France’s Soitec doubles down on Singapore with more investment dollars, job creation

French chipmaker Soitec is raising its game in Singapore, just a year after it announced a multi-million dollar upgrade for the Pasir Ris factory to ramp up output.

The company plans to plough an additional 400 million euros (S$570 million) into an extension for the factory that will double its size. Half the funds will go towards construction, while the rest will be spent on tools and equipment.

With a bigger factory, Soitec is also planning to double its headcount to more than 600, with new hires involving a gamut of roles from technicians to engineers and logistics managers.

“We are not just looking at (roles) within the fab (fabrication plant) and the clean room...(but) also at how to grow the company and create the right organisation to sustain all the activity around the factory,” Soitec’s chief executive Paul Boudre told The Business Times in an exclusive interview.

“This is always a challenge because the industry needs a lot of good people, and that’s also one of the reasons why we picked Singapore,” he said. “We are very happy with the performance of the team and the quality of the people we have in Singapore.”

Soitec’s new investment in the Republic comes amid the ongoing global chip shortage that was triggered by the Covid-19 pandemic and later exacerbated by supply chain woes.

Meanwhile, the demand for high-tech products has only accelerated, whether it’s 5G or power-efficient automotives.

“The world is becoming more intelligent,” said Boudre, noting that the demand for more electronics and connected devices makes semiconductors “indispensable”.

The investment would allow Soitec’s Singapore operations to produce up to 2 million 300mm silicon-on-insulator (SOI) wafers by 2026, double the capacity originally projected a year ago. It also means that two-thirds of these wafers produced by the company will be made in Singapore.

“It’s a huge acceleration - we basically moved ahead (with this decision) by one year...because we now have a much better understanding and visibility from end customers,” Boudre said. This follows long-term contracts that the company has inked with customers who are looking to raise capacity.

In turn, these contracts help Soitec side-step any disruption to supply. He explained: “Since our customers are giving us very good visibility with solid contracts, we can also provide visibility to our suppliers. We have been able to stay in good shape in terms of being able to serve our customers,” he said.

“But what is true is that there is still a shortage overall,” he admitted.

A majority of the company’s raw materials comes from Asia, including Japan and Korea, whereas its equipment is largely from Europe, the United States and Japan.

Fortunately for Soitec, its production process does not involve the rare gases that Ukraine is a major supplier of, which means the Russia-Ukraine war has had limited impact on the company, said Boudre.

Still, with much uncertainty these days surrounding cost and supply, having some form of a flexibility clause, even in long-term contracts, is “very important”, said Boudre.

The company has priced in rising labour costs and inflation with “conservative numbers”, with the assumption that the macroeconomic environment does not throw up new surprises.

“We have included the opportunity to re-discuss things in our long-term contracts with customers. If it totally goes south, we need to reopen and re-discuss, and this is something that we have now put in place in all our contracts.”

Asked if Covid-19 remains a risk for the industry, Boudre instead offered a sanguine view - that the coronavirus essentially helped to accelerate innovation and propel the growth of semiconductors, and the chip shortage is merely a manifestation of that.

“Covid-19 is giving the semiconductor world the opportunity to grow much faster than what we were expecting,” said Boudre.

This is why the value of the semiconductor industry is set to double to more than US$1 trillion by 2030, he noted. In other words, it is expected to achieve the same amount of growth in the next 7 years as what it achieved over the last 30 years.

“Everything that we have done over 30 years, we need to accelerate it and do it in 7 years,” said Boudre, noting that it is a challenge in terms of capacity, resources, people and logistics.

“It takes time and this is why we are still struggling to serve all the market at the right level,” he said, adding that it is unlikely for the global chip shortage to be resolved within the next 2 years.

While the pandemic is not quite over, the business environment is markedly different from a year ago,

For one, most countries have reopened their borders, a development that Boudre said has allowed new collaborations to be forged.

But China’s pursuit of a strict Covid-zero policy and the resulting lockdowns have dampened consumer sentiment, creating a “weakness” in the low-end smartphone market in particular, Boudre said.

“For us, the business is based on the complexity in a smartphone. So, it is absolutely true that the high-end smartphone gives us more millimetre square of SOI inside the phone. So in a way, we compensate some of the weakness that we are seeing in the market by having more value-added products shipped to customers,” he said.

Boudre is optimistic over Soitec’s prospects; the company’s financial year 2022 results back that up. Net profit more than doubled to 202 million euros, compared with the year before, while revenue crossed the US$1 billion mark for the first time.

The stellar results have led to an upgrade of Soitec’s revenue target: instead of hitting US$2 billion by 2026, the company now wants to reach S$2.3 billion in the same period.

And that’s a goal that his successor Pierre Barnabe, who joined from technology consultancy Atos, will have to deliver, when Boudre steps down at the end of the month.

Said Boudre: “He is going to look also at what is next after FY2026 - how do we double this revenue by 2030 and make the company deliver bigger work.”

As for Boudre, a Singapore permanent resident who spent the last 7 years dividing his time between France and Singapore, he expects to spend his time in the city state post retirement. It seems his passion for the semiconductor industry isn’t about to fade, even if spending more time with family will take priority.

“It’s all about friendship and working together, so I could be on company boards and trying to also help some companies to grow and develop,” he said. “Whenever I can do it, I will do it.”

He added: “This industry needs a lot of good support. Singapore is a unique platform for semiconductors - there’re a lot of new companies, a lot of new opportunities and also a lot of connections to bring into this industry.”

Source: The Business Times © SPH Media Limited. Permission required for reproduction.