PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT PRIVILEGE / ATTORNEY WORK PRODUCT
CALDERWOOD & HARKNESS LLP One Liberty Plaza, 42nd Floor New York, NY 10006
MEMORANDUM
To: Vivienne St. Claire, Partner; Robert Adeyemi, Partner
From: Claire Dempsey, Lead Associate; Audrey Zhou, Working Associate
Date: February 14, 2026
Re: Halcyon Semiconductor AG — Due Diligence Memorandum: Environmental and Manufacturing Compliance
Matter No.: 1032-00003
Subject Company: Halcyon Semiconductor Aktiengesellschaft (FRA: HCY; proposed Nasdaq: HCYN)
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I. Executive Summary
This memorandum summarizes the findings of the environmental and manufacturing compliance due diligence conducted by Calderwood & Harkness LLP ("C&H") in connection with the prospective initial public offering in the United States of Halcyon Semiconductor Aktiengesellschaft ("Halcyon" or the "Company") via a Level III American Depositary Receipt program. The offering is expected to be effected through a registration statement on Form F-1 filed with the U.S. Securities and Exchange Commission (the "SEC"), with targeted gross proceeds of approximately $900,000,000 (the "IPO" or the "Offering"). Due diligence commenced on January 27, 2026, and this memorandum reflects findings through the date hereof.
The scope of this memorandum encompasses our review of: (i) environmental permits and regulatory approvals applicable to the Company's manufacturing facilities; (ii) hazardous materials handling protocols and chemical management systems; (iii) manufacturing facility regulatory compliance, including air emissions, wastewater discharge, hazardous waste management, and Seveso III Directive classification assessments; (iv) occupational health and safety compliance; (v) soil and groundwater conditions at manufacturing sites; (vi) climate and sustainability disclosure considerations for the SEC registration statement; and (vii) environmental and related liability insurance coverage. This memorandum also identifies prospectus risk factor and business section disclosure recommendations arising from our review.
In conducting this review, we have coordinated closely with Bähr Stein Rechtsanwälte, the Company's German environmental and regulatory counsel, through Dr. Christoph Maurelban and Johanna Weiß of that firm, who have provided guidance on the German environmental regulatory framework and assisted in obtaining and reviewing German-language regulatory documents. We have also coordinated with the Company's Chief Operating Officer, Ingrid Baumann, and General Counsel, Wilhelm Ostermann, who facilitated document production and arranged management interviews with the Company's environmental health and safety ("EHS") staff at each manufacturing location. The Company's document production in response to our Due Diligence Request List was substantially complete by February 7, 2026, and management interviews were conducted between February 3 and February 11, 2026.
Overview of Key Findings. Halcyon operates semiconductor fabrication, assembly, and testing facilities across four jurisdictions. Its primary manufacturing footprint consists of: (a) a headquarters campus and original fabrication facility ("Fab 1") in Munich, Germany; (b) two fabrication facilities in Dresden, Germany — one operational ("Fab 2") and one under construction ("Fab 3") — held through the Company's wholly owned subsidiary, Halcyon Power Solutions GmbH; and (c) an assembly and testing facility in Brno, Czech Republic, held through the Company's wholly owned subsidiary, Halcyon Automotive Components s.r.o. The Company employs approximately 8,400 people worldwide. As is inherent in semiconductor fabrication, particularly in the silicon carbide ("SiC") and gallium nitride ("GaN") processing that constitutes a significant and growing portion of Halcyon's business, the Company's operations involve the use of substantial quantities of regulated hazardous chemicals, including toxic process gases, corrosive wet chemicals, and high global-warming-potential ("GWP") fluorinated gases.
Based on our review of the documents and information made available to us, no material unresolved environmental violations have been identified at any of the Company's manufacturing facilities. Each facility maintains current and valid environmental operating permits, and the Company's internal EHS management systems appear robust and consistent with industry practice for tier-one semiconductor manufacturers. However, several items have been identified that, in our view, require prospectus risk factor disclosure in the Form F-1 registration statement, including: (i) the dependency of the Fab 3 expansion project — to which $280,000,000, or approximately 46.1% of estimated net IPO proceeds, has been allocated — on the timely receipt of final operating permits from the Saxon environmental authorities; (ii) emerging regulatory risks related to per- and polyfluoroalkyl substances ("PFAS"), which are widely used in semiconductor fabrication processes; (iii) general environmental regulatory compliance costs and the potential for increased regulation across the multiple jurisdictions in which Halcyon operates; and (iv) climate-related physical and transition risks. These disclosure recommendations are discussed in detail in Sections VIII.C and X.B below.
This memorandum covers Due Diligence Request List categories 7.1 through 7.14 (Environmental Permits and Compliance), 8.1 through 8.6 (Manufacturing and Operational Compliance), 9.1 through 9.4 (Occupational Health and Safety), and 15.1 through 15.5 (ESG and Sustainability Disclosures), as reflected in the Master Due Diligence Request List circulated on January 29, 2026.
II. Overview of Halcyon's Manufacturing Footprint
A. Munich Headquarters and Original Fabrication Facility (Fab 1)
Halcyon's global headquarters are located at Maximilianstraße 72, 80539 Munich, Germany, where the Company maintains its principal executive offices, investor relations, and corporate administrative functions. Separately, the Company operates its original semiconductor fabrication facility, designated "Fab 1," at a dedicated industrial campus located at Halcyon-Allee 1, 85748 Garching bei München, Germany, approximately 15 kilometers north of the Munich city center.
Fab 1 serves a dual purpose within Halcyon's manufacturing operations. First, it continues to produce legacy silicon-based power devices, including insulated-gate bipolar transistors ("IGBTs") and metal-oxide-semiconductor field-effect transistors ("MOSFETs"), which, while a declining proportion of the Company's revenue mix, continue to serve the Company's automotive and industrial customer base. Second, and of increasing strategic significance, Fab 1 houses the Company's primary research and development cleanroom facility for next-generation GaN-on-SiC and GaN-on-Si power device development. The Company has disclosed in its preliminary prospectus materials that approximately $140,000,000 of net IPO proceeds are designated for R&D investment in next-generation GaN power devices, a portion of which will fund capital expenditures and equipment installations at the Munich R&D cleanroom. Accordingly, the Munich site is not only a legacy production facility but also a critical node in the Company's forward-looking growth strategy.
Fab 1 has been operational since Halcyon's founding in 1997 and has undergone multiple modernization phases, most recently a significant upgrade to its cleanroom and chemical delivery systems completed in 2021, which brought portions of the facility to 200mm-wafer-capable standards. While the facility's age necessarily means that certain building systems and environmental infrastructure are older than those at the Dresden facilities, our review of the Company's capital expenditure records and maintenance logs indicates that the Company has invested consistently in maintaining and upgrading Fab 1's environmental compliance infrastructure, including its air emission abatement systems, wastewater pre-treatment plant, and hazardous materials storage and distribution systems.
The Munich campus (headquarters and Fab 1 combined) employs a significant subset of the Company's approximately 8,400 worldwide employees, encompassing headquarters and R&D personnel as well as Fab 1 manufacturing, quality assurance, and EHS staff. The precise headcount breakdown by site was confirmed during management interviews to be approximately 2,200 at the Garching Fab 1 site and approximately 650 at the Maximilianstraße headquarters, though we note that certain R&D personnel work across both locations.
B. Dresden Fabrication Facilities — Halcyon Power Solutions GmbH
The Company's Dresden-based fabrication operations are conducted through Halcyon Power Solutions GmbH ("HPS GmbH"), a Gesellschaft mit beschränkter Haftung (limited liability company) registered and operating in Dresden, Germany, and a 100% direct subsidiary of Halcyon Semiconductor AG. HPS GmbH's registered address is Königsbrücker Straße 180, 01099 Dresden, Germany. HPS GmbH was established in 2014 to house the Company's expanding SiC power semiconductor manufacturing operations, leveraging Dresden's position as one of Europe's most important semiconductor manufacturing clusters, benefiting from the presence of other major semiconductor manufacturers, a skilled workforce, and established supplier and logistics infrastructure.
Fab 2. HPS GmbH's operational fabrication facility, designated "Fab 2," is a state-of-the-art SiC wafer fabrication facility and serves as the Company's primary high-volume production facility for advanced power semiconductor devices targeting the automotive (electric vehicle powertrains), industrial (motor drives, power conversion), and renewable energy (solar inverters, wind turbine converters) end markets. Fab 2 commenced production in 2016 and has been expanded in phases, with the most recent capacity expansion completed in late 2024. The facility currently operates on 150mm SiC wafers and is capable of processing in excess of 40,000 wafer starts per month, making it one of the larger dedicated SiC fabrication facilities in Europe. Fab 2 is the source of the majority of the Company's SiC revenue, which represented approximately 48% of total Company revenue in fiscal year 2025 (unaudited) and is the fastest-growing segment of the business.
Fab 3 (Under Construction). HPS GmbH is also constructing a new SiC fabrication facility, designated "Fab 3," on a parcel of land adjacent to the existing Fab 2 campus. Fab 3 represents the single largest planned use of net IPO proceeds, with $280,000,000 (approximately 46.1% of estimated net proceeds of $607,950,000, after deducting estimated underwriting discounts, commissions, and offering expenses) allocated for the construction, equipping, and commissioning of this facility. Construction of Fab 3 commenced in the third quarter of 2025, and the facility is designed to substantially increase the Company's SiC wafer processing capacity, with an initial target of an additional 30,000 wafer starts per month on 150mm and, in a subsequent phase, 200mm SiC substrates. The Company expects Fab 3 to begin initial production in the first half of 2028, with full production capacity targeted by mid-2029, subject to the timely receipt of final operating permits and the completion of equipment installation and qualification.
The Dresden manufacturing campus is central to Halcyon's growth strategy, and the successful and timely completion of Fab 3 is a key element of the Company's investment thesis for the IPO. The environmental permitting status of Fab 3, including the risks associated with potential delays in obtaining final operating permits, is accordingly a significant area of focus for this memorandum and is discussed in detail in Section IV.C below.
Combined employment at the Dresden sites (Fab 2 and the Fab 3 construction project) is approximately 3,100 as of January 2026, with the Company planning to increase Dresden headcount to approximately 5,000 upon full commissioning of Fab 3.
C. Brno Assembly and Testing Facility — Halcyon Automotive Components s.r.o.
The Company's module assembly and final testing operations are conducted through Halcyon Automotive Components s.r.o. ("HAC s.r.o."), a společnost s ručením omezeným (limited liability company) registered and operating in Brno, Czech Republic, and a 100% direct subsidiary of Halcyon Semiconductor AG. HAC s.r.o.'s registered address is Technologický park 6, 612 00 Brno, Czech Republic. The Brno facility was established in 2012 to take advantage of the Czech Republic's skilled technical workforce and proximity to the Company's German fabrication sites.
The Brno facility receives fabricated semiconductor dies from the Munich (Fab 1) and Dresden (Fab 2) fabrication facilities and performs downstream operations including die attach, wire bonding, encapsulation/molding, module assembly, and comprehensive final electrical and reliability testing. The facility does not perform semiconductor wafer fabrication, and accordingly its chemical and environmental profile is substantially less complex than that of the fabrication sites. However, as discussed in greater detail in Sections IV.D and V below, the Brno facility does handle certain hazardous materials in connection with its assembly operations, including lead-free soldering fluxes and solder pastes, epoxy and silicone encapsulation compounds, cleaning solvents (primarily isopropyl alcohol and acetone), and various adhesives.
The Brno site employs approximately 1,800 persons.
D. Non-Manufacturing Facilities (Noted for Completeness)
In addition to the manufacturing sites described above, Halcyon maintains the following non-manufacturing subsidiary offices and facilities, which are noted here for completeness but were not the primary focus of this environmental due diligence review:
• Halcyon Semiconductor USA Inc. — 2500 Augustine Drive, Suite 100, Santa Clara, California 95054. This entity serves as the Company's U.S. sales, application engineering, and customer support hub. It does not conduct any manufacturing or fabrication activities and occupies leased Class A office space.
• Halcyon Asia Pacific Pte. Ltd. — 8 Marina Boulevard, #36-02, Marina Bay Financial Centre Tower 1, Singapore 018981. This entity serves as the Company's Asia-Pacific sales hub and regional distribution center. It does not conduct manufacturing activities.
• Halcyon Shanghai Semiconductor Co., Ltd. — No. 500 Zhangheng Road, Pudong New Area, Shanghai 201203, People's Republic of China. This entity operates as the Company's PRC-based sales and engineering support center. While it does not conduct manufacturing, we note that it maintains certain engineering laboratories that may use limited quantities of chemicals subject to PRC environmental regulations. A supplemental review of the Shanghai facility's compliance posture is not included in this memorandum but may be warranted if the engineering lab activities involve regulated substances in material quantities.
Our environmental due diligence was focused on the manufacturing sites (Munich, Dresden, and Brno), with supplemental review of the non-manufacturing facilities limited to a desktop assessment of lease terms and environmental representations and warranties. No environmental issues were identified at the non-manufacturing facilities based on this limited review.
III. Regulatory Framework
The following section summarizes the principal environmental regulatory frameworks applicable to Halcyon's manufacturing operations. Given the multi-jurisdictional nature of the Company's operations and the significance of both German and EU-level regulation, a thorough understanding of this framework is essential to evaluating the Company's compliance posture and the associated disclosure obligations in the Form F-1 registration statement.
A. German Environmental Law (Applicable to Munich and Dresden)
Germany maintains one of the most comprehensive environmental regulatory regimes in the European Union, implemented through a combination of federal statutes, federal ordinances, and state-level administrative oversight. The following statutes and regulations are of primary relevance to Halcyon's fabrication operations in Munich and Dresden:
Federal Immission Control Act (Bundes-Immissionsschutzgesetz — BImSchG). The BImSchG is the primary German federal statute governing air pollution, noise emissions, vibrations, and similar environmental impacts from industrial installations. It establishes a comprehensive permitting regime for industrial facilities, including semiconductor fabrication plants. Semiconductor fabrication facilities are classified as installations requiring a permit (genehmigungsbedürftige Anlagen) under the Fourth Ordinance on the Implementation of the Federal Immission Control Act (4. BImSchV), owing to the nature and quantities of chemicals used and emissions generated. A BImSchG operating permit serves as the principal environmental operating authorization for each of Halcyon's fabrication facilities and incorporates conditions relating to air emissions, noise, and, in certain cases, operational safety requirements. Permit holders are subject to ongoing compliance obligations, including periodic emission monitoring and reporting, and to inspection by the competent state-level authorities. Any material modification to an existing installation — including capacity expansions, changes to production processes, or the introduction of new chemical substances — may require a permit amendment or a new permit application.
Federal Water Act (Wasserhaushaltsgesetz — WHG) and State Water Laws. The WHG, together with applicable Bavarian and Saxon state water legislation, regulates the discharge of wastewater from industrial installations. Semiconductor fabrication generates substantial volumes of process wastewater, including acidic effluents (from wet etching and cleaning processes), alkaline effluents, fluoride-bearing wastewater (particularly from hydrofluoric acid-based processes), and wastewater containing trace metals. The WHG requires that industrial wastewater be treated to meet specified discharge limits prior to discharge to municipal wastewater treatment systems or, where applicable, directly to receiving water bodies. Halcyon's facilities discharge pre-treated process wastewater to municipal systems pursuant to indirect discharge permits (Indirekteinleitergenehmigung), which impose specific concentration limits for regulated parameters.
Closed Substance Cycle Waste Management Act (Kreislaufwirtschaftsgesetz — KrWG). The KrWG is the primary German statute governing the management, classification, and disposal of waste, including hazardous waste. Semiconductor fabrication generates range waste streams classified as hazardous under the KrWG and the European Waste Catalogue, including spent process chemicals (acids, bases, solvents), photoresist waste, contaminated cleaning materials, metal-bearing slurries from chemical-mechanical planarization ("CMP") processes, and contaminated substrates. The KrWG imposes obligations on waste generators with respect to waste minimization, proper classification, documentation (including the use of waste tracking documents — Begleitscheine), and disposal through licensed waste management contractors. Halcyon is required to maintain a waste management officer (Abfallbeauftragter) at each facility.
Hazardous Substances Ordinance (Gefahrstoffverordnung — GefStoffV). The GefStoffV implements EU Directive 98/24/EC on chemical agents at work and regulates the handling, storage, use, and workplace exposure to hazardous chemical substances. Of particular relevance to semiconductor fabrication, the GefStoffV establishes workplace exposure limits (Arbeitsplatzgrenzwerte — "AGW") for hazardous substances, requires employers to conduct risk assessments for activities involving hazardous chemicals, mandates substitution assessments (evaluating whether less hazardous alternatives exist), and requires the provision of appropriate personal protective equipment ("PPE") and engineering controls. Given the broad range of toxic, corrosive, flammable, and pyrophoric chemicals used in semiconductor fabrication — from highly toxic gases such as arsine and phosphine to corrosive liquids such as hydrofluoric acid — compliance with the GefStoffV is a central element of the Company's occupational health and safety program.
EU REACH Regulation (EC No. 1907/2006). The Registration, Evaluation, Authorisation and Restriction of Chemicals ("REACH") regulation is the EU's comprehensive framework for the management of chemical substances. REACH requires manufacturers and importers of chemical substances in quantities of one tonne or more per year to register those substances with the European Chemicals Agency ("ECHA"). Users of registered substances must comply with conditions of use specified in registration dossiers and safety data sheets. Of particular relevance to Halcyon, REACH includes an authorization procedure for "substances of very high concern" ("SVHCs"), which may restrict or condition the use of certain chemicals used in semiconductor fabrication. The Company's REACH compliance obligations extend to chemicals sourced from non-EU suppliers, which must be registered by an EU-based importer or "only representative." We reviewed the Company's REACH compliance procedures and confirmed that the Company maintains an internal REACH compliance team that monitors the ECHA Candidate List and Authorisation List for substances relevant to its operations.
EU Seveso III Directive (Directive 2012/18/EU) / Störfall-Verordnung (12th BImSchV). The Seveso III Directive, as implemented in Germany through the Störfall-Verordnung (12th BImSchV), establishes requirements for industrial establishments that store or use dangerous substances above specified threshold quantities. Establishments are classified as either "lower-tier" or "upper-tier" depending on the aggregate quantities of dangerous substances present, with upper-tier establishments subject to more stringent obligations, including the preparation of a safety report, implementation of a safety management system, development of internal and external emergency plans, and provision of information to the public. Semiconductor fabrication facilities, given their use of toxic, flammable, and oxidizing chemicals and gases, may fall within the scope of the Seveso III Directive. We have reviewed the Seveso classification assessments for each of Halcyon's German manufacturing sites, as discussed in Sections IV.A and IV.B below.
Environmental Impact Assessment (Umweltverträglichkeitsprüfung — UVP). Under the German Environmental Impact Assessment Act (Gesetz über die Umweltverträglichkeitsprüfung — UVPG), which implements EU Directive 2011/92/EU, certain categories of projects — including the construction of new industrial installations of a specified type and scale — are subject to a mandatory environmental impact assessment prior to the grant of planning or construction permits. The construction of Fab 3 in Dresden triggered a mandatory EIA, the status and outcome of which is discussed in Section IV.C below.
State-Level Regulatory Authorities. Environmental permitting and enforcement in Germany is primarily administered at the state (Land) level. The competent authority for Halcyon's Munich/Fab 1 operations is the Government of Upper Bavaria (Regierung von Oberbayern), operating under the oversight of the Bavarian State Ministry of the Environment and Consumer Protection (Bayerisches Staatsministerium für Umwelt und Verbraucherschutz). For the Dresden operations (Fab 2 and Fab 3), the competent authority is the Directorate of Saxony (Landesdirektion Sachsen), operating under the oversight of the Saxon State Ministry for Energy, Climate Protection, Environment and Agriculture (Sächsisches Staatsministerium für Energie, Klimaschutz, Umwelt und Landwirtschaft).
B. Czech Environmental Law (Applicable to Brno)
The Czech Republic's environmental regulatory framework applicable to the Brno assembly and testing facility is derived from both domestic legislation and the transposition of EU directives. The principal applicable regulations are as follows:
Czech Act on Integrated Prevention (Zákon č. 76/2002 Sb., o integrované prevenci). This act implements the EU Industrial Emissions Directive (Directive 2010/75/EU) in Czech law and establishes an integrated pollution prevention and control ("IPPC") permitting regime for specified categories of industrial installations. Depending on the nature and scale of its activities, the Brno facility may require an IPPC permit, or may fall below the relevant thresholds, in which case it would be subject to separate, sector-specific permits. Our review of the facility's permitting status is discussed in Section IV.D below.
Czech Waste Act (Zákon č. 541/2020 Sb., o odpadech). The Czech Waste Act governs the generation, classification, handling, transport, and disposal of waste, including hazardous waste. Although the Brno facility generates substantially lower volumes of hazardous waste compared to the fabrication sites, it is nonetheless subject to the Waste Act's requirements with respect to waste classification, record-keeping, and disposal through authorized contractors.
Czech Air Protection Act (Zákon č. 201/2012 Sb., o ochraně ovzduší) and Czech Water Act (Zákon č. 254/2001 Sb., o vodách). These acts regulate air emissions and wastewater discharges, respectively. The Brno facility's air emissions and wastewater discharge profiles are modest, as described in Section IV.D.
EU-Derived Obligations. As a member state of the European Union, the Czech Republic has transposed the requirements of the REACH Regulation, the RoHS Directive (Directive 2011/65/EU on the restriction of hazardous substances in electrical and electronic equipment), and the WEEE Directive (Directive 2012/19/EU on waste electrical and electronic equipment) into Czech law, and these obligations apply to HAC s.r.o.'s operations as applicable.
Regional Regulatory Authority. The competent environmental regulatory authority for the Brno facility is the South Moravian Regional Office (Krajský úřad Jihomoravského kraje), which administers environmental permitting and conducts compliance inspections in the region.
C. Other Applicable Regulations
In addition to the jurisdiction-specific regulations described above, the following cross-cutting EU and international regulatory frameworks are relevant to Halcyon's operations and disclosure obligations:
EU RoHS Directive (Directive 2011/65/EU). The Restriction of Hazardous Substances ("RoHS") Directive restricts the use of specified hazardous substances — including lead, mercury, cadmium, hexavalent chromium, polybrominated biphenyls ("PBBs"), and polybrominated diphenyl ethers ("PBDEs") — in electrical and electronic equipment placed on the EU market. Halcyon's end products (power semiconductor modules and discrete devices) must comply with RoHS requirements, which the Company confirms through its RoHS compliance program and material declarations from suppliers.
EU WEEE Directive (Directive 2012/19/EU). The Waste Electrical and Electronic Equipment ("WEEE") Directive establishes obligations for producers of electrical and electronic equipment regarding the collection, treatment, recycling, and recovery of waste products. Halcyon, as a component manufacturer rather than a producer of finished consumer equipment, has a more limited exposure under the WEEE Directive, but its obligations as a component supplier are monitored by the Company's environmental compliance team.
EU Emissions Trading System (EU ETS). We assessed whether Halcyon's manufacturing facilities fall within the scope of the EU Emissions Trading System. Semiconductor fabrication processes per se are not among the activities listed in Annex I to the EU ETS Directive (Directive 2003/87/EC, as amended). However, facilities that operate combustion installations (e.g., combined heat and power plants, boilers) with a total rated thermal input exceeding 20 MW may fall within the scope of the EU ETS. Our review of Halcyon's facility energy infrastructure indicates that neither Fab 1 nor Fab 2 operates combustion installations of sufficient scale to trigger EU ETS inclusion. Fab 3 is being designed with an energy supply concept that will rely primarily on grid electricity and district heating, and is not expected to trigger EU ETS thresholds. We recommend that this assessment be re-confirmed upon finalization of Fab 3's energy infrastructure design.
PFAS (Per- and Polyfluoroalkyl Substances) Regulatory Developments. PFAS, a broad class of fluorinated chemicals characterized by their extreme persistence in the environment, are widely used in semiconductor fabrication processes — including as etchants, cleaning agents, anti-reflective coatings, and in certain photolithographic applications. In February 2023, the European Chemicals Agency received a restriction proposal submitted by five EU member states (Germany, Denmark, the Netherlands, Norway, and Sweden) proposing a near-universal ban on the manufacture, placing on the market, and use of PFAS in the EU, subject to certain derogations. If adopted in a form that does not provide adequate derogations for semiconductor manufacturing, this restriction could have a material impact on the semiconductor industry, including Halcyon's operations. As of the date of this memorandum, the restriction proposal remains under evaluation by ECHA's scientific committees, with a final decision by the European Commission not expected before 2027 or 2028 at the earliest. We recommend that this emerging regulatory risk be addressed as a prospectus risk factor, as discussed in Section VIII.C below.
IV. Environmental Permits and Compliance Status
A. Munich / Fab 1
BImSchG Operating Permit. Fab 1 holds a valid BImSchG operating permit originally issued by the Government of Upper Bavaria (Regierung von Oberbayern) on March 14, 2000, following the facility's initial commissioning in the late 1990s. The permit has been amended on six occasions, most recently on September 22, 2021, in connection with the cleanroom modernization and capacity upgrade project. Each amendment was obtained through the standard permit modification procedure under Section 16 of the BImSchG. We reviewed the current consolidated permit and its conditions, which cover the facility's operations including semiconductor wafer fabrication processes, chemical storage and handling, air emission abatement systems, and wastewater pre-treatment. No conditions of the current permit were identified as being in breach or in need of immediate remedial action based on our review.
Air Emissions Permit. The BImSchG operating permit incorporates air emission conditions consistent with the requirements of the Technical Instructions on Air Quality Control (Technische Anleitung zur Reinhaltung der Luft — "TA Luft"). The primary air emissions from Fab 1 include volatile organic compounds ("VOCs") from photoresist coating and solvent-based cleaning processes, acid gases (including hydrogen fluoride ("HF"), hydrogen chloride ("HCl"), and nitrogen oxides ("NOx")) from wet etching and chemical vapor deposition ("CVD") processes, and particulate matter from certain deposition and planarization processes. The facility operates point-source emission abatement systems, including acid gas scrubbers (packed-tower scrubbers and venturi scrubbers), activated carbon adsorption units for VOC control, and particulate filters (HEPA and bag-house systems). Emission monitoring and reporting are conducted in accordance with the permit conditions, including continuous emissions monitoring for key parameters and periodic third-party emission measurements (typically annually) by accredited testing organizations. We reviewed the most recent three years of emission monitoring reports (2023, 2024, and preliminary 2025 data) and found all reported values to be within permitted limits.
Wastewater Discharge Permit. Fab 1 holds an indirect discharge permit (Indirekteinleitergenehmigung) issued by the Munich municipal wastewater authority (Münchner Stadtentwässerung), authorizing the discharge of pre-treated semiconductor process wastewater to the municipal wastewater collection system. The Company operates an on-site wastewater pre-treatment facility at Fab 1 that includes acid-base neutralization, fluoride precipitation and removal, heavy metals precipitation and settling, and suspended solids filtration. The indirect discharge permit establishes concentration limits for key parameters, including pH, fluoride (F⁻), chemical oxygen demand ("COD"), ammoniacal nitrogen (NH₄-N), and specified heavy metals (copper, nickel, zinc, chromium). We reviewed the most recent three years of wastewater monitoring data submitted to the municipal authority and confirmed that all results were within permitted limits, with the exception of a single instance in April 2024 where the fluoride concentration in a 24-hour composite sample slightly exceeded the permit limit (measured: 22.4 mg/L; limit: 20 mg/L). This exceedance was self-reported by the Company to the municipal authority in accordance with permit conditions, attributed to a temporary malfunction in the fluoride precipitation dosing system, and corrected within 48 hours. The municipal authority acknowledged the report and did not initiate an enforcement action. We do not consider this isolated incident to be material.
Hazardous Waste Management. Fab 1 generates a range of hazardous waste streams, including spent acids and bases, spent organic solvents and photoresist waste, CMP slurry waste containing metal particulates, contaminated packaging materials, and spent activated carbon from emission abatement systems. The Company contracts with three licensed hazardous waste disposal companies for the collection, transport, and disposal or recycling of these waste streams. We reviewed the Company's waste management records, including annual hazardous waste volume reports, waste classification records, and waste transport manifests (Begleitscheine) for the period 2021 through 2025. Annual hazardous waste volumes at Fab 1 have ranged from approximately 480 tonnes to 540 tonnes over this period. All waste streams appear to be properly classified and documented, and all disposal contractors hold valid waste management licenses. The Company maintains a designated waste management officer (Abfallbeauftragter) for the Munich site, as required by Section 59 of the KrWG.
Seveso Classification Assessment. We reviewed the Company's Seveso classification assessment for the Munich/Fab 1 site, which was last updated in March 2025 in connection with changes to the chemical inventory resulting from the cleanroom modernization project. Based on the aggregate quantities of dangerous substances present at the site — principally toxic gases (silane, phosphine, arsine, diborane), flammable gases (hydrogen, silane), and corrosive substances (hydrofluoric acid, hydrogen chloride) — Fab 1 is classified as a lower-tier Seveso establishment under the Störfall-Verordnung (12th BImSchV). As a lower-tier establishment, the facility is required to prepare a major-accident prevention policy ("MAPP"), implement a safety management system, and notify the competent authority of the presence of dangerous substances. These requirements have been met, and we reviewed the current MAPP documentation and notification filings. The facility does not reach the upper-tier thresholds that would trigger the more extensive obligations of safety report preparation and external emergency planning.
Regulatory Inspections and Enforcement. We reviewed the records of regulatory inspections conducted at Fab 1 over the past five years (2021–2025). A total of nine inspections were identified, including four routine scheduled inspections by the Regierung von Oberbayern, three inspections by the municipal wastewater authority, and two fire safety/hazardous materials inspections by the Munich fire department (Berufsfeuerwehr München). The inspections resulted in a total of twelve findings, all of which were classified as minor or administrative in nature (e.g., incomplete labeling on secondary containment bunds, overdue calibration of a wastewater monitoring instrument, minor recordkeeping deficiencies in waste transport documentation). All findings were remediated within the timeframes specified by the inspecting authorities, and no formal notices of violation, administrative orders, or penalty proceedings were initiated. We confirmed this through review of the inspection reports, the Company's corrective action records, and correspondence with the relevant authorities (provided by Bähr Stein Rechtsanwälte).
Pending Permit Amendments or Renewals. No permit amendments or renewal applications are currently pending for Fab 1. The Company's General Counsel confirmed during management interviews that no changes to Fab 1's operations are planned that would trigger a permit modification requirement in the near term.
Finding: No material unresolved environmental violations were identified at the Munich/Fab 1 site. The facility is operating in compliance with its environmental permits, and routine inspection findings have been addressed in a timely manner. The fluoride exceedance in April 2024 was isolated, self-reported, and corrected, and does not constitute a material compliance issue. Standard prospectus risk factor language regarding environmental regulatory compliance costs and the general risks of operating semiconductor fabrication facilities with hazardous materials is recommended but no site-specific risk factor for Fab 1 is required.
B. Dresden / Fab 2 (Operational)
BImSchG Operating Permit. Fab 2 holds a valid BImSchG operating permit issued by the Directorate of Saxony (Landesdirektion Sachsen) on July 8, 2016, with subsequent amendments granted in 2018, 2020, and most recently on November 3, 2024. The 2024 amendment corresponds to the most recent capacity expansion phase. The permit authorizes the operation of SiC semiconductor wafer fabrication processes, including epitaxial growth, ion implantation, photolithography, wet and dry etching, chemical vapor deposition, physical vapor deposition, thermal oxidation, and chemical-mechanical planarization, together with associated chemical storage, distribution, and waste treatment operations. We reviewed the current consolidated permit and its conditions in coordination with Bähr Stein Rechtsanwälte.
Air Emissions. SiC fabrication at Fab 2 involves the use of a range of process gases and chemicals that generate regulated air emissions. Key process gases include silane (SiH₄), which is used as a precursor in CVD processes and is both toxic and pyrophoric; hydrogen chloride (HCl), used in etching and cleaning; trichlorosilane ("TCS"), a precursor for SiC epitaxial growth; and various etch gases including fluorinated compounds (CF₄, CHF₃, SF₆, NF₃). The facility's emission abatement systems are state-of-the-art and include wet acid gas scrubbers, thermal oxidizer units for VOC and combustible gas abatement, point-of-use ("POU") abatement systems for individual process tools, and HEPA particulate filtration. The facility is subject to TA Luft emission limits and to specific emission conditions in its BImSchG permit. We reviewed the three most recent annual emission reports (2022, 2023, 2024) and confirmed compliance with all permitted limits. The Company also reports greenhouse gas emissions from Fab 2 in its annual sustainability report, including emissions of high-GWP fluorinated gases (SF₆ and NF₃), which are discussed further in Section VIII below.
Wastewater. Fab 2 generates acidic and alkaline process wastewater streams, as well as fluoride-bearing effluents from etching processes using hydrofluoric acid and fluorinated gas-based dry etching. The facility operates a dedicated on-site wastewater neutralization and pre-treatment plant, which includes multi-stage neutralization reactors, fluoride precipitation (using calcium hydroxide), coagulation/flocculation, and sedimentation. Pre-treated wastewater is discharged to the Dresden municipal wastewater system under an indirect discharge permit issued by the Stadtentwässerung Dresden. We reviewed three years of wastewater monitoring data and confirmed that all results were within permitted discharge limits.
Hazardous Materials Storage and Handling — Seveso Classification. Fab 2, as a large-scale SiC fabrication facility, stores and uses substantial quantities of hazardous chemicals, including toxic and pyrophoric process gases (stored in pressurized cylinders and bulk containers in dedicated gas storage areas with abatement systems), corrosive wet chemicals (stored in bulk in a chemical distribution building with secondary containment), and various specialty chemicals. Based on the Company's most recent Seveso classification assessment (updated August 2025), Fab 2 is classified as an upper-tier Seveso establishment under the Störfall-Verordnung. This classification was triggered primarily by the aggregate quantities of toxic gases (silane, hydrogen chloride, phosphine, arsine) and the threshold calculations under the Seveso III Directive rules. As an upper-tier establishment, Fab 2 is subject to the full range of Seveso obligations, including:
(i) preparation and submission of a safety report (Sicherheitsbericht) to the competent authority;
(ii) implementation of a comprehensive safety management system;
(iii) development of an internal emergency plan (interner Notfallplan) and coordination with local authorities for the preparation of an external emergency plan (externer Notfallplan);
(iv) provision of information to the public regarding the nature of hazards present and appropriate safety measures; and
(v) regular updating of the safety report and notification of any significant changes to the establishment's dangerous substance inventory.
We reviewed the current safety report, which was most recently submitted to the Landesdirektion Sachsen in October 2025, and confirmed that it addresses the required elements. We also reviewed the internal emergency plan and the hazardous materials alarm and emergency response plan (Alarm- und Gefahrenabwehrplan), which has been coordinated with the Dresden professional fire department. Management confirmed that the Company conducts regular emergency response drills, including at least two full-scale evacuation and hazardous materials response exercises per year, with the most recent drill conducted in December 2025.
Hazardous Waste Management. Annual hazardous waste generation at Fab 2 is approximately 1,200 to 1,400 tonnes, reflecting the larger scale of operations compared to Fab 1 and the specific waste streams associated with SiC fabrication (including SiC substrate off-cuts, spent CMP slurry, and SiC dust from dicing operations). We reviewed waste classification records, disposal contractor agreements, and waste transport manifests. All disposal contractors hold valid licenses, and waste management documentation appears to be in order.
Regulatory Correspondence, Inspections, and Enforcement. We reviewed regulatory inspection reports and correspondence for Fab 2 covering the past five years (2021–2025). A total of fourteen inspections were identified, including six routine scheduled inspections by the Landesdirektion Sachsen, four wastewater authority inspections, two Seveso-related inspections (including a follow-up inspection after the 2025 safety report submission), and two fire department inspections. The inspections resulted in a total of fifteen findings, of which fourteen were classified as minor or administrative. One finding from a March 2024 inspection merits specific mention: an inspector identified that the labeling on a specific hazardous waste storage container for spent CMP slurry waste did not fully comply with the labeling requirements of the KrWG in that the hazardous properties designation (Gefahrenmerkmale) was incomplete. The Company corrected the labeling within seven days and submitted a corrective action report. The inspecting authority confirmed acceptance of the corrective action, and no formal enforcement action was initiated. This was the only finding that rose above a purely administrative or recordkeeping deficiency during the review period.
Finding: Fab 2 is in good standing with the relevant environmental authorities. The single labeling finding related to CMP slurry waste was corrected during the inspection period and did not result in any enforcement action, penalty, or ongoing compliance obligation. The facility's upper-tier Seveso classification is a standard feature of large-scale semiconductor fabrication operations and does not, in itself, present a material risk, provided that the Company continues to fulfill its Seveso obligations. We recommend standard risk factor language addressing the environmental risks inherent in semiconductor fabrication and the regulatory requirements associated with Seveso-classified establishments.
C. Dresden / Fab 3 (Under Construction)
Status. Fab 3 is currently under construction on a parcel of approximately 12 hectares adjacent to the existing Fab 2 campus. As noted above, $280,000,000 of net IPO proceeds — the largest single designated use of proceeds, representing approximately 46.1% of estimated net proceeds — is allocated for the construction, equipping, and commissioning of Fab 3. The significance of this capital allocation to the IPO investment thesis makes the environmental permitting status of Fab 3 a matter of particular importance for this due diligence review.
Environmental Impact Assessment (UVP). The construction of Fab 3 was subject to a mandatory environmental impact assessment under the UVPG. The EIA process was initiated by HPS GmbH in the first quarter of 2025, with the environmental impact study (Umweltverträglichkeitsprüfung) prepared by the environmental consulting firm Grünfeld & Partner Umweltberatung GmbH. The EIA addressed the anticipated environmental impacts of the facility's construction and operation, including air emissions, water use and wastewater generation, hazardous materials use and storage, noise impacts on surrounding areas, impacts on soil and groundwater, and ecological impacts (including an assessment of any protected habitats or species in the vicinity). The EIA study was made available for public consultation in accordance with the requirements of the UVPG, and a public hearing was conducted. Two public comments were received — one from a neighboring residential property owner regarding construction-phase noise and one from a local environmental non-governmental organization regarding water consumption — neither of which constituted a material objection to the project. The competent authority (Landesdirektion Sachsen) issued a positive EIA decision (Feststellung der Umweltverträglichkeit) on June 17, 2025, concluding that the project was environmentally compatible, subject to certain conditions relating to construction-phase stormwater management, noise mitigation during nighttime construction activities, and the implementation of specified air emission abatement technologies during the operational phase. A summary of the EIA decision and its conditions is included in Appendix D to this memorandum.
BImSchG Construction and Operating Permit. Following the positive EIA decision, HPS GmbH applied for a BImSchG construction permit, which was granted by the Landesdirektion Sachsen on August 29, 2025, authorizing the construction of the Fab 3 building structure, utilities infrastructure, and site preparation works. The construction permit incorporates a number of conditions, including compliance with the EIA conditions and requirements for construction-phase environmental management. Construction activities commenced in September 2025 and are proceeding in accordance with the construction permit conditions.
The BImSchG operating permit — which will authorize the commissioning and operation of the fabrication processes, chemical storage and handling, and air emission abatement and wastewater treatment systems — has not yet been issued. The Company submitted the operating permit application to the Landesdirektion Sachsen on December 15, 2025. The application is currently under review by the competent authority. Based on discussions with the Company's EHS team and with Bähr Stein Rechtsanwälte, the review process is expected to take approximately 8 to 12 months, with a decision anticipated in the second half of 2026 or the first quarter of 2027. Bähr Stein Rechtsanwälte has advised that, based on the positive EIA decision, the facility's design compliance with applicable technical standards (including best available techniques under the Industrial Emissions Directive), and the absence of material public objections during the EIA process, there is no identified basis for a denial of the operating permit; however, the standard permitting timeline and the possibility of conditions being imposed by the authority cannot be ruled out, and there is no guarantee that the permit will be issued within the expected timeframe.
Construction-Phase Environmental Compliance. During the construction phase, Fab 3 is subject to environmental compliance obligations relating to stormwater management (including sediment and erosion control measures to prevent construction-related runoff to nearby water bodies), soil disturbance and excavation (including proper handling and disposal of excavated materials), dust control, and noise mitigation for neighboring properties (construction is subject to the provisions of the 32nd BImSchV — the Construction Noise Regulation). We reviewed the Company's construction-phase environmental management plan and confirmed that it addresses these requirements. No construction-phase environmental violations or complaints have been reported to date.
Future Operational Permits. In addition to the BImSchG operating permit, the operational phase of Fab 3 will require: (i) an indirect discharge permit for wastewater; (ii) hazardous materials storage permits; and (iii) Seveso classification and, depending on the outcome of the classification assessment, compliance with applicable lower-tier or upper-tier Seveso obligations. The Company has commenced pre-application consultations with the relevant authorities for each of these permits. Based on the projected chemical inventory for Fab 3 (which is expected to be comparable to or larger than Fab 2), it is anticipated that Fab 3 will also be classified as an upper-tier Seveso establishment, with corresponding obligations.
Contamination / Historical Land Use. A Phase I environmental site assessment was conducted for the Fab 3 construction site by Geotechnik Leibnitz GmbH in January 2025, supplemented by a limited Phase II investigation (including soil and groundwater sampling) completed in March 2025. The Phase I assessment identified no evidence of prior industrial use of the site that would give rise to contamination concerns; the site was previously used for agricultural purposes (arable farming). The Phase II investigation confirmed the absence of soil or groundwater contamination above applicable German soil quality standards (Bundesbodenschutzverordnung — BBodSchV). No remediation requirements were imposed as a condition of the construction permit. The Phase I and Phase II reports are available for review in the virtual data room.
Key Risk — Permitting Delays. The most significant environmental risk associated with Fab 3 is the potential for delays in obtaining the BImSchG operating permit (and associated wastewater and hazardous materials permits) required to commence fabrication operations. Such delays could affect the timeline for bringing Fab 3 into production, which the Company currently targets for the first half of 2028 (initial production) and mid-2029 (full production capacity). Given that $280,000,000 of net IPO proceeds is designated for Fab 3, any material delay in the permitting process would directly impact the Company's ability to deploy these proceeds as planned and could delay the realization of anticipated revenues from the expanded SiC manufacturing capacity. We strongly recommend that the Form F-1 registration statement include a specific risk factor addressing the dependency of the Fab 3 project on the timely receipt of regulatory permits and the potential consequences of permitting delays on the use of proceeds and the Company's growth strategy.
Finding: The EIA for Fab 3 was completed without material objections, and the construction permit has been obtained and is being complied with. The BImSchG operating permit application was filed in December 2025 and is currently under review. While there are no identified impediments to the issuance of the operating permit, the standard review timeline and inherent regulatory uncertainty warrant prospectus risk factor disclosure regarding the potential for delays and the impact on the use of proceeds. We recommend continued monitoring of the permitting process through the SEC filing and post-effective periods, with prospectus updates as appropriate.
D. Brno / Assembly and Testing Facility
Integrated Pollution Prevention Permit. The Brno assembly and testing facility operates under an integrated prevention permit issued by the South Moravian Regional Office (Krajský úřad Jihomoravského kraje) under the Czech Act on Integrated Prevention. The permit was originally issued on April 11, 2013, and was most recently renewed on February 5, 2022. The permit authorizes the facility's operations, including electronic component assembly, soldering, cleaning, encapsulation, and testing, and incorporates conditions relating to air emissions, waste management, and wastewater discharge. We reviewed the current permit and confirmed that it is valid and that the facility's operations are within the scope of the permitted activities.
Hazardous Materials. As noted in Section II.C, the Brno facility's hazardous materials profile is substantially more limited than that of the fabrication sites. The principal hazardous materials used at the facility include lead-free solder pastes (containing tin, silver, and copper per RoHS requirements), soldering fluxes, cleaning solvents (primarily isopropyl alcohol and acetone in moderate quantities), epoxy and silicone encapsulation compounds, and various adhesives and die-attach materials. The facility does not use the highly toxic or pyrophoric process gases characteristic of wafer fabrication. The facility maintains an up-to-date hazardous materials inventory and safety data sheet library in compliance with Czech occupational health and safety and chemical management regulations.
Waste Management. The facility generates waste streams including electronic waste (primarily defective components and test scrap), packaging waste, and minor hazardous waste streams (spent solvents, solder dross, used cleaning materials). Waste is managed in accordance with the Czech Waste Act, and disposal is conducted through licensed waste management contractors. Annual hazardous waste generation is approximately 25 to 35 tonnes.
Air Emissions. Air emissions from the Brno facility are minimal, consisting primarily of fugitive emissions from soldering stations (managed through local exhaust ventilation with filtration) and minor VOC emissions from cleaning and adhesive application processes. The facility's emission profile is well within the limits set by its integrated prevention permit, and no separate air emission permit is required beyond the conditions incorporated in the integrated permit.
Wastewater. The facility's wastewater discharge is predominantly domestic in character, with only minimal process wastewater generated from cleaning operations. Process wastewater is not discharged to the municipal system but is collected separately and disposed of as liquid waste through a licensed contractor.
Regulatory Inspection History. We reviewed inspection reports from the South Moravian Regional Office covering the past five years (2021–2025). A total of four inspections were conducted, all resulting in findings of compliance with no deficiencies identified.
Finding: The Brno assembly and testing facility presents a low environmental risk profile. No material compliance issues were identified, and the facility's hazardous materials use, waste generation, and emissions are modest relative to the fabrication sites. Minimal site-specific environmental disclosure is required in the prospectus; the Brno facility can be addressed within the Company's general description of its environmental management practices.
V. Hazardous Materials Handling — Detailed Analysis
A. Categories of Hazardous Materials Used in Semiconductor Fabrication
Semiconductor fabrication, and particularly SiC and GaN power device fabrication, involves the use of a broad range of hazardous materials. The following categories of hazardous materials are used at Halcyon's fabrication facilities (Fab 1, Fab 2, and, upon commissioning, Fab 3):
Process Gases. Halcyon's fabrication processes utilize numerous specialty gases, many of which are toxic, pyrophoric, flammable, corrosive, or oxidizing. Key process gases include:
• Silane (SiH₄): used as a silicon precursor in CVD processes; highly pyrophoric (spontaneously ignites upon contact with air) and toxic.
• Hydrogen (H₂): used as a carrier gas and reducing agent in epitaxial growth and annealing processes; highly flammable.
• Ammonia (NH₃): used in nitride deposition processes; toxic and corrosive.
• Nitrogen trifluoride (NF₃): used as a chamber cleaning gas; toxic and a potent greenhouse gas (GWP approximately 17,200).
• Sulfur hexafluoride (SF₆): used as an etch gas; potent greenhouse gas (GWP approximately 25,200).
• Chlorine (Cl₂): used in dry etching processes; highly toxic and corrosive.
• Hydrogen chloride (HCl): used in etching and cleaning; toxic and corrosive.
• Phosphine (PH₃): used as an n-type dopant gas; extremely toxic.
• Arsine (AsH₃): used as an n-type dopant gas; extremely toxic.
• Diborane (B₂H₆): used as a p-type dopant gas; highly toxic and flammable.
We note that SiC fabrication involves certain specialized precursors, including trichlorosilane (used in SiC epitaxial growth) and propane/ethylene (used as carbon sources in CVD processes), in addition to the gases listed above. GaN fabrication, which is primarily conducted at the R&D stage at Fab 1, utilizes trimethylgallium (TMGa) and trimethylaluminum (TMAl) as metal-organic precursors, both of which are pyrophoric and require specialized handling and containment.
Wet Chemicals. The semiconductor fabrication process uses large volumes of high-purity wet chemicals, including:
• Hydrofluoric acid (HF): used extensively in oxide etching, wafer cleaning (e.g., HF dips in RCA clean sequences), and surface preparation; extremely hazardous due to its ability to cause severe burns and systemic toxicity even from small dermal exposures.
• Sulfuric acid (H₂SO₄): used in piranha (SPM) cleans and photoresist stripping; highly corrosive.
• Phosphoric acid (H₃PO₄): used in etching of silicon nitride and certain metals; corrosive.
• Ammonium hydroxide (NH₄OH): used in SC-1 (APM) cleaning solutions; corrosive and produces ammonia vapors.
• Hydrogen peroxide (H₂O₂): used as an oxidant in cleaning solutions; strong oxidizer.
• Isopropyl alcohol (IPA): used as a drying agent and solvent; flammable.
• Acetone: used as a photoresist solvent; flammable.
• Photoresist chemicals: various proprietary photoresist f