ON Semiconductor, a leading supplier of smart power and sensing technologies, and GT Advanced Technologies ("GTAT"), a manufacturer of silicon carbide (SiC), announced on August 25th, US time that they have reached a final agreement. According to the agreement, ON Semiconductor will acquire GTAT for US$415 million in cash.
GTAT was established in 1994 and has extensive experience in crystal growth including SiC. SiC is a key material for next-generation semiconductors, which can provide technical advantages for SiC power switching devices and significantly improve the system energy efficiency of electric vehicles (EV), EV charging, and energy infrastructure.
The transaction will enable ON Semiconductor to better ensure and increase the supply of SiC to meet the rapidly growing demand for SiC-based solutions in the sustainable ecosystem, including EVs, EV charging and energy infrastructure. With the rapid development of the sustainable ecosystem in the next ten years, combining ON Semiconductor's manufacturing capabilities with GTAT's technical expertise will accelerate the development of SiC and enable ON Semiconductor to better serve customers. This enhanced SiC capability will enable ON Semiconductor to ensure the supply of key devices to customers and further commercialize smart power technology.
Hassane El-Khoury, President and CEO of ON Semiconductor, said: "The transaction reflects our confidence and clear commitment to make meaningful investments in silicon carbide solutions to support the creation of smart power and sensing technologies to help build a sustainable future. We focus on deepening our leadership and innovation in disruptive technologies to support the automotive and industrial sectors, and GTAT brings outstanding technical capabilities and expertise in the development of wafer-ready silicon carbide, and we intend to accelerate and expand these technologies , In order to better enhance our ability to empower customers in high-growth end markets. We look forward to welcoming talented GTAT employees to join the ON Semiconductor team to jointly promote innovation."
Greg Knight, President and CEO of GTAT, said: “Today’s announcement marks the beginning of a new chapter for GTAT, proving the value created by our team’s efforts and strength. ON Semiconductor’s strategic positioning can expand our capabilities, provide resources and Platform to give full play to the potential of our cutting-edge production technology and ensure that we continue to be at the forefront of advanced crystal growth."
The acquisition also reinforces ON Semiconductor’s commitment to major investments in disruptive, high-growth technologies, which is consistent with the company’s recent 2025 target financial model announced on its Financial Analyst Day. As ON Semiconductor said before, due to the company's investment to promote differentiation and leadership, including investment in the SiC field, it is expected that capital expenditures in 2022 and 2023 will account for about 12% of revenue. The transaction is not expected to affect the company's target financial model for 2025.
ON Semiconductor plans to invest in expanding GTAT's research and development work to advance 150mm and 200mm SiC crystal growth technology, while also investing in a wider SiC supply chain, including fab capacity and packaging.
The transaction has been unanimously approved by the board of directors of ON Semiconductor and GTAT, and is expected to be completed in the first half of 2022. The completion of the transaction is subject to regulatory approval and other conventional closing conditions. The proposed transaction does not require the approval of ON Semiconductor's shareholders.
ON Semiconductor intends to fund this transaction with cash on hand and existing revolving credit. The company expects the transaction to slightly dilute its non-GAAP earnings per share in the short term and gain within one year after the transaction is completed.
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