Europe's No 2 chip maker STMicroelectronics to form US$3.2 billion semiconductor joint venture with China's Sanan Optoelectronics in Chongqing

STMicroelectronics (STM), Europe's second-largest chip maker by revenue, and Chinese firm Sanan Optoelectronics on Wednesday said they have agreed to form a US$3.2 billion semiconductor joint venture in the southwestern city of Chongqing, supporting rising domestic demand for silicon carbide (SiC) devices in the electric vehicle, industrial power and energy sectors.

The deal involves the creation of a new 200mm SiC device manufacturing operation that will start production in the fourth quarter of 2025, with anticipated full buildout in 2028.

"China is moving fast towards electrification in automotive and industrial, and this is a market where ST is already well-established with many engaged customer programmes," Jean-Marc Cherry, president and chief executive of STMicroelectronics, said in a statement released on Wednesday. "Creating a dedicated foundry with a key local partner is the most efficient way to serve the rising demand of our Chinese customers."

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This new enterprise will be financed by contributions from STMicroelectronics and Sanan Optoelectronics, local government support and loans to the joint venture, according to the statement.

Sanan Optoelectronics is China's market leader in so-called compound semiconductors, including silicon carbide and gallium nitride. Photo: Shutterstock alt=Sanan Optoelectronics is China's market leader in so-called compound semiconductors, including silicon carbide and gallium nitride. Photo: Shutterstock>

In parallel, Sanan Optoelectronics will build and operate separately a new 200mm SiC substrate manufacturing facility to fulfil the joint venture's requirements, using its own SiC substrate process.

One of the most important advanced ceramics in contemporary usage, SiC is a semiconductor base material consisting of silicon and carbon. Historically, manufacturers used SiC in high-temperature settings for devices such as bearings, heating machinery components, car brakes and even knife-sharpening tools.

In recent years, SiC has become a force in the semiconductor industry. It is used in chips such as metal-oxide-semiconductor field-effect transistors and power modules. SiC devices are now widely used in electric car, rail transport, and wind and solar power applications.

STMicroelectronics' new joint venture in Chongqing, a major manufacturing base in China, underscores the country's efforts to remain strong in "legacy semiconductors" - defined as chips made with 28-nanometre process technology or older - amid US trade sanctions that have restricted the mainland's access to advanced integrated circuits and chip-making equipment.

A bird's-eye view of southwestern Chongqing's skyline. Photo: Shutterstock alt=A bird's-eye view of southwestern Chongqing's skyline. Photo: Shutterstock>

Sanan Optoelectronics chief executive Simon Lin said the joint venture with STMicroelectronics is expected to become "a major driving force for the wide adoption of SiC devices on the Chinese market".

Completion of their manufacturing venture is subject to regulatory approvals, according to the statement.

Switzerland-based STMicroelectronics, which has been operating in China for around four decades, has moved to deepen its ties to the world's second largest economy, despite the escalating tech war between Washington and Beijing.

During his visit to China in December, company chief Chery expressed STMicroelectronics' commitment to China amid fast-growing demand for semiconductors in the country's vast electric vehicle market, according to a report by state-run newspaper Economic Daily that month.

Sales of new energy vehicles in China nearly doubled to 6.9 million units last year, leading the world for eight consecutive years, according to the China Association of Automobile Manufacturers.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2023 South China Morning Post Publishers Ltd. All rights reserved.

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