onesmi ON recently announced that it is expanding its silicon carbide (SiC) facility in Hudson, New Hampshire. The newly-inaugurated hub will increase ON’s SiC boule production capacity by five times year over year and address certain supply-chain bottlenecks it faces.
This will aid in fully controlling onesmi’s silicon carbide manufacturing supply chain from sourcing silicon carbide powder and graphite raw material to delivering fully packaged SiC devices.
onesmi signed long-term supply agreements with various customers for the next three years, which helped it secure more than $4 billion of committed silicon carbide revenues. To drive its silicon carbide revenues, onsemi is rapidly expanding capacity across new sites like Hudson, New Hampshire.
ON initiated its capacity expansion to capitalize on the uptrend in the high-growth markets like electric vehicles (EV), ADAS, and energy infrastructure and factory automation.
onsemi Expands Production Capacity to Aid Top Line
onsemi’s recent expansion of its Hudson facility will aid in meeting rising demand for SiC-based solutions, which is critical for developing EVs and energy infrastructure and is also an important contributor to decarbonization. Per onsemi, the SiC total addressable market is projected to grow from $2 billion in 2021 to $6.5 billion in 2026, seeing a CAGR of 33%.
ON may have gained from the EV megatrend as its silicon carbide modules are attracting big automobile companies like Daimler DDAIF.
Daimler’s Mercedes EQXX electric vehicle platform is powered by onsemi’s silicon carbides, helping the new electric vehicle gain a range of 620 miles.
Apart from this new facility, onesmi is looking to expand the 200-millimeter Silicon Carbide capacity at its existing fabs and to double the front-end wafer capacity by the end of 2023 from the year-ago period’s level, besides further doubling that capacity by 2024 end.
The expansion of its various facilities will help ON well diversify its product portfolio. onesmi generates a significant percentage of revenues from the computing, consumer, industrial, communications and automotive markets.
onesmi is reallocating its capacity to strategic and high-margin products to drive a favorable mix shift and eliminate the price-to-value discrepancies. Due to an expanding portfolio in high-margin products and long-term supply agreements for products in high demand, onsemi is expected to witness long-term revenue growth.
In the last reported quarter, onsemi’s revenues of $2.09 billion beat the Zacks Consensus Estimate by 3.4% and improved 7.2% on a year-over-year basis.
However, ON is facing stiff competition from the likes of Texas Instruments TXN and STMicroelectronics STM.
STMicroelectronics’ third-generation STPOWER silicon-carbide MOSFETs help meeting the energy-saving efficiency requirements in EVs and are a chief competitor of onsemi in the EV market. STMicroelectronics’ solutions will aid EV makers in achieving faster charging and help reduce the EV weight. This helps STM win a significant market share in the industry.
Texas Instruments is also seeing success in certain fast-growing automotive market segments. TXN is focused on infotainment, safety and ADAS, body electronics (including lighting), hybrid electric vehicle and powertrain segments of the automotive market. It also experiences significant traction from the EV megatrend.
Another big sore point for onsemi is the persistence of supply-chain constraints, especially for certain products manufactured by its foundry partners due to unfavorable macroeconomics and geopolitical dynamics.
However, onsemi expects demand to continue outpacing supply throughout 2022. With the recent expansion of its SiC plant, ON can address the rising supply-chain issues, which distinguish its services from its competitors.
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