We can do it. We have huge credit in the US

 

Have you been sleeping well lately? And don’t you sometimes wake up in the morning with the thought that the big investment in the Rožnov plant, the largest in the modern history of the Czech Republic, might not work out after all?

I sleep very well. There is a lot of talk now about a new big investment in silicon carbide, but for us it is not a completely new thing. Here in Rožnov, we have already invested around 12 billion crowns in one part of silicon carbide in the last three years, so we have an idea of ​​the preparation that such an investment entails. So no, it certainly did not deprive me of sleep.

Rožnov has high credit

The parent company onsemi has chosen the Rožnov plant and intends to invest almost two billion dollars, or more than 46 billion crowns, in the production of silicon carbide chips here. How significant an investment is this for you? How significant is it for the Czech Republic?

One aspect is the direct impacts. I would mention one number here: The company’s current annual turnover is seven billion crowns, the investment will mean an increase of 20 billion, so that is a significant financial benefit.

However, in my opinion, the other aspects are significantly more important. Europe and actually the whole world are going through a certain development and change, and this investment and these products are important for this transformation. They will contribute to the success of the Czech industry and, thanks to it, also of European car manufacturers.

Silicon carbide is a new material that is mainly used in high-voltage applications and this investment will allow us to develop other chips and other technologies. So this is also important from a longer-term perspective.

Another aspect is that only a few countries in the world produce chips and it is certainly good to be one of them. It is a strategic production that will generate interest and can attract other investors to us.

As far as I know, the parent company was deciding between the Czech Republic, South Korea and the United States regarding the new investment. Why do you think it decided on Rožnov?

I see three main factors there. First, the corporation evaluated the cooperation with the Czech government very positively – without the support of the Ministry of Industry and Trade, it would not have been possible. This is also related to the second factor, which is Europe’s effort to have its own chip supplies. That is why the Chip Act was created, which allowed these productions to receive financial support in European countries. And finally, the third aspect is that onsemi has been in Rožnov for almost thirty years and I dare say that our plant has enormous credit in the corporation. We complete all projects on time and in the required quality. And we have taken it as a personal commitment that we will manage this new investment.

 

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“The new investment will increase turnover by twenty billion annually.”

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The fact that Onsemi wants to supply more chips to European automakers and the Rožnov plant is the only European plant in the group certainly played a role.

Certainly. On the one hand, the corporation preferred to invest in a place where production already exists, on the other hand, European automakers, due to previous experiences with Covid, want to reduce dependence on other continents. So it intersected well.

It can’t be done without support

It is mid-November, the investor has promised an investment, but the investment incentive, which is a condition for everything to be implemented, has still not been decided (it has not been decided by the end of 2024 – editor’s note). There is talk that the incentive should reach 10 billion crowns. Is that true?

Negotiations are underway and I will not comment on them. I can only describe the entire process. Even the approval of the incentive itself has several steps. The Ministry of Industry and Trade must review all documentation, then other ministers will give their opinions, and only then will the final approval by the entire government follow.

In parallel, the so-called notification process is underway with the European Commission, which also requires extensive documentation, from which it should be clear what this project brings new to Europe and what the positive effects will be. The final document for the European Commission must justify that the support that the Czech Republic wants to grant the investment is really necessary and that without it it would have been implemented in another location.

When can we expect any progress?

The time frame is not specified in any way. It is clear that now that the European Commission is changing, it will take some time for the entire formal process to take place.

If the amount of the incentive were 10 billion crowns, it would be roughly 22 percent of the total investment. How does it work in the semiconductor world in general? Do other countries provide more generous incentives?

I certainly cannot confirm the amount of the considered incentive, but we can generally look at how it is in other European countries. For example, Intel, which planned an investment in Germany, was promised an incentive of at least 40 percent. In Italy, a similar investment received 30 percent.

But we cannot compare it exactly like that. It is not a simple calculation of who can give what percentage. The amount of the incentive is based on the fact that the corporation has a financially optimal investment option and then the one where it decides to invest. It compares these two options, documents them and requests compensation for the difference.

In this particular case, onsemi compares what the difference is between making the investment here and in South Korea, where it already has such production.

Yes, Korea currently produces silicon carbide chips. This means that it would not have the same problem as us, that it would have to build a new building, install a production line, transform the process and qualify it for the customer. And all this will take a relatively long time. During this time, the corporation does not have any income from this with us. The amount of support is then intended to compensate for this disadvantage.

Can you at least indicate what part of the incentive should be direct financial support and what part should be tax relief?

For the planned investment, we are trying to obtain an investment incentive in the form of direct financial support, but unfortunately I cannot say more about that at this time.

Full launch in 2030

You said that in order to start new production, it will be necessary to build new buildings and install new technology. How financially and time-consuming are these two steps?

As for the building, it may seem like just a shell, but a clean and super-clean space must be created in it. This usually represents 25 to 30 percent of the investment, the rest is for machinery. The construction of such a hall will take a year, and clean rooms will gradually open in parallel with the arrival of production equipment.

Do you even have free space on the premises to build new halls?

We plan to completely demolish one building and build a multi-story building, where technologies for new production will be on each floor. Chip production generally does not require a large space.

Full launch is expected only from 2030, which is five years from now. However, you will probably have to think about where you will hire new people. Or will you transfer some from the “silicon” production?

Today we employ two thousand workers here. We will further develop the silicon production. So of course we will need new workers for the new production, we expect an increase of tens of percent. Together with the companies that are connected to us as suppliers, it should be about four thousand people.

From Czech schools in particular

Are you looking for suitable people yet?

Our strategy is to educate employees in Czech schools, we have no ambition to acquire talents elsewhere in the world. This is a long-term strategy, for example, we started cooperating with BUT in Brno twenty years ago and as our production grows, we are expanding cooperation to other schools. For example, at Masaryk University in Brno we even have clean rooms where students can make simple chips themselves and we will provide these opportunities to other schools.

At Tomáš Bata University, we are helping to create a completely new field of study, which is focused on materials engineering and is already related to the announced investment here. Some fields have also been modified at the universities in Ostrava and Olomouc, which should contribute to having workers available when needed.

 

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“Our strategy is to educate our employees in Czech schools; we have no ambition to acquire talent elsewhere in the world.”

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Then there is the area of ​​secondary schools, from which more students should apply to technical fields of universities and also join us, for example, in equipment maintenance – because we will need a lot of such professions. We were also involved in the creation of a new technical lyceum at the local industrial school, which should start teaching from the next school year.

It will also be necessary to provide some facilities for the new workers. Offer apartments, capacities in kindergartens and schools for their children.

Yes, we have also involved the city in this and created a joint working group that deals with both the education sector and housing and transport. This is not just about Rožnov itself, it also concerns other municipalities not only in the Zlín region, but also in the Moravian-Silesian region. And of course, we also rely on developers, the cooperation should be on a commercial basis. We plan to financially support mortgages for our new employees.

You say that you cooperate with surrounding municipalities. Is there no longer any place to build in Rožnov?

That is a matter of the zoning plan, which is currently being updated. But today we already have workers here in Rožnov from the surrounding area, 35 kilometers is a natural circle. We assume that it will be the same in the future.

Will any changes in transportation be necessary? Increasing chip production probably does not represent any excessive pressure on transportation.

From this perspective, no. However, the fact that the number of employees is increasing may raise concerns that the traffic situation will worsen. In general, the new investment is well received by the local residents, they are proud of what we have achieved here, but we are still implementing some improvements, for example, we have already solved the unsatisfactory intersection at the entrance to the complex.

Do you expect new managers from abroad to come here with the new investment?

I cannot rule it out, but I do not expect it. Since 2008, there has only been Czech management here.

Silicon vs. silicon carbide

Semiconductors have been produced in Rožnov since 1955, and semiconductor chips began to be produced under the name onsemi in 2003. In 2017, work began on the research and development of silicon carbide. Will the new investment also mean further strengthening of research and development?

Certainly. Today, we have both chip design development and semiconductor technology development. Designers are constantly improving the parameters of components based on demand, and this is followed by the development of new technology. After the investment is completed, we will primarily produce so-called MOSFETs here, components that control the flow of current between the source and the drain via the gate voltage. They are widely used in power amplifiers, voltage regulators and switching circuits, in the automotive industry they are used in advanced driver assistance systems, they reduce overall CO2 production and at the same time provide better range.

This production will allow us to continue developing new generation components, or even others that will have slightly different uses.

Why was it necessary to develop technology for the production of silicon carbide chips in Rožnov, when such production is already running within the corporation in South Korea?

You have to look at the entire production flow as it is today. At the beginning there is silicon carbide powder, from which a semiconductor crystal will be “grown” in another Onsemi plant in the United States, some material that we will receive. In Rožnov, we developed a process to separate individual boards from this mass and polish them to have specified parameters. We developed the so-called epitaxial layer here, which eliminates all defects on the board and which is the first basic layer of the chip.

And that is the result of Rožnov development, no one else in the corporation came up with it.

Yes, within the corporation it is only here. Of course, there are several companies, our competitors, that have also developed a similar process, but we do not know exactly their procedure.

In Rožnov, we developed a process for modifying boards using an epitaxial layer, and in South Korea they developed MOFSET technology on this board.

Your current effort is – and the investment will make it possible – to have the entire process take place in Rožnov, from the “growth” of the crystal from powder to the final production of chips. Does this mean that the same production will take place here and in Korea?

There will now be the possibility of dividing forces, a certain type of component will be produced here and another in Korea, our products can be intended for the European market and the Korean ones for another. But it is certainly not the case that individual locations work in isolation, teams in different countries cooperate and information is shared on absolutely everything.

Currently, the largest volume of your production is silicon chips. Which operations are specifically done here?

The first part is the growth of silicon crystals and the production of silicon wafers, and then the production of chips on them. Our final product is a board with chips, which goes to Malaysia, where the individual chips are encapsulated and the final application is carried out.

Daily production is ten million chips.

Automotive industry needs

How much of your production is intended for automotive?

The distribution is similar to that of the corporation worldwide, automotive accounts for about 40 percent. Another large area is industrial applications, such as automation, robotics, energy, and the rest is communication technology, such as phones, wifi networks and others.

 

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“Automotive represents forty percent of onsemi’s customers.”

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What are the uses of the simpler ones, i.e. silicon chips, in cars? Are they also used in electric cars?

There are about 1,500 of them in a car on average and they provide the same functions in both cars with combustion engines and electric cars. For example, they can lower windows, adjust seats, airbags, and more. So these chips will always be needed, and we will continue to supply them.

Let’s move on to silicon carbide. What are these chips better at?

Let me go back to the century before last, when Nikola Tesla argued with Thomas Alva Edison about whether the transmission system should use alternating or direct voltage. In the end, Nikola Tesla won, who, together with George Westinghouse, convinced the world that it had to be alternating voltage. So there are alternating voltage distribution systems everywhere in the world. However, there are applications that require DC voltage – for example, batteries in electric cars.

Previously, it was possible to change DC voltage to AC using a mechanical machine, but this meant large losses. Chips can do this more efficiently. Of course, it started with silicon ones, which are also significantly more efficient than a mechanical process, but silicon carbide is even significantly more efficient, saving up to 50 percent of energy compared to silicon during conversion. So that’s what it’s about.

As a result, these chips can have a different purpose than silicon ones.

Yes. Silicon carbide chips are designed for electromobility and generally for converting DC voltage to AC, which is used, for example, in solar panels. Another area is artificial intelligence, which consumes a huge amount of energy.

Will you remain focused on the automotive industry in the future, after the investment is made? Which segment do you think will grow the fastest?

Currently, we are primarily focused on the automotive segment, but we can already see that the other segments are growing perhaps faster than we expected. I cannot predict what it will be like in five years. The fact is that the need for chips in general is expected to double by 2030.

There is growth potential in all areas, but I see the smallest potential in computers, where applications have achieved a certain level of performance and there is no need to quickly move up.

What we have not talked about yet and which has really great potential are self-driving cars, which need lots of sensors, cameras, evaluation systems, and the like.

So if today’s car or electric car has 6,500 chips, how many do you think a vehicle that will drive autonomously will need? Twice as many?

That’s for sure, and it’s not that far in the future.

Ambition of onsemi: number one on the market

Who will be the customers for your future production? It has already been announced that the Volkswagen Group will be the largest. But there will probably be others.

We already have a signed contract with Volkswagen, but the corporation is also negotiating with other potential customers.

While your chips currently reach customers via Malaysia, where they are finished, the new silicon carbide ones will probably go directly to European automakers, is that right?

That will depend on the agreement with the specific customer. Specifically, we expect Volkswagen to deliver the final product directly.

Which is related, among other things, to the fact that in the past there were problems with deliveries from more distant regions.

Certainly.

The entire Onsemi corporation is today the sixth largest manufacturer of automotive chips in the world. What is its position in the field of silicon carbide? And how will it change after you start further production here?

Today, onsemi is the second largest producer of silicon carbide in the European market in terms of turnover. The corporation has already announced that it wants to achieve a 40 percent share in silicon carbide. This would make it number one on the European market, and that is its ambition.

What were the economic results of onsemi Rožnov last year (2023 – editor’s note) and what do you expect this year (2024 – editor’s note)?

Last year (2023 – editor’s note) the turnover was seven billion crowns, this year (2024 – editor’s note) we expect a five percent drop due to weakened demand from the automotive industry.

At the beginning of the interview, we talked about the fact that onsemi Rožnov has a great reputation within the corporation, which it owes, among other things, to the long tradition of local production. Now your position on the world market will be even stronger, thanks to the support of the Czech government. As a major successful company, do you feel any obligation to the Czech Republic?

Of course. We are interested in the development of the Czech Republic as a country that presents itself with interesting results in research and development and can attract other investors in strategic areas. For example, we provide a certain part of our capacity to scientific institutions and schools that can develop something here themselves.

We have also been cooperating with the Academy of Sciences for a long time and some time ago we jointly developed chips for the pixel detector for CERN. Thanks to this detector, a subatomic particle, the so-called Iggs boson, was discovered, and a Nobel Prize was awarded for this discovery.

In the field of silicon carbide, we are developing radiation-resistant chips together with the Academy of Sciences, which find application in both the space industry and the healthcare sector. Through similar joint projects with Czech entities, we want to contribute to strengthening research and development and overall increasing the competitiveness of the Czech Republic.

onsemi is also actively involved in the development of the entire semiconductor ecosystem within the Czech National Semiconductor Cluster, from education, research and development to the design of semiconductor devices and the design of new semiconductor solutions.

 

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Aleš Cáb joined the Rožnov company in 1993 after graduating from electrical engineering at the Brno University of Technology. He started as a process engineer and completed a one-year internship at Motorola Toulouse. His experience and analytical skills led him to production, where he began to participate in planning the expansion of the chip line. He later became a chip production manager and then an operations manager. His ability to lead multifunctional teams and his focus on results qualified him in 2008 for his current position as Rožnov site manager, managing two production lines including support departments. Since 2020, he has been the vice president of Rožnov onsemi.

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