ON Semiconductor considers $2bn investment in EV chip production
Business
The company makes more than half of its own chips internally
(Reuters) - ON Semiconductor Corp is considering investing $2 billion in boosting production of silicon carbide chips that are widely used to help extend the range of electric vehicles, company executives said on Tuesday.
Company executives said during an analyst presentation the company is considering the expansion in either the U.S., the Czech Republic or Korea. The firm already has factories in each of those countries.
ON Semiconductor is a long-time 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.
The company 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.
In an interview, ON Semiconductor Chief Executive 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.
"It's always good to have a geographically distributed supply chain," El-Khoury said.
At a financial analyst day on Thursday, executives said they aim to capture 40% of the silicon carbide automotive chip market by 2027.
The company forecast that growth in that area and others will help it grow revenue at a 10% to 12% compound annual rate,
expanding sales from $8.3 billion in 2022 to an estimate with a midpoint of $13.9 billion by 2027.
Over the same time period, ON Semiconductor expects to expand free cash flows from $1.6 billion in 2022 to $3.5 billion to $4 billion by 2027.
