock.
I don't know about the OSB being fire retardant like sheetrock.