On August 5th, Hon Hai Precision Industry Co. clinched a deal to purchase a six-inch wafer fabrication plant, including facilities and manufacturing equipment, from Macronix International Co. for NT$2.52 billion.

During the press conference, Hon Hai Chairman Young Liu, who cut his teeth in Taiwan’s first semiconductor company, United Microelectronics Corporation, announced that the newly acquired plant will serve as the Hsinchu headquarters of Hon Hai’s Business Group S, which heads the conglomerate’s semiconductor-related business. 

He went on to say that although the 6-inch wafer fab is using an outdated manufacturing process by the standards of Taiwan’s semiconductor industry, the purchase is still a golden opportunity for Hon Hai. 

Hon Hai plans to convert this plant from manufacturing logic gates to third-generation silicon carbide (SiC) semiconductor chips. “This is vital to Hon Hai’s future development of electric vehicles,” said Liu.

Keeping up with BYD across the strait

More than a month ago, Hon Hai founder Terry Guo’s longtime nemesis—China’s electric vehicle giant BYD Co., located in Shenzhen, announced that its spinoff, BYD Semiconductor, would go public on the Shenzhen Stock Exchange. Chinese media pounced on the juiciest bit of the announcement: BYD Semiconductor planned to spend 730 million RMB to build a SiC wafer production line with a monthly output of 20,000 units—almost exactly the same as Macronix’s 6-inch wafer fab.

The two titans are trading blows because of Tesla.

Silicon carbide has unique properties that allow it to operate at higher frequencies and higher voltages, while offering higher conductivity. In the past, it was mainly used in industrial applications, such as solar inverters or uninterruptible power supplies for data centers. 

In 2018, Tesla changed the world by using SiC chips in its Model 3 inverter, reducing the weight to just 4.8 kilograms—less than half of what inverters used by the Japanese electric vehicle Leaf weighed. The industry was quick to catch on. MOSFETS components made with SiC replaced the silicon-based IGBTs used in the past.

According to the market research company Yole Développement, by 2024, the market value of SiC-based power semiconductor devices will grow to US$2 billion. 

Currently, global silicon carbide production lies in the hands of European semiconductor companies like Infineon and STMicroelectronics, Japanese companies like ROHM and Mitsubishi Electric, and the American company Cree. The prices are sky-high; everyone wants a piece of the pie. Since electric vehicles figure prominently in Liu’s plan to transform Hon Hai, he has also set his eyes on the prize. A lot is riding on this 6-inch wafer fab, which is the missing link that will complete the dream of manufacturing electric cars.

“There are some who think our factory is a pile of scrap metal. But the newest SiC plants employ the same 6-inch manufacturing process. For Hon Hai, our 6-inch fab is a match made in heaven,” says Macronix President Chih-yuan Lu. He reveals that ever since Macronix had put out feelers about selling the fabrication plant, there had been no shortage of interested buyers from around the world.

He also reveals that Hon Hai has saved itself three to five years of preparation by buying a ready-made wafer fab. 

(Source: Hon Hai)

Bob Wei-Ming Chen, head of Hon Hai’s Business Group S, reveals that the 6-inch wafer fab still needs to procure new equipment. “At the moment, we expect to get the new machines in ten months’ time. Research and development will begin as soon as we move into the plant; in fact, we’ve already started,” he says.

It is apparent that Liu has a plan. He disclosed during the press conference that Hon Hai’s design for future SiC production will dwarf the current capacity of the 6-inch fab. 

“The capabilities you see now are just the start. With the help of these SiC chips, we hope to improve our production of electric vehicles,” Liu says. 

Hon Hai’s future in electric vehicles may be tied to these power semiconductor devices. But, as the saying goes, was it necessary to buy a cow just for a glass of milk?

Macronix President Lu observes that Hon Hai sees SiC chips as a vital component that may affect the performance of their final product: “Just like how Apple manufactures the most essential chips used in their products by themselves.”

As the world’s third largest electric vehicle company, BYD is following the same playbook. Wu Haiping, director of chip research and development at BYD Semiconductor, has publicly stated that BYD’s electric drive systems have been using SiC chips since last year, making BYD the second auto company in the world to adopt SiC-based electric drives.

But BYD is hampered by its inadequate SiC production capacity. Therefore, it has decided to build its own assembly line. Its goal is to replace all the silicon-based IGBTs in its electric cars with SiC products by 2023. 

Edward Yi Chang, Dean of the International College of Semiconductor at National Yang Ming Chiao Tung University, says that no one in Taiwan has been able to manufacture MOSFET with SiC chips yet.

Will Hon Hai be the first to succeed?

Since May of this year, Hon Hai has ramped up its efforts in the semiconductor industry. First, it has signed an agreement with passive devices giant Yageo Corp. to form a joint venture called XSemi Corp., with the express purpose of developing “small ICs” and analog semiconductors. In June, it spent 780 million to buy shares of the Malaysian technology firm DNeX, making it the second time Hon Hai has expanded its 8-inch wafer manufacturing capacity since it had acquired Sharp’s 8-inch facility. Snapping up Macronix’s 6-inch fab is Hon Hai’s third semiconductor-related investment in a relatively short period of time. Having inked this ideal, Hon Hai is now in possession of a true wafer fabrication facility.

A Morgan Stanley report published on August 5th is supportive of the acquisition. “Hon Hai continues to invest in key technologies that are in line with its ‘3+3’ strategy. We feel this is the right way to enhance the production capability of its electric vehicle components,” the report says.

In the face of rival BYD’s momentous growth, and with the weight of Hon Hai’s decisive transformation on his shoulders, Chairman Liu has finally made a key play on the semiconductor battlefield. How his move will propel the development of electric vehicles is something for the world to keep an eye on.

Have you read?

♦ Hon Hai aims for 10% global EV market share
♦ Will electric vehicles send Hon Hai’s gross margin over 10%?

Translated by Jack Chou
Edited by TC Lin
Uploaded by Penny Chiang