“With the significant uptick in the last 8 quarters we are into double digits investment in capex on both front and backend,” said Bill Hall, executive vice president of the Power Solutions Group (above, left). “We have 13 fabs globally and 18 back end plants in Asia, and the majority of the investment is in power, MOSFETs, IGBTs and modules.”
The investment of over 10% of the $5.5bn revenue will include planning for a move to 300mm (12in) wafers. Arch-competitor Infineon Technologies announced its first 1200V MOSFETs on 300mm wafers earlier this week, and On Semi expects to announce its plans by the end of the year.
“We are actively working on plans to get into 12in, that’s a high capital required,” said Hall. “The return on investment (ROI) is not there until you fully load those fabs so we are working on various scenarios with a plan by the end of the year with capacity to follow in 2 to 3 years – it will be in the Asia-Pacific region.”
But the bulk of the investment is to boost capacity. For example it has invested $23m in the former Fairchild fab at South Portland, Maine, which is delivering SiC epi wafers, an increasingly key capability to have in-house, says Hall. “We are one of the only companies to do epi and substrates and we made a significant investment in that,” he said. It also has a substrate fab in the Czech Republic from its days as Motorola Semiconductor. “We are growing that site significantly, it’s really paying off in this market.”
The company is also investing in the fab at Mountaintop, Pennsylvania for power MOSFETs and the former Samsung fab in Busan, Korea for IGBTs. It is increasing its ownership in a joint fab with Fujitsu in Japan planning to own it completely by 2020 for MOSFETs and IGBTs
“We believe that the investment is just there to meet current demand – these are cycle resistant markets driven by energy efficiency, cloud power infrastructure,” said Asif Jakwani, Vice President and General Manager of the High Power Division. “It will go to high single digits in 18 months but we don’t see softness in the market in next 12 months.”
He points to the $15bn market for silicon power semiconductors, compared to $300m for the widebandgap technologies (WBG) such as SiC and gallium nitride.
“Widebandgap is growing very rapidly but there is still a significant runway for IGBT and superjunction FETs,” he said. “SiC will play a significant role but not for two years, possibly longer. GaN is still in its infancy and we believe it will take some time to ramp. Now everyone has moved to enhancement mode and we are working on that. We still see GaN behind SiC by at least two years.”
All of this is being driven by demand for e-mobility, cloud power and 5G wireless networks. The company is already working on SiC designs for the 2022 to 2024 generation of electric vehicles with global car makers and tier one suppliers.
“We don’t see any relief in capacity for power,” said Jakwani. “All these areas are highly power intensive requiring significant amounts of power and that will drive significant amounts of capacity over the next 3 to 5 years.”
One of the key areas is packaging, particularly in modules.
“In modules we are developing dual sided module – it will deliver the lowest $ per KW in 2019 and we are seeing significant traction with alpha customers in electric vehicles,” says Jakwani. “There are two ways to solve the power problem – generate less heat with IGBTs or SiC or get the heat out of the die as efficiently as possible so both packaging and the front end are key. What we hear from customers is the dual sided module reduces inverter size by half.”
Back in 2016 when On Semi acquired Fairchild, the business in modules was $100m. Now it is $500m “For us the shift is huge,” said Hall. “The whole business has grown 50% since the Fairchild purchase in last 6 quarters,” he added.
The module business benefits from a lack of standardisation that JEDEC provides for standard power packaging. “In JEDEC we are not seeing any move to standardising the footprint for modules,” said Jakwani. “What we are seeing is the standard on qualification.”
Two of the potential challenges to the growth come from China. One is the potential for a global trade war with tariffs on all kinds of equipment from the latest vehicles to consumer electronics. The other is the slow down in solar farms being installed across China. Its government announced a cap on capacity to be installed this year, which was reached in the first six months. As On Semi is a major supplier to inverter makers in China, this has potential to hit demand.
“We see no impact on the design pipeline or backlog,” said Jakwani. “We are also seeing more opportunities in Europe both from European companies and Chinese suppliers looking to move into Europe. In the medium term we believe the market will get back to growth in Q4 or early 2019. We don’t believe the normal cycles will apply to this power market as they are regulated by governments.”
In fact, Hall and Jakwani see this pause as a good thing, allowing more focus on electric vehciles. “Volumes ramped so quickly we didn’t have to catch our breath so now with this pause we are dedicating more engineering runs and wafers into EV projects,” said Jakwani.
Although it is further out, in GaN technology they have ambitious plans to move to monolithic devices on a CMOS process.
“In the lower power GaN we want to combine the gate driver in DrGaN with a monolithic GaN switch on a CMOS process initially in a single package then monolithic,” said Zakwani.
Looking to overtake the market leader in discrete power and modules, Infineon, will take a combination of organic and technology growth and to a degree an acquisition, says Hall. “There’s always the potential for an acquisition, that’s a key area for us but execution is the key of the next three to five years,” he said.
“What’s attractive there is the manufacturing capability, and any instant boost in capacity would be a great thing. In the past we could buy used equipment but now most of that has gone, and there are lead times on new equipment, that’s why those are attractive.”
“Our biggest fear is we may be underestimating what’s coming in the pipeline,” said Jakwani. “Two customers have said we may be underestimating the investment – this is a significant opportunity.”