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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
5.1Summary of important developments .......................................	26
5.2Statement of the Board of Directors .	26
5.3Statutory 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, 2022 ...	26
5.4Consolidated financial statements .....	30
Notes to the consolidated financial statements
1Basic information and description of the X-FAB Silicon Foundries SE Group’s business ...................................	35
2Group structure ....................................	35
3Basis of preparation .............................	36
3.1Statement of compliance ...........	36
3.2Basis of measurement .................	36
3.3Functional and presentation currency ........................................	36
3.4Use of judgments, assumptions,and estimation uncertainties .................................	36
4Summary of accounting policies ........	37
4.1Basis of consolidation ..................	37
4.2Foreign currency translation ......	38
4.3Revenue from contracts with customers .....................................	38
4.4Research and development expenses .......................................	38
4.5Finance income and finance costs ..............................................	39

4.6Rental income from investment properties .....................................	39
4.7Employee benefits ......................	39
4.8Property, plant, equipment, and investment properties .................	39
4.9Intangible assets ..........................	40
4.10Impairment ...................................	40
4.11Financial instruments ...................	40
4.12Derivative financial instruments .	43
4.13Inventories ....................................	43
4.14Cash and cash equivalents ..........	43
4.15Equity ............................................	43
4.16Provisions .....................................	43
4.17Leases ...........................................	44
4.18Subsidies .......................................	45
4.19Income taxes ................................	45
4.20Changes to accounting policies .	46
5Business combinations ........................	47
6Notes to the consolidated statement of profit or loss ...................	47
6.1Revenue ........................................	47
6.2Cost of sales .................................	48
6.3Research and development expenses .......................................	48
6.4Selling expenses ..........................	48
6.5General and administrative expenses .......................................	48
6.6Expenses by nature .....................	48
6.7Rental income from investment properties .....................................	49
6.8Rental expenses related to investment properties .................	49
6.9Other income ...............................	49
6.10Other expenses ...........................	49
6.11Finance income ............................	50
6.12Finance costs ...............................	50
6.13Income tax ....................................	50
6.14Earnings per share .......................	53
7Notes to the statement of financial position ..................................................	54
7.1Property, plant, equipment, and investment properties .................	54
7.2Intangible assets ..........................	56

	Annual Report 2022 | Contents

2

7.3Inventories ....................................	56
7.4Trade and other receivables .......	57
7.5Other assets .................................	58
7.6Cash and cash equivalents ..........	58
7.7Equity ............................................	58
7.8Dividends ......................................	59
7.9Non-controlling interests ............	60
7.10Loans and borrowings .................	60
7.11Other non-current liabilities ........	65
7.12Trade payables and other current liabilities ...........................	66
7.13Provisions .....................................	66
8Notes to the statement of cash flows .......................................................	67
9Segment reporting ...............................	67
10Financial instruments – fair values and risk management ...........................	69
11Leases ....................................................	72
12Transactions with related parties .......	73
13Other disclosures ..................................	74
13.1Purchase commitments and contingencies ...............................	74
13.2Unresolved legal disputes and claims ............................................	75
13.3Employees ....................................	75
13.4List of shareholdings ...................	75
13.5Consolidated financial statements of the ultimate parent ............................................	76
13.6Auditor and auditor’s remuneration ................................	76
14Events after the reporting period ......	76
6.Corporate social responsibility at      X-FAB ..........................................................	80
6.1Scope .....................................................	80
6.1.1    X-FAB’s key environmental, social, and governance (ESG) goals ..............................................	81
6.1.2 Stakeholder engagement ............	82
6.1.3 Digital transformation ...................	84
6.2Environment ..........................................	85
6.2.1Environmental awareness and responsibility ................................	85
6.2.2Materials and waste management ................................	86
6.2.2.1Energy efficiency ............	86
6.2.2.2Water ................................	87
6.2.2.3Greenhouse gases ..........	87
6.3Social ......................................................	88
6.3.1Human rights and human resources ...................................	88
6.3.2Social commitment ..................	93

6.3.3Healthy work environment ......	94
6.4Governance ...........................................	95
6.4.1Anti-corruption and bribery ........	95
6.4.2X-FAB’s supply chain ...................	95
6.4.2.1Selection and categorization of X-FAB suppliers ...........................	95
6.4.2.2Audits and continual improvement of suppliers ...........................	96
6.4.2.3Handling of conflict minerals ............................	97
6.4.3Data Security ................................	97
6.4.4X-FAB’s responsibility towards its customers and society ...........	98
6.5 EU taxonomy.........................................	98
7.Corporate governance statement .......	104
7.1Shareholders .........................................	104
7.2Management structure ........................	104
7.3Board of Directors ................................	105
7.4Committees ..........................................	107
7.5Executive Management .......................	108
7.6Diversity policy ......................................	108
7.7Remuneration report ...........................	108
7.8Policy on certain transactions .............	114
7.9Internal control and risk assessment procedures in relation to financial reporting ................................................	115
7.10Description of certain information from the Articles of Association and elements pertinent to a takeover bid	116
7.11Auditor ................................................	117
7.12Compliance with the 2020 Belgian Code on Corporate Governance .......	118
8.Shareholder information ........................	122
9.X-FAB SE statutory accounts ...............	124
10.Risk factors ................................................	126
11.Glossary ......................................................	130

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,

2022, which has been prepared in accordance with

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

Companies and Associations (BCCA).

2022 has been another rollercoaster year. On the one

hand, I am very proud that – in the midst of various

challenges – X-FAB has had a successful twelve

months, laying a solid foundation for future growth and

stability. On the other hand, the world faced serious

challenges. In particular, the start of the war in Ukraine

was a major turning point in 2022 for all of us. It has

dramatically aggravated the world political situation

and continues to cause unimaginable suffering.

Combined with the lingering effects of the pandemic,

this has led to major disruptions in the global economy,

including an energy crisis, high inflation rates, and the

continued tightening of supply chains. In this

challenging environment, we have successfully

developed our business, and I would like to sincerely

thank all X-FAB employees for their unwavering

commitment to achieving the best results in

challenging times.

In 2022, X-FAB recorded revenues of USD 739.5

million. This represents an increase of 12% year on year,

well above the semiconductor industry’s average low-

single-digit growth. Order intake remained strong

throughout the year, consistently outpacing our

manufacturing capacity and resulting in an

unprecedented year-end backlog of USD 480.5

million.

Revenues in X-FAB’s core markets – automotive,

industrial, and medical – amounted to USD 618.0

million, which is an increase of 18% year on year,

reflecting the consistently strong demand in these end

markets. With this, we have also continued the

transformation of our business towards a higher share

of high value-added business with long lifecycles. The

proportion of total revenues accounted for by our core

business (automotive, industrial, and medical) further

increased in 2022 to 84% compared to 80% in the

previous year.

Electrification of everything is the key to meeting the

challenges of climate change and moving away from

fossil fuels. With our technology portfolio ranging from

silicon carbide (SiC) to high-voltage CMOS to on-chip

high-voltage isolation, we enable the development of

sustainable and energy-efficient products and are

perfectly positioned to support the transition to

electric mobility and renewable energy sources. On the

other hand, the digitization of medicine is becoming a

reality, and X-FAB continues to benefit from the

growing trend to use semiconductor technology for

advances in the prevention, diagnosis, treatment, and

monitoring of disease. Our combined CMOS and

MEMS capabilities enable a wide range of different

applications – from personal medical devices, such as

temperature sensors, hearing aids, or cochlear

implants, to x-ray or ultrasound applications and highly

complex lab-on-a-chip devices capable of DNA

sequencing, sepsis detection, or allergy testing.

That said, X-FAB is addressing major megatrends of

our time, and this has been fueling growth in all of our

key end markets. For the full year, automotive revenue

was USD 389.3 million, up 17% year on year, while

industrial revenue grew 19% to USD 172.9 million. Full-

year medical revenue was USD 55.8 million, an increase

of 16% over the prior year.

From a technology perspective, our SiC business has

been a major source of growth with annual revenues of

USD 54.5 million, up 61% year on year, while SiC

volumes produced in 2022 more than doubled

compared to the prior year. X-FAB’s CMOS business

recorded annual revenues of USD 609.4 million, up 9%

year on year, and MEMS revenues grew by 15% to USD

75.6 million in 2022.

	Annual Report 2022 | Letter to our stakeholders

4

While revenue growth contributed positively to

X‑FAB’s financial results, this was partially offset by an

exceptional item related to arbitration proceedings

with a supplier. EBITDA for the full year was USD 134.9

million, down 12% year on year. This represents an

EBITDA margin of 18.2%. Excluding this one-off item,

the EBITDA margin would have been 23.4%. Thanks to

the natural hedging of our business, last year’s euro

weakness had no impact on earnings, and price

increases offset cost inflationary pressures.

2022 was another transformative year for the

semiconductor industry, driven by the severe and

prolonged chip shortage, which demonstrated the

strategic importance and high complexity of

semiconductor manufacturing. It caused all players in

the supply chain to fundamentally rethink the way they

do business, and X-FAB – for the first time in the

Company’s history – introduced long-term

agreements with its largest customers, covering a

significant share of its business. This provides stability

both for X-FAB to improve the visibility of its business

and for our customers, assuring them of their supplies.

For more than 90% of what we manufacture we are the

single source for our customer, which makes reliable

and sufficient supply key for X-FAB’s and our

customers’ success.

I am excited about how well X-FAB is positioned. Our

key end markets, particularly automotive and industrial,

are forecast to be the strongest growing segments

within the semiconductor industry over the next five to

ten years. Given the high demand we expect going

forward, supported by long-term customer contracts,

we have initiated a major investment program totaling

USD 1 billion over the next three years (2023–2025) to

expand manufacturing capacity at our existing sites.

Main projects include the capacity expansion at X-FAB

Sarawak, Malaysia, the continued conversion of

capacity at our French site to further ramp up the

automotive business, as well as the gradual expansion

of our SiC business in Lubbock, Texas. Furthermore,

we will expand capacity at our site in Dresden,

Germany, as well as the capacity for MEMS production

at our German sites in Erfurt and Itzehoe.

Semiconductor technology is critical to all sectors of

the economy, and we are proud to provide viable

solutions to the challenges of our time, most notably

climate change and a growing and aging population. At

the same time, semiconductor manufacturing is a

resource-intensive business.

To further strengthen our efforts to act responsibly

and integrate environmental and social considerations

into our daily business, we have committed to the

following long-term ESG objectives: We want to drive

innovation that contributes to sustainable products,

promote diversity and inclusion to ensure equal

opportunities for all employees, and reduce our carbon

footprint as well as the water consumption per stepped

mask layer we produce. More details can be found in

chapter six of this report.

X-FAB is well positioned for a successful future, and we

are fully focused on delivering on our commitments. I

look forward to the continued collaboration with all

employees, our customers, investors, and business

partners in 2023 and beyond, and thank you for the

trust you place in us.

After the close of 2022, there were no major events

that would require disclosure.

Best regards,

Rudi De Winter

CEO

5

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 4,200

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

find an international and diverse working environment.

Our employees represent about 45 nationalities and

have varied cultural backgrounds. This makes working

at X-FAB an inspiring experience – across borders and

cultures. Nonetheless, we are well aware that our

customers expect excellent products and services

independent from nationalities and locations.

It is therefore essential to enable our employees –

no matter where they are located or come from –

to collaborate successfully.

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.

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.

In 2022, X-FAB launched a new series of leadership

training programs for managers and, for the first time,

applied the same training concept and leadership

principles at all X-FAB sites. These trainings focus on

purpose, business ethics, and leading high-

performance teams, enabling all executives to apply

the same principles to drive performance, teamwork,

and output.

	Annual Report 2022 | Our culture

8

Social media highlights 2022

9

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 pure-play

foundry X-FAB manufactures IC products based on

designs created by its customers or third parties in

cooperation and mostly based on X-FAB’s portfolio of

modular, highly specialized proprietary process

technologies and IP. 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. The

next generation 110nm process technology on 200 mm

wafers is under development and will enter production

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 2022 | Our business

12

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 2022, revenues based on X-FAB’s CMOS

technologies amounted to USD 609.4 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.

13

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 BCD-on-SOI technology has special

structures on the chip called deep trench isolation

(DTI) that make the process suitable for operation at

high voltages. DTI allows driver circuits operating at

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.

2022 R&D highlights include:

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

technology platform as successor to its very

successful 180nm BCD-on-SOI. Samples of first

product including embedded Flash memory

shipped to lead customer;

•expanding the maximum voltage of X-FAB’s 180nm

BCD-on-SOI technology to enable 375V

applications that enable ultrasound probe heads for

high-resolution medical imaging;

•lead customer of the world’s first single-molecule

protein sequencing platform based on X-FAB’s

photonics process announced commercial

availability;

•customer prototypes of the X-FAB Integrated

Passive Devices (XIPD) process show promising

results as a cost-effective integration solution for

complex RF systems;

•second-generation single photon avalanche

photodiode (SPAD) devices with increased photon

detection probability (PDP) and first working

samples of spectral filters for the lead customer of

the spectral sensing development project;

•continued enhancement of process technologies,

design libraries, and design IP, including the release

of embedded Flash fully compliant with stringent

AEC100-grade 0 automotive specification and a

circuit design reference kit with the world’s leading

EDA vendors;

•increased sales and marketing activities in China,

resulting in strong adoption of X-FAB’s SiC

technologies; and

	Annual Report 2022 | Our business

14

•18 new patent applications and 31 patents were

granted in 2022, contributing to an overall patent

portfolio of more than 451 patents and patent

applications.

MEMS: Interface to the physical world

MEMS, or micro-electro-mechanical systems, build the

interface between mechanical properties and

electronics. Complex processes are used to produce

structures or components in silicon that convert

mechanical variables, such as pressure or acceleration,

into electrical signals. MEMS devices can be found in

products or modules such as airbags 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 that are not used in integrated circuit

manufacturing or are even undesirable because they

would 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 decided 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 MEMS business, which recorded revenues of

USD 75.6 million in 2022, is built on three pillars:

•sensors and actuators;

•silicon-based microfluidics; and

•3D/heterogeneous integration.

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.

Another area for investment is the concept to process

the piezoelectric material aluminum nitride for

applications such as precision dosing of minute

amounts of liquids.

In the long term, the latter technology could also be

used for silicon-based microfluidics, already a

designated focus area for X-FAB. For microfluidic

devices that are built on integrated circuits, X-FAB

provides an offer to augment its 350nm and 180nm

CMOS processes with dedicated materials or

structures. This offer includes the fabrication of inert

electrodes for contact of the chip with a biological

substance, polyamide layers to form channels, cavities

to hold the samples, and glass lids to seal the

microfluidic structures.

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.

Further capabilities of X-FAB’s MEMS 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 in concept phase. The first

15

customer products utilizing one of the aforementioned

technologies were launched in the middle of 2022.

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 pure-play 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

tremendous revenue growth of 61% in 2022.

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

electricity 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 pure-play 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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16

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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 pure-play

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 or metal layers,

improving the solderability of the final product. 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 additional capacity

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 54.5

million, a 61% 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.

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 438 customers worldwide

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 438 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.

	Annual Report 2022 | Our business

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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. X-FAB will invest up to USD 1 billion in the

next three years. 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.

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

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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

2022. The freed-up capacities were immediately used

for the production of automotive products.

After the global Covid-19-driven recession in 2020 the

demand for semiconductors recovered rapidly in 2021,

a trend that has continued into 2022.

The strong growth in demand 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 17%. 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 2021. At the same time, revenues

achieved with medical semiconductors grew by 16%.

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. 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

battery management, tire pressure monitoring, and

anti-lock braking systems, are all exploiting X-FAB

technologies.

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). On average, there are

several 100 analogue chips per car, but only about ten

MCUs, a situation from which X-FAB benefits

particularly strongly.

With CMOS, BCD-on-SOI, and SiC, X-FAB provides

the right technology mix and focuses on chips sensing

the “real world” and processing analog signals.

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 about eight 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.

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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. Due to the high number of chips that are

manufactured on a wafer, the lack of only one wafer

can cause up to 10,000 cars to not be finished.

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. The situation will hardly change, as there

is low investment in equipment to produce wafers with

a diameter of 8 inches, which is why X-FAB’s

investments in capacity expansion will further

strengthen its position as the prime foundry for

automotive ICs.

X-FAB actively supports its lead customers in driving

automotive innovation in electronics. Among the

described growth areas, 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.

Fig. 4.7: Main areas of automotive applications

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.

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•

Fig. 4.8: 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. 4.9: 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.

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.

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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.

23

24

25

5. X-FAB CONSOLIDATED

FINANCIAL STATEMENTS

5.1 Summary of important developments

Revenue and results

The Group’s total sales revenue in 2022 amounted to

USD 739,469 thousand (2021: USD 657,751 thousand),

an increase of 12% compared to the previous year. The

Group recorded a net profit in 2022 of USD 52,491

thousand compared to a net profit of USD 83,640

thousand in the previous year.

Gross profit increased from USD 149,978 thousand in

2021 to USD 175,954 thousand in 2022 as a result of

the Group’s increased sales revenues and improved

profit margin. This was offset by 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) and the non-recurring effects of

the USD 6,563 thousand recognized as a deduction

from cost of sales representing a loan forgiven under

the “Paycheck Protection Program” under the U.S.

federal government’s Coronavirus Aid, Relief, and

Economic Security Act during the pandemic in 2021

(notes 6.2 and 7.10).

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 Covid-19 pandemic or 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 incurred for

external production-related services. In 2022, cost of

sales increased by USD 55,742 thousand, representing

an increase of 11% compared to the previous year which

corresponds with the increase in sales in 2022.

Research and development expenses

Research and development expenses amounted to

USD 40,803 thousand in 2022, representing 6% of

revenue (2021: 5%). Compared to the previous year

the research and development expenses increased by

19%. 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 12% in 2022.

Financial result

The Group’s net financial expense (finance costs less

finance income) increased by USD 15,947 thousand

from a net expense of USD 4,326 thousand in 2021 to a

net expense of USD 20,273 thousand in 2022. This

increase was primarily attributable to the settlement of

the arbitration award 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, 2022

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, 2022, as well as other legal and

regulatory requirements. Our report is one and

indivisible.

We were appointed as statutory auditor by the general

meeting of April 30, 2020, 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, 2022. We have performed the statutory

audit of the consolidated financial statements of the

Group for 15 consecutive financial years.

	Annual Report 2022 | X-FAB consolidated financial statements

26

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, 2022, prepared in accordance with IFRS 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, 2022, the consolidated

statements of profit or loss and other comprehensive

income, changes in equity and cash flows for the year

then ended and notes, comprising a summary of

significant accounting policies and other explanatory

information. The total of the consolidated statement

of financial position amounts to  USD 1.255.057

thousand and the consolidated statement of profit or

loss and other comprehensive income shows a profit

for the year of USD 52.491 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, 2022 and of its

consolidated financial performance and its

consolidated cash flows for the year then ended in

accordance with IFRS 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 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, 2022.

Description

The X-Fab Group, which is subject to various tax

jurisdictions and resulting obligations, has a significant

amount of unused tax losses carried forward (USD

198,0 million) and deductible temporary differences

(USD 245,7 million) and has recognized deferred tax

assets of USD 68,0 million as at December 31, 2022.

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;

•Assessing whether deferred tax assets had been

appropriately recognized in the consolidated

financial statements as at December 31, 2022

based on the extent to which they can be

recovered by future taxable profits; and

•Assessing the adequacy of the relevant disclosures.

27

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

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

the 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 the

board of directors;

•Conclude on the appropriateness of the 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.

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.

	Annual Report 2022 | X-FAB consolidated financial statements

28

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, 2022, 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 23, 2023

KPMG Bedrijfsrevisoren - Réviseurs d’Entreprises

Statutory Auditor represented by

Jos Briers

Bedrijfsrevisor / Réviseur d’Entreprises

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	2022	2021
Revenue	6.1/12	739,469	657,751
Cost of sales	6.2/6.6/12	(563,515)	(507,773)
Gross profit		175,954	149,978
Research and development expenses	6.3/6.6/12	(40,803)	(34,308)
Selling expenses	6.4/6.6/12	(8,179)	(8,017)
General and administrative expenses	6.5/6.6	(37,487)	(32,771)
Rental income and expenses from investment properties	6.7/6.8/12	(298)	1,898
Impairment loss on trade receivables	7.4	(104)	(299)
Other income and other expenses	6.9/6.10/12	(31,748)	711
Operating profit		57,335	77,192
Finance income	6.11/12	36,531	16,115
Finance costs	6.12/12	(56,804)	(20,441)
Net finance income/(costs)		(20,273)	(4,326)
Profit before tax		37,062	72,866
Income tax	6.13	15,429	10,774
Profit for the period		52,491	83,640
Attributable to:
Equity holders of the Company		52,491	83,607
Non-controlling interest	7.9	—	33

	Annual Report 2022 | 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	2022	2021
Profit for the period		52,491	83,640
Other comprehensive income
Items that will not be reclassified to profit or loss
Remeasurement of defined benefit obligation (asset)	7.11	184	842
Items that are or may be transferred to profit or loss as follows:
Foreign currency translation differences for foreign operations		333	188
Other comprehensive income/(loss) for the period, net of income tax		517	1,030
Total comprehensive income for the period		53,008	84,670
Total comprehensive income attributable to:
Owners of the Company		53,008	84,637
Non-controlling interest	7.9	—	33
Total comprehensive income for the period		53,008	84,670
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	0.40	0.64

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

31

Consolidated statement of financial position

in thousands of U.S. dollars	Note	December 31, 2022	December 31, 2021
ASSETS
Non-current assets
Property, plant, and equipment	7.1	460,126	340,670
Investment properties	7.1	7,675	8,310
Intangible assets	7.2	6,199	4,034
Other assets	7.5	79	28
Deferred tax assets	6.13	67,977	45,645
Total non-current assets		542,056	398,687
Current assets
Inventories	7.3	214,435	181,014
Trade and other receivables	7.4/12	73,116	73,689
Income tax receivables	6.13	257	745
Other assets	7.5	55,768	42,609
Cash and cash equivalents	7.6	369,425	290,187
Total current assets		713,001	588,244
Total assets		1,255,057	986,931
EQUITY AND LIABILITIES
Equity
Share capital	7.7	432,745	432,745
Share premium	7.7	348,709	348,709
Retained earnings	7.7	16,509	(36,154)
Cumulative translation adjustment	7.7	(226)	(559)
Treasury shares	7.7	(770)	(770)
Total equity attributable to equity holders of the Company		796,967	743,971
Non-controlling interests	7.9	—	365
Total equity		796,967	744,336
Non-current liabilities
Loans and borrowings	7.10	63,432	39,916
Other liabilities and provisions	7.11	4,024	5,686
Total non-current liabilities		67,456	45,602
Current liabilities
Trade payables	7.12/12	53,654	41,364
Loans and borrowings	7.10	233,513	87,114
Income tax payable	6.13	8,210	3,184
Provisions	7.13	7,413	4,445
Other liabilities	7.12	87,844	60,886
Total current liabilities		390,634	196,993
Total equity and liabilities		1,255,057	986,931

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

	Annual Report 2022 | 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, 2020		130,781,669	432,745	348,709	(120,603)	(747)	(770)	659,334	343	659,677
Profit for the period					83,607			83,607	33	83,640
Remeasurement of defined benefit plans					842			842		842
Currency translation effect, net of tax						188		188	—	188
Total comprehensive income		—	—	—	84,449	188	—	84,637	33	84,670
Transactions with owners of the Company
Distribution to non- controlling interests (GVG)	7.9								(11)	(11)
Total transactions with owners of the Company		—	—	—	—	—	—	—	(11)	(11)
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						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)					(12)				(354)
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

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

33

Consolidated statement of cash flows

For the year ended December 31

in thousands of U.S. dollars	Note	2022	2021
Cash flow from operating activities:
Profit for the period		52,491	83,640
Income tax	6.13	(15,429)	(10,774)
Income before taxes		37,062	72,866
Reconciliation of net income to cash flow arising from operating activities:		96,296	70,319
Depreciation and amortization, before effect of grants and subsidies	6.6/7.1/7.2	77,534	76,093
Amortization of investment grants and subsidies	6.6	(3,346)	(3,530)
Interest income and expenses (net)	6.11/6.12	17,407	(176)
Loss/(gain) on the sale of plant, property and equipment (net)	6.9/6.10/ 7.1/7.2	(3,889)	(275)
Loss/(gain) on the change in fair value of financial assets	6.11/10	500	—
Other non-cash transactions (net)	8	8,090	(1,793)
Changes in working capital		(32,887)	(31,573)
Decrease/(increase) of trade and other receivables	7.4	(6,661)	(9,769)
Decrease/(increase) of other assets	7.5	(12,759)	(4,034)
Decrease/(increase) of inventories	7.3	(33,422)	(27,302)
(Decrease)/increase of trade payables	7.12/8	(1,873)	5,146
(Decrease)/increase of other liabilities and provisions	7.11/7.12/7.13	21,828	4,386
Income taxes (paid)/received		(480)	(2,101)
Net cash from operating activities		99,991	109,511
Cash flow from investing activities:
Payments for property, plant, equipment, and intangible assets	7.1/7.2	(180,580)	(66,972)
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	(299)	(827)
Proceeds from loan investments related parties	12	284	211
Proceeds from the sale of property, plant, and equipment	7.1	4,017	669
Interest received	6.11/6.12	1,801	1,769
Net cash used in investing activities		(174,981)	(65,150)
Proceeds from loans and borrowings	7.10	184,272	82,585
Repayment of loans and borrowings	7.10	(11,420)	(28,218)
Receipts from sale and leaseback arrangements	7.10/8	7,723	—
Payment of lease liabilities	7.10	(5,662)	(5,094)
Receipt of government grants and subsidies		945	535
Interest paid	6.10/6.11	(17,812)	(1,569)
Dividends to non-controlling interests	7.9	(11)	(12)
Net cash from/used in financing activities		158,035	48,227
Effects of changes in foreign currency exchange rates on cash balances		(3,807)	(8,269)
Net increase/(decrease) of cash and cash equivalents		83,045	92,589
Cash and cash equivalents at the beginning of the period		290,187	205,867
Cash and cash equivalents at the end of the period		369,425	290,187

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

	Annual Report 2022 | 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 spectrums 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, 2022 is illustrated below.

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

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 micromechanical

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.

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, 2022, were

authorized for issue in accordance with a resolution of

the directors on March 23, 2023.

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 certain

non-derivative financial investments which are

measured at fair value. The net defined benefit liability

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)

Judgment was applied in determining whether revenue

from the sale of process control wafers should be

recognized over time or at a point in time. Based on

management’s assessment of its contracts with

customers, the Group has determined that only a

limited number of contracts provide for an enforceable

right to payment for performance completed in the

case that a customer would cancel a contract for

reasons other than any failure to perform as promised.

As a result, the potential recognition of contracts over

time has been considered to be not material.

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:

	Annual Report 2022 | X-FAB consolidated financial statements

36

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, 2023, may differ from the amounts

recorded as impairments in the year ended

December 31, 2022, which may result in a material

adjustment.

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

4 Summary of accounting policies

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.

37

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. However, for the majority

of contracts with its most important customers, X-FAB

has 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. Accordingly, revenue from the sale of

process control wafers (PCM wafers) is recognized

when shipment has been made. At this date, control

over the goods has passed to the customer. Invoices

for the sale are generated at that point in time. 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

	Annual Report 2022 | X-FAB consolidated financial statements

38

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.

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

assets qualifying for the capitalization of borrowing

costs were constructed or acquired 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.

39

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.

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

40

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

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.

41

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.

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.

	Annual Report 2022 | X-FAB consolidated financial statements

42

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

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 7.6.

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.

43

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.

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

	Annual Report 2022 | X-FAB consolidated financial statements

44

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

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

taxation. 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

45

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

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, 2022, have been applied by the Group for

the first time in preparing these consolidated financial

statements.

Standard/interpretation	Effective date
Amendments to IFRS 3 Business Combinations; IAS 16 Property, Plant and Equipment; IAS 37 Provisions, Contingent Liabilities and Contingent Assets; and Annual Improvements 2018–2020 (all issued May 14, 2020)	January 1, 2022

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, 2022, and have

not been applied in preparing these consolidated

financial statements.. These amendments are not

expected to have a material impact on the Group’s

consolidated financial statements.

Amendments to IAS 1 Presentation of Financial

Statements and IFRS Practice Statement 2:

Disclosure of Accounting Policies, issued on

February 12, 2021, include narrow-scope amendments

to improve accounting policy disclosures so that they

provide more useful information to investors and other

primary users of the financial statements. The

amendments to IAS 1 require companies to disclose

their material accounting policy information rather than

their significant accounting policies. The amendments

to IFRS Practice Statement 2 provide guidance on how

to apply the concept of materiality to accounting

policy disclosures.

The amendments are effective for annual periods

beginning on or after January 1, 2023, with early

application permitted. These amendments have been

endorsed by the EU.

Amendments to IAS 8 Accounting Policies,

Changes in Accounting Estimates and Errors:

Definition of Accounting Estimates, issued on

February 12, 2021, clarify how companies should

distinguish changes in accounting policies from

changes in accounting estimates. The distinction is

important because changes in accounting estimates

are applied prospectively only to future transactions

and other future events, but changes in accounting

policies are generally also applied retrospectively to

past transactions and other past events.

The amendments are effective for annual periods

beginning on or after January 1, 2023, with early

application permitted. These amendments have been

endorsed by the EU.

Amendments to IAS 12 Income Taxes: Deferred Tax

Related to Assets and Liabilities Arising from a

Single Transaction, issued on May 7, 2021, clarifies

how companies should account for deferred tax on

transactions such as leases and decommissioning

obligations. IAS 12 Income Taxes specifies how a

company accounts for income tax, including deferred

tax, which represents tax payable or recoverable in the

future. In specified circumstances, companies are

exempt from recognizing deferred tax when they

recognize assets or liabilities for the first time.

Previously, there had been some uncertainty about

whether the exemption applied to transactions such as

leases and decommissioning obligations — transactions

for which companies recognize both an asset and a

liability. The amendments clarify that the exemption

does not apply and that companies are required to

recognize deferred tax on such transactions. The aim

of the amendments is to reduce diversity in the

reporting of deferred tax on leases and

decommissioning obligations.

The amendments are effective for annual periods

beginning on or after January 1, 2023, with early

application permitted. These amendments have been

endorsed by the EU.

	Annual Report 2022 | X-FAB consolidated financial statements

46

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.

Amendments to IAS 1 Presentation of Financial

Statements: Classification of Liabilities as Current

or Non-Current, 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.

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

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, 2022, or

December 31, 2021.

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	2022	2021
Gross revenue PCM wafer	653,420	572,986
Gross revenue NRE and technology services	92,217	89,290
Other revenue	16	19
Discounts and warranty credits	(6,184)	(4,544)
Total	739,469	657,751

Revenues from production increased by 14%, driven by

a consistently strong demand across all end markets,

while revenue from prototyping increased by 3%.

No revenue is recognized in the current year from

performance obligations satisfied in prior years (e.g.

changes in transaction price).

47

6.2 Cost of sales

The cost of sales comprises the following:

in thousands of U.S. dollars	2022	2021
Employee-related expenses	(192,228)	(181,086)
Cost of materials	(167,034)	(156,937)
Costs of fixed assets (maintenance, spare parts, etc.)	(85,828)	(77,783)
Depreciation and amortization	(67,854)	(66,194)
Facility costs	(69,532)	(60,332)
External services	(9,095)	(7,736)
Changes in inventories	12,427	22,303
Grants	16,642	20,240
Other	(1,013)	(248)
Total	(563,515)	(507,773)

The increase in cost of sales of 11% corresponds with

the increase in revenues of 12%.

Grants that are presented as an offset against cost of

sales include capital and income-related grants, which

in 2021 additionally included a one-off amount of

USD 6,563 thousand received in 2020 under the

“Paycheck Protection Program,” which had been

granted and subsequently forgiven under the U.S.

federal government’s Coronavirus Aid, Relief, and

Economic Security Act to secure payroll and utility

payments during the pandemic. Further details are

provided in note 7.10.

6.3 Research and development expenses

Research and development expenses comprise the

following:

in thousands of U.S. dollars	2022	2021
Employee-related expenses	(24,980)	(25,245)
Cost of materials	(9,923)	(10,279)
Costs of fixed assets (maintenance, spare parts, etc.)	(4,019)	(3,693)
Depreciation and amortization	(1,586)	(1,371)
Facility costs	(869)	(949)
External services	(884)	(799)
Grants	5,643	10,681
Other	(4,185)	(2,655)
Total	(40,803)	(34,310)

Research and development expenses increased

consistently with the increased sales volume in 2022. 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	2022	2021
Employee-related expenses	(7,447)	(7,046)
Advertising costs and costs of selling goods	(633)	(844)
External services	(139)	(154)
Facility costs	(143)	(147)
Depreciation and amortization	(103)	(102)
Other	286	276
Total	(8,179)	(8,017)

6.5 General and administrative expenses

The general and administrative expenses comprise the

following:

in thousands of U.S. dollars	2022	2021
Employee-related expenses	(23,354)	(21,206)
External services	(5,946)	(3,864)
Depreciation and amortization	(3,033)	(3,273)
Costs of fixed assets (maintenance, spare parts, etc.)	(3,989)	(3,232)
Insurance, dues, and fees	(1,468)	(1,522)
Facility costs	(1,103)	(1,128)
Grants	444	635
Other	962	819
Total	(37,487)	(32,771)

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	2022	2021
Included in cost of sales	(67,000)	(65,232)
Included in research and development expenses	(1,218)	(1,196)
Included in selling expenses	(103)	(102)
Included in general and administrative expenses	(1,692)	(1,625)
Included in expenses related to investment properties and other expenses	(1,612)	(1,623)
Total	(71,625)	(69,778)

	Annual Report 2022 | X-FAB consolidated financial statements

48

Expenses include charges for amortization of

intangible assets allocated to the following items:

in thousands of U.S. dollars	2022	2021
Included in cost of sales	(854)	(962)
Included in research and development expenses	(368)	(175)
Included in general and administrative expenses	(1,341)	(1,648)
Total	(2,563)	(2,785)

Employee-related expenses allocated according to

function in the income statement consist of the

following:

in thousands of U.S. dollars	2022	2021
Wages and salaries	(190,512)	(184,334)
Social security costs	(38,069)	(35,580)
Contributions to defined contribution plans	(11,445)	(10,077)
Other employee-related costs	(7,983)	(4,592)
Total	(248,009)	(234,583)

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	2022	2021
Income from technical services provided	7,223	7,075
Income from investment property rentals	6,425	6,876
Total	13,648	13,951

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	2022	2021
Expenses for technical services provided	(9,176)	(8,956)
Expenses for connection with investment property rentals	(4,770)	(3,097)
Total	(13,946)	(12,053)

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	2022	2021
Gains on disposals of property, plant, and equipment	3,899	600
Income from recharges	3,015	2,817
Income from other admin services/cost sharing	527	693
Income from sales of materials	188	199
Other	547	657
Total	8,176	4,966

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

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.

6.10 Other expenses

Other expenses comprise the following:

in thousands of U.S. dollars	2022	2021
Settlement of a trade dispute	(36,811)	—
Expenses from recharges	(3,015)	(2,817)
Losses on disposal of property, plant, and equipment	(10)	(325)
Other	(87)	(1,113)
Total	(39,923)	(4,255)

Expenses incurred to settle a trade dispute represent

the costs of settling a dispute with a supplier consisting

49

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	2022	2021
Interest on financial assets measured at amortized cost:
Interest on cash and cash equivalents	1,836	1,767
Other:
Income from exchange rate differences	34,695	14,347
Total	36,531	16,114

The increase in income from exchange rate

differences is primarily due to the higher level of

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 expense (income

less expense disclosed in note 6.12) from exchange

rate differences decreased to USD 2,366 thousand

(2021: USD 4,503 thousand).

6.12 Finance costs

Finance costs comprise the following:

in thousands of U.S. dollars	2022	2021
Interest on financial liabilities measured at amortized cost:
Loans and borrowings	(6,619)	(1,592)
Other interest	(12,624)	—
Other:
Expenses from exchange rate differences	(37,061)	(18,850)
Other	(500)	—
Total	(56,804)	(20,442)

Other interest of USD 12,624 thousand 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.

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.

Income taxes comprised the following:

in thousands of U.S. dollars	2022	2021
Current taxes:
Actual income tax charge for the period	(6,420)	(2,060)
Adjustment of prior years’ tax charges	(483)	(2,420)
	(6,903)	(4,480)
Deferred taxes	22,332	15,253
Total	15,429	10,773

The Belgian applicable tax rate applicable for the

Group’s result was 25.00% in 2022 and 2021 . 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% (2021: 26.50%).

	Annual Report 2022 | X-FAB consolidated financial statements

50

The reconciliation of the theoretical tax charge based

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

years 2022 and 2021:

in thousands of U.S. dollars	2022	2021
Result before taxes	37,062	72,866
Theoretical tax at combined applicable Belgian tax rate	(9,266)	(18,217)
Recognition of previously unrecognized deferred tax on timing differences and tax losses	39,810	42,395
Current year losses for which no deferred tax asset is recognized	(13,463)	(12,457)
Adjustment of prior period tax liabilities recorded in the current period	(483)	(2,420)
Effect of tax-free income	1,206	1,580
Currency effects	(93)	(892)
Effect of permanent differences	(290)	(89)
Effect of non-deductible expenditures	(169)	(147)
Effect of changes in applicable tax rates enacted during the year	—	—
Effect of different tax rates applying to foreign operations	(1,889)	600
Differences which are only valid for special taxes	66	420
Income/(expense) for income taxes recognized in the consolidated statement of profit or loss	15,429	10,773

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 primarily consists of

deferred tax assets of USD 39,889 thousand

recognized in the Group’s Malaysian subsidiary at

December 31, 2022 (December 31, 2021: USD 39,209

thousand) and of USD 16,041 thousand (December 31,

2021: USD 2,974 thousand) recognized in the US

subsidiary. The income statement includes recognition

of previously unrecognized deferred tax on timing

differences and tax losses carried forward of

USD 42,966 thousand (previous year: USD 42,395

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 current and previous year

at the Group’s subsidiary in France.

Effects from tax-free income primarily relate to

various tax exempted items of X-FAB Sarawak, for

example interest income, exchange rate gains, gains

from fixed asset sales, and the gain on the

derecognition of the liability described in note 7.10.

Currency effects mainly relate to the effect of changes

in exchange rates on tax carrying amounts

denominated in euros in 2022 and 2021.

The deferred tax assets and liabilities arise from

temporary differences and unused tax losses as

follows:

in thousands of U.S. dollars	2022	2021
Deferred tax assets – unrecognized amounts
On unused tax losses	198,038	215,947
On temporary differences
Property, plant, and equipment/capital allowances	239,582	278,996
Other temporary differences	6,107	1,613
Total unrecognized deferred tax assets	443,727	496,556
Deferred tax assets – recognized amounts
On unused tax losses	39,313	18,833
On temporary differences
Property, plant, and equipment/capital allowances	33,709	31,341
Other temporary differences	(5,045)	(4,529)
Total recognized deferred tax assets	67,977	45,645

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.

51

Unrecognized temporary differences on property,

plant, and equipment and other timing differences

which can be used to offset future taxable income

mainly relate to 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 2026 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	2022	2021
Belgian tax loss carry forward	—	—
German corporation tax loss carry forward	141,136	172,876
German trade tax loss carry forward	180,007	203,005
U.S. federal tax loss carry forward	169,241	144,416
U.S. state tax loss carry forward	39,650	14,825
Malaysian tax loss carry forward	341,789	361,114
French tax loss carry forward	271,274	219,559

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 2022 (2021: USD 3,591 thousand). The

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

USD 27.8 million will expire in the year 2023 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 2022 | X-FAB consolidated financial statements

52

in thousands of U.S. dollars	Tax losses carried forward	Property, plant, and equipment	Other temporary differences	Total
Balance at January 1, 2021	12,380	26,144	(8,131)	30,393
Recognized in profit and loss	6,453	5,197	3,602	15,252
Recognized in other comprehensive income	—	—	—	—
Balance at December 31, 2021	18,833	31,341	(4,529)	45,645
Set off of tax	—	3,794	(3,794)	—
Net balance at December 31, 2021	18,833	35,135	(8,323)	45,645
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

Changes in recognized deferred tax assets resulted in

a deferred tax income of USD 22,332 thousand (2021:

income of USD 15,252 thousand). The increase in

previously unrecognized deferred tax assets on

property, plant, and equipment and other timing

differences recognized in 2022 compared to 2021 is

due to a higher level of taxable income from achieved

and projected operating results at the Group’s

subsidiaries against which timing differences can be

offset.

No tax 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, 2022, and

December 31, 2021.

No instruments with a potential diluting effect on

shareholders’ equity have been in issue during the

years ended December 31, 2022, and December 31,

2021. Accordingly, there is no potential dilution of the

profit attributable to equity shareholders and no

difference between basic and diluted earnings per

share.

53

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, 2022	14,110	37,843	209,401	5,816	73,500	340,670
Accumulated historical cost January 1, 2021	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, 2021	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
Net book value January 1, 2021	14,139	40,554	232,686	4,855	44,614	336,848
Accumulated historical cost January 1, 2020	14,291	110,466	1,068,016	28,009	44,614	1,265,396
Additions	1	80	11,850	1,490	60,322	73,743
Disposals	—	(5)	(12,106)	(322)	—	(12,433)
Reclassifications	—	732	28,098	2,220	(31,436)	(386)
Effect of changes in exchange rates	—	—	—	11	—	11
Accumulated historical cost December 31, 2020	14,292	111,273	1,095,858	31,408	73,500	1,326,331
Accumulated depreciation January 1, 2021	(152)	(69,912)	(835,330)	(23,154)	—	(928,548)
Additions	(30)	(3,523)	(62,853)	(2,740)	—	(69,146)
Disposals	—	5	11,726	308	—	12,039
Effect of changes in exchange rates	—	—	—	(6)	—	(6)
Accumulated depreciation December 31, 2021	(182)	(73,430)	(886,457)	(25,592)	—	(985,661)
Net book value  December 31, 2021	14,110	37,843	209,401	5,816	73,500	340,670

	Annual Report 2022 | X-FAB consolidated financial statements

54

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 58 million), X-FAB Sarawak (USD 58

million), X-FAB Texas (USD 41 million), X-FAB Erfurt

(USD 6 million), X-FAB Dresden (USD 18 million),

X‑FAB MEMS Foundry Itzehoe (USD 1 million), and

X‑FAB MEMS Foundry (USD 7 million). Assets under

construction primarily include investments in technical

machinery. Additions in property, plant, and equipment

resulted in cash outflows in 2022 of USD 180,580

thousand (2021: USD 66,972 thousand). Refer to the

statement of cash flows.

The Group received investment grants related to the

acquisition of qualifying assets totaling USD 945

thousand (2021: USD 535 thousand).

No impairment tests were performed in the financial

year ended December 31, 2022 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 137,517 thousand

(December 31, 2021: USD 136,121 thousand) and

accumulated depreciation has been reduced by

USD 126,159 thousand (December 31, 2021:

USD 122,880 thousand).

At December 31, 2022 property, plant, and equipment

with a book value of USD 23 million (December 31,

2021: USD 31 million) had been provided as collateral

security to third-party lenders. The carrying values of

technical machinery and equipment include USD 21.4

million (December 31, 2021: USD 22.0 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	2022	2021
Net book value, beginning of period	8,309	8,556
Additions	—	—
Depreciation	(635)	(632)
Disposals	—	—
Reclassifications	—	385
Net book value, end of period	7,674	8,309
Accumulated cost	33,647	33,647
Accumulated depreciation	(25,974)	(25,339)
Fair value	32,845	26,258

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, 2022: USD

17,025 thousand; December 31, 2021: 9,374 thousand),

the USA (December 31, 2022: USD 1,698 thousand;

December 31, 2021: 2,039 thousand), and France

(December 31, 2022: USD 14,122 thousand; December

31, 2021: 14,845 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 4.0% (December

31, 2021: 1.5%). 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 2022 or 2021.

55

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	2022	2021
2022	—	5,034
2023	5,017	5,125
2024	5,630	1,063
2025	1,797	1,063
2026	1,797	1,063
2027	1,371	—
Total	15,612	13,348

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, 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
Net book value January 1, 2021	3,585	1,141	4,726
Accumulated historical cost January 1, 2021	69,533	1,141	70,674
Additions	768	1,325	2,093
Disposals	(15)	—	(15)
Reclassifications	1,088	(1,088)	—
Accumulated historical cost December 31, 2021	71,374	1,378	72,752
Accumulated amortization January 1, 2021	(65,948)	—	(65,948)
Additions	(2,785)	—	(2,785)
Disposals	15	—	15
Accumulated amortization December 31, 2021	(68,718)	—	(68,718)
Net book value December 31, 2021	2,656	1,378	4,034

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 2022 or 2021.

7.3 Inventories

Inventories comprise the following:

in thousands of U.S. dollars	2022	2021
Materials and supplies	124,760	106,020
Work in progress	95,383	78,495
Finished goods	3,723	2,050
Merchandise	6	6
Write-downs	(9,437)	(5,558)
Total	214,435	181,013

	Annual Report 2022 | X-FAB consolidated financial statements

56

Changes in work in progress and finished goods

totaling USD 14,824 thousand were included in cost of

sales in 2022 (2021: USD 22,844 thousand). Write-

downs are recorded against inventories and

recognized as an expense in cost of sales in the period

of USD 2,397 thousand (2021: USD 541 thousand).

There have not been any reversals of write-downs.

Inventories wholly represent amounts which are

expected to be realized within 12 months.

7.4 Trade and other receivables

Trade receivables and other receivables comprise the

following:

in thousands of U.S. dollars	2022	2021
Trade accounts receivable	43,989	49,500
Amounts due from related party entities	30,214	25,217
Allowances	(1,087)	(1,028)
Total	73,116	73,689

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	2022	2021
Neither past due nor impaired	31,463	30,305
Past due 1–30 days	9,207	17,004
Past due 31–60 days	1,592	615
Past due 61–360 days	640	548
Past due > 360 days	—	—
Total	42,902	48,472

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.

A settlement arrangement was entered into in 2021

with a customer, a related party, concerning

outstanding receivables in excess of 360 days overdue

totaling USD 1,277 thousand. Impairment allowances of

USD 848 thousand had been recorded in 2020 against

these balances. Under this arrangement, collateral

security in the form of certain intellectual property

rights was transferred by the customer to the Group as

final settlement of the outstanding balances due. The

Group valued the collateral security received at

USD 484 thousand, and accordingly the outstanding

amounts were derecognized and a gain on

derecognition of the receivables, net of allowances, of

USD 55 thousand was recognized in 2021. The

intellectual property rights received have been

recognized as intangible assets on initial recognition at

their fair value. The fair value of the intellectual

property rights received was estimated by

management based on the discounted royalties which

can be earned on the expected future product sales

that will generated using the intellectual property,

discounted using a weighted average cost of capital

(WACC). The WACC was obtained by reference to a

risk-free interest rate and entity-specific risk premiums

obtained by reference to external third party reference

databases (a level 3 valuation).

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, 2022, and December 31, 2021:

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)

57

December 31, 2021
in thousands of U.S. dollars	Weighted average loss rate	Gross carrying amount	Loss allowance
Neither past due nor impaired	0.08%	56,462	(45)
Past due 1–30 days	0.08%	15,431	(12)
Past due 31–60 days	1.50%	742	(11)
Past due 61–90 days	3.75%	343	(13)
More than 90 days past due (less credit impaired)	9.75 %	711	(69)
Total		73,689	(150)

in thousands of U.S. dollars	2022	2021
Balance at January 1	(1,028)	(1,513)
Impairment loss recognized	(58)	(275)
Use of allowance	2	784
Reversal of allowance	27	—
Net remeasurement of loss allowance	(30)	(24)
Balance at December 31	(1,087)	(1,028)

There are no balances which were written off during

the period and which continue to be the subject of

collection processes.

7.5 Other assets

Other assets comprise the following:

in thousands of U.S. dollars	2022	2021
Other assets	55,768	42,609
Other non-current assets	79	28
Total	55,847	42,637

Current other assets comprise the following:

in thousands of U.S. dollars	2022	2021
R&D grants receivable	22,537	18,596
Prepaid expenses	20,700	18,112
Receivables from energy surcharges	4,872	3,116
Taxes (other)	5,676	1,512
Investment grants and subsidies receivable	1,170	480
Deposits	535	341
Other	278	452
Total	55,234	42,268

Research and development grants receivable in 2022

include USD 20,194 thousand research and

development tax credits and competitiveness and

employment tax credits attributable to X-FAB France

(December 31, 2021: USD 15,895 thousand).

Research and development tax credits and

competitiveness and employment tax credits

attributable to X-FAB France totaling USD 8,227

thousand (2021: USD 9,217 thousand) were sold

without recourse to a bank in 2022. The carrying

amounts of the credits sold generated cash inflows of

USD 7,245 thousand (2021: USD 8,928 thousand) net

of USD 982 thousand representing interest expenses

and fees (2021: USD 233 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.

7.6 Cash and cash equivalents

Cash and cash equivalents comprise the following:

in thousands of U.S. dollars	2022	2021
Cash and bank balances	367,221	287,907
Term deposits	2,204	2,280
Total	369,425	290,187

Term deposits and some cash at bank balances earn

interest at floating rates based on daily bank deposit

rates. The fair values of cash and short-term deposits

are identical to the carrying amounts.

7.7 Equity

Share capital

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

in ordinary shares in issue at December 31, 2022, and

December 31, 2021. Each share carries one vote at the

Company’s general meetings. There are no unissued

shares authorized for issue.

	Annual Report 2022 | X-FAB consolidated financial statements

58

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.

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, 2022 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, 2021:

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, 2022, or December 31,

2021.

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.

7.8 Dividends

No dividends were resolved or paid in the years 2022

or 2021.

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.

59

7.9 Non-controlling interests

Non-controlling interests 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 (full year 2021: net profit of USD 807

thousand). At the date on which the non-controlling

interests were acquired GVG had total assets

amounting to USD 8,777 thousand (December 31,

2021: USD 9,084 thousand), liabilities of USD 3,996

thousand (December 31, 2021: USD 4,887 thousand),

and equity of USD 4,781 thousand (December 31, 2021:

USD 4,197 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.

7.10 Loans and borrowings

The Group has unused credit lines available under bank

loan facilities as follows:

in thousands of U.S. dollars	2022	2021
Unused credit lines
Unused part of multicurrency revolving credit facility denominated in EUR or in USD – variable rates	2,000	152,494
Interest rate USD: SOFR + 1.25%
Interest rate EUR: EURIBOR +1.0%
Unused credit lines denominated in EUR – fixed rates	7,473	4,520
Interest rate: 3.75–4.01%
Other unused credit lines denominated in EUR – variable rates	2,135	5,651
Interest rates: EURIBOR +2.5%

	Annual Report 2022 | X-FAB consolidated financial statements

60

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	2022	2021
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	67,380	23,247
Maturity: 2023–2029
Interest rates: 0.85–2.3%
Repayments in monthly or quarterly installments
Variable interest revolving credit facility denominated in USD	138,998	30,582
Maturity: 2023
Interest rates: SOFR + 1.67%
Repayment on maturity
Variable interest revolving credit facility denominated in EUR	64,056	42,944
Maturity: 2023
Interest rates: EURIBOR + 1.0%
Repayment on maturity
Leasing arrangements
Leasing liabilities denominated in EUR	13,467	15,256
Maturity: 2023–2034
Interest rates: 0.02–1.91%
Repayment in monthly installments
Leasing liabilities denominated in USD	7,018	6,903
Maturity: 2023–2034
Interest rates: 3.32%
Repayment in monthly installments
Leasing liabilities denominated in MYR	6,024	8,098
Maturity: 2023–2025
Interest rates: 4.66%
Repayment in monthly installments
Total	296,945	127,030
Current loans and borrowings	233,513	87,114
Non-current loans and borrowings	63,432	39,916

Variable interest bank loans include loans amounting to

USD 138,000 thousand and EUR 60,000 thousand

(December 31, 2021: USD 31,000 thousand and

EUR 38,000 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.

The movements on loans and borrowing include

exchange rate gains of USD 1,151 thousand resulting

from the translation of euro-denominated loans and

borrowings (2021: exchange rate gains of USD 2,627

thousand).

61

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

presented in note 10.

Approximately 32% of the Group’s borrowings are at a

fixed rate of interest (December 31, 2021: 42%). Refer

to note 10.

Bank loans and overdrafts of USD 18,548 thousand

(2021: USD 20,281 thousand) are secured by charges

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

A bank loan with a carrying value of USD 6,563

thousand at December 31, 2020 was derecognized and

reported in the previous financial year as a deduction

from cost of sales. The loan, obtained and paid to

X‑FAB Texas in 2020, was issued under the “Paycheck

Protection Program” established by the U.S. federal

government’s Coronavirus Aid, Relief, and Economic

Security Act to secure payroll and utility payments.

Under the terms of the program, the borrower was

entitled to apply for forgiveness of the loan by

December 31, 2020, provided certain conditions

regarding retention and rehiring of employees had

been met and provided the government still had

sufficient budget available to forgive those loans. An

application for forgiveness of the bank loan was made

in the financial year 2020 and was approved on

June 10, 2021. Accordingly the balance on the loan was

released to income and was offset against cost of sales

matching the classification of the costs – direct

production-related costs – which were financed under

the program.

Contractual maturities

The contractual maturities of the Group’s non-

derivative financial liabilities (including lease liabilities)

at December 31, 2022, and December 31, 2021 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	2022	2021
2022		87,880
2023	230,414	13,687
2024	22,440	8,733
2025	18,965	4,753
2026	13,472	2,556
2027–2034	11,654	9,421
Total	296,945	127,030

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 2022 | X-FAB consolidated financial statements

62

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	—	—	—	—	—	—	—
Equity related	—	—	—	—	52,663	—	52,663
Total liability-related other changes	6,619	(5,266)	—	—	—	—	1,353
Total equity-related other changes	—	—	—	—	—	(354)	(354)
Balance at December 31, 2022	270,434	26,509	432,745	348,709	16,508	—	1,094,905

63

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

activities for the year 2021:

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, 2020	51,573	24,636	432,745	348,709	(120,604)	344	748,440
Changes from financing cash flows
Proceeds from loans and borrowings	82,585	—	—	—	—	—	82,585
Repayment of loans and borrowings	(28,218)	—	—	—	—	—	(28,218)
Repayment of loans and borrowings from related parties	—	—	—	—	—	—	—
Payments of lease liabilities	—	(5,094)	—	—	—	—	(5,094)
Interest paid	(1,569)	—	—	—	—	—	(1,569)
Payment of preference dividend	—	—	—	—	—	—	—
Distribution to non- controlling interests	—	—	—	—	—	(12)	(12)
Receipt of investment government grants and subsidies	—	—	—	—	—	—	—
Total changes from financing cash flows	52,798	(5,094)	—	—	—	(12)	47,692
Other changes
Effect of changes in foreign exchange rates	(2,627)	(86)	—	—	—	—	(2,713)
Liability related
New leases	—	8,488	—	—	—	—	8,488
Prolongation of existing lease contracts	—	2,313	—	—	—	—	2,313
Interest expenses	1,592	—	—	—	—	—	1,592
Gain on derecognition of financial liability	(6,563)	—	—	—	—	—	(6,563)
Equity related	—	—	—	—	84,449	33	84,482
Total liability-related other changes	(4,971)	10,801	—	—	—	—	5,830
Total equity-related other changes	—	—	—	—	84,449	33	84,482
Balance at December 31, 2021	96,773	30,257	432,745	348,709	(36,155)	365	872,694

	Annual Report 2022 | X-FAB consolidated financial statements

64

7.11 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, 2022

(December 31, 2021: USD 5,620 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 546 thousand (December 31, 2021: USD 0

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 8,547

thousand (December 31, 2021: USD 9,974 thousand)

less plan assets recorded at their fair values of

USD 4,034 thousand (December 31, 2021: USD 4,354

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, 2022 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 1,844

thousand at December 31, 2022 (December 31, 2021:

USD 1,918 thousand) and equity savings plans with a

value of USD 2,189 thousand at December 31, 2022

(December 31, 2021: USD 2,436 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, 2022	9,974	(4,354)	5,620
Included in profit or loss:
Current service cost	484	—	484
Past service cost/curtailment	—	—	—
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
			—
January 1, 2021	8,571	(4,272)	4,299
Included in profit or loss:
Current service cost	382	—	382
Past service cost	2,323	—	2,323
Currency effects from conversion into USD	(777)	347	(430)
Included in OCI:
Return on plan assets		(429)	(429)
Actuarial losses	(414)	—	(414)
Other:
Contributions paid by the employer	—	—	—
Benefits paid	(111)	—	(111)
December 31, 2021	9,974	(4,354)	5,620

The primary assumptions made in calculating the defined benefit obligation were as follows:

65

in thousands of U.S. dollars	2022	2021
Discount rate	3.36%	0.79%
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, 2021: 0.5% lower). Assumptions

regarding future mortality have been based on

published statistics and mortality tables.

Past service cost adjustments in the previous financial

year related to amendments to a plan curtailment at

X‑FAB France initially recorded in 2020 for which

estimates were revised following implementation of

the restructuring plan in 2021.

The Group expects to pay no contributions to the

funding plan in 2022.

Reasonably possible changes at December 31, 2022,

and December 31, 2021 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, 2022	Decrease at Dec. 31, 2022	Increase at Dec. 31, 2021	Decrease at Dec. 31, 2021
Discount rate (+0.25% movement)	—	124	—	166
Future salary growth (+0.25% movement)	132	—	167	—

The defined benefit obligation is not materially

sensitive to a reasonable potential change in the

assumed mortality rate.

7.12 Trade payables and other current liabilities

Trade payables are non-interest bearing and are

normally settled on 60-day terms. Trade payables

have been increased from USD 41,364 thousand at

December 31, 2021, to USD 53,654 thousand at

December 31, 2022. 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	2022	2021
Accrued liabilities	31,464	17,521
For invoices not yet received	29,280	15,850
Royalties	419	376
Sales commissions	349	307
Staff association costs	691	602
Other	725	386
Advances received	31,127	19,193
Deferred income	298	293
Employee-related liabilities	24,958	23,879
Wages	2,992	2,931
Earned holiday entitlement, incentives	15,556	12,469
Payroll taxes	2,377	3,870
Social security costs	4,033	4,609
Other	(4)	—
Total	87,843	60,886

Liabilities for social security costs at December 31,

2022, and December 31, 2021, 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. Advances received relate to

prepayments from customers for future wafer sales. In

2022, advances received additionally include USD 10.8

million capacity reservation deposits from long-term

agreements concluded with customers in 2022.

7.13 Provisions

Provisions comprise the following:

in thousands of U.S. dollars	2022	2021
Current provisions	7,413	4,445
Non-current provisions	56	66
Total	7,469	4,511

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.

	Annual Report 2022 | X-FAB consolidated financial statements

66

The unused amounts of a restructuring provision

initially recognized in 2020 amounting to USD 3,312

thousand were offset against general and

administration expenses following implementation of

the plan in 2021.

The movements on provisions during the year were as

follows:

in thousands of U.S. dollars	Warranty provisions	Employee provisions	Restruct- uring cost	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

in thousands of U.S. dollars	Warranty provisions	Employee provisions	Restruct- uring costs	Total
January 1, 2021	2,541	1,412	5,722	9,675
Provided for	2,176	17	—	2,193
Utilized	(979)	(571)	(2,023)	(3,573)
Released	—	(69)	(3,312)	(3,381)
Effect of changes in exchange rates	(47)	31	(387)	(403)
December 31, 2021	3,691	820	—	4,511

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.

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.

67

Revenue by geographic area:

in thousands of U.S. dollars	2022	2021
Europe	454,197	403,201
Belgium	294,400	256,258
Germany	72,794	70,245
United Kingdom	42,117	37,028
Austria	11,007	10,837
France	8,022	7,240
Switzerland	7,918	7,380
Sweden	5,215	3,752
Denmark	3,090	2,990
Other	3,179	2,585
Finland	2,384	1,743
Netherlands	2,629	1,689
Ireland	1,442	1,454
Asia	174,947	149,736
China	55,084	44,916
Japan	28,582	24,815
Malaysia	20,055	17,893
Singapore	18,225	16,743
Thailand	14,556	10,123
Taiwan	12,232	10,067
Hong Kong	12,029	5,667
Korea	9,648	15,302
New Zealand	3,420	3,060
Other	1,116	1,150
United States of America	106,725	102,189
Rest of the world	3,600	2,625
Total	739,469	657,751

Non-current assets by geographic area:

in thousands of U.S. dollars	2022	2021
Malaysia	187,265	156,660
Germany	151,114	133,482
France	114,289	66,491
United States of America	89,388	42,054
Total	542,056	398,687

Significant customers

The Group has one (2021: one) customer whose

revenues exceeded 10% of the Group’s consolidated

external revenues. The total revenue from this

customer, which is a related party (see note 12),

amounted to USD 293,014 thousand in 2022 (2021:

USD 254,362).

	Annual Report 2022 | X-FAB consolidated financial statements

68

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, 2022
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	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)
December 31, 2021
Financial assets measured at amortized cost
Trade and other receivables	73,689
Cash and cash equivalents	290,187
Financial liabilities measured at amortized cost
Trade payables	(41,364)
Bank loans, overdrafts, and lease liabilities	(127,030)		(127,223)		(127,223)

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.

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.

69

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, 2022

approximately 32% of the Group’s borrowings

(excluding financial leases) are at a fixed rate of

interest (December 31, 2021: 42%). 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	2022	2021
Assets
Trade accounts receivable	15,342	25,603
Other assets	34,521	19,145
Cash	180,284	103,702
Liabilities
Trade payables	13,625	11,411
Loans and borrowings	144,903	75,399
Other liabilities and provisions	39,479	33,521

Assets and liabilities denominated in MYR:

in thousands of U.S. dollars	2022	2021
Assets
Trade accounts receivable	44	49
Other assets	5,813	5,972
Cash	14,839	70,419
Liabilities
Trade payables	269	330
Loans and borrowings	6,203	7,110
Other liabilities and provisions	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:

	2022	2021
USD/EUR
Closing rate	0.937	0.885
Average rate	0.948	0.845
USD/MYR
Closing rate	4.405	4.182
Average rate	4.398	4.144

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 42% (2021: 37%) of the Group’s sales

and 40,2% (2021: 47%) of the Group’s costs are

denominated in currencies other than the functional

currency of the operating unit making the sales.

	Annual Report 2022 | X-FAB consolidated financial statements

70

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
2022	5%	1,607
	-5%	(1,607)
2021	5%	1,404
	-5%	(1,404)
USD/MYR	Increase/ (decrease) in MYR rate	Effect on profit before tax
2022	20%	2,669
	-20%	(2,669)
2021	20%	13,800
	-20%	(13,800)

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 risk credit risk concentrations

affecting financial assets are in respect of trade

receivables (described in note 7.4), balances with

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

deposits at banks (note 7.6).

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 7.4 and 7.5.

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, 2022, or December 31, 2021. The

expected cash inflows from trade and other

receivables maturing within two months total

USD 73,116 thousand (December 31, 2021: USD 73,689

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

7.10.

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, 2022, and December 31, 2021.

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, 2022.

71

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.

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 0.02% and 4.66% (December 31, 2021: 0.02%

and 4.46%). 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.

In 2021 the Group entered into a sale and leaseback

transaction under which machinery was sold at book

value and leased back. The contractual arrangements

include a purchase option at a price that is lower than

the fair value and the lease term is for the major part of

the economic life. The Group continues to be able to

direct the use of the assets and obtain substantially all

of the remaining benefits from their use. Accordingly,

the transaction is wholly recognized as a financing

arrangement, and no sale or gain or loss is recognized

on the transaction. The assets were not derecognized.

The lease period runs until 2028 and carries an interest

rate of 1.26%.

The carrying values of right-of-use assets presented

as property, plant, and equipment were as follows:

in thousands of U.S. dollars	2022	2021
Net book value January 1	24,415	25,278
Additions	1,923	2,316
Depreciation	(4,373)	(4,339)
Disposals	—	—
Reclassifications	(527)	1,160
Net book value December 31	21,438	24,415

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.

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

in thousands of U.S. dollars	2022		2021
	Minimum leasing payment	Present value	Minimum leasing payment	Present value
2023	6,050	5,506
2024–2026	22,865	21,003
2022			6,015	5,380
2023–2025			27,062	24,877
Total	28,915	26,509	33,077	30,257
Interest	(2,407)	(2,407)	(2,821)	(2,821)
Liability	26,508	24,102	30,256	27,436

	Annual Report 2022 | X-FAB consolidated financial statements

72

The minimum leasing payments disclosed for the

previous year have been amended to include certain

amounts previously omitted from future interest

charges. The amendments have no effect on the

results of operations or on the carrying amounts

reported in the statement of financial position.

Expenses relating to short-term leases amounted to

USD 646 thousand (2021: USD 616 thousand) and

expenses relating to leases of low-value assets

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

amounted to USD 22 thousand (2021: USD 18

thousand).

12 Transactions with related parties

Transactions with shareholders and their

subsidiaries

As part of its normal business activities, X-FAB SE

Group undertakes transactions with entities in the

XTRION Group, a group of companies controlled by

XTRION NV, the ultimate parent company and the

largest shareholder of X-FAB SE. These include the

purchase of certain work in process and services, as

well as the sale of products and provision of services to

these companies. XTRION NV is also the parent

company of Melexis NV, which develops, designs, and

sells integrated circuits to customers such as the

automotive industry. The main wafer suppliers for the

Melexis Group are X-FAB SE’s subsidiaries. The

Melexis Group also provides final test services as well

as design support to X-FAB SE subsidiaries. Refer also

to the corporate governance statement. 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.

in thousands of U.S. dollars	2022	2021
Trade accounts receivable due from Melexis group companies	27,241	22,224
Trade accounts receivable due from M-MOS group companies	2,905	2,961
Trade accounts receivable due from X-Celeprint	34	32
Trade accounts receivable due from X Display Company Technology	34	—
Total	30,214	25,217

in thousands of U.S. dollars	2022	2021
Advances received from Melexis group companies	3,833	9,101
Advances received from M- MOS group companies	3,827	—
Trade accounts payable due to Melexis group companies	132	178
Trade accounts payable due to M-MOS group companies	22	59
Trade accounts payable due to XTRION	26	21
Trade accounts payable due to Sensinnovat	118	96
Other	18	22
Total	7,976	9,477

Receivables from related parties relate to trade

receivables, do not carry interest, and are payable on

normal credit terms. As described in detail in note 7.4, a

settlement arrangement was entered into in 2021 with

a related party customer, concerning outstanding

receivables in excess of 360 days overdue totaling

USD 1,277 thousand. Impairment allowances of

USD 848 thousand had been recorded in 2020 against

these balances. Under this arrangement the Group

received intellectual property, which had been

provided by the customer as collateral security, which

the Group valued at USD 484 in settlement of the

outstanding liability.

Sales made to XTRION group companies 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.

73

Sales and other income comprise the following:

in thousands of U.S. dollars	2022	2021
Sales to Melexis group companies	293,014	254,362
Sales to M-MOS group companies	18,940	16,386
Sales to Anvo-Systems	—	50
Sales to X-Celeprint	—	—
Sales to X Display Company Technology	359	297
Property rental and other income from Melexis group companies	2,080	2,211
Other income from M-MOS	39	122
Total	314,432	273,428

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	2022	2021
Services provided by Melexis group companies	413	533
Services/purchases provided by M-MOS group companies	18	400
Services provided by            X-Celeprint	—	8
Services purchased from Sensinnovat	477	302
Services purchased from ESA	202	159
Warranty cost Melexis group	2,724	2,036
Services provided from XTRION	87	—
Services provided by XTRION	3,921	3,438

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.

Remuneration of persons with key management

positions

in thousands of U.S. dollars	2022	2021
Short-term employee benefits	1,297	1,302
Short-term employee benefits for members of management that are not on the payroll of the Company (CEO and CFO)	679	655
Directors’ compensation	231	205
Total	2,207	2,162

The persons with key management positions as

referred above as of December 31, 2022, include the

Group’s CEO, CTO, CFO, 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.

The Group has made contributions to defined

contribution pension plans for the benefit of persons

with key management positions totaling USD 101

thousand (2021: USD 79 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	2022	2021
Purchase commitments for:
Property, plant, and equipment	334,217	67,621
Intangible assets	2,400	383
Material and services	39,865	9,512
Total	376,482	77,516

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.

	Annual Report 2022 | X-FAB consolidated financial statements

74

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, 2021: USD 136.1

million); the retention requirements have not yet been

fulfilled in full for grants and subsidies received totaling

USD 12.2 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:

	2022	2021
Production	3,568	3,318
Research and development	310	305
Sales, marketing, and administration	290	264
Trainees	117	102
Total	4,285	3,989

The total number of employees employed by the

Group at December 31 was as follows:

	2022	2021
Production	3,662	3,430
Research and development	319	305
Sales, marketing, and administration	299	270
Trainees	131	118
Total	4,411	4,123

Note: Number of employees excludes contract workers

(borrowed)

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%

75

13.5 Consolidated financial statements of the

ultimate parent

The parent of the Company is XTRION NV. Although

XTRION NV does not hold a majority of the Company’s

shares, it is 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 are also included in the consolidated

financial statements of XTRION NV. These can be

obtained on request from XTRION NV, Transportstraat

1, 3980 Tessenderlo, Belgium.

13.6 Auditor and auditor’s remuneration

During the general shareholders’ meeting on April 30,

2020, KPMG Bedrijfsrevisoren BV was reappointed as

the Company’s auditor for the years 2020, 2021, and

2022.

The auditor’s remuneration for the period was as

follows:

in thousands of U.S. dollars	2022	2021
Audit cost
KPMG	345	392
Other audit firms	105	61
Other services
KPMG	27	36
Total	477	489

14 Events after the reporting period

There have been no reportable events subsequent to

the balance sheet date.

Tessenderlo, March 23, 2023

Managing Director, CEO

Sensinnovat BV

Represented by Rudi De Winter

CEO

	Annual Report 2022 | X-FAB consolidated financial statements

76

77

78

79

6. CORPORATE SOCIAL

RESPONSIBILITY AT X-FAB

6.1 Scope

This chapter documents X-FAB’s environmental and

social performance during the 2022 financial year. The

environmental and social performance figures

encompassed 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, there is information on cyber security at

X-FAB and a section on EU taxonomy and the

associated reporting requirements.

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 2022

financial year. Where applicable, data were collected

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

sources, such as utility providers. Data compiled from

X-FAB sites were 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. More information in the Corporate Governance Statement

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

In general, the provided statements and figures are

valid for the entire organization. Site-specific

information is indicated where applicable. The report

covers all entities of X-FAB Silicon Foundries SE. Its

scope and boundary was confirmed by the X-FAB

Board.

X-FAB is fully engaged 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.

	Annual Report 2022 | Corporate social responsibility at X-FAB

80

To exceed the expectations of its customers, X-FAB

practices a quality management system certified

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

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 a new automotive 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, health and safety, 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 has

signed 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 largest specialty foundry groups,

is aware of its social responsibility derived from 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 across all parts of

the value chain.

In the year 2022 and 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. 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.

These are the long-term key ESG objectives X-FAB

defined and committed to in 2022:

Fig. 6.2: X-FAB’s ESG objectives

Innovation goal

X-FAB supports its customers to develop medical

applications to 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.

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.

81

Diversity and inclusion goal

X-FAB has made a commitment to enhancing diversity

and inclusion within the organization and has formed a

global Diversity Council comprised of members from

Germany, France, Malaysia, and the USA to support

these efforts. The Council meets regularly to focus on

particular topics and goals, with a specific emphasis on

increasing the percentage of women in the

organization. In the past four years, the percentage of

women at X-FAB has increased from 26% to 29%, and

the Company intends to continue this positive trend.

As part of its strategy, the Diversity Council has

established two objectives to achieve by 2023:

◦offer targeted training to managers

on diversity and inclusion; and

◦review and further improve equal treatment

policies across all sites.

Carbon footprint reduction goal

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.

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.

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, and other

platforms. As the scarcity of skilled workers continued

in 2022, 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 6.3

shows the different channels X-FAB is using to

communicate about its activities.

Fig. 6.3: Stakeholder engagement

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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, a virtual 360° fab tour of the Dresden site and a

xfabulous-branded tram that is used in Erfurt as part of

the local transport network. At the same time various

initiatives targeted existing employees to increase their

commitment to X-FAB. Apart from a corporate benefit

program, a new video series with the title “Quarterly”

was launched. This regular video update addresses the

latest developments within X-FAB Group and also

provides insight into the work and topics of the

corporate management team. As it was possible to

meet in person again this year, several employee

events took place, such as the annual dinner at X-FAB

Sarawak, summer parties, after work parties, and the

Environmental, Health, and Safety (EHS) week.

Customer engagement

X-FAB engages with its customers on several levels

beyond daily business. In 2022, face-to-face events

finally returned, and X-FAB had a booth at several

conferences and exhibitions, including APEC, ChipEx,

and Electronica. X-FAB contributed to several events

by presenting, speaking or moderating forum

discussions. A special event was again held in 2022: the

X-FAB Technology Conference, which is an excellent

platform for invited customers and the X-FAB

technology team to discuss the latest technical

achievements and challenges, and to set the starting

point for the innovative products of tomorrow.

Another format for bringing customers and employees

together also continued in 2022: 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

promotes 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. In January 2022, X-FAB Sarawak

participated in the CSR "The Gift of Giving:

Mangala Computer Charity Project" and donated

50 sets of refurbished computers to Maha Mangala

Charity of Malaysia (MMCOM). These computers will

be distributed to families in Kuching and rural areas in

two batches. With help from X-FAB’s procurement and

IT teams, X-FAB was able to donate a complete set of

desktops that come with a monitor, keyboard, and

mouse, plus a new webcam and speakers.

Fig. 6.4: Employees of X-FAB Sarawak handing over the

donated computers to the project team

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.

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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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. 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 of action have been defined and

are the heart of the Digital Transformation Strategy

2022–2026.

New work

X-FAB has implemented several initiatives to support

an efficient work environment. These initiatives include

the implementation of new and agile systems such as

global interoffice and hybrid collaboration tools, a

paperless office with automation of forms, a single

project management solution, and an employee app

for communication and services.

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, and MES systems, as well as inter and

intra bay lot transport, equipment and warehousing

automation, virtual factory solutions, and energy

efficiency systems. Additionally, robotics has been

adopted in certain areas to further optimize operations

and reduce manual labor.

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.

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Data and AI

X-FAB has a long-term roadmap for implementing

next-generation data and AI initiatives, which includes a

range of projects and technologies. One initiative is

extending the Gravity and AIR projects globally, as part

of the focus on next-generation data and AI initiatives.

Some of the specific technologies involved in these

initiatives include R/Shiny, a software developer

community, and reporting and capacity planning

systems.

X-FAB is also exploring how AI and automation can

improve various processes, such as defect detection,

early fault detection, and maintenance prediction.

Customer transparency and quality

Through digitalization and automation, X-FAB is

enhancing its quality and customer transparency

processes. This includes initiatives such as B2B

integration, my X-FAB, error proofing, "poka yoke" and

failure prevention, and the use of AI for fast

abnormality recognition via data.

Business process optimization and RPA (robotic

process automation)

X-FAB has revised its business processes to identify

areas for lean and automation improvements. In line

with this objective, we have implemented a business

process automation platform and adopted a lean

approach across the organization. X-FAB has assessed

and implemented robotic process automation (RPA)

to improve manufacturing efficiency and reduce costs.

We have also standardized our processes to ensure

readiness for an enterprise resource planning (ERP)

upgrade.

Fig. 6.5: 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.

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

large amounts of different materials, among them toxic

materials and greenhouse gases. Thus, 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 2022, the data used for an overview of X-FAB’s

environmental indicators is consolidated across all sites

and normalized to wafer area sold in cm2 (total of

281.24 million cm2). 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.

85

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.

The total waste disposal in 2022 is comparable to the

total waste in 2021 with a waste recovery of 84.1%

compared to 84.7% in 2021.

Fig. 6.6: Amount of waste by type and disposal method

normalized to the total wafer area sold (tons per million cm2

wafer sold)

X-FAB pursues permanent environmental objectives

to decrease its overall environmental impact. Some of

the activities carried out are:

•co-processing of fluoride sludge waste as raw

material at a cement plant instead of landfill

(Kuching); and

•reuse of wooden pallets for scheduled waste

storage instead of purchasing wooden pallets

(Kuching).

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 based on the advanced

cleanroom conditions as well as the production process

itself. In 2022, X-FAB’s global energy consumption was

at about 531 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 72%, and the share of high-carbon

sources, such as oil, gas, coal, biofuel, etc., was at 28%.

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.

Fig. 6.7: 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

50001:2011.

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.

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X-FAB aims to improve its energy efficiency and

reduce energy consumption, and a range of activities

are being undertaken to achieve this, illustrated by the

following examples of projects completed during the

2022 financial year at the Group’s Lubbock facilities:

•replacement of 25-year-old cooling towers with an

estimated annual energy savings of 167,137 kWh;

•replacement of CDA (clean dry air) compressor

units to support current system for facility

expansion, which will lead to an estimated annual

electrical savings of 40 kW; and

•continuation of energy saving program launched in

2019 with the replacement of fans and variable

frequency drives.

Such environmental goals are communicated during

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

Figure 6.8 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. 6.8: Power consumption of all X-FAB sites from 2020 to

2022 (in GWh)

6.2.2.2 Water

In 2022, X-FAB’s production consumed roughly 17.1

liters of water per each cm2 wafer area sold. 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 is a slight

increase in consumption due to the higher production

volumes in 2022.

	Amount in liter/cm2
From a river	1.62
Ground water	4.03
Local drinking water supplier (city council)	11.42
Total water withdrawal	17.06

Fig. 6.9: Total water withdrawal by source

Fig. 6.10: Total water consumption (1,000 m3 per million cm2

wafer sold) over a three-year period

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 microchips and

sensors. Figure 6.11 lists the 2022 total consumption of

these gases. For 2022, reporting values are now

reported in kilogram CO2 per million cm2 wafer sold.

Gas	Amount in kg	Amount in kg CO2
CF4	2,424	17,910
CHF3	230	3,401
SF6	174	3,959
NF3	119	2,054
C4F8	44	455
N2O	33,147	8,784
CH3F	42	4
C2F6	3,742	45,654
C5F8	50,498	101
CH2F2	3	2
C4F6	59,391	117
C3F8	7	59

Fig. 6.11: Gas emissions by weight

Fig. 6.12: Two-year comparison of PFC gas consumption (all

gases ≥1 ton CO2 per million cm2 wafer sold)

87

It is X-FAB’s intention to minimize the output 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 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.

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

“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 are

under negotiation and will be finalized 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.

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

than 100 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

2022 attended a mandatory employee orientation, of

which training on human rights policies 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

2022.

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 2022, X-FAB had around 4,350

employees worldwide at six different manufacturing

sites in Europe, Asia, and the US. 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.

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Location	Absolute # of employees	Percentage of male employees [%]	Absolute # of male employees	Absolute # of female employees	Percentage of female employees [%]
North America	508	70.5	358	150	29.5
Europe	2,490	75.1	1,871	619	24.9
Asia	1,373	65.0	893	480	35.0
TOTAL	4,371	71.4	3,122	1,249	28.6

Fig. 6.13: Number of employees (without trainees) by region and gender at the end of 2022

In line with the strong demand in semiconductors the

number of employees increased from 2021 to 2022 by

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

employees (FTEs) was mainly driven by strong focus

on social media employer branding activities as well as

various other activities to hire qualified staff.

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

female employees. The share of female employees is

constantly increasing in all regions X-FAB is operating

in. It increased from 26% in 2018 to 29% in 2022 for the

entire Group.

Fig. 6.14: Share of male and female employees by region 2018–

2022

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 2%

of staff are contract workers.

In 2022 the number of part-time contracts increased

slightly, primarily attributable to an increase in part-

time male employees.

The full “Flex@work” policy was deployed 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. With this full

flexibility X-FAB employees could adapt to the

different Covid-19 regulations in the countries X-FAB

operates in.

89

Location	Gender	Temporary/ fixed term	Permanent employees	Contract workers	Trainees/ internships	Full-time	Part-time
North America	Male	0	325	33	0	355	3
	Female	0	118	32	0	149	1
Europe	Male	191	1,675	1	107	1,763	104
	Female	52	571	0	25	492	131
Asia	Male	16	877	0	0	893	0
	Female	18	462	0	0	480	0
TOTAL	Male	207	2,877	34	107	3,011	107
	Female	70	1,151	32	25	1,121	132

Fig. 6.15: Employment contracts by type, region, and gender as at year end 2022

About 98% of all contracts in Europe are collective

bargaining contracts. In 2022 X-FAB started to

negotiate one common collective bargaining

agreement for all German sites. In other regions of the

world this concept is not common, and therefore, there

are no collective bargaining agreements in place.

In 2022, 821 new employees were hired, 71% of whom

were male and 29% were female. The majority of newly

hired employees are younger than 35 years. The

average 12-month turnover rate in 2022 was 5%, up

from 4% in the previous year.

Location	Gender	<35 yrs	36–50 yrs	51–60 yrs	> 60 yrs	Total
North America	Male	68	21	5	3	97
	Female	38	15	3	0	56
Europe	Male	268	97	30	4	399
	Female	81	31	11	0	123
Asia	Male	77	10	3	0	90
	Female	53	3	0	0	56
TOTAL	Male	413	128	38	7	586
	Female	172	49	14	0	235

Fig. 6.16: Newly hired employees (including contract workers, excluding trainees) by age and gender in 2022

Location	Gender	<35 yrs	36–50 yrs	51–60 yrs	> 60 yrs	Total
North America	Male	13	12	4	2	31
	Female	6	2	0	1	9
Europe	Male	248	79	22	7	356
	Female	69	21	8	1	99
Asia	Male	39	16	0	0	55
	Female	13	2	0	0	15
TOTAL	Male	300	107	26	9	442
	Female	88	25	8	2	123

Fig. 6.17: Number of employees (excluding trainees and retirements) who have left X-FAB in 2022 by age and gender

X-FAB conducts an employee engagement survey,

referred to as 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 action teams on a

global as well as on local level. 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 2021.

Location	Average age of all employees	Average age of male employees	Average age of female employees
North America	44.0	45.0	42.0
Europe	42.3	42.2	42.1
Asia	37.2	38.4	34.9
TOTAL	41.2	41.9	39.7

Fig. 6.18: Average age by location and gender in 2022

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

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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

to all employees for private and professional use. With

unrestricted access at any time, anywhere, employees

can benefit from the largest e-learning platform

worldwide. Based on the yearly training needs analysis,

specific training was recommended in 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, in 2021 X-FAB introduced

a new performance management process (PMP) that

is based on constant feedback from supervisor to

employee on performance and goal achievement. The

newly introduced software, SAP SuccessFactors, helps

to track progress on an individual level. 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. In 2022 a full year’s cycle was

completed and goal achievements were tracked and

stored in the new system.

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 particular, e-learning

campaigns were tested in 2022 and will be further

rolled out in 2023.

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. At the

beginning of the year training was held virtually, which

included internal as well as external training. In the

second half of 2022 more training was offered face to

face. In total, the amount of training hours increased

compared to 2021.

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	37	36	28	28
	Female	40	37	22	21
Asia	Male	21	16	17	0
	Female	20	19	16	0

Fig. 6.19: Average training hours per year and employee in 2022

In 2022 X-FAB launched a new two-year education

program for professionals and talents from all X-FAB

sites designed to develop project management and

personal skills. This global talent development

program, referred to as ProMPT (Project Management

for Professionals and Talents), was first introduced in

2016 and concentrates on the areas “personality and

leadership,” “project management,” “quality

management,” “strategic thinking,” and “cultural

awareness.” In 2022, 15 employees from all X-FAB

locations were selected for a new round of the

program with the first training taking place in France

(Fig. 6.20). Alongside their training they worked on

several strategically important projects for the X-FAB

Group.

Fig. 6.20: Participants of the global PromPT team during the

training in France

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 2022 X-FAB promoted 17 technical

experts to a global grade on the Technical Ladder. This

not only shows that more and more of the Company’s

experts work on global projects it also stands for the

broad technical knowledge base X-FAB has.

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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 2022

X-FAB’s overall patent portfolio amounts to more

than 450 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, 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 130 apprentices are

currently undertaking their first, second, or third year of

VET (vocational and educational training).

In 2021, X-FAB rebranded its employer brand “We are

X-FABulous,” showcasing the experiences of real

employees in operator, engineering, and technician

roles, as well as interns or managers and experts. Over

the year 2022 site-specific advertisement campaigns

aimed at raising brand awareness in the public were

launched successfully at all locations. A specific

Instagram account with biweekly updates was launched

and each month employee-focused stories are 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. In particular, during the

pandemic, X-FAB offered a full “Flex@Work” approach

by offering mobile working wherever the tasks were

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. In 2022 a collective bargaining

agreement applicable to German employees was

introduced and more than 600 employees benefited

from a company pension scheme.

X-FAB cares about its employees’ increased health

awareness and growing interest in an active way of life.

X-FAB supports activities at its different sites to keep

the employees healthy, such as internal sport groups,

soccer teams, and running groups, or reduced pricing

for fitness clubs. Furthermore, a variety of fitness

activities and trial lessons as well as fitness and health

checks are offered to employees.

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

journals, 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.

Fig. 6.21: New breakout room for shift personnel at the Erfurt

site

Even during significant pandemic restrictions, X-FAB

ensured that local cafeterias stayed open for the well-

being of the employees. During weekends as well as

night shifts X-FAB staff had the opportunity to use the

cafeteria and breakout rooms.

X-FAB rewards outstanding employee performance

with incentive cash 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.

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In 2022 each X-FAB employee was rewarded with an

extra bonus at the end of the year, honoring the

extraordinary efforts during the challenging year of

2022. In some countries special governmental

schemes were used to provide these bonuses under

special tax conditions.

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. In 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 we plan to launch a

monthly campaign via the e-learning platform LinkedIn

Learning on IT security, lean principles, diversity and

inclusion, etc. to raise awareness of specific topics.

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 order

to support the people in Ukraine, X-FAB collected aid

supplies at several sites and furthermore donated

EUR 10,000 to an association of international and

German aid organizations, an alliance of "Bündnis

Entwicklung Hilft" (relief organizations alliance) and

"Aktion Deutschland Hilft" (Germany’s relief coalition).

In December 2022, X-FAB hosted its traditional

Christmas donation campaign. The beneficiary was

“Tafel” in Itzehoe, which is a local food bank and

provides food and essential goods for those in need.

X‑FAB donated USD 0.25 for each click on the

Company’s Christmas webpage. As a result, X-FAB was

able to hand over a check in the amount of EUR 2,500

as the campaign recorded 10,000 clicks in total.

Fig. 6.22: Handover of the check to the local food bank in

Itzehoe

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.

The site in Kuching launched a ”Show your care” charity

campaign to help their employee Mohn Zambri Apen

following a fire tragedy. The employees raised

MYR 5,500.

Fig. 6.23: Lee Boon Chun, CEO of X-FAB Sarawak, handing

over the donation to Mohn Zambri Apen

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.

Fig. 6.24: X-FAB Itzehoe employees at a local run

Educational awareness and responsibility

It is important to X-FAB to invest in the education and

skill development of the young and children as the next

generation by sponsoring books and other educational

material to 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 2022 X-FAB

reactivated the international internship program to

invite students to undertake their practical training at

one of X-FAB’s sites.

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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 considering a future career in a

science, technology, engineering, or mathematics

(STEM) field. In 2022 several activities were restarted.

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

2022 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 kids and the young, 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. X-FAB actively contributed by sponsoring and

running STEM days for girls.

In 2022 X-FAB continued to used social media

channels, such as Facebook and LinkedIn, to inform the

general public about social activities and job

opportunities. For the first time an X-FAB Instagram

channel was launched, which is used exclusively to

enhance X-FAB’s employer branding in social media.

Within a few weeks the number of followers increased

significantly, which has helped to raise awareness of

X‑FAB as an attractive company.

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 2022 most of these

events were held virtually but in the second half of the

year more and more in-person events took place.

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 trainings and instructions 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 to 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

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 45

accidents in 2022, which caused 7428 work hours lost,

resulting in a frequency rate of 7.75 and a severity rate

of 159.86.

Safety improvement programs that took place in 2022:

•exchange of HLOX (pure liquid oxygen) tank to

resolve leaking filling valve during running of fab

(Dresden); and

•improved toxic/flammable gas detection

monitoring to allow access to central terminal

outside of the hazard area (Lubbock).

Hygiene concepts for cleanrooms

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

employees work in a cleanroom 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

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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 execution of the

global procedure is secured with local instructions,

which manage 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.

This all together helps to confirm 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 has 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

native language. All reports are treated confidentially,

and there is a strict no-retaliation policy.

No incidents were reported in 2022.

Ethics training is provided to all employees. 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 includes 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 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 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

95

their quality and environmental management systems

as well as with respect to the composition 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 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

•Demonstrated compliance of quality management system according to IATF 16949

•Commitment to a code of conduct, e.g. ZVEI Code of Conduct 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 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 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 2022, 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 seven different suppliers for strategic materials (e.g.

chemicals, gases, wafers) or services, two located in

the United States, one in Europe, and four in Asia.

These audits also focused on environmental and other

aspects according to X-FAB’s standards.

Supplier	Category	Location	Audit type and result
Supplier 1	Gases	Malaysia	Supplier audit / rating A
Supplier 2	Subcontracting	Malaysia	Supplier audit / rating A
Supplier 3	Wafers	United States	Supplier audit / rating A
Supplier 4	Subcontracting	Malaysia	Supplier audit / rating A
Supplier 5	Gases	China	Supplier audit / rating A
Supplier 6	Wafers	United States	Supplier audit / rating A
Supplier 7	Equipment	Germany	Supplier audit / rating B

Fig. 6.23: Supplier audits performed by X-FAB in 2022

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Supplier Corrective Action Requests (SCAR)

In 2022, in total 64 SCARs had to be issued towards

different suppliers, the majority of which have not been

critical with respect to the continuity or quality of the

wafer manufacturing processes at X-FAB nor the

products of our 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 2022, 19 new quality assurance agreements with

suppliers of X-FAB have been implemented, in order

to ensure the supplier’s 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 introduced 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 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 is

accepting 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.

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.

X-FAB has described a product declaration

committing 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 under 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.

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 it

sources 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 crucial

to safeguarding X-FAB’s reputation and brand. X-FAB

currently does not apply a customer data deletion

concept due to adherence with the IATF automotive

standard, which allows for deletion only after at least 15

years of inactivity. X-FAB deactivates data records

whenever requested and has not received any

customer complaints about data privacy. X-FAB

applies an email opt-out system for customer data for

hotline news, webinars, and customer surveys. These

are maintained via different technologies, including the

ERP system, the survey, and the email marketing tool,

in an automated or semi-automated way.

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Cybersecurity

X-FAB IT's strategies for 2022-2025 focus on

improving IT security by continuing to provide

cybersecurity awareness training and phishing

campaigns to employees and thus becoming the

human firewall in protecting X-FAB from cyber threats.

X-FAB IT is also conducting IT Security Posture

Maturity Assessments to improve the Information

Security Management System and monitor the

readiness of the X-FAB sites.

To ensure the security of the Group's IT systems and

assets, X-FAB IT has established a Global IT Security

Team composed of experts responsible for

implementing security policies, monitoring for threats,

responding to cybersecurity incidents, and

implementing security controls.

In addition, X-FAB IT has established an IT Security

Committee, composed of dedicated cybersecurity

professionals from IT departments from various sites. It

oversees and advises on the Group’s IT security

projects and initiatives, reviews and approves security

policies, and ensures compliance with laws and

regulations. It regularly evaluates and recommends

improvements to X-FAB IT cybersecurity programs.

The IT Security Committee meets periodically to

discuss emerging cybersecurity risks and vulnerabilities

and to make key decisions regarding the Group’s IT

security.

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.

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 2022, 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

protection and restoration of biodiversity and

ecosystems. Technical screening criteria for each

environmental objective will be defined through

delegated acts.

The Delegated Act (Commission Delegated

Regulation (EU) 2021/2139) on climate mitigation and

climate adaptation, laying out the technical screening

criteria that define whether an economic activity

substantially contributes to the objective of climate

change mitigation or climate change adaptation, was

published in the Official Journal on December 9, 2021.

This also includes minimum safeguards that must be

secured for the other four environmental objectives of

the taxonomy, the so-called Do No Significant Harm

(DNSH) criteria. The delegated acts defining the rules

and requirements on the reporting requirements for

the other environmental objectives are yet to be

published.

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These new reporting requirements are being

introduced gradually. For 2022, companies need to

report on the eligibility and alignment of their activities

regarding the environmental objectives of climate

change mitigation and adaptation. However, the

interpretation of the EU taxonomy is unclear with many

rules, regulations, and guidelines still under

development. The following paragraphs describe

X‑FAB’s approach based on the current stance 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. 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. These activities are therefore

contributing to climate change mitigation since they

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.

An economic activity qualifies as contributing

substantially to climate change adaptation if that

activity provides adaptation solutions that contribute

substantially to reducing or preventing the adverse

impact of the current or expected future climate, or

the risk of such adverse impact, on that activity itself or

on people, nature or assets. So far, X-FAB and its

customers’ activities are mainly focused on climate

change mitigation. X-FAB therefore focuses this

reporting on the climate change mitigation objective.

1. Turnover

To report turnover under this section, the definition of

turnover in accordance with International Financial

Reporting Standards (IFRS) is used.

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.

2. It must comply with the technical screening criteria

established by the Commission.

3. It must not significantly harm any of the

environmental objectives.

This criterion is put in place to avoid that activities

qualify as environmentally sustainable in cases where

the economic activities benefitting from those

investments cause harm to the environment to an

extent that outweighs their contribution to an

environmental objective. There are several aspects to

this. Companies must:

•carry out a risk and vulnerability assessment

to identify solutions for climate change

adaptation;

•use water in a sustainable way and protect

water and marine resources;

•assess whether there are techniques available

for the economic activity in question that

support circular economy principles;

•comply with the criteria on pollution

prevention and control; and

•comply with the criteria relating to the

protection and restoration of biodiversity and

ecosystems.

99

The semiconductor industry heavily relies on the use of

chemicals. The current wording regarding the aspect

of pollution prevention and control therefore gives rise

to a lot of questions. 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 pieces of legislation and complies with them.

However, the Climate Delegated Act does not seem 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 point to the European Commission.

4. 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. Sections 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.

Based on the above-described uncertainties and the

current status of the legislation, X-FAB deems it

prudent to report a 0% alignment.

Economic activity	Activity description	Proportion eligible	Proportion aligned
3.6	Manufacture of other low-carbon technologies	43.07%	0%

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.

The CapEx can be categorized into two types:

a.Technology CapEx: the eligibility for the

technology CapEx is based on the

categorizing 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 mainly relates to

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;

iii.installation, maintenance and repair

of instruments and devices for

measuring, regulation and controlling

energy performance of buildings.

We have assessed the respective substantial

contribution and DNSH criteria and show the results in

the table below.

Economic activity	Activity description	Proportion eligible	Proportion aligned
3.6	Manufacture of other low-carbon technologies (technology CapEx)	74.31%	0%
7.3-7.5	Facilities CapEx	1.17%	100%
TOTAL		74.84%	1.17%

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 categorizing 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.

Economic activity	Activity description	Proportion Eligible	Proportion Aligned
3.6	Manufacture of other low-carbon technologies	55.12%	0%

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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

participation 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 management 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

recommendation 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	58	2026	Non-executive director
Sensinnovat BV (Represented by Rudi De Winter)	62	2025	Managing Director, CEO
Roland Duchâtelet	76	2025	Non-executive director
Thomas Hans-Jürgen Straub	68	2025	Non-executive director
Tan Sri Datuk Amar Dr. Hamid bin Bugo	77	2025	Non-executive director (Chair)
Aurore NV (Represented by Christine Juliam)	62	2026	Non-executive and independent director
Christel Verschaeren	58	2025	Non-executive and independent director
Estelle Iacona	50	2025	Non-executive and independent director
Vlinvlin BV (Represented by Ling Qi)	52	2023	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. 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 is the co-founder of the parent

company of X-FAB. He 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

105

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, Petroleum Sarawak Berhad

and board member of Sapura Resources 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. Moreover, 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. In 2021, Ms. Juliam started 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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106

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 seven times in 2022 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 2023; and

•the ESG-strategy.

Dato Sri Dr. Wan Lizozman bin Wan Omar was excused

for one meeting and was represented by proxy at

three other meetings of the Board. Also, Tan Sri Datuk

Amar Dr. Hamid bin Bugo was excused for one

meeting. Christel Verschaeren was represented by

proxy at 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. The next evaluation will be

performed in 2023.

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 2022, 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 the internal audit and the

renewal of the audit mandate. All members of the

Audit Committee as well as the external auditor

attended all meetings. The internal auditor was present

at two meetings.

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 four non-executive members: Christel

Verschaeren, Chair; Aurore NV, represented by

Christine Juliam, independent director; Tan Sri Datuk

Amar Dr. Hamid bin Bugo, non-executive director; and

Estelle Iacona, independent director.

The Remuneration and Nomination Committee met

three times in 2022. 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	62	Chief Executive Officer
Alba Morganti	54	Chief Financial Officer
Jörg Doblaski	44	Chief Technology Officer
Lee Boon Chun	53	Chief Executive Officer, X-FAB Sarawak
Dr. Jocelyne Wasselin	64	Chief Executive Officer, X-FAB France
Lloyd Whetzel	65	Chief Executive Officer, X-FAB Texas
Dr. Gabriel Kittler	44	Chief Executive Officer, X-FAB Erfurt
Rico Tillner	40	Chief Executive Officer, X-FAB Dresden

Functioning

The Executive Management Team is composed of the

CEO, the CFO, the CTO, 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 2022

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

2022 Vlinvlin BV (represented by Ling Qi) and Hans-

Jürgen Straub received additional remuneration of

USD 68,699 and USD 14,686 respectively 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 10,543 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.

	Annual Report 2022 | Corporate governance statement

108

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	15,814.65	—	25,229.10	—	—
Tan Sri Dr. Hamid bin Bugo, Non- executive director	26,357.75	—	—	—	—
Aurore NV (Represented by Christine Juliam), Independent director	26,357.75	—	—	—	—
Christel Verschaeren, Independent director	26,357.75	—	—	—	—
Estelle Iacona, Independent director	26,357.75	—	—	—	—
Vlinvlin BV (Represented by Ling Qi), Non-executive director	15,814.65	—	68,699.17	—	—
Sensinnovat BV, permanently represented by Rudi De Winter, Executive, CEO	384,823.15	—	—	41,368.49	96,205.79
Executive Management excl. Sensinnovat BV	1,088,758.14	—	67,272.43	127,931.21	—

109

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	—	—	41,043.75	Fixed:	100%
Tan Sri Dr. Hamid bin Bugo, Non-executive director	—	—	26,357.75	Fixed:	100%
Aurore NV (Represented by Christine Juliam), Independent director	—	—	26,357.75	Fixed:	100%
Christel Verschaeren, Independent director	—	—	26,357.75	Fixed:	100%
Estelle Iacona, Independent director	—	—	26,357.75	Fixed:	100%
Vlinvlin BV (Represented by Ling Qi), Non-executive director	—	—	84,513.82	Fixed:	100%
Sensinnovat BV, permanently represented by Rudi De Winter, Executive, CEO	—	—	522,397.43	Fixed:	74%
				Variable:	26%
Executive Management excl. Sensinnovat BV	—	101,352.50	1,385,314.28	Fixed:	91%
				Variable:	9%
			2,138,700.28

	Annual Report 2022 | Corporate governance statement

110

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 2022 by IC Insights. 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 2022 are shown in

the table below. In 2022 the EBIT was USD 57.3 million.

This means that 43% 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)	2,500,000	a)	130,000,000	a)	57,335,000
Relative weighting 50%	b)	0	b)	96,206	b)	41,368
Total bonus		0		96,206		41,368

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

IC Insights as a reference value.

The results for performance year 2022 are shown in

the table below. In 2022, the revenue growth was 12%

compared to 2021. The industry average amounted to

8%. The revenue growth compared to 2020 was 55%

while the industry averaged 28%. This results in the

bonus calculation as depicted in the following table.

111

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 >8%	a)	12%
	b)	48,103		48,103
Revenue growth over the last two years	a)	Revenue growth >28%	b)	55%
	b)	48,103		48,103
Total bonus		96,206		96,206

	Annual Report 2022 | Corporate governance statement

112

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 2022 are shown in

the table below. In 2022 the EBIT was USD 57.3 million.

This means that 43% of the short-term cash bonus that

is linked to the operational result of the Company will

be paid out. One member of the Executive

Management waived the variable remuneration for

2022.

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)	2,500,000	a)	130,000,000	a)	57,335,000
Relative weighting 50%	b)	0	b)	121,240	b)	36,732
Individual/team performance	a)	Determined individually	a)	Determined individually	a)	Determined individually
Relative weighting 50%	b)	0	b)	121,240	b)	91,198
Total bonus		0		242,480		127,931

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.

113

Name	2018	2019	2020	2021	2022
Annual change of remuneration (Executive management)
•Fixed remuneration	—	—	—	-4.1%	4.2%
•Variable remuneration	—	—	—	+100%	-33.4%
•Total remuneration	—	—	—	21.3%	-2.5%
Annual change in the developments and performances (in thousands of U.S. dollars)
•Performance criteria (EBIT)	32,919	-43,865	-14,617	77,192	57,335
•Net profit	22,554	-48,540	13,530	83,640	52,491
Annual change in the average remuneration of employees on consolidated basis*	2.26%	-6.06%	0.91%	8.39%	-1.58%

*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.

In 2022 the ratio between the highest and lowest

remuneration was 56.3 to 1. The highest remuneration

used for this comparison includes the base salary of a

member of the Executive Management. The lowest

remuneration includes the base salary 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 as no contract

with a member of the Executive Management was

terminated in 2022.

Use of clawback provisions

No clawbacks were applied in 2022.

Vote of the shareholders

The remuneration report for the financial year ended

December 31, 2021, was approved at the annual

shareholders’ meeting held on April 28, 2022, with a

98.6% majority of the 75.2% 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.

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 2022, there was a conflict of interest according to

Article 7:96 BCCA for one topic on the agenda of the

Board of Directors meeting of March 24. It concerned

the approval of the management contract of the CEO.

Please find the full excerpt of the board minutes on

this subject below.

Approval of the management agreement of the

CEO

Conflict of interest

Prior to discussing the changes to the management

agreement with Sensinnovat BV, Rudi De Winter,

permanent representative of Sensinnovat BV, director

of the Company, declares to have an interest of a

patrimonial nature which is conflicting with the decisions

that fall within the scope of the powers of the board of

directors, in respect of the changes to be made to his

management agreement with the Company (the

“Management Agreement”). This conflict of interest

results from the fact that Sensinnovat BV is a director of

the Company and a party to the Management

Agreement. The changes to the Management

Agreement will have financial consequences for the

Company as it will require the Company to pay an

increased management fee to Sensinnovat BV as

	Annual Report 2022 | Corporate governance statement

114

compensation for the provision of its services under the

Management Agreement. Under Article 9 of the Council

Regulation (EC) No 2157/2001 of October 8, 2001 on

the Statute for a European company (the “SE

Regulation”) juncto Article 7:96 of the Companies and

Associations Code, a conflict of interest prevents the

directors in question from taking part in the

deliberations and from voting on the decision for which

a potential conflict of interest exists.

The board of directors took note of the changes to the

Management Agreement. Informed of the existence of

a conflict of interest with respect to this agreement, the

board of directors decided nevertheless to approve the

changes thereto. The Company requires highly qualified

specialists with extensive experience and expertise in its

field of business. The board of directors is of the opinion

that Sensinnovat BV (represented by its permanent

representative Rudi De Winter) has clearly evidenced

these skills over the past years. The fee has, however,

remained unchanged and is therefore no longer in line

with market standards. The board of directors has

concluded that the changes to the Management

Agreement (i.e. the increase of the management fee)

are in the interest of the Company, given that, even

though it involves the increased payment by the

Company to Sensinnovat BV of a management fee,

those management fees are proportionate for the

services to be provided by this manager to the

Company. The board resolved that the changes to the

Management Agreement are approved in the form

presented to the board of directors.

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 2022, 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

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.

115

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

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. have entered into a shareholders’ agreement as

shareholders of X-FAB (the “Shareholders’

Agreement”).

The Shareholders’ Agreement applies for as long as

each of the shareholders holds more than 5% of the

shares in X-FAB. The Shareholders’ Agreement

addresses 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 have the right to appoint two directors on

the Board of Directors. The Shareholders’ Agreement

furthermore provides 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

	Annual Report 2022 | Corporate governance statement

116

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

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. Jos Briers, auditor, was appointed as the

permanent representative of the auditor.

The audit fee for the audit of the consolidated financial

statements amounted to USD 450,000, excluding

value-added taxes. Additional fees were charged in

2022 for other services amounting to USD 27,000,

excluding value-added taxes. Non-audit related

services mainly relate to certification engagements

and tax compliance services.

117

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 2022 | Corporate governance statement

118

119

120

121

8. SHAREHOLDER

INFORMATION

Shareholder structure

	NUMBER OF SHARES	SHARE IN %
XTRION NV	63,333,563	48.4
Sarawak Technology Holdings Sdn. Bhd.	14,948,655	11.4
Public	52,499,451	40.1
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, 2022:	130,781,669
Market capitalization on December 31, 2022:	EUR 865,774,648.78

	Annual Report 2022 | Shareholder information

122

Financial calendar

April 27, 2023

Publication of Q1 2023 results

Annual shareholders’ meeting

June 8, 2023

X-FAB Investor Day 2023

July 27, 2023

Publication of Q2 2023 results

September 5, 2023

Publication of Half-Year Report 2023

October 26, 2023

Publication of Q3 2023 results

Contact information

X-FAB Silicon Foundries SE

Investor Relations

Transportstraat 1

3980 Tessenderlo

Belgium

Phone: +32 1361 3627

E-mail: [email protected]

Web: www.xfab.com

123

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	2022	2021
Operating income
Turnover	13,016	11,775
Operating charges
Cost of services and other expenses	(13,106)	(11,650)
Wages and salaries, social security costs and pension costs	(135)	(105)
Depreciation	(4)	(8)
Operating profit	(229)	12
Finance income
Income from financial fixed assets	14,848	56,371
Income from current assets	—	—
Other financial income	2,040	1,015
Finance costs
Debt charges	(53)	(19)
Other financial charges	(87)	—
Net financial result	16,748	57,367
Profit before taxes	16,519	57,379
Income tax	(414)	(316)
Profit for the period	16,105	57,063

	Annual Report 2022 | X-FAB SE statutory accounts

124

Condensed non-consolidated statement of financial position

in thousands of EUR	December 31, 2022	December 31, 2021
ASSETS
Fixed assets
Other equipment	5	9
Financial assets
Affiliated companies
Investments in affiliates	927,250	927,250
Loans issued to affiliated companies	—	239
Total fixed assets	927,255	927,498
Current assets
Amounts receivable within one year
Other receivables	18,100	60,409
Cash and cash equivalents	70,097	16,133
Accruals and deferred income	8	8
Total current assets	88,205	76,550
Total assets	1,015,460	1,004,048
EQUITY AND LIABILITIES
Equity
Capital
Share capital - issued	657,457	657,457
Share premium	92,902	92,902
Reserves
Legal reserves	13,207	12,402
Reserve for treasury shares	562	562
Accumulated profits	250,201	234,900
Total equity	1,014,329	998,223
Current liabilities
Amounts payable within one year
Trade payables	198	589
Other current liabilities	621	5,133
Taxes	312	44
Accrued charges and deferred income	—	59
Total current liabilities	1,131	5,825
Total equity and liabilities	1,015,460	1,004,048

125

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, with

its largest customer being a related party.

X-FAB’s largest customer, Melexis, accounted for 40%

of the Group’s revenue in 2022, while the Group’s top

three customers accounted for 47% of revenue and its

top five customers accounted for 52% 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. Further,

Melexis is a related party, as it is controlled by X-FAB’s

largest shareholder, XTRION (which is beneficially

owned by Roland Duchâtelet, Rudi De Winter, and

Françoise Chombar, and the permanent

representative of X-FAB’s CEO, Rudi De Winter, is

married to Françoise Chombar who served as the CEO

of Melexis until the end July 2021 and is currently chair

of the board of directors of Melexis. Conditions of the

commercial relations between X-FAB and Melexis are

in line with those that would have been agreed upon

between independent parties in comparable

circumstances. The arm’s length character of these

conditions are analyzed, determined, and tested in

accordance with the principles and best practices in

this respect as detailed in the OECD’s 2017 Transfer

Pricing Guidelines for Multinational Enterprises and Tax

Administrations. Notwithstanding due care taken in the

Group’s transfer pricing analyses, there can be no

assurance that the tax authorities or courts will not take

a position contrary to the Group’s position.

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

	Annual Report 2022 | Risk factors

126

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.

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 2022, raw wafer costs accounted for 13% 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

127

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.

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

•The interests of X-FAB’s principal shareholder may

not necessarily be aligned with X-FAB’s interests or

the interests of the holders of 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.

	Annual Report 2022 | Risk factors

128

•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.

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.

129

11. GLOSSARY

AEC	Automotive Electronics Council
AI	Artificial intelligence
AIM	Automotive, industrial, medical
Analog M/S	Analog mixed-signal
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
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
EDA	Electronic design automation
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 2022 | Glossary

130

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
IFRS	International Financial Reporting Standards as adopted by the European Union
IoT	Internet of things
IP	Intellectual property
ISAs	International Standards on Auditing
KW	Kilowatt
LTA	Long-term agreement
MCU	Microcontroller unit
MEMS	Micro-electro-mechanical systems
MES	Manufacturing execution system
METIS	Microelectronics training, industry and skills
MFI	X-FAB MEMS Foundry Itzehoe GmbH
M-MOS	M-MOS Semiconductor Sdn. Bhd.
MW	Megawatt
NRE	Non-recurring engineering
NVM	Non-volatile memory
OCI	Other comprehensive income
OECD	Organization for Economic Cooperation and Development
OEM	Original equipment manufacturer

131

PCM	Process control monitoring
PDK	Process design kit
PDP	Photon detection probability
PMP	Performance management process
REACH	Registration, Evaluation, Authorization, and Restriction of Chemicals
RF	Radio frequency
PFC	Perfluorinated carbons
RMA	Responsible Mining Alliance
RoHS	Restriction of the use of certain hazardous substances
RPA	Robotic process automation
SCAR	Supplier corrective action request
SE Regulation	Council Regulation (EC) No 2157/2001 of October 8, 2001 on the Statute for a European company (SE)
SiC	Silicon carbide
SiP	System in package
SOI	Silicon-on-insulator
SPAD	Single photon avalanche photodiode
STEM	Science, technology, engineering and mathematics
TSV	Through-silicon via
VDA	German Association of the Automotive Industry
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 2022 | Glossary

132

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