(Yicai Global) June 8 -- China’s Sanan Optoelectronics and Switzerland’s STMicroelectronics have agreed to jointly invest USD3.2 billion in a joint venture to make chip devices for electric vehicles.

The JV will produce silicon carbide devices exclusively for ST at a new plant in the Chinese city of Chongqing, Xiamen-based Sanan said yesterday. Sanan will have a 51 percent stake in the JV, with ST owning the rest and contributing its proprietary SiC manufacturing process technology.

The more energy-efficient SiC chips are mainly used in fast-growing electric car industry, which has been the main driving force for their development in recent years.

Work to build the plant will start after regulatory approval and it will likely be completed and put into operation in the last quarter of 2025, Sanan said, noting that once at full capacity in 2028, the factory will have a weekly production capacity of 10,000 eight-inch SiC wafers.

To provide the plant with substrate materials for SiC chips, Sanan will also build a CNY7 billion (USD988 million) plant in Chongqing with an annual capacity of 480,000 pieces of eight-inch SiC substrates, the firm added.

“The establishment of this JV will be a major driving force for the wide adoption of SiC devices on the Chinese market,” said Sanan Chief Executive Simon Lin. “With this new JV and the new SiC substrate capacity expansion, we are confident that we will continue to take the lead in the SiC foundry market.”

ST President and CEO Jean-Marc Chery said: “The combination of Sanan Optoelectronics’ future substrate manufacturing facility with the front-end JV and ST’s existing back-end facility in Shenzhen, China will enable ST to offer our Chinese customers a fully vertically integrated SiC value chain.

“It is an important step to further scale up our global SiC manufacturing operations, coming in addition to our continuing significant investments in Italy and Singapore,” Chery added.

Shares of Sanan [SHA: 600703] closed 6.1 percent lower at CNY19.03 (USD2.67) each in Shanghai today. ST’s stock [NYSE: STM] rose 2.1 percent to USD45.76 in New York yesterday.

Sanan opened a CNY16 billion (USD2.2 billion) manufacturing hub in Changsha High-Tech Industrial Park in June 2021, making it China’s first vertically integrated SiC production line. Once it reaches the designated capacity, the plant, operated by Hunan Sanan Semiconductor, will produce 500,000 six-inch SiC wafers a year.

Sanan’s SiC devices for new energy vehicle engines are expected to start being installed in autos from the first quarter this year, Yicai Global learned earlier.

Editors: Tang Shihua, Futura Costaglione