2021 has been a tough year for the industry. It started off with most people predicting that the industry would return to normal during the course of the year. That hasn’t happened, and the automotive market – one that onsemi is especially focussed on – has been the worst affected of all. This has resulted in a large scaling back of vehicle production around the world. However, challenges and opportunities often go hand in hand. El-Khoury sees a larger and more profitable target in the coming years and wants to ensure that onsemi is primed to take advantage of that. He explained by saying, “The demand came back strongly after two years of very weak demand. I think we will be in that situation until the first half of 2022 when things are resolved. Our focus is on doing the best we can to ensure the same situation doesn’t occur in 2023, 2024 and 2025 when the EV market will dramatically ramp up, consuming a lot more electronics than it does today.”
To try to ensure that the company is ready for that strong EV ramp up, onsemi is taking more control over its own supply chain. At the end of August this year, the company announced that it had paid $415 million in cash to buy GT Advanced Technologies (GTAT), a New Hampshire-based developer and supplier of silicon carbide boules. The purchase gives onsemi access to an assured supply of boules, along with the ability to direct future research on the technology to optimise the boules for the company’s technology and processes. El-Khoury described his thinking behind the purchase, “Given where the market is today with the supply constraint of some materials, supply assurance to our customers will become even more important in the future.” Along with the GTAT acquisition, onsemi is also investing in its complete SiC supply chain, including packaging and modules.
Supply assurance is only a single part of El-Khoury’s strategy. It is his intention for onsemi to double down on the company’s intelligent power and intelligent sensing solutions – even to the point of redirecting resources from some of its other products. He expanded on that by saying, “The one big thing I have pushed for is focus - the company should completely focus on its strategic targets. Previously, we have been doing too many things and not believing in all of them. We are going to reduce the number of things we do, and realign the R&D resources to the things that are strategic to us.”
For onsemi, that means taking a step back from commodity products and other non-core offerings. It is a big step, as those products currently make up 15% of the company’s revenue. However, El-Khoury is confident that he can recoup that amount and more in the higher margin intelligent power module space. To assist that rebalancing, the company is doubling investment in intelligent power and sensing. The investment will be used on OpEx, R&D and capacity expansion. That capacity expansion includes moving some power production to a 12” fab that the company is currently in the process of converting for power use.
Intelligent power is how onsemi describes its integrated approach to power solutions. In the CEO’s own words, “A lot of people think of power as the FET, but it is also what drives the FET, what controls the FET, and what protects the FET. This combination of technologies is what I call intelligent power.” That integration also includes additional features, such as current or temperature sensing embedded within the product to allow the digital side of the circuit to control the power in a more complete way than it would in an open loop system. It also takes into account the packaging, which El-Khoury points out is a big differentiation between onsemi and its competitors, “You can have the best product or technology, but if you can't package it in an efficient power density package, you're not going to succeed. We have complete vertical integration from silicon technology or silicon carbide technology, all the way through to the packaging. That is a very big competitive advantage, and we will use that to our benefit.”
The final advantage that El-Khoury wishes to highlight is the company’s existing reputation, which is very important to automotive suppliers. He expands, “Our top customers might on average buy more than 20 different parts from us. We have the breadth of offerings, customers know the quality of our products, and we are 100% focussed on automotive. We already have the relationships with automotive manufacturers that we have built over the last two decades. When customers have a reliable supplier, and they wish to see a future roadmap, the first place that they will look is their current supplier base. That is where we are today, and we have a roadmap that aligns very well with where they want to take their respective companies.”
The automotive industry is pretty exciting at the minute. Besides the electrification of vehicles, great advances are coming in in-vehicle entertainment, ADAS and autonomous driving, all of which will significantly add to the number of electronic devices in each vehicle. Almost every electronics manufacturer sees the area as a huge opportunity for growth. Incumbent suppliers like onsemi face many challenges from those competitors and will have to be on top of their game to continue to succeed. Time will tell who the winners will be, but Hassane El-Khoury is confident that he has all the ingredients for success at onsemi.
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