Aixtron purpose of this thread

One is a world top ten semiconductor company, and the other is an A-share chip company. Silicon carbide is a core material of the third generation semiconductors, which can be made into silicon carbide-based gallium nitride radio frequency devices and silicon carbide power devices. Benefiting from the development of 5G communications, new energy vehicles and new energy photovoltaics, the growth potential of silicon carbide is highly expected. The large-scale cooperation between the two has attracted great attention from the market.

One more move
The announcement shows that in the joint venture, Hunan San'an (a wholly-owned subsidiary of San'an Optoelectronics) holds a 51% stake, and STMicroelectronics (STMicroelectronics International NV, referred to as ST) holds a 49% stake, and both have invested in installments in the form of monetary funds.

The 21st Century Business Herald reporter further learned that of the total investment of about 22.8 billion yuan, capital expenditure in the next five years will be about 17 billion yuan. As of the end of the first quarter of 2023, Sanan Optoelectronics had 8.091 billion yuan in cash, including accounts receivable, inventory and other assets, and current assets totaling 20.38 billion yuan.

Obviously, for such a huge investment, Sanan Optoelectronics needs a partner.

The announcement revealed that the above funding sources include capital investment from STMicroelectronics and Sanan Optoelectronics, as well as support from the Chongqing government and external loans from the joint venture.

According to the agreement, the joint venture will use the intellectual property rights approved by ST to manufacture silicon carbide wafers and sell them exclusively to the exclusive purchaser ST (or any entity designated by ST). Hunan Sanan or its designated party will supply substrates to the joint venture and sign an agreement. Sanan Optoelectronics promises to ensure that Hunan Sanan complies with the joint venture agreement and the substrate supply agreement. The joint venture will sign a long-term silicon carbide substrate supply agreement with Hunan Sanan to ensure the joint venture's future material process needs.

From the above content, it can be seen that the joint venture will obtain technical support from STMicroelectronics and supply STMicroelectronics exclusively.

Sanan Optoelectronics said in the announcement, "This investment will expand production capacity to ensure the use of the joint venture's substrates, which will help expand the company's revenue scale, increase the market share of the company's products, and improve the company's profitability."

A reporter from 21st Century Business Herald learned that Sanan Optoelectronics has continued to expand its layout in the silicon carbide field in recent years.

Among them, the first phase of the Changsha SiC full-industry chain factory invested by Hunan Sanan with a total investment of RMB 16 billion was put into production in June 2021, with the production capacity of 6-inch SiC wafers climbing to 15,000 pieces/month. The second phase of the project is expected to be completed in 2023, with an annual production capacity of 500,000 6-inch SiC wafers after reaching full production. In 2020, Hunan Sanan acquired Fujian Nortel New Materials Technology Co., Ltd., whose main business is SiC crystal growth and substrate manufacturing; in 2022, Hunan Sanan and Ideal Auto jointly established Suzhou Sike Semiconductor Co., Ltd., with a planned annual production capacity of 2.4 million SiC half-bridge power modules. The infrastructure construction of the project has been completed.

A relevant person in charge of Sanan Optoelectronics recently revealed in an interview with the media that "customer orders are too late to be delivered." The company currently has long-term purchase orders for silicon carbide MOSFETs worth more than 7 billion yuan, of which the strategic purchase intention agreement for silicon carbide chips signed with a well-known car company has reached 3.8 billion yuan, and the intention of cooperation with several other new energy vehicle customers is also being followed up.

Regarding the cooperation with STMicroelectronics, Lin Kechuang, CEO of Sanan Optoelectronics, said: "The establishment of this joint venture will strongly promote the widespread adoption of SiC devices in the Chinese market. As an internationally renowned high-quality SiC wafer foundry service company, Sanan will also build a new SiC substrate factory to provide SiC substrates for the newly established joint venture. This is an important step for Sanan Optoelectronics to become a professional SiC wafer foundry."

It is worth noting that this cooperation involves cooperation with overseas companies. The partners still need to obtain approval from overseas competent authorities, and the project still needs to be reviewed and approved by relevant state ministries and commissions and approved by the company's shareholders' meeting.

Demand outstrips supply
For STMicroelectronics, this cooperation ensures the supply of silicon carbide, and also reflects the hot market for silicon carbide devices.

STMicroelectronics is a major international company in the industrialization of silicon carbide power devices. According to its official website, STMicroelectronics launched its first silicon carbide diode as early as 2004, SiC MOSFET was launched in 2009, and mass production began in 2014. Related products are used in electric vehicle (EV) applications, solar inverters, energy storage, industrial motor drives and power supplies.

According to Yole data, STMicroelectronics ranked first in the sales revenue ranking of silicon carbide power devices in 2021, with revenue of 3.2 billion yuan; followed by Infineon with revenue of 1.76 billion yuan, almost twice as much as ST.

The above ranking shows STMicroelectronics' status in the silicon carbide power device market, which also means that its demand for upstream materials such as silicon carbide (SiC) is huge.

A reporter from 21st Century Business Herald noted that STMicroelectronics has always wanted to improve its internal supply capacity of silicon carbide.

In April this year, STMicroelectronics China executives said in an interview with the media that the demand for silicon carbide is huge and it is difficult for the semiconductor industry to provide enough silicon carbide. One of the challenges comes from the substrate. However, the global SiC substrate wafer market is mainly in the hands of several suppliers, and STMicroelectronics cannot always rely on external substrates. Therefore, the company has made plans and taken practical actions to integrate silicon carbide substrates into the entire manufacturing strategy of silicon carbide devices and technologies. Its goal is to achieve internal supply of more than 40% of silicon carbide substrates by 2024.

The establishment of the joint venture is a key step for ST to control the SiC supply chain.

Jean-Marc Chery, President and CEO of STMicroelectronics, said of the collaboration: "Combining Sanan Optoelectronics' future 8-inch substrate manufacturing plant, the newly established front-end joint venture manufacturing plant, and ST's existing back-end manufacturing plant in Shenzhen, China, ST will be able to provide our Chinese customers with a fully vertically integrated SiC value chain. This move will be an important step in further expanding ST's global SiC manufacturing business following its continued significant investments in Italy and Singapore. The new joint venture will help ST achieve its goal of achieving more than 35 billion yuan in SiC revenue by 2030."

In recent years, the booming new energy market has led to a substantial increase in demand for silicon carbide devices. TrendForce predicts that by 2023, the overall market value of silicon carbide power devices will reach 16.23 billion yuan, a year-on-year increase of 41.4%. By 2026, the market value of silicon carbide power devices is expected to reach 37.84 billion yuan.

It is worth noting that Tesla had previously proposed that the use of SiC in the next generation of electric vehicles would be cut by 75%, which once caused the market to worry about the prospects of silicon carbide. However, an industry insider told reporters that " high-end models have high requirements for performance and energy consumption, so SiC will still be used. Tesla has a large shipment volume. If all of them use SiC, the world's leading companies cannot afford it. In order to increase the volume, they will consider reducing SiC ."

Another industry insider told the reporter, " Silicon carbide has certain advantages in automotive applications, but the cost is very high and the cycle is long, so it is difficult to achieve industrialization in the short term. "

This has also made the few domestic manufacturers with supply capabilities increasingly popular. According to statistics, the A-share companies that have increased the volume of silicon carbide products or made related arrangements include China Resources Microelectronics, Star Semiconductor, New Clean Energy, Silan Microelectronics, etc.

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