ON Semiconductor is considering an investment of $2 billion in boosting production of silicon carbide chips that are widely used in electric vehicles, Reuters news report said.
Company executives said during an analyst presentation the company is considering the expansion in either the U.S., the Czech Republic or Korea. ON Semiconductor already has factories in each of those countries.
ON Semiconductor is a longtime supplier to the automotive industry, supplying both chips that go into drive trains of electric cars as well as a broad swath of other chips like cameras and sensors that help with driver-assistance systems.
ON Semiconductor makes more than half of its own chips internally and has invested in a full supply chain for energy efficient silicon carbide chips, making both the raw materials and finished chips in-house.
ON Semiconductor CEO Hassane El-Khoury said the firm’s silicon carbide chip production is currently centered on one of its factories in Bucheon, South Korea. The company plans to find end-to-end production, meaning that whichever site it chooses will transform raw silicon carbide powder into a chip.
El-Khoury said that replicating the entire production process in more than one place has become an important selling point to automakers who are still cautious from 2021, when a freeze in chip-heavy Texas and a shortage from Asian chip suppliers led shutdowns on car production lines.
ON Semiconductor in its earnings report said it is aiming at flexible manufacturing strategy with low fixed cost footprint.
ON Semiconductor aims to invest in internal capacity for differentiated technologies and strategic growth areas (Intelligent Power and Silicon Carbide) Utilize external manufacturing for non-proprietary technologies with flex capacity internally and externally.
ON Semiconductor exited sub-scale fabs and shift to 300mm capacity in order to increase back-end flexibility for common packages. External volume is expected to increase to ~45 percent from 34 percent in 2021.
At a financial analyst day on Thursday, ON Semiconductor executives said they aim to capture 40 percent of the silicon carbide automotive chip market by 2027.
ON Semiconductor forecast that growth in that area and others will help it grow revenue at a 10 percent to 12 percent compound annual rate, expanding sales from $8.3 billion in 2022 to an estimate with a midpoint of $13.9 billion by 2027.
ON Semiconductor expects to expand free cash flows from $1.6 billion in 2022 to $3.5 billion to $4 billion by 2027.
ON Semiconductor reported 1 percent increase in revenue to $1,959.7 million during the first quarter of 2023 with operating margin of 28.8 percent.
ON Semiconductor’s Automotive revenue increased 38 percent to record 50 percent of total revenue. Automotive and industrial end-markets together represented record 79 percent of revenue
ON Semiconductor has generated revenue of $1,012.8 million (+3 percent) from PSG, $592.8 million (–14 percent) from ASG and 354.1 (+32 percent) from ISG business units in Q1 2023.
ON Semiconductor is targeting revenue of $1,975 million to $2,075 million in the second quarter of 2023.
