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CONTENTS

1. Letter to our stakeholders ......................	04
2. X-FAB at a glance ......................................	06
3. Our culture ...................................................	08
4. Our business ................................................	12
5. X-FAB consolidated financial statements ..................................................	26
5.1 Summary of important developments ........................................	26
5.2 Statement of the Board of Directors ..	26
5.3 Statutory auditor’s report to the general meeting of X-FAB Silicon Foundries SE on the consolidated financial statements as of and for the year ended December 31, 2023 ...........	26
5.4 Consolidated financial statements ......	30
Notes to the consolidated financial statements	35
1 Basic information and description of the X-FAB Silicon Foundries SE Group’s business ....................................	35
2 Group structure .....................................	35
3 Basis of preparation ...............................	36
3.1 Statement of compliance ............	36
3.2 Basis of measurement ..................	36
3.3 Functional and presentation currency .........................................	36
3.4 Use of judgments, assumptions,and estimation uncertainties ..................................	36
4 Summary of accounting policies ..........	38
4.1 Basis of consolidation ...................	38
4.2 Foreign currency translation ........	38
4.3 Revenue from contracts with customers ......................................	38
4.4 Research and development expenses ........................................	39
4.5 Finance income and finance costs ...............................................	39

4.6 Rental income from investment properties ......................................	39
4.7 Employee benefits ........................	40
4.8 Property, plant, equipment, and investment properties ..................	40
4.9 Intangible assets ............................	40
4.10 Impairment .....................................	41
4.11 Financial instruments ....................	41
4.12 Derivative financial instruments ..	43
4.13 Inventories .....................................	44
4.14 Cash and cash equivalents ...........	44
4.15 Equity .............................................	44
4.16 Provisions .......................................	44
4.17 Leases ............................................	44
4.18 Subsidies ........................................	46
4.19 Income taxes .................................	46
4.20 Changes to accounting policies ..	47
5 Business combinations ..........................	48
6 Notes to the consolidated statement of profit or loss .......................................	49
6.1 Revenue .........................................	49
6.2 Cost of sales ..................................	50
6.3 Research and development expenses ........................................	50
6.4 Selling expenses ............................	50
6.5 General and administrative expenses ........................................	50
6.6 Expenses by nature ......................	50
6.7 Rental income from investment properties ......................................	51
6.8 Rental expenses related to investment properties ..................	51
6.9 Other income ................................	51
6.10 Other expenses .............................	52
6.11 Finance income .............................	52
6.12 Finance costs .................................	52
6.13 Income tax .....................................	52
6.14 Earnings per share ........................	55
7 Notes to the statement of financial position ....................................................	56
7.1 Property, plant, equipment, and investment properties ..................	56
7.2 Intangible assets ............................	58

	Annual Report 2023 | Contents

2

7.3 Inventories .....................................	58
7.4 Contract assets .............................	59
7.5 Trade and other receivables ........	59
7.6 Other assets ..................................	60
7.7 Cash and cash equivalents ...........	60
7.8 Equity .............................................	61
7.9 Dividends .......................................	61
7.10 Non-controlling interests .............	62
7.11 Loans and borrowings ..................	62
7.12 Other non-current liabilities .........	67
7.13 Trade payables and other current liabilities ............................	68
7.14 Provisions .......................................	69
8 Notes to the statement of cash flows .	69
9 Segment reporting ................................	69
10 Financial instruments – fair values and risk management ...................................	71
11 Leases .....................................................	74
12 Transactions with related parties .........	75
13 Other disclosures ...................................	77
13.1 Purchase commitments and contingencies ................................	77
13.2 Unresolved legal disputes and claims ..............................................	77
13.3 Employees .....................................	77
13.4 List of shareholdings .....................	78
13.5 Consolidated financial statements of the ultimate parent .............................................	78
13.6 Auditor and auditor’s remuneration .................................	78
14 Events after the reporting period ........	78
6. Corporate social responsibility at      X-FAB ...........................................................	82
6.1 Scope ......................................................	82
6.1.1    X-FAB’s key environmental, social, and governance (ESG) goals ...............................................	83
6.1.2 Stakeholder engagement ..............	85
6.1.3 Digital transformation ....................	87
6.2 Environment ...........................................	88
6.2.1 Environmental awareness and responsibility ..................................	88
6.2.2 Materials and waste management .................................	89
6.2.2.1 Energy efficiency .............	89
6.2.2.2 Water .................................	90
6.2.2.3 Greenhouse gases ...........	91

6.3 Social .......................................................	91
6.3.1 Human rights and human resources ....................................	91
6.3.2 Social commitment ....................	96
6.3.3 Healthy work environment ........	97
6.4 Governance ............................................	98
6.4.1 Anti-corruption and bribery .........	98
6.4.2 X-FAB’s supply chain ....................	99
6.4.2.1 Selection and categorization of X-FAB suppliers ............................	99
6.4.2.2 Audits and continual improvement of suppliers ............................	99
6.4.2.3 Handling of conflict minerals .............................	100
6.4.3 Data security ..................................	100
6.4.4 X-FAB’s responsibility towards its customers and society .............	101
6.5 EU taxonomy ..........................................	101
7. Corporate governance statement ........	114
7.1 Shareholders ..........................................	114
7.2 Management structure .........................	114
7.3 Board of Directors .................................	115
7.4 Committees ............................................	117
7.5 Executive Management ........................	118
7.6 Diversity policy .......................................	118
7.7 Remuneration report .............................	118
7.8 Policy on certain transactions ..............	122
7.9 Internal control and risk assessment procedures in relation to financial reporting .................................................	124
7.10 Description of certain information from the Articles of Association and elements pertinent to a takeover bid ..	124
7.11 Auditor ....................................................	126
7.12 Compliance with the 2020 Belgian Code on Corporate Governance ........	126
8. Shareholder information ..........................	127
9. X-FAB SE statutory accounts ................	129
10. Risk factors ..................................................	131
11. Glossary ........................................................	135

	Annual Report 2023 | Contents

3

Dear

stakeholders,

On behalf of the board of directors of X-FAB Silicon

Foundries SE, I have the pleasure of submitting to you

the annual report for the year ended December 31,

2023, which has been prepared in accordance with

articles 3:6 and 3:32 of the Belgian Code on

Companies and Associations (BCCA).

2023 was a remarkable year for X‑FAB. We recorded

record revenues across the board and a significant

increase in profitability. We completed the transition of

X-FAB’s activities towards high-growth, high-value-

added business in the automotive, industrial, and

medical end markets, and launched an unprecedented

expansion program to better serve the strong

customer demand.

Full-year revenue in 2023 amounted to USD 906.8

million, up 23% year on year, which includes USD 16.6

million in revenues recognized over time according to

IFRS 15. X‑FAB has been growing strongly, while the

semiconductor market has experienced a fall and

recorded a double‑digit decline in 2023. X‑FAB’s

strong growth is also a testament to the strength of

the key end markets that we serve: annual turnover in

automotive, industrial, and medical came in at

USD 812.6 million, up 31% year on year.

X-FAB is uniquely positioned with a broad portfolio of

specialty technologies, including high-voltage CMOS,

silicon carbide and microsystems, tailored to the needs

of the automotive, industrial, and medical end markets.

Combined with our renowned design support, we

enable our customers to develop innovative,

sustainable, and energy-efficient products that help to

resolve the key challenges of today.

In 2023, we have seen that climate change no longer is

a future theory. Global warming is happening now with

all the consequences it has. We take pride in providing

solutions that support the transition to electric mobility

and renewable energy sources, which fueled growth of

our automotive and industrial business. Automotive

revenue in 2023 came in at USD 539.1 million, up 38%

year on year. In the industrial end market, we recorded

annual revenue of USD 206.2 million, which is an

increase of 19% against the previous year.

Population growth and aging societies demand

medical care to keep pace. Semiconductor technology

is the answer, as it drives digital transformation and

efficiency improvements in the medical sector and

significantly improves the prevention, diagnostics,

treatment, and monitoring of diseases. In 2023,

X‑FAB’s medical business recorded revenues

amounting to USD 67.3 million, up 21% year on year,

driven by the increasing use of wearable medical

devices as well as the growing demand for testing and

point-of-care devices. In particular, our capability to

combine CMOS and MEMS technology as well as our

systems integration expertise to add value on wafer

level enables innovative medical solutions, which

contributed to the growth of our medical business.

Looking at the revenue by technology underlines the

successful development of the past year. In 2023,

revenue with our CMOS technologies came in at

USD 722.4 million, up 19% year on year. SiC revenues

amounted to USD 72.6 million, recording a strong

growth of 33% year on year, and microsystems

revenue increased by 26% year on year to a total of

USD 95.2 million. A highlight in 2023 was the

introduction of the industry’s first 110nm BCD-on-SOI

solution. With this technology we address the next

generation of automotive, medical, and industrial smart

power applications and have already received

overwhelming interest from customers, who will be

able to benefit from great efficiency improvements.

	Annual Report 2023 | Letter to our stakeholders

4

Over recent years, we have successfully restructured

our business to create an optimized business portfolio

that supports X-FAB’s growth. In 2023, we generated

91% of total revenue with a high value-added product

mix in our key end markets. The remaining 9% went

into consumer, computer, and communications (CCC)

applications. With the complete phase-out of the CCC

legacy business at X-FAB France in early 2023, the

CCC portion of our activities has reached a stable level,

and X-FAB’s top-line growth was no longer impacted

by the declining legacy business.

In 2023, we launched an unprecedented capacity

expansion program with investments in new equipment

between 2023 and 2025 totaling USD 1 billion. Why is

that important? Demand for our popular 200mm

CMOS, silicon carbide, and microsystems technologies

remains high and continued to exceed our capacities

throughout 2023. Our success is our customers'

success, and reliable supply to meet their business

needs is critical as we are the sole supplier of a specific

product in more than 90% of cases. We need to grow

our capacity in line with the strong demand we see

going forward, supported by long-term agreements

and customer forecasts.

Capacity expansions at our existing sites will lead to

higher productivity through economies of scale.

Together with product mix improvements, this

supported a significant increase in profitability in 2023.

Full-year EBITDA was USD 245.6 million, up 82%

against the prior year, with an EBITDA margin of 27.1%,

slightly above the guidance range of 23-27%. Thanks

to the natural hedging of our business, our profitability

was not affected by exchange rate fluctuations.

2023 has once again been marked by various crises,

and democracy has shown its vulnerable side in many

regions of the world. At X‑FAB, we want to counter this

by emphasizing our strong corporate values,

promoting open-minded, unbiased thinking and

embracing diversity and inclusion, which is also one of

our key ESG objectives. X‑FAB’s Diversity Council has

taken action to raise awareness of diversity issues,

provide information and offer targeted training.

Diversity makes X‑FAB an inspiring place to work, helps

us to get better every day, and attracts new talent, and

we – as X-FAB – will always do our part to uphold

universal values such as respect, openness, and

diversity. More information on diversity and X-FAB’s

other ESG objectives can be found in chapter 6 of this

report.

I am proud of our accomplishments in 2023, and I see

X-FAB uniquely positioned to continue its growth

trajectory. We can be proud of the contributions our

expertise and capabilities are making to address the

world's most critical challenges, and I would like to

extend my sincere thanks to all of our employees for

their outstanding commitment to X-FAB's success.

I look forward to continuing to work with all of X-FAB's

stakeholders in 2024 and beyond and thank you for

the trust you have placed in us.

After the close of 2023, there were no major events

that would require disclosure.

Best regards,

Rudi De Winter

CEO

	Annual Report 2023 | Letter to our stakeholders

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6

7

3. OUR CULTURE

Diversity at X-FAB

Since its inception in 1992, X-FAB has grown to

become a global company with a strong presence in

Europe, North America, and Asia with more than 4,500

employees spread all over the globe. At X-FAB, you will

find an international and diverse working environment.

Our employees represent more than 45 nationalities

with a large variety of cultural, religious, and ethnic

backgrounds, are of all ages, and have varied

educational levels. This not only makes working at

X‑FAB an inspiring experience, but it also drives

performance in many ways: our diverse workforce

fosters innovation, creativity, and problem-solving

skills, increases employee engagement, attracts new

talent, and contributes to better financial results.

Promoting diversity and inclusion in the workplace to

ensure equal opportunities for all employees is one of

X-FAB's key ESG objectives, under which X-FAB

regularly undertakes actions to further improve its

diversity and inclusion. X-FAB's Diversity Council,

established in 2022, is dedicated to the many themes,

large and small, that together make up a diverse and

inclusive organization. In 2023, the Diversity Council

developed an X-FAB-wide Equal Treatment Policy,

launched an awareness campaign on diversity and

inclusion, provided training on diversity-related topics,

and conducted a diversity survey among female

employees to derive actions to support an increasing

number of women in the organization and in leadership

positions.

Guiding us to success

Strong values build the basis for the success of X-FAB,

the way we work together, and how we interact with

each other and with our stakeholders. At X-FAB, we

put our clients and customers at the center of what we

do, and our values of integrity and respect, teamwork,

commitment, and innovation are guiding us every day

to live up to being a customer-oriented company.

X-FAB’s values are an integral part of corporate life.

New employees are introduced to X-FAB’s values in a

half-day Vision & Values workshop, and X-FAB’s

performance management process, designed to

encourage regular exchange between employees and

supervisors, draws attention to how the values are

being realized in our daily work.

X-FAB’s leaders have a decisive role to play in this

respect. As role models, they lay the foundation for the

success of their teams by providing direction, fostering

motivation, and communicating effectively based on

X‑FAB’s core values. In order to strengthen culture and

leadership, X-FAB has launched a Global Leadership

Program and, for the first time, organized a Global

Leadership Conference in August 2023 with 82 leaders

and executives from all X-FAB sites. They gathered in

the vibrant city of Leipzig, Germany, for three intense

days of workshops, keynote presentations, and

networking opportunities focused on the strategic

direction of X-FAB, plus culture and leadership topics.

What are we striving for?

OUR VISION

To be the foundry of choice for the analog world.

OUR MISSION

We are fully engaged to be the foundry of choice for

the analog world by focusing on innovative solutions

and manufacturing excellence that meet customer

expectations, enabling long-lasting success for all our

stakeholders.

	Annual Report 2023 | Our culture

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Social media highlights 2023

	Annual Report 2023 | Our culture

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10

11

4. OUR BUSINESS

The specialty foundry business model

X-FAB is one of the world’s leading specialty foundry

groups for analog/mixed-signal semiconductor

technologies with a clear focus on automotive,

industrial, and medical applications. As a specialty

foundry, X-FAB provides manufacturing and strong

design support services to its customers that design

analog/mixed-signal integrated circuits (ICs) and other

semiconductor devices for use in their own products or

the products of their customers.

As a specialty foundry, X-FAB is the development

and manufacturing partner for its customers. X-FAB's

modular, highly specialized portfolio of process

technologies and associated design IP enables

innovative semiconductor products, which are

designed by and manufactured on behalf of its

customers using X-FAB’s capabilities and expertise.

The trend to further capture and evaluate measured

values in the real world generates growing need for

specialty foundry services.

Fig. 4.1: Value chains for foundries, fabless companies, and IDMs

The X-FAB Group has an established track record with

over 30 years of experience providing proprietary

manufacturing processes and advanced design and

engineering support offerings. Excellent service,

reliability, and first-class technical support: that’s what

X-FAB stands for.

Manufacturing excellence

X-FAB manufactures analog/mixed-signal ICs utilizing

its in-house developed process technologies.

A modular approach allows customers to choose from

a wide range of enhanced options across many

semiconductor technologies, designs and processes,

including complementary metal-oxide

semiconductor (CMOS), silicon on insulator (SOI),

silicon carbide (SiC), and micro-electro-mechanical

systems (MEMS). Customers can draw on a variety of

features in order to develop ICs specifically tailored to

their end-use requirements and to optimize product

performance, product size, power consumption, and

other parameters. Currently, the foundry offers

process technologies with feature sizes of 1.0μm,

0.8μm, and 0.6μm on 150 mm wafers and 0.6μm,

350nm, 180nm, and 130nm on 200 mm wafers.

Production of the next-generation 110 nm SOI process

technology on 200 mm wafers was successfully

launched in 2023.

The X-FAB Group operates six wafer manufacturing

sites in Germany, France, Malaysia, and the United

States, with aggregate production capacity of

approximately 100,000 200 mm equivalent wafer

starts per month (WSPM).

CMOS and SOI:

X-FAB’s open-platform technologies

The vast majority of X-FAB’s technologies are based

on CMOS, with SOI being a specialty variant offering a

so-called SOI layer for better technical performance

within certain electrical parameters. These processes

are available for all customers and include

performance-optimized primitive analog devices such

as low noise transistors, high voltage transistors (up to

700-volt breakdown voltage), or integrated sensor

elements such as optical sensor diodes.

	Annual Report 2023 | Our business

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X-FAB’s DNA: Analog/mixed-signal ICs
X-FAB produces microchips and other semiconductor devices. These microchips and devices prepare real-world signals from the analog world (sensory data such as sound, light, pressure, motion, temperature, etc.) for subsequent digital processing or converting digital values into analog signals. Mixed-signal circuits (also referred to as “analog/mixed-signal ICs”)	embed both digital and analog circuitry onto a single IC. With more and more electronic devices interfacing with the “real world” (such as through the Internet of Things, IoT), the demand for such devices is growing continually, making mixed-signal semiconductor ICs an increasingly important part of the market for electronic equipment.

Fig. 4.2: X-FAB connects the real world with the digital world by enabling smart applications

Even though those open-platform technologies

typically address multiple applications and sometimes

more than one market, most of them are qualified for

automotive use and support high temperatures up to

175°C. In 2023, revenues based on X-FAB’s CMOS

technologies amounted to USD 722.4 million.

The Group owns all its technologies and the

corresponding IP. The extensive IP offering comes with

the option of customizing certain IP blocks, which

means that customers can combine X-FAB IP with

their own IP for optimized functionality. To enable fast

and easy design of new products, X-FAB also provides

process design kits (PDKs), libraries with digital and

analog circuit elements, and complex IP blocks such as

embedded flash memories, related software, and

consultancy services.

X-FAB’s technology portfolio (see Figure 4.3) spans

geometries from 110nm to 1.0μm. The mature

technologies down to the 180nm node provide very

rich feature sets and thus enable a wide range of

applications. X-FAB’s approach to extending this

portfolio is driven by customer demand to enable

further fields of use. The feature set for the 130nm

node is optimized for radio frequency (RF)

applications, while the 110nm process technology is

geared towards automotive use and will be

progressively extended. New process nodes will be

added eventually.

To mention a few examples: the current 180nm SOI

technology is able to operate voltages up to 375 volts,

which is crucial for medical ultrasound equipment.

Integrated optical sensors enable light curtain safety

devices for automated factories. Embedded flash

memories, which are qualified for automotive

applications and support high temperatures, are suited

for controller ICs placed in a car close to the engine.

X‑FAB's new 110nm SOI technology offers advantages

in integrating a greater proportion of digital functions

such as enhanced microprocessors and memory.

	Annual Report 2023 | Our business

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Fig. 4.3: X-FAB open platform process portfolio and features

Advantages of X-FAB’s specialized technologies

The feature set of a particular technology node is

extended over time, enabling a very wide range of

applications, which in turn increases the number of

customers adopting the technology. For example,

X‑FAB’s 180nm and 110nm BCD-on-SOI technologies

have special structures on the chip called deep trench

isolation (DTI) that make the processes suitable for

operation at high voltages. DTI allows driver circuits

operating at up to 375 volts to be placed alongside

sensitive amplifiers processing low voltages of a few

mV. To prevent interference and crosstalk, DTI can

also be placed between separate low-voltage circuits.

X-FAB supports the automotive quality standard

AEC‑Q100 grade 0, allowing the development of ICs

that can be used at temperatures of up to 150°C. Such

high temperatures can occur close to the combustion

engine in hybrid electric vehicles, in battery

management systems, or close to the inverter of

electric vehicles.

By the subsequent integration of noble metal

electrodes onto CMOS wafers, X-FAB creates

interface structures for biological material. These

electrodes allow the chips to measure physiological

parameters of a biological sample without influencing

the sample itself. At the same time, corrosion or

deterioration of the chip through interaction with the

sample is prevented. Noble metal electrodes make

CMOS chips biocompatible.

Silicon carbide (SiC) as the crystalline compound of

silicon and carbon has advantages over elemental

silicon when used in power technologies. Due to their

special material properties, components manufactured

in SiC offer higher efficiency in power conversion,

fewer losses, and high temperature operation. These

advantages result in more energy-efficient systems

with reduced size, weight, and cost. In the case of

energy supply, this means that more energy reaches

the consumer, which in the case of electric cars leads

to greater driving range.

2023 R&D highlights include:

• release of X-FAB’s new 110nm automotive

technology platform. Compared to its highly

successful 180 nm predecessor platform, the

110 nm process offers improved device

performance and area savings for digital circuits

and memory IP. It features automotive AEC100-0

qualified flash memory and operating temperatures

from -40°C to 175°C. With this release the

technology is generally available for early product

studies and prototyping for all X‑FAB customers;

• extension of the 350nm CMOS platform with

integration options for capacitive and inductive

couplers, enabling both discrete and integrated

digital galvanic isolators;

• introduction of a single-photon avalanche diode

(SPAD) optimized for near-infrared applications

such as time-of-flight measurement, vehicle LiDAR

imaging and a variety of medical applications;

• X-FAB has taken the lead of the EU-funded

photonixFAB project, which aims to establish a

European value chain for photonics components

and initial industrial manufacturing capabilities. The

project is being supported by the Key Digital

Technologies Joint Undertaking (KDT JU), with

funding from EU and the national authorities.

Possible applications for the capabilities to be

developed include data communication, telecoms,

biomedical sensors/detectors, quantum computing

and vehicle LiDAR;

• introduction of a technology to integrate a passive

device directly into mixed-signal ICs for RF

communication applications, resulting in significant

space and cost savings; and

• 22 new patent applications and 32 patents were

granted in 2023, contributing to an overall patent

portfolio of more than 458 patents and patent

applications.

	Annual Report 2023 | Our business

14

Microsystems: Interfacing the physical world

on the microscale

Microsystems are microscale components which

incorporate the functions of an entire system or

sub‑system. The focus at X-FAB’s Microsystems

Business Unit is to provide tailored solutions for

microsystems providing the interface between

microelectronics and the physical world. There are

three technological focus areas where X-FAB is active:

• MEMS, or micro-electro-mechanical systems,

build the interface between mechanical

properties and electronics;

• monolithically integrated on-chip solutions for

sensors, sensor interfaces and actuators with

analog/mixed-signal ASICs; and

• advanced wafer-level integration by means of

2.5D integration and heterogeneous

integration.

Complex processes are used to produce structures or

components in silicon that convert mechanical

variables, such as pressure or acceleration, into

electrical signals. MEMS and microsystem devices can

be found in many products or modules, such as airbags,

medical diagnostics devices, or inkjet printer heads.

The development of MEMS products differs from the

development of integrated circuits in that usually the

manufacturing process has to be adapted to the

specification of the final product. This leads to higher

development costs and longer development times, but

also offers the opportunity to bring products with

unique features and strong intellectual property

protection to the market, as a lot of know-how goes

into the manufacturing process.

MEMS product manufacturing also requires the use of

materials not used in or undesirable in integrated circuit

manufacturing because they could contaminate

manufacturing lines. These are the reasons why

manufacturers either focus exclusively on MEMS

product manufacturing or, like X-FAB, run separate

facilities for the manufacturing of CMOS and MEMS

wafers.

X-FAB has chosen to using these existing capabilities

to expand MEMS to include medical and biological

phenomena. This expansion, along with X-FAB's

willingness to respond to customer needs and take on

additional manufacturing steps in the supply chain, is

the cornerstone of a very successful MEMS business.

X-FAB’s Microsystems business generated revenues

of USD 95.2 million in 2023, representing growth of

26% compared to the previous year.

Sensors and actuators have been the traditional

application types of MEMS, and X-FAB builds on its

established processes to further develop business in

this field. X-FAB offers next-generation sensor

technologies for relative and absolute pressure

sensors for all kinds of media, including corrosive and

high-temperature environments. X-FAB further

provides a proprietary open platform technology

(XMB10) for inertial sensing covering both

accelerometers and gyroscopes in the X, Y, and Z axes.

By making it available through EUROPRACTICE, the

European initiative for low-entry design and fabrication

of electronic circuits, this technology is gaining traction.

Gas and flow sensors are based on X-FAB’s well-

established noble-metal processes, resulting in very

small sensor devices, while temperature sensors apply

the thermopile principle, requiring a well-controlled

etching process. This more established part of X-FAB’s

MEMS business is characterized by continuous

improvement, both technologically and operationally.

At the same time, X-FAB invests in disruptive

technologies. Jointly with a lead customer, X-FAB

developed an integrated thermopile solution for

contactless temperature measurement, providing size

reduction for smaller form factors and at the same

time providing medical grade accuracy. The first

product based on this technology won the 2019 Best

of Sensors Awards and generated significant turnover

in the first years of production. The second generation

of this sensor is under development, which will address

an even wider range of applications and new classes of

wearable health products with a smaller form factor.

Glass wafer processing is an important capability that

X-FAB offers and is used for biomedical and life

science devices.

The combination of robust analog/mixed-signal CMOS

technologies with the opportunities offered by

post‑processing dedicated to medical applications is

attracting great attention in the marketplace. X-FAB’s

customer base ranges from established companies

expanding into new application areas to start-up

companies with innovative approaches to leverage the

integration of integrated circuits and microfluidic

structures on one lab-on-a-chip device. The platform

approach that X-FAB is taking enables it to offer a

wide range of applications, leading to an extremely

dynamic business development and revenue growth.

X-FAB will further invest in development and facilities

that will enable it to offer complete solutions to its

medical customers.

This combination of CMOS technologies and noble

metal electrodes is now being used in applications

outside the medical field, such as the next generation

of automotive adaptive headlights.

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Further capabilities of X-FAB’s Microsystems business

unit include 3D integration and wafer level packaging.

Through-silicon vias (TSVs) are one of the key

technologies for 3D stacking of integrated circuits.

X‑FAB enables this product-specific processing step

for its foundry customers and successfully operated

multiple prototyping runs on selected devices. For the

assembly of microcomponents on top of other chips or

substrates, the technology of micro-transfer-printing

is in development. Further ways to integrate

heterogeneous electronic component concepts for

system in package (SiP) are under intense evaluation

with numerous research and technology organizations

(RTOs), linking into the scope of the EU Chips Act as

well as the industry trends promoted in the IEEE

heterogeneous integration roadmap.

X-FAB’s Microsystems business unit successfully

applied and launched two activities within the scheme

of IPCEI (Integrated Project of Common European

Interest), the funding framework for development and

demonstration of innovative technologies around

heterogeneous integration for communication,

automotive and medical applications and glass wafer

processing with focus on biomedical applications.

In line with customer demand, all activities described

above are aimed at expanding X-FAB’s value creation

along the supply chain. The close cooperation with

X‑FAB's customers and their strong commitment,

which is reflected by the high prototyping revenue of

the business unit MEMS, lead us to expect a successful

future for these activities.

Silicon carbide: High power for a high-growth

market

At the point X-FAB entered the SiC business it was the

first foundry for wide bandgap material and is to date

the leading foundry supplier for SiC technologies.

Following the positive trend of the previous years ,

X‑FAB’s SiC business recorded a revenue of USD 72.6

million in 2023.

SiC is a semiconductor substrate that, thanks to its

material properties, supports the global trend to

reduce greenhouse gas emissions. In the transition to

CO2 emissions-free mobility and transport, devices

manufactured in SiC address two of the main

challenges: driving range and charging time. By using

SiC for components in the power train of electric

vehicles, the driving range achievable with one battery

charge can be increased by approximately 9%.

Similarly, used in charging infrastructure, SiC enables

high-power, high-speed DC charging, allowing electric

vehicles to travel further and faster.

SiC is an already established material for components

in the energy sector. An increasing number of suppliers

are moving towards greener and more sustainable

energy technologies. At the same time the demand for

electrification is growing dramatically, creating an

ever‑growing market for these components. SiC

transistors are a core component in systems for power

generation from renewable sources such as

photovoltaic or wind energy. SiC also enables huge

energy savings in power supplies for data centers,

computers, chargers for mobile phones, and devices

for the Internet of Things.

The majority of devices manufactured in silicon carbide

are offered by integrated device manufacturers (IDM)

designing, manufacturing, and selling semiconductor

components under their own brand. X-FAB decided to

offer silicon carbide processing capabilities to a variety

of customers, strictly following its business model as a

specialty foundry. Customers are enabled by X-FAB to

develop solutions based on their own specifications to

differentiate and compete in the market.

X-FAB’s success as the number 1 foundry for SiC is

built on four pillars:

• secure supply chain;

• leading technology offer;

• economy of scale; and

• trusted partnership.

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Customers sourcing SiC wafers from X-FAB can rely

on the supply chain that has been established for the

entire foundry business for over 30 years. The access

to leading technology in services, equipment, and

processes enables them to create outstanding device

performance. The existing foundry infrastructure

ensures ramping to production volumes individually

suited to any respective customer and product need.

Finally, through its business model, X-FAB will never

compete with its customers by selling components or

modules under its own brand. This trusted partnership

is a cornerstone of X-FAB’s success as foundry.

Since the launch of its foundry offer for silicon carbide,

X-FAB has achieved a number of successes. For the

broad technology platform that was established in

recent years, X-FAB provides standard process blocks

supporting customers in the development of diodes

and transistor products. A state-of-the-art tool set is

available for all relevant process steps, enhanced with

next-generation processing capabilities. This has

enabled the thinning of wafers and solderable backside

metals. X-FAB has established collaborations with

design houses that can support customers during

product design and has built an extensive processing

knowledge base that will support each customer with

their individual process.

X-FAB has established long-term partnerships with its

customers and is supporting more customers than

ever. The majority of the non-IDM suppliers of SiC

devices are choosing X-FAB as their manufacturing

site. Also, smaller IDMs leverage the unique capabilities

offered by X-FAB for their products.

The SiC processes are complementing X‑FAB’s offer

for power electronics in the automotive and industrial

markets. A growing number of customers using

X‑FAB’s SiC technology, strong growth in prototyping

revenue, and increasing production volumes from a

variety of customers supports the promising outlook

for this part of X FAB’s business.

SiC revenues for the full year came in at USD 72.6

million, representing 33% growth compared to the

previous year, as more customers started volume

production. With the strong pull from the market,

X‑FAB is adding more SiC-related equipment,

extending its SiC capacity and capabilities further.

Investments in additional capacity,

capabilities, and productivity improvements

Due to the continuing demand from X-FAB's core

markets for its process technologies, X-FAB expects

customer demand to exceed supply capacity in the

coming years. X-FAB is making significant investments

in the expansion of its production capacity to meet this

demand. X-FAB is creating additional production

capacity at the 200 mm sites in Kuching,

Corbeil‑Essonnes, and Dresden, and at the SiC foundry

in Lubbock. X-FAB is also investing in additional

capacity and capabilities in the manufacturing of

microsystems at its sites in Erfurt and Itzehoe and

making use of additional capacity through

collaboration with selected outsourcing

partners.foundry.

A main driver for productivity improvement is

automation, standardization and digitization of

processes. In addition to a large number of measures

to increase efficiency, X-FAB has introduced a so-

called scheduler program, which is a software that

makes the best plan ("schedule") based on all

information available (e.g. tool capabilities, material

availability, WIP (work in progress) situation, lot

priorities, etc.). The scheduler gives guidance which

batches are to be processed next on a particular tool

and helps to optimize the wafer processing in view of

the large number of different products in the factory at

the same time.

These expansions and activities will enable X-FAB to

manufacture products with an increased level of

integration for its customers and thus achieving

greater added value. Comparing a conventional

consumer product, which is manufactured

using 19 photomasks, with a complex product, such as a

chip for DNA sequencing, which requires 54 masks, the

manufacturing complexity almost triples and leads to a

proportional increase in the value of the product.

Customer orientation: Long-standing

relationships and strong product

customization

Fig. 4.4: X-FAB’s customer count by annual revenue. X-FAB

has grown to a diverse base of more than 400 customers

worldwide

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The majority of X-FAB’s customers are fabless

semiconductor companies (often also called fabless

houses): companies that have no own manufacturing

and process technology expertise but rely on foundries

for those services and related expertise. A smaller

portion of X-FAB’s customer base are either original

equipment manufacturers (OEMs) or integrated

device manufacturers (IDMs).

X-FAB has a diverse base of more than 400

customers worldwide and continually wins new

customers in its core markets (see Figure 4.4).

Due to the high degree of product customization

usually required by customers, a specialty foundry is

less vulnerable to extreme price and demand volatility

experienced by many competitors in the broader

foundry market. X‑FAB’s focus on highly customized

analog/mixed-signal ICs results in smaller production

volumes per each product and requires more

engineering input per unit creating a high value-add for

the customer.

The long-term availability of these high-quality

products is essential for X-FAB’s customers, since

X‑FAB is the sole source for more than 90% of the

products it manufactures. This is an important aspect

contributing to long-lasting customer loyalty. Most of

the customer products are designed using X-FAB

proprietary process technologies and design IP, and it

would require significant effort by the customer to

migrate products to other foundries, an effort that

would often be equivalent to a new development.

The global chip shortage that was observed in 2022

put more focus on the supply chain of the

semiconductor industry and led to the realization that

semiconductors are strategic for many products of

today's life including cars, industry equipment and

medical devices. To ensure mutual planning security

X‑FAB signed long-term agreements (LTAs) with

some customers, which include a commitment to

deliver and a commitment to buy certain wafer

quantities. These LTAs typically have a term of three

years.

The LTAs give X-FAB the necessary security for

investments into capacity expansions in all of its

factories. An expected impact of the LTAs is the

mitigation of the large swings in the semiconductor

industry caused by the long lead times and the closure

of factories.

Fig. 4.5: Illustrative lifecycle for automotive: Analog/mixed-signal products are much more specialized for their applications and are

used for many years

By providing a wide range of design-related product

and support services as part of its comprehensive

offering, including engineering, technical, and design

support, X-FAB typically has strong, long-lasting

relationships with its customers. Through special offers,

like post-processing of CMOS ICs and sensors, X-FAB

accomplishes significant manufacturing steps, creating

valuable benefits for its customers.

Those long-standing customer relationships are crucial

because a large portion of the products manufactured

by X-FAB have long product lifecycles of ten or more

years. For example, X-FAB’s first medical MEMS

product, a sensor used to monitor blood pressure, has

been in production for more than 25 years.

Best-in-class support: X-FAB’s close

relationships with customers

X-FAB aims to differentiate its business through

unique technologies combined with excellent technical

support. A strong asset of X-FAB is its close

collaboration with customers in every phase of an IC

product lifetime. From a request for a quotation and

the selection of the best suited process technology to

the start of volume production, X-FAB has dedicated

teams to assist its customers with technical,

commercial, and logistical support and consultation.

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Fig. 4.6: Assignment of X-FAB teams to every phase of an IC product lifetime

X-FAB’s strategic markets

X-FAB serves the markets for automotive, industrial,

and medical (AIM) applications. The AIM market

segments all share the same requirements for quality

and reliability and feature similar long product lifetimes.

Consequently, X-FAB places strategic focus on AIM

while selling into the market for consumer,

communications, and computer (CCC) products

when product requirements demand technologies that

are within X-FAB’s portfolio. Despite this, and mainly

because of the high demand for chips for the

automotive industry, sales of CCC products declined in

2023. The freed-up capacities were converted for the

production of automotive products.

The strong growth in demand for chips for AIM

applications was caused by several factors from a rising

number of automotive ICs per new car, to increasing

sales of devices for the Internet of Things and a

broader proliferation of medical electronics. Given the

industry-wide trend, X-FAB’s automotive business

grew by 38%. While a similar surge was seen in the

industrial semiconductor market, X‑FAB’s industrial

business was fueled by high demand for SiC

applications, recording a revenue increase of 19%

compared to 2022. At the same time, revenues

achieved with medical semiconductors grew by 21%.

X-FAB enables innovative solutions to address global

challenges such as:

• global warming;

• the replacement of fossil energy by sustainable

energy; and

• the cost of healthcare and an aging population.

X-FAB is confident of success due to its:

• close collaboration with market leaders in various

segments;

• ongoing investment in new technologies;

• wide portfolio of technologies and capabilities; and

• strong pipeline of projects in prototyping stage.

Automotive electronics – We think

automotive

Product reliability and established trust in suppliers are

two key prerequisites for successfully serving the

automotive industry. Meeting these demands is part of

X-FAB’s DNA.

Furthermore, X-FAB actively supports its automotive

customers in driving innovation in electronics. In

addition to further developments in advanced vehicle

safety and comfort systems, the electrification of

vehicles might be the biggest technology shift the

automotive industry has ever seen. By 2040 electric

vehicles will represent about 70% of global light duty

vehicle sales, according to Bloomberg. As cars become

more and more sophisticated X-FAB will be right there

to develop the technologies to make it happen.

All these new technologies combined are leading to a

sharp increase in the number of semiconductor

devices in a car. The number of chips in a car is

expected to triple in the next few years, with demand

for analog chips growing much faster than demand for

microcontroller units (MCU).

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A breakdown of the different semiconductor

application areas in automotive is shown in Figure 4.7.

Fig. 4.7: Share of automotive semiconductor application areas

in 2022 and applications addressed by X-FAB (source: Yole)

Around two-thirds of these chips can be realized with

the processes offered by X-FAB. With CMOS, BCD-

on-SOI and SiC, X-FAB offers the right mix of

technologies, and with its optimization for processing

analog signals the right features for chips that interface

with the "real world."

ICs produced at X-FAB can be found everywhere in a

car: in the interior as well as under the hood. Functions

directly accessible to the driver, such as control of the

interior lighting, hands-free phone kits, and parking

assistance, as well as tire pressure monitoring and

anti‑lock braking systems, all make use of X-FAB

technologies.

The electrification of cars requires intelligent solutions

for battery management and charging. Batteries for

electric vehicles consist of several thousand individual

battery cells, each of which needs to be monitored by

the so-called battery management systems (BMS).

The temperature, the voltage, and the charge of each

cell must stay in an optimal range. The better this is

managed, the further the car can drive.

Typically, a BMS has up to 16 ICs to manage the

battery. X-FAB’s analog-mixed signal processes with

their high-voltage and high-temperature capabilities

and their rich portfolio of IP including embedded flash

memory are particularly well suited for this. Transistors

manufactured at X-FAB's SiC foundry enable inverters

with higher efficiency and contribute to increased

range on a single battery charge.

Safety in traffic will be improved by sophisticated

techniques of collision prevention, distance control,

lane change assistance, and blind spot detection,

ultimately paving the way for autonomous driving. The

increasing relevance of environmental protection is

leading to innovations to improve fuel efficiency and

reduce pollution of hybrid vehicles. Connected cars will

be enabled by the advent of 5G cellular mobile

networks.

Fig. 4.8: Share of automotive semiconductors by technology

node in 2022 and nodes covered by X-FAB (source: Yole)

This growing need for semiconductor products for cars

led to a highly visible shortage in analog chip supply,

which had a negative impact on light vehicle

production. Analyses consistently show that while the

bottleneck for leading-edge technologies for MCUs

seems to be overcome, the shortage of chips in

technologies with node sizes of 40nm and bigger will

persist in the coming years.

Figure 4.8 shows the breakdown of the chips in a car by

node size of the utilized semiconductor technology. It

shows that more than 75% of the chips are

manufactured in process nodes larger than 110nm and

therefore most likely in 8-inch production lines. As

there is low investment in equipment to produce

wafers with a diameter of 8 inches, the situation for the

automotive industry is unlikely to change. This is why

X‑FAB’s investments in capacity expansion will further

strengthen its position as the prime foundry for

automotive ICs.

Fig. 4.9: Main areas of automotive applications

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Industrial electronics – We empower

the future

The market for application-specific analog ICs for

industrial applications is a highly fragmented market

spanning applications from avionics to factory

automation. About 60% of X-FAB’s current customers

in production address the industrial market and rely on

X-FAB’s ability to provide volume production over a

10- to 15-year period. Four global megatrends are

driving the next industrial revolution and will change

our way of producing, consuming, and living: Industry

4.0 with an end-to-end connected value chain;

factory automation including industrial IoT, robots,

machine-to-machine communication; smart cities,

enabling central building management and improving

urban lives through interaction and management of

connected services; and, finally, sustainable energy

through exploiting renewable sources of energy and

improving power management.

X-FAB is positioned to play a major role in addressing

those megatrends based on its commitment to

industrial markets and customers. The Group’s

competitive advantages rely on four pillars:

• Easy to work with. Collaboration with X-FAB is made

easy for industrial customers as X-FAB can

efficiently handle small to medium volumes often

required for industrial applications.

• Design support. X-FAB provides comprehensive

design support and high-quality IP to achieve

first‑time-right design. For industrial customers that

want to outsource their IC design efforts, X-FAB

maintains a global partner network of service

providers for design, test, assembly, and supply

chain management.

• X-FAB’s quality systems. X-FAB’s automotive

technologies fit well with most industrial

applications, which often also operate in harsh

environments.

• X-FAB is a reliable foundry partner. X-FAB is a

trusted supplier and has built long relationships with

its industrial customers.

Fig. 4.10: Main areas of industrial applications

Medical electronics – We save lives

The chips X-FAB manufactures for medical

applications are used in equipment or devices where

people, doctors, and patients depend on reliable,

accurate, and error-free operation or data. X-FAB

delivers chips for personal medical devices from

cardiac pacemakers and spinal cord stimulators to

traditional and implanted hearing aids. X-FAB’s

specialized technologies can be found in equipment

for medical imaging technologies such as ultrasound

and X-ray sensors.

A trend for the next few years is the evolution of

consumer wearables with the aim of medical

precision, offering the user actionable insights into her

or his physical conditions.

Fig. 4.11: Main areas of medical applications

Implantable devices are very important for patients

with chronic diseases, and research in this area will

continue to provide new therapies, for example for

rheumatism, strokes, or obesity. Portable devices will

move medical imaging from hospitals and medical

practices to patients’ homes for point-of-care testing.

Further trends in ultrasonic imaging are wireless probe

heads and 3D imaging.

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With the rapid decline in the costs of DNA sequencing

since the availability of next-generation sequencing

technology in 2007, new uses have been introduced

for health care, industry, and research. There are not

only companies that offer genetic testing as a service,

DNA sequencing is also being used for the analysis of

pathogens helping to contain epidemics as well as the

examination of food to identify contamination or

allergens. The availability of affordable genetic

information is pushing the development of

personalized medicine, with great benefits for patients

and huge potential for cost-saving in the health care

sector as a result of more effective therapies. Lab-on-

a-chip or microfluidics are devices to handle minute

quantities of liquids or biomaterial, usually on a chip or

in a small cavity. That is where X-FAB’s capability to

combine CMOS and MEMS is a key benefit.

Manufacturing steps, for which customers initially had

to engage with several suppliers, are now provided by

X-FAB exclusively.

According to market research, the lab-on-a-chip

market is expected to grow at a CAGR of up to 14%

over the next five years.

Connecting the two worlds of

microelectronics and microfluidics

Biological and pharmaceutical research is making

significant progress by leveraging from advances in

silicon technology. Lab-on-a-chip devices created by

integrating microfluidic structures onto silicon chips are

essential parts of many cartridges in today’s lab

equipment. CMOS chips that are capped with glass or

have antibodies applied to their surface are used to

directly analyze biological samples. The miniaturization

significantly reduces the size of the probe to just a few

microliters while at the same time shortening the

duration of the test. As a result, smaller and lighter

devices can be developed to analyze samples on site,

for example at the patient’s home. The Covid-19

pandemic drastically showed the need for fast and

cost-effective testing. DNA sequencing is required to

investigate viruses and identify mutations. The

detection of pathogens in a blood sample or the

investigation of individual cells to monitor their reaction

to pharmaceuticals are other uses of this technology.

Consumer, communications, and computer –

We connect people

X-FAB entered the mobile communications market

with a clear vision: connecting mobile devices with the

real world. With this vision in mind, X-FAB became a

leading foundry provider for discrete and integrated

mobile sensor solutions. X-FAB’s processes enable

communication and consumer applications that make

our lives smarter, greener, and safer.

Specialized technologies enable optical sensors,

camera autofocus, haptic drivers, touchscreen

controllers, and gesture recognition solutions to create

intuitive user interfaces that guarantee a great mobile

experience. X-FAB’s RF SOI technology enables high-

performance 5G and WLAN RF front-end modules by

meeting stringent requirements for both mobile

phones and infrastructures. Smart home use

applications such as lighting or air climate control and

home automation for the elderly and disabled are

made possible thanks to X-FAB’s RF technologies.

Devices for augmented reality (AR) and virtual reality

(VR) require a multitude of sensors, analog/mixed-

signal chips, and wireless connectivity. X-FAB’s high-

voltage CMOS and SOI technologies enable enhanced

power management solutions to improve the energy

efficiency of consumer devices, communication

infrastructure, and computers. Examples where chips

manufactured by X-FAB help to reduce power

consumption, optimize battery lifetime, and prolong

device usage are AC/DC chargers, 5G base station

switches, or battery management ICs for power tools

applications.

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5. X-FAB CONSOLIDATED

FINANCIAL STATEMENTS

5.1 Summary of important developments

Revenue and results

The Group’s total sales revenue in 2023 amounted to

USD 906,786 thousand (2022: USD 739,469

thousand), an increase of 23% compared to the

previous year. The Group recorded a net profit in 2023

of USD 161,895 thousand compared to a net profit of

USD 52,491 thousand in the previous year.

Revenues include USD 16,605 thousand recognized for

the sale of wafers over time under long-term contracts

with customers which meet the criteria for over time

recognition in accordance with IFRS 15. The volume of

business arising on long-term contracts meeting the

criteria for over time recognition has become material

under IFRS 15 for the first time in the current financial

year. From now on X-FAB will consistently report

revenues over time in line with the terms and the long-

term nature of these contracts.

Gross profit increased from USD 175,954 thousand in

2022 to USD 258,052 thousand in 2023 as a result of

the Group’s increased sales revenues and improved

profit margin.

Operating profits and profit before tax in the previous

year were offset by the non-recurring effects of the

settlement of an arbitration agreement in 2022 of

USD 36,811 thousand, associated interest penalties of

USD 12,624 thousand, and legal costs of USD 1,271

thousand (note 6.10).

There have been no significant effects on the Group’s

balance sheet or any significant effects on the carrying

value or fair values of financial instruments arising from

the war in Ukraine.

Cost of sales

Cost of sales includes material expenses such as raw

materials, the costs of maintaining fixed assets,

depreciation, staff costs, and costs for external

services. In 2023 cost of sales increased by USD 85,219

thousand or 15% compared to the financial year 2022,

partially related to the inclusion of manufacturing costs

totaling USD 8,752 thousand representing the cost of

sales associated with the cost of products for which

revenues have been recognized over time.

Research and development expenses

Research and development expenses amounted to

USD 47,191 thousand in 2023, representing 5% of

revenue (2022: 6%). Compared to the previous year

the research and development expenses increased by

16%. The Group’s research and development activities

focus on development of new fabrication processes,

optimization of existing processes using the Group’s

key process technologies, and development of new

integrated circuit features in order to meet customers’

analog/mixed-signal needs.

General, administrative, and selling expenses

General, administrative, and selling expenses increased

by 26% in 2023.

Financial result

The Group’s net financial expense (finance costs less

finance income) decreased by USD 17,782 thousand

from a net expense of USD 20,273 thousand in 2022

to a net expense of USD 2,491 thousand in 2023. This

decrease was primarily attributable to the settlement

of the arbitration award in the previous year described

above and discussed in more detail in note 6.10.

5.2 Statement of the Board of Directors

The Board of Directors certifies, on behalf and for the

account of the Company, that, to their knowledge,

• the consolidated financial statements, which have

been prepared in accordance with IFRS as adopted

by the EU, give a true and fair view of the assets,

liabilities, financial position, and profit or loss of the

Company and the entities included in the

consolidation as a whole; and

• the annual report provides a fair view of the

development and results of the Company and the

companies included in the consolidation, as well as

a description of the main risks and uncertainties

that they are exposed to.

5.3 Statutory auditor’s report to the general

meeting of X-Fab Silicon Foundries SE on the

consolidated financial statements as of and

for the year ended December 31, 2023

In the context of the statutory audit of the

consolidated financial statements of X-Fab Silicon

Foundries SE (“the Company”) and its subsidiaries

(jointly “the Group”), we provide you with our statutory

auditor’s report. This includes our report on the

consolidated financial statements for the year ended

December 31, 2023, as well as other legal and

regulatory requirements. Our report is one and

indivisible.

	Annual Report 2023 | X-FAB consolidated financial statements

26

We were appointed as statutory auditor by the general

meeting of April 27, 2023, in accordance with the

proposal of the board of directors issued on the

recommendation of the audit committee. Our

mandate will expire on the date of the general meeting

deliberating on the annual accounts for the year ended

December 31, 2025. We have performed the statutory

audit of the consolidated financial statements of the

Group for 16 consecutive financial years.

Report on the consolidated financial

statements

Unqualified opinion

We have audited the consolidated financial statements

of the Group as of and for the year ended December

31, 2023, prepared in accordance with IFRS Accounting

Standards as issued by the International Accounting

Standards Board and as adopted by the European

Union, and with the legal and regulatory requirements

applicable in Belgium. These consolidated financial

statements comprise the consolidated statement of

financial position as at December 31, 2023, the

consolidated statements of profit or loss, profit or loss

and other comprehensive income, changes in equity

and cash flows for the year then ended and notes,

comprising material accounting policies and other

explanatory information. The total of the consolidated

statement of financial position amounts to USD

1.703.814 thousand and the consolidated statement of

profit or loss shows a profit for the year of USD 161.895

thousand.

In our opinion, the consolidated financial statements

give a true and fair view of the Group’s equity and

financial position as at December 31, 2023 and of its

consolidated financial performance and its

consolidated cash flows for the year then ended in

accordance with IFRS Accounting Standards as issued

by the International Accounting Standards Board and

as adopted by the European Union, and with the legal

and regulatory requirements applicable in Belgium.

Basis for our unqualified opinion

We conducted our audit in accordance with

International Standards on Auditing (“ISAs”) as

adopted in Belgium. In addition, we have applied the

ISAs as issued by the IAASB and applicable for the

current accounting year while these have not been

adopted in Belgium yet. Our responsibilities under

those standards are further described in the “Statutory

auditors’ responsibility for the audit of the consolidated

financial statements” section of our report. We have

complied with the ethical requirements that are

relevant to our audit of the consolidated financial

statements in Belgium, including the independence

requirements.

We have obtained from the board of directors and the

Company’s officials the explanations and information

necessary for performing our audit.

We believe that the audit evidence we have obtained is

sufficient and appropriate to provide a basis for our

opinion.

Key audit matter

Key audit matters are those matters that, in our

professional judgement, were of most significance in

our audit of the consolidated financial statements of

the current period. These matters were addressed in

the context of our audit of the consolidated financial

statements as a whole, and in forming our opinion

thereon, and we do not provide a separate opinion on

these matters.

Valuation of deferred tax assets

We refer to note 4.19 section of the consolidated

financial statements for the accounting policies

relating to deferred taxes and to note 6.13 for the

disclosures relating to deferred taxes as at December

31, 2023.

Description

The Group, which is subject to various tax jurisdictions

and resulting obligations, has a significant amount of

unused tax losses carried forward (USD 211,2 million)

and deductible temporary differences (USD 226,2

million) and has recognized deferred tax assets of USD

83,8 million as at December 31, 2023.

Deferred tax assets are recognized only to the extent

that it is probable that sufficient future taxable profits

will be generated, against which the unused tax losses

carried forward and deductible temporary differences

can be utilized. Significant judgement is required to

assess the amount of probable future taxable profits

that support the recognition of deferred tax assets.

Our audit procedures

In collaboration with our own tax specialists, we have

assessed the Group’s ability to utilize the deferred tax

assets. Our procedures included:

• Obtaining the forecasted taxable income in the

various tax jurisdictions and reconciling these to the

latest budget and forecasts approved by the board

of directors;

• Assessing the consistency and reliability of the

Group’s approach to budgeting by comparing

historical budgets to actual results;

• Challenging management’s key assumptions used

in its budget and forecasts, such as projected

growth rates, by comparing them with our own

expectations derived from our knowledge of the

industry and our knowledge gained during our

audit;

• Recalculating independently the deferred tax

assets which comprise a combination of temporary

differences between tax and accounting values as

well as available tax losses;

	Annual Report 2023 | X-FAB consolidated financial statements

27

• Assessing whether deferred tax assets had been

appropriately recognized in the consolidated

financial statements as at December 31, 2023

based on the extent to which they can be

recovered by future taxable profits; and

• Assessing the adequacy of the relevant disclosures.

Board of directors’ responsibilities for the

preparation of the consolidated financial

statements

The board of directors is responsible for the

preparation of these consolidated financial statements

that give a true and fair view in accordance with IFRS

Accounting Standards as issued by the International

Accounting Standards Board and as adopted by the

European Union, and with the legal and regulatory

requirements applicable in Belgium, and for such

internal control as board of directors determines, is

necessary to enable the preparation of consolidated

financial statements that are free from material

misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, the

board of directors is responsible for assessing the

Group’s ability to continue as a going concern,

disclosing, as applicable, matters related to going

concern and using the going concern basis of

accounting unless the board of directors either intends

to liquidate the Group or to cease operations, or has no

realistic alternative but to do so.

Statutory auditor’s responsibilities for the audit of

the consolidated financial statements

Our objectives are to obtain reasonable assurance as

to whether the consolidated financial statements as a

whole are free from material misstatement, whether

due to fraud or error, and to issue an auditor’s report

that includes our opinion. Reasonable assurance is a

high level of assurance, but is not a guarantee that an

audit conducted in accordance with ISAs will always

detect a material misstatement when it exists.

Misstatements can arise from fraud or error and are

considered material if, individually or in the aggregate,

they could reasonably be expected to influence the

economic decisions of the users taken on the basis of

these consolidated financial statements.

When performing our audit we comply with the legal,

regulatory and professional requirements applicable to

audits of the consolidated financial statements in

Belgium. The scope of the statutory audit of the

consolidated financial statements does not extend to

providing assurance on the future viability of the

Group nor on the efficiency or effectivity of how the

board of directors has conducted or will conduct the

business of the Group. Our responsibilities regarding

the going concern basis of accounting applied by the

board of directors are described below.

As part of an audit in accordance with ISAs, we exercise

professional judgement and maintain professional

skepticism throughout the audit. We also perform the

following procedures:

• Identify and assess the risks of material

misstatement of the consolidated financial

statements, whether due to fraud or error, design

and perform audit procedures responsive to those

risks, and obtain audit evidence that is sufficient

and appropriate to provide a basis for our opinion.

The risk of not detecting a material misstatement

resulting from fraud is higher than for one resulting

from error, as fraud may involve collusion, forgery,

intentional omissions, misrepresentations, or the

override of internal control;

• Obtain an understanding of internal controls

relevant to the audit in order to design audit

procedures that are appropriate in the

circumstances, but not for the purpose of

expressing an opinion on the effectiveness of the

Group’s internal control;

• Evaluate the appropriateness of accounting

policies used and the reasonableness of accounting

estimates and related disclosures made by board

of directors;

• Conclude on the appropriateness of board of

directors’ use of the going concern basis of

accounting and, based on the audit evidence

obtained, whether a material uncertainty exists

related to events or conditions that may cast

significant doubt on the Group’s ability to continue

as a going concern. If we conclude that a material

uncertainty exists, we are required to draw

attention in our auditors’ report to the related

disclosures in the consolidated financial statements

or, if such disclosures are inadequate, to modify our

opinion. Our conclusions are based on the audit

evidence obtained up to the date of our auditors’

report. However, future events or conditions may

cause the Group to cease to continue as a going

concern;

• Evaluate the overall presentation, structure and

content of the consolidated financial statements,

including the disclosures, and whether the

consolidated financial statements represent the

underlying transactions and events in a manner that

achieves fair presentation;

• Obtain sufficient appropriate audit evidence

regarding the financial information of the entities or

business activities within the Group to express an

opinion on the consolidated financial statements.

We are responsible for the direction, supervision

and performance of the group audit. We remain

solely responsible for our audit opinion.

We communicate with the audit committee regarding,

among other matters, the planned scope and timing of

the audit and significant audit findings, including any

significant deficiencies in internal control that we

identify during our audit.

	Annual Report 2023 | X-FAB consolidated financial statements

28

We also provide the audit committee with a statement

that we have complied with relevant ethical

requirements regarding independence, and to

communicate with them all relationships and other

matters that may reasonably be thought to bear on our

independence, and where applicable, related

safeguards.

For the matters communicated with the audit

committee, we determine those matters that were of

most significance in the audit of the consolidated

financial statements of the current period and are

therefore the key audit matters. We describe these

matters in our auditor’s report unless law or regulation

precludes public disclosure about the matter.

Other legal and regulatory requirements

Responsibilities of the Board of Directors

The board of directors is responsible for the

preparation and the content of the board of directors’

annual report on the consolidated financial statements.

Statutory auditor’s responsibilities

In the context of our engagement and in accordance

with the Belgian standard which is complementary to

the International Standards on Auditing as applicable in

Belgium, our responsibility is to verify, in all material

respects, the board of directors’ annual report on the

consolidated financial statements, and to report on

these matters.

Aspects concerning the board of directors’ annual

report on the consolidated financial statements

Based on specific work performed on the board of

directors’ annual report on the consolidated financial

statements, we are of the opinion that this report is

consistent with the consolidated financial statements

for the same period and has been prepared in

accordance with article 3:32 of the Companies’ and

Associations’ Code.

In the context of our audit of the consolidated financial

statements, we are also responsible for considering, in

particular based on the knowledge gained throughout

the audit, whether the board of directors’ annual report

on the consolidated financial statements contains

material misstatements, that is information incorrectly

stated or misleading. In the context of the procedures

carried out, we did not identify any material

misstatements that we have to report to you.

The non-financial information required by article 3:32

§2 of the Companies’ and Associations’ Code has been

included in the board of directors’ annual report on the

consolidated financial statements. The Company has

prepared this non-financial information based on the

Global Reporting Initiative (“GRI”) Standards. In

accordance with art 3:80 §1, 1st paragraph, 5° of the

Companies’ and Associations’ Code, we do not

comment on whether this non-financial information

has been prepared in accordance with the mentioned

GRI Standards.

Information about the independence

• Our audit firm and our network have not performed

any engagement which is incompatible with the

statutory audit of the consolidated accounts and

our audit firm remained independent of the Group

during the term of our mandate.

• The fees for the additional engagements which are

compatible with the statutory audit referred to in

article 3:65 of the Companies’ and Associations’

Code were correctly stated and disclosed in the

notes to the consolidated financial statements.

European Single Electronic Format (ESEF)

In accordance with the draft standard on the audit of

compliance of the Financial Statements with the

European Single Electronic Format (hereafter “ESEF”),

we have audited as well whether the ESEF-format is in

accordance with the regulatory technical standards as

laid down in the EU Delegated Regulation nr. 2019/815

of 17 December 2018 (hereafter “Delegated

Regulation”).

The Board of Directors is responsible for the

preparation, in accordance with the ESEF

requirements, of the consolidated financial statements

in the form of an electronic file in ESEF format

(hereafter “digital consolidated financial statements”)

included in the annual financial report.

It is our responsibility to obtain sufficient and

appropriate information to conclude whether the

format and the tagging of the digital consolidated

financial statements comply, in all material respects,

with the ESEF requirements under the Delegated

Regulation.

In our opinion, based on our work performed, the

format of and the tagging of information in the English

version of the digital consolidated financial statements

as per December 31, 2023, included in the annual

financial report of X-Fab Silicon Foundries SE, are, in all

material respects, prepared in compliance with the

ESEF requirements under the Delegated Regulation.

Other aspect

• This report is consistent with our additional report

to the audit committee on the basis of Article 11 of

Regulation (EU) No 537/2014.

Hasselt, March 25, 2024

KPMG Bedrijfsrevisoren - Réviseurs d’Entreprises

Statutory Auditor represented by

Herwig Carmans

Bedrijfsrevisor / Réviseur d’Entreprises

	Annual Report 2023 | X-FAB consolidated financial statements

29

5.4 Consolidated financial statements

Consolidated statement of profit or loss and other comprehensive income

For the year ended December 31

in thousands of U.S. dollars	Note	2023	2022
Revenue	6.1/12	906,786	739,469
Cost of sales	6.2/6.6/12	(648,734)	(563,515)
Gross profit		258,052	175,954
Research and development expenses	6.3/6.6/12	(47,191)	(40,803)
Selling expenses	6.4/6.6/12	(8,463)	(8,179)
General and administrative expenses	6.5/6.6	(47,157)	(37,487)
Rental income and expenses from investment properties	6.7/6.8/12	2,906	(298)
Impairment loss on trade receivables	7.4	(297)	(104)
Other income and other expenses	6.9/6.10/12	(175)	(31,748)
Operating profit		157,675	57,335
Finance income	6.11/12	34,658	36,531
Finance costs	6.12/12	(37,149)	(56,804)
Net finance income/(costs)		(2,491)	(20,273)
Profit before tax		155,184	37,062
Income tax	6.13	6,711	15,429
Profit for the period		161,895	52,491

	Annual Report 2023 | X-FAB consolidated financial statements

30

Consolidated statement of profit and loss and other comprehensive income (continued)

For the year ended December 31

in thousands of U.S. dollars	Note	2023	2022
Profit for the period		161,895	52,491
Other comprehensive income
Items that will not be reclassified to profit or loss
Remeasurement of defined benefit obligation (asset)	7.11	(532)	184
Items that are or may be transferred to profit or loss as follows:
Foreign currency translation differences for foreign operations		(75)	333
Other	7.8	2,287	—
Other comprehensive income/(loss) for the period, net of income tax		1,680	517
Total comprehensive income for the period		163,575	53,008
Weighted average number of shares outstanding, basic and diluted	6.14	130,631,921	130,631,921
Earnings per share
Basic and diluted (in U.S. dollars)	6.14	1.25	0.40

The accompanying notes are an integral part of these consolidated financial statements.

	Annual Report 2023 | X-FAB consolidated financial statements

31

Consolidated statement of financial position

in thousands of U.S. dollars	Note	December 31, 2023	December 31, 2022
ASSETS
Non-current assets
Property, plant, and equipment	7.1	734,488	460,126
Investment properties	7.1	7,171	7,675
Intangible assets	7.2	5,627	6,199
Other assets	7.6	58	79
Deferred tax assets	6.13	83,772	67,977
Total non-current assets		831,116	542,056
Current assets
Inventories	7.3	269,227	214,435
Contract assets	7.4	24,010	—
Trade and other receivables	7.5/12	123,101	73,116
Income tax receivables	6.13	594	257
Other assets	7.6	50,065	55,768
Cash and cash equivalents	7.7	405,701	369,425
Total current assets		872,698	713,001
Total assets		1,703,814	1,255,057
EQUITY AND LIABILITIES
Equity
Share capital	7.8	432,745	432,745
Share premium	7.8	348,709	348,709
Retained earnings	7.8	180,159	16,509
Cumulative translation adjustment	7.8	(301)	(226)
Treasury shares	7.8	(770)	(770)
Total equity		960,542	796,967
Non-current liabilities
Loans and borrowings	7.11	42,661	63,432
Other liabilities and provisions	7.12	4,024	4,024
Total non-current liabilities		46,685	67,456
Current liabilities
Trade payables	7.13/12	90,681	53,654
Loans and borrowings	7.11	218,316	233,513
Income tax payable	6.13	10,233	8,210
Provisions	7.14	9,775	7,413
Other liabilities	7.13	367,582	87,844
Total current liabilities		696,587	390,634
Total equity and liabilities		1,703,814	1,255,057

The accompanying notes are an integral part of these consolidated financial statements.

	Annual Report 2023 | X-FAB consolidated financial statements

32

Consolidated statement of changes in Group equity

in thousands of U.S. dollars	Note	Shares issued and fully paid	Share capital	Share premium	Retained earnings	Cumulative translation adjustment	Treasury shares	Total attributable to owners of the Company	Non-controlling interests	Total equity
At December 31, 2021		130,781,669	432,745	348,709	(36,154)	(559)	(770)	743,971	365	744,336
Profit for the period		—	—	—	52,491	—	—	52,491	—	52,491
Remeasurement of defined benefit plans		—	—	—	184	—	—	184	—	184
Currency translation effect, net of tax		—	—	—	—	333	—	333	—	333
Total comprehensive income		—	—	—	52,675	333	—	53,008	—	53,008
Transactions with owners of the Company
Distribution to non- controlling interests (GVG)	7.9	—	—	—	—	—	—	—	(11)	(11)
Acquisition of non- controlling interests (GVG)	7.9	—	—	—	(12)	—	—	(12)	(354)	(366)
Total transactions with owners of the Company		—	—	—	(12)		—	(12)	(365)	(377)
At December 31, 2022		130,781,669	432,745	348,709	16,509	(226)	(770)	796,967	—	796,967
Profit for the period		—	—	—	161,895	—	—	161,895	—	161,895
Remeasurement of defined benefit plans		—	—	—	(532)	—	—	(532)	—	(532)
Currency translation effect		—	—	—	—	(75)	—	(75)	—	(75)
Other	7.8	—	—	—	2,287	—	—	2,287	—	2,287
Total comprehensive income		—	—	—	163,650	(75)	—	163,575	—	163,575
At December 31, 2023		130,781,669	432,745	348,709	180,159	(301)	(770)	960,542	—	960,542

The accompanying notes are an integral part of these consolidated financial statements.

	Annual Report 2023 | X-FAB consolidated financial statements

33

Consolidated statement of cash flows

For the year ended December 31

in thousands of U.S. dollars	Note	2023	2022
Cash flow from operating activities:
Profit for the period		161,895	52,491
Income tax	6.13	(6,711)	(15,429)
Income before taxes		155,184	37,062
Reconciliation of net income to cash flow arising from operating activities:		88,948	96,296
Depreciation and amortization, before effect of grants and subsidies	6.6/7.1/7.2	87,939	77,534
Amortization of investment grants and subsidies	6.6	(2,972)	(3,346)
Interest income and expenses (net)	6.11/6.12	2,600	17,407
Loss/(gain) on the sale of plant, property and equipment (net)	6.9/6.10/ 7.1/7.2	(3,373)	(3,889)
Loss/(gain) on the change in fair value of financial assets	6.11/10	—	500
Other non-cash transactions (net)	8	4,754	8,090
Changes in working capital		172,490	(32,887)
Decrease/(increase) of trade and other receivables	7.4	(39,774)	(6,661)
Decrease/(increase) of other assets	7.5	4,855	(12,759)
Decrease/(increase) of inventories	7.3	(52,504)	(33,422)
Decrease/(increase) of contract assets		(24,010)	—
(Decrease)/increase of trade payables	7.12/8	16,634	(1,873)
(Decrease)/increase of other liabilities and provisions	7.11/7.12/7.13	267,289	21,828
Income taxes (paid)/received		(6,658)	(480)
Net cash from operating activities		409,964	99,991
Cash flow from investing activities:
Payments for property, plant, equipment, and intangible assets	7.1/7.2	(337,789)	(180,580)
Payments for investments in investment properties	7.1	—	—
Payments for acquisition of non-controlling interest	7.9	—	(204)
Payments for loan investments to related parties	12	(276)	(299)
Proceeds from loan investments related parties	12	252	284
Proceeds from the sale of property, plant, and equipment	7.1	3,733	4,017
Interest received	6.11/6.12	10,457	1,801
Net cash used in investing activities		(323,623)	(174,981)
Proceeds from loans and borrowings	7.10	205,784	184,272
Repayment of loans and borrowings	7.10	(241,806)	(11,420)
Receipts from sale and leaseback arrangements	7.10/8	—	7,723
Payment of lease liabilities	7.10	(5,512)	(5,662)
Receipt of government grants and subsidies		—	945
Interest paid	6.10/6.11	(11,630)	(17,812)
Dividends to non-controlling interests	7.9	—	(11)
Net cash from/(used in) financing activities		(53,164)	158,035
Effects of changes in foreign currency exchange rates on cash balances		3,099	(3,807)
Net increase/(decrease) of cash and cash equivalents		33,177	83,045
Cash and cash equivalents at the beginning of the period		369,425	290,187
Cash and cash equivalents at the end of the period		405,701	369,425

The accompanying notes are an integral part of these consolidated financial statements.

	Annual Report 2023 | X-FAB consolidated financial statements

34

Notes to the consolidated financial

statements

1 Basic information and description of the X-FAB

Silicon Foundries SE Group’s business

X-FAB Silicon Foundries SE (hereafter referred to as

“X-FAB SE,” “the Company,” or “the parent company”

and, together with its subsidiaries, as “X-FAB SE

Group” or “the Group”) is a European limited company

(Societas Europaea/SE) registered under the number

BE0882.390.885 in Hasselt, Belgium. The parent

company’s registered address is Transportstraat 1,

3980 Tessenderlo, Belgium.

The Group has no associates, joint ventures, joint

operations, or investments in unconsolidated

structured entities (entities designed so that voting or

similar rights are not the dominant factor in deciding

which party controls the entity).

The X-FAB SE Group is one of the world’s leading

pure-play foundry providers specializing in analog/

mixed-signal technologies.

Analog/mixed-signal products are circuits capable of

processing digital as well as analog signals. As a pure-

play foundry, the Group develops its own technologies,

offering its customers a comprehensive range of

product development (design support) and

production services. The X-FAB SE Group

manufactures integrated circuits to customers’

designs, supplying these in the form of silicon wafers.

For this purpose, X-FAB SE offers special technology

modules, cell libraries, and design kits, which allow the

Group’s customers to develop specific circuits with

broad function spectrum and to accelerate their

development processes.

X-FAB SE Group’s customers include companies that

concentrate on the development of integrated circuits

(ICs) and leave their manufacture to others (fabless

companies). The Group’s customers are primarily in the

communication, automotive, consumer, and industrial

product sectors, and are located in Europe, the United

States, and Asia.

2 Group structure

The X-FAB SE Group structure as of December 31, 2023, is illustrated below.

X-FAB Dresden GmbH & Co. KG refers to X-FAB Dresden GmbH & Co. KG and X-FAB Dresden Verwaltungs-GmbH

	Annual Report 2023 | X-FAB consolidated financial statements

35

The Group’s primary operations are held by X-FAB

Semiconductor Foundries GmbH (X-FAB GmbH),

X-FAB Dresden GmbH & Co. KG (X-FAB Dresden),

X-FAB Texas Inc., Lubbock, Texas (X-FAB Texas),

X-FAB Sarawak Sdn. Bhd. (X-FAB Sarawak), and

X-FAB France SAS (X-FAB France), each of which

operate wafer factories at their respective locations.

X-FAB MEMS Foundry Itzehoe GmbH (MFI) and

X-FAB MEMS Foundry GmbH (XMF) offer process

technologies for the fabrication of micro mechanical

sensors for the detection of pressure, acceleration,

rotation, and IR-radiation including integrated solutions

that combine MEMS and CMOS. The remaining entities

provide research and development, marketing and

sales, and administration services to other Group

entities or serve administrative purposes.

Business activities at MikroDesign OOO ceased in the

financial year 2023 and the company is currently in the

process of being liquidated.

3 Basis of preparation

3.1 Statement of compliance

The consolidated financial statements have been

prepared in accordance with International Financial

Reporting Standards (IFRS) as endorsed by the

European Union. All IFRS and IAS standards and

associated interpretations were adopted to the extent

that they had been endorsed by the European Union

by the date of issue of these financial statements.

The consolidated financial statements of X-FAB SE

Group for the year ended December 31, 2023, were

authorized for issue in accordance with a resolution of

the directors on March 21, 2024.

3.2 Basis of measurement

The consolidated financial statements have been

prepared on a historical cost basis, except for

derivative financial assets and liabilities and the net

defined benefit liability for post-retirement obligations,

which is measured at the present value of the defined

obligation less the fair value of plan assets.

3.3 Functional and presentation currency

The consolidated financial statements are presented in

U.S. dollars (USD), which is the functional and

presentation currency of the parent company and the

Group’s primary operating companies. Amounts are

rounded to the nearest thousand except when

otherwise indicated. Rounding differences may occur.

3.4 Use of judgments, assumptions, and estimation

uncertainties

In preparing these consolidated financial statements

management has made judgments, assumptions, and

estimates that affect the application of the Group’s

accounting policies and the reported amounts of

assets, liabilities, income, and expenses. Actual

amounts may differ from these estimates.

Estimates and underlying assumptions are reviewed on

an ongoing basis. Revisions to accounting estimates

are recognized in the period in which the estimates are

revised and in any future periods affected.

Judgments

Determination of functional currency

The functional currency of the holding company and

most of its subsidiaries has been assessed as the U.S.

dollar (USD) due to the fact that the currency that

mainly influences sales prices for goods and services is

the USD. Only two subsidiaries have different

functional currencies (the euro and the Russian ruble).

These subsidiaries are not significant to the Group’s

consolidated financial statements.

With respect to the holding company the assessment is

based on the fact that the holding acts as an

investment holding entity (in operational subsidiaries

with USD as their functional currency) and its sole

activity consists of the re-allocation of Group costs

which are incurred and subsequently recharged in USD.

Hence the USD is deemed the most appropriate

functional currency of the holding for the preparation

of the consolidated financial statements.

Revenue recognition (note 4.3)

There has been a change applied in the recognition of

revenues for the sale of process control wafers (PCM

wafers). PCM wafers manufactured and sold by the

Group are generally customer-specific, i.e., when

manufacturing goods for a customer X-FAB is creating

an asset for the customer that has no alternative use

for X-FAB. In previous reporting periods, for the

majority of contracts with its most important

customers X-FAB had determined that it does not

have an enforceable right to obtain payment for work

completed should a customer cancel an incomplete

contract for reasons other than any failure by X-FAB to

perform as promised. Based on this assessment,

revenue from the sale of PCM wafers was recognized

when shipment had been made. In the current financial

year X-FAB has determined that the volume of

contracts for which it supplies customer-specific

goods and for which it has an enforceable right to

obtain payment for work completed should a customer

cancel an incomplete contract for reasons other than

any failure by X-FAB to perform as promised is

significant. For such contracts, as from the

consolidated financial statements for the year ended

December 31, 2023 and for subsequent periods

thereafter revenue is recognized over time, i.e., over

the period in which the Group meets its performance

obligations under those contracts proportionate to the

fulfillment of its performance obligations under the

contracts.

There has been no change in the accounting policy for

the recognition of revenues for which the Group does

not have an enforceable right to obtain payment for

work completed.

	Annual Report 2023 | X-FAB consolidated financial statements

36

Invoices are usually payable within 30 days. No

discounts of the invoiced amounts are offered to

customers in exchange for prompt payment of

invoices. Sales prices with customers do not include a

significant financing component.

The effect of the above change is described in

notes 4.3 and 6.1.

Recognition of right-of-use assets and lease

liabilities (notes 4.17 and 11)

The Group recognizes right-of-use assets and lease

liabilities for certain assets held under leasing

arrangements. Some of the Group’s lease contracts

include renewal or termination options. In order to

determine the lease term for these contracts the

Group took into account all relevant facts and

circumstances in order to assess whether it is

reasonably certain that these options will be exercised.

This assessment has an impact on the term of the

lease, which has a significant effect on the amount of

the lease liabilities and the measurement of the right-

of-use asset recognized. Should the Group make

changes to its assessment of whether the renewal or

termination options will be exercised, it may be

necessary to increase or decrease the right-of-use

assets and lease liabilities recognized.

Assumptions and estimation uncertainties

Information about assumptions and estimation

uncertainties that have a significant risk of resulting in a

material adjustment in the next financial year is

included in the following notes:

Recognition of deferred tax assets (note 6.13)

Deferred tax assets are recorded where it is

considered probable that tax savings will be made in

future periods from the use of losses carried forward

and from the reversal of taxable timing differences

arising on the difference between the accounting and

tax values of the Group’s assets. Taxable profits and

the reversal of timing differences in the next financial

year may differ from the amounts assumed, and

assumptions made in the next financial year about

future taxable profits and reversals of subsequent

years may change. Such changes could result in a

material adjustment.

Measurement of expected credit losses (ECLs) on

trade receivables (note 7.4)

Allowances are made to reflect estimates of the

amount of ECLs on any receivables. The actual amount

of credit losses for receivables in the year ending

December 31, 2024, may differ from the amounts

recorded as impairments in the year ended

December 31, 2023, which may result in a material

adjustment.

With the exception of the assessment of the

significance of customer contracts requiring

recognition over time, the significant judgments made

by management in applying the Group’s accounting

policies and the key sources of estimation uncertainty

were the same as those that applied to the

consolidated financial statements as at and for the

year ended December 31, 2022.

Measurement of fair values

A number of the Group’s accounting policies and

disclosures require the measurement of fair values,

both for financial and non-financial assets and liabilities.

If third-party information is used to measure fair

values, the evidence obtained from third parties is

assessed to support the conclusion that such

valuations meet the requirements of IFRS 13, including

the level in the fair value hierarchy in which such

valuations should be classified.

When measuring the fair value of an asset or a liability,

the Group uses market observable data as far as

possible.

Fair values are classified into different levels in a fair

value hierarchy based on the inputs used in the

valuation techniques as follows:

Level 1:quoted (unadjusted) prices in active markets

for identical assets or liabilities.

Level 2:other techniques for which all inputs that have

a significant effect on the recorded fair value

are observable, either directly or indirectly.

Level 3:techniques that use inputs which have a

significant effect on the recorded fair value

that are not based on observable market data.

If the inputs used to measure the fair value of an asset

or a liability might be categorized in different levels of

the fair value hierarchy, then the fair value

measurement is categorized in its entirety in the same

level of the fair value hierarchy as the lowest level input

that is significant to the entire measurement.

The Group measures transfers between levels of the

fair value hierarchy at the end of the reporting period

during which the change has occurred.

Further information about the assumptions made in

measuring fair values is included in the following notes:

• 7.1 Property, plant, equipment, and investment

properties

• 7.4 Trade and other receivables

• 7.10 Loans and borrowings

• 10 Financial instruments – fair values and risk

management

	Annual Report 2023 | X-FAB consolidated financial statements

37

4 Summary of accounting policies

With the exception of the accounting policy applied to

contracts with customers for the sale of wafers which

meet the criteria for revenue recognition over time

(refer to 4.3 below), the accounting policies applied are

consistent with those applied in the annual

consolidated financial statements for the year ended

December 31, 2022.

4.1 Basis of consolidation  

Entities included in the Consolidation

The consolidated financial statements include the

financial statements of the parent company and its

subsidiaries, which are entities directly or indirectly

controlled by the parent company. The Group controls

an entity when it is exposed to, or has rights to, variable

returns from its involvement with the entity and has the

ability to affect those returns through its power over

the entity. Control is generally obtained by ownership

of a majority of shares.

The financial statements of subsidiaries are included in

the consolidated financial statements from the date on

which control commences until the date on which

control ceases.

The financial statements of the subsidiaries are

prepared for the same reporting year as the parent

company, using consistent accounting policies.

All intra-group balances, transactions, income, and

expenses, as well as profits and losses resulting from

intra-group transactions, are fully eliminated in these

consolidated financial statements.

Non-controlling interests

Non-controlling interests represent the portion of

profit or loss, component of other comprehensive

income and net assets of a subsidiary attributable to

equity interests that are not owned, directly or

indirectly, by the parent company. Non-controlling

interests’ share of income and share of equity are

presented separately in the income statement and

within equity in the consolidated statement of financial

position respectively, separately from parent

shareholder’s equity.

Non-controlling interests are measured at the date of

acquisition at their proportionate share of the acquired

company’s identifiable net assets.

4.2 Foreign currency translation

Transactions in foreign currencies are initially recorded

at the functional currency rate ruling at the date of the

transaction. Monetary assets and liabilities

denominated in foreign currencies are translated at the

functional currency rate of exchange ruling at the

statement of financial position date. All differences are

taken to profit or loss. Non-monetary items that are

measured in terms of historical cost in a foreign

currency are translated using the exchange rate as at

the dates of the initial transactions. If the functional

currency of a consolidated entity differs from the

Group’s presentation currency, assets and liabilities of

that entity are translated into the presentation

currency at the closing rate at the statement of

financial position date, whereas equity is translated

using the historic rates, and the income statement is

translated at the average rate of the reporting period.

All resulting differences are recognized in the

cumulative translation adjustment in equity.

4.3 Revenue from contracts with customers

Sales revenue is measured based on the consideration

specified in a contract with a customer. Sales revenues

are recognized net of discounts, customer bonuses,

and rebates granted.

There is no significant uncertainty concerning the

nature, amount, or timing of the revenue or the cash

flows of the revenues reported. The Group recognizes

revenue when it transfers control over a good or

service to a customer.

Sale of process control wafers (PCM wafers)

PCM wafers are goods that are generally customer

specific, i.e. when manufacturing goods for a customer,

X-FAB is creating an asset for the customer that has

no alternative use to X-FAB. In general, revenue from

the sale of wafers is recognized at a point in time. In the

financial year 2023, for the first time the Group also

reports revenues from wafer sales which are

recognized over time, i.e., on the basis of progress

made towards fulfilling the Group’s performance

obligation under the supply contract, and not, as is the

case with revenue recognized at a point in time, only

when the wafers are completed and delivered to the

customer. Revenue for wafer sales recognized over

time represents the Group’s rights to consideration for

work completed but not invoiced at the reporting date

for wafer sales under long-term contracts which meet

the criteria for revenue recognition over time.

Contracts with customers meet the criteria for

recognition over time when work performed under the

contract creates an asset which has no alternative use

to X-FAB (for example, due to the specific nature of

the product or to exclusivity agreements) and X-FAB

has an enforceable right to payment for the

performance of the work completed. Progress towards

fulfilling the Group’s performance obligations under

such contracts is determined based on the cost-to-

cost method as X-FAB is of the opinion that this

measure most faithfully depicts the transformation of

the work in progress. Revenues for the sale of wafers

which meet the criteria for revenue recognition over

time were not material in previous reporting periods.

In connection with long-term contracts with customers,

and as described in note 7.13 below, in the financial year

2023 the Group has received prepayments from

customers for future wafer sales and capacity

reservation deposits. These amounts, which are initially

recognized as other liabilities, include variable

consideration for the goods transferred to the

customer within the contract. When recognizing

	Annual Report 2023 | X-FAB consolidated financial statements

38

revenue for the contract, the Group is required to

estimate the amount of variable consideration to which

it will be entitled in exchange for transferring the

promised goods to the customer. To the extent that

part of the prepayment will be retained by X-FAB

without X-FAB being required to offset amounts

against valid purchase orders (for example, when there

is a shortfall in customer orders compared to the

amounts agreed under the sales contract when X-FAB

is entitled to retain the revenue prepaid), the revenue

recognized as revenue for the goods that have been

delivered includes amounts attributable to the

expected shortfall. However, variable consideration is

included in the transaction price only to the extent that

it is highly probable that a significant reversal in the

amount of cumulative revenue recognized will not

occur when the uncertainty associated with the

variable consideration is resolved.

Invoices are usually payable within 30 days. No

discounts of the invoiced amounts are offered to

customers in exchange for prompt payment of

invoices. Sales prices with customers do not include a

significant financing component.

Sales of non-recurring engineering (NRE) services

and technology services

When providing non-recurring engineering (NRE)

services and technology services X-FAB creates an

asset for a customer that has no alternative use to X-

FAB as the prototype wafers created are generally

customer specific. Invoices are issued according to

contractual terms – based on milestones – and are

usually payable within 30 days. X-FAB has an

enforceable right to payment for the performance of

work completed up to the agreed milestones. Revenue

is therefore recognized over time, and X-FAB applies a

practical expedient for the measurement of progress.

Invoicing based on milestones is a reasonable

approximation of the progress made to completing the

performance obligation. No discounts of the invoiced

amounts are offered to customers in exchange for

prompt payment of invoices. Sales prices with

customers do not include a significant financing

component.

Rental and other income

Revenue in respect of rental and other income is

recognized over time when the relevant service is

provided (see 4.6 below).

Warranty obligations

The Group typically provides warranties for defects

that existed at the time of sale, as required by the

terms and conditions of sale. These are assurance-

type warranties which are accounted for as warranty

provisions based on past experience. No service-type

warranties are sold either separately or bundled

together with the sale of the Group’s products.

Contract costs and contract fulfillment costs

Costs of obtaining contracts requiring capitalization

have been incurred by the Group; however, the

deferral of such costs is not material for the purposes

of these consolidated financial statements.

No costs of fulfilling contracts requiring capitalization

have been incurred which are not recorded as assets in

accordance with IAS 2 Inventories, IAS 16 Property,

Plant and Equipment, or IAS 38 Intangible Assets.

4.4 Research and development expenses

Research and development expenses comprise staff

expenses, depreciation, and other directly attributable

expenses and are allocated process based, i.e. relate to

research and development activities that are not

related to the improvement of the existing production

technologies. Costs incurred in connection with

improving existing production technologies used in

operational production lines are allocated to cost of

sales.

Research and development costs are expensed as

incurred. X-FAB SE Group considers that development

work performed does not qualify for capitalization

because the amount of future benefits to be derived

from use of work performed is characterized by a high

level of uncertainty until the projects are completed.

Government grants are awarded to the Group for its

research and development activities in the form of

cash tax payments or tax credits. IAS 20 Government

Grants is applied to all grants, including the research

and development grants received by X-FAB France,

which are paid out using the French corporation tax

system. The grants are recognized as income and as a

non-current or current asset, as appropriate, when

there is reasonable assurance that the entity will

comply with the relevant conditions set out in the

terms of the grant arrangement and that the grant will

be received. These income-related grants are

recognized in profit or loss on a systematic basis as the

entity recognizes as expenses the costs that the grants

are intended to compensate.

4.5 Finance income and finance costs

Interest income or expense is recognized using the

effective interest method. Dividend income is

recognized in profit or loss on the date on which the

Group’s right to receive payment is established.

4.6 Rental income from investment properties

Rental income from operating leases on investment

property is accounted for on a straight-line basis over

the lease term. Lease incentives granted are

recognized as an integral part of the total rental

income and recognized over the term of the lease.

	Annual Report 2023 | X-FAB consolidated financial statements

39

4.7 Employee benefits

Employee benefits consist of short-term employee

benefits, payments into defined contribution pension

schemes, and a long-service retirement lump-sum

payment scheme at the Group’s subsidiary X-FAB

France. The Group has no share-based payment

arrangements.

Short-term employee benefits are expensed as the

related service is provided. A liability is recognized for

the amount expected to be paid if the Group has a

present legal or constructive obligation to pay this

amount as a result of past service provided by the

employee and the obligation can be estimated reliably.

Obligations for contributions to defined contribution

plans are expensed as the related service is provided.

Prepaid contributions are recognized as an asset to the

extent that a cash refund or a reduction in future

payments is available.

The Group’s net obligation in respect of the long-

service retirement lump-sum payment scheme is

calculated by estimating the amount of future benefit

that employees have earned in the current and prior

periods, discounting that amount, and deducting the

fair value of any plan assets. The calculation of the

obligation is performed annually by an independent

third-party expert actuary using the projected unit

credit method. When the calculation results in a

potential asset for the Group, the recognized asset is

limited to the present value of economic benefits

available in the form of any future refunds from the

plan or reductions in future contributions to the plan.

To calculate the present value of economic benefits,

consideration is given to any applicable minimum

funding requirements. Remeasurements of the net

defined benefit liability, which comprise actuarial gains

and losses, the return on plan assets (excluding

interest), and the effect of the asset ceiling (if any,

excluding interest), are recognized immediately in

other comprehensive income. The Group determines

the net interest expense (income) on the net defined

benefit liability (asset) for the period by applying the

discount rate used to measure the defined benefit

obligation at the beginning of the annual period to the

then-net defined benefit liability (asset), taking into

account any changes in the net defined benefit liability

(asset) during the period as a result of contributions

and benefit payments. Net interest expense and other

expenses related to defined benefit plans are

recognized in profit or loss. When the benefits of a plan

are changed or when a plan is curtailed, the resulting

change in benefit that relates to past service or the

gain or loss on curtailment is recognized immediately in

profit or loss. The Group recognizes gains and losses

on the settlement of a defined benefit plan when the

settlement occurs.

Termination benefits are recorded as an expense at

the earlier of when the Group can no longer withdraw

the offer of those benefits and when the Group

recognizes costs of a restructuring. The benefits are

discounted if it is not expected that they will be settled

wholly within 12 months of the reporting date.

4.8 Property, plant, equipment, and investment

properties

Property, plant, and equipment are measured at

purchase cost less accumulated depreciation and

accumulated impairment losses. Purchase cost

includes expenditure that is directly attributable to the

acquisition of the asset. These accounting policies

have also been applied to investment properties under

the cost model in accordance with IAS 40.

Depreciation is provided using the straight-line

method for property, plant, factory, and office

equipment and for investment properties.

Depreciation is calculated to write off the cost of items

of property, plant, and equipment less their estimated

residual values using the straight-line method over

their estimated useful lives. If significant parts of an

item of property, plant, and equipment have different

useful lives, then they are accounted for as separate

items (major components) of property, plant, and

equipment.

The following useful lives are used as a basis for

calculating depreciation:

• Buildings, including investment properties: over

40–50 years

• Factory and office equipment: straight-line over 3–

10 years

Borrowing costs were not capitalized because no

borrowing costs applicable to the assets qualifying for

the capitalization of borrowing costs were incurred in

the period. Costs incurred which extend the useful life

of assets, or which increase performance or capacity of

assets, are capitalized where appropriate. Maintenance

and repair costs are expensed as incurred.

Assets are recorded as disposals when they are sold or

scrapped. The resulting gain or loss is recorded in income

within “other income” or “other expenses” as appropriate.

4.9 Intangible assets

Purchased intangible assets are capitalized at purchase

cost, including, where applicable, own work capitalized

in preparing the intangible assets for use, and

depreciated on a straight-line basis over their expected

useful lives. The useful life applied is five years.

Internally generated intangible assets were not

capitalized because the criteria for capitalization were

not met (see note 4.4).

The Group has no intangible assets with indefinite

useful lives.

	Annual Report 2023 | X-FAB consolidated financial statements

40

4.10 Impairment

The carrying amounts of the Group’s non-financial

assets other than inventories and deferred tax assets

(for which separate reviews are performed) are

reviewed at each reporting date to determine whether

there is any indication of impairment. If any such

indication exists then the asset’s recoverable amount is

estimated.

The recoverable amount of an asset or cash-

generating unit is the greater of its value in use and its

fair value less costs to sell. In assessing value in use, the

estimated future cash flows are discounted to their

present value using a pre-tax discount rate that

reflects current market assessments of the time value

of money and the risks specific to the asset. For the

purpose of impairment testing, assets are grouped

together into the smallest group of assets that

generates cash inflows from continuing use that are

largely independent of the cash inflows of other assets

or groups of assets (the “cash-generating unit”).

An impairment loss is recognized if the carrying

amount of an asset or its cash-generating unit exceeds

its estimated recoverable amount. Impairment losses

are recognized in profit or loss. Impairment losses

recognized in respect of cash-generating units are

allocated first to reduce the carrying amount of any

goodwill allocated to the units and then to reduce the

carrying amounts of the other assets in the unit (group

of units) on a pro rata basis.

An impairment loss is reversed if there has been a

change in the estimates used to determine the

recoverable amount. An impairment loss is reversed

only to the extent that the asset’s carrying amount

does not exceed the carrying amount that would have

been determined, net of depreciation or amortization,

if no impairment loss had been recognized.

4.11 Financial instruments

Recognition and initial measurement

Trade receivables are initially recognized when they are

originated, i.e. when or as the goods and services are

provided and the revenue for those goods and

services is recognized. Regular way purchases and

sales of financial assets were accounted for at the

settlement date. All other financial assets and financial

liabilities are initially recognized when the Group

becomes a party to the contractual provisions of the

financial instrument. The Group’s trade receivables do

not include a significant financing component and the

amounts recognized for trade receivables are initially

recognized at the transaction price. All other financial

assets and financial liabilities are initially recognized at

fair value plus, for items not recognized at fair value

through profit or loss (FVTPL), transaction costs that

are directly attributable to its acquisition or issue.

Classification and subsequent measurement

On initial recognition, a financial asset is classified as

measured at amortized cost; FVOCI – debt

investment; FVOCI – equity investment; or FVTPL.

(a) Financial assets at amortized cost

A financial asset is classified as measured at amortized

cost if it meets both of the following conditions and is

not designated as at FVTPL:

• it is held within a business model whose objective is

to hold assets to collect contractual cash flows; and

• its contractual terms give rise on specified dates to

cash flows that are solely payments of principal and

interest on the principal amount outstanding.

(b) Debt investments at fair value through other

comprehensive income (FVOCI)

A debt investment is classified as measured at fair

value through other comprehensive income if it meets

both of the following conditions and is not designated

as at FVTPL:

• it is held within a business model whose objective is

achieved by both collecting contractual cash flows

and selling financial assets; and

• its contractual terms give rise on specified dates to

cash flows that are solely payments of principal and

interest on the principal amount outstanding.

(c) Equity investments at fair value through other

comprehensive income (FVOCI)

An equity investment is classified as measured at fair

value through other comprehensive income if it is not

held for trading and the Group irrevocably elects to

present subsequent changes in the investment’s fair

value in OCI. This election is made on an investment-

by-investment basis.

(d) Financial assets at fair value through profit or

loss (FVTPL)

All financial assets not classified as measured at

amortized cost or FVOCI as described above are

measured at FVTPL. This includes all derivative

financial assets, equity investments held for trading,

and equity instruments not held for trading, but for

which the Group did not elect to present fair value

changes in other comprehensive income.

On initial recognition, the Group may irrevocably

designate a financial asset that otherwise meets the

requirements to be measured at amortized cost or at

FVOCI as at FVTPL if doing so eliminates or

significantly reduces an accounting mismatch that

would otherwise arise. No such designations have been

made by the Group.

Financial assets – business model assessment

The Group makes an assessment of the objective of

the business model in which a financial asset is held at a

portfolio level because this best reflects the way the

business is managed and information is provided to

management. The information considered includes:

• the stated policies and objectives for the portfolio

and the operation of those policies in practice.

These include whether management’s strategy

focuses on earning contractual interest income,

maintaining a particular interest rate profile,

matching the duration of the financial assets to the

duration of any related liabilities or expected cash

	Annual Report 2023 | X-FAB consolidated financial statements

41

outflows, or realizing cash flows through the sale of

the assets;

• how the performance of the portfolio is evaluated

and reported to the Group’s management;

• the risks that affect the performance of the

business model (and the financial assets held within

that business model) and how those risks are

managed;

• how managers of the business are compensated –

e.g. whether compensation is based on the fair

value of the assets managed or the contractual

cash flows collected; and

• the frequency, volume, and timing of sales of

financial assets in prior periods, the reasons for

such sales, and the expectations about future sales

activity.

Transfers of financial assets to third parties in

transactions that do not qualify for derecognition are

not considered sales for this purpose, consistent with

the Group’s continuing recognition of the assets.

Financial assets that are held for trading or are

managed and whose performance is evaluated on a

fair value basis are measured at FVTPL.

Financial assets – Assessment of whether

contractual cash flows are solely payments of

principal and interest

For the purposes of this assessment, “principal” is

defined as the fair value of the financial asset on initial

recognition. “Interest” is defined as consideration for

the time value of money and for the credit risk

associated with the principal amount outstanding

during a particular period of time and for other basic

lending risks and costs (e.g. liquidity risk and

administrative costs), as well as a profit margin. In

assessing whether the contractual cash flows are solely

payments of principal and interest, the Group

considers the contractual terms of the instrument. This

includes assessing whether the financial asset contains

a contractual term that could change the timing or

amount of contractual cash flows such that it would not

meet this condition. In making this assessment, the

Group considers:

• contingent events that would change the amount

or timing of cash flows;

• terms that may adjust the contractual coupon rate,

including variable-rate features;

• prepayment and extension features; and

• terms that limit the Group’s claim to cash flows

from specified assets (e.g. non-recourse features).

A prepayment feature is consistent with the solely

payments of principal and interest criterion if the

prepayment amount substantially represents unpaid

amounts of principal and interest on the principal

amount outstanding, which may include reasonable

additional compensation for early termination of the

contract. Additionally, for a financial asset acquired at a

discount or premium to its contractual par value, a

feature that permits or requires prepayment at an

amount that substantially represents the contractual

par amount plus accrued (but unpaid) contractual

interest (which may also include reasonable additional

compensation for early termination) is treated as

consistent with this criterion if the fair value of the

prepayment feature is insignificant at initial recognition.

Financial assets – Subsequent measurement and

gains and losses

Financial assets at FVTPL

These assets are subsequently measured at fair value.

Net gains and losses, including any interest or dividend

income, are recognized in profit or loss. The Group

does not apply hedge accounting and accordingly

does not apply alternative allowed accounting

treatment permitted for derivatives designated as

hedging instruments.

Financial assets at amortized cost

These assets are subsequently measured at amortized

cost using the effective interest method. The

amortized cost is reduced by impairment losses.

Interest income, foreign exchange gains and losses,

and impairment are recognized in profit or loss. Any

gain or loss on derecognition is recognized in profit or

loss.

Debt investments at FVOCI

These assets are subsequently measured at fair value.

Interest income calculated using the effective interest

method, foreign exchange gains and losses, and

impairment are recognized in profit or loss. Other net

gains and losses are recognized in OCI. On

derecognition, gains and losses accumulated in OCI are

reclassified to profit or loss.

Equity investments at FVOCI

These assets are subsequently measured at fair value.

Dividends are recognized as income in profit or loss

unless the dividend clearly represents a recovery of

part of the cost of the investment. Other net gains and

losses are recognized in OCI and are never reclassified

to profit or loss.

Financial liabilities

Financial liabilities are classified as measured at

amortized cost or FVTPL. A financial liability is

classified as at FVTPL if it is classified as held for

trading, it is a derivative, or it is designated as such on

initial recognition, whereby no liabilities as at FVTPL

have been made by the Group. Financial liabilities at

FVTPL are measured at fair value, and net gains and

losses, including any interest expense, are recognized

in profit or loss. Other financial liabilities are

subsequently measured at amortized cost using the

effective interest method. Interest expense and

foreign exchange gains and losses are recognized in

profit or loss. Any gain or loss on derecognition is also

recognized in profit or loss.

	Annual Report 2023 | X-FAB consolidated financial statements

42

Derecognition

Financial assets

The Group derecognizes a financial asset when the

contractual rights to the cash flows from the financial

asset expire, or it transfers the rights to receive the

contractual cash flows in a transaction in which

substantially all of the risks and rewards of ownership

of the financial asset are transferred or in which the

Group neither transfers nor retains substantially all of

the risks and rewards of ownership and it does not

retain control of the financial asset.

The Group enters into transactions whereby it

transfers assets recognized in its statement of financial

position, but retains either all or substantially all of the

risks and rewards of the transferred assets. In these

cases, the transferred assets are not derecognized.

Financial liabilities

The Group derecognizes a financial liability when its

contractual obligations are discharged or canceled, or

expire. The Group also derecognizes a financial liability

when its terms are modified and the cash flows of the

modified liability are substantially different, in which

case a new financial liability based on the modified

terms is recognized at fair value.

On derecognition of a financial liability, the difference

between the carrying amount extinguished and the

consideration paid (including any non-cash assets

transferred or liabilities assumed) is recognized in

profit or loss.

Offsetting

No financial assets or liabilities are presented on a net

basis in these consolidated financial statements.

Impairment

The Group recognizes loss allowances for the

expected credit losses (ECLs) that it expects to incur

over the lifetime of financial assets which it measures

at amortized cost.

Loss allowances for trade receivables are always

measured at an amount equal to lifetime ECLs. When

determining whether the credit risk of a financial asset

has increased significantly since initial recognition and

when estimating ECLs, the Group considers

reasonable and supportable information that is

relevant and available without undue cost or effort.

This includes both quantitative and qualitative

information and analysis, based on the Group’s

historical experience and informed credit assessment

and including forward-looking information.

The maximum period considered when estimating

ECLs is the maximum contractual period over which

the Group is exposed to credit risk.

Measurement of ECLs for non-credit-impaired

receivables is assessed collectively based on a

probability-weighted estimate of credit losses

dependent on the number of days the balances are

overdue. Expected credit losses are measured based

on past experience of the recovery of similar portfolios

of receivables as the Group considers this to be a

reasonable approximation of the present value of the

shortfalls that can be expected in future. ECLs are

discounted at the effective interest rate of the

financial asset if the discounting effect is determined

to be material. Based on the contractual agreements,

receivables are in default when the balances are unpaid

by the due date. Dunning collection procedures

commence when a receivable is five days overdue.

Receivables are classified as credit impaired from the

date on which the receivable is 90 days overdue,

despite dunning procedures having being performed,

or from the date any other specific indications are

received that a significant deterioration in credit has

occurred. Credit-impaired receivables are assessed on

a case-by-case basis and assessments of collectability

are based on the information available concerning the

outstanding balance, including discussions with the

customer, assessments of the reliability of the

information provided, available counterclaims or

security, an understanding of the economic climate in

which the customer operates, and experience with that

customer, as well as experience of similar collection

procedures.

The relevant amounts are written off when the Group

considers that there is no realistic prospect of recovery

of the receivable and when no further enforcement

activity is taken. When a customer is in liquidation the

outstanding amounts are listed and monitored in an

ongoing liquidation register until the liquidation

process is complete.

No loss allowances are made for cash and cash

equivalents as it has been determined that, because of

the good standing of the Group’s banking partners, the

credit risk at the reporting date is so low that the ECLs

are insignificant both at the date of their initial

recognition and since initial recognition.

Fair values of cash and cash equivalents and current

receivables and liabilities

The fair values of cash and cash equivalents, current

receivables, and current liabilities approximate their

book values due to their short-term nature.

4.12 Derivative financial instruments

The Group holds derivative financial instruments to

hedge certain foreign currency and interest risk

exposures. Embedded derivatives are separated from

the host contract and accounted for separately if the

host contract is not a financial asset and certain criteria

are met. Derivative financial instruments are not

designated as hedging instruments for hedge

accounting purposes and are accordingly classified as

fair value through profit or loss.

Gains and losses from changes in the fair values of the

derivative financial instruments are reported in the

income statement within finance income and finance

expenses. The fair values of the derivative financial

instruments are presented in the statement of financial

position as other current assets and/or other current

	Annual Report 2023 | X-FAB consolidated financial statements

43

liabilities, as appropriate, unless their maturity exceeds

12 months in which case they will be presented as non-

current.

4.13 Inventories

Inventories of raw materials, consumables, and supplies

are measured at the lower of cost and net realizable

value. The cost of inventories comprises all costs of

purchase, cost of conversion, and other costs incurred

in bringing the inventories to their present location and

condition, determined by using the weighted average

acquisition cost method. Allowances are recognized if

the carrying amount exceeds the expected sales price

less the estimated cost to complete the inventories

and the cost of marketing, sales, and distribution

activities. Allowances are made in full for inventories

with no realizable value.

4.14 Cash and cash equivalents

Cash and cash equivalents represent cash in hand,

checks, and available balances on bank current

accounts with an original maturity of four weeks or less.

The use of cash and cash equivalents reported are in

general not subject to restrictions with the exception

of term deposits reported as cash in note 7.7.

4.15 Equity

Share capital

The nominal paid-in contribution amount on each

share is recorded in share capital.

Share premium

Incremental costs directly attributable to the issue of

share capital are recognized as a deduction from the

share premium account, less any related tax effects.

Treasury shares

The Group reports treasury shares as deductions from

the Group equity at the cost of purchase.

Equity instruments and financial liabilities

Equity instruments and financial liabilities (including

share capital, redeemable preference shares, and other

loans and borrowings) are classified according to the

substance of the contractual arrangements entered

into. An equity instrument is any contract that

evidences a residual interest in the assets of the Group

after deducting all of its liabilities. Dividends and

distributions relating to equity instruments are debited

directly to reserves. Equity instruments issued are

recorded at the proceeds received, net of direct issue

costs. A financial liability exists where there is a

contractual obligation to deliver cash or another

financial asset to another entity, or to exchange

financial assets or financial liabilities under potentially

unfavorable conditions. In addition, contracts that

result in the entity delivering a variable number of its

own equity instruments are financial liabilities. Shares

containing such obligations are classified as financial

liabilities. Finance costs and gains or losses relating to

financial liabilities are included in the income statement.

The carrying amount of the liability is increased by the

finance cost and reduced by payments made in

respect of that liability.

4.16 Provisions

Provisions are recognized when present obligations

(legal or constructive) exist which result from past

events and which are expected to result in an outflow

of resources of which the timing or amount is

uncertain. The provisions are measured at the

discounted amount of the expected future cash flows

arising under the respective obligation at a pre-tax rate

that reflects current market assessments of the time

value of money and the risks specific to the liability.

The unwinding of the discount is recognized as finance

cost. Where the Group expects some or all of a

provision to be reimbursed, for example under an

insurance contract, the reimbursement is recognized

as a separate asset but only when the reimbursement

is virtually certain. The expense relating to any

provision is presented in profit or loss. If the effect of

the time value of money is material, provisions are

discounted using a pre-tax rate that reflects current

market assessments of the time value of money and of

the risk specific to the liability.

A provision for restructuring is recognized when the

Group has approved a detailed and formal restructuring

plan, and the restructuring either has commenced or has

been announced publicly. A provision for onerous

contracts is recognized for each specific contract in

which the unavoidable costs of meeting the obligations

under the contract exceed the economic benefits

expected to be received under the contract.

4.17 Leases

The Group assesses whether a contract is, or contains,

a lease arrangement. A contract is, or contains, a lease

if a contract conveys a right to control the use of an

identified asset for a period of time in exchange for

consideration.

The Group as lessee

The assets held under the Group’s leasing

arrangements are primarily commercial properties,

production equipment, and infrastructure equipment.

The Group recognizes right-of-use assets and lease

liabilities for most assets, i.e. these are presented

on‑balance sheet. However, it has elected to not to

recognize right-of-use assets and lease liabilities for

leases of low-value assets. The Group recognizes the

lease payments associated with these leases as an

expense on a straight-line basis over the lease term.

The Group has not applied a simplification election

available under IFRS 16 not to separate non-lease

components of a lease. At inception or on

reassessment of a contract that contains a lease

component the Group allocates the consideration in

the contract to each lease and non-lease component

of the respective contract on the basis of their relative

stand-alone prices.

	Annual Report 2023 | X-FAB consolidated financial statements

44

The Group presents right-of-use assets within

“property, plant, and equipment” in the statement of

financial position, on the same line as it presents

underlying assets of the same nature that are owned

by the Group. The Group does not hold any properties

under leases which are classified as investment

properties.

The Group presents lease liabilities within “loans and

borrowings”, classified between current and non-

current liabilities as appropriate.

The Group recognizes a right-of-use asset and a lease

liability at the lease commencement date. The right-

of-use asset is initially measured at cost, which

comprises the initial amount of the lease liability

adjusted for any lease payments made at or before the

commencement date, plus any initial direct costs

incurred and an estimate of costs to dismantle and

remove the underlying asset or to restore the

underlying asset or the site on which it is located, less

any lease incentives received.

The right-of-use asset is subsequently depreciated

using the straight-line method from the

commencement date to the end of the lease term,

unless the lease transfers ownership of the underlying

asset to the Group by the end of the lease term or the

cost of the right-of-use asset reflects that the Group

will exercise a purchase option. In that case the right-

of-use asset will be depreciated over the useful life of

the underlying asset, which is determined on the same

basis as those of property and equipment. In addition,

the right-of-use asset is periodically reduced by

impairment losses, if any, and adjusted for certain

remeasurements of the lease liability.

The lease liability is initially measured at the present

value of the lease payments that are not paid at the

commencement date, discounted using the interest

rate implicit in the lease or, if that rate cannot be readily

determined, the Group’s incremental borrowing rate.

Generally, the Group uses an estimate of its

incremental borrowing rate as the discount rate.

The Group determines its incremental borrowing rate

by obtaining interest rates from various external

financing sources and makes certain adjustments to

reflect the terms of the lease and type of the asset

leased.

Lease payments included in the measurement of the

lease liability comprise the following:

• fixed payments, including in-substance fixed

payments;

• variable lease payments that depend on an index or

a rate, initially measured using the index or rate as

at the commencement date;

• amounts expected to be payable under a residual

value guarantee; and

• the exercise price under a purchase option that the

Group is reasonably certain to exercise, lease

payments in an optional renewal period if the

Group is reasonably certain to exercise an

extension option, and penalties for early

termination of a lease unless the Group is

reasonably certain not to terminate early.

Some of the Group’s lease contracts include renewal

or termination options. In order to determine the lease

term for these contracts the Group takes into account

all relevant facts and circumstances in order to assess

whether it is reasonably certain that these options will

be exercised. This assessment has an impact on the

term of the lease, which has a significant effect on the

amount of the lease liabilities and the measurement of

the right-of-use asset recognized.

Generally, the Group uses an estimate of its

incremental borrowing rate as the discount rate.

The lease liability is remeasured when there is a change

in future lease payments arising from a change in an

index or rate, if there is a change in the Group’s

estimate of the amount expected to be payable under

a residual value guarantee, if the Group changes its

assessment of whether it will exercise a purchase,

extension or termination option, or if there is a revised

in-substance fixed lease payment. When the lease

liability is remeasured in this way, a corresponding

adjustment is made to the carrying amount of the

right-of-use asset, or is recorded in profit or loss if the

carrying amount of the right-of-use asset has been

reduced to zero.

Short-term leases and leases of low-value assets

The Group has elected not to recognize right of-use

assets and lease liabilities for leases of low-value assets

and short-term leases, including IT equipment. The

Group recognizes the lease payments associated with

these leases as an expense on a straight-line basis over

the lease term.

Sale and leaseback transactions

When the Group undertakes a sale and leaseback

transaction with a buyer-lessor, it determines whether

the transfer qualifies as a sale. This determination is

based on the requirements for satisfying a

performance obligation in IFRS 15 Revenue from

Contracts with Customers. If the transfer qualifies as a

sale and the transaction is on market terms the Group

splits the previous carrying amount of the underlying

asset into (a) a right-of-use asset arising from the

leaseback and (b) the rights in the underlying asset

retained by the buyer-lessor at the end of the

leaseback. The Group recognizes a portion of the total

gain or loss on the sale. The amount recognized is

calculated by splitting the total gain or loss into (a) an

unrecognized amount relating to the rights retained by

the seller-lessee and (b) an amount recognized

amount relating to the buyer-lessor’s rights in the

underlying asset at the end of the leaseback.

The leaseback itself is then accounted for under the

lessee accounting model. Adjustments are required if

consideration for the sale is not at fair value and/or

	Annual Report 2023 | X-FAB consolidated financial statements

45

payments for the lease are not at market rates. These

adjustments result in recognition of a prepayment to

reflect below-market terms and/or additional financing

provided by the buyer-lessor to the seller-lessee to

reflect above-market terms.

The Group as lessor

The Group is lessor at several locations where it leases

commercial property which is owned by the Group but

not used for its own commercial business purposes.

The Group has classified these leases as operating

leases, because they do not transfer substantially all of

the risks and rewards incidental to the ownership of the

assets.

At inception or on modification of a contract that

contains a lease component, the Group allocates the

consideration in the contract to each lease component

on the basis of their relative stand-alone prices.

When the Group acts as a lessor, it examines each

lease at lease inception to determine whether is a

finance lease or an operating lease. This consists of

making an overall assessment of whether the lease

transfers substantially all of the risks and rewards

incidental to ownership of the underlying asset. If this is

the case, then the lease is a finance lease; if not, then it

is an operating lease. As part of this assessment, the

Group considers certain indicators such as whether the

lease is for the major part of the economic life of the

asset.

When the Group is an intermediate lessor, it accounts

for its interests in the head lease and the sublease

separately. It assesses the lease classification of a

sublease with reference to the right-of-use asset

arising from the head lease, not with reference to the

underlying asset. If a head lease is a short-term lease to

which the Group applies the exemption described

above, then it classifies the sub-lease as an operating

lease. If an arrangement contains lease and non-lease

components, then the Group applies IFRS 15 to

allocate the consideration in the contract.

All leases entered into by the Group as lessor to date

have been classified as operating leases and relate to

investment properties rented to third parties. The

Group recognizes lease payments received under

operating leases as income on a straight-line basis over

the lease term as part of “Income from investment

property rentals.”

4.18 Subsidies

The Group receives government assistance in the form

of government investment grants and investment

subsidies which are dependent on the acquisition of

certain assets qualifying under the respective grant

awards. Grants and subsidies related to assets are

recognized when there is reasonable assurance that

the entity will comply with the relevant conditions of

the grant, and that grant will be received. They are

recognized in profit or loss on a systematic basis as the

entity recognizes as expenses the costs that the grants

are intended to compensate. The investment grants

and subsidies received reduce the purchase cost for

the relevant subsidized assets recorded under

property, plant, and equipment.

The receipt of government assistance is governed by

terms set out in law and by specific terms and

conditions attached to the applicable grants and

subsidies.

4.19 Income taxes

The income tax charge includes current and deferred

tax. It is recognized in profit or loss except to the

extent that it relates to a business combination, or

items recognized directly in equity or in other

comprehensive income.

Current tax comprises the expected tax payable or

receivable on taxable profit or loss for the year and any

adjustment to the tax payable or receivable in respect

of previous years. The amount of current tax payable

or receivable is the best estimate of the tax amount

expected to be paid or received. It is measured using

tax rates enacted or substantively enacted at the

reporting date.

Current tax assets and liabilities are only offset if

certain criteria are met.

The Group has applied the exception to recognizing

and disclosing information about deferred tax assets

and liabilities related to Pillar Two income taxes, in

accordance with the amendments to IAS 12 issued in

May 2023.

Deferred income taxes reflect the tax effects of

temporary differences between the carrying amounts

of assets and liabilities for financial reporting purposes

and the amounts used for income tax purposes and

the deferred benefits expected from unused tax

losses, unused tax credits, and other credits carried

forward, whereby amounts are only recognized when

their realization is considered by management to

probable. Deferred tax assets and liabilities are

measured using the tax rates expected to apply to

taxable income in the years in which these temporary

differences are expected to be recovered or settled,

based on tax rates enacted or substantially enacted at

the statement of financial position date.

The measurement of deferred tax liabilities and

deferred tax assets reflects the tax consequences that

would follow from the manner in which the enterprise

expects, at the statement of financial position date, to

recover or settle the carrying amount of its assets and

liabilities.

Deferred tax assets are not discounted and are

classified as non-current assets in the statement of

financial position. Current and deferred tax assets and

liabilities are offset only if certain criteria are met. Such

criteria mean the entity has a legally enforceable right

to set off the recognized amounts and it intends either

to settle on a net basis or to realize the asset and settle

	Annual Report 2023 | X-FAB consolidated financial statements

46

the liability simultaneously. Deferred tax assets are

recognized when it is probable that sufficient taxable

profits will be available against which the deferred tax

assets can be utilized.

At each statement of financial position date, the Group

reassesses unrecognized deferred tax assets and the

carrying amount of deferred tax assets. The Group

recognizes a previously unrecognized deferred tax

asset to the extent that it has become probable that

future taxable profit will allow the deferred tax asset to

be recovered. The probability of recognition is based

on the expected tax profits included in the Group’s

current business planning. The Group conversely

reduces the carrying amount of a deferred tax asset to

the extent that it is no longer probable that sufficient

taxable profit will be available to allow the benefit of

part or that entire deferred tax asset to be utilized. A

deferred tax liability is recognized for all taxable

temporary differences, unless the deferred tax liability

arises from the initial recognition of goodwill or the

initial recognition of assets or liabilities in a transaction

that is not a business combination and that affects

neither accounting nor taxable profit or loss.

4.20 Changes to accounting policies

New accounting pronouncements

The following amendments to standards, which are

effective for annual periods beginning on or before

January 1, 2023, have been applied by the Group for

the first time in preparing these consolidated financial

statements.

Standard/interpretation	Effective date
IFRS 17 Insurance Contracts (issued on May 18, 2017); including Amendments to IFRS 17 (issued on June 25, 2020)	January 1, 2023
Amendments to IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors: Definition of Accounting Estimates (issued on February 12, 2021)	January 1, 2023
Amendments to IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2: Disclosure of Accounting Policies (issued on February 12, 2021)	January 1, 2023
Amendments to IAS 12 Income Taxes: Deferred Tax Related to Assets and Liabilities arising from a Single Transaction (issued on May 7, 2021)	January 1, 2023
Amendments to IFRS 17 Insurance Contracts: Initial Application of IFRS 17 and IFRS 9 – Comparative Information (issued on December 9, 2021)	January 1, 2023
Amendments to IAS 12 Income Taxes: International Tax Reform – Pillar Two Model Rules (issued on May 23, 2023)	January 1, 2023

Standard/interpretation	Effective date
Amendments to IFRS 16 Leases: Lease Liability in a Sale and Leaseback (issued on September 22, 2022)	January 1, 2023
Amendments to IAS 1 Presentation of Financial Statements: • Classification of Liabilities as Current or Non-current (issued on January 23, 2020); • Classification of Liabilities as Current or Non-current - Deferral of Effective Date (issued on July 15,  2020); and • Non-current Liabilities with Covenants (issued on October 31, 2022)	January 1, 2023

The above amendments to standards and amended

interpretations did not have a significant effect on the

consolidated financial statements of the X-FAB Group.

New standards, amendments to standards, and

interpretations effective for annual periods

beginning after January 1, 2023

A number of new standards, amendments to

standards, and interpretations are not yet effective for

annual periods ended December 31, 2023, and have

not been applied in preparing these consolidated

financial statements.

The Group is examining whether the amendments to

IAS 1 Classification of Liabilities as Current or

Non‑current will require an amendment to the

presentation of borrowings under the multicurrency

revolving credit facility currently presented as current

liabilities.

As a consequence of the amendments to IAS 1 these

obligations may in future be reported as non-current

liabilities until the borrowing facility as a whole has a

remaining period to maturity of one year or less,

irrespective of whether management chooses to repay

them within one year within the process of managing

its overall capital requirements.

The remaining amendments are not expected to have

a material impact on the Group’s consolidated financial

statements.

Amendments to IAS 1 Presentation of Financial

Statements:

– Classification of Liabilities as Current or

Non‑current Date (issued on January 23,

2020);

– Classification of Liabilities as Current or

Non‑current - Deferral of Effective Date

(issued on July 15, 2020); and

– Non-current Liabilities with Covenants

(issued on October 31, 2022)

	Annual Report 2023 | X-FAB consolidated financial statements

47

Amendments to IAS 1 Presentation of Financial

Statements: Classification of Liabilities as Current or

Non-current Date (issued on January 23, 2020, clarify

a criterion in IAS 1 for classifying a liability as non-

current: the requirement for an entity to have the right

to defer settlement of the liability for at least 12 months

after the reporting period. The amendments:

– specify that an entity’s right to defer

settlement must exist at the end of the

reporting period;

– clarify that classification is unaffected by

management’s intentions or expectations

about whether the entity will exercise its right

to defer settlement;

– clarify how lending conditions affect

classification; and

– clarify requirements for classifying liabilities an

entity will or may settle by issuing its own

equity instruments.

On July 15, 2020, the IASB issued Classification of

Liabilities as Current or Non-current — Deferral of

Effective Date (Amendment to IAS 1) deferring the

effective date of the January 2020 amendments with

one year.

On October 31, 2022, the IASB issued Non-current

Liabilities with Covenants, which amends IAS 1 and

specifies that covenants (i.e. conditions specified in a

loan arrangement) to be complied with after the

reporting date do not affect the classification of debt

as current or non-current at the reporting date.

Instead, the amendments require a company to

disclose information about these covenants in the

notes to the financial statements.

All of the amendments are effective for annual

reporting periods beginning on or after January 1,

2024, with early adoption permitted. The amendments

have not yet been endorsed by the EU

Amendments to IFRS 16 Leases: Lease Liability in a

Sale and Leaseback, issued on September 22, 2022,

introduce a new accounting model which will impact

how a seller-lessee accounts for variable lease

payments in a sale-and-leaseback transaction.

Under this new accounting model for variable

payments, a seller-lessee will:

– include estimated variable lease payments

when it initially measures a lease liability

arising from a sale-and-leaseback transaction;

and

– after initial recognition, apply the general

requirements for subsequent accounting of

the lease liability such that it recognizes no

gain or loss relating to the right of use it

retains.

These amendments will not change the accounting for

leases other than those arising in a sale and leaseback

transaction.

The amendments apply retrospectively for annual

periods beginning on or after January 1, 2024, with

early application permitted. These amendments have

been endorsed by the EU.

Amendments to IAS 7 Statement of Cash Flows

and IFRS 7 Financial Instruments: Disclosures:

Supplier Finance Arrangements, issued on May 25,

2023, introduce additional disclosure requirements for

companies that enter into supplier finance

arrangements. The amendments are effective for

periods beginning on or after January 1, 2024, with

early application permitted. However, some relief from

providing certain information in the year of initial

application is available. These amendments have not

yet been endorsed by the EU.

Amendments to IAS 21 The Effects of Changes in

Foreign Exchange Rates: Lack of Exchangeability,

issued on August 15, 2023, clarify when a currency is

exchangeable into another currency (and when it is

not). When a currency is not exchangeable, a company

needs to estimate a spot rate. The company’s

objective when estimating a spot rate is that it reflects

the rate at which an orderly exchange transaction

would take place at the measurement date between

market participants under prevailing economic

conditions. The amendments contain no specific

requirements for estimating a spot rate. Under the

amendments, companies will need to provide new

disclosures to help users assess the impact of using an

estimated exchange rate on the financial statements.

The amendments are effective for annual reporting

periods beginning on or after January 1, 2025, with

early adoption permitted. These amendments have

not yet been endorsed by the EU.

5 Business combinations

There have been no business combinations involving

the Group in the years ended December 31, 2023, or

December 31, 2022.

Subsequent to the balance sheet date, on January 1,

2024, the Group acquired the entire share capital of

M-MOS Semiconductor Hong Kong Limited (M-MOS),

a limited liability company incorporated under the laws

of Hong Kong, and its subsidiaries for a consideration

of EUR 22,500 thousand (USD 24,863 thousand)

payable in cash. M-MOS was acquired from XTRION, a

related party.

M-MOS is a developer of metal–oxide–semiconductor

field-effect transistor (MOSFET) process technologies

and designs standard and custom devices using

MOSFET technologies focusing on selling wafers to its

customers. The acquisition was made to generate

business synergies in particular in respect of the

MOSFET wafer business.

	Annual Report 2023 | X-FAB consolidated financial statements

48

No acquisition costs have been recorded as expenses

in the financial year 2023 in respect of the acquisition.

The following table summarizes the assets and

liabilities assumed as a result of the acquisition at

January 1, 2024:

in thousands of U.S. dollars
Property, plant, and equipment	238
Deferred tax assets	66
Inventories	2,805
Accounts receivable	4,483
Other assets	4,532
Cash and cash equivalents	23,229
Total assets	35,353
Non-current loans and borrowings	26
Trade payables	2,691
Other current liabilities	7,712
Deferred tax liabilities	134
Total liabilities	10,563
Total identifiable assets and liabilities acquired	24,790

The above amounts represent the Group’s preliminary

estimates of the fair values of the assets and liabilities

assumed based on provisional assessments available as

at the date of the issue of these consolidated financial

statements. The Group’s accounting for the acquisition

will be based on the Group’s final assessment of the

fair values of the assets and liabilities assumed.

The accounting for the acquisition will be revised if new

information is obtained within one year of the

acquisition about facts and circumstances that existed

at the date of acquisition which identifies adjustments

to the above amounts, or which identifies the necessity

to record any additional provisions for obligations that

existed at the date of acquisition.

No material differences between carrying value and

fair market value have been identified. Thus, the

Group's accounting for the M-MOS acquisition will be

based on these established values.

Goodwill of USD 73 thousand will be recognized as a

result of the business combination. The goodwill is

attributable to the skills and technical knowledge of the

employees of M-MOS and the synergies that the

Group anticipates generating as a result of the

acquisition.

6 Notes to the consolidated statement of profit or

loss

6.1 Revenue

Revenue, which wholly and exclusively represents

revenue from contracts with customers, comprises the

following (refer to note 9 for revenue by geographic

concentration):

in thousands of U.S. dollars	2023	2022
Gross revenue PCM wafer	787,180	653,420
Gross revenue NRE and technology services	109,246	92,217
Revenue recognized over time PCM wafer	16,605	—
Other revenue	24	16
Discounts and warranty credits	(6,269)	(6,184)
Total	906,786	739,469

Revenues from production increased by 20%, driven

by a consistently strong demand across all end

markets, while revenue from prototyping increased by

18%.

Revenue from PCM wafer sales is generally recognized

at the specific point in time when the wafers are

delivered to the customer.

In the financial year 2023, for the first time, the Group

is reporting revenues from wafer sales which are

recognized over time. Revenue for wafer sales

recognized over time represents the Group’s rights to

consideration for work completed but not invoiced at

the reporting date on wafer sales under long-term

contracts which meet the criteria for revenue

recognition over time. The revenues from such

contracts were not material in previous reporting

periods. As described in note 7.13 below, in the financial

year 2023 the Group has received prepayments from

customers for future wafer sales and capacity

reservation deposits in connection with such long-term

contracts.

The Group has not recognized revenues of variable

consideration from customers in respect of shortfalls

of orders from customers, nor any incurred or

anticipated contract penalties, or any downward

revisions of revenues previously recognized in the

financial year 2023 or 2022 as, at the current time, it is

anticipated that all customer orders will be supplied to

customers in full without any shortfalls. In addition, no

revenue is recognized in the current year from

performance obligations satisfied in prior years (e.g.

changes in transaction price).

	Annual Report 2023 | X-FAB consolidated financial statements

49

6.2 Cost of sales

The cost of sales comprises the following:

in thousands of U.S. dollars	2023	2022
Employee-related expenses	(221,766)	(192,228)
Cost of materials	(188,638)	(167,034)
Costs of fixed assets (maintenance, spare parts, etc.)	(100,790)	(85,828)
Depreciation and amortization	(77,925)	(67,854)
Facility costs	(93,890)	(69,532)
External services	(10,058)	(9,095)
Changes in inventories	19,505	12,427
Grants	20,482	16,642
Other	4,346	(1,013)
Total	(648,734)	(563,515)

The increase in cost of sales of 15% corresponds with

the increase in revenues of 23%.

Grants presented as a deduction from cost of sales

represent the benefits of grants which offset the cost

of manufacturing operations, and primarily represent

grants received in earlier years to offset the cost of

acquiring property, plant, and equipment.

6.3 Research and development expenses

Research and development expenses comprise the

following:

in thousands of U.S. dollars	2023	2022
Employee-related expenses	(27,664)	(24,980)
Cost of materials	(10,944)	(9,923)
Costs of fixed assets (incl. maintenance software, etc.)	(3,920)	(4,019)
Depreciation and amortization	(1,837)	(1,586)
Facility costs	(1,111)	(869)
External services	(684)	(884)
Grants	6,872	5,643
Other	(7,903)	(4,185)
Total	(47,191)	(40,803)

Research and development expenses increased

consistently with the increased sales volume in 2023. It

is X-FAB’s policy to maintain a consistent rate of

research and development expenses in relation to

revenue.

6.4 Selling expenses

The selling expenses comprise the following:

in thousands of U.S. dollars	2023	2022
Employee-related expenses	(8,069)	(7,447)
Advertising costs and costs of selling goods	(627)	(633)
External services	(198)	(139)
Facility costs	(164)	(143)
Depreciation and amortization	(106)	(103)
Other	701	286
Total	(8,463)	(8,179)

6.5 General and administrative expenses

The general and administrative expenses comprise the

following:

in thousands of U.S. dollars	2023	2022
Employee-related expenses	(29,309)	(23,354)
External services	(6,790)	(5,946)
Depreciation and amortization	(3,450)	(3,033)
Costs of fixed assets (maintenance software, etc.)	(5,871)	(3,989)
Insurance, dues, and fees	(1,585)	(1,468)
Facility costs	(1,416)	(1,103)
Grants	23	444
Other	1,241	962
Total	(47,157)	(37,487)

Increases in employee-related expenses refer to

increases in wages and salaries and to inflation

compensation payments. Increases in software costs

include costs for a change in ERP system.

6.6 Expenses by nature

In the income statement, expenditures are classified by

function. Expenses include depreciation charges

allocated to the following items:

in thousands of U.S. dollars	2023	2022
Included in cost of sales	(77,060)	(67,000)
Included in research and development expenses	(1,284)	(1,218)
Included in selling expenses	(106)	(103)
Included in general and administrative expenses	(2,038)	(1,692)
Included in expenses related to investment properties and other expenses	(1,649)	(1,612)
Total	(82,137)	(71,625)

	Annual Report 2023 | X-FAB consolidated financial statements

50

Expenses include charges for amortization of

intangible assets allocated to the following items:

in thousands of U.S. dollars	2023	2022
Included in cost of sales	(865)	(854)
Included in research and development expenses	(553)	(368)
Included in general and administrative expenses	(1,412)	(1,341)
Total	(2,830)	(2,563)

Employee-related expenses allocated according to

function in the income statement consist of the

following:

in thousands of U.S. dollars	2023	2022
Wages and salaries	(217,684)	(190,512)
Social security costs	(44,417)	(38,069)
Contributions to defined contribution plans	(13,028)	(11,445)
Other employee-related costs	(11,679)	(7,983)
Total	(286,808)	(248,009)

The increase in staff costs compared to the previous

year is primarily due to the general increase in business

activity.

Defined contribution plans primarily consist of

contributions made under statutory schemes by

employers to state-based defined contribution plans.

6.7 Rental income from investment properties

Rental income from investment properties comprises

the following:

in thousands of U.S. dollars	2023	2022
Income from technical services provided	11,391	7,223
Income from investment property rentals	6,178	6,425
Total	17,569	13,648

Property rentals and technical services for tenants

represent activities outside the X-FAB SE Group’s core

activities. Technical services mainly comprise the

supply of power, water, cooling water, ultra-pure water,

bulk gases, or compressed dry air.

6.8 Rental expenses related to investment

properties

Expenses related to investment properties comprise

the following:

in thousands of U.S. dollars	2023	2022
Expenses for technical services provided	(12,206)	(9,176)
Expenses for connection with investment property rentals	(2,457)	(4,770)
Total	(14,663)	(13,946)

Expenses in connection with investment properties

primarily relate to depreciation and building

maintenance.

6.9 Other income

Other income comprises the following:

in thousands of U.S. dollars	2023	2022
Gains on disposals of property, plant, and equipment	3,595	3,899
Income from recharges	3,078	3,015
Governmental refunds for energy	942	—
Income from other admin services/cost sharing	757	527
Income from sales of materials	67	188
Other	968	547
Total	9,407	8,176

The income from recharges primarily results from

charges for software maintenance costs to Melexis, a

related party, included in the disclosures presented in

note 12.

Gains on disposal of property, plant, and equipment in

2023 and 2022 primarily related to sales of technical

machinery and equipment previously used by X-FAB

France for technologies in operation in its predecessor

business prior to it being acquired by the X-FAB

Group.

	Annual Report 2023 | X-FAB consolidated financial statements

51

6.10 Other expenses

Other expenses comprise the following:

in thousands of U.S. dollars	2023	2022
Settlement of a dispute	(5,095)	(36,811)
Expenses from recharges	(3,078)	(3,015)
Losses on disposal of property, plant, and equipment	(462)	(10)
Other	(947)	(87)
Total	(9,582)	(39,923)

Expenses incurred in 2023 to settle a dispute

represent the costs incurred to settle a third-party

liability claim for damages.

In 2022 the Group incurred costs to settle a trade

dispute with a supplier consisting of payments for

materials not purchased by the Group in breach of

binding order commitments in the years 2019 and

2020 (USD 36,811 thousand), together with associated

interest penalties (USD 12,624 thousand; refer to note

6.12) and legal costs (USD 1,271 thousand). The

settlement was the result of a final and binding decision

received under trade settlement arbitration

proceedings.

The expenses from recharges primarily relate to costs

in connection with recharges for software maintenance

provided to related parties. Refer to note 12.

6.11 Finance income

Finance income comprises the following:

in thousands of U.S. dollars	2023	2022
Interest on financial assets measured at amortized cost:
Interest on cash and cash equivalents	10,463	1,836
Other:
Income from exchange rate differences	24,195	34,695
Total	34,658	36,531

Income from exchange rate differences is primarily

due to currency exchange rate gains on cash balances

denominated in Malaysian ringgit and euros and from

the translation effects of euro-denominated loans and

of euro-denominated cash. The net income (income

less expense disclosed in note 6.12) from exchange

rate differences increased to USD 109 thousand (2022:

expense of USD 2,366 thousand).

6.12 Finance costs

Finance costs comprise the following:

in thousands of U.S. dollars	2023	2022
Interest on financial liabilities measured at amortized cost:
Loans and borrowings	(12,173)	(6,619)
Other interest	(889)	(12,624)
Other:
Expenses from exchange rate differences	(24,087)	(37,061)
Other	—	(500)
Total	(37,149)	(56,804)

Other interest of USD 12,624 thousand incurred in

2022 refers to an arbitration award as discussed in

note 6.10.

Exchange rate expenses primarily result from the

translation effects of euro-denominated loans and of

Malaysian ringgit and euro-denominated cash.

In 2022, other items represent the write-down of a

financial asset received in lieu of unpaid overdue trade

receivables from a customer.

6.13 Income tax

Income taxes comprise German corporation and trade

taxes (plus solidarity surcharge), Belgian corporation

tax, French tax, and Malaysian tax on interest received.

United States federal income taxes have not been

incurred during the reporting period as no taxable

income was generated in that country or sufficient tax

losses were available to offset taxable income.

Belgium, the jurisdiction where the “ultimate parent

entity” (i.e. X-FAB Silicon Foundries SE) of the X-FAB

group is located, formally adopted the Pillar Two

(Global Minimum Tax) legislation in December 2023,

effective from 2024 onwards (i.e. for financial years

starting on or after December 31, 2023).

However, as a result of the demerger that took place

November 14, 2023 and applying the relevant scoping

rules under the Pillar Two legislation, the X-FAB Group

is not expected to fall in the scope of the Global

Minimum Tax rules until the financial year beginning

January 1, 2025.

	Annual Report 2023 | X-FAB consolidated financial statements

52

Since the Pillar Two legislation was not yet applicable at

the reporting date, the X-FAB group does not have

exposure to additional current taxes as a consequence

of the Pillar Two legislation. The Group has applied the

exception to recognizing and disclosing information

about deferred tax assets and liabilities related to Pillar

Two income taxes in accordance with the amendments

to IAS 12 issued in May 2023.

Income taxes comprised the following:

in thousands of U.S. dollars	2023	2022
Current taxes:
Actual income tax charge for the period	(8,243)	(6,420)
Adjustment of prior years’ tax charges	(841)	(483)
	(9,084)	(6,903)
Deferred taxes	15,795	22,332
Total	6,711	15,429

The Belgian tax rate applicable for the Group’s result

was 25.00% in 2023 and 2022 . The deferred tax assets

and liabilities of the foreign subsidiaries are valued

based on local tax rates. The Group’s various German

operations incur federal income taxes and local trade

taxes which result in overall applicable tax rates of

between 31.58% and 32.28%. The federal income tax

rate applicable to the Group’s earnings in the United

States is 21.00%, the tax rate applicable on earnings in

Malaysia amounts to 24.00%, and the tax rate

applicable to X-FAB France is 25.00%.

The reconciliation of the theoretical tax charge based

on the IFRS net income before tax is as follows for the

years 2023 and 2022:

in thousands of U.S. dollars	2023	2022
Result before taxes	155,184	37,062
Theoretical tax at combined applicable Belgian tax rate	(38,796)	(9,266)
Recognition of previously unrecognized deferred tax on timing differences and tax losses	58,100	39,810
Current year losses for which no deferred tax asset is recognized	(16,971)	(13,463)
Adjustment of prior period tax liabilities recorded in the current period	(841)	(483)
Effect of tax-free income	3,106	1,206
Currency effects	4,498	(93)
Effect of permanent differences	81	(290)
Effect of non-deductible expenditures	(236)	(169)
Effect of changes in applicable tax rates enacted during the year	—	—
Effect of different tax rates applying to foreign operations	(1,470)	(1,889)
Differences which are only valid for special taxes	(760)	66
Income/(expense) for income taxes recognized in the consolidated statement of profit or loss	6,711	15,429

Previously unrecognized deferred tax on timing

differences and tax losses results in deferred tax

income as the Group recognizes deferred tax on

timing differences and tax losses which are expected

to be realized in the near future. As described below,

the amount recognized in the statement of financial

position is based on the Group’s current business

planning. The amount reported consists of deferred

tax assets of USD 55,615 thousand recognized in the

Group’s Malaysian subsidiary at December 31, 2023

(December 31, 2022: USD 39,889 thousand), of

USD 7,949 thousand (December 31, 2022: USD 16,041

thousand) recognized in the US subsidiary and of

USD 20,518 thousand (December 31, 2022: USD 12,446

thousand). The income statement includes recognition

of previously unrecognized deferred tax on timing

differences and tax losses carried forward of

USD 58,100 thousand (previous year: USD 42,966

thousand) based on the carrying value at the reporting

date, less the amount recognized in the previous year,

after the amount recognized in the previous year had

been reduced by the assets utilized in the current year.

Current year losses for which no deferred tax asset is

recognized primarily arose in the current and previous

years at the Group’s subsidiary in France.

	Annual Report 2023 | X-FAB consolidated financial statements

53

Effects from tax-free income primarily relate to

various tax-exempted items of X-FAB Sarawak, for

example interest income, exchange rate gains, and

gains from fixed asset sales.

Currency effects mainly relate to the effect of changes

in exchange rates on tax carrying amounts

denominated in euros in 2023 and 2022.

The deferred tax assets and liabilities arise from

temporary differences and unused tax losses as follows:

in thousands of U.S. dollars	2023	2022
Deferred tax assets – unrecognized amounts
On unused tax losses	211,209	198,038
On temporary differences
Property, plant, and equipment/capital allowances	220,397	239,582
Other temporary differences	5,807	6,107
Total unrecognized deferred tax assets	437,413	443,727
Deferred tax assets – recognized amounts
On unused tax losses	34,976	39,313
On temporary differences
Property, plant, and equipment/capital allowances	51,505	33,709
Other temporary differences	(2,709)	(5,045)
Total recognized deferred tax assets	83,772	67,977

X-FAB SE Group recognizes deferred tax assets resulting

from temporary differences and from unused tax losses

which exceed the deferred tax liabilities only to the extent

that, on the basis of the Group’s business planning, the

realization of these assets is assessed as probable. This

assessment involves a review by management of profits

and losses expected in the business plan and limiting

recognition of the future tax benefits to take account of

potential variances against the business plan. Accordingly,

recognized and unrecognized deferred tax assets are

subject to estimation uncertainty, and there is a significant

risk that the carrying amounts will require adjustment in

subsequent periods. The estimates are, in particular,

subject to the estimation uncertainties inherent in

business planning which affect the likely utilization of

unused tax losses and subject to potential changes in

exchange rates which affect the size of timing

differences.

Unrecognized temporary differences on property,

plant, and equipment and other timing differences

which can be used to offset future taxable income

mainly relate to an investment tax allowance of the

Group's Malaysian subsidiary.

More specifically, for the assessment of future available

taxable profit a risk-adjusted profits approach was

applied to the forecasts included in the Group’s business

planning. This method was applied to reflect the risk that

actual taxable profits will fall short of the expectations.

The Board has determined that adjusting the expected

future taxable profits for this component by using a risk

factor is appropriate considering the inherent risk in the

semiconductor market and the specific exchange rate

volatility risks which affect the assessment. In addition,

the Board has determined that taxable income as from

2027 does not meet the “probable” threshold as

required under IFRS standards and is not taken into

account for the determination of the amount of

deferred tax assets to be recognized.

In particular, tax legislation in the jurisdictions in which

the Group operates provides for the full or partial

cancellation of unused tax losses on the occurrence of

significant changes in the direct or indirect equity

ownership of the taxable entity. Accordingly, there is a

risk that recognized and unrecognized deferred tax

assets may not be realized should such transactions

occur in the future.

X-FAB SE and its subsidiaries have unused corporation

tax losses as follows:

in thousands of U.S. dollars	2023	2022
Belgian tax loss carry forward	2,702	—
German corporation tax loss carry forward	128,606	141,136
German trade tax loss carry forward	163,885	180,007
U.S. federal tax loss carry forward	151,883	169,241
U.S. state tax loss carry forward	22,291	39,650
Malaysian tax loss carry forward	327,678	341,789
French tax loss carry forward	357,084	271,274

The Group’s French and German tax losses can be

carried forward indefinitely, whereby in France and

Germany there are restrictions on the amounts that

can be utilized in any specific year. U.S. federal tax

losses for years prior to 2018 expire, if unused, after a

period of 20 years. U.S. federal tax losses of USD 28.5

million expired in 2023 (2022: USD 4.8 million). The

Group estimates that further U.S. federal tax losses of

USD 27.8 million will expire in the year 2024 unless

utilized. Unabsorbed Malaysian business losses expire

after a period of seven years. The unused tax losses

changed as a result of tax losses in the year, tax losses

offset in the year, and, in addition, changes in currency

exchange rates. Insignificant changes resulted from

changes in estimates between the dates of

preparation of the previous year’s consolidated

financial statements and the finalization of the tax

returns and tax assessments of individual entities.

Significant deferred tax balances arise in respect of tax

losses carried forward and on timing differences on

property, plant, and equipment. A summary of the

movements is presented in the table below. Deferred

tax balances on other balance sheet positions are

presented on a combined basis for this purpose.

	Annual Report 2023 | X-FAB consolidated financial statements

54

in thousands of U.S. dollars	Tax losses carried forward	Property, plant, and equipment	Other temporary differences	Total
Balance at January 1, 2022	18,833	31,341	(4,529)	45,645
Recognized in profit and loss	20,480	2,368	(516)	22,332
Recognized in other comprehensive income	—	—	—	—
Balance at December 31, 2022	39,313	33,709	(5,045)	67,977
Set off of tax	—	1,141	(1,141)	—
Net balance at December 31, 2022	39,313	34,850	(6,186)	67,977
Balance at January 1, 2023	39,313	33,709	(5,045)	67,977
Recognized in profit and loss	(4,337)	17,796	2,336	15,795
Recognized in other comprehensive income	—	—	—	—
Balance at December 31, 2023	34,976	51,505	(2,709)	83,772
Set off of tax	—	1,215	(1,215)	—
Net balance at December 31, 2023	34,976	52,720	(3,924)	83,772

Changes in recognized deferred tax assets resulted in

a deferred tax income of USD 15,795 thousand (2022:

income of USD 22,332 thousand). The increase in

previously unrecognized deferred tax assets on

property, plant, and equipment and other timing

differences recognized in 2023 compared to 2022 is

due to a higher than previously anticipated level of

taxable income generated from current and future

planned operating results at the Group’s subsidiaries.

This has generated an increase in deferred tax assets in

timing differences available for offsetting against

taxable income in future periods..

No income tax expenses or income have been

recorded on items recorded within other

comprehensive income (previous year: none).

6.14 Earnings per share

The earnings per share is calculated by dividing the

profit for the period attributable to the ordinary

shareholders (as reported in the statement of profit or

loss and other comprehensive income) by the

weighted average number of shares in issue during the

period.

The weighted average number of ordinary shares is

identical to the number of ordinary shares in issue

during the years ended December 31, 2023, and

December 31, 2022.

No instruments with a potential diluting effect on

shareholders’ equity have been in issue during the

years ended December 31, 2023, and December 31,

2022. Accordingly, there is no potential dilution of the

profit attributable to equity shareholders and no

difference between basic and diluted earnings per

share.

	Annual Report 2023 | X-FAB consolidated financial statements

55

7 Notes to the statement of financial position

7.1 Property, plant, equipment, and investment properties

in thousands of U.S. dollars	Land	Buildings	Technical machinery and equipment	Factory and office equipment	Assets under construction	Total
Net book value January 1, 2023	14,080	35,029	235,678	6,619	168,720	460,126
Accumulated historical cost January 1, 2023	14,292	112,027	1,175,354	33,288	168,720	1,503,681
Additions	15	2,147	60,105	2,610	291,619	356,496
Disposals	—		(5,454)	(1,685)	—	(7,139)
Reclassifications	—	15,431	95,982	1,903	(113,416)	(100)
Effect of changes in exchange rates	—	—	—	(182)	—	(182)
Accumulated historical cost December 31, 2023	14,307	129,605	1,325,987	35,934	346,923	1,852,756
Accumulated depreciation January 1, 2023	(212)	(76,998)	(939,676)	(26,669)	—	(1,043,555)
Additions	(30)	(3,826)	(74,129)	(3,649)	—	(81,634)
Disposals	—	—	5,266	1,513	—	6,779
Reclassifications	—	—	—	—	—	—
Effect of changes in exchange rates	—	—	—	142	—	142
Accumulated depreciation December 31, 2023	(242)	(80,824)	(1,008,539)	(28,663)	—	(1,118,268)
Net book value December 31, 2023	14,065	48,781	317,448	7,271	346,923	734,488
Net book value January 1, 2022	14,110	37,843	209,401	5,816	73,500	340,670
Accumulated historical cost January 1, 2022	14,292	111,273	1,095,858	31,408	73,500	1,326,331
Additions	—	88	28,738	2,266	159,463	190,555
Disposals	—	—	(11,275)	(1,943)	—	(13,218)
Reclassifications	—	666	62,033	1,530	(64,243)	(14)
Effect of changes in exchange rates	—	—	—	27	—	27
Accumulated historical cost December 31, 2022	14,292	112,027	1,175,354	33,288	168,720	1,503,681
Accumulated depreciation January 1, 2022	(182)	(73,430)	(886,457)	(25,592)	—	(985,661)
Additions	(30)	(3,568)	(64,419)	(2,973)	—	(70,990)
Disposals	—	—	11,200	1,889	—	13,089
Reclassifications	—	—	—	23	—	23
Effect of changes in exchange rates	—	—	—	(16)	—	(16)
Accumulated depreciation December 31, 2022	(212)	(76,998)	(939,676)	(26,669)	—	(1,043,555)
Net book value  December 31, 2022	14,080	35,029	235,678	6,619	168,720	460,126

	Annual Report 2023 | X-FAB consolidated financial statements

56

Property, plant, and equipment

Additions in technical machinery and equipment and

additions in assets under construction mainly refer to

capital investments in technical machinery in X-FAB

France (USD 104 million, 2022: USD 58 million), X-FAB

Sarawak (USD 145 million, 2022: USD 58 million), X-

FAB Texas (USD 68 million, 2022: USD 41 million), X-

FAB Erfurt (USD 6 million2022: USD 6 million), X-FAB

Dresden (USD 24 million, 2022: USD 18 million), X‑FAB

MEMS Foundry Itzehoe (USD 4 million, 2022:

USD 1 million), and X‑FAB MEMS Foundry

(USD 5 million, 2022: USD 7 million). Assets under

construction primarily include investments in technical

machinery. Additions in property, plant, and equipment

resulted in cash outflows in 2023 of USD 337,789

thousand (2022: USD 180,580 thousand). Refer to the

statement of cash flows.

The Group has not received investment grants related

to the acquisition of qualifying assets (2022: USD 945

thousand).

No impairment tests were performed in the financial

year ended December 31, 2023 as there were no

triggering events that would have required impairment

tests to be performed.

Accumulated historical costs have been reduced by

investment grants received of USD 137,573 thousand

(December 31, 2022: USD 137,517 thousand) and

accumulated depreciation has been reduced by

USD 129,066 thousand (December 31, 2022:

USD 126,149 thousand).

At December 31, 2023, property, plant, and equipment

with a book value of USD 17 million (December 31,

2022: USD 23 million) had been provided as collateral

security to third-party lenders. The carrying values of

technical machinery and equipment include USD 17.6

million (December 31, 2022: USD 21.4 million) which are

not owned by the Group but which are held under

leasing arrangements as disclosed in note 11.

Investment properties

Investment properties consist of properties let to third

parties by X‑FAB GmbH, X‑FAB Dresden, X‑FAB

Texas, and X‑FAB France. The lease arrangements, the

majority of which expire at various dates until 2024,

continue after expiry unless canceled by either party

within notice periods of between one month and six

months.

Investment properties are accounted for at purchase

cost less straight-line depreciation. The book and fair

values of these properties at the reporting date were

as follows:

in thousands of U.S. dollars	2023	2022
Net book value, beginning of period	7,674	8,309
Additions	—	—
Depreciation	(503)	(635)
Disposals	—	—
Reclassifications	—	—
Net book value, end of period	7,171	7,674
Accumulated cost	33,647	33,647
Accumulated depreciation	(26,476)	(25,974)
Fair value	34,714	32,845

Properties are reclassified between the land and

buildings and investment properties classifications

when there is a change in the use of the property (for

example, when a property previously used by the

Group is let to third parties or the Group uses a

property previously let to third parties).

Additions to investment properties represents work

capitalized on the Group’s existing investment

properties.

The fair values of the investment properties relate to

properties in Germany (December 31, 2023:

USD17,439 thousand; December 31, 2022: 17,025

thousand), the USA (December 31, 2023: USD 2,081

thousand; December 31, 2022: 1,698 thousand), and

France (December 31, 2023: USD1 4,617 thousand;

December 31, 2022: 14,122 thousand). The fair value

measurements of the investment properties have

been categorized as a Level 3 fair value based on the

inputs to the valuation techniques used. The valuations

disclosed of the Group’s investment properties are

updated annually. In the U.S. and in France the

valuations were performed by independent third-party

experts with the appropriate professional qualifications

and the necessary expertise in the location and

category of property. In Germany they are performed

by the management of X‑FAB SE Group, calculated on

the basis of discounted future cash flows, and

discounting future rents at a rate of 6.0%

(December 31, 2022: 4.0%). The valuation model takes

into account the rent per square meter, expected

rental growth rates, other costs, and the maturity of

the contracts.

No impairment charges were recorded against

investment properties in 2023 or 2022.

	Annual Report 2023 | X-FAB consolidated financial statements

57

The following table sets out a maturity analysis of lease

payments which will be received in respect of

investment properties, showing the undiscounted

lease payments to be received after the reporting

date.

in thousands of U.S. dollars	2023	2022
2023		5,017
2024	5,835	5,630
2025	5,796	1,797
2026	2,513	1,797
2027	2,091	1,371
2028	1,125	—
Total	17,360	15,612

7.2 Intangible assets

The movements on intangible assets were as follows:

in thousands of U.S. dollars	Licenses	Payments on account	Total
Net book value January 1, 2023	4,381	1,818	6,199
Accumulated historical cost January 1, 2023	61,556	1,818	63,374
Additions	760	1,398	2,158
Disposals	(73)	—	(73)
Reclassifications	1,694	(1,594)	100
Effect of changes in exchange rates	—	—	—
Accumulated historical cost December 31, 2023	63,937	1,622	65,559
Accumulated amortization January 1, 2023	(57,175)	—	(57,175)
Additions	(2,830)	—	(2,830)
Disposals	73	—	73
Accumulated amortization December 31, 2023	(59,932)	—	(59,932)
Net book value December 31, 2023	4,005	1,622	5,627
Net book value January 1, 2022	2,656	1,378	4,034
Accumulated historical cost January 1, 2022	71,374	1,378	72,752
Additions	2,314	2,335	4,649
Disposals	(14,106)	—	(14,106)
Reclassifications	1,888	(1,895)	(7)
Effect of changes in exchange rates	86	—	86
Accumulated historical cost December 31, 2022	61,556	1,818	63,374
Accumulated amortization January 1, 2022	(68,718)	—	(68,718)
Additions	(2,563)	—	(2,563)
Disposals	14,106	—	14,106
Accumulated amortization December 31, 2022	(57,175)	—	(57,175)
Net book value December 31, 2022	4,381	1,818	6,199

Disposals refer to software licenses from which the

Group obtains no further benefit.

Intangible assets in the statement of financial position

do not include any capitalized costs of internally

generated assets. Payments on account refer to

advance and milestone payments made for the

acquisition of software licenses and the customization

of such software in a project not yet fully completed.

Refer to note 4.9.

No impairment against the carrying values of payments

on account was recorded in 2023 or 2022.

7.3 Inventories

Inventories comprise the following:

in thousands of U.S. dollars	2023	2022
Materials and supplies	163,949	124,760
Work in progress	105,765	95,383
Finished goods	6,749	3,723
Merchandise	6	6
Write-downs	(7,242)	(9,437)
Total	269,227	214,435

	Annual Report 2023 | X-FAB consolidated financial statements

58

Changes in work in progress and finished goods

totaling USD 20,244 thousand were included in cost of

sales in 2023 (2022: USD 14,824 thousand). Write-

downs are recorded against inventories and

recognized as an expense in cost of sales in the period

of USD 739 thousand (2022: USD 2,397 thousand).

There have not been any reversals of write-downs.

Inventories wholly represent amounts which are

expected to be realized within 12 months.

Inventories for the manufacture of wafers under

contracts for which sales are recognized over time are

not recognized in work in process; instead they are

recorded as an expense within cost of sales with the

associated rights to consideration for work completed

but not invoiced at the reporting date recognized

within contract assets (note 7.4 below).

7.4 Contract assets

Contract assets relate to the Group’s rights to

consideration for work completed but not invoiced at

the reporting date on wafer sales recognized over

time. No impairment charges have been recognized on

contract assets. The contract assets are transferred to

receivables when the rights become unconditional.

This usually occurs when the Group issues an invoice to

the customer.

7.5 Trade and other receivables

Trade receivables and other receivables comprise the

following:

in thousands of U.S. dollars	2023	2022
Trade accounts receivable	121,646	43,989
Amounts due from related party entities	2,774	30,214
Allowances	(1,319)	(1,087)
Total	123,101	73,116

The increase in trade accounts receivable and

corresponding decrease in amounts due from related

party entities is largely due to the reclassification of

amounts receivable from entities which were classified

as related parties until November 14, 2023 (refer to

note 12).

Trade receivables are generally on 30 to 90-day terms

and are non-interest bearing. They are classified as

financial assets at amortized cost for financial reporting

purposes. Under consideration of allowances made,

the fair values of trade receivables approximate their

carrying amount. The amounts due from related

parties are in respect of trade accounts receivable

balances.

As at December 31, the aging analysis of trade

accounts receivables (third parties, net of allowances)

is as follows:

in thousands of U.S. dollars	2023	2022
Neither past due nor impaired	83,269	31,463
Past due 1–30 days	24,149	9,207
Past due 31–60 days	941	1,592
Past due 61–360 days	11,968	640
Past due >360 days	—	—
Total	120,327	42,902

The Group measures the expected credit losses of

trade receivables by using an allowance matrix to

measure the expected losses on trade receivable

balances, including those with related parties. The

allowances are based on the number of days each

balance is overdue. The assessment of expected

losses on trade receivable balances that are not

impaired is based on past experience of credit losses,

which the Group considers to be a reasonable

approximation of the losses that can be expected in

future periods since there are no indications that there

will be significant changes in the industry going

forward. An analysis of receivables by geographic

region or by type of customer is not made since X‑FAB

mainly deals with global customers and hence there is

no significant difference in risks between the

geographic regions where X‑FAB is active or the type

of customers served by X‑FAB. The amount of trade

receivables due from related parties is disclosed

separately from trade receivables in the table above

and in the related party disclosures in note 12 below.

In addition, X‑FAB recorded several additional

allowances on individual case-by-case assessments for

credit-impaired balances.

The following tables provide information on the

exposure to credit risk and the loss allowances made

for balances which are not credit impaired as at

December 31, 2023, and December 31, 2022:

December 31, 2023
in thousands of U.S. dollars	Weighted average loss rate	Gross carrying amount	Loss allowance
Neither past due nor impaired	0.08%	94,756	(76)
Past due 1–30 days	0.08%	24,149	(19)
Past due 31–60 days	1.50%	941	(14)
Past due 61–90 days	3.75%	869	(33)
More than 90 days past due (less credit impaired)	9.75%	2,386	(233)
Total		123,101	(375)

	Annual Report 2023 | X-FAB consolidated financial statements

59

December 31, 2022
in thousands of U.S. dollars	Weighted average loss rate	Gross carrying amount	Loss allowance
Neither past due nor impaired	0.08%	61,589	(49)
Past due 1–30 days	0.08%	8,917	(7)
Past due 31–60 days	1.50%	1,388	(21)
Past due 61–90 days	3.75%	264	(10)
More than 90 days past due (less credit impaired)	9.75%	958	(93)
Total		73,116	(180)

in thousands of U.S. dollars	2023	2022
Balance at January 1	(1,087)	(1,028)
Impairment loss recognized	(4)	(58)
Use of allowance	(33)	2
Reversal of allowance	—	27
Net remeasurement of loss allowance	(195)	(30)
Balance at December 31	(1,319)	(1,087)

There are no balances which were written off during

the period and which continue to be the subject of

collection processes.

7.6 Other assets

Other assets comprise the following:

in thousands of U.S. dollars	2023	2022
Other assets	50,064	55,768
Other non-current assets	58	79
Total	50,122	55,847

Current other assets comprise the following:

in thousands of U.S. dollars	2023	2022
R&D grants receivable	25,188	22,537
Prepaid expenses	13,072	20,700
Receivables from energy surcharges	5,116	4,872
Taxes (other)	5,658	5,676
Investment grants and subsidies receivable	—	1,170
Deposits	543	535
Other	487	278
Total	50,064	55,768

Research and development grants receivable in 2023

include USD 10,343 thousand research and

development tax credits and competitiveness and

employment tax credits attributable to X‑FAB France

(December 31, 2022: USD 20,194 thousand).

Research and development tax credits and

competitiveness and employment tax credits

attributable to X‑FAB France totaling USD 8,510

thousand (2022: USD 8,227 thousand) were sold

without recourse to a bank in 2023. The carrying

amounts of the credits sold generated cash inflows of

USD 7,639 thousand (2022: USD 7,245 thousand) net

of USD 871 thousand representing interest expenses

and fees (2022: USD 982 thousand). On initial

recognition, X‑FAB France presents the grant

receivables as a reduction of cost of sales and research

and development expenses, consistent with the

Group’s general presentation of subsidized expenses.

The sales accelerate the cash inflows from tax credits;

in the normal course of events where the credits are

not sold they can be offset against income tax payable

by X‑FAB France or will be paid to X‑FAB France at a

subsequent date if there is no income tax to be paid.

Due to the sale, these repayments will be received by

the bank directly. There are no remaining ongoing

obligations to be fulfilled by X‑FAB France in respect

of the tax credits and the credits have been

derecognized and the amounts received by the bank

have been recognized as cash and cash equivalents.

Prepaid expenses refer to prepayments made for raw

materials.

The deposits mainly represent security deposits

provided as collateral security and are classified as

current assets as they are either in connection with

contractual arrangements which may be canceled at

short notice or are expected to be released within

12 months on other grounds.

7.7 Cash and cash equivalents

Cash and cash equivalents comprise the following:

in thousands of U.S. dollars	2023	2022
Cash and bank balances	157,545	367,221
Restricted cash	4,018	—
Term deposits	244,138	2,204
Total	405,701	369,425

Term deposits and some cash at bank balances earn

interest at floating rates based on daily bank deposit

rates. Restricted cash refers to pledged cash against

bank guarantee facilities for electricity charges and

custom clearance charges in X‑FAB Sarawak. The fair

values of cash and short-term deposits are identical to

the carrying amounts.

	Annual Report 2023 | X-FAB consolidated financial statements

60

7.8 Equity

Share capital

X‑FAB Silicon Foundries SE had 130,781,669 fully paid-

in ordinary shares in issue at December 31, 2023, and

December 31, 2022. Each share carries one vote at the

Company’s general meetings. There are no unissued

shares authorized for issue.

Share premium

The share premium of X‑FAB Silicon Foundries SE

represents the excess of paid-in capital for shares at

the time of their issue over the fractional value of the

shares.

Retained earnings

Retained earnings represent the accumulated profits

and losses of the Group together with the

accumulated balance of the remeasurement of the

Group‘s defined benefit post-employment benefit

plans.

Other comprehensive income includes an amount of

USD 2,287 thousand to record the accumulated effect

of wafer sales recognized over time at the beginning of

the reporting period.

Cumulative translation adjustment

The translation reserve comprises all foreign currency

differences arising from the translation of the financial

statements of foreign operations that have functional

currencies other than USD.

Treasury shares

At December 31, 2023 the Group held 149,748 treasury

shares of X‑FAB Silicon Foundries SE held by its fully

owned subsidiary X‑FAB GmbH. Based on the

purchase price of EUR 11.25 per share, the treasury

shares reduced the equity capital of the parent

company by USD 770 thousand (December 31, 2022:

USD 770 thousand).

Share-based payment arrangements

The Group had no share-based payment

arrangements and no share option programs during

the years ended December 31, 2023, or December 31,

2022.

Authorization to acquire treasury shares

In accordance with the Belgian Companies and

Associations Code, the Articles of Association permit

the Company to acquire, on or outside the stock

market, its own shares, profit-sharing certificates or

associated certificates by resolution approved by the

shareholders’ meeting by a majority of at least 75% of

the votes cast where at least 50% of the share capital

and at least 50% of the profit certificates, if any, are

present or represented. Prior approval by the

shareholders is not required if the Company purchases

the shares in order to offer them to the Company’s

employees.

The shares, profit-sharing certificates, or associated

certificates can only be acquired with funds that would

otherwise be available for distribution as dividend. The

total nominal value or fractional value of the shares,

profit-sharing certificates, or associated certificates

held by the Company can at no time be more than 20%

of the share capital. Voting rights attached to shares

held by the Company as treasury shares are

suspended.

On April 28, 2022, an extraordinary shareholders’

meeting authorized the Board of Directors to purchase

up to 20% of the outstanding shares, for a price not

lower than 10% below the lowest closing price in the last

30 trading days preceding the transaction and not

more than 5% above the highest closing price during

the last 30 trading days preceding the transaction. This

authorization is valid for five years from April 28, 2022.

The above authorization is also valid if the acquisition

was made by one of the subsidiaries directly controlled

by the Company, as set out in Article 5 SE Regulation

juncto Article 7:221 of the Belgian Companies and

Associations Code.

The Board of Directors is authorized to divest all or

part of the shares, profit-sharing certificates, or

associated certificates at a price it determines, on or

outside the stock market or in the framework of its

remuneration policy to employees, directors, or

consultants of the Company, or to prevent any serious

and imminent harm to the Company. This authorization

is valid without any restriction in time, except when the

divestment is made to prevent serious and imminent

harm to the Company, in which case the authorization

is only valid for three years as from the date of the

publication of the authorization in the Annexes to the

Belgian State Gazette (Belgisch Staatsblad/Moniteur

belge) (i.e. May 2, 2022). The authorization covers the

divestment of the shares, profit-sharing certificates, or

associated certificates by a direct subsidiary of the

Company, as set out in Article 5 SE Regulation juncto

Article 7:221 of the Belgian Companies and

Associations Code.

7.9 Dividends

No dividends were resolved or paid in the years 2023

or 2022.

Under Belgian company law, the shareholders decide

on the distribution of profits at the annual

shareholders’ meeting, based on the latest audited

statutory accounts of the Company. Dividends may be

paid either in cash or in kind. However, shareholders

may not declare a dividend if the Company has not first

reserved at least 5% of its profits for the financial year

until such reserve has reached an amount equal to 10%

of its share capital (the “Legal Reserve”) or if, following

any such dividend, the level of the net assets adjusted

for the unamortized balance of the incorporation costs

and capitalized research and development costs of the

Company falls below the amount of the Company’s

paid-in-capital and of its non-distributable reserves.

The Board of Directors may pay an interim dividend,

provided certain conditions set forth in Belgian

company law are met.

	Annual Report 2023 | X-FAB consolidated financial statements

61

7.10 Non-controlling interests

Non-controlling interests in the previous year

represented a 5.1% interest in the subsidiary GVG

which was held by external shareholders until its

acquisition by the X‑FAB Group on September 1, 2022.

GVG, which has subsequently been merged into a

wholly owned Group subsidiary, was a property

management company responsible for the

administration of certain of the Group’s properties in

Dresden, Germany. GVG’s net profit for the financial

year 2022 until the date on which the non-controlling

interests were acquired amounted to USD 595

thousand. At the date on which the non-controlling

interests were acquired GVG had total assets

amounting to USD 8,777 thousand, liabilities of

USD 3,996 thousand, and equity of USD 4,781

thousand. The purchase price paid to acquire the non-

controlling interest amounted to USD 204 thousand

and was paid in cash. As GVG was already controlled by

the X‑FAB Group, the purchase of additional shares in

the subsidiary (so reducing NCI) did not result in the

recognition goodwill or other adjustments to the initial

accounting for the consolidation of the entity and the

transaction was wholly recognized within equity as a

transaction with owners of the entity. The currency

translation effect of the retranslation of non-

controlling interests in GVG is not material to the

movements on other comprehensive income or the

statement of changes in equity.

7.11 Loans and borrowings

The Group has unused credit lines available under bank

loan facilities as follows:

in thousands of U.S. dollars	2023	2022
Unused credit lines
Unused part of multicurrency revolving credit facility denominated in EUR or in USD – variable rates	19,000	2,000
Interest rate USD: SOFR +1.25%
Interest rate EUR: EURIBOR +1.0%
Unused credit lines denominated in EUR – fixed rates	7,735	7,473
Interest rate: 6.47–6.51%
Other unused credit lines denominated in EUR – variable rates	2,210	2,135
Interest rates: EURIBOR +2.5%

	Annual Report 2023 | X-FAB consolidated financial statements

62

The carrying amounts of the Group’s loans and borrowings at December 31 are shown in the following table:

in thousands of U.S. dollars	2023	2022
Bank loans and overdrafts
Variable interest bank overdrafts in EUR
Maturity: 2023	—	2
Interest rates: EURIBOR + 2.5%
Fixed interest bank loans denominated in EUR	47,373	67,380
Maturity: 2024–2029
Interest rates: 0.85–2.3%
Repayments in monthly or quarterly installments
Fixed interest bank loans denominated in USD	405	—
Maturity: 2028
Interest rates:.8.25–8.5%
Repayments in monthly installments/on maturity
Variable interest revolving credit facility denominated in USD	99,876	138,998
Maturity: 2024
Interest rates: SOFR + 1.67%
Repayment on maturity
Variable interest revolving credit facility denominated in EUR	91,715	64,056
Maturity: 2024
Interest rates: EURIBOR + 1.0%
Repayment on maturity
Leasing arrangements
Leasing liabilities denominated in EUR	11,230	13,467
Maturity: 2024–2034
Interest rates: 0.15–3.57%
Repayment in monthly installments
Leasing liabilities denominated in USD	6,526	7,018
Maturity: 2024–2034
Interest rates: 3.32%
Repayment in monthly installments
Leasing liabilities denominated in MYR	3,852	6,024
Maturity: 2024–2025
Interest rates: 4.66%
Repayment in monthly installments
Total	260,977	296,945
Current loans and borrowings	218,316	233,513
Non-current loans and borrowings	42,661	63,432

	Annual Report 2023 | X-FAB consolidated financial statements

63

Variable interest bank loans include loans amounting to

USD 98,000 thousand and EUR 83,000 thousand

(December 31, 2022: USD 138,000 thousand and

EUR 60,000 thousand) under the EUR 200,000,000

multicurrency revolving facility agreement (“the

facility”) entered into between the parent company

and its principal subsidiaries and a syndicate of eight

international banks on December 1, 2021. The credit

facility is for a five-year period until December 2026,

with an option for X‑FAB to request an extension of

the facility’s maturity date until December 2027. The

option is exercisable not earlier than 90 days prior to

and not 45 days later than prior to the initial

termination date of November 30, 2026.

Borrowings under the facility are reported as current

liabilities as, at the reporting date the Group does not

expect to refinance or roll over these obligations for at

least 12 months after the reporting date under the

existing loan facility.

The movements on loans and borrowing include

exchange rate losses of USD 4,415 thousand resulting

from the translation of euro-denominated loans and

borrowings (2022: exchange rate gains of USD 1,151

thousand).

The fair values of the Group’s loans and borrowings are

presented in note 10.

Approximately 27% of the Group’s borrowings are at a

fixed rate of interest (December 31, 2022: 32%). Refer

to note 10.Bank loans and overdrafts of USD 10,298

thousand (2022: USD 18,548 thousand) are secured by

charges on plant and machinery and land (see note 7.1).

Contractual maturities

The contractual maturities of the Group’s non-

derivative financial liabilities (including lease liabilities)

at December 31, 2023, and December 31, 2022, are

shown in the table below. The amounts presented in

the table are undiscounted and do not include interest

as most of the liabilities are linked to credit facilities for

which interest can fluctuate over time depending on

the level of the used part of these facilities:

in thousands of U.S. dollars	2023	2022
2023		230,414
2024	215,469	22,440
2025	19,484	18,965
2026	13,853	13,472
2027	2,860	2,860
2028-2034	9,311	8,794
Total	260,977	296,945

The Group is exposed to a liquidity risk in that the

maturity of bank loan agreements, which are presented

based on the contractual payment obligations, could

be brought forward should the Group fail to comply

with its contractual obligations under the bank loan

agreements.

	Annual Report 2023 | X-FAB consolidated financial statements

64

The following table provides a reconciliation of the movements in liabilities to the cash flows arising from financing

activities for the year 2023:

in thousands of U.S. dollars	Liabilities		Equity
	Loans and borrowings	Lease liability	Share capital	Share premium	Retained earnings	NCI	Total
Balance at December 31, 2022	270,434	26,509	432,745	348,709	16,508	—	1,094,905
Changes from financing cash flows
Proceeds from loans and borrowings	205,784	—	—	—	—	—	205,784
Repayment of loans and borrowings	(241,806)	—	—	—	—	—	(241,806)
Repayment of loans and borrowings from related parties	—	—	—	—	—	—	—
Receipts from sale and leaseback arrangements	—	—	—	—	—	—	—
Payments of lease liabilities	—	(5,512)	—	—	—	—	(5,512)
Interest paid	(11,630)	—	—	—	—	—	(11,630)
Payment of preference dividend	—	—	—	—	—	—	—
Distribution to non- controlling interests	—	—	—	—	—		—
Receipt of investment government grants and subsidies	—	—	—	—	—	—	—
Total changes from financing cash flows	(47,652)	(5,512)	—	—	—	—	(53,164)
Other changes
Effect of changes in foreign exchange rates	4,414	23	—	—	—	—	4,437
Liability related
New leases in prior year, funds received in current year	—	—	—	—	—	—	—
Prolongation of existing lease contracts	—	588	—	—	—		588
Interest expenses	12,173	—	—	—	—	—	12,173
Gain on derecognition of financial liability	—	—	—	—	—	—	—
Equity related	—	—	—	—	163,650	—	163,650
Total liability-related other changes	12,173	588	—	—	—	—	12,761
Total equity-related other changes	—	—	—	—	163,650	—	163,650
Balance at December 31, 2023	239,369	21,608	432,745	348,709	180,158	—	1,222,589

	Annual Report 2023 | X-FAB consolidated financial statements

65

The following table provides a reconciliation of the movements in liabilities to the cash flows arising from financing

activities for the year 2022:

in thousands of U.S. dollars	Liabilities		Equity
	Loans and borrowings	Lease liability	Share capital	Share premium	Retained earnings	NCI	Total
Balance at December 31, 2021	96,773	30,257	432,745	348,709	(36,155)	365	872,694
Changes from financing cash flows
Proceeds from loans and borrowings	184,272	—	—	—	—	—	184,272
Repayment of loans and borrowings	(11,420)	—	—	—	—	—	(11,420)
Repayment of loans and borrowings from related parties	—	—	—	—	—	—	—
Receipts from sale and leaseback arrangements	—	7,723					7,723
Payments of lease liabilities	—	(5,662)	—	—	—	—	(5,662)
Interest paid	(5,188)	—	—	—	—	—	(5,188)
Payment of preference dividend	—	—	—	—	—	—	—
Distribution to non- controlling interests	—	—	—	—	—	(11)	(11)
Receipt of investment government grants and subsidies	—	—	—	—	—	—	—
Total changes from financing cash flows	167,664	2,061	—	—	—	(11)	169,714
Other changes
Effect of changes in foreign exchange rates	(622)	(543)	—	—	—	—	(1,165)
Liability related
New leases in prior year, funds received in current year	—	(7,190)	—	—	—	—	(7,190)
Prolongation of existing lease contracts	—	1,924	—	—	—	—	1,924
Interest expenses	6,619	—	—	—	—	—	6,619
Gain on derecognition of financial liability	—	—	—	—	—	—	(6,563)
Equity related	—	—	—	—	52,663	—	52,663
Total liability-related other changes	6,619	(5,266)	—	—	—	—	1,353
Total equity-related other changes	—	—	—	—	52,663	(354)	52,309
Balance at December 31, 2022	270,434	26,509	432,745	348,709	16,508	—	1,094,905

	Annual Report 2023 | X-FAB consolidated financial statements

66

7.12 Other non-current liabilities

Other non-current liabilities primarily comprise defined

benefit pension obligations and deferred rental

income.

Other non-current liabilities include an amount of

USD 3,967 thousand at December 31, 2023

(December 31, 2022: USD 3,967 thousand),

representing the net defined benefit obligations under

a long-service retirement lump-sum payment scheme

at the Group’s subsidiary X‑FAB France. An additional

USD 730 thousand (December 31, 2022: USD 546

thousand) of defined benefit obligations relating to

this plan are recorded as other current liabilities. The

net defined benefit obligation consists of defined

benefit obligations under the scheme of USD 9,057

thousand (December 31, 2022: USD 8,547 thousand)

less plan assets recorded at their fair values of

USD 4,360 thousand (December 31, 2022: USD 4,034

thousand). Under this scheme, X‑FAB France awards

its employees a lump-sum payment on reaching

retirement age of 65 (for management employees)

and 62 (for other employees). The payment is

dependent on the final salary of the employee and the

length of time the employee has been employed by

X‑FAB France. Employees are not required to

contribute to the plan. The liability recognized for the

future defined benefit obligation under this scheme is

presented net of the funding plan assets which are

“ring fenced” to meet obligations under the scheme.

The plan assets at December 31, 2023 consist of

investments in a fund that is managed by a financial

institution of which the underlying assets relate to

long-term bonds with capital guarantees of USD 1,969

thousand at December 31, 2023 (December 31, 2022:

USD 1,844 thousand) and equity savings plans with a

value of USD 2,391 thousand at December 31, 2023

(December 31, 2022: USD 2,189 thousand).

Accordingly, there are risks typical of such defined

benefit obligations, i.e. actuarial risks associated with

the uncertainties of the estimated obligations under

the scheme and with the anticipated performance of

the investment assets held to offset the obligations

under the scheme.

in thousands of U.S. dollars	DBO	Fair value of plan assets	Net defined benefit liability
January 1, 2023	8,547	(4,034)	4,513
Included in profit or loss:
Current service cost	674	—	674
Past service cost/curtailment	—	—	—
Currency effects from conversion into USD	304	(282)	22
Included in OCI:
Return on plan assets	—	(44)	(44)
Actuarial losses	577	—	577
Other:
Contributions paid by the employer	(1,045)	—	(1,045)
Benefits paid		—	—
December 31, 2023	9,057	(4,360)	4,697
			—
January 1, 2022	9,974	(4,354)	5,620
Included in profit or loss:
Current service cost	484	—	484
Past service cost	—	—	—
Currency effects from conversion into USD	(563)	431	(132)
Included in OCI:
Return on plan assets	—	(111)	(111)
Actuarial losses	(295)	—	(295)
Other:
Contributions paid by the employer	—	—	—
Benefits paid	(1,053)	—	(1,053)
December 31, 2022	8,547	(4,034)	4,513

	Annual Report 2023 | X-FAB consolidated financial statements

67

The primary assumptions made in calculating the

defined benefit obligation were as follows:

in thousands of U.S. dollars	2023	2022
Discount rate	3.18%	3.36%
Employee turnover	5.00%	5.00%
Social security costs	47.00%	47.00%

The discount rate used is calculated by reference to

marked yields on high quality corporate bonds. Future

salary growth is assumed to be 1.0% higher than

inflation (December 31, 2022: 1.0%). Assumptions

regarding future mortality have been based on

published statistics and mortality tables.

The Group expects to pay no contributions to the

funding plan in 2024.

Reasonably possible changes at December 31, 2023,

and December 31, 2022, to one of the actuarial

assumptions, holding other assumptions constant,

would have affected the defined benefit obligation

changing the discounted amounts of the net liability by

the amounts shown below:

in thousands of U.S. dollars	Increase at Dec. 31, 2023	Decrease at Dec. 31, 2023	Increase at Dec. 31, 2022	Decrease at Dec. 31, 2022
Discount rate (+0.25% movement)		153	—	124
Future salary growth (+0.25% movement)	163		132	—

The defined benefit obligation is not materially

sensitive to a reasonable potential change in the

assumed mortality rate.

7.13 Trade payables and other current liabilities

Trade payables are non-interest bearing and are

normally settled on 60-day terms. Trade payables

increased from USD 53,654 thousand at December 31,

2022, to USD 90,681 thousand at December 31, 2023.

This increase was influenced by the general increase of

business and increases in investments in property,

plant, and equipment.

Other current liabilities comprise the following:

in thousands of U.S. dollars	2023	2022
Accrued liabilities	39,606	31,464
For invoices not yet received	37,385	29,280
Royalties	682	419
Sales commissions	415	349
Staff association costs	632	691
Other	492	725
Advances received	301,287	31,127
Deferred income	(29)	298
Employee-related liabilities	26,722	24,958
Wages	3,165	2,992
Earned holiday entitlement, incentives	17,419	15,556
Payroll taxes	1,358	2,377
Social security costs	4,780	4,033
Other	(4)	(4)
Total	367,582	87,843

Advances received relate to prepayments from

customers for future wafer sales of USD 29,186

thousand (December 31, 2022: USD 20,852 thousand)

and capacity reservation deposits received under

long‑term agreements concluded with customers of

USD 272,101 thousand (December 31, 2022: USD 10,275

thousand). These amounts represent contract liabilities

as defined in IFRS 15 and, depending on the respective

agreements with the customer, will be settled by

offsetting advances received against deliveries of

wafers made or by settlement against trade accounts

receivable within the next three to five years.

All prepayments from customers for future wafer sales

and capacity reservation deposits are recorded as

current or non-current based on the usual classification

principles, i.e., items that are settled within the normal

operating cycle are classified as current, even if they

are expected to be settled after twelve months.

However, the Group expects prepayments from

customers for future wafer sales and capacity

reservation deposits totaling USD 261,914 thousand to

be settled after more than 12 months.

Liabilities for social security costs at December 31,

2023, and December 31, 2022, include deferred

payments of amounts due by X‑FAB France in

accordance with the terms of a government support

scheme to alleviate the economic effects of the

Covid-19 pandemic.

	Annual Report 2023 | X-FAB consolidated financial statements

68

7.14 Provisions

Provisions comprise the following:

in thousands of U.S. dollars	2023	2022
Current provisions	9,775	7,413
Non-current provisions	56	56
Total	9,831	7,469

Current provisions primarily relate to warranty costs.

Warranty provisions are estimated based on the

Group’s experience of past claim rates and knowledge

of current claims together with an assessment of

rectification costs. Increased business resulted in an

increase in warranty provisions in the financial year.

Non-current provisions refer to anniversary bonuses

for employees accounted for in accordance with

IAS 19, which include estimates of future staff turnover,

based on the Group’s experience of staff turnover

rates in recent years.

The movements on provisions during the year were as

follows:

in thousands of U.S. dollars	Warranty provisions	Employee provisions	Other	Total
January 1, 2023	6,854	616	—	7,470
Provided for	3,687	10	1,000	4,697
Utilized	(1,500)	(50)	—	(1,550)
Released	(535)		(287)	(822)
Effect of changes in exchange rates	17	17	3	37
December 31, 2023	8,523	593	716	9,832

in thousands of U.S. dollars	Warranty provisions	Employee provisions	Other	Total
January 1, 2022	3,691	820	—	4,511
Provided for	5,471	23	—	5,494
Utilized	(2,073)	(179)	—	(2,252)
Released	(181)	(3)	—	(184)
Effect of changes in exchange rates	(54)	(45)	—	(99)
December 31, 2022	6,854	616	—	7,470

8 Notes to the statement of cash flows

The change in trade payables in working capital

excludes changes in the amounts of outstanding

liabilities for additions to property, plant, and

equipment, as payments for additions to fixed assets

are recorded in the statement of cash flows when

payment is made.

Cash flows from operating activities in the financial

year 2023 include, for the first time, significant

amounts of receipts of prepayments from customers

for the future supply of wafers and receipts and

repayments of capacity reservation deposits received

under long-term agreements concluded with

customers. The amounts of prepayments from

customers and capacity reservation deposits carried

forward for offsetting against trade accounts

receivable or for repayment to customers are

disclosed within other current liabilities as reported in

note 7.12.

Non-cash transactions primarily include the effects

from exchange rate differences, allowances on trade

receivables and increases in provisions.

The difference between the cash outflows for

investments and the additions to property, plant, and

equipment is primarily due to the level of outstanding

invoices for additions recorded at the end of the

financial year.

The Group entered into one sale and leaseback

transaction for property, plant, and equipment in 2021.

The cash inflow from that transaction was received in

2022 and amounted to USD 7,723 thousand.

9 Segment reporting

Operating segment

The Group manages its CMOS and MEMS operations

as one single operating segment. Operating decisions

are taken on a product and technology level by the

President and Chief Executive Officer, who is assisted

by the parent company’s management team.

Accordingly, X‑FAB has identified its President and

CEO as its chief operating decision maker for the

purposes of defining segments in accordance with

IFRS 8. No separate operating results for the CMOS

and MEMS operations are used by the chief operating

decision maker to manage X‑FAB’s operations, assess

performance, or make resource allocation decisions. As

a result, X‑FAB has determined that its operations

constitute one single segment.

Geographic concentrations

The following table shows an analysis of revenue

(based on the customer’s billing location) and non-

current assets by geographic area for the reporting

period.

	Annual Report 2023 | X-FAB consolidated financial statements

69

Revenue by geographic area:

in thousands of U.S. dollars	2023	2022
Europe	595,583	454,197
Belgium	402,545	294,400
Germany	87,558	72,794
United Kingdom	58,871	42,117
Austria	8,351	11,007
France	7,098	8,022
Switzerland	8,434	7,918
Sweden	6,116	5,215
Denmark	3,475	3,090
Other	3,288	3,179
Finland	2,369	2,384
Netherlands	4,872	2,629
Ireland	2,606	1,442
Asia	213,476	176,128
China	78,855	55,084
Japan	40,947	28,582
Malaysia	18,237	20,055
Singapore	14,021	18,225
Thailand	18,230	14,556
Macau (China)	10,523	1,181
Taiwan	5,388	12,232
Hong Kong	15,477	12,029
Korea	9,532	9,648
New Zealand	1,001	3,420
Other	1,265	1,116
United States of America	96,154	106,725
Rest of the world	1,573	2,419
Total	906,786	739,469

Non-current assets by geographic area:

in thousands of U.S. dollars	2023	2022
Malaysia	318,794	187,265
France	197,106	114,289
Germany	174,167	151,114
United States of America	141,050	89,388
Total	831,117	542,056

Significant customers

The Group has one (2022: one) customer whose

revenues exceeded 10% of the Group’s consolidated

external revenues. The total revenue from this

customer, which was a related party until November 14,

2023 (see note 12), amounted to USD 399,844

thousand in 2023 (2022: USD 293,014 thousand).

	Annual Report 2023 | X-FAB consolidated financial statements

70

10 Financial instruments – fair values and risk management

Accounting classifications and fair values

The following tables show the carrying amounts and fair values of financial assets and financial liabilities measured

at fair value through profit or loss and measured at amortized cost, respectively, including their levels in the fair

value hierarchy.

December 31, 2023
in thousands of U.S. dollars	Carrying amount	Fair value
	Total	Level 1	Level 2	Level 3	Total
Financial assets measured at amortized cost
Trade and other receivables	123,101
Cash and cash equivalents	405,701
Financial liabilities measured at amortized cost
Trade payables	(90,681)
Bank loans, overdrafts, and lease liabilities	(260,977)		(261,273)		(261,273)
December 31, 2022
Financial assets measured at amortized cost
Trade and other receivables	73,116
Cash and cash equivalents	369,425
Financial liabilities measured at amortized cost
Trade payables	(53,654)
Bank loans, overdrafts, and lease liabilities	(296,945)		(296,950)		(296,950)

Financial instruments measured at amortized cost

The carrying amount of cash and cash equivalents,

bank overdrafts, trade and other receivables, and trade

payables approximates their fair value due to the

short-term maturity of these financial instruments.

The fair value of the Group’s non-current liabilities is

based on their present values calculated by

discounting future cash flows at current rates of

interest available for debt with the same maturity

profile.

The Group’s principal financial instruments not carried

at fair value are cash and cash equivalents, trade

receivables, other current assets, other non-current

assets, trade and other payables, bank overdrafts, and

long-term borrowings.

There have been no transfers of assets or liabilities

between levels of the fair value hierarchy in the current

or previous year.

Financial assets and liabilities accounted for at fair

value through profit or loss

The Group held no financial instruments measured at

fair value through profit or loss in the current or

previous financial year.

The Group held no forward foreign exchange

contracts or interest rate swaps in the current or

previous financial year.

Financial assets and liabilities accounted for at fair

value through other comprehensive income

The Group held no financial assets and liabilities

accounted for at fair value through other

comprehensive income in the current or previous

financial year.

Management of risks arising from financial

instruments

The X‑FAB SE Group’s principal financial liabilities

comprise bank loans and bank overdrafts, and trade

payables. The main purpose of these financial liabilities

is to finance the Group’s operations. The Group has

various financial assets, such as trade receivables and

cash and short-term deposits, which arise directly from

its operations.

Financial assets in the form of free short-term cash

available are placed on deposit with banks with a high

credit rating.

	Annual Report 2023 | X-FAB consolidated financial statements

71

Deliveries made by the Group are subject to the

reservation of proprietary rights until the customer has

paid for the goods. Generally, further security is not

obtained.

While the Group did not hold any derivative financial

instruments in the current or previous year, it does,

from time to time, enter into derivative financial

instruments to manage the foreign exchange risks and

interest rate arising from the Group’s sources of

finance where the risks of financial loss or the liquidity

risk appears excessive. Such transactions are

exclusively entered into to reduce the risk of

contractually agreed or highly probable transactions.

These transactions are classified as FVTPL for

accounting purposes because the Group does not

formally account for them using hedge accounting

techniques.

The primary risks arising from the Group’s financial

instruments are market risks (interest rate and foreign

currency risks), credit risk, and liquidity risk. The Board

of Directors reviews and agrees policies for managing

each of these risks. The primary objective in managing

these risks is to minimize the risk of financial loss and

the risk of any interference with the Group’s ability to

pursue its commercial objectives. The policies followed

in respect of each risk are summarized below.

Interest rate risk

The X‑FAB SE Group’s exposure to the risk of changes

in market interest rates relates primarily to the Group’s

long-term debt obligations with floating interest rates.

The Group’s policy is to manage its interest cost using

a mix of fixed and variable rate debts. To manage this,

the Group might enter into interest rate swaps, in which

the Group agrees to exchange, at specified intervals,

the difference between fixed and variable rate interest

amounts calculated by reference to an agreed-upon

notional principal amount. At December 31, 2023

approximately 20% of the Group’s borrowings

(excluding financial leases) are at a fixed rate of

interest (December 31, 2022: 25%). Accordingly, the

Group’s exposure to interest rate risk is limited.

Foreign currency risk

The Group’s statement of financial position can be

affected by changes in the dollar exchange rates, in

particular movements against the euro (EUR) and the

Malaysian ringgit (MYR). This risk mainly relates to

transactions in foreign currency.

The following tables provide an analysis of monetary

assets and liabilities by currency denomination,

expressed in thousands of USD:

Assets and liabilities denominated in EUR:

in thousands of U.S. dollars	2023	2022
Assets
Trade accounts receivable	33,813	15,342
Other assets	36,616	34,521
Cash	110,763	180,284
Liabilities
Trade payables	34,095	13,625
Loans and borrowings	150,318	144,903
Other liabilities and provisions	133,012	39,479

Assets and liabilities denominated in MYR:

in thousands of U.S. dollars	2023	2022
Assets
Trade accounts receivable	38	44
Other assets	5,461	5,813
Cash	43,419	14,839
Liabilities
Trade payables	89	269
Loans and borrowings	3,852	6,203
Other liabilities and provisions	2,000	882

The Group’s policy is to manage selected foreign

currency exchange risk by entering into forward rate

currency purchase or sale transactions (currency

forwards) for specific amounts of foreign currencies in

anticipation of transactions which are contractually

fixed or highly probable.

The following exchange rates were used in preparing

the consolidated financial statements:

	2023	2022
USD/EUR
Closing rate	0.905	0.937
Average rate	0.925	0.948
USD/MYR
Closing rate	4.595	4.405
Average rate	4.559	4.398

The Group also has currency exposures arising from

sales or purchases made when operating units

undertake transactions in currencies other than their

functional currencies.

Approximately 44% (2022: 42%) of the Group’s sales

and 44% (2022: 40%) of the Group’s costs are

denominated in currencies other than the functional

currency of the operating unit making the sales.

	Annual Report 2023 | X-FAB consolidated financial statements

72

The following table demonstrates the sensitivity to

changes in fair value of monetary assets and liabilities

on the Group’s profit before tax to reasonably possible

changes in the USD/EUR and USD/MYR exchange

rates, with all other variables held constant and

excluding effects of foreign exchange related

derivatives held. We have also assessed that the

sensitivity to changes in fair value of monetary assets

and liabilities to profit before tax is a good

approximation of the effect on equity of the Group as

the associated tax effect would not be significant.

USD/EUR	Increase/ (decrease) in EUR rate	Effect on profit before tax
2023	5%	(6,875)
	-5%	6,875
2022	5%	1,607
	-5%	(1,607)
USD/MYR	Increase/ (decrease) in MYR rate	Effect on profit before tax
2023	20%	7,643
	-20%	(7,643)
2022	20%	2,669
	-20%	(2,669)

The Group believes that a reasonably possible change

of other exchange rates, with all other variables held

constant, will not have a significant effect on the

Group’s profit before tax and on the Group’s equity.

The currency risk from translating foreign entities with

a functional currency that is different from the

presentation currency can be considered to be

immaterial as it relates to non-significant entities.

Credit risk

The Group’s primary credit risk concentrations

affecting financial assets are in respect of trade

receivables (described in note 7.5), balances with

related parties (note 12), and balances and short-term

deposits at banks (note 7.7).

The Group only trades with recognized, creditworthy

third parties. It is the Group’s policy that all customers

who wish to trade on credit terms are subject to credit

verification procedures. In addition, receivables

balances are monitored on an ongoing basis to ensure

that the Group is not exposed to significant risk of

credit loss. The maximum exposure is represented by

the carrying amounts disclosed in notes 7.5 and 7.6.

With respect to credit risk arising from financial assets,

including cash and cash equivalents, the Group’s

maximum exposure to credit risk arising from default

of the counterparty is equal to their carrying amounts

in the statement of financial position.

The Group has not recorded any expected credit

losses for cash and cash equivalents as it considers that

any measurement of the 12-month expected loss

would be an insignificant amount given the good credit

rating of the respective banks.

Liquidity risk

The Group monitors its risk of a shortage of funds and

of difficulties in meeting obligations associated with

financial liabilities. The Group’s objective is to maintain

a balance between continuity of funding and flexibility

through the use of bank loans, bank overdrafts, and

other financial instruments. Based on the positive cash

flow projections and the excess of current assets over

current liabilities, there was no significant liquidity risk

at December 31, 2023, or December 31, 2022. The

expected cash inflows from trade and other

receivables maturing within two months total

USD 123,101 thousand (December 31, 2022: USD 73,116

thousand). Trade accounts payables are due within the

next 12 months. An analysis of the maturity of financial

liabilities and available credit lines is presented in

note 7.11.

Capital management

The primary objective of the Group’s capital

management is to ensure that it maintains a strong

credit rating and healthy capital ratios in order to

support its business and maximize shareholder value.

Further, management aims to maintain a stable level of

cash balances available for ready use at all times and to

at least maintain, or increase, the available cash at the

current level and to ensure that it meets financial

covenants attached to the interest-bearing loans and

borrowings. These goals can be achieved by a

combination of cash inflows and the use of new

external new financing arrangements. The Group

manages its capital structure (consisting of equity and

borrowings) and makes adjustments to it in light of

changes in economic conditions. To adjust its capital

structure, the Group may choose to take measures

such as making payments to or adjusting dividend

payments made to shareholders, returning capital to

shareholders, or raising new capital by issuing new

shares or adjusting its borrowing levels. No change was

made to the Group’s capital management objectives,

policies, or processes during the years ended

December 31, 2023, and December 31, 2022.

The EUR 200,000,000 multicurrency revolving credit

facility is available to the parent company and its

primary subsidiaries for use for euro and U.S. dollar

capital expenditures, general working capital

requirements and general corporate purposes

(including acquisitions). The facility contains a

covenant stating that the borrower shall ensure that

the ratio of total net indebtedness (the sum of all

borrowing and guarantee obligations of a financial

nature, defined more closely in the facility agreement)

cannot exceed 3.5 times its EBITDA, otherwise the loan

will be repayable on demand. The Group was in

compliance with this covenant at December 31, 2023.

	Annual Report 2023 | X-FAB consolidated financial statements

73

The X‑FAB SE Group’s other bank loan agreements do

not include requirements to comply with externally

imposed capital requirements, for example

requirements to meet specific equity and free cash

flow ratios.

The EUR 200,000,000 multicurrency revolving credit

facility and other bank loan agreements contain certain

other covenants typical for such borrowing

arrangements which impose a number of requirements

on the borrower, including, among other things, early

termination and set-off of asset balances against

matured obligations balances in case of a material

event of default, negative pledge clauses, obligations

to provide certain information relating to the financial

condition of the borrower, and change of control

provisions. Early repayments of amounts borrowed

may be demanded or offset against asset balances

and renewals or drawdowns of additional tranches

under credit arrangements may not be available if

there is an event of default or should the Group fail to

meet its other obligations under such terms and

conditions. Further, the Company has entered into

undertakings under the terms of certain credit

agreements to maintain its existing equity percentage

in the share capital and related percentage of voting

rights of its respective subsidiaries.

The lenders in the bank syndicate providing the

Group’s EUR 200,000,000 multicurrency revolving

credit facility and lenders under other bank loan

agreements have confirmed that the changes in the

shareholdings in the Company held by investors made

in November 2023 described in note 12 under which

XTRION NV sold its shareholdings in the Company and

ceased to be a shareholder of X‑FAB SE will not trigger

any repayment of amounts borrowed and will not result

in any change to the facilities available for use by the

Group under its borrowing facilities.

11 Leases

The Group has various lease arrangements for the use

of commercial properties, infrastructure, and technical

equipment and machinery. The arrangements run for

various periods until 2034 and carry interest rates

between 0.15% and 4.66% (December 31, 2022: 0.02%

and 4.66%). The contractual arrangements vary from

lease to lease. Some of these arrangements include

purchase options at a price that is lower than the

expected fair value of the assets at the end of the

lease period, so that the Group expects that these will

be acquired at a later date. Other leases are for a fixed

period of time and are renewed unless canceled by

either party, or include lease period extension options

exercisable by the Group.

The carrying values of right-of-use assets presented

as property, plant, and equipment were as follows:

in thousands of U.S. dollars	2023	2022
Net book value January 1	21,438	24,415
Additions	588	1,923
Depreciation	(4,438)	(4,373)
Disposals	—	—
Reclassifications	—	(527)
Net book value December 31	17,588	21,438

For lease arrangements which include extension

options exercisable by the Group, the Group assesses,

at the commencement of the lease, whether it is

reasonably certain to exercise the extension options.

The Group makes subsequent reassessments of

whether it is reasonably certain to exercise such

options if there is a significant event or significant

changes in circumstances which are within its control.

Should the Group exercise the extension options, the

future cash outflows under leasing arrangements, the

right-of-use assets recognized, and the commitments

under the lease liabilities would be increased. The

Group does not make estimates of such potential

increases as the most significant extension options are

at future dates and the amounts and available

operational alternatives may change. The overall level

of right-of-use assets and leasing obligations are,

however, unlikely to change by material amounts.

	Annual Report 2023 | X-FAB consolidated financial statements

74

The future minimum lease payments due in respect of lease liabilities are as follows:

in thousands of U.S. dollars	2023		2022
	Minimum leasing payment	Present value	Minimum leasing payment	Present value
2024	5,916	5,503
2025–2027	17,554	16,104
2023			6,050	5,506
2024–2026			22,865	21,003
Total	23,470	21,607	28,915	26,509
Interest	(1,863)	(1,863)	(2,407)	(2,407)
Liability	21,607	19,744	26,508	24,102

Expenses relating to short-term leases amounted to

USD 868 thousand (2022: USD 646 thousand), and

expenses relating to leases of low-value assets

(excluding short-term leases of low-value assets)

amounted to USD 26 thousand (2022: USD 22

thousand).

The Group has entered into a further sale and

leaseback agreement which commences January 1,

2024. This lease arrangement generates USD 26,717

thousand (EUR 24,178 thousand) of financing cash

flows; repayment of the lease liability is made over five

years in monthly installments together with interest

based on an EURIBOR plus an agreed lending margin.

12 Transactions with related parties

Transactions with shareholders and their

subsidiaries

As part of its normal business activities, the Group

undertakes transactions with entities in the XTRION

Group, a group of companies controlled by

XTRION NV, which holds equity stakes in a range of

portfolio companies in the semiconductor industry.

XTRION NV and the companies controlled by it are

related parties of X‑FAB SE due to the fact that

XTRION NV is jointly controlled by Roland Duchâtelet,

Françoise Chombar, and Rudi De Winter via STAK

Xpeqt.

Until November 14, 2023, XTRION NV was the

controlling shareholder of X‑FAB SE and Melexis NV.

Melexis NV (and its subsidiaries) develop, design, and

sell integrated circuits to customers such as the

automotive industry and is a significant customer of

X‑FAB SE’s subsidiary companies. On November 14,

2023 Sensinnovat BV and Elex NV acquired the

shareholdings in X‑FAB SE and Melexis NV held at that

date by XTRION NV. On the same date, XTRION NV,

and Sarawak Technology Holdings Sdn. Bhd also

terminated their shareholders agreement under which

they were acting in concert in regard to their holdings

in X‑FAB SE. Accordingly, Melexis NV, companies in the

Melexis Group and Sarawak Technology Holdings Sdn.

Bhd together with companies controlled by Sarawak

Technology Holdings Sdn. Bhd ceased to be related

parties of X‑FAB SE and its subsidiaries with effect

from November 14, 2023.

Transactions disclosed as related party transactions

with shareholders and their subsidiaries include, in

addition to transactions with XTRION NV and its

subsidiaries, transactions with Melexis NV and its

subsidiaries until November 14, 2023, and management

fees paid to Sensinnovat BV, ESA Management BV,

and FAJEL Consultants SPRL for services as directors

of the Company. Such management fees are included

in, and not in addition to, the amounts disclosed below

within remuneration of persons with key management

positions.

Transactions entered into between the Group and

XTRION NV and its subsidiaries and Melexis NV and its

subsidiaries until November 14, 2023, include the

purchase of certain work in process and services, as

well as the sale of products and provision of services to

these companies. X‑FAB SE’s subsidiaries are the main

wafer suppliers for the Melexis Group, and Melexis is a

significant customer of X‑FAB SE’s subsidiaries. In

addition, the Melexis Group also provides final test

services as well as design support to X‑FAB SE

subsidiaries.

Subsequent to the balance sheet date, on January 1,

2024, the Group acquired the entire share capital of

M-MOS Semiconductor Hong Kong Limited (M-MOS),

a limited liability company incorporated under the laws

of Hong Kong, and its subsidiaries for a consideration

of EUR 22,500 thousand (USD 24,863 thousand)

payable in cash. M-MOS was acquired from XTRION, a

related party. Further details on this transaction are

provided in note 5.

Conditions of the commercial relations between

X‑FAB and its related parties are in line with those that

have been agreed upon between independent parties

in comparable circumstances.

The tables below show the balances with shareholders

and their subsidiaries included in the statement of

financial position.

	Annual Report 2023 | X-FAB consolidated financial statements

75

in thousands of U.S. dollars	2023	2022
Trade accounts receivable due from Melexis group companies	—	27,241
Trade accounts receivable due from M-MOS group companies	2,408	2,905
Trade accounts receivable due from X-Celeprint	32	34
Trade accounts receivable due from X Display Company Technology	334	34
Total	2,774	30,214

in thousands of U.S. dollars	2023	2022
Advances received from Melexis group companies	—	3,833
Advances received from M- MOS group companies	3,827	3,827
Trade accounts payable due to Melexis group companies	—	132
Trade accounts payable due to M-MOS group companies	23	22
Trade accounts payable due to XTRION	33	26
Trade accounts payable due to Sensinnovat	—	118
Other	—	18
Total	3,883	7,976

Receivables from related parties relate to trade

receivables, do not carry interest, and are payable on

normal credit terms.

Sales made to XTRION group companies (Melexis

group and M-MOS group until their sale by XTRION

and X-Celeprint and X Display Company) primarily

include the supply of PCM-tested wafers and NRE on

the basis of wafer supply agreements made between

the parties.

Other income results from the provision of technical

facilities, supplies, utilities, property rentals, and

services provided. Services provided include

information technology, personnel, and legal support

services. For services provided, charges are made in

relation to the costs incurred based on an agreed

formula which considers the use of facilities, employee

time spent, and specific transaction details. Interest

income and expenses arose in connection with loan

arrangements.

Sales and other income comprise the following:

in thousands of U.S. dollars	2023	2022
Sales to Melexis group companies	339,229	293,014
Sales to M-MOS group companies	13,300	18,940
Sales to X Display Company Technology	255	359
Property rental and other income from Melexis group companies	3,484	2,080
Other income from M-MOS	48	39
Other income from X Display Company	11	—
Total	356,327	314,432

Property rental and other income from Melexis group

companies includes rentals and charges for technical

services included in the amounts described in note 6.7

as well as other items classified in other positions in the

consolidated statement of income.

Purchases, expenses, and other transactions recorded

with shareholders and their subsidiaries were as follows:

in thousands of U.S. dollars	2023	2022
Services provided by Melexis group companies	618	413
Services/purchases provided by M-MOS group companies	21	18
Services provided by XTRION	105	87
Services provided from Elex	76	—
Warranty cost Melexis group	1,288	2,724
Total	2,108	3,242

Services purchased from member companies of the

XTRION group primarily included wafer test and final

test services.. Outstanding balances from sales and

purchases of goods and from receiving and rendering

of services at the reporting date are unsecured,

interest free, and settled in cash. There have been no

guarantees provided or received for any related party

receivables or payables.

	Annual Report 2023 | X-FAB consolidated financial statements

76

Remuneration of persons with key management

positions

in thousands of U.S. dollars	2023	2022
Short-term employee benefits	1,334	1,297
Short-term employee benefits for members of management that are not on the payroll of the Company (CEO,  CFO, and COO)	1,305	679
Directors’ compensation	187	231
Total	2,826	2,207

The persons with key management positions as

referred above as of December 31, 2023, include the

Group’s CEO, CTO, CFO, COO, the CEO of X‑FAB

Dresden, the CEO of X‑FAB Sarawak, the CEO of

X‑FAB Texas, the CEO of X‑FAB Erfurt and the CEO of

X‑FAB France. Short-term employee benefits for

members of management that are not on the payroll

of the Company disclosed above represent payments

for the provision of key management personnel that

are provided by separate management entities.

The Group has made contributions to defined

contribution pension plans for the benefit of persons

with key management positions totaling USD 106

thousand (2022: USD 101 thousand). Contributions to

defined contribution plans primarily comprise statutory

contributions to be made by employers to state-based

defined contribution plans. In connection with these

plans there are no minimum guarantees by the

employer. The defined contribution is based on a fixed

percentage of the (capped) gross salary determined

by state laws.

13 Other disclosures

13.1 Purchase commitments and contingencies

Purchase commitments comprise the following at

December 31:

in thousands of U.S. dollars	2023	2022
Purchase commitments for:
Property, plant, and equipment	600,040	334,217
Intangible assets	1,465	2,400
Material and services	10,869	39,865
Total	612,374	376,482

Purchase commitments mainly refer to purchase

orders placed for investments in technical machinery.

Commitments concerning investment grants and

subsidies received

Various Group entities receive grants and subsidies in

connection with the acquisition of certain qualifying

assets (asset-related grants and subsidies) and

subsidies to offset research and development costs

(income-related grants). No material amounts of other

government assistance are received.

Specifically, XMF and X‑FAB Dresden receive grants

and subsidies in connection with the acquisition of

certain qualifying assets (asset-related grants and

subsidies). The grant rules require that the assets on

which investment grants have been received are

retained for a period of five years (the subsidy rules,

which largely apply to the same assets, have a similar

three-year retention requirement) and that specified

employee levels are maintained at specific locations. If

it is not possible to fulfill these conditions, the grants

and subsidies may be partially repayable. The total

amount of grants and subsidies received in the past

(and thus deducted from the carrying amounts of the

assets) on property, plant, and equipment amounted

to USD 137.5 million (December 31, 2022: USD 137.5

million); the retention requirements have not yet been

fulfilled in full for grants and subsidies received totaling

USD 13.5 million included in that total.

13.2 Unresolved legal disputes and claims

The Group is not aware of any unresolved legal

disputes, claims or proceedings which could have a

significant financial impact on the Group.

13.3 Employees

The average number of employees employed by the

Group during the year was as follows:

	2023	2022
Production	3,845	3,568
Research and development	309	310
Sales, marketing, and administration	307	290
Trainees	128	117
Total	4,589	4,285

The total number of employees employed by the

Group at December 31 was as follows:

	2023	2022
Production	4,000	3,662
Research and development	318	319
Sales, marketing, and administration	317	299
Trainees	137	131
Total	4,772	4,411

Note: Number of employees excludes contract workers

(borrowed)

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13.4 List of shareholdings

Entity	Place of incorporation	Principal activities	Shareholding in %
X-FAB Silicon Foundries SE	Tessenderlo, Belgium	Holding company
X-FAB Semiconductor Foundries GmbH	Erfurt, Germany	Wafer manufacturing	100.00%
X-FAB Dresden GmbH & Co. KG	Dresden, Germany	Wafer manufacturing	100.00%
X-FAB Dresden Verwaltungs-GmbH	Dresden, Germany	No activity	100.00%
X-FAB Texas Inc.	Texas, USA	Wafer manufacturing	100.00%
X-FAB Sarawak Sdn. Bhd.	Kuching, Malaysia	Wafer manufacturing	100.00%
X-FAB France SAS	Corbeil-Essonnes, France	Wafer manufacturing	100.00%
X-FAB Japan KK	Yokohama, Japan	Trading company	100.00%
X-FAB MEMS Foundry GmbH	Erfurt, Germany	Wafer manufacturing	100.00%
OOO Microdesign	Voronesh, Russia	R&D, design	100.00%
X-FAB MEMS Foundry Itzehoe GmbH	Itzehoe, Germany	Wafer manufacturing	100.00%
X-FAB Global Services GmbH	Erfurt, Germany	R&D, administration services	100.00%

13.5 Consolidated financial statements of the

ultimate parent

Until November 14, 2023, the ultimate parent of

X‑FAB SE and its subsidiaries was XTRION NV.

Although XTRION NV did not hold a majority of the

Company’s shares, it was the Company’s largest

shareholder and has a controlling interest given its

dominant shareholding position relative to the size and

dispersion of other shareholders. The financial

statements of the companies included in the Group

were also included in the consolidated financial

statements of XTRION NV until November 14, 2023.

The consolidated financial statements of XTRION NV

can be obtained on request from XTRION NV,

Transportstraat 1, 3980 Tessenderlo, Belgium.

As described in note 12, on November 14, 2023

Sensinnovat BV and Elex NV acquired the

shareholdings in X‑FAB SE and Melexis NV held at that

date by XTRION NV. No shareholder has held overall

control of X‑FAB Silicon Foundries SE since that date.

13.6 Auditor and auditor’s remuneration

During the general shareholders’ meeting on April 27,

2023, KPMG Bedrijfsrevisoren BV was reappointed as

the Company’s auditor for the years 2023, 2024, and

2025.

The auditor’s remuneration for the period was as

follows:

in thousands of U.S. dollars	2023	2022
Audit cost
KPMG	583	345
Other audit firms	107	105
Other services
KPMG	95	27
Total	785	477

14 Events after the reporting period

Subsequent to the balance sheet date, on January 1,

2024, the Group acquired the entire share capital of

M-MOS Semiconductor Hong Kong Limited (M-MOS),

a limited liability company incorporated under the laws

of Hong Kong, and its subsidiaries for a consideration

of EUR 22,500 thousand (USD 24,863 thousand)

payable in cash. M-MOS was acquired from XTRION, a

related party. Further details on this transaction are

provided in note 5.

Tessenderlo, March 21, 2024

Managing Director, CEO

Sensinnovat BV

Represented by Rudi De Winter

CEO

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	Annual Report 2023 | X-FAB consolidated financial statements

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80

81

6. CORPORATE SOCIAL

RESPONSIBILITY AT X-FAB

6.1 Scope

This chapter documents X‑FAB’s environmental and

social performance during the 2023 financial year. The

environmental and social performance figures

reported in this chapter have been prepared in

accordance with the Global Reporting Initiative (GRI)

Sustainability Reporting Standards (2016) core option.

During the materiality analysis and the review of the

GRI standards, the expectations and requirements of

external and internal stakeholders were evaluated. A

report is prepared to outline various topics with

regards to sustainability, respect for human rights,

personal and social matters, environmental matters,

anti-corruption and bribery, and the supply chain.

Additionally, information on cyber security at X‑FAB

and a section on EU taxonomy and the associated

reporting requirements are presented.

The report contains the core GRI indices as well as

standard disclosures on general characteristics of

X‑FAB as an organization. Some of these figures can

be found in other parts of the annual report. A table

identifying the location of key figures and statements

can be found on X‑FAB’s website. Unless otherwise

specified, the disclosed information refers to the 2023

financial year. Where applicable, data was collected

and/or measured by X‑FAB or obtained from external

sources, such as utility providers. Data compiled from

X‑FAB sites was validated using internal procedures.

Therefore, the environmental and social information in

this report was not externally assured.

This chapter is structured according to the three key

areas of environment, social, and governance (ESG)

and is based on a broader understanding with respect

to external stakeholders.

Environmental		Social		Governance
Considers how X-FAB performs as a steward of nature, e.g. energy emissions and waste management.		Examines how X-FAB manages its relationships with employees and the community, e.g. health and well-being, working conditions, and social awareness.		Deals with how X-FAB is governed, e.g. governance overview and supply chain management. Please refer to the Corporate Governance Statement for more information.

Fig. 6.1: Environmental, social, and governance (ESG) topics

In general, the statements and figures provided are

valid for the entire organization. Site-specific

information is indicated where applicable. The report

covers all entities of the X‑FAB Silicon Foundries SE

Group. Its scope and boundary was confirmed by the

X‑FAB Board.

X‑FAB aims to be the foundry of choice for the analog

world by focusing on innovative solutions and on the

quality of products as well as services. X‑FAB’s

manufacturing excellence meets customer

expectations and enables long-lasting success for all

stakeholders.

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To meet the product and service quality expectations

of its customers, X‑FAB has established and is

maintaining a quality management system certified

according to ISO 9001:2015 and IATF 16949:2016.

ISO 9001 and IATF 16949

ISO 9001:2015 specifies the requirements for a quality management system. It helps organizations to ensure they meet the needs of customers and other stakeholders while also respecting statutory and regulatory requirements related to a product or service. IATF 16949:2016 as an automotive industry standard for quality management systems is implemented as a supplement to and in conjunction with ISO 9001:2015. It specifies the requirements for establishing, implementing, maintaining, and continually improving a quality management system in the automotive supply chain.

Furthermore, X‑FAB assumes responsibility by seeking

an appropriate balance of interests between the

consequences of required business decisions and its

activities on economic, technological, social, and

environmental levels. To save natural resources and to

support the global reduction of CO2 emissions, X‑FAB

operates an environmental and energy management

system that is certified according to ISO 14001:2015

and ISO 50001:2018. Additionally, X‑FAB is a member

of the German Electrical and Electronic Manufacturers

association (ZVEl) and is committed to the ZVEI Code

of Conduct.

ZVEI

The ZVEI (“Zentralverband Elektrotechnik- und Elektronikindustrie e.V.”) is the representative of the economic, technological, and environmental interests of the German electrical industry. The ZVEI has drawn up a Code of Conduct of its own, governing corporate social responsibility. The ZVEI Code of Conduct takes internationally established benchmarks as its reference and covers all relevant subjects.

X‑FAB, as one of the industry’s largest specialty

foundry groups, is aware of its social responsibility in

view of the Company’s global business activities.

X‑FAB’s company culture is based on universal ethical

values and principles, especially integrity, honesty,

diversity, respect of human dignity, openness, and

non-discrimination comprising religion, ideology,

gender, and ethnicity. X‑FAB is also committed to

promoting those values wherever possible and along

the entire value chain.

To the best of X‑FAB’s knowledge, there has been no

non-compliance of any laws or regulations identified

concerning the use and provision of products and

services related to environmental laws and regulations

in 2023. X‑FAB fosters partnerships and trustworthy

interactions with its supervisory authorities, its supply

chain partners, and its customers.

X‑FAB also manufactures a large variety of products

with sustainable impact on mobility, healthcare, and the

energy sector. In particular, in the area of electrification

of cars and the usage of renewable energy, the

products manufactured at X‑FAB play a vital part in

reducing CO2 emissions.

6.1.1 X‑FAB’s key environmental, social, and

governance (ESG) goals

Sustainability has been a significant driver of X‑FAB's

development activities for several years, as the

Company focuses not only on the broad range of its

products but also on various internal and external

activities. X‑FAB's mission is to contribute to the social,

environmental, and economic development of the

countries and regions where it operates. In 2022,

X‑FAB took significant steps towards corporate

sustainability by setting long-term key ESG objectives

and initiatives, as sustainability is a journey that X‑FAB

is ever more committed to.

X-FAB has committed itself to the following four long-

term key ESG objectives. These objectives were

reviewed in 2023 and remain valid:

Fig. 6.2: X‑FAB’s ESG objectives

Drive technological innovation to support health,

well-being, and environmental sustainability

Semiconductor technology is key for the digital

transformation of and efficiency improvements in the

healthcare sector, and X‑FAB supports its customers

to develop products for medical applications that meet

the needs of a growing and aging populations. We want

to increase the use of X‑FAB technologies in medical

applications and aim to grow X‑FAB’s medical business

at an average annual growth rate of 10% until 2030. In

2023 X‑FAB recorded a year-on-year growth of 21% in

the medical end market, reflecting the increasing use

of wearable medical devices as well as the growing

demand for testing and point-of-care devices. Among

the growth drivers in 2023 were an infrared

temperature sensor and a DNA sequencing

application.

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X‑FAB recognizes the importance of environmental

protection for a sustainable future and supports its

customers in developing green technologies. Energy

efficiency can play a critical role in reducing

greenhouse gas emissions, conserving natural

resources, and promoting sustainable development

across a broad range of sectors, such as transportation,

industrial, or communication technology. Therefore, we

intend to increase the percentage of our technologies

that contribute to higher energy efficiency of the

products they are used for, from 38% of total revenue

in 2021 to 65% in 2030. In 2023, 54% of total revenue

(excluding revenue recognized over time according to

IFRS 15) has been generated through technologies

that contribute to higher energy efficiency. Among the

key growth drivers were X‑FAB’s popular 180nm

automotive technology and silicon carbide.

Promote diversity and inclusion

In 2022 X‑FAB founded a global Diversity Council

comprised of members from Germany, France,

Malaysia, and the USA to support our efforts on

diversity and inclusion. The Council met on a quarterly

basis and held a three-day workshop in Dresden,

Germany, in November 2023.

Fig. 6.3: Members of the Diversity Council (from left to right:

Elisabeth Straube, Venessa Garver, Henryk Schoder, Quentin

Graiz, Maureen Labarge; missing: Rowena Tan, Rymaine

Guerra, Melanie Salzberger)

As part of its 2023 strategy, the Diversity Council

established two objectives: first, offer targeted training

on diversity and inclusion to managers; and second,

review and further improve equal treatment policies

across all sites.

In 2023, several training sessions on diversity and

inclusion were held at all locations, e.g. on sexual

harassment. In addition, X‑FAB launched a dedicated

LinkedIn Learning campaign on diversity and inclusion

for all employees in March 2023.

In order to further improve equal treatment and make

it even more transparent, X‑FAB created a global equal

treatment policy in 2023, which will be published both

internally and externally in early 2024.

Focus in 2023 was also on increasing the percentage

of women in the organization and in supervisory

positions. The members of the Diversity Council

conducted 16 interviews with female employees in the

USA, Malaysia, Germany, and France to find out about

their experiences and expectations, in particular with

regards to existing or potential management positions.

As a result, the Council defined two major goals for

2024:

1. Development and Group-wide roll-out of

e‑learning courses in support of an

unconscious bias awareness campaign: over

the next three years, all employees will be

required to complete training on unconscious

bias, which has to be repeated every two

years.

2. Increase the internal and external branding of

X‑FAB's diversity campaigns: improve the

visibility of X‑FAB’s Diversity Council across

various channels to continuously report and

inform on diversity-related topics and

objectives.

Reduce carbon footprint

Reducing carbon emissions and other greenhouse

gases is an important step in mitigating climate change

and its negative effects on the environment. X‑FAB is

committed to exploring and implementing sustainable

measures to minimize its carbon footprint, and seeks to

actively reduce its direct CO2 emissions rather than

artificially improve the Company's CO2 balance by

purchasing carbon credits.

X‑FAB has set a goal to reduce its carbon footprint,

measured in carbon emissions per stepped mask layer,

by 40% by 2030 compared to 2021. Major initiatives

involve shifting towards a low-carbon energy mix,

improving the energy efficiency of its equipment,

modernizing and extending gas abatements, and

adopting low-carbon transportation options.

An update on the CO2 emissions reduction achieved in

2023 can be found in section 6.2.2.3, Greenhouse

gases.

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Water consumption goal

Water consumption can have a significant impact on

the environment, including the depletion of freshwater

resources, water pollution, and damage to aquatic

ecosystems. By reducing water consumption,

companies can help to conserve this precious resource

and ensure that it is available for future generations as

well as minimize the impact on the environment. X‑FAB

aims to reduce water consumption per stepped mask

layer by 20% in 2030 compared to 2021. Major

initiatives include a water reduction program in

Operations as well as broad investments to increase

water reuse by recycling or reclaiming water at all

X‑FAB sites.

An update on water consumption in 2023 can be found

in section 6.2.2.2, Water.

All targets are regularly reviewed and reported on

annually.

6.1.2 Stakeholder engagement

Effective communication and collaboration with

stakeholders are key to promote transparency, build

trust, and achieve long-term sustainable development.

X‑FAB has identified the following stakeholders:

customers, employees, investors, suppliers, and local

communities. X‑FAB utilizes different channels to

communicate and engage with all of them, including in-

person meetings, digital communication such as video

messages to employees, and the use of other

platforms. As the scarcity of skilled workers continued

in 2023, particular focus was set on communication

with existing employees and the external employment

market. X‑FAB regularly takes into account feedback

from stakeholders to improve its reporting. Figure 6.4

shows the different channels X‑FAB is using to

communicate about its activities.

Fig. 6.4: Stakeholder engagement

Employee engagement

X‑FAB continued its employer branding campaign with

various activities aimed at attracting new talents to

support future growth. These included, among other

things, xfabulous-branded buses in Erfurt and Dresden,

as well as local sponsoring of science fairs and other

related activities.

At the same time, various initiatives targeted existing

employees to increase their commitment to X‑FAB.

In 2023, after a one-year delay, X‑FAB celebrated its

30th anniversary in Erfurt with employees from all

German sites participating. At the other sites local

events were held to honor the founding of X‑FAB in

1992.

Fig. 6.5: X‑FAB’s 30th anniversary party in Erfurt, Germany

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85

X‑FAB France, for the first time ever, organized a

family day for its employees and their family members.

A variety of activities were offered: among others,

family members were invited to join a company tour to

see and experience the day-to-day work of a

semiconductor factory.

Fig. 6.6: Images from the very first X-FAB France Family Day in

Corbeil-Essonnes

Customer engagement

X‑FAB engages with its customers on several levels

beyond daily business. In 2023, X‑FAB participated in

various conferences and exhibitions. Exhibitions where

X-FAB had a booth presence included two shows in

the US: the power electronics show APEC in Orlando,

Florida, and Sensors Converge in Santa Clara,

California. There were also exhibitions in Germany

(European Microwave Week), Israel (ChipEx), Poland

(MicroTAS), and China (ICCAD). X‑FAB’s technical

experts presented more than 50 papers, posters and

invited talks at semiconductor-related conferences.

In December 2023, X‑FAB hosted its 50th technical

webinar with a record attendance of more than 450

participants. This anniversary edition on X‑FAB’s next-

generation automotive 110nm technology was a

highlight in X‑FAB’s webinar track record dating back

to 2009. Since then, a total of 9,124 people from 58

countries have attended an X‑FAB technical webinar.

Another format for bringing customers and employees

together also continued in 2023: the popular "X-Snack"

event series, which took place at our Erfurt and

Dresden sites. X-Snack provides employees of X‑FAB

the opportunity to get to know our customers and

learn about innovative applications enabled by X‑FAB

technology.

Local community engagement

X‑FAB encourages its employees to engage in

volunteer activities that benefit local communities and

promote collaboration and dialog. A particular focus is

on improving working conditions and promoting social

and environmental responsibility, thus contributing to

the well-being and long-term development of

societies.

At each site, X‑FAB supports several activities of its

employees. In Itzehoe, X‑FAB supported employees

who participated in a local run and in Lubbock

supported the donation campaign of the charity

United Way. In Dresden, X‑FAB employees

participated in the initiative “Dresden is(s)t

bunt” (“Dresden is/eats colorful”), promoting diversity

in the local society.

Fig. 6.7: Employees of X‑FAB Dresden at “Dresden is/eats

colorful”

Industry association engagement

X‑FAB promotes state-of-the-art technologies and

their advancement through its involvement in

numerous industry associations and other

organizations.

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86

Industry associations
X-FAB is a member of or otherwise related to several industry associations as well as scientific, governmental, and standardization organizations, including but not limited to:
A. Industry associations • AENEAS – Association for European Nanoelectronics Activities • ACSIEL – Professional French organization for the electronic field • edaCentrum – Association for Electronic Design Automation, Germany • EPIC - European Photonics Industry Association • ESIA – European Semiconductor Industry Association • FOA – Fab Owners Alliance • Förderkreis Mikroelektronik (Society for the Promotion of Microelectronics, Germany) • GSA – Global Semiconductor Alliance • Medicen – Medical Competitiveness Cluster, Paris region • Minalogic – Competitiveness cluster for digital technologies in the Auvergne Rhone Alpes region in France • MSIA - Malaysia Semiconductor Industry Association • SECA – Sarawak Electronics and Supporting Industries Companies Association, Malaysia • SEMI – Global industry association serving the manufacturing supply chain for the micro- and nanoelectronics industries • SFAM – Semiconductor Fabrication Association of Malaysia • Silicon Saxony, Germany • ZVEI – Zentralverband Elektrotechnik- und Elektronikindustrie (Electrical Industry Association, Germany)	B. Scientific organizations • Curatorship in different Fraunhofer Institutes, Germany • IMMS Institut fur Mikroelektronik- und Mechatronik- Systeme (IMMS Institute for Microelectronic and Mechatronic Systems, Germany) • C2N Center for Nanoscience and Nanotechnology at the University Paris-Saclay • Texas Tech University, Electrical Engineering Industrial Advisory Board, and Dean's Council for the College of Engineering C. Governmental committees/organizations • Mikroelektronik Strategiekreis (Microelectronics strategy circle, Germany) • Silicon Germany D. Standardization organizations • DKE – Deutsche Kommission Elektrotechnik Elektronik Informationstechnik in DIN und VDE (German Commission for Electrical Engineering, Electronics, and Information Technology of DIN and VDE)

6.1.3 Digital transformation

Digital transformation can play a crucial role in

achieving sustainability goals by providing new tools

and approaches to reduce resource use, minimize

waste, and increase production efficiency. Digital

transformation is the integration of process

improvement and technology in all areas of X‑FAB. In

2021 a dedicated department was established with the

goal to fundamentally change the way we work, how

we create customer value, and how we shape our

organizational culture. “We have a vision to inspire

changes across X‑FAB by driving digitalization and

automation projects to success,” says Ulrike

Sampermans, VP Digital Transformation. This covers

aspects of change management and transformation,

as well as technology and digital planning and portfolio

management. The initiatives that are part of our digital

strategy aim to strongly improve our efficiency and

customer satisfaction, and to contribute to a great

work environment. The overall goal is to simplify and

deliver connections across X‑FAB, with our customers

and suppliers.

Five core focus areas have been defined and are the

heart of the Digital Transformation Strategy 2023–

2027. For each of these focus areas, X‑FAB defined

roadmaps with priority initiatives, with global teams

driving their implementation across all departments

and sites.

New work

X‑FAB has rolled out the “ONE X” new work strategy to

support an efficient, fun, and productive work

environment. These initiatives include the

implementation of new and agile systems such as

global interoffice and hybrid collaboration tools, a

move to implement a paperless office with automation

of forms, a single project management solution to

enhance our development cycle, and mobile access to

all collaboration, communication, and business

applications from anywhere.

Fab efficiency

X‑FAB has undertaken global initiatives to automate its

fabs and manufacturing processes, aimed at increasing

efficiency and productivity. These initiatives include

the implementation of various yield enhancement

tools, scheduling, MES systems, equipment

automation, lot tracking, and transportation, as well as

energy efficiency systems. Additionally, robotics has

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been adopted in certain areas to further optimize

operations to shift manual labor to more value-add

activities.

Through these automation efforts, X‑FAB seeks to

improve quality and delivery, reduce cycle times, and

lower costs, while also minimizing its environmental

impact and enhancing the safety and well-being of its

employees.

Data and AI

X‑FAB is advancing its data and AI strategy with a suite

of global initiatives. Key projects include:

• AI enhancements for equipment and process

fault detection and classification (FDC) as

well as predictive equipment maintenance;

• advanced data analysis using R/Shiny; and

• standardized AI platform for automatic image

recognition (AIR) to improve wafer defect

detection and classification.

In addition to these projects, X‑FAB complements its

business intelligence with solutions for capacity

planning and operational benchmarking to boost

reporting and analytics capabilities. Through

collaborative initiatives, such as the global R/Shiny

community and annual hackathons, X‑FAB is driving

innovations, uniting programmers, engineers, and

experts to devise creative data and AI solutions for

business challenges.

Customer transparency and quality

Through digitalization and automation, X‑FAB is further

enhancing its quality and customer transparency

processes. This includes a variety of activities, such as

the continuous improvement of the customer portal

“myX‑FAB”, initiatives to enable direct B2B integration

with customers, as well as overall sales and marketing

improvements through automation in the CRM system.

As part of our quality and continuous improvement

activities, X‑FAB is pursuing automation of error

proofing, failure prevention, and the use of AI for fast

abnormality recognition via data.

Business process optimization and new ERP

X‑FAB has revised its business process landscape to

harmonize, optimize, and automate activities and to

identify areas for a lean approach globally and across

departments. In line with this objective, a business

process optimization and automation initiative has

been established to simplify and support the

implementation of a new next level ERP system across

the organization. X‑FAB has assessed and started to

implement robotic process automation (RPA) to

improve manufacturing and business efficiency and

reduce costs.

Fig. 6.8: Focus areas of X‑FAB’s digital transformation strategy

6.2 Environment

X‑FAB’s expertise in process technologies is used by its

customers to develop green technology for energy

solutions contributing to a sustainable future.

However, the production of high-quality microchips

and microsensors requires a huge amount of materials

and energy in general. Thus, X‑FAB has a responsibility

regarding environmental topics. This is why, in addition

to the Company’s business, environmental activities

are handled with an integrated quality management

system with all sites being certified according to the

ISO 14001:2015 standard. It is X‑FAB’s goal to balance

current environmental, social, and economic

requirements in order to minimize its impact on future

generations. One standard and permanent goal is to

fulfill all existing compliance obligations.

6.2.1 Environmental awareness and responsibility

In addition to the company values, X‑FAB trains its

employees on various topics in order to increase

individual awareness for the Company’s environmental

impact as well as sustainability. All sites obey strict

environmental local laws .

X‑FAB is committed to carbon footprint reduction of

40% and a reduction of water consumption per

stepped masked layer by 20% in 2030. The set targets,

both with reference to 2021, will be reviewed and

reported annually with site-specific goals to continually

reduce the Company’s impact on the environment.

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Various environmental topics have been assigned to

dedicated employees within X‑FAB to ensure these

environmental responsibilities in compliance with the

EHS policy following the requirements of ISO

14001:2015 are fully covered. The following functions

are defined: waste inspector, energy management

inspector, radiation and emission inspector, and safety

inspector. Employees taking over any of these roles

are trained accordingly.

The production of semiconductors requires the use of

of many different materials, among them toxic

materials and greenhouse gases. Tracking the material

flow and monitoring the material efficiency as well as

their use is necessary to reach sustained environmental

conservation. All X‑FAB sites are located in industrial

areas. There are no adjacent nature reserves or

similarly classified areas so that the impact on

biodiversity is minimized.

For 2023, the data used for an overview of X‑FAB’s

environmental indicators is consolidated across all sites

and normalized to stepped mask layers (total of 21.5

million stepped mask layers). X‑FAB Itzehoe is not

included as the site is shared with third parties with only

aggregated data available. However, compared to all

other sites, the Group’s material and energy

consumption as well as the corresponding output of

waste and gases at that location are not material.

6.2.2 Materials and waste management

The need to use materials that might cause toxic waste

in the production of semiconductor products is a

special challenge and a key environmental aspect.

Therefore, material departments and waste

commissioners have been established at each X‑FAB

site. The following materials are used for production:

solvents, photoresists, neutral etchants, acids and

bases, metals, gases, and water. Classifications are

used and waste is separated by X‑FAB to reduce the

amount of hazardous or non-recyclable waste. The

majority of the waste (hazardous as well as

nonhazardous) is sent for recycling in order to recover

valuable resources.

With 81.5% of waste recovered, the total waste disposal

in 2023 was slightly lower compared to 2022 with a

waste recovery of 84.1%.

Fig. 6.9: Amount of waste by type and disposal method

normalized to stepped mask layers (tons per million stepped

mask layers)

X‑FAB pursues permanent environmental objectives to

decrease its overall environmental impact. An activity

at the Kuching site carried over from 2022 is to

increase the recycling rate of fluoride sludge waste for

co-processing as a raw material in a cement plant

instead of using landfill solutions.

6.2.2.1 Energy efficiency

At X‑FAB, energy is mainly used in the form of

electricity, whereas other sources play only a minor

role. The production department has the highest

energy consumption due to the energy-intensive

advanced cleanroom conditions and production

processes used. In 2023, X‑FAB’s global energy

consumption was at about 541 GWh, a slight increase

due to the increase in production equipment. The

share of low-carbon electricity power sources, such as

hydro, nuclear, solar, and wind, was at 66%, and the

share of high-carbon sources, such as oil, gas, coal,

biofuel, etc., was at 34%. The split for X‑FAB Sarawak is

based on data for 2021, as it is the most recent data

available from the local electricity provider.

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Fig. 6.10: Share of low-carbon and high-carbon electricity

power sources (in percent)

At the sites in Erfurt, Dresden, and Corbeil-Essonnes,

X‑FAB has implemented an energy management

system according to the requirements of ISO

50001:2018.

ISO 50001

This international standard specifies requirements for establishing, implementing, maintaining, and improving an energy management system, the purpose of which is to enable an organization to follow a systematic approach in achieving continual improvement of energy performance, including energy efficiency, energy use, and consumption.

This enables the assessment of improvement

potentials of the Company’s energy efficiency and

their implementation in daily work. Across the

Company, different activities and projects exist to

reduce energy consumption, which are part of the

aforementioned annually renewed environmental

goals.

Several projects to improve energy efficiency were

completed in 2023, examples of which are:

• replacement of a 7 MW chiller in Corbeil-Essonnes;

• replacement of CDA compressors in Erfurt;

• replacement of recirculating fans in Dresden with

an estimated annual energy saving of 80,000 kWh;

and

• continued replacement of VLF (vertical laminar

flow) recirculating fans in Lubbock with an

estimated annual energy saving of 44,000 kWh.

These projects contributed indirectly to the reduction

of CO2 emissions.

X‑FAB’s environmental goals are communicated during

X‑FAB’s annual EHS week taking place at all sites.

Figure 6.11 shows the power consumed at all X‑FAB

sites over the past three years. Data is not available for

Itzehoe for the entire period shown.

Fig. 6.11: Power consumption of all X‑FAB sites from 2021 to

2023 (in GWh)

6.2.2.2 Water

In 2023, X‑FAB’s production consumed roughly 226.4

liters of water per stepped mask layer. The majority

was used for cooling as well as for the supply and

cleaning of production tools. Different sources of

water supply are used, including surface water,

municipal water, and ground water. There was a slight

increase in consumption due to a changed product mix

at some of the production sites compared to 2022.

The Group’s total water consumption (normalized to

stepped mask layers) increased by 8% compared to

2021. Projects to reduce the total water consumption

through increased recycling have been defined and are

in execution across all sites.

	Amount in liter/sML
From a river	22
Ground water	52
Local drinking water supplier (city council)	152
Total water withdrawal	226

Fig. 6.12: Total water withdrawal by source

Fig. 6.13: Total water consumption (1,000 m3 per million

stepped mask layers) over a three-year period

One of the activities to reduce water consumption is

the reuse of flushing water from the UPW (ultra pure

water) analyzer at the Kuching facility. The UPW

analyzer flush water is collected and diverted to the

raw water tank instead of the wastewater treatment

plant.

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6.2.2.3 Greenhouse gases

Global climate change is an important challenge to all

industrial players worldwide. X‑FAB understands the

climate impact from its operations on society and the

global economy. Nevertheless, the use of greenhouse

gases is inevitable for the production of semiconductor

devices, such as microchips and sensors. Figure 6.14

lists the 2023 total consumption of these gases after

conversion to ton CO2 equivalent.

Gas	Amount in t CO2 eq	GWP (IPPC AR4)
C2F6	24,300	12,200
CF4	19,686	7,390
N2O	13,446	298
NF3	3,093	17,200
SF6	2,991	22,800
CHF3	2,954	14,800
C4F8	606	10,300
C5F8	119	2
C3F8	114	8,830
C4F6	101	2
CH2F2	7	675
CH3F	0	92
C4F8O	0	13,900

Fig. 6.14: Gas emissions by ton CO2 equivalent

Fig. 6.15: Three-year comparison of PFC gas consumption (all

gases ≥10 ton CO2 per million stepped mask layers)

It is X‑FAB’s intention to minimize the direct emission

of greenhouse gases. Therefore, each production site

is equipped with state-of-the-art cleaning systems.

The functionality of these systems is tracked and

linked to the production equipment using greenhouse

gases. There are additional measures at every site to

ensure all regulations are followed. As a result, no

significant spills of hazardous substances and

greenhouse gases were found in the reporting period.

Gas usage is monitored to ensure no wastage is

occurring.

There was a significant decrease in PFC gas

consumption in the last year due to replacements of

old technology systems and energy efficiency

programs; refer to section 6.2.2.1, Energy efficiency. To

further decrease X‑FAB’s impact on the environment

the corporate management board decided to reduce

the CO2 emission per stepped mask layer by 40% by

2030 compared to the 2021 level.

In 2023, the Group’s total CO2 footprint (CO2

equivalents normalized to stepped mask layers)

reduced by 23% compared to the baseline value of

2021. This includes the reduction of direct emissions by

43% and an increase of the CO2 footprint related to

energy consumption by 1.5% against 2021. Main drivers

for the achieved reduction were the substitution of

clean gases used in Kuching and investments in

additional abatements in Corbeil-Essonnes. Similar

projects are running at all sites.

6.3 Social

6.3.1 Human rights and human resources

X‑FAB’s company ethics are based on universally held

ethical values and principles, including respect of

human dignity, openness, and nondiscrimination

according to the ZVEI Code of Conduct.

Consequently, X‑FAB stands up for human rights as

stated in the Charter of the United Nations, especially

the protection from harassment, the prohibition of

child and forced labor, the prohibition of discrimination,

fair working standards and compensation, and freedom

of thought, expression, association, and assembly, as

well as collective bargaining. Based on the principle of

“freedom of association” 98% of our employees in

Europe are organized under the regulation of local and

national collective bargaining agreements. These

agreements give the highest level of transparency of

working conditions to all employees. In France and

Germany new collective bargaining agreements were

negotiated and implemented in 2023.

All operations are continually monitored and reviewed

regarding human rights. All of X‑FAB’s investments are

in compliance with respective local laws. Additionally, a

specific policy exists addressing the sourcing of

conflict minerals which is further described in section

6.4.2.3 of this report. Respecting human rights is a

matter of course for X‑FAB and in all employment

contracts. Any kind of child and/or forced labor is

prohibited. Health and safety for all employees is

guaranteed. The protection from corporal punishment

as well as physical, sexual, psychological, or verbal

harassment and abuse is ensured.

In 2023 a global equal treatment policy was created by

reviewing local policies and establishing a global

approach. In 2024 the policy will be implemented and

published internally and externally.

Internal and external security personnel follow very

high standards of human rights practices. During the

selection process, they have to undergo special

screenings and have to provide special certifications

and qualification. They undergo specific training on

values, behavior standards, and policies of X‑FAB.

X‑FAB supports disabled or handicapped persons

according to local laws. At X‑FAB’s workplace more

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than 120 employees (officially registered with

disabilities) are well integrated into the daily work

processes and routines. Any form of discrimination is

strictly prohibited. All new employees who started in

2023 attended a mandatory employee orientation, of

which training on human rights policies and X‑FAB’s

Code of Conduct is an important focus. Relevant local

laws together with company handbooks are accessible

to all employees on X‑FAB’s intranet as well as in

printed form. This is implemented by the Human

Resources (HR) department, whose members are

regularly trained externally and internally on human

rights topics in more detail, such as inclusion, diversity,

and anti-discrimination.

Employees are encouraged to report incidents related

to human rights to the HR department or, where

available, the workers’ council and the equal

opportunities officer. No incidents were reported in

2023.

In the case of reported incidents, corrective actions are

initiated in consultation with the HR department and in

compliance with local laws. The identity and well-being

of employees who report on the violation of any law or

regulation of the Company, on any activities that are

against the interests of the Company, or on any matter

likely to harm any other person are protected by the

Company’s corresponding global procedure. X‑FAB

operates a no-retaliation policy for those individuals.

Employee statistics

At the end of 2023, X‑FAB had around 4,700

employees worldwide at six different manufacturing

sites in Europe, Asia, and the USA. At all of its sites,

X‑FAB’s recruitment policy is based on the employee’s

qualifications and the Company’s requirements.

Consequently, different requirement profiles exist in

technology and operations-related positions.

More than half of X‑FAB’s staff is located in Europe.

Location	Absolute # of employees	Percentage of male employees [%]	Absolute # of male employees	Absolute # of female employees	Percentage of female employees [%]
North America	549	71.0	390	159	29.0
Europe	2,635	75.3	1,983	652	24.7
Asia	1,494	65.5	978	516	34.5
TOTAL	4,678	71.8	3,351	1,327	28.4

Fig. 6.16: Number of employees (excluding trainees) by region and gender at the end of 2023

In line with the strong demand in semiconductors the

number of employees increased from 2022 to 2023 by

307. The growth in the number of full-time equivalent

employees (FTEs) was realized with a strong focus on

X‑FAB’s internal employee referral program as well as

X‑FAB’s presence on social media.

In particular, X‑FAB is aiming to increase its share of

female employees. The share of female employees is

steadily increasing in all regions X‑FAB is operating in. It

increased from 27% in 2020 to 28% in 2023. There was,

however, slight reduction compared to the previous

year (28.6% in 2022 vs. 28.4% in 2023) as a result of

hiring of a higher number of male employees in 2023.

Fig. 6.17: Share of male and female employees by region 2019–

2023

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Employees’ rights and working standards are highly

valued at X‑FAB. Consequently, all arrangements

comply with corresponding national laws and

requirements. X‑FAB employees with a full-time

contract, which applies to 95% of all employees, work

between 35 and 40 hours per week. 94% of employees

hold a permanent employment contract. Less than 1%

of staff are contract workers.

In 2023 the number of part-time contracts increased

slightly, primarily attributable to an increase in the

number of part-time male employees.

The full “Flex@work” policy was deployed during the

coronavirus pandemic at all X‑FAB locations, so that,

where practical, employees were able to work from

home and were provided with the technical

requirements for remote work. After the end of the

coronavirus-related restrictions, X‑FAB introduced a

Work from Home policy at all X‑FAB sites as a

permanent method of working if the nature of the

work allows such a model.

Location	Gender	Temporary/ fixed term	Permanent employees	Contract workers	Trainees/ internships	Full-time	Part-time
North America	Male	0	374	16	0	384	6
	Female	0	144	15	0	157	2
Europe	Male	175	1,806	2	115	1,870	113
	Female	53	598	1	23	527	125
Asia	Male	29	949	0	0	878	0
	Female	24	492	0	0	516	0
TOTAL	Male	204	3,129	18	115	3,132	119
	Female	77	1,234	16	23	1,200	127

Fig. 6.18: Employment contracts by type, region, and gender as at year end 2023

Approximately 98% of all employment contracts in

Europe are covered by collective bargaining contracts.

In 2023 X‑FAB established one common collective

bargaining agreement for all German sites. In France a

new collective bargaining agreement was implemented

and went live in January 2024. In other regions of the

world this concept is not common, and therefore, there

are no collective bargaining agreements in place.

In 2023, 803 new employees were hired, 73% of whom

were male and 27% were female. The majority of newly

hired employees are younger than 35 years. The

average 12-month turnover rate in 2023 was 4%, down

from 5% in the previous year.

Location	Gender	<35 yrs	36–50 yrs	51–60 yrs	> 60 yrs	Total
North America	Male	64	15	8	2	89
	Female	28	11	2	1	42
Europe	Male	254	89	15	1	359
	Female	74	24	8	0	106
Asia	Male	128	14	0	0	142
	Female	58	7	0	0	65
TOTAL	Male	446	118	23	3	590
	Female	160	42	10	1	213

Fig. 6.19: Newly hired employees (including contract workers, excluding trainees) by age and gender in 2023

Location	Gender	<35 yrs	36–50 yrs	51–60 yrs	> 60 yrs	Total
North America	Male	21	6	2	1	30
	Female	10	0	1	1	12
Europe	Male	209	47	22	28	306
	Female	74	20	5	10	109
Asia	Male	28	11	1	0	40
	Female	11	8	0	0	19
TOTAL	Male	258	64	25	29	376
	Female	95	28	6	11	140

Fig. 6.20: Number of employees (excluding trainees and retirements) who have left X‑FAB in 2023 by age and gender

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X‑FAB conducts an employee engagement survey,

referred to as the Barometer, on a regular basis. The

results of the most recent survey conducted in 2021

indicated some areas for improvement. In response,

X‑FAB management has established local action teams

who continued their work throughout 2023. As a result,

several initiatives have been launched in the areas of

training and development, benefits, communication,

and leadership.

Average employee ages vary across the Group’s

locations, ranging from an average of 37 years in Asia

to an average of 44 years in North America. There was

an overall decrease in average age compared to 2022.

Location	Average age of all employees	Average age of male employees	Average age of female employees
North America	43.0	43.0	41.0
Europe	41.1	41.0	41.0
Asia	36.8	37.8	34.9
TOTAL	40.6	40,9	39.0

Fig. 6.21: Average age by location and gender in 2023

X‑FAB is aware of the importance of fair payment.

Therefore, all employees receive salaries above the

minimum wage according to individual qualification

irrespective of gender or age. Based on specific local

laws and regulations the relevant employees have the

opportunity to inform themselves about the equal pay

policy of X‑FAB by benchmarking their payment

against a relevant group of employees. Of all

employees who were on parental leave, nearly 100%

returned to X‑FAB.

Developing excellence

The success of a company, and thus also X‑FAB,

depends on whether its employees are able to

optimally contribute their individual strengths, which

consequently need to be identified and individually

developed. The required expertise includes solid

knowledge and understanding of X‑FAB’s internal

procedures and production processes as well as job-

specific knowledge, all of which are part of the

introductory training plan for each new employee.

In 2022 X‑FAB introduced LinkedIn Learning licenses

for all employees for private and professional use. In

2023 X‑FAB globally executed campaigns via LinkedIn

Learning on several topics, such as diversity and

inclusion, feedback culture or work safety. In addition

to the global campaigns and based on the yearly

training needs analysis, specific training was

recommended on the e-learning system. For

individuals who have no direct access to a computer,

X‑FAB offers private areas with access to undertake

relevant training in each location.

To strengthen individual development and drive

performance improvement, X‑FAB extended and

improved the performance management process

(PMP) via SAP SuccessFactors. It is based on constant

feedback from supervisor to employee on

performance and goal achievement. This standardized

global process allows X‑FAB to ensure that every

employee is aware of his or her individual goals as well

as the goals of the department, the site, and the

Company.

For a high level of environmental and social awareness,

company values, quality awareness, and employee

rights are highlighted from the beginning of the

working relationship at X‑FAB. In June 2023, a LinkedIn

Learning campaign was launched on sustainability to

raise employees’ awareness for X‑FAB’s sustainability

goals in the area of innovation, diversity and inclusion,

water consumption and carbon emission.

Enabling employees to be promoted to positions with

either higher technical or staff responsibility requires

constant development in different areas. To ensure

global knowledge transfer and continual development

of all employees, internal workshops, training sessions,

Lunch & Learn sessions, knowledge networks, and

webinars on various technical topics are incorporated

into the daily work of every X‑FAB employee. Hybrid or

purely virtual meetings became a normal way of

communicating during the pandemic, while there was

also a return to more face-to-face meetings in 2023.

The average number of training hours per employee

decreased compared to 2022. Increasing online or e-

learning is expected to result in more on-the-job

training and less classroom training.

Location	Gender	<35 yrs	36–50 yrs	51–60 yrs	> 60 yrs
North America	Male	24	24	24	12
	Female	24	24	24	12
Europe	Male	21	26	16	18
	Female	26	28	16	10
Asia	Male	23	20	20	0
	Female	23	14	20	0

Fig. 6.22: Average training hours (excluding e-learning) per

year and employee in 2023

In 2023 X‑FAB launched a Global Leadership Program

(GLP) tailored to establish a common company-wide

understanding of culture and leadership based on

X‑FAB’s core values. To strengthen a new leadership

mindset, X-FAB leaders from all over the world

participate in a unique program, which is composed of

four modules:

• Purpose

• Business Ethics

• Developing High Performance Teams

• Disruptive Innovations, Strategy and Modern

Corporate Governance

In 2023, 162 leaders participated in at least one module

of the Global Leadership Program.

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To focus X‑FAB’s leadership team on future goals and

to establish constant exchange and networking, a

Global Leadership Conference (GLC) was held in

Leipzig, Germany, in August 2023. 82 leaders from all

X-FAB locations participated in the three-day event

and discussed strategic direction as well as culture and

leadership topics. The GLC will be established as a

biannual event alternating with X-FAB’s Technology

Conference.

Fig. 6.23: Imagess from the first X-FAB Global Leadership

Conference in Leipzig, Germany

To support the career of X‑FAB’s technical experts and

to acknowledge that technical and management

expertise make contributions to the organization that

are equally important, X‑FAB has established a system

of human capital management. An important part of

that is X‑FAB’s Technical Ladder. It enables visionary

technical leadership and expertise, and supports

recruitment, individual development, and retention of

talented people in a competitive employment market,

acknowledging the highest levels of technical

expertise. In 2023 X‑FAB promoted 20 technical

experts to a global grade Member Technical Staff

(MTS) or Senior Member Technical Staff (SMTS) on

the Technical Ladder. This not only shows that more

and more of the Company’s experts work on global

projects, but it also stands for the broad technical

knowledge base X‑FAB has.

To keep up with the fast development within the high

tech area, X‑FAB supports innovation – being one of

the company values – and participates in publicly

funded projects. In those projects, X‑FAB enables

technical experts to conduct research and to propel

state-of-the-art technologies by proving feasibility of

new concepts or the industrialization of innovative

process technologies. Innovation is appreciated by

X‑FAB, and technical experts are explicitly invited and

encouraged to publish their findings in international

journals and to file patents. As at year end 2023

X‑FAB’s overall patent portfolio amounts to

approximately 460 patents and patent applications.

Besides the development of its existing staff, X‑FAB is

highly interested in offering a wide range of

opportunities to potential future employees, for

example via apprenticeships, internships, and student

training. This comprises commercial and technical

careers, dual study programs, and financial support for

employees who enhance their skills and knowledge by

obtaining relevant qualifications.

X‑FAB also offers dual study programs in Germany,

France, and Malaysia, which combine theoretical

sessions and practical work, allowing students to

integrate these skills into their future working life from

the beginning of their studies. Apprenticeships offered

by X‑FAB to young talents cover commercial as well as

technical careers. In Germany and France more than

140 apprentices are currently undertaking their first,

second, or third year of VET (vocational and

educational training).

The focus of X‑FAB’s employer branding activities in

2023 was on establishing local job-specific campaigns

in each location, such as, for example, a campaign

targeted at recruiting maintenance technicians in

France or operators in Erfurt. A specific Instagram

account with regular updates was launched and every

quarter an employee-focused story is posted on the

corporate LinkedIn account.

Rewarding efforts

As an international company, X‑FAB employs people

from many different regions around the world with

different ethnic origins and social backgrounds,

resulting in a broad range of individual needs. Being

aware of those needs and driven by the responsibility

for the Company’s staff as well as the aim of long-term

employment, X‑FAB strives to meet those needs.

Nowadays, the modern world demands a high level of

self-responsibility and flexibility, especially for working

parents and those with responsibilities for caring for

the elderly. Therefore, X‑FAB offers flexible working

time models and strives to find individual working time

solutions for its employees. X‑FAB now offers a full

“Flex@Work” approach by offering mobile working

wherever the tasks are suitable for remote work.

X‑FAB grants leisure time for private matters, such as

moving and marriage, and supports working parents

financially in case of their children’s illness. As part of

collective bargaining agreements, German employees

above a certain age are offered the possibility to

reduce their weekly working hours, if appropriate. The

flexibility to start and end the working day at variable

times at X‑FAB’s Asian site was a benefit that was well

perceived to balance personal and private matters.

Moreover, X‑FAB’s company pension scheme supports

its employees financially after their transition to

retirement.

X‑FAB cares about its employees’ increased health

awareness and growing interest in an active way of life.

To help employees stay healthy, X‑FAB supports a

variety of activities at various locations, such as internal

sports groups, football teams, and running groups, as

well as reduced rates for fitness clubs. Employees are

also offered trial classes at fitness clubs, as well as

fitness and health checks.

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Fig: 6.24: X‑FAB Dresden employees at the Rewe Team

Challenge

Work environment

X‑FAB is interested in a good working atmosphere for

its employees and strives at providing a pleasant and

inspiring working environment. Cafeterias, lunchrooms,

and subsidized meals are offered to employees.

Furthermore, chill-out rooms and staff rooms with

magazines, internet access, and free nonalcoholic

drinks are available to support employees during their

work breaks. In several locations the breakout rooms

for shift personnel have been updated and

refurbished. In Corbeil-Essonnes and in Erfurt, outside

seating areas were implemented which can be used

during break hours.

X‑FAB continues to improve the environment and

quality of the local cafeterias for the well-being of the

employees. At the site in Erfurt a new cafeteria

concept was created in 2023 and will be implemented

soon. During weekends as well as night shifts X‑FAB

staff have the opportunity to use the cafeteria and

breakout rooms.

X‑FAB rewards outstanding employee performance

with incentive payments during the year and in the

form of bonuses. Both individual employees and teams

who undertake extraordinary efforts for X‑FAB’s

benefit are acknowledged by the Company’s

corporate management.

6.3.2 Social commitment

X‑FAB encourages its employees to engage in

nonprofit and educational activities that contribute to

the communities X‑FAB is active in. Across several

sessions, each employee is trained in the company

values with the implementation of those values in

everyday work life being recorded in a learning

management system (LMS) aiming at personal

development. Eventually, this leads to even more

innovation and higher ethical standards, which also has

a positive impact outside the working environment. In

2023 a monthly campaign via the e-learning platform

LinkedIn Learning on IT security, lean principles,

diversity and inclusion, etc. was implemented to raise

awareness of specific topics. This will be continued in

2024.

Social awareness and responsibility

X‑FAB identified opportunities for global and local

activities that contribute to the communities in which

X‑FAB is operating. X‑FAB has also raised money to

support local programs as well as international charity

organizations, such as United Way Worldwide .In

February 2023 X‑FAB donated EUR 10,000 to the

UNHCR to help the victims of the devastating

earthquake in Syria and Turkey. All our employees were

encouraged to donate individual funds to respective

charities in their countries.

In December 2023, X‑FAB hosted its traditional

Christmas donation campaign. For each click on the

Company’s Christmas webpage, X‑FAB donated

USD 0.25. The campaign raised EUR 2,500. In 2023,

employees at the Erfurt site were asked to vote for a

local charity to which the money should be donated

and decided on an Erfurt-based parents’ initiative for

children suffering from cancer and leukemia. The

charity was established 30 years ago and supports a

child care center at the Helios hospital in Erfurt

specializing in oncology.

Fig. 6.25: Dr. Gabriel Kittler, Site CEO Erfurt, handing over the

donation from X-FAB’s Christmas donation campaign

Blood donation is one of the most important activities

for making a direct personal contribution. X‑FAB

supports such collective efforts by organizing regular

blood donation campaigns several times a year. For

employees it is a matter of course to voluntarily

support the Red Cross through blood donation.

Due to the pandemic regulations all blood donations

were put on hold but will be activated as soon as it is

possible.

X‑FAB also supports sports events with a charity

background by enabling its employees to attend these

events. This not only helps to increase team spirit but

also supports local organizations and sports clubs.

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Fig. 6.26: X‑FAB Sarawak employees at a local charity run for

autism

Educational awareness and responsibility

X‑FAB places a high importance on investing in the

education and skill development of children and young

people as the next generation and does this by

sponsoring books and other educational material for

use in kindergartens, supporting lectures at universities

(e.g. providing design courses in engineering schools),

investing in education competitions, and organizing

summer schools (“Microchip Summer University”). To

provide opportunities for practical training and work

experience in technical fields, X‑FAB offers internships

to high school and university students and also offers

students company tours on request. In 2023, three

international students participated in X‑FAB’s

international internship program. These students

completed their internships at different X‑FAB

locations.

Besides its sponsoring activities, X‑FAB maintains close

relations with high schools, colleges, and universities to

support students by offering internships and career

guidance. X‑FAB also works with local universities and

supported the SEMI High Tech University for high

school graduates in the USA considering a future

career in a science, technology, engineering, or

mathematics (STEM) field. In 2023 39 students (20

female and 19 male) successfully completed their

course at X‑FAB.

Fig. 6.27: Students from SEMI High Tech University in Lubbock

Back in 2019, X‑FAB France was the only French

semiconductor company invited to participate in a

Pan-European project, funded by the European

Commission, called METIS (microelectronics, training,

industry, skills). As part of the ERASMUS+ consortium,

which consists of over 30 participating parties from

industry, education, university, and training, X‑FAB

actively contributes to the success of the program. In

2023 X‑FAB continued to participate in several

activities within the program and will continue to work

in this project until 2024.

Various scientific and engineering competitions are

supported either by providing knowledge to the

participants or by serving as judges, e.g. at the student

robotics competition. X‑FAB works with many global

and local partners to improve educational

opportunities for children and young people, e.g. by

supporting corresponding technical clubs. Besides the

educational responsibility towards society, X‑FAB cares

about gender equality and the development of girls in

STEM jobs.

In addition, each X‑FAB site participates in college and

university career fairs in order to recruit interested

students and to provide information about career

opportunities. Besides its presence at job fairs, X‑FAB

also participated in numerous technical exhibitions and

conferences to offer its employees the possibility to

gain and exchange professional knowledge and to

network. At the beginning of 2023 most of these

events were held in person, which helps to build

personal relationships with potential customers and

employees.

X‑FAB developed a social media campaign to serve

customers as well as the general public.

6.3.3 Healthy work environment

Employees’ well-being and safety

X‑FAB ensures that all company activities are

performed in a manner that considers the health and

safety of employees, contractors, suppliers, customers,

and the general public with no adverse impact on the

environment through manufacturing operations and

products by operating an EHS management system

that is certified according to ISO 14001:2015.

Education and training to improve employees’ EHS

awareness, safety, and well-being is critical for X‑FAB.

Regular safety-related training and instruction help to

avoid accidents and injuries. Each location has an

associated company doctor performing routine

medical examinations, such as eye examinations,

vaccinations, travel-related medical consultations, etc.

Security personnel (internal and outsourced) are also

trained in company policies.

Additionally, periodic safety briefings are performed

and a global EHS week program has been established.

At the annual EHS week, information about health

protection, safety, sustainability, and environmental

topics is offered to all employees via information

desks, posters, and other events. Company tours

offered by coworkers are designed to increase

employees’ awareness of hazards in the workplace and

several training sessions are offered to improve their

skills in first aid and firefighting. Furthermore, a variety

of fitness activities and trial lessons as well as fitness

and health checks are offered to employees. In

addition to these dedicated training sessions and

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events, information on environmental and quality

awareness is provided and made accessible to all

employees via the company intranet.

At all X‑FAB locations, accidents are tracked according

to local laws but there is no globally harmonized

procedure to collect additional information related to

accidents or occupational diseases. However, X‑FAB

tracks accidents in the operations department the

same way at all manufacturing locations.

Based on this information, X‑FAB recorded 48

accidents in 2023, which caused 3,757 work hours lost,

resulting in a frequency rate of 7.70 and a severity rate

of 75.36.

Safety improvement programs that took place in 2023:

• improved storage and delivery of KOH (potassium

hydroxide) intermediate bulk containers (IBCs)

using electric pallet lifters to reduce the risk of

leakage and increase work safety by eliminating

manual handling of heavy IBCs (Dresden);

• replacement of old PVC pipes with PP and PE

pipes and installation of secondary containment

and housing of NaOH (sodium hydroxide) mixing

station (Dresden);

• elimination of personnel exposure to arc flash/arc

blast boundary by using a remote electrical

switching actuator allowing staff to actuate

electrical switch gear from 15 meters away

(Lubbock); and

• safety wall for safety-related communication,

safety awareness and training, etc. (Lubbock).

Hygiene concepts for cleanrooms

At each of X‑FAB’s production sites, a large share of

employees work in cleanroom environments where the

use of rubber gloves, special clothes, and shoes is a

requirement. It is necessary to avoid particle and ion

contamination or electrostatic discharge as it would

negatively impact the functionality of the

semiconductor products manufactured. X‑FAB aims to

prevent any medical harm as well as ensure a safe

working environment and employees’ well-being.

X‑FAB has therefore established cleanroom concepts

to maintain a high level of hygiene and health including

specific protection plans. For example, to prevent skin

diseases, there is a skin protection plan in place with

skin care products available at any time for each

employee. For orthopedic reasons, cleanroom shoes

are individualized and ergonomic. Cleanroom clothes

are partially personalized. Ear plugs are available for

noise protection.

Preventive maintenance

Maintenance activities are the basis for the safe

operation of equipment and tools. To prevent

equipment malfunctions and failures X‑FAB uses a

global procedure to manage a preventive maintenance

system. Even though the system’s focus is on securing

the productivity of the equipment, operational safety is

one of the objectives covered. The proper execution

of the global procedure is ensured with the use of local

instructions, which govern the preventive maintenance

regime for each production site. The maintenance

instructions and schedule include information based on

vendor manuals, experiences during operation, tool

performance parameters, major incidents, product

quality, and audit findings. Furthermore, two types of

preventive maintenance actions exist: actions

triggered by a time interval, and actions triggered by

reaching special tool parameters describing the

current tool wear.

Taken together, this helps to ensure that the overall tool

status remains excellent and to prevent accidents caused

by machine malfunctions such as electrical hazards,

leakage of dangerous materials, or mechanical issues.

6.4 Governance

Further information on corporate governance can be

found in section 7 of the annual report.

6.4.1 Anti-corruption and bribery

X‑FAB’s business practices follow the principles of fair

competition with particular focus on professional

behavior. X‑FAB respects consumer interests by

abiding by regulations that protect consumers, and by

using appropriate sales, marketing, and information

practices in accordance with the ICC International

Code of Advertising Practice and the OECD

Guidelines for Multinational Enterprises.

In particular, X‑FAB rejects corruption and bribery as

stated in the relevant UN Convention against

Corruption from 2003, and promotes transparency,

trading with integrity, responsible leadership, and

company accountability.

In order to prevent corruption, X‑FAB is aiming for an

increased awareness from its employees through

comprehensive and repetitive sessions on the

company values and strict regulations as outlined in the

company handbook. These sessions are attended by all

employees and emphasize the corporate values, such

as integrity and respect, as well as X‑FAB’s code of

conduct. Training is organized at least once every two

years, and every employee is required to attend. New

employees are provided with special initial training

during their on-boarding. An Ethics and Conflict of

Interest policy is part of X‑FAB’s code of conduct.

Furthermore, anti-corruption is mentioned in the

Company’s rules and handbooks, which are part of

each employment contract. Concerns about unethical

behavior are reported either via the workers’ council or

directly to Human Resources.

As an alert system to confidentially report any violation,

in 2018 X‑FAB installed a Whistle Blower policy, which

was disclosed to all employees globally. All employees

worldwide can report incidents anonymously in their

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native language. All reports are treated confidentially,

and there is a strict no-retaliation policy.

No incidents were reported in 2023.

Ethics training is provided to all employees. In addition

to regular training and as part of the newly introduced

framework of the global leadership program, a

dedicated module deals with all relevant information

on the topic “business ethics.” At the start of

employment with X‑FAB, each new employee receives

a copy of the work regulations, which comprise policies

on harassment prevention and the acceptance of gifts,

and include a definition of infractions that lead to legal

actions such as contract termination. Actions taken in

response to incidents of corruption comprise all legal

actions according to the corresponding national laws.

In addition to following all national laws regarding

ethical and anti-corruption behavior, X‑FAB does not

influence politics, neither by participating in political

activities nor by donating to or supporting parties in

elections.

6.4.2 X‑FAB’s supply chain

As a manufacturer of a large variety of products,

X‑FAB relies on a number of suppliers. It is part of the

Company’s corporate ethics to strive for long-term

partnerships with its suppliers. The selection and

auditing of suppliers is carried out by means of a global,

cross-site procedure valid for all X‑FAB sites. Part of

this procedure is a classification of suppliers, based on,

among others, the supplied quantity as well as the

frequency of supply: tier 1 suppliers, strategic suppliers,

and all others that do not qualify for one of the two

categories. In order to be approved as a new supplier,

depending on the categorization, the supplier has to

pass a process audit according to the requirements of

the automotive standard VDA 6.3 (the German

Association of the Automotive Industry) and answer

various questions, including on environmental and

governance topics. The existence of an environmental

management system and compliance with RoHS or

REACH are important criteria for X‑FAB during the

selection process for new suppliers

.

6.4.2.1 Selection and categorization of

X‑FAB suppliers

X‑FAB has implemented and maintains a supplier

selection and monitoring process which is compliant

with the quality management system standards ISO

9001 and IATF 16949 as well as with the environmental

management system standard ISO 14001. Suppliers of

strategic materials are requested to confirm

compliance with X‑FAB’s list of banned substances and

have to provide transparent information regarding

their quality and environmental management systems

as well as with respect to the composition, sources, and

environmental impact of the supplied materials.

Those aspects are intensively checked and validated

by X‑FAB’s supplier quality management and

procurement organization before any new strategic

material or supplier is released. This is done via on-site

audits and contractual agreements. After the initial

release, which has to be authorized by a

multidisciplinary team, the compliance of suppliers with

the relevant requirements and their overall

performance with respect to X‑FAB’s objectives are

continually monitored by X‑FAB.

Requirements to qualify as an X-FAB strategic supplier

• Certified quality management system according to ISO 9001

• Certified environmental management system according to ISO 14001

• Demonstration of compliance with quality management system in line with the requirements of IATF 16949

• Commitment to a code of conduct, e.g. ZVEI Code of Conduct, Ten Principles of UN Global Compact, or equivalent

• Conflict minerals reporting if applicable

X‑FAB has a global approach towards sourcing of main

supplies to run the factories, and therefore local

suppliers are only taken into account if they meet the

high quality standards.

6.4.2.2 Audits and continual improvement of

suppliers

X‑FAB stores all certificates and completed

questionnaires from its suppliers in a database that is

accessible for stakeholders at all X‑FAB sites in order

to improve the harmonization and standardization of

supplier management. The most important suppliers

are subject to a supplier assessment once a year. If

X‑FAB’s requirements are not met by at least 85%, the

supplier must submit proposals for improvement

actions to stay under contract with X‑FAB. In addition

to these annual assessments, a regular audit exists to

verify the existence of a management system in

compliance with the defined requirements.

In 2023, supplier audits according to the quality

management system standards ISO 9001, IATF 16949,

and VDA 6.3 for process audits have been performed

by X‑FAB’s supplier quality management organization

at 11 different suppliers for strategic materials (e.g.

chemicals, equipment, gases, wafers) or services, three

located in the United States, five in Europe, and three

in Asia. These audits also focused on environmental,

governance, and other aspects according to X‑FAB’s

standards.

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Supplier	Category	Location	Audit type and result
Supplier 1	Equipment	Germany	Supplier audit / rating A
Supplier 2	Wafers	United States	Supplier audit / rating A
Supplier 3	Wafers	United States	Supplier audit / rating A
Supplier 4	Wafers	Japan	Supplier audit / rating A
Supplier 5	Wafers	United States	Supplier audit / rating A
Supplier 6	Wafers	South Korea	Supplier audit / rating A
Supplier 7	Subcontracting	Germany	Supplier audit / rating A
Supplier 8	Sputtering targets	Germany	Supplier audit / rating A
Supplier 9	Subcontracting	Japan	Supplier audit / rating A
Supplier 10	Subcontracting	Germany	Supplier audit / rating A
Supplier 11	Chemicals	France	Supplier audit / rating A

Fig. 6.28: Supplier audits performed by X‑FAB in 2023

Supplier Corrective Action Requests (SCAR)

In 2023, in total, 20 SCARs had to be issued to various

suppliers, the majority of which were not critical to the

continuity or quality of the wafer manufacturing

processes at X‑FAB or the products of the Group’s

customers. However, all SCARs have been tracked and

the effectiveness of the defined corrective and

preventive actions has been checked and validated by

X‑FAB’s supplier quality management organization.

Engagement with non-compliance suppliers to

reach compliance

In 2023, 12 new quality assurance agreements with

suppliers of X‑FAB have been implemented in order to

ensure the suppliers’ commitment to several key

requirements with respect to quality and

environmental management and other aspects.

Furthermore, X‑FAB actively supported various

potential suppliers to achieve conformance to the

X‑FAB requirements for strategic suppliers.

To prove the financial sustainability of its suppliers, in

2022, X‑FAB has established access to an international

database that allows us to check the financial health of

suppliers as well as their revenues. The aim is not only

to ensure that very small suppliers are not in a situation

of financial dependency towards X‑FAB, i.e. X‑FAB’s

business volume must not represent more than 25% of

a supplier’s revenue), but also to check the financial

sustainability of some critical suppliers.

Furthermore, X‑FAB has established a supplier award

system to encourage its suppliers to continuously

commit to environmental protection and social

aspects. An annual “Supplier Excellence Award” is

awarded to the best local supplier for each X‑FAB site.

The supplier with the highest value in the supplier

assessment is nominated as “Supplier of the Year.”

6.4.2.3 Handling of minerals from conflict regions

(conflict minerals)

X‑FAB is aware of the Dodd–Frank Act requirements

regarding, among others, the sourcing of tin, tantalum,

tungsten, and gold from conflict regions and accepts

its responsibility along the supply chain. Thus, X‑FAB

requests all its relevant suppliers to source minerals

from regions that are conflict-free. The commitment

of X‑FAB suppliers to these requirements is

documented in a central company database to ensure

traceability and transparency.

X‑FAB has issued a product declaration stating that to

the best of its knowledge, X‑FAB products do not

contain materials that had been sourced from mines in

conflict regions in the eastern region of the

Democratic Republic of Congo. X‑FAB does checks on

smelters to ensure that they are certified conflict-free

by comparing them against the list of compliant

smelters on the Responsible Mining Alliance (RMA)

website.

All strategic material suppliers for materials containing

tungsten, tantalum, tin, and gold must complete the

Conflict-Free Smelter Reporting Template according

to an industry-benchmark reporting format, e.g.

Responsible Minerals Initiative (RMI) or Conflict

Material Reporting Template (CMRT).

X‑FAB is also working with suppliers on other minerals

disclosures. These include cobalt and mica reporting.

Currently, X‑FAB is working with suppliers to ensure

sourcing from conflict-free cobalt smelters. X‑FAB

products do not contain mica.

6.4.3 Data security

Customer data privacy

The protection of customer data is of the highest

importance to X‑FAB and all stakeholders and is critical

to safeguarding X‑FAB's reputation and brand. X‑FAB

does not currently apply a customer data deletion

policy as the IATF automotive standard only allows

deletion after at least 15 years of inactivity. X‑FAB

deactivates data records on request and has not

received any customer complaints about data

protection. X‑FAB utilizes an email opt-out system for

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customer data for hotline news, webinars, and

customer surveys. These are maintained via various

technologies, including the ERP system, survey, and

email marketing tool, in an automated or semi-

automated way.

Cybersecurity

In 2023, X‑FAB IT prioritized safeguarding its

infrastructure by implementing robust internet

protection measures aimed to proactively prevent

internet-borne threats from infiltrating X‑FAB’s

computers and compromising sensitive data.

Recognizing the evolving threat landscape and the

need for comprehensive protection beyond the

perimeter, X‑FAB IT established a Secure Endpoint

Management (SEM) strategy to secure X‑FAB devices

against various cyber threats. As employees are the

front line of X‑FAB, X‑FAB IT ensures that employees

do not fall prey to potential phishing attacks by

conducting cybersecurity awareness trainings and

phishing campaigns for employees.

By implementing these key initiatives in 2023, X‑FAB IT

significantly improved its overall IT security posture.

Enhanced internet protection at the perimeter coupled

with a comprehensive SEM strategy created a layered

defense system, safeguarding the organization against

a wide range of cyber threats. These activities are

embedded in a long-term IT security strategy to

ensure the stability and continuous improvement of all

security measures. The commitment to cybersecurity

not only protects valuable data and assets but also

fosters a safer and productive work environment for all

X‑FAB employees.

6.4.4 X‑FAB’s responsibility towards its customers

and society

In line with its EHS policy, X‑FAB continually works on

the reduction of its environmental impact via legal

compliance and also promotes human rights values

among suppliers and customers. It is X‑FAB’s policy to

ensure that all purchased materials are compliant with

current government and safety constraints on

restricted, toxic, and hazardous materials and that all

environmental standards, applicable to the country of

manufacture and sale, are fulfilled.

X‑FAB follows RoHS and meets the requirements of

REACH. X‑FAB thereby confirms that all its products

are halogen-free and do not contain intentionally

introduced lead (Pb), cadmium (Cd), mercury (Hg),

hexavalent chromium (Cr6+), polybrominated biphenyl

(PBB), polybrominated diphenyl ether (PBDE), bis(2-

ethylhexyl) phthalate (DEHP), butyl benzyl phthalate

(BBP), dibutyl phthalate (DBP), or diisobutyl phthalate

(DIBP). Furthermore, RoHS and REACH-conformant

safety data sheets are available for all X‑FAB products

and are accessible to every X‑FAB customer on the

Company’s website. Finally, all products do not contain

any of the substances in the ECHA (European

Chemicals Agency) Candidate List of Substances of

Very High Concern.

RoHS and REACH

RoHS is the short form of the “Directive 2011/65/EU of the European Parliament and of the Council of June 8, 2011 on the restriction of the use of certain hazardous substances in electrical and electronic equipment.” It aims to address the global issue of consumer electronics waste. It pertains to manufacturing of various types of electronic and electrical equipment without the use of six different hazardous materials. It is the responsibility of the company that puts the product on the market to comply with the directive. REACH stands for Registration, Evaluation, Authorization, and Restriction of Chemicals. The purpose of this European Union regulation is to address the production and use of chemical substances and their potential impacts on both human health and the environment. Whereas RoHS bans substances that are present in electrical equipment, REACH pertains to all chemicals including those used to make a product. This can include materials, solvents, paints, chemicals, and more.

There is a global procedure in place to control and

avoid negative health and safety impacts, requiring

that every X‑FAB product is tested at every stage of

development. In addition, all X‑FAB products are

inspected annually by an external laboratory for

hazardous substances, and the Company’s customers

are informed about the results by means of product

declarations.

It is part of the Company’s ethics that products are not

sold into countries that are listed on an embargo list for

corresponding products. During 2023, X‑FAB was

compliant with laws in relation to this provision and the

use of X‑FAB products and did not have to pay any

fines for violations.

6.5 EU taxonomy

The European Green Deal is a set of initiatives by the

European Commission with the overarching objective

for the EU to become climate neutral by 2050. In this

context and in order to channel investments of the

financial sector to more sustainable technologies and

businesses, the EU has developed a common

classification system, referred to as the EU taxonomy,

which is aimed to provide guidance to companies,

investors, and policymakers on which economic

activities can be considered environmentally sustainable.

The Taxonomy Regulation (Regulation (EU)

2020/852) was published in the Official Journal of the

European Union on June 22, 2020, and entered into

force on July 12, 2020. The EU taxonomy defines

specific performance criteria to assess an economic

activity’s contribution towards six environmental

objectives: climate change mitigation, climate change

adaptation, the sustainable use and protection of water

and marine resources, the transition to a circular

economy, pollution prevention and control, and the

101

protection and restoration of biodiversity and

ecosystems. Technical screening criteria for each

environmental objective are defined through

delegated acts.

The Climate Delegated Act (Commission Delegated

Regulation (EU) 2021/2139 as amended by

Commission Delegated Regulation (EU) 2023/2485)

lays out the technical screening criteria that define

whether an economic activity substantially contributes

to the objective of climate change mitigation or

climate change adaptation. The Environmental

Delegated Act (Commission Delegated Regulation

(EU) 2023/2486) establishes the technical screening

criteria for determining the conditions under which an

economic activity qualifies as contributing substantially

to the sustainable use and protection of water and

marine resources, to the transition to a circular

economy, to pollution prevention and control, or to the

protection and restoration of biodiversity and

ecosystems. These delegated acts also include

minimum safeguards that must be secured for the

other four environmental objectives of the taxonomy,

the so-called Do No Significant Harm (DNSH) criteria.

As from January 1, 2024, companies need to report on

the eligibility and alignment of their activities regarding

all six of the the environmental objectives. It is clear

that semiconductors are essential to reach the goals of

the European Green Deal and to reach carbon

neutrality in 2050. In its current form, however, the EU

taxonomy is unclear in many aspects with rules,

regulations, and guidelines still under development.

The following paragraphs describe X‑FAB’s approach

based on the current status of the legislative

framework.

Assessment by X‑FAB

The EU taxonomy currently does not list an activity

that specifically describes X‑FAB’s business. The

activity that most closely describes X‑FAB’s business is

activity 3.6, “Manufacturing of other low carbon

technologies.” However, it is clear that X‑FAB is an

enabler of technologies that significantly reduce

energy consumption and greenhouse gas (GHG)

emissions.

As a foundry, X‑FAB does not always know the end

market or end application in which its products will be

used. To determine the eligibility under the taxonomy

regulation, we have therefore made a classification of

the technologies themselves. Our technologies

contribute substantially to the stabilization of GHG

concentrations consistent with the long-term

temperature goal of the Paris Agreement, through the

avoidance or reduction of GHG emissions or the

increase of GHG removals, including through process

and product innovations. By providing robust analog/

mixed-signal CMOS processes, MEMS, and wide-

bandgap semiconductors, X‑FAB contributes to the

creation of sustainable and energy-efficient products

in various fields, such as mobility and the energy sector.

Sensors and power devices improve the energy

efficiency of electric vehicles and optimize the energy

use of the drivetrain. High-voltage technologies

including silicon carbide support the transition to

renewable energy by enabling the efficient generation,

conversion, and storage of energy. While it is possible

that our customers provide solutions for any of the

other environmental objectives, based on the

classification of our technologies, we can only assess

the contribution to climate change mitigation. We

therefore conclude that X‑FAB has no taxonomy-

eligible economic activities relating to any of the other

five environmental objectives.

An economic activity is deemed eligible where it

matches the description set out in one of the

delegated acts adopted by the Commission. For an

activity to be eligible for climate change mitigation

under this category, the activity needs to have the

objective of enabling a substantial reduction of GHG

emissions in another sector of the economy.

Semiconductor manufacturing can therefore be a

taxonomy-eligible activity where it enables another

economic activity to make substantial GHG emission

savings.

X‑FAB has analyzed its activities by categorizing its

technologies based on whether they are aimed at

substantially reducing GHG emissions in another sector

of the economy. For example, technologies that

provide superior isolation for high voltages or

technologies that, due to their material properties,

offer the possibility of developing systems with

maximum energy efficiency (e.g., wide-bandgap

technologies) are deemed by X‑FAB to be eligible

under the taxonomy regulation.

An eligible activity must fulfil four basic criteria to be

classified as aligned.

1. It must substantially contribute to at least one of the

environmental objectives.

To contribute substantially to climate change

mitigation, the economic activity must manufacture

technologies that are aimed at and demonstrate

substantial lifecycle GHG emission savings compared

to the best performing alternative technology/

product/solution available on the market. The GHG

reduction across the lifecycle could be evaluated

based on product lifecycle emissions and applications.

As a pure-play foundry, however, we do not have the

necessary information from the end market to make

such a complete lifecycle assessment. As a result of

this, and the uncertainty relating to the DNSH criteria

of pollution prevention and control, we classify our

activities as non-aligned.

2. It must not significantly harm any of the other

environmental objectives.

This criterion is put in place to avoid that activities

qualify as environmentally sustainable in cases where

the economic activities that benefit from those

investments cause harm to the environment to an

extent that outweighs their contribution to an

environmental objective.

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• Climate change adaptation: as part of its risk

management, X‑FAB regularly assesses the potential

impact of disruptions both at its own or its suppliers’

operations caused by severe weather conditions

whose occurrence is increasing due to climate

change. Water scarcity is another element related to

climate change adaptation that is being monitored

for all of X‑FAB’s manufacturing sites.

• Sustainable use and protection of water and marine

resources: semiconductor manufacturing requires

large quantities of water, in particular to rinse and

clean the wafers during the manufacturing process

to avoid their contamination with particles. Water is a

valuable resource and X‑FAB seeks to reduce its

water consumption by means of higher tool

efficiency and increased water recycling. Further

details on this can be found in Section 6.2.2.2.

• Transition to a circular economy: several types of

material are used in semiconductor manufacturing:

water, gases, as well as chemicals such as solvents,

resists, acids, or metals. The use of those materials is

tightly controlled by material departments and waste

commissioners established at each site. All waste is

separated to reduce the amount of hazardous or

non-recyclable waste. The majority of the waste is

sent for recycling to recover valuable resources.

X‑FAB has an ongoing environmental objective of

reducing waste, reducing the use of hazardous

materials, and increasing the recycling rate. Further

details on this can be found in Section 6.2.2.

• Pollution prevention and control: the semiconductor

industry heavily relies on the use of chemicals. The

current wording regarding the aspect of pollution

prevention and control has given rise to a number of

ongoing issues. An economic activity may not lead to

the manufacture, placing on the market, or use of

certain chemicals in order to be taxonomy-aligned.

The Climate Delegated Act refers to other existing

EU legislation that regulates the use of certain

chemicals (REACH and RoHS). X‑FAB is, of course,

very familiar with these legislative requirements and

complies with them. However, the Climate

Delegated Act in its current form does not appear to

allow for the existing exemptions and derogations

for the use of certain chemicals in very specific

cases. Several industry associations have already

addressed this issue with the European Commission.

• Protection and restoration of biodiversity and

ecosystems: the impact on biodiversity is minimized

as all sites are located in industrial areas. None of the

Group’s sites is adjacent to nature reserves or

similarly classified areas.

3. It must be carried out in compliance with certain

minimum safeguards.

Article 18 of the taxonomy regulation requires

companies to implement procedures to ensure the

alignment of their activities with the OECD Guidelines

for Multinational Enterprises and the UN Guiding

Principles on Business and Human Rights, including the

principles and rights set out in the eight fundamental

conventions identified in the Declaration of the

International Labour Organization on Fundamental

Principles and Rights at Work and the International Bill

of Human Rights. X‑FAB respects consumer interests

by abiding by regulations that protect consumers, and

by using appropriate sales, marketing, and information

practices in accordance with the ICC International

Code of Advertising Practice and the OECD

Guidelines for Multinational Enterprises. In particular,

X‑FAB rejects corruption and bribery as stated in the

relevant UN Convention against Corruption from

2003, and promotes transparency, trading with

integrity, responsible leadership, and company

accountability. X‑FAB’s company ethics are based on

universally held ethical values and principles, including

respect of human dignity, openness, and

nondiscrimination according to the ZVEI Code of

Conduct. Consequently, X‑FAB stands up for human

rights as stated in the Charter of the United Nations.

Sections 6.3.1, 6.4.1 and 6.4.2 of this Annual Report

describe how X‑FAB makes sure that it carries out its

economic activities in an honest, responsible, and

respectful way.

1. Turnover

To report turnover under this section, the definition of

turnover in accordance with International Financial

Reporting Standards (IFRS) is used.

Based on the above-described uncertainties and the

current status of the legislation, X‑FAB deems it

prudent to report a 0% alignment.

2. CapEx

The Disclosures Delegated Act (Commission

Delegated Regulation (EU) 2021/2178) defines CapEx.

It covers additions to tangible and intangible assets

during the financial year considered before

depreciation, amortization and any remeasurements,

including those resulting from revaluations and

impairments, for the relevant financial year and

excluding fair value changes.

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The CapEx can be categorized into two types:

a. Technology CapEx: CapEx that is part of a

plan to expand our Taxonomy-eligible

economic activities (Type B CapEx). The

eligibility for the technology CapEx is based

on the categorization of technologies as done

for determining eligibility for turnover. For the

same reasons as above, X‑FAB deems it

prudent to report a 0% alignment.

b. Facilities CapEx: this CapEx relates to the

purchase of individual measures enabling the

target activities to become low-carbon or to

lead to greenhouse gas reductions (Type C).

It includes the following activities:

i. installation, maintenance, and repair

of charging stations for electric

vehicles in buildings;

ii. installation, maintenance, and repair

of energy-efficiency equipment; and

iii. installation, maintenance, and repair

of wastewater-related equipment..

3. OpEx

According to the Disclosures Delegated Act, OpEx

covers direct non-capitalized costs that relate to

research and development, building renovation

measures, short-term lease, maintenance and repair,

and any other direct expenditures relating to the day-

to-day servicing of assets of property, plant, and

equipment by the undertaking or third party to whom

activities are outsourced that are necessary to ensure

the continued and effective functioning of such assets.

X‑FAB focuses on research and development costs

since the other costs that could possibly fall within this

definition are likely to be immaterial in comparison.

The proportion of eligible R&D activities has been

determined by looking at the same categorization of

technologies as done for determining eligibility for

turnover. For the same reasons as above, X‑FAB

deems it prudent to report a 0% alignment.

The following tables provide the outcome of the

analysis in the required format.

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* The revenue for work-in-progress that is recognized over time under IFRS 15 is not included

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112

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7. CORPORATE GOVERNANCE

STATEMENT

The Royal Decree of May 12, 2019 (published in the

Belgian Official Gazette on May 17, 2019) designated

the Belgian Corporate Governance Code 2020 as the

reference code for Belgian listed companies. This

Code is available for download on the website of the

Belgian Corporate Governance Committee

(www.corporategovernancecommittee.be).

In view of the “comply-or-explain” principle of the

Code, section 7.12 gives an overview of the provisions

of the Belgian Corporate Governance Code 2020 that

X‑FAB does not comply with, along with an explanation

of the reasons for non-compliance.

X‑FAB’s Corporate Governance Charter is in alignment

with the 2020 Code on Corporate Governance. The

Corporate Governance Charter can be consulted on

the “Investors” page of the Company’s website.

7.1 Shareholders

X‑FAB seeks to guarantee transparent and clear

communication with its shareholders. Active partici-

pation of the shareholders is encouraged by X‑FAB.

In order to achieve this goal, shareholders can find

important and relevant information on X‑FAB’s

website. X‑FAB publishes its annual reports, half-year

reports, statutory reports, quarterly results, and

financial calendar on its website in the “Investors”

section. X‑FAB realizes that the publication of these

reports and information benefits its trust-based

relationship with its shareholders and other

stakeholders.

Furthermore, X‑FAB is committed to guaranteeing

shareholder rights.

• At the Shareholders’ Meeting, the Chairman will

lead the meeting in such a manner that there will be

sufficient time to answer questions that

shareholders may have relating to the annual

report, special reports, and/or the items on the

agenda.

• At the latest 30 days prior to the general meeting,

the agenda and other relevant documents are

published in different locations including X‑FAB’s

website and the Belgian Official Gazette.

• Shareholders representing at least 10% of the share

capital have the right to add items and/or

resolution proposals to the agenda.

• During the general meeting, shareholders have the

right to vote on each item on the agenda. If they

cannot attend the general meeting, they have the

right to appoint a proxy.

• The minutes of the general meeting with the voting

results will be kept in a special register after the

general meeting.

Chapter 8 shows the shareholder structure of X‑FAB

based on the transparency notifications received.

7.2 Management structure

X‑FAB has opted for a “one-tier” governance structure

whereby the Board of Directors is the ultimate decision-

making body, with overall responsibility for the manage-

ment and control of the Company. The Board of Directors

is vested with the power to perform all acts that are

necessary or useful for the realization of the Company’s

purpose, except for those actions that are specifically

reserved by law or the Articles of Association to the

shareholders’ meeting or other management bodies.

As such, the Board, among others, defines the general

policy orientations, decides on major strategic, financial,

and operational matters, and oversees the management.

The Board has established committees (an Audit

Committee and a Remuneration and Nomination

Committee) to analyze specific issues and advise the

Board on those issues. The decision-making power

remains within the responsibility of the Board of

Directors itself.

The daily management of X‑FAB has been delegated

by the Board of Directors to the Chief Executive

Officer, Sensinnovat BV, permanently represented by

Rudi De Winter, who can represent the Company with

his sole signature within and outside the framework of

the daily management. For actions that fall outside the

scope of the daily management, X‑FAB is also validly

represented by two directors acting jointly.

The Chief Executive Officer is the chairman of the

Executive Management. The Executive Management is

responsible for leading X‑FAB in accordance with the

global strategy, values, planning, and budgets as set out

and approved by the Board of Directors. The Executive

Management is also responsible for screening the

various risks and opportunities that the Company might

encounter in the short, medium, or longer term, as well

as for ensuring that systems are in place to identify and

address these risks and opportunities.

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7.3 Board of Directors

Composition

In accordance with Article 15 of X‑FAB’s Articles of

Association, the Board of Directors consists of at least

five members. At least three members should be

independent in accordance with Article 7:87 BCCA. As

of the date of this annual report, the Board of Directors

comprises nine members, three of which are indeed

independent. At least half of the Board of Directors

consists of non-executive members, and there is at

least one executive member. Independent directors

qualify as non-executive directors.

The term of office of directors under Belgian law is

limited to six years (renewable) but the Corporate

Governance Code recommends that it be limited to

four years. Directors of X‑FAB are appointed for a

period of four years by the majority of the votes cast at

the general meeting, after having received a recom-

mendation of the Remuneration and Nomination

Committee. In the same way the general meeting may

revoke a director at any time. There is no age limit for

directors, and directors with an expiring mandate can

be reappointed within the limits stipulated in the BCCA.

The Chief Executive Officer is the only member of the

Board of Directors that has an executive mandate. The Chair

of the Board is Tan Sri Datuk Amar Dr. Hamid bin Bugo.

The composition of the Board of Directors already

takes into account Article 7:86 BCCA which requires

that one third of its members have to be of a different

gender.

The directors of X‑FAB are:

Name	Age	Mandate expires	Position
Dato Sri Dr. Wan Lizozman bin Wan Omar	59	2026	Non-executive director
Sensinnovat BV (Represented by Rudi De Winter)	63	2025	Managing Director, CEO
Roland Duchâtelet	77	2025	Non-executive director
Thomas Hans-Jürgen Straub	69	2025	Non-executive director
Tan Sri Datuk Amar Dr. Hamid bin Bugo	78	2025	Non-executive director (Chair)
Aurore NV (Represented by Christine Juliam)	63	2026	Non-executive and independent director
Christel Verschaeren	59	2025	Non-executive and independent director
Estelle Iacona	51	2025	Non-executive and independent director
Vlinvlin BV (Represented by Ling Qi)	53	2027	Non-executive director

Sensinnovat BV is represented by Rudi De Winter.

Mr. De Winter joined X‑FAB in 2011 as Co-CEO and

became CEO in 2014. Between 1996 and 2011 he

served as the Chief Executive Officer and Managing

Director of Melexis NV. Prior to that date, Mr. De

Winter served as a development engineer at Mietec

Alcatel (Belgium) from 1984 to 1985 and as a

development manager at Elmos GmbH (Germany)

from 1985 to 1989. In 1990, Mr. De Winter became

director together with Mr. Duchâtelet of XTRION NV,

the parent company of X‑FAB until November 14,

2023. Mr. De Winter holds a degree in electronic

engineering from the University of Ghent.

Throughout his career, Roland Duchâtelet has founded

several companies and has organized approximately

50 acquisitions or sales of companies. He has been

active in the internet business since 2000 and was a

member of the Belgian Senate from 2007 to 2010.

Mr. Duchâtelet holds degrees in electrical engineering

and applied economics from the University of Leuven

and obtained an MBA from the same university.

Thomas Hans-Jürgen Straub has more than 30 years

of experience in the management of semiconductor

companies. From 1982 to 1990, Mr. Straub served as

Head of Central Planning at the Kombinat

Mikroelektronik in Erfurt. Thereafter, Mr. Straub was a

member of the managing board of PTC Electronic AG,

a holding company that managed 18 subsidiaries. From

1991 to 1999, Mr. Straub served as president of several

companies, including Mikroelektronik und

Technologie-Gesellschaft mbH, Dresden and Thesys

Gesellschaft für Mikroelektronik mbH, Erfurt. From

1999 to 2014, Mr. Straub served as Chief Executive

Officer of X‑FAB. Mr. Straub holds a diploma in

economics from the Hochschule für Ökonomie Berlin

(Berlin Business School).

Tan Sri Datuk Amar Dr. Hamid bin Bugo has worked as

personnel manager for Malaysia LNG Sdn Bhd, a joint

venture between Petronas, Shell, and Mitsubishi.

He was the first general manager of the Land Custody

and Development Authority, Sarawak, and was

permanent secretary to the Ministry of Resource

Planning, and state secretary of Sarawak. Tan Sri Datuk

Amar Dr. Hamid bin Bugo has also served as a board

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member of several corporate and governmental

agencies and charitable organizations. After graduating

with a master’s degree in economics and political

science from the University of Canterbury, New

Zealand, he gained a postgraduate diploma in teaching

from Christchurch Teachers’ College, New Zealand,

and has a certificate in business studies from the

Harvard Institute of Development Studies, USA. Tan Sri

Datuk Amar Dr. Hamid bin Bugo was awarded an

honorary PhD in commerce by Lincoln University,

New Zealand. Currently, he is Chairman of the National

Library Council of Malaysia and Petroleum Sarawak

Berhad.

Dato Sri Dr. Wan Lizozman bin Wan Omar is the State

Financial Secretary of Sarawak. Before that he served

as Deputy State Financial Officer and formerly as

Permanent Secretary in the Ministry of Urban

Development and Natural Resources as well as the

Ministry of Housing Sarawak. Besides his role as State

Financial Secretary, Dato Sri Dr. Wan Lizozman bin Wan

Omar is chairman of two Malaysian state

government‑linked companies as well as a director of

various state‑owned companies. In addition, he is a

board member of the Sarawak Economic

Development Corporation (SEDC) and the Sarawak

Timber Industry Development Corporation (STIDC).

His academic qualifications include a certificate in

Southeast Asian studies from Columbia University,

New York City, USA, a bachelor of science degree in

economic and political science from the University of

Northern Illinois, USA, followed by a master’s degree in

international affairs (economic development) from the

School of International & Public Affairs, Columbia

University, New York City, USA. In 2014, he was

awarded a PhD in business studies from UNIMAS

(University Malaysia Sarawak).

Aurore NV is represented by Christine Juliam.

She started her career in clinical research at MSD in

Belgium before moving into product management, and

subsequently into sales, marketing, and business

planning responsibilities. In July 1996, she started to

work for Abbott Belgium as director of its

pharmaceutical product division and joined Nycomed

as Managing Director Belgium/Luxembourg in 2006.

From 2011 onwards she was Region Head for France,

the Netherlands, Belgium, and Luxembourg for

Nycomed, which was acquired by Takeda in the same

year. Subsequently, Ms. Juliam managed Takeda Italy

and France as country manager between 2013 and

2017 and became Divestment Lead until 2020.

Between 2021 and 2022, Ms. Juliam worked as General

Manager at Orifarm. Christine Juliam has a doctor of

medicine degree from the University of Ghent, a

license in marketing from St. Aloysius College in

Brussels, a master’s in management from Solvay

Commercial School in Brussels, and an MBA from

Northwestern University.

Christel Verschaeren served for 29 years at IBM. She

held different technical positions as well as commercial

leadership positions in general business, channel sales,

and inside sales. She led business operations for IBM

Belgium/Luxembourg for three years. In 2005, she

became Director of Business Transformation and IT for

IBM Europe. From 2010 until 2012 she served as

Director Global Organizational Change Management.

From 2012 until 2016 she was the VP of CIO Services in

EMEA. Ms. Verschaeren holds a master’s in economics

from the University of Antwerp.

Estelle Iacona is professor in physics of

CentraleSupélec. She was a director of EM2C

laboratory (CNRS, École Centrale Paris) from 2008 to

2012 after which she became Dean and Vice-President

Research of the École Centrale Paris and of

CentraleSupélec. She served as Executive

Vice‑President for Academic Affairs at

CentraleSupélec from 2016 to 2019. She was also a

member of the board of École Centrale Casablanca.

In 2020, Estelle Iacona was elected as Senior

Vice‑President at Paris‑Saclay University. Currently she

is President at Paris‑Saclay University. Ms. Iacona holds

an engineering degree and a master of science from

the University of Nantes (Polytech’Nantes) and a PhD

in physics of transfer from the École Centrale Paris.

Vlinvlin BV is represented by Ling Qi. Ling Qi has more

than 20 years of international business management

experience in China. After winning an English language

competition from a field of one thousand competitors,

she organized international trade fairs and trade

missions for the city government of Shenyang and was

the personal translator for the mayor of Shenyang. She

left politics to host a weekly TV program with news and

interviews of foreign expats in China. In 1996, she

became vice-president of the animation film company

OHY in charge for the company’s business in the US. In

2000, Ling Qi married Belgian director Wouter Dierickx

with whom she founded Sophie Animation Ltd.

Currently, she is CEO of two multimedia and animation

film companies. Alongside this, Ling Qi has been

consulting for foreign invested companies in China and

is a board member of a Belgian private bank. She holds

a degree in international trade and English from the

University of Liaoning and obtained a certificate of

Dutch at University of Antwerp.

Appointment and replacement of directors

The Articles of Association (Article 16) and the X‑FAB

Corporate Governance Charter contain specific rules

concerning the (re)appointment, the induction, and the

evaluation of directors. Directors are appointed for a

term not exceeding four years by the general meeting

of shareholders, who can also revoke their mandate at

any time. An appointment or dismissal requires a simple

majority of the votes cast.

If and when a position of a director prematurely

becomes vacant within the Board, the remaining

directors have the right to temporarily appoint a new

director until the next general meeting which shall

confirm such appointment. Said appointment will then

be included in the agenda of the next general meeting.

The Remuneration and Nomination Committee makes

recommendations to the Board with regard to the

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appointment of directors, the CEO, and the other

members of the Executive Management. The

Committee will consider proposals made by the

members of the Board or other relevant parties.

Functioning of the Board

The internal regulation of the Board is part of the

Corporate Governance Charter. In principle, the Board

of Directors meets on a quarterly basis. Additional

meetings may be called with appropriate notice at any

time to address specific needs of the business. A

meeting of the Board of Directors must in any event be

convened if requested by at least two directors.

The Board convened nine times in 2023 and discussed,

among others, the following topics:

• the financial results of the Group;

• the business plan and capital expenditure;

• the budget for the financial year 2024; and

• potential acquisitions.

Dato Sri Dr. Wan Lizozman bin Wan Omar was excused

for one meeting and was represented by proxy at one

other meeting of the Board. Also, Estelle Iacona was

excused for one meeting. Other than that, all Board

members attended all meetings.

Under the lead of the Chairman, the Board regularly

evaluates its scope, composition, and performance and

that of its committees, as well as the interaction with

the Executive Management. In 2023, the Board

conducted an evaluation via an anonymous survey

complemented by an open discussion of the results.

No issues have been identified and the Board was

satisfied with its composition and functioning.

7.4 Committees

Audit Committee

The Audit Committee advises the Board of Directors

on accounting, audit, and internal control matters as

further detailed in the Company’s Corporate

Governance Charter. The Audit Committee also assists

the Executive Management in its assessment and

follow-up of the auditor’s recommendations.

The Audit Committee is composed of four non-

executive members: Aurore NV, represented by

Christine Juliam, independent director and Chair;

Christel Verschaeren, independent director; Tan Sri

Datuk Amar Dr. Hamid bin Bugo, non-executive

director; and Estelle Iacona, independent director.

According to Article 7:99 BCCA the members of the

Audit Committee maintain a collective expertise in the

field of the Company’s activities. At least one of them

shall have accounting and audit expertise. Given his

education as well as extensive experience as a board

member for a number of different companies, Tan Sri

Datuk Amar Dr. Hamid bin Bugo complies with this

requirement.

In 2023, the Audit Committee met four times. During

these meetings the audit plan and key audit matters

were discussed with the external auditor. Other topics

covered were the results of internal audits and the

upcoming requirements on ESG reporting. All

members of the Audit Committee as well as the

external auditor attended all meetings. The results

from internal audits were shared with the Board.

Remuneration and Nomination Committee

The Remuneration and Nomination Committee advises

the Board of Directors principally on matters regarding

the appointment and remuneration of directors and

members of the Executive Management.

The Remuneration and Nomination Committee is

composed of five non-executive members: Christel

Verschaeren, Chair; Aurore NV, represented by

Christine Juliam, independent director; Dato Sri Dr.

Wan Lizozman bin Wan Omar, non-executive director;

Tan Sri Datuk Amar Dr. Hamid bin Bugo, non-executive

director; and Estelle Iacona, independent director.

The Remuneration and Nomination Committee met

two times in 2023. During these meetings, matters

such as the remuneration and succession of the

Executive Management and the (re)appointment of

directors were discussed. All members of the

Remuneration and Nomination Committee attended all

meetings.

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7.5 Executive Management

Composition

The Executive Management is composed of the following members:

Name	Age	Position
Rudi De Winter	63	Chief Executive Officer
Alba Morganti	55	Chief Financial Officer
Jörg Doblaski	45	Chief Technology Officer
Damien Macq	57	Chief Operations Officer (from April 3, 2023)
Lee Boon Chun	54	Chief Executive Officer, X-FAB Sarawak
Dr. Gabriel Kittler	45	Chief Executive Officer, X-FAB Erfurt
Dr. Jocelyne Wasselin	65	Chief Executive Officer, X-FAB France (until July 31, 2023)
Dr. Sébastien Daveau	49	Chief Executive Officer, X-FAB France (from August 1, 2023)
Lloyd Whetzel	66	Chief Executive Officer, X-FAB Texas (until August 17, 2023)
Rico Tillner	41	Chief Executive Officer, X-FAB Dresden (until March 31, 2023) Chief Executive Officer X-FAB Texas (from August 18, 2023)
Michael Woittennek	43	Chief Executive Officer, X-FAB Dresden (from April 1, 2023)

Functioning

The Executive Management Team is composed of the

CEO, the CFO, the CTO, the COO, and the site

managers of X‑FAB France, X‑FAB Sarawak, X‑FAB

Texas, X‑FAB Erfurt, and X‑FAB Dresden. The

members are appointed and removed by the Board of

Directors after having received the advice of the CEO

and the Remuneration and Nomination Committee.

The Executive Management Team exercises the duties

assigned to it by the Board of Directors and the CEO,

under the ultimate supervision of the Board of Directors.

The CEO leads the Executive Management Team,

within the framework established by the Board of

Directors and under its ultimate supervision. The CEO

chairs the Executive Management Team.

7.6 Diversity policy

The Remuneration Committee and the Board of Directors

ensure that diversity criteria such as age, gender, and

background are taken into consideration in its selection

processes and management of succession planning.

At the end of the reporting year, four of the nine

members of the Board were female, thereby reaching

the best possible equilibrium in terms of gender

diversity. The composition of the Board is in line with

the requirements of the BCCA on diversity. The

Executive Management Team also consists of a

diverse team in terms of age, background, and gender.

7.7 Remuneration report

The remuneration of the directors and the Executive

Management is governed by X‑FAB’s remuneration

policy which can be found at www.xfab.com/investors.

The remuneration policy was approved by the

Shareholders’ Meeting on April 29, 2021. This

remuneration report has been prepared in accordance

with Article 3:6, §3 BCCA as introduced by law on

April 28, 2020.

Total remuneration

The application of the remuneration policy during 2023

for the directors and executives led to the effective

remuneration as shown in the table on the next page.

The non-executive and independent directors receive

a compensation for their mandate as director. Such

compensation consists of a fixed annual amount of

EUR 15.000. The remuneration of directors takes into

account their membership(s) in any of the board

committees; for each membership in a board

committee, directors receive an additional fixed

amount of EUR 5,000 per committee. Such

compensation is independent from their participation

rate in board or board committee meetings.

Roland Duchâtelet waived his right to receive any

remuneration as a non-executive Board member.

In 2023 Vlinvlin BV (represented by Ling Qi) received

additional remuneration of USD 35,848 for consultancy

services provided to the Strategy department above

and beyond her work as director of the Company.

Hans-Jürgen Straub received an additional USD 10,814

for his mandate on the supervisory board of X‑FAB

Semiconductor Foundries GmbH.

Members of the Executive Management who are

employed by X‑FAB Group companies under an

employment contract also benefit from group

insurance policies in their respective home countries

providing various pension, life insurance, disability, and

medical insurance benefits, all of which are defined

contribution schemes. All these group insurance

elements are in line with home country market

practices and only represent a minor portion of their

respective remuneration packages. The base salary for

members of the Executive Management who are

employees does not include the employer

contributions.

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in U.S. dollars
Name, position	1. Fixed remuneration			2. Variable remuneration
	Base salary	Fees	Other benefits	One-year variable	Multi-year variable
Roland Duchâtelet, Non- executive director	—	—	—	—	—
Thomas Hans-Jürgen Straub, Non-executive director	16,221.00	—	10,814.00	—	—
Tan Sri Datuk Amar Dr. Hamid bin Bugo, Non-executive director	27,035.00	—	—	—	—
Aurore NV (Represented by Christine Juliam), Independent director	27,035.00	—	—	—	—
Christel Verschaeren, Independent director	27,035.00	—	—	—	—
Estelle Iacona, Independent director	27,035.00	—	—	—	—
Vlinvlin BV (Represented by Ling Qi), Non-executive director	16,221.00	—	35,848.00	—	—
Sensinnovat BV, permanently represented by Rudi De Winter, Executive, CEO	394,704.00	—	—	67,050.29	98,676.00
Executive Management excl. Sensinnovat BV	1,443,768.00	—	73,907.14	454,058.12	—

in U.S. dollars
Name, position	3. Extra- ordinary items	4. Pension expense	5. Total remuneration	6. Proportion of fixed and variable remuneration
Roland Duchâtelet, Non- executive director	—	—	—	Fixed:	100%
Thomas Hans-Jürgen Straub, Non-executive director	—	—	27,035.00	Fixed:	100%
Tan Sri Datuk Amar Dr. Hamid bin Bugo, Non-executive director	—	—	27,035.00	Fixed:	100%
Aurore NV (Represented by Christine Juliam), Independent director	—	—	27,035.00	Fixed:	100%
Christel Verschaeren, Independent director	—	—	27,035.00	Fixed:	100%
Estelle Iacona, Independent director	—	—	27,035.00	Fixed:	100%
Vlinvlin BV (Represented by Ling Qi), Non-executive director	—	—	52,068.00	Fixed:	100%
Sensinnovat BV, permanently represented by Rudi De Winter, Executive director, CEO	—	—	560,430.00	Fixed:	70%
				Variable:	30%
Executive Management excl. Sensinnovat BV	—	106,257.22	2,077,990.48	Fixed:	78%
				Variable:	22%
			2,825,663.48

	Annual Report 2023 | Corporate governance statement

119

Application of the performance criteria

CEO

The variable remuneration for the CEO is a cash bonus

that is capped at 50% of the annual base salary. It

contains short, medium and long-term elements:

• short term: 50% of the variable remuneration is

based on performance criteria measured over one

financial year;

• medium term: 25% is based on performance

criteria measured over two financial years; and

• long term: 25% is based on performance criteria

measured over three financial years.

The cash bonus for the CEO is calculated by reference

to yearly established targets to reflect global business

performance criteria, which are measured on an X‑FAB

Group consolidated basis. Where financial indicators

are used these are based on reported figures

determined in accordance with IFRS accounting

standards. The targets are as follows:

• 50% of the cash bonus (the short-term element)

depends on the achievement of the target EBIT of

X‑FAB measured over the performance year in

order to link the bonus to the operational result of

X‑FAB; and

• 50% of the cash bonus (the medium and long-

term element) is dependent on X‑FAB generating

revenue growth that outperforms the industry

average over the last one or two years, whereby

the industry reference growth is determined by

reference to the November Q4 Update to The

McClean Report 2023 by TechInsights. The

forecasts for optoelectronics, sensors and

actuators, and discrete (O-S-D) devices is used as

a reference value.

Short-term cash bonus (one-year variable)

The results for performance year 2023 are shown in

the table below. In 2023 the EBIT was USD 157.7 million.

This means that 67.95% of the short-term cash bonus

will be paid out.

in U.S. dollars
Performance criteria	a)	Minimum threshold performance	a)	Maximum performance	a)	Measured performance
	b)	Corresponding remuneration	b)	Corresponding remuneration	b)	Actual remuneration outcome
Global business performance	a)	50,000,000	a)	210,000,000	a)	157,675,000
Relative weighting 50%	b)	0	b)	98,676	b)	67,050
Total bonus		0		98,676		67,050

Medium and long-term cash bonus (two and three-

year variable)

The two and three-year variable remuneration of the

CEO depends on X‑FAB generating revenue growth

over the last one or two years exceeding the industry

average using the statistics for the optoelectronics,

sensors and actuators, and discrete (O-S-D) devices

market published in the McClean Report 2023 by

TechInsights as a reference value.

The results for performance year 2023 are shown in

the table below. In 2023, the revenue growth was 20%

compared to 2022. The industry average amounted to

1%. The revenue growth compared to 2021 was 35%

while the industry averaged 9%. This results in the

bonus calculation as depicted in the following table.

in U.S. dollars
Performance criteria	a)	Threshold performance	a)	Measured performance
	b)	Corresponding remuneration	b)	Actual remuneration outcome
Revenue growth over the last year	a)	Revenue growth >1%	a)	20%
	b)	49,338	b)	49,338
Revenue growth over the last two years	a)	Revenue growth >9%	a)	35%
	b)	49,338	b)	49,338
Total bonus		98,676		98,676

	Annual Report 2023 | Corporate governance statement

120

Other members of the Executive Management

The variable remuneration for the other members of

the Executive Management consists of a short-term

cash bonus expressed as a fixed amount:

• 50% is based on a global business

performance measured through the

achievement of the target EBIT of the

Company in order to link the bonus to the

operational result of the Company; and

• 50% is based on an assessment of individual,

department, or site performance measured

through achievement of pre-established

targets within the criteria determined by the

CEO.

Currently no long-term incentives are foreseen for

members of the Executive Management.

The results for performance year 2023 are shown in

the table below. In 2023 the EBIT was USD 157.7 million.

This means that 67.95% of the short-term cash bonus

that is linked to the operational result of the Company

will be paid out.

in U.S. dollars
Performance criteria	a)	Minimum threshold performance	a)	Maximum performance	a)	Measured performance
	b)	Corresponding remuneration	b)	Corresponding remuneration	b)	Actual remuneration outcome
Global business performance	a)	50,000,000	a)	210,000,000	a)	157,675,000
Relative weighting 50%	b)	0	b)	221,857	b)	150,009
Individual/team performance	a)	Determined individually	a)	Determined individually	a)	Determined individually
Relative weighting 50%	b)	0	b)	221,857	b)	173,290
Total bonus		0		443,714		323,299

Share-based remuneration

The remuneration policy of X‑FAB does not provide

for share-based remuneration for directors or

executives.

Evolution of the remuneration and performances

of X‑FAB

The table below provides an overview of the annual

change in total remuneration, developments and

performance of X‑FAB, and the average remuneration

of employees.

Non-financial performance criteria are not linked to

remuneration and are therefore not reported. We refer

to section 6 of this annual report for an overview of

non-financial topics. To ensure comparability, the

annual change in remuneration is only reported since

the implementation of Directive (EU) 2017/828 as

regards the encouragement of long-term shareholder

engagement.

Name	2019	2020	2021	2022	2023
Annual change of remuneration (Executive management)
• Fixed remuneration	—	—	-4.1%	4.2%	24.1%
• Variable remuneration	—	—	+100%	-33.4%	133.4%
• Total remuneration	—	—	21.3%	-2.5%	38.3%
Annual change in the developments and performances (in thousands of U.S. dollars)
• Performance criteria (EBIT)	-43,865	-14,617	77,192	57,335	157,675
• Net profit	-48,540	13,530	83,640	52,491	161,895
Annual change in the average remuneration of employees on consolidated basis*	-6.06%	0.91%	8.39%	-1.58%	7.98%

*The average employee remuneration was calculated with the numbers as reported in notes 6.6 and 13.3 (wages and salaries) in

this annual report (personnel expenses and average number of employees). Social security, pension, and benefit costs are

excluded.

	Annual Report 2023 | Corporate governance statement

121

In 2023 the ratio between the highest and lowest

remuneration was 95.2 to 1. The highest remuneration

used for this comparison includes the total

remuneration of a member of the Executive

Management. The lowest remuneration includes the

base salary, variable pay as well as other benefits such

as insurance, pension contributions.

All figures are presented on an X‑FAB Group

consolidated basis in the above table. Information is

provided from 2017 onwards, after X-FAB went public.

Severance payments

No severance payments were made in 2023.

Use of clawback provisions

No clawbacks were applied in 2023.

Vote of the shareholders

The remuneration report for the financial year ended

December 31, 2022, was approved at the annual

Shareholders’ Meeting held on April 27, 2023, with a

94% majority of the 71.6% validly votes cast. As the

remuneration report was approved with a large

majority and X‑FAB still believes in the principles

included therein, X‑FAB will retain its remuneration

policy.

7.8 Policy on certain transactions

Terms and conditions of transactions with related

parties

All related party transactions were made on terms

equivalent to those that prevail in arm’s length

transactions.

Conflicts of interest of the Board of Directors

According to Article 7:96 BCCA a member of the

Board of Directors is required to inform the other

directors about any item on the agenda of the Board

that will cause a direct or indirect conflict of interest of

a financial nature to him/her. In this event, the

respective director may not participate in the

deliberation and voting on this agenda item.

There was one conflict of interest as per article 7:96

BCCA in the financial year 2023. This conflict of

interest concerned the proposed acquisition of

M-MOS (“the Transaction and Share Transfer

Agreement”) during the board meeting of December

21, 2023:

Mr. Rudi De Winter (representing Sensinnovat BV) and

Mr. Roland Duchâtelet informed the board of directors

that they both have an indirect control over XTRION NV

and that they both, directly or indirectly, own shares in

XTRION NV. XTRION NV is a contracting party with

regard to the proposed decision and owns all

5,000,000 shares (100%) of M-MOS Semiconductor

Hong Kong Limited (M-MOS).

Both directors declared having an interest of a

patrimonial nature within the meaning of article 7:96

BCAC that could possibly be found to conflict with that

of X‑FAB Silicon Foundries SE (X‑FAB) in the decisions

under agenda items 3 and 4. The legal procedure on

conflicts of interests under article 7:96 BCAC was

therefore applied in respect of agenda items 3 and 4,

and this will be communicated to the X‑FAB’s auditor.

The other directors declared that they have no interest

of a patrimonial nature within the meaning of article

7:96 BCAC in the decision-making on the agenda items

that conflicts with that of X‑FAB.

The following is an extract from the meeting of the

Board of Directors held on December 21, 2023:

“Agenda item 3: Deliberation and approval in application

of article 7:97 BCAC of the Transaction and the Share

Transfer Agreement

In application of articles 7:96 and 7:97 BCAC, Mr Rudi

De Winter and Mr Roland Duchâtelet left the meeting

during the deliberation and decision on agenda items 3

and 4.

The patrimonial consequences of the Transaction and

Share Transfer Agreement for X‑FAB can essentially be

summarized as follows:

X‑FAB intends to buy all shares in the share capital of

M-MOS at a price amounting to EUR 22.5 million with

execution date of the shares transfer on January 1,

2024. This price is close to M-MOS’ consolidated equity

value. Resulting goodwill or badwill will be limited based

on a provisional assessment of the fair value. A more

detailed PPA (Purchase Price Allocation) exercise is still

to be done by management at a later stage. The price is

substantiated by a discounted cash flow (DCF)

valuation model.

The board of directors is of the opinion that the

Transaction is in the interest of X‑FAB and that the

proposed terms are at arm’s length.

The directors confirmed that they had no further

questions or comments on the proposed resolutions.

DECISION: After thorough consideration of the Advice,

the proposed terms of the Transaction and the Share

Transfer Agreement, the board of directors decided to

approve the entering into the Share Transfer

Agreement by X‑FAB and the amount and terms of the

Transaction provided therein.

Agenda item 4: Deliberation and approval of the Press

Release in application of Article 7:97, §4/1 BCAC

In accordance with article 7:97, §4/1 BCAC, X‑FAB must

immediately publicly announce the decision taken under

agenda item 3. To this end, a draft was prepared which

was attached as Annex 3 to these minutes and which

was provided to all directors in advance.

The directors had no further comments on the draft.

DECISION: The board approved the Press Release.”

	Annual Report 2023 | Corporate governance statement

122

Pursuant to Article 7:97 BCCA, companies listed on the

stock exchange must follow a special procedure

before decisions are taken or operations are executed

concerning (i) the relations of the listed company with

an affiliated company, except its subsidiaries, and (ii)

the relations between a subsidiary of the listed

company and an affiliated company of the subsidiary,

other than a subsidiary of the subsidiary. Prior to the

decision or transaction, a committee composed of

three independent directors, if deemed necessary

assisted by one or more independent experts, must

prepare written advice for the Board of Directors.

The auditor delivers an opinion regarding the accuracy

of the information contained in the committee advice

and in the minutes of the Board of Directors’ decision.

The advice of the committee, an excerpt from the

minutes of meetings of the Board of Directors, and the

opinion of the auditor have to be recorded in the

annual report of the Company.

In 2023, the above mentioned procedure regarding

related parties transactions had to be applied once.

On December 21, 2023 at 8:45 a.m. CET, X‑FAB

announced the following statement via press release

(https://www.xfab.com/investors/news) in accordance

with article 7:97 BCCA:

“X‑FAB Silicon Foundries SE (Euronext Paris: XFAB)

(X‑FAB or the Company) announces the application of

article 7:97 of the Belgian Code on Companies and

Associations (BCCA) in the context of the planned

acquisition of M-MOS Semiconductor Hong Kong

Limited, a fabless company focused on the

development of MOSFET technologies.

X‑FAB Silicon Foundries SE resolved to purchase 100%

of the capital shares issued by M-MOS Semiconductor

Hong Kong Limited (M-MOS) for a total of EUR 22.5

million (the Transaction). The sole seller of these shares

is XTRION NV.

Article 7:97, §1, second subparagraph of the Belgian

Companies and Associations Code (BCAC) provides

that listed companies (X‑FAB) are not allowed to take

any decision regarding a related party transaction

without the prior approval by the board of directors

having applied the special procedure contained in article

7:97 BCAC.

Considering that X‑FAB and XTRION are related parties

in accordance with IAS 24, the decision to approve the

purchase price and terms and conditions of the Share

Transfer Agreement by the board of directors of

X‑FAB, triggered the conflict of interests’ procedure for

related party transactions under article 7:97 BCAC.

After advice from the committee of independent

directors, dated December 21, 2023, the board of

directors approved the Transaction and the signing of

the Share Transfer Agreement. This decision is in line

with the conclusion of the committee of independent

directors, which states:

‘It is the opinion of the Committee that the Transaction

and the Share Transfer Agreement are:

• not such as to cause X‑FAB a disadvantage which,

in light of the strategy of X‑FAB, is manifestly

illegitimate; and

• in the interest of X‑FAB and do not cause a

disadvantage to X‑FAB which would not be

outweighed by benefits for X‑FAB.’

The auditor has assessed the financial and accounting

information mentioned in the related minutes of the

board of directors and in the above-mentioned

committee’s advice. The conclusion of the auditor reads

as follows:

‘Based on our review, nothing has come to our attention

that causes us to believe that the financial and

accounting data as included in the advice of the

Committee of Independent Directors dated

December 21, 2023 and in the minutes of the board of

directors dated December 21. 2023, justifying the

proposed Transaction, do not give, in all material

respects, a true and fair view of, and are consistent with

the information available to us in the context of our

engagement’.”

Other transactions with directors and Executive

Management

As determined by section 6 of the X‑FAB Corporate

Governance Charter, members of the Board of

Directors should arrange their personal and business

affairs in such a way as to avoid conflicts with X‑FAB.

Moreover, the members of the Board of Directors and

the Executive Management are not permitted to enter,

either directly or indirectly, into agreements with

X‑FAB or any of its subsidiaries for the provision of

paid services or goods, unless explicitly authorized by

the Board of Directors. Such agreements must always

be at arm’s length. Please refer to note 12 on related

party transactions.

In 2023, there were no transactions between the

Company and its directors or Executive Managers

involving a conflict of interest.

Insider trading

In compliance with the 2020 Belgian Code on

Corporate Governance and EU regulation on market

abuse (EU No 596/2014) the X‑FAB Insider Trading

Policy was updated and approved by the Board of

Directors in 2020.

X‑FAB complies with the Belgian provisions on insider

trading and market abuse. In this respect a list is kept

up to date of all people with managerial responsibilities

as well as all other people who have access to sensitive

information which could have an effect on the share

price.

The purpose of the X‑FAB Insider Trading Policy is to

prevent the abuse of inside information. Before trading

any company shares, the members of the Board and

	Annual Report 2023 | Corporate governance statement

123

the Executive Management have to receive the green

light from the Compliance Officer and have to report

back once the transaction has been completed.

Furthermore, the members of the Board and the

Executive Management as well as their closely

associated persons have to notify all their transactions

above a certain threshold in X‑FAB shares to the

Belgian Financial Services and Markets Authority, which

will publish these notices on its website.

Compliance with the X‑FAB Insider Trading Policy will

be supported and verified by the Compliance Officer.

7.9 Internal control and risk assessment

procedures in relation to financial reporting

The internal control and risk assessment procedures in

relation to the process of financial reporting are

coordinated by the CFO. Such procedures are in place

to ensure that the financial reporting is based on

reliable information and that the continuity of the

financial reporting in conformity with the IFRS

accounting principles is guaranteed.

The process of internal control in relation to the

financial reporting is based on the following principles:

• Data on transactions or use of assets of the

Company are registered accurately and saved in an

automated global enterprise resource planning

(ERP) system by the different X‑FAB business

units.

• Accounting transactions are registered in globally

standardized operating charts of accounts.

• The financial information is prepared and reported

in first instance by the accounting teams in the

different legal entities of X‑FAB worldwide.

• Consequently, the finance managers at the

different X‑FAB sites will review the prepared and

reported local financial information before sending

it to the Global Finance Department.

• In the Global Finance Department, the financial

information will receive its final review before it is

included in the consolidated financial statements.

X‑FAB is validly represented by the sole signature of

the CEO for all aspects within and outside the daily

management of the Company. Specific powers are

granted to members of the Executive Management to

represent X‑FAB in matters that relate to the

functional area for which they are responsible. For

actions that fall outside the scope of the daily

management, the Company is validly represented by

two directors acting together.

In the event of the detection of certain deficiencies,

this will be reported to the Executive Management to

determine which appropriate measures can be taken.

The risk assessment in connection with the financial

reporting is based on the following principles:

• Risks that the Company is confronted with are

detected and monitored by the responsible

persons of the different departments of the

Company.

• The automated ERP system provides the

responsible persons of the departments with

permanent access to the financial information

relevant to the business activities of their functional

area for monitoring, controlling, and directing

purposes.

• Closing the accounts at the end of every month

warrants that the financial consequences of the

identified risks are monitored closely to be able to

anticipate to possible adverse evolutions.

• The financial results are also reviewed monthly on a

global level.

• A data protection system based on antivirus

software, internal and external backup of data, and

the controlling of access rights to information

protects the Company’s information and

guarantees the continuity of the financial reporting.

The adequacy and integrity of these IT systems

and procedures are reviewed regularly.

• In accordance with the 2020 Belgian Code on

Corporate Governance, X‑FAB has set up an

internal audit function for its financial department,

whose resources and skills are adapted to assess

the financial reporting and the risk management of

the Company. The Audit Committee receives a

periodic summary of the internal audit activities.

7.10 Description of certain information from

the Articles of Association and elements

pertinent to a takeover bid

Capital structure

The registered capital of X‑FAB amounts to

EUR 657,456,850.68 and is represented by

130,781,669 equal shares without par value. The shares

are in registered or dematerialized form.

Restrictions on the transfer of securities

The Articles of Association contain no restrictions on

the transfer of the shares. The Board of Directors is

furthermore not aware of any restrictions imposed by

law on the transfer of shares by any shareholder,

except in the framework of market abuse regulations.

Restrictions on the exercise of voting rights

Each share entitles the holder to one vote. The Articles

of Association contain no restrictions on the voting

rights and each shareholder can exercise their voting

rights provided they are validly admitted to the general

meeting and their rights have not been suspended.

Pursuant to Article 11 of the Articles of Association the

	Annual Report 2023 | Corporate governance statement

124

Company is entitled to suspend the exercise of the

rights attaching to securities belonging to several

owners until one person is appointed towards the

Company as representative of the security.

No one can vote at the general meeting using voting

rights attached to securities that have not been

reported in due time in accordance with the Articles of

Association and with the law.

The Board is not aware of any other restrictions

imposed by law on the exercise of voting rights.

Agreements among shareholders

XTRION NV and Sarawak Technology Holdings Sdn.

Bhd. entered into a shareholders’ agreement as

shareholders of X‑FAB (the “Shareholders’

Agreement”). This Shareholders’ Agreement was

terminated by mutual consent on November 20, 2023.

The Shareholders’ Agreement addressed certain

matters relating to the governance of X‑FAB as well as

the transfer of shares in X‑FAB held by the parties to

this Shareholders’ Agreement.

Pursuant to the terms of the Shareholders’ Agreement,

XTRION NV and Sarawak Technology Holdings Sdn.

Bhd. each had the right to appoint two directors on the

Board of Directors. The Shareholders’ Agreement

furthermore provided for certain restrictions on the

ability of XTRION NV and Sarawak Technology

Holdings Sdn. Bhd. to transfer their shares in X‑FAB.

Amendments to the Articles of Association

Matters involving special legal quorum requirements

include, among others, amendments to the Articles of

Association, issues of new shares, convertible bonds, or

warrants, and decisions regarding mergers and

demergers, which require at least 50% of the share

capital to be present or represented. If the quorum is

not reached, a second meeting may be convened at

which no quorum shall apply.

Matters involving special majority requirements

include, among others, decisions regarding mergers

and demergers, which require a majority of at least 75%

of the votes cast.

Authorities of the Board to issue, buy back, or

dispose of own shares

The Articles of Association foresee that the Board of

Directors may increase the registered capital of the

Company in one or several times by a (cumulated)

amount of maximum EUR 657,456,850.68. Such

authorization may be renewed in accordance with the

relevant legal provisions. The Board of Directors may

exercise this power for a period of five (5) years as

from the date of publication in the Annexes to the

Belgian State Gazette of the amendment to these

Articles of Association approved by the Shareholders’

Meeting on April 28, 2022.

The Board of Directors is further authorized by

Article 13 of the Articles of Association to acquire own

shares in the Company, either directly, by a person

acting in his/her own name on behalf of the Company,

or by a direct subsidiary within the meaning and the

limits set out by Article 7:221 BCCA, under the following

conditions:

• This authorization applies for a number of own

shares, profit-sharing certificates, or associated

certificates that is at most equal to that which, after

acquisition, results in a total number of own shares

held by the Company equal to the set limit of 20%

as stipulated in Article 5 of the SE Regulation juncto

Articles 7:215 ff. BCCA.

• Under this authorization a share should be acquired

at a price that will respect the legal requirements,

but that will in any case not be more than 10% below

the lowest closing price in the last 30 trading days

preceding the transaction and not more than 5%

above the highest closing price in the last 30

trading days preceding the transaction.

• This authorization is valid for five years from

April 28, 2022.

By resolution of the Shareholders’ Meeting held on

April 28, 2022, the Board of Directors is authorized to

divest itself of part of or all the Company’s shares,

profit-sharing certificates, or associated certificates.

• This can be done at any time and at a price it

determines, on or outside the stock market or in

the framework of its remuneration policy, to

personnel within the meaning of article 1:27 BCCA

or to prevent any serious and imminent harm to the

Company.

• The authorization covers the divestment of the

Company’s shares, profit-sharing certificates, or

associated certificates by a direct subsidiary within

the meaning of Article 7:221 BCCA.

• The authorization is valid without any time

restriction, except when the divestment is to

prevent any serious and imminent harm, in which

case the authorization is valid for three (3) years

from the date of publication of the authorization in

the Annexes to the Belgian State Gazette (May 2,

2022).

Authorities of the Board to proceed with a capital

increase

As per the Articles of Association, the Board of

Directors was expressly empowered to proceed with a

capital increase in any and all forms, including but not

limited to a capital increase accompanied by the

restriction or withdrawal of the preferential

subscription rights, even after receipt by the Company

of a notification by the Financial Services and Markets

Authority (FSMA – “Autoriteit voor Financiële Diensten

en Markten”/“Autorité des Services et Marchés

Financiers”) of a takeover bid for the Company‘s

shares. Where this is the case, however, the capital

increase must comply with the additional terms and

conditions laid down in Article 5 of the SE Regulation

juncto Article 7:202 BCCA. The powers conferred on

	Annual Report 2023 | Corporate governance statement

125

the Board of Directors remain in effect for a period of

three (3) years from the date of the amendment to the

Articles of Association approved by Shareholders’

Meeting held on April 28, 2022. These powers may be

renewed for a further period of three years by

resolution of the Shareholders’ Meeting, deliberating

and deciding in accordance with applicable rules. If the

Board of Directors decides upon an increase of

authorized capital pursuant to this authorization, this

increase will be deducted from the remaining part of

the authorized capital.

Other elements

The Company has not issued securities with special

control rights.

No agreements have been concluded between the

Company and its directors or employees providing for

compensation if, as a result of a takeover bid, the

directors should resign or are made redundant without

valid reason or if the employment of the employees is

terminated.

7.11 Auditor

KPMG Bedrijfsrevisoren BV, whose registered office is

situated at 1930 Zaventem, Luchthaven, Brussel

Nationaal 1K, was appointed as statutory auditor of the

Company. Mr. Herwig Carmans, auditor, was appointed

as the permanent representative of the auditor.

The audit fee for the audit of the consolidated financial

statements amounted to USD 583,000, excluding

value-added taxes. Additional fees were charged in

2023 for other services amounting to USD 95,000,

excluding value-added taxes. Non-audit related

services mainly relate to certification engagements

and tax compliance services.

7.12 Compliance with the 2020 Belgian Code

on Corporate Governance

X‑FAB complies with the principles of the Code 2020.

In view of the “comply-or-explain” principle of the

Code the following overview sets out those provisions

of the Code that X‑FAB does not comply with, along

with an explanation of the reasons for non-compliance:

• Contrary to recommendation 7.9 of the Code

2020, the members of the Executive Management

are not required to hold a minimum threshold of

shares in the Company. Further, the Company does

not grant shares, options, or other rights to acquire

shares to its members of the Executive

Management. However, it should be noted that the

CEO is an important shareholder of the Company.

The Board of Directors believes that the stock

price of a company does not always correctly

reflect the performance of that company since

there are many external factors that also have an

influence on the price of a financial instrument.

The financial numbers that impact the level of the

business component of the variable remuneration,

i.e. the EBIT target, are a more important element

driving the valuation of the Company. As such, the

directors believe there is a clear alignment between

shareholders on the one hand and management on

the other.

• Contrary to recommendation 7.6 of the Code

2020 for non-executive directors, the directors do

not receive shares in the Company as part of their

remuneration. The purpose of the

recommendation is to better align the interests of

non-executive directors with regard to long-term

shareholder interest. At X‑FAB, that long-term

shareholder perspective is sufficiently represented

on the Board of Directors since the CEO as well as

one director are important (indirect) shareholders

of the Company.

	Annual Report 2023 | Corporate governance statement

126

8. SHAREHOLDER

INFORMATION

Shareholder structure

	NUMBER OF SHARES	SHARE IN %
Elex NV	32,672,778	25.0
Sensinnovat BV	31,666,781	24.2
Sarawak Technology Holdings Sdn. Bhd.	14,948,655	11.4
Public	51,493,455	39.4
TOTAL	130,781,669	100.0

Total number of votes: 130,781,669

Share information

First day of listing:	April 6, 2017
Stock exchange:	Euronext Paris
Ticker:	XFAB
ISIN:	BE0974310428
Number of shares outstanding on December 31, 2023:	130,781,669
Market capitalization on December 31, 2023:	EUR 1,255,597,400.51

	Annual Report 2023 | Shareholder information

127

Financial calendar

April 25, 2024

Publication of Q1 2024 results

Annual shareholders’ meeting

July 25, 2024

Publication of Q2 2024 results

September 3, 2024

Publication of Half-Year Report 2024

October 25, 2024

Publication of Q3 2024 results

Contact information

X‑FAB Silicon Foundries SE

Investor Relations

Transportstraat 1

3980 Tessenderlo

Belgium

Phone: +32 1361 3627

E-mail: ir@xfab.com

Web: www.xfab.com

	Annual Report 2023 | Shareholder information

128

9. X-FAB SILICON FOUNDRIES

SE STATUTORY ACCOUNTS

The separate financial statements of X‑FAB Silicon

Foundries SE, the Group’s parent, have been audited in

accordance with Belgian statutory requirements. The

auditor’s report is unqualified and certifies that the

financial statements have been prepared in

accordance with Belgian GAAP, and that they give a

true and fair view of the financial position and results of

X‑FAB Silicon Foundries SE in accordance with all legal

and regulatory requirements.

The separate financial statements, together with the

separate management report of the board of directors

to the general assembly of shareholders as well as the

auditor’s report thereon, will be filed with the National

Bank of Belgium in accordance with the relevant

statutory filing due dates. In addition, they are available

on the Company’s website or can also be obtained on

request at the registered office of the company at

Transportstraat 1, 3980 Tessenderlo.

The separate financial statements are reproduced

below in condensed form.

The condensed statutory financial statements of

X‑FAB Silicon Foundries SE are presented in

thousands of EUR as the functional currency of the

statutory accounts is the EUR.

Participations in affiliated companies are recognized at

their acquisition cost.

Condensed non-consolidated statement of profit and loss

For the year ended December 31

in thousands of EUR	2023	2022
Operating income
Turnover	16,022	13,016
Operating charges
Cost of services and other expenses	(16,511)	(13,106)
Wages and salaries, social security costs and pension costs	(228)	(135)
Depreciation	(4)	(4)
Operating profit	(721)	(229)
Finance income
Income from financial fixed assets	135,146	14,848
Income from current assets	725	—
Other financial income	—	2,040
Finance costs
Debt charges	—	(53)
Other financial charges	(2,449)	(87)
Net financial result	133,422	16,748
Profit before taxes	132,701	16,519
Income tax	—	(414)
Profit for the period	132,701	16,105

	Annual Report 2023 | X-FAB SE statutory accounts

129

Condensed non-consolidated statement of financial position

in thousands of EUR	December 31, 2023	December 31, 2022
ASSETS
Fixed assets
Other equipment	1	5
Financial assets
Affiliated companies
Investments in affiliates	1,034,250	927,250
Loans issued to affiliated companies	—	—
Total fixed assets	1,034,251	927,255
Current assets
Amounts receivable within one year
Other receivables	60,067	18,100
Cash and cash equivalents	53,932	70,097
Accruals and deferred income	38	8
Total current assets	114,037	88,205
Total assets	1,148,288	1,015,460
EQUITY AND LIABILITIES
Equity
Capital
Share capital – issued	657,457	657,457
Share premium	92,902	92,902
Reserves
Legal reserves	19,842	13,207
Reserve for treasury shares	562	562
Accumulated profits	376,267	250,201
Total equity	1,147,030	1,014,329
Current liabilities
Amounts payable within one year
Trade payables	510	198
Other current liabilities	682	621
Taxes	66	312
Accrued charges and deferred income	—	—
Total current liabilities	1,258	1,131
Total equity and liabilities	1,148,288	1,015,460

	Annual Report 2023 | X-FAB SE statutory accounts

130

10. RISK FACTORS

An investment in shares involves risks and

uncertainties. Prior to making a decision to invest in

shares of X‑FAB, the information provided in this

annual report and, in particular, the risks and

uncertainties described below should be read and

considered carefully. The occurrence of any of these

risks could adversely affect the Company’s business,

results of operations, and/or financial condition.

Risks relating to X‑FAB’s business and the

semiconductor industry

Structural trends in the markets for the end-user

products produced by X‑FAB’s customers, or

material volatility in demand for these products,

may limit X‑FAB’s ability to maintain or increase

sales and profit levels.

A significant portion of X‑FAB’s revenues is derived

from customers who use ICs manufactured by the

Group as components for the production of a wide

range of products including automotive, industrial,

medical, and communications devices. If consumer

demand for these products is volatile, or past and

expected structural growth trends in these industries

do not continue, it may lead to reduced demand for

X‑FAB’s analog/mixed-signal ICs.

A global systemic economic or financial crisis,

increased political uncertainty, or increased

economic protectionism could negatively affect

X‑FAB.

X‑FAB’s business is subject to inherent and indirect

risks arising from general and sector-specific economic

conditions in the markets in which it operates. In recent

years, several major systemic economic and financial

crises and events leading to political uncertainty have

negatively affected global business conditions, the

semiconductor industry, and a variety of consumer and

industrial markets. X‑FAB’s protection against

downturns is limited, since a substantial majority of

customer contracts do not contain minimum order

requirements, and as a result any decline or slow GDP

growth, whether caused by political uncertainty,

changes in trade regulation, or broader economic

conditions, which leads to reduced consumer and

industrial spending, may adversely impact X‑FAB’s

customers and result in lower demand for its analog/

mixed-signal ICs.

A significant portion of X‑FAB’s revenue comes

from a relatively limited number of customers.

X-FAB’s largest customer, Melexis, accounted for 45%

of the Group’s revenue in 2023, while the Group’s top

three customers accounted for 52% of revenue and its

top five customers accounted for 56% of revenue

during the year. None of X‑FAB’s customers are

prohibited by contract from purchasing from other

semiconductor suppliers. In the past, customers have

switched to other semiconductor suppliers with little or

no notice, or have notified the Group that they would

source semiconductors for new end-user products

from other semiconductor manufacturers. Changes in

X‑FAB’s relationships with its top customers, the loss of

one or more of these customers, or a change in the

competitive position of any of these customers could

have a material adverse impact on X‑FAB.

Due to X‑FAB’s relatively fixed-cost structure, its

ability to grow profitability is dependent on its

ability to maintain appropriate utilization levels.

The profitability of X‑FAB’s operations is closely tied to

its level of utilization. X‑FAB’s ability to improve or

maintain utilization levels depends, among other things,

on the general economic environment, the success of

its major customers, and its ability to offer the

technologies and processes required for it to stay

competitive. Failure to maintain or improve utilization

levels could have a material adverse impact on X‑FAB.

X‑FAB faces difficulties in forecasting demand and

may therefore be unable to match its production

capacity to demand.

Difficulties in projecting future business levels make it

more difficult to reach and to maintain optimal

utilization levels and adequately predict capacity needs

across X‑FAB’s operations. Because customers usually

place orders on a short-term basis, X‑FAB may face

difficulties to predict demand accurately. Significant

capacity problems or inability or delay in shifting

production to another fab could harm X‑FAB’s

relationships with its customers and lead to lost sales.

Furthermore, small changes in sales at the OEMs may

trigger inventory corrections throughout the supply

chain. As it can take about ten months from placing an

order at X‑FAB to assembling the final product at the

OEM, a small variation in sales combined with a

negative or positive market segment growth could

cause overreactions in the supply chain that amplify

the effects on X‑FAB’s operations, since X‑FAB is at

the end of the supply chain.

X‑FAB may be unsuccessful in its attempts to

increase its production capacity and capabilities.

As part of its strategy to expand capacity, X‑FAB

intends to expand capabilities and capacity at the

Group’s existing sites. This depends on the timely

availability of equipment as well as the ability to install

and qualify such new equipment on a timely basis.

Although X‑FAB does not have any current targets for

future acquisitions, the Group may acquire additional

companies or production sites over the medium term.

X‑FAB may also seek to grow its production capacity

through the development of new manufacturing sites.

Failure to integrate any acquired company, fab, or

technology successfully, or to achieve desired

synergies, may inhibit X‑FAB’s future expansion.

	Annual Report 2023 | Risk factors

131

X‑FAB may not realize all the anticipated benefits

from its acquisition of Altis’ core business.

X‑FAB acquired the Altis assets in 2016, including a fab

located in Corbeil-Essonnes, France. The integration

process includes a series of technology introductions,

capacity enhancements, adoptions of Group-wide

systems, and implementation of cost-efficiency

measures. X‑FAB may encounter delays or

interruptions in this integration process, among others

due to delays in customer qualifications in the fab or a

need to make additional capital expenditures. There

can be no assurance that this integration will be

successful, that X‑FAB will meet targeted synergies or

financial returns at the new facility, or that X‑FAB will

be able to keep all existing customers to secure

satisfactory fab utilization during the business

transition.

X‑FAB’s expectations of an increase in market

share by foundries might not occur.

A key component of X‑FAB’s strategy is its belief that

the market for foundries will grow, due to increased

outsourcing of specialty technologies by IDMs and

increasing prevalence of fabless companies. Although

this trend has been prevalent in the digital IC market, it

may not develop to the same extent in the market for

specialty technologies. If increasing market growth for

foundries were to slow or reverse, it could have a

material adverse impact on X‑FAB.

X‑FAB may face increasing competition.

Although X‑FAB operates in a narrow market segment

within the broader semiconductor manufacturing

industry, the Group faces competition from other

semiconductor producers, some of which have greater

manufacturing, financial, research and development,

and marketing resources than X‑FAB does. In the long

term, these competitors may win a higher portion of

new customers than X‑FAB, or win existing customers

from X‑FAB. If X‑FAB cannot provide the same level of

design and engineering support, capacity, or advanced

capabilities as competitors, it may have a material

adverse effect on X‑FAB.

X‑FAB may face competitive pricing pressures.

Competitors may have an impact on X‑FAB’s selling

prices and demand for its services. Although X‑FAB

has not experienced significant pricing pressure in the

past, there can be no assurance this will be the case in

the future. Significant declines in average selling prices

(ASPs) could have a material adverse effect on X‑FAB.

X‑FAB may face price increases from its suppliers.

X‑FAB manufactures analog/mixed-signal ICs, utilizing

proprietary process technologies and third-party

silicon wafers and other raw materials. Changes in the

availability or prices of such wafers, raw materials,

electricity, spare parts, etc. can have an effect on the

operating margin if the additional costs cannot be

included in the prices for X‑FAB’s own customers.

In 2023, raw wafer costs accounted for 15% of total

cost of sales. For most raw wafer types, X‑FAB uses

more than one supplier to secure availability of

required volumes but also to remain flexible. However,

having several suppliers per wafer type also means a

greater effort to acquire the necessary qualifications

for these suppliers.

X‑FAB may be subject to penalties if it fails to meet

the terms of long-term contracts with customers

and suppliers.

X‑FAB has concluded long-term agreements with a

number of customers and suppliers. Long-term

contracts with customers include take-or-pay

arrangements which specify agreed wafer quantities

and prices for a customer’s business with X‑FAB over a

period of three years. Such arrangements provide

X‑FAB with a better overview of its future business

levels. However, should X‑FAB be unable to deliver the

agreed quantities of wafers on time, it will be subject to

penalty payments. In a similar manner, long-term

procurement contracts with suppliers include take-or-

pay arrangements and X‑FAB may be subject to

penalties if it does not purchase the agreed quantities

from suppliers under such contracts.

X-FAB's operations could be disrupted by an

unreliable or insufficient power supply.

Reliable power supply is essential to maintain a wafer

fabrication facility. Unscheduled interruptions can

cause significant damage to work in progress (WIP)

and equipment. In addition, in times of increased

geopolitical tensions and global competition for scarce

resources, the energy supply in some regions may

become inadequate.

X‑FAB is subject to risks associated with currency

fluctuations.

X‑FAB records its financial results in U.S. dollars but

receives revenues and incurs costs in a variety of

currencies, including euros and Malaysian ringgit.

Changes in the exchange rate of the U.S. dollar to the

euro or Malaysian ringgit could result in translational

losses in a given year, as compared to prior operating

periods, or in a mismatch between local currency

expenses and U.S. dollar revenues. X‑FAB strives for a

natural hedging of the business, which would make

X‑FAB’s profitability development largely independent

from exchange rate fluctuations; however, this may not

be effective in preventing exchange rate losses.

Price, credit, liquidity, and cash flow risks and risks

associated with the use of financial instruments are

described in note 10 to the X‑FAB consolidated

financial statements in chapter 5.

	Annual Report 2023 | Risk factors

132

X‑FAB is subject to risks associated with any form

of cyber criminality.

X‑FAB’s operations may be disrupted due to the

unauthorized use or theft of critical data as well as

sabotage, viruses, or any other malicious activity

targeted at the Company’s IT infrastructure. This could

have an impact on the confidentiality, integrity, and

availability of data and/or IT systems of the Company.

X‑FAB has taken measures to make the Company’s IT

infrastructure robust and secure and has implemented

state-of-the-art security and control frameworks and

technology. Any significant interruption or failure of

X‑FAB’s IT systems or any significant breach of

security could have an adverse effect on the

Company’s business, operational results, financial

condition, and cash flows.

X‑FAB is also subject to the following risks:

• X‑FAB depends on successful technological

advances.

• X‑FAB depends on successful materials, machinery,

and component procurement for its manufacturing

processes.

• X‑FAB’s business may temporarily be negatively

impacted due to disruptions in the supply chain or

market demand caused by a pandemic or epidemic.

• X‑FAB may be unable to recruit or retain the

personnel required for its growth strategy.

• X‑FAB may be affected by reductions in

government subsidies and grants and could fail to

comply with the conditions and obligations under

such subsidy programs.

• Industry studies, forecasts, and growth rates

relating to the semiconductor market as a whole

may not be indicative of X‑FAB’s operations within

the analog/mixed-signal semiconductor market.

• X‑FAB’s ability to compete successfully and

achieve future growth will depend, in part, on its

ability to protect its proprietary technology.

• X‑FAB may be subject to claims for alleged

infringement of third parties’ intellectual property

rights.

• X‑FAB depends on intellectual property rights of

third parties, and failure to maintain or acquire

licenses could harm the Group’s business.

• X‑FAB could be adversely affected by

manufacturing interruptions.

• X‑FAB’s business could be adversely affected by

changes in export control regulations, trade

restrictions, and economic sanctions.

• If X‑FAB experiences difficulty in achieving

acceptable device yields or process performance

as a result of manufacturing problems, it could

result in delayed deliveries.

• X‑FAB’s insurance coverage may not be adequate

to compensate for any interruptions or loss of

business.

• X‑FAB’s operations may be impacted by

disruptions both at its own or its suppliers’

operations caused by severe weather conditions

whose occurrence is increasing due to climate

change.

• X‑FAB could incur material costs to comply with

regulation, including environmental and health and

safety laws, especially as a result of climate change.

Changes in such regulations could require

significant changes in the production process or

could even require purchasing additional

equipment.

• X‑FAB may be subject to litigation, disputes, or

other legal proceedings.

• X‑FAB carries a significant amount of deferred tax

assets on its balance sheet.

• Low or negligible employee motivation as well as

the occurrence of accidents due to human failure

may negatively impact X‑FAB’s business.

• Cultural differences may lead to misalignment

among X‑FAB sites, negatively impacting X‑FAB’s

business.

• X‑FAB may be subject to penalty payments if labor

rights or environmental provisions are being

violated.

• X‑FAB’s public image may be adversely affected

based on the impact of its business on the

environment.

Risks related to the shares

• Future sales of substantial amounts of X‑FAB’s

ordinary shares, or the perception that such sales

could occur, could adversely affect the market

value of the shares.

• X‑FAB may not be able to pay dividends.

• Investors with a reference currency other than

euros will become subject to foreign exchange rate

risk when investing in shares.

• Any sale, purchase, or exchange of shares may

become subject to financial transaction tax.

• Certain provisions of the Belgian Companies and

Associations Code and the Articles of Association

may affect potential takeover attempts and may

affect the market price of the shares.

	Annual Report 2023 | Risk factors

133

Forward-looking information

This annual report may include forward-looking

statements. Forward-looking statements are

statements regarding or based upon management’s

current intentions, beliefs, or expectations relating to,

among other things, X‑FAB’s future results of

operations, financial condition, liquidity, prospects,

growth, strategies, or developments in the industry in

which it operates. By their nature, forward-looking

statements are subject to risks, uncertainties, and

assumptions that could cause actual results or future

events to differ materially from those expressed or

implied thereby. These risks, uncertainties, and

assumptions could adversely affect the outcome and

financial effects of the plans and events described

herein.

Forward-looking statements contained in this annual

report regarding trends or current activities should not

be taken as a report that such trends or activities will

continue in the future. We undertake no obligation to

update or revise any forward-looking statements,

whether as a result of new information, future events,

or otherwise, unless legally required. You should not

place undue reliance on any such forward-looking

statements, which speak only as of the date of this

annual report.

The information contained in this annual report is

subject to change without notice. No re-report or

warranty, express or implied, is made as to the fairness,

accuracy, reasonableness, or completeness of the

information contained herein, and no reliance should

be placed on it.

	Annual Report 2023 | Risk factors

134

11. GLOSSARY

AEC	Automotive Electronics Council
AI	Artificial intelligence
AIM	Automotive, industrial, medical
Analog M/S	Analog mixed-signal
ASIC	Application-specific integrated circuit
B2B	Business to business
BCCA	Belgian Code on Companies and Associations
BCD	Bipolar-CMOS-DMOS
Belgian Companies Code	The Belgian Act of May 7, 1999 containing the Companies Code as amended from time to time
Belgian GAAP	Belgian generally accepted accounting principles, which refers to the financial reporting framework applicable in Belgium
BMS	Battery management system
CAGR	Compound annual growth rate
CCC	Consumer, communications, computer
CDA	Clean dry air
CMOS	Complementary metal-oxide-semiconductor
Company	X-FAB Silicon Foundries SE
CRM	Customer relationship management
DBO	Defined benefit obligation
DNA	Deoxyribonucleic acid
DTI	Deep trench isolation
EBIT	Earnings before net finance cost and income taxes, which is equivalent to operating profit, as presented in the historical financial information
EBITDA	Earnings before net finance cost, income taxes, depreciation, and amortization.
ECL	Expected credit loss
EHS	Environmental, Health and Safety
ERP	Enterprise resource planning
ESEF	European Single Electronic Format
ESG	Environmental, social, governance
EU	The European Union
EUR, euros, or €	The common currency of the EU member states that are part of the Eurozone

	Annual Report 2023 | Glossary

135

Fab	Wafer fabrication facility
FSMA	The Belgian Financial Services and Market Authority
FTE	Full-time equivalent
FVOCI	Fair value through other comprehensive income
FVTPL	Fair value through profit or loss
GDP	Gross domestic product
GHG	Greenhouse gases
GRI	Global Reporting Initiative
GVG	X-FAB Dresden Grundstücks-Vermietungsgesellschaft mbH & Co. KG
GWh	Gigawatt hours
IAASB	International Auditing and Assurance Standards Board
IATF	International Automotive Task Force
IC	Integrated circuit
ICC	International Chamber of Commerce
IDM	Integrated device manufacturer
IEEE	Institute of Electrical and Electronics Engineers
IFRS	International Financial Reporting Standards as adopted by the European Union
IoT	Internet of things
IP	Intellectual property
IPCEI	Important Projects of Common European Interest
ISAs	International Standards on Auditing
KW	Kilowatt
LiDAR	Light imaging, detection, and ranging
LTA	Long-term agreement
MCU	Microcontroller unit
MEMS	Micro-electro-mechanical systems
MES	Manufacturing execution system
MFI	X-FAB MEMS Foundry Itzehoe GmbH
M-MOS	M-MOS Semiconductor Sdn. Bhd.
MW	Megawatt
NCI	Non-controlling interest
NRE	Non-recurring engineering
NVM	Non-volatile memory
OCI	Other comprehensive income

	Annual Report 2023 | Glossary

136

OECD	Organization for Economic Cooperation and Development
OEM	Original equipment manufacturer
PCM	Process control monitoring
REACH	Registration, Evaluation, Authorization, and Restriction of Chemicals
RF	Radio frequency
PFC	Perfluorinated carbons
RoHS	Restriction of the use of certain hazardous substances
SCAR	Supplier corrective action request
SEM	Secure endpoint management
SE Regulation	Council Regulation (EC) No 2157/2001 of October 8, 2001 on the Statute for a European company (SE)
SiC	Silicon carbide
SOI	Silicon-on-insulator
STEM	Science, technology, engineering and mathematics
UPW	Ultra pure water
VDA	German Association of the Automotive Industry
WIP	Work in progress
WSPM	Wafer starts per month
X-FAB SE, or the Company	X-FAB Silicon Foundries SE
X-FAB SE Group, or the Group	X-FAB Silicon Foundries SE together with its subsidiaries
X-FAB GmbH	X-FAB Semiconductor Foundries GmbH
X-FAB Dresden	X-FAB Dresden GmbH & Co. KG and X-FAB Dresden Verwaltungs-GmbH
X-FAB France	X-FAB France SAS
X-FAB Texas	X-FAB Texas Inc.
X-FAB Sarawak	X-FAB Sarawak Sdn. Bhd.
X-FAB Japan	X-FAB Japan K.K.
XMF	X-FAB MEMS Foundry GmbH
ZVEI	Electrical Industry Association, Germany

	Annual Report 2023 | Glossary

137