onsemi Selects the Czech Republic to Establish End-to-End Silicon Carbide Production for Advanced Power Semiconductors

Rhea-AI Summary

onsemi plans to invest up to $2 billion in establishing a silicon carbide (SiC) manufacturing facility in the Czech Republic. This multi-year investment aims to build a vertically integrated SiC production site to meet the rising demand for energy-efficient semiconductors in electric vehicles, renewable energy, and AI data centers. The project, among the largest private sector investments in the Czech Republic, will significantly enhance the region's semiconductor supply chain. The new facility is expected to contribute over $270 million annually to the Czech GDP. The investment aligns with the European Chips Act, aiming to strengthen EU's semiconductor market share and technological capabilities.

Positive

• Planned $2 billion investment in the Czech Republic.
• Vertically integrated SiC production site to meet rising demand.
• Enhances semiconductor supply chain for Europe and global customers.
• Expected to contribute over $270 million annually to Czech GDP.
• Supports European Chips Act's goals of market share and technological advancement.

Negative

• None.

Insights

Financial Analyst

onsemi's planned investment of up to $2 billion in a silicon carbide production facility in the Czech Republic signifies a substantial move in the semiconductor industry. Financially, this represents a significant capital expenditure that could impact onsemi's balance sheet in both the short-term and long-term. In the short term, such a heavy investment might constrain liquidity and increase debt unless offset by cash reserves or financing options.

However, this investment can be seen as a strategic move to meet the rising demand in the electric vehicle (EV), renewable energy and AI sectors. If executed well, this could result in significant future revenue streams, making the company more competitive in these high-growth markets.

The involvement of the Czech government in preparing an incentive package suggests potential financial benefits like tax breaks or grants, which can mitigate some of the upfront costs. Investors should also note the opportunity costs and the timeline for returns, which could be several years.

Tech Expert

This investment is critical from a technology standpoint. Silicon carbide (SiC) is a superior material for high-power, high-temperature applications compared to traditional silicon. It’s used in high-efficiency power devices essential for electric vehicles and renewable energy systems. onsemi’s ability to produce SiC from crystal growth to advanced packaging sets it apart from many competitors, who often rely on third parties for various stages of production.

This vertically integrated approach ensures better quality control and faster innovation cycles, which can directly impact product performance and reliability. Moreover, advanced packaging capabilities will boost their ability to create more compact and efficient power modules, essential for space-constrained applications like EVs.

Investors should appreciate how this technological advantage can translate into a competitive edge in a market that is increasingly looking to reduce energy consumption and enhance performance.

Market Research Analyst

The broader context of this investment aligns with major market trends such as electrification and renewable energy. The European Union’s emphasis on reducing carbon emissions and dependency on non-renewable energy sources creates a favorable environment for onsemi’s products. Building a facility in Central Europe also strategically positions onsemi within the European Chips Act framework, aimed at bolstering the semiconductor supply chain within Europe.

From a market perspective, this move not only addresses the rising demand but also solidifies onsemi’s presence in a key geographical market. Central Europe is becoming an attractive hub for technology investments due to lower operational costs and a skilled workforce. Furthermore, collaboration with the Czech government underscores the supportive business environment.

Short-term market reactions might be tempered by the initial costs, but long-term prospects look promising as the demand trajectory for efficient power semiconductors is upward.

Brownfield investment would bring critical manufacturing capabilities of energy efficient chips to Central Europe to power the future of electrification, renewables and AI

NEWS HIGHLIGHTS

• onsemi’s planned multi-year investment of up to $2 billion would solidify advanced power semiconductor supply chain for its European and global customer base
• Vertically integrated silicon carbide site brings advanced packaging capabilities to the region and best positions onsemi to meet rising demand for clean, energy efficient semiconductor solutions
• onsemi is cooperating with the government of the Czech Republic to prepare an incentive package that would support the investment
• The investment would be one of the largest private sector investments in the Czech Republic’s history and one of the first investments in advanced semiconductor manufacturing in Central Europe

SCOTTSDALE, Ariz.--(BUSINESS WIRE)-- Electrification, renewables and artificial intelligence are global megatrends converging and driving unprecedented demands for advanced power semiconductors capable of optimizing energy conversion and management. In a strategic move toward addressing these demands, onsemi announced plans to establish a state-of-the-art, vertically integrated silicon carbide (SiC) manufacturing facility in the Czech Republic. The site would produce the company’s intelligent power semiconductors that are essential for improving the energy efficiency of applications in electric vehicles, renewable energy and AI data centers.

onsemi facility in Rožnov pod Radhoštěm in the Czech Republic (Graphic: Business Wire)

"Our brownfield investment would establish a Central European supply chain to better service our customers’ rapidly increasing demand for innovative technologies that improve the energy efficiency in their applications,” said Hassane El-Khoury, president and CEO, onsemi. “Through a close collaboration with the Czech government, the expansion would also enhance our production of intelligent power semiconductors that are essential to helping ensure the European Union is able to achieve its ambitions to significantly reduce carbon emissions and environmental impact.”

“onsemi’s decision to expand in Czechia is a clear confirmation of our country’s attractiveness for foreign investment and will bring significant momentum for the development of our economy,” said Mr. Jozef Síkela, Minister of Industry and Trade of the Czech Republic. “This investment not only strengthens our position in the semiconductor field but can also contribute to the development of the automotive industry and help us with its adaptation to the rise of electromobility.”

onsemi's Commitment to Europe and the Czech Republic

onsemi’s plan to expand SiC manufacturing with a multi-year brownfield investment of up to $2 billion (44 billion CZK) is part of the company’s previously disclosed long-term capital expenditure target. This investment would build on the company’s current operations in the Czech Republic, which include silicon crystal growth, silicon and silicon carbide wafer manufacturing (polished and EPI) and a silicon wafer fab. Today, the site can produce more than three million wafers annually, including more than one billion power devices. Upon completion, the operation would contribute annually more than $270 million USD (6 billion CZK) to the country’s GDP.

Pending all final regulatory and incentive approvals¹, this would be one of the largest private sector investments in the Czech Republic’s history and would further contribute to the prosperity and economic dynamism of the Zlín region. onsemi is one of the first companies to invest in advanced semiconductor manufacturing in the Central European region. With this investment, the company would contribute to the strategic positioning of the region within the EU’s semiconductor value chain and demonstrate that all EU countries can benefit from the European Chips Act. The announcement also reflects onsemi's strategic alignment with the overarching goals of the European Chips Act of increasing market share and technological advancement to strengthen the resilience of the EU’s semiconductor supply chains in times of ever-growing demand.

Driving Innovation in Power Semiconductors

Silicon carbide is a critical material for high-power, high-temperature applications, and is extremely difficult to produce. onsemi is one of the only companies in the world with the ability to manufacture SiC-based semiconductors from crystal growth to advanced packaging solutions. By expanding its production facilities in the Czech Republic, onsemi would be faster to provide supply assurance for customers, strengthening its leadership in intelligent power solutions. This integration would also enable onsemi to leverage its latest advancements in research and development (R&D) to maximize manufacturing and production efficiency.

¹ Including the investment incentive approval by the government of the Czech Republic and its notification to the European Commission

About onsemi

onsemi (Nasdaq: ON) is driving disruptive innovations to help build a better future. With a focus on automotive and industrial end-markets, the company is accelerating change in megatrends such as vehicle electrification and safety, sustainable energy grids, industrial automation, and 5G and cloud infrastructure. onsemi offers a highly differentiated and innovative product portfolio, delivering intelligent power and sensing technologies that solve the world’s most complex challenges and leads the way to creating a safer, cleaner and smarter world. onsemi is recognized as a Fortune 500^® company and included in the Nasdaq-100 Index^® and S&P 500^® index. Learn more about onsemi at www.onsemi.com.

onsemi and the onsemi logo are trademarks of Semiconductor Components Industries, LLC. All other brand and product names appearing in this document are registered trademarks or trademarks of their respective holders.

This document includes “forward-looking statements,” as that term is defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical facts, included or incorporated in this document could be deemed forward-looking statements, particularly statements about onsemi’s planned investments in the Czech Republic, pending regulatory and incentive approvals and potential contributions to the Czech Republic’s GDP. Forward-looking statements are often characterized by the use of words such as “believes,” “estimates,” “expects,” “projects,” “may,” “will,” “intends,” “plans,” “anticipates,” “should” or similar expressions or by discussions of strategy, plans or intentions. All forward-looking statements in this document are made based on our current expectations, forecasts, estimates and assumptions and involve risks, uncertainties and other factors that could cause results or events to differ materially from those expressed in the forward-looking statements. Certain factors that could affect our future results or events are described under Part I, Item 1A “Risk Factors” in the 2023 Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on February 5, 2024 (the “2023 Form 10-K”) and from time to time in our other SEC reports. Readers are cautioned not to place undue reliance on forward-looking statements. We assume no obligation to update such information, which speaks only as of the date made, except as may be required by law. Investing in our securities involves a high degree of risk and uncertainty, and you should carefully consider the trends, risks and uncertainties described in this document, our 2023 Form 10-K and other reports filed with or furnished to the SEC before making any investment decision with respect to our securities. If any of these trends, risks or uncertainties actually occurs or continues, our business, financial condition or operating results could be materially adversely affected, the trading prices of our securities could decline, and you could lose all or part of your investment. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by this cautionary statement.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240619849155/en/

Krystal Heaton

Director, Head of Public Relations

onsemi

(480) 242-6943

Krystal.Heaton@onsemi.com

Lenka Stralkova

Public Relations, Czech Republic

onsemi

(420) – 606-731-834

lenka.stralkova@onsemi.com

Parag Agarwal

Vice President - Investor Relations & Corporate Development

onsemi

(602) 244-3437

investor@onsemi.com

Source: onsemi

FAQ

What is onsemi's latest investment in the Czech Republic?

onsemi plans a multi-year investment of up to $2 billion to establish a silicon carbide manufacturing facility in the Czech Republic.

What will the new onsemi facility in the Czech Republic produce?

The new facility will produce silicon carbide (SiC) semiconductors for electric vehicles, renewable energy, and AI data centers.

How much will onsemi's new facility contribute to the Czech GDP?

Upon completion, the new facility is expected to contribute over $270 million annually to the Czech GDP.

How does onsemi's investment align with the European Chips Act?

The investment aligns with the European Chips Act by increasing market share and technological advancement to strengthen the EU's semiconductor supply chain.

What is the significance of onsemi's investment in the Czech Republic?

The investment is one of the largest private sector investments in the Czech Republic and strengthens the region's position in the semiconductor industry.