SUBJECT: BKF3142 PROCESS ENGINEERING ECONOMICS

SECTION: 03

Project Title: Production of MOSFET using silicon

Company: ON Semiconductor Corporation

LECTURER: DR ROHANA BINTI ABU

SUBMISSION DATE: 22 NOVEMBER 2019

GROUP MEMBERS:

NAME ID
AMIRUL ASYRAAF BIN AHMAD ZAKI KA16214
SEELAAN A/L KARUNAKARAN KH17005
NUR ZAFIRAH BINTI MOHAMAD ANNUAR KA17109
TENGKU NUR ANISS IRYANIE BINTI TENGKU ISKANDAR KA17072

1
 TABLE OF CONTENTS

CONTENT PAGE
1.0 PROJECT BACKGROUND 3

2.0 IDENTIFICTION OF TECHNOLOGY 5

3.0 MARKET ANALYSIS 6

4.0 FUNDING STRATEGIES & ITS 8

TIMING

5.0 FINANCIAL ANALYSIS 12

5.1 INCOME STATEMENT 12

5.2 CASH FLOW STATEMENT 14
5.3 BALANCE SHEET 16
5.4 FINANCIAL RATIO 20
6.0 RISK ANALYSIS 25

7.0 CONCLUSION AND 28

RECOMMENDATIONS
8.0 REFERENCES 29

2
1.0 Project background

The main purpose of this project is to finance a young company during their start-up
phase and to provide additional capital for their growth. On Semiconductor Corporation is
established in 1999. The company is certified with ISO 9001:2015 and in Malaysia, the plant
is located at Seremban, Negeri Sembilan. On Semiconductor Corporation was originally a
spinoff of Motorola's Semiconductor Components Group. It continues to manufacture
Motorola's discrete, standard analog, and standard logic devices. On Semiconductor assume
the present name to facilitate them in the listing on ACE Market of Bursa Securities Malaysia
Berhad. Therefore, On Semiconductor Corporation is focused in the project.

On Semiconductor Corporation is principally involved in the manufacturing and

trading of semiconductor devices. In this project, the technology project is producing the
MOSFET (metal–oxide–semiconductor field-effect transistor) or also called the
MOS transistor using silicon. This is a huge step for the company to achieve their target so it
can be listed in the ACE Market of Bursa Securities Malaysia Berhad in two years or less
than it.

Semiconductor devices is an electronic component that relies on

the electronic properties of a semiconductor material primarily silicon, germanium,
and gallium arsenide, as well as organic semiconductors for its function. Semiconductor
devices have replaced vacuum tubes in most applications. They use electrical conduction in
the solid state rather than the gaseous state or thermionic emission in a vacuum.
Semiconductor devices are manufactured both as single discrete devices and as integrated
circuit (IC) chips, which consist of two or more devices which manufactured and
interconnected on a single semiconductor wafer.

Semiconductor materials are useful because their behaviour can be easily manipulated
by the deliberate addition of impurities, known as doping. Semiconductor conductivity can be
controlled by the introduction of an electric or magnetic field, by exposure to light or heat, or
by the mechanical deformation of a doped monocrystalline silicon grid. Thus,
semiconductors can make excellent sensors. Current conduction in a semiconductor occurs
due to mobile or free electrons and electron holes, collectively known as charge carriers.
Doping a semiconductor with a small proportion of an atomic impurity, such
as phosphorus or boron, greatly increases the number of free electrons or holes within the
semiconductor. When a doped semiconductor contains excess holes, it is called a p-type

3
semiconductor (p for positive electric charge) and when it contains excess free electrons, it is
called an n-type semiconductor (n for negative electric charge). A majority of mobile charge
carriers have negative charge. The manufacture of semiconductors controls precisely the
location and concentration of p-type and n-type dopants. The connection of n-type and p-type
semiconductors to form p–n junctions. Semiconductor components made per year have been
growing by 9.1% on average since 1978, and shipments in 2018 are predicted for the first
time to exceed 1 trillion, meaning that well over 7 trillion has been made to date, in just in the
decade prior.

Based on trustable sources of statistics, it is strongly believed that developed market

such as USA will continue to support the demand for semiconductor components while the
potential for further growth is arising from demand by emerging markets such as Japan, India
and China.

First, this project will take into consideration aspects including the corporate profile,
products and services provide and current technology available by the company for more
understanding about On Semiconductor Corporation. Next, the technology superior and its
differences are also discussed in the proposal for the investor purpose. Besides, a few
analyses were carried out to complete the project such as industrial analysis, market analysis,
financial analysis, funding portfolio and methodology and risk analysis.

4
2.0 The Technology – Superiority of your chosen

Since On Semiconductor mainly used the silicon, germanium and gallium arsenide to
make various semiconductor devices, hence we proposed a new technology for company that
is producing MOSFET (metal–oxide–semiconductor field-effect transistor) or also called the
MOS transistor using silicon. The production of the MOSFET is expected to increase the
revenue of the company due to increasing demand in the market nowadays.

The first and dominant reason of this proposal project being superior to venture
capital in this market in its technology. The proposed production in making MOSFET or
MOS transistor has a very proof in dominating the market.

One of the superiority of the MOS transistor is can be operated in either depletion or
in enhancement mode. Next, MOS transistor have input impedance much higher than that of
junction gate field-effect transistor producing high switching speed. This is due to negligibly
small leakage current. The other superiority is MOS transistor has higher speed of operation
compared to junction gate field-effect transistor. This is because he oxide layer is so thin, the
MOS transistor has a higher speed of operation compared to other transistors. The next
superiority is MOS transistors provide greater efficiency while operating at lower voltages.
For low-voltage applications, lower gate voltage power MOSFETs improve the efficiency for
extended battery life and reduce the heat dissipation involved in switching the loads. In
addition, they simplify the design of numerous control functions by allowing direct control /
drive. For example, MOSFETs that operate at 1.5V and even 1.2V gate drive provide
improved performance over previous 2.5V versions. Lastly, MOSFETs operate at low power
and draws no current.

For the production part, it is a risky move but the advantages has a very high return. It
has risky in term of market analysis since the product is new in market. However, the return
is very promising where break-even point can be achieved in two years or less than that.
Hence, thus proposal project is superior with interesting profit projection.

5
3.0 MARKET ANALYSIS

3.1 OVERVIEW

Malaysia is expected to become the preferred location for international companies

seeking to expand their semiconductor company. Backed by growing know how to effectively
support a semiconductor industry, the country has had the potential to play a greater role in the
semiconductor industry than it does today, especially in unique capabilities and sectors with
multiple advantages that can be better optimized and promoted. The World Semiconductor
Market Statistics forecast global sales of semiconductors to increase by just 2.6 percent in 2019,
reflecting a marked difference compared to sales growth of 21.6 percent and 13.7 percent in
2017 and 2018, respectively.

In recent years, the global MOSFET market has been growing steadily and is expected
to grow in the years to come at a steady CAGR. The global market size of MOSFET was
estimated at $3,730 million in 2016 and is projected to reach $6,340 million by 2023. The
growth of the market for this market.

3.2 SUPPLY

Supply represents how much the market can offer. The quantity supplied refers to the
amount of a certain goods producers are willing to supply when receiving a certain price. The
law of supply demonstrates the quantities that will be sold at a certain price. The higher the
price, the higher the quantity supplied.

One of the main reasons why supply stays tight is that MOSFETs are built on
production lines of 150 mm and 200 mm wafer. Other chips are also built on 150 mm and 200
mm wafer production lines, such as display drivers, micro-controllers and mixed-signal
semiconductors, and there is not enough capacity to go around.

Most likely, the manufacturers would produce MOSFETs on 300 mm wafers instead of
200 mm or 150 mm wafers in order to address these production challenges. For larger wafers,
chip makers can efficiently increase supply by making more chips per wafer. Moreover, super
junction MOSFET, depending on a supplier, faces much longer lead times, stretching to over
a year. As the supply gets smaller, the price increases by 15%-30% on the market. Those
companies that are willing to change with the industry, and aren’t afraid to take advantage of
this rapid globalization, will revolutionize the industry and remain or become integral parts of
the semiconductor supply chain.

6
3.3 DEMAND

Figure 3.3 shows the electronic market analysis

Demand is a buyer's willingness and ability to pay a price for a specific quantity of a
good or service. Demand refers to how much (quantity) of a product or service is desired by
buyers at various prices. The quantity demanded is the amount of a product people are willing
or able to buy at a certain price and the relationship between price and quantity demanded is
known as the demand. The law of demand states that, if all other factors remain equal, the
higher the price of a good, the less people will demand that good. In other words, the higher
the price, the lower the quantity of demand.

According to figure 3.3, the electronics market is expected to hit an estimation of

USD 43 billion at a CAGR of 3 percent from 2017 to 2023 (projected period). The current
demand for MOSFET is heavy across all segments in 2018 and 2019. In economic terms, this
market substantially forces out the lead times, right up to 30-40 weeks. Most chip makers are
likely to follow suit over the next five years and manufacture MOSFET on 300 mm wafers.
Most likely, the supply of MOSFET will start to catch up to their demand around 2022 or
2023. Driven by growing demand by increased efficiency and durability. Because of its
compact size and improved resilience, the market MOSFET is projected to see moderate
growth in the near future.

7
4.0 Funding Strategies & Timing

Seed Capital
Seed capital is the initial fund or money which is required by a budding entrepreneur to
start a new business venture. ‘Seed’ here refers to the business which is at the beginning stage.
‘Capital’ is referred to the money or funds required at the very beginning of starting a business.
A ‘budding entrepreneur’ is the business aspirant who looks forward to making money from
his or her business idea. But sometimes a person lacks of sufficient money for funding the plan,
and there comes the role of seed capital.

Family and Friends

Often times the first check comes from a family member or a friend. In theory, it is a
lot easier to close them because they already know each other. In practice, sometimes this may
lead to an awkward situation in the future. For example, if a friend gives you some money and
the company goes belly up and you may lose this friend. Another thing is that friends and
family members may not clearly understand the risk and how the work start. Take the time to
educate them, and if they get it and still want in, then you are all clear.

Angel investor

Angel investors will put $10K-25K-50K-100K (lower is more common), and can
participate in priced or debt rounds. Angels can be very valuation sensitive. It is important to
distinguish between active / professional and occasional angel investors. Active / Professional
angels will do at least 6 deals per year, and usually more. We have to ask them on how many
deals they do per year and look them up on AngelList. If someone only does a few deals a year,
only talk to them if they have approached you, someone gave you a warm intro, or they have
relevant experience and background in your space. Otherwise, infrequent investors should not
be on your target list. Occasional angels will take longer to close and will be more flaky. Expect
to close them within the first 1-3 meetings. It is a good idea and totally fine to ask them if they
are interested at the end of the first meeting. Before having a meeting with an angel, understand
what they are interested in. Read their AngelList profile or ask via email to make a
conformation. Don’t go after people randomly because it will be a waste of your time and their
time. Confirm with whomever introduces you that the introduction makes sense.

8
Angel Groups

An Angel Group, is a bunch of angels investing together and sharing the deal flow.
Angel Groups can do priced rounds, and if a significant percentage of the angels in a group get
interested, they can lead your deal. Angel Groups will have a regularly meeting and having a
regular pitch process. Some do more due diligence than others, but typically several members
of the group will be assigned to do the diligence if your initial pitch goes well.

AngelList Syndicates

These day, AngelList Syndicates are the most effective way to raise up money on
AngelList. Syndicates are formed by influential angels, and the range is from a few hundred
thousand to over a million. The key thing is to identify angels who have the significant
syndicates on AngelList, and get in front of them. If we can get such an angel excited, the
syndicate will be run. For example, the angel might put in $50K, and then another $250K will
come via a syndicate for a total of $300K raised via AngelList. Note that the amount raised via
syndicate varies and is not guaranteed.

Micro Venture Capital

This is either an individual writing $100K+ checks or more likely a firm with $10MM-
50MM under management. The individuals are basically angel investors with a bigger sized
check. They will commit to invest or will say NO after 2-3 meetings. They may lead and be
comfortable doing either debt or equity. Micro Venture Capital Funds will likely take longer
time, and would not be too far off from a typical Venture Capital. This may require 3-4
meetings to get into a decision. Micro Venture Capital do care about ownership and having the
ability to follow on, but to a lesser extent than Venture Capital. They are not looking for 20%
of your company, more likely 8-10% and re-up in the next round (depending on the size of
their fund). Like the angels, we need to decide whether a specific Micro Venture Capital is
right for you. We have to spend some time studying their portfolio. Not only understanding the
fund, you need to understand each partner. All partner will have different experiences and focus
areas. Also, they have different preferences for companies as well. We have to target a specific
partner in a specific fund. Carefully make a research their portfolio and see if it is a potential
fit.

9
Venture Capital

Venture Capital firms have fund sizes which is in range from $100M – 500MM. For
seed deals, they would do as low as $250K to as high as $2MM. Most likely they would invest
about $500K - 1MM. They really care about percentage of ownership, and would likely do the
seed if they think they can do Series A as well. That is, they might want to buy the ownership
to be at 15%-20% after series A. Another critical thing for every fund is to understand if they
are currently investing: Some funds may not have the capital because they are in between funds,
but they would spend the time with you anyway. It is probably not the best use of your time
though. Figuring out who will be the partner on the deal with the larger firms, it is not always
obvious. Look on how many companies they are involved with and ask them on how many
companies they typically manage. In a 150MM – 300MM fund, a partner would have 8-12
companies at any given time. 10 is really a lot. If the partner is already busy, they will not
invest even if they like you because they are at capacity. Research on how many investments
the partner has to understand your chances. Always ask them what their process is like and
what is best follow up. Each firm may have a unique process and required us to understand it
upfront so we can know what to expect. Set up clear next steps and follow ups. We should be
direct, and ask if they are interested in continuing the conversation. Try to avoid the vague state
of MAYBE. If yes, then what is the next step. NO is okay, we will get a lot of those. NO is
better than a MAYBE.

Mega Venture Capital

Mega Venture Capitals are firms that have over $1BN under management. These
include Andreessen, Khosla, Kleiner Perkins, Sequoia, Bessemer, etc. Some of them doing
seed investing, but recognize that the seeds for these guys do not move the needle at all.
Research whether the fund has a seed program. If they do, figure out who runs it and what the
process is. It is more likely a partner in charge of seeds and the process is compressed compared
to raise more capital. Recognizing Venture Capital funds required to deploy large amount of
capital per deal to be able to return their massive funds. Rather than spending more time trying
to get their attention for your seed round, it may make more sense to start build the relationships
with them for Series A and B

10
Timing

Market timing is a type of investment or trading strategy. It is the act of moving in and out of
a financial market or switching between asset classes based on predictive methods. These
predictive tools include following technical indicators or economic data, to gauge how the
market is going to move. Many investors, academics, and financial professionals believe it is
impossible to time the market. Other investors, notably active traders, believe strongly in it.
Thus, whether market timing is possible is a matter of opinion. What can be said with
certainty is it is very difficult to time the market consistently over the long run successfully.
Market timing is the opposite of a buy-and-hold investment strategy.

11
5.0 PRO FORMA FINANCIAL PERFORMANCE (NEXT 5 YEARS)

The reference company for the On Semiconductor Corporation is Vitrox Corporation

Berhad.

5.1 Income Statements

A statement of income is a financial statement that documents the financial health and
performance of a company over a specific period of accounting, usually taken as quarterly.
Financial performance is measured by summarizing how the company generates revenue and
expenditures through both operating and non-operating operations. It also indicates the net
profit or loss sustained during a specific period of accounting. The data of income statement of
On Semiconductor Corporation for financial year ended 31 December 2018 and 2018 shown.

12
 YEAR INCOME STATEMENT(RM)
2017 19173000
2018 23165000
*2019 25018200
*2020 27019656
*2021 31515727
*2022 34667299
*2023 38134029
Remarks: *represents forecast years

Table 5.1: Income Statement for the Past Two Years and Next Five Years

INCOME STATEMENT VS YEAR

45000000

40000000 38134029.38
34667299.43
35000000 31515726.76
INCOME STATEMENT

30000000 27019656
25018200
25000000

20000000

15000000

10000000

5000000
2019 2020 2021 2022 2023
0
1 2 3 4 5
YEAR

13
5.2 Cash Flow Statements

Cash flow statement is a compulsory part of the financial reports of a company that records th
e amount of cash and cash equivalents that enter and leave a company.Cash flow is determine
d by looking at three components through which cash enters and leaves a business from opera
ting, investment, and financing activities. The data for cash flow statements of On
Semiconductor Corporation for financial year ended 31 December 2017 and 2018 shown
below.

14
Table 5.2: Cash and Cash Equivalents carried forward for the Past Two Years and Next
Five Years

Year Cash and cash equivalents at end of financial year (RM)

2017 4405400.00
2018 58979000.00
*2019 63697320.00
*2020 68793105.60
*2021 74296554.05
*2022 81726209.45
*2023 89898830.40
Remarks: *represents forecast years

Cash Flow Vs Year

100000000
89898830.4
Cash and cash equivalents at end of financial year

90000000 81726209.45
80000000 74296554.05
68793105.6
70000000 63697320

60000000

50000000
(RM)

40000000

30000000

20000000

10000000
2019 2020 2021 2022 2023
0
1 2 3 4 5
Year

Figure 5.2: Graph of Cash and Cash Equivalents carried forward vs Year

15
5.3 BALANCE SHEET

A financial statement that summarizes a company’s assets, liabilities and shareholder’s

equity at a specific time interval is known as balance sheet. The investors idea as to what the
company owns and owes, as well as the amount invested by the shareholders are explained by
these three segments of balance sheet.

The balance sheet adheres to the following accounting principle:

Assets = Liabilities + Equity

Assets are divided into two part which is current assets, and non-current asset. Current
assets are what can be converted to cash in one year or less, while non-current assets are assets
that cannot be converted into cash. Liabilities are money that the company owes from outside
parties, such as bills that should be paid by the company to suppliers or interest on bond which
has been issued to creditors of rent, utilities and salaries. Current liabilities are liabilities that
are due within a year time and being listed in order of their due date. Long-term liabilities are
liabilities that are due at any point after a year. Some liabilities will not appear in the balance
sheet, this liabilities is known as off-balance sheet such as operating leases. The money
attribute to a business owner is a shareholder equity which also known as “nett assets” since it
is equivalent to the total assets of a company minus by its liabilities.

Below shows the data of previous balance sheets of ON Semiconductor Corporation for
financial year ended 31 December 2017 and 2018.

16
 Table 1: Data of previous two years’ balance sheet

Year Total Asset Total Liabilities Total Equity

(RM) (RM) (RM)
2017 87950000 16901000 104851000
2018 92062000 18642000 110704000
*2019 99426960 20133360 119560320
*2020 107381116.80 217440288.80 324821405.60
*2021 115971606.20 23483551.10 139455157.30
*2022 127568766.80 25831906.22 153400673
*2023 140325643.40 28415096.84 168740740.20

Remarks: *represents forecast years

Table 2: Total Assets, Liabilities and Equity for the past two years and next five years

17
 Total Asset Vs Year
160000000
140000000
Total Asset

120000000
(RM)

100000000
80000000
60000000
40000000
20000000
0
2017 2018 *2019 *2020 *2021 *2022 *2023
Year

Figure 1: Graph of Total Assets vs Year

Total Liabilities Vs Year

30000000

25000000
Total Asset (RM)

20000000

15000000

10000000

5000000

0
2017 2018 *2019 *2020 *2021 *2022 *2023
Year

Figure 2: Graph of Total Liabilities vs Year

18
 Total Equity Vs Year
180000000
160000000
Total Equity (RM) 140000000
120000000
100000000
80000000
60000000
40000000
20000000
0
2017 2018 *2019 *2020 *2021 *2022 *2023
Year

Figure 3: Graph of Total Equities vs Year

Both equities and liabilities increase as the time increase. These can be seen from the
above graphs. The increment of equities and liabilities will result in the increase of assets. For
the first three years, the interest gained is about 8% while the last two years the interest raised
up to 10%. The interest is gained due to the high demand of the product. As the technology
still developing, the demand of the product become higher than usual. Also, the product is
promoted at a reasonable price, so that the supply and demand are at equilibrium. There will
be small losses borne by the company when the supply and demand are at equilibrium.

19
5.4 Financial Ratios

Financial ratios are created with the use of numerical values taken from financial
statements to gain meaningful information about a company. The numbers found on a
company’s financial statements – balance sheet, income statement, and cash flow
statement are used to perform quantitative analysis and assess a company’s liquidity,
leverage, growth, margins, profitability, rates of return, valuation, and more.

A. Liquidity Ratios

Liquidity ratios are financial ratios that measure a company’s ability to repay both
short- and long-term obligations.

i) Current Ratio

The current ratio is a liquidity ratio that measures a company's ability to pay short-
term obligations or those due within one year. It tells investors and analysts how a company
can maximize the current assets on its balance sheet to satisfy its current debt and other
payables.

Current Assets
Current Ratio = Current Liabilities

A current ratio that is in line with the industry average or slightly higher is generally
considered acceptable. A current ratio that is lower than the industry average may indicate a
higher risk of distress or default. Similarly, if a company has a very high current ratio
compared to their peer group, it indicates that management may not be using their assets
efficiently. The current ratio is called “current” because, unlike some other liquidity ratios, it
incorporates all current assets and liabilities. It is also called as working capital ratio.

Year Current ratio

2017 4.6075
2018 4.2216
*2019 4.2215
*2020 4.2215
*2021 4.2215
*2022 4.2215
*2023 4.2215
Remarks: *represents forecast years
20
 Current Ratio Vs Year

5
Current Ratio

4
3
2
1
Current Ratio
0
*2019 *2020 *2021 *2022 *2023
Year

ii) Quick Ratio

The quick ratio is an indicator of a company’s short-term liquidity position and

measures a company’s ability to meet its short-term obligations with its most liquid assets.
Current Assets−Inventory
Quick Ratio =
Current Liabilities

In general, the higher the ratio, the greater the company's liquidity, the better able to
meet current obligations using liquid assets.

B. Leverage Ratios

The leverage ratio is the proportion of debts that a bank has compared to its equity or
capital.

C. Activity Ratios

Activity ratios or commonly known as efficiency ratios are a category of financial

ratios that measure a firm's ability to convert different accounts within its balance sheets into
cash or sales. Activity ratios measure the relative efficiency of a firm based on its use of its
assets, leverage, or other similar balance sheet items and are important in determining
whether a company's management is doing a good enough job of generating revenues and
cash from its resources.

i) Inventory Turnover

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 Inventory turnover is a measure of the number of times inventory is sold or used in a
time period such as a year. It is calculated to see if a business has an excessive inventory in
comparison to its sales level. The equation for inventory turnover equals the cost of goods
sold divided by the average inventory.

Cost of Goods Sold Sales

Inventory Turnover = Average Inventory OR Inventory

ii) Asset Turnover

Asset turnover is a financial ratio that measures the efficiency of a company's use of
its assets in generating sales revenue or sales income to the company. Companies with low
profit margins tend to have high asset turnover, while those with high profit margins have
low asset turnover. Companies in the retail industry tend to have a very high turnover ratio
due mainly to cutthroat and competitive pricing.

Net Sales
Asset Turnover = Average Total Assets

D. Profitability Ratios

Profitability ratios are a class of financial metrics that are used to assess a business's
ability to generate earnings relative to its revenue, operating costs, balance sheet assets,
and shareholders' equity over time, using data from a specific point in time.

E. Gross Profit Margin

Gross profit margin is a metric used to assess a company's financial health and
business model by revealing the amount of money left over from sales after deducting
the cost of goods sold. The gross profit margin is often expressed as a percentage of sales and
may be called the gross margin ratio.

Sales−Cost of Goods Sold (COGS)

Gross Profit Margin = (100)
Sales

22
FIGURE 5.4-1: Profitability For Gross Margin

FIGURE 5.4-2: Financial Ratios

23
Figure 5.4-3: Management Effectiveness For Average 5 years

24
6.0 RISK ANALYSIS

6.1 INDUSTRY RISK

Unfavorable global economic conditions may lead to fluctuations and decreases in consumer
and commercial spending from time to time such factors or uncertainties can lead to lower
orders for their products and make it difficult for them to predict and schedule their future
business activities accurately.

In expectation of 29 declines in general economic conditions, the semiconductor industry has

often experienced significant declines. Global economic instability, including the level of
economic recovery in the United States, the Chinese economy's growth rate, the
consequences of conditions in Japan, including a weakened market climate and Japanese
Yen, and economic instability in many other countries and regions, oil price fluctuations and
conflicts in Eastern Europe and the Middle East, may have an adverse and significant effect
on their market, company and they cannot accurately predict uncertainty or how serious and
prolonged any recession or recovery could be.

Reduced investment has motivated them in the past and may lead them and their rivals to
lower consumer prices in the future, which has a negative effect on gross profit. Therefore, to
the degree that they mistakenly prepare for favorable economic conditions that do not
materialize or take longer than expected to materialize, their company could be adversely and
negatively affected. In addition, sales fluctuations due to volatile economic conditions will
change their expected needs for working capital and interfere with our short-term and long-
term needs.

In fact, increased economic instability could be witnessed by the United States and global
credit markets. If previous credit strains have been revived or they are facing a further global
recession, they may not be able to obtain additional funding on favorable term. If so, they
may not be able to refinance any outstanding debt at due time, all of which could have a
significant negative impact on their company. Though they assume that they have adequate
sources of liquidity to meet their anticipated working capital needs on acceptable terms. Debt
and capital expenditure for the immediate future, if their cash flow or capital assets are
inadequate, or if interest rates are significantly higher, they may face liquidity problems that
could have a substantial and negative impact on their financial results.

25
6.2 OPERATION AND PRODUCTIVITY RISK

Their results of operations could be adversely affected if they are unable to obtain adequate
supplies of raw materials in a timely manner. The costs of their raw materials increase
significantly and the raw materials give rise to compatibility or performance issues in their
products.

Several raw materials are used in their manufacturing processes. In general, their supplier
contracts do not place any minimum or continuing supply commitments. They get their raw
materials and supplies on a just in time basis from a wide number of sources.

Because of capacity constraints or other factors, suppliers can extend lead times and increase
prices from time to time. Although they assume that their current raw material supplies are
sufficient, shortages of various critical materials may occur due to supply disruption or
increased demand in the industry.

On the other hand, they also rely on a small number of highly qualified suppliers for the
necessary components and materials for some of their products. The number of qualified
alternative suppliers for such technologies is extremely limited. Such supplier’s failure to
provide sufficient supplies of manufacturing materials or other supplies may interrupt product
manufacturing. However, they cannot guarantee that for these key technologies they will not
lose their suppliers or their suppliers will be able to meet performance and quality
requirements or production schedules. Disruption or termination of their limited supply
sources for these components and materials could disrupt their deliveries of products using
these technologies and harm current and prospective customer relationships.

6.3 OPERATION AND FINANCIAL RISK

Through their foreign subsidiaries, they operate globally. Therefore, subject to specific
transfer pricing laws in the jurisdictions in which they operate. Transfer pricing regulations
generally require transactions between related parties to be priced for tax purposes on a basis
that would be equivalent to an unrelated party value transaction. In compliance with these
laws, there is ambiguity and inherent subjectivity.

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To the degree that any foreign tax authorities disagree with their policy on transfer pricing,
they may be subject in substantial tax liabilities and sanctions. Based on their current
experience and analysis of potential outcomes, they think that they made all tax exposures
free. The ultimate outcome of a tax audit could be substantially different from their
arrangements and could have a significant adverse effect on their company, financial
condition, operating results and cash flows.

Their legal organizational structure could lead to unforeseen unfavorable tax or other
consequences that could have a material negative impact on their financial condition and
operational outcomes. Changes in tax laws, regulations, future profitability of them and their
subsidiaries and related interpretations of regulations in countries in which they work may
have an effect on taxes that they pay or tax laws that could have a significant negative impact
on their operating results. Therefore, any changes to how their companies are organized or
realigned or their business goals by tax authorities may lead them to be subject to significant
tax liabilities and penalties that could adversely affect their company, financial condition,
operating results and cash flow.

6.4 DEBT RISK

Borrowing under some of their facilities from time to time, including under their senior
revolving credit facility are at adjustable interest rates and expose them to interest rate risk. If
interest rates were to increase, their debt service obligations on the variable rate indebtedness
would increase even though the amount borrowed remained the same thing will happen and
their net income and cash flows including cash available to support their debt will decline
accordingly. In the future, they can enter into interest rate swaps that require swapping for
fixed rate interest payments to minimize the volatility of interest rates. However, they may
not maintain interest rate derivatives for all of their variable rate debt and any swaps that they
join may not completely offset their interest rate risk.

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7.0 CONCLUSION & RECOMMENDATIONS

In a nutshell, this project is designed to produce the MOSFET (metal–oxide–

semiconductor field-effect transistor) or also called the MOS transistor using silicon. This
technology product is proposed for On Semiconductor Corporation to increase their revenue.
After conducting financial analysis, risk analysis, market analysis of the product as well as
the costing and budgeting of the proposed project. we are confident that the method of
producing MOSFET by using silicon waste is high potential to fulfil the future high demand
as it can be. Apart from this, after evaluating the income statement, cash flow statements and
balance sheets of On Semiconductor corporation, it provides quite stable financial status by
holding high positive trend in current ratio, quick ratio and low debt ratio for the past 2 years.
Hence, it is competent to carry out this project under On Semiconductor corporation in
accordance to the financial ratio that have been done. On the other hand, risk analysis such as
risk to operating personnel, risk to maintenance and project personnel, risk to office
personnel and offsite risk have been conducted in this project to ensure that the technologies
employed, and products can be manufactured in a safe environment which will not pose any
risk to producers and consumers. After the implementation of this new technology and
product, it is expected to continue to increase the profit and income of the On Semiconductor
corporation in the future and have the potential to be listed within 2 years or less on high
growth technological market, in Bursa Malaysia ACE Market (formerly known as
MESDAQ), via Initial Public Offering, IPO.

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8.0 REFERENCES

1. https://www.marketwatch.com/press-release/mosfet-transistor-industry-2019-global-
market-growth-size-share-demand-trends-and-forecasts-to-2025-2019-03-26
2. https://www.reuters.com/brandfeatures/venture-capital/article?id=7346
3. https://www.bondcapital.ca/wp-content/uploads/pdfs/2016-bond-capital-mezzanine-
finance-white-paper.pdf
4. https://www.techstars.com/content/blog/7-sources-of-startup-seed-capital-from-
family-to-billion-dollar-funds/
5. https://www.onsemi.com/PowerSolutions/content.do?id=1138
6. http://www.bursamalaysia.com/market/listed-companies/company-
announcements/5926809
7. https://www.sourcengine.com/blog/as-lead-times-grow-for-power-mosfets-the-
industry-adapts-current-market-trends-for-mosfets
8. http://www.annualreports.com/Company/on-semiconductor
9. https://en.wikipedia.org/wiki/MOSFET
10. https://electricalfundablog.com/mosfet-working-types-applications-advantages-
disadvantages/

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