Broad-based chip company ON Semiconductor Corp. is in the process of selling four wafer fabs and buying one.
But it is all part of the ‘fab-liter’ plan put in place by CEO Hassane El-Khoury. And in a brief conversation with eeNews Europe El-Khoury expressed some optimism about how his company is now positioned for 2023.
The sale has been announced or executed of Oudenaarde, Belgium; South Portland, Maine; Pocatello, Idaho; and Niigata Japan. These are smaller fabs manufacturing on 6-inch or a mix of 6-inch and 200mm-diameter wafers (see OnSemi sells off two more wafer fabs).
“We are focusing on technologies that provide differentiation and the ability to scale. We are divesting those fabs, but focusing our existing position and we will close the purchase of a 12-inch wafer fab by the end of the year.” This is the acquisition of the East Fishkill wafer fab from Globalfoundries Inc. (OnSemi buys ex-IBM fab from Globalfoundries).
The fab was originally constructed IBM but was acquired by Globalfoundries in 2015, ownership and control has been transferred gradually since the deal was announced in 2019.
“This is why we have let out capex expand from 6 percent of revenue in 2021 to 12 percent of revenue in 2022. In the long-term we are moving up to 15 percent on average to support our differentiated technology.
One of the main platforms for that differentiation is silicon-carbide, much in demand for motive traction in electric vehicles. But there are plenty of major players – such as Infineon, STMicroelectronics, StarPower, Wolfspeed, Rohm – also in this market.
El-Khoury is not fazed. “We have a $4 billion long-term supply agreement with a customer.” Even if automobile sales may stall next year, growth in EV [electric vehicles] will not, he said.
But that does beg the question; what about next year? With macroeconomic post-pandemic headwinds of recession and inflation, US-China geopolitical tension and a war in Ukraine surely things are not looking good? “Consumer and computer spending have been soft since the middle of the year,” El-Khoury acknowledges but he expresses confidence that industrial, automotive, 5G and power infrastructure sectors will expand and OnSemi’s strong coupling to those sectors, will help drive the company in 2023.
OnSemi has a long list of manufacturing sites that perform probe, assembly and test. These are partly left over from the days as Motorola’s Semiconductor Products Sector, but also from its acquisitions of Sanyo facilities and Fairchild Semiconductor. Certainly, in automotive quality assurance there are good reasons to keep these things internal. But the OnSemi legacy includes three locations in China and three in the Philippines and one each in Malaysia and Vietnam.
Will the focus that El-Khoury has applied to wafer fabs also be applied to assembly and test?
“We haven’t announced anything. Right now, we are reshaping our assembly and test to match our product portfolio. For example, adapting to the manufacture of more modules. Once we get to stability we can look again. But we are continually monitoring performance. “We always have to be better at doing something than somebody else being paid to do it for us. As long as that is the case we continue to do it because it brings competitive advantage.”
But what about those three facilities in China and about OnSemi’s relations with China more generally at a time when the US is applying tough export controls?
El-Khoury doesn’t see problems ahead. “We are a US company and abide by all the regulations.” He says that OnSemi’s various types of technology are not listed and are not being sold directly, or indirectly, into critical or worrisome applications. “China is a big market for semiconductors and it will continue to be so,” he said.
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