The brownfield project would be the largest one-off direct foreign investment in the Czech Republic.
Pending approval of state aid, Onsemi will expand its operations in the eastern town of Roznov pod Radhostem to house the full production chain for silicon carbide semiconductors including final chip modules used in the automotive and renewables sectors.
The investment follows similar moves by STMicroelectronics (STMPA.PA) -- also for silicon carbide chips -- in Italy, and by Intel (INTC.O) and TSMC (2330.TW) in Germany.
"The site would produce the company’s intelligent power semiconductors essential for improving energy efficiency of applications in electric vehicles, renewable energy and AI data centres," an Onsemi statement said.
Silicon carbide chips are more expensive than standard silicon ones but are favoured by automakers because they are energy-efficient, lightweight and tough.
Massive supply chain disruptions during the COVID-19 pandemic and a rise in trade tensions with China have heightened scrutiny of Europe's reliance on Asia for chip supplies, with recent disruption to Red Sea shipping adding to concerns.
Czech Prime Minister Petr Fiala said the investment would be "the biggest of its kind in modern history" and would multiply current output at the plant, which is 10 million chips per day.
The head of Onsemi's power solutions division, Simon Keeton, told Reuters that production from the new investment could start in 2027 but did not disclose further detail on jobs, production volumes or expected revenue.
The investment is within the company's capital expenditure target and follows its announcement last week of about 1,000 job cuts among its 30,000-strong workforce.
Global semiconductor manufacturing is expected to become a trillion-dollar industry by 2030, expanding from $600 billion in 2021, consultancy firm McKinsey says.
INCENTIVES
Onsemi did not comment on the size of the incentive package under negotiation with the Czech government.
"With this investment, the company would contribute to the strategic positioning of the region within the EU’s semiconductor value chain and demonstrate that all EU countries can benefit from the European Chips Act," Onsemi said.
The Czech Industry and Trade Ministry said that state aid could reach up to 27.5% of the total investment. The incentive should be approved, including notification with the European Commission, in the first quarter of 2025, the ministry added.
The STMicroelectronics plant in Catania will cost 5 billion euros ($5.4 billion) and receive a direct government grant of about 2 billion euros.
Germany will contribute up to 5 billion euros to TSMC's $11 billion factory in Dresden, German officials said last year.
Intel, meanwhile, plans to spend 30 billion euros on two chip plants in Germany, with substantial government subsidies.
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