ac1f09ecb567b6c8a914f6af12fd50438fe56f0f6fc8cd9a57e12bbcbd68db60

63f648861e588cc3286656565e39ff94be23ec07ce15f5ece2c94b1786544b6e

Adjustments for Non-Cash Items [USD, Millions]

Stock-Based Compensation [USD, Millions]

Changes in Working Capital [USD, Millions]

Capital Expenditures (CapEx) [USD, Millions]

Proceeds from / Repayments of Debt [USD, Millions]

Share Repurchases [USD, Millions]

Dividend Payments [USD, Millions]

Net Change in Cash [USD, Millions]

71bed2af3d50f1c351b6ba2fe0d298517b026ef0bdd32e95f5193562dd9aa1e4

ON Semiconductor Corporation, known as onsemi, specializes in providing intelligent power and sensing solutions, primarily for the automotive and industrial markets **[0001628280-24-003201_on-20231231.htm:4]** **[0001628280-24-043880_on-20240927.htm:25]**. The company offers a range of semiconductor products organized into three main segments: Power Solutions Group, Analog and Mixed-Signal Group, and Intelligent Sensing Group **[0001628280-24-003201_on-20231231.htm:4]** **[0001628280-24-043880_on-20240927.htm:25]**. onsemi is strategically focused on high-growth areas such as vehicle electrification and advanced driver-assistance systems (ADAS), and is expanding its silicon carbide (SiC) manufacturing capabilities to meet the increasing demand for high-efficiency power applications **[0001628280-24-003201_on-20231231.htm:4]** **[ON_3404198_3]**.

1. **Power Solutions Group (PSG)** - Offers analog, discrete, module, and integrated semiconductor products, serving as the largest revenue contributor by providing essential components for power management and conversion **[0001628280-24-003201_on-20231231.htm:6]**.
2. **Analog and Mixed-Signal Group (AMG)** - Develops a variety of analog and mixed-signal semiconductor products, previously known as the Advanced Solutions Group, supporting a wide range of applications in the automotive and industrial sectors **[0001628280-24-003201_on-20231231.htm:6]**.
3. **Intelligent Sensing Group (ISG)** - Focuses on CMOS image sensors and related technologies, catering to the growing needs for advanced sensing solutions in various applications **[0001628280-24-003201_on-20231231.htm:6]**.

5a436a4aa0dc27ca95d9b5e215c6df1cccbb7c9e51a41b78f779ccadaec93ed8

| Business Segment | Q4 2022 | Q1 2023 | Q2 2023 | Q3 2023 | Q4 2023 | Q1 2024 | Q2 2024 | Q3 2024 |
|------------------|---------|---------|---------|---------|---------|---------|---------|---------|
| **Power Solutions Group (PSG) [USD Million]** | **1,048.4**  **[ON_3226902_4]**  | **1,012.8**  **[0001628280-23-014387_on-20230331.htm:27]**  | **1,119.8**  **[0001628280-23-026196_on-20230630.htm:29]**  | **1,230.6**  **[0001193125-23-265690_d539978dex991.htm:0]**  | **1,085.8**  **[0001193125-24-023485_d610011dex991.htm:0]**  | **874.2**  **[0001193125-24-120128_d806921dex991.htm:0]**  | **835.2**  **[0001628280-24-033229_on-20240628.htm:27]**  | **829.4**  **[0001193125-24-244677_d901571dex991.htm:0]** **[0001628280-24-043880_on-20240927.htm:28]**  |
| **Advanced Solutions Group (ASG) / Analog and Mixed Signal Group (AMG) [USD Million]** | **701.0**  **[ON_3226902_4]**  | **592.8**  **[0001628280-23-014387_on-20230331.htm:27]**  | **649.5**  **[0001628280-23-026196_on-20230630.htm:29]**  | **621.6**  **[0001193125-23-265690_d539978dex991.htm:0]**  | **624.6**  **[0001193125-24-023485_d610011dex991.htm:0]**  | **697.0**  **[0001193125-24-120128_d806921dex991.htm:0]**  | **647.8**  **[0001628280-24-033229_on-20240628.htm:27]**  | **653.7**  **[0001193125-24-244677_d901571dex991.htm:0]** **[0001628280-24-043880_on-20240927.htm:28]**  |
| **Intelligent Sensing Group (ISG) [USD Million]** | **354.2**  **[ON_3226902_4]**  | **354.1**  **[0001628280-23-014387_on-20230331.htm:27]**  | **325.1**  **[0001628280-23-026196_on-20230630.htm:29]**  | **328.6**  **[0001193125-23-265690_d539978dex991.htm:0]**  | **307.7**  **[0001193125-24-023485_d610011dex991.htm:0]**  | **291.5**  **[0001193125-24-120128_d806921dex991.htm:0]**  | **252.2**  **[0001628280-24-033229_on-20240628.htm:27]**  | **278.8**  **[0001193125-24-244677_d901571dex991.htm:0]** **[0001628280-24-043880_on-20240927.htm:28]**  |
| **Total Revenue [USD Million]** | **2,103.6**  **[ON_3226902_4]**  | **1,959.7**  **[0001628280-23-014387_on-20230331.htm:27]**  | **2,094.4**  **[0001628280-23-026196_on-20230630.htm:29]**  | **2,180.8**  **[0001193125-23-265690_d539978dex991.htm:0]**  | **2,018.1**  **[0001193125-24-023485_d610011dex991.htm:0]**  | **1,862.7**  **[0001193125-24-120128_d806921dex991.htm:0]**  | **1,735.2**  **[0001628280-24-033229_on-20240628.htm:27]**  | **1,761.9**  **[0001193125-24-244677_d901571dex991.htm:0]** **[0001628280-24-043880_on-20240927.htm:28]**  |

c83a6b300d74af8bedebfba3494c520f9c938f3ef71e27345d66e28e3d786a02

1. Given the current market softness and slowdown in silicon carbide growth, how confident are you in your strategy of building up bridge inventory in silicon carbide substrates, and is there a risk that this inventory could become obsolete or lead to pricing pressure?  **[ON_3404198_13]** 

2. With the expansion of distribution inventory to support mass market customers despite a softer macro environment, how are you mitigating the risk of creating an overhang or potential write-downs if demand does not materialize as expected?  **[ON_3404198_9]** 

3. Considering that you are reducing capital expenditures and capital intensity, are you at risk of underinvesting in future capacity, especially in light of your competitors receiving significant CHIPS Act funding that could enhance their competitive position?  **[ON_3404198_29]** 

4. As you transition from 6-inch to 8-inch silicon carbide wafer production, which increases capacity by 2.5 times, how are you balancing this capacity expansion with the current demand environment to avoid potential overcapacity and its impact on pricing?  **[ON_3404198_1]** **[ON_3404198_3]** 

5. In your efforts to capture share in 800-volt EV systems in China, you previously mentioned approaching 60% share but now state 50%; has there been a change in your competitive positioning or market dynamics affecting your share, and what are you doing to address this?  **[ON_3404198_23]** 

e049dddaa769df90beb5f5cefc01477f91d29770e36078ad9503d80f842b0657

5b5631aa75581ab52dd527bc6f0375a019f8ff37264d3d39e662e71b84f6b7f7

Hong Kong

Singapore

United Kingdom

United States

China

Japan

Other

Total Revenue

b002b35dec2ba163061b1835b187bf21673dc72be8099beba2160d049e740c37

- Infineon Technologies AG (Infineon)  **[0001628280-24-003201_on-20231231.htm:9]** 
- STMicroelectronics N.V. (STMicroelectronics)  **[0001628280-24-003201_on-20231231.htm:9]** 
- Wolfspeed Inc.  **[0001628280-24-003201_on-20231231.htm:9]** 
- Texas Instruments Incorporated (TI)  **[0001628280-24-003201_on-20231231.htm:9]** 
- Nexperia BV  **[0001628280-24-003201_on-20231231.htm:9]** 
- Analog Devices, Inc.  **[0001628280-24-003201_on-20231231.htm:9]** 
- Renesas Electronics Corporation  **[0001628280-24-003201_on-20231231.htm:9]** 
- Monolithic Power Systems Inc.  **[0001628280-24-003201_on-20231231.htm:9]** 
- NXP Semiconductors N.V. (NXP)  **[0001628280-24-003201_on-20231231.htm:9]** 
- Sony Semiconductor Manufacturing Corporation  **[0001628280-24-003201_on-20231231.htm:9]** 
- Samsung Electronics Co., Ltd.  **[0001628280-24-003201_on-20231231.htm:9]** 
- Omnivision Technologies Inc.  **[0001628280-24-003201_on-20231231.htm:9]** 

24bbf09f02cff444fbae8e2df217b3d47b6b3ecda9b46ccb38e1e4d082291b5f

### Q3 2024 Earnings Call (Guidance for Q4 2024)
- **Revenue**: $1.71 billion to $1.81 billion  **[ON_3404198_5]** .
- **Non-GAAP Gross Margin**: 44% to 46%  **[ON_3404198_5]** .
- **Non-GAAP Operating Expenses**: $300 million to $315 million, including share-based compensation of $31 million  **[ON_3404198_5]** .
- **Non-GAAP Other Income**: Net benefit of $12 million  **[ON_3404198_5]** .
- **Non-GAAP Tax Rate**: Approximately 16%  **[ON_3404198_5]** .
- **Non-GAAP Diluted Share Count**: Approximately 427 million shares  **[ON_3404198_5]** .
- **Non-GAAP Earnings Per Share**: $0.92 to $1.04  **[ON_3404198_5]** .
- **Capital Expenditures**: $130 million to $170 million  **[ON_3404198_5]** .

### Q2 2024 Earnings Call (Guidance for Q3 2024)
- **Revenue**: $1.7 billion to $1.8 billion  **[ON_3394871_5]** .
- **Non-GAAP Gross Margin**: 44.4% to 46.4%  **[ON_3394871_5]** .
- **Utilization**: Mid-60% range  **[ON_3394871_5]** .
- **Non-GAAP Operating Expenses**: $305 million to $320 million, including share-based compensation of $31 million  **[ON_3394871_5]** .
- **Non-GAAP Other Income**: Net benefit of $12 million  **[ON_3394871_5]** .
- **Non-GAAP Tax Rate**: Approximately 16%  **[ON_3394871_5]** .
- **Non-GAAP Diluted Share Count**: Approximately 429 million shares  **[ON_3394871_5]** .
- **Non-GAAP Earnings Per Share**: $0.91 to $1.03  **[ON_3394871_5]** .
- **Capital Expenditures**: $130 million to $170 million  **[ON_3394871_5]** .

### Q1 2024 Earnings Call (Guidance for Q2 2024)
- **Revenue**: $1.68 billion to $1.78 billion  **[ON_3381346_4]** .
- **Non-GAAP Gross Margin**: 44.2% to 46.2%  **[ON_3381346_4]** .
- **Non-GAAP Operating Expenses**: $313 million to $328 million, including share-based compensation of $28.6 million  **[ON_3381346_4]** .
- **Non-GAAP Other Income**: Net benefit of $12 million  **[ON_3381346_4]** .
- **Non-GAAP Tax Rate**: Approximately 16%  **[ON_3381346_4]** .
- **Non-GAAP Diluted Share Count**: Approximately 432 million shares  **[ON_3381346_4]** .
- **Non-GAAP Earnings Per Share**: $0.86 to $0.98  **[ON_3381346_4]** .
- **Capital Expenditures**: $180 million to $220 million  **[ON_3381346_4]** .

### Q4 2023 Earnings Call (Guidance for Q1 2024)
- **Revenue**: $1.8 billion to $1.9 billion  **[ON_3371877_5]** .
- **Non-GAAP Gross Margin**: 44.5% to 46.5%  **[ON_3371877_5]** .
- **Non-GAAP Operating Expenses**: $305 million to $320 million, including share-based compensation of $27 million  **[ON_3371877_5]** .
- **Non-GAAP Other Income**: Net benefit of $8 million  **[ON_3371877_5]** .
- **Non-GAAP Tax Rate**: 15.5% to 16.5%  **[ON_3371877_5]** .
- **Non-GAAP Diluted Share Count**: Approximately 433 million shares  **[ON_3371877_5]** .
- **Non-GAAP Earnings Per Share**: $0.98 to $1.10  **[ON_3371877_5]** .
- **Capital Expenditures**: $310 million to $340 million  **[ON_3371877_5]** .

This comprehensive view includes all the metrics guided for in each of the last four earnings calls.

20e0868f7473df2255b6e40e95b3542c76d6a75b847c1442c2fb2f722a2ec0b4

| Name                | Position                                                                 | Start Date       | Short Bio                                                                                                                                                                                                 |
|---------------------|--------------------------------------------------------------------------|------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Hassane El-Khoury   | President, Chief Executive Officer, and Director                         | December 2020    | Hassane El-Khoury has been serving as the President, Chief Executive Officer, and Director of ON Semiconductor Corporation since December 2020. He previously worked at Cypress Semiconductor Corporation  **[0001628280-24-003201_on-20231231.htm:17]** **[0001628280-24-003201_on-20231231.htm:94]** . |
| Thad Trent          | Executive Vice President, Chief Financial Officer, and Treasurer         | February 2021    | Thad Trent was appointed as the Executive Vice President, Chief Financial Officer, and Treasurer of ON Semiconductor Corporation in February 2021. He previously served as CFO at Cypress Semiconductor Corporation  **[0001628280-24-003201_on-20231231.htm:17]** **[0001628280-23-002350_on-20221231.htm:16]** . |
| Simon Keeton        | Group President, Power Solutions Group                                   | January 2019     | Simon Keeton joined onsemi in July 2007 and currently serves as the Group President, Power Solutions Group. He has held various management positions at onsemi and previously worked at Intel Corporation and Vitesse Semiconductor Corporation  **[0001628280-24-003201_on-20231231.htm:18]** **[0001628280-23-002350_on-20221231.htm:17]** . |
| Sudhir Gopalswamy   | Group President, Analog and Mixed-Signal Group and Intelligent Sensing Group | February 2024    | Sudhir Gopalswamy joined onsemi in March 2022 and currently serves as the Group President, Analog and Mixed-Signal Group and Intelligent Sensing Group. He was promoted to Group President in February 2024  **[0001097864-24-000001_on-20240403.htm:30]** **[0001628280-24-003201_on-20231231.htm:18]** . |
| Ross F. Jatou       | Former Senior Vice President and General Manager, Intelligent Sensing Group | N/A              | Ross F. Jatou joined onsemi in 2015 and was named Senior Vice President and General Manager of ISG in October 2020. He resigned from all positions with onsemi effective February 22, 2024  **[0001628280-24-003201_on-20231231.htm:17]** **[0001628280-23-002350_on-20221231.htm:16]** . |
| Paul Dutton         | Senior Vice President, Chief Legal Officer, and Secretary                | May 2024         | Paul Dutton serves as the Senior Vice President, Chief Legal Officer, and Secretary at ON Semiconductor Corporation. He has been involved in signing reports on behalf of the company as of May 23, 2024  **[0001193125-24-145982_d806468dsd.htm:1]** . |

fe6842d03fe1d6fd319b0c0a5a6f7d647c84d84fb5313131880d8468c43043f9

| Program Details          | Program 1      |
|--------------------------|----------------|
| Approval Date            | February 2023  **[0001628280-24-043880_on-20240927.htm:43]**  |
| End Date/Duration        | December 31, 2025  **[0001628280-24-043880_on-20240927.htm:43]**  |
| Total additional amount  | $3.0 billion  **[0001628280-24-043880_on-20240927.htm:43]**  |
| Remaining authorization amount | $2.0 billion  **[0001628280-24-043880_on-20240927.htm:43]** **[0001628280-24-043880_on-20240927.htm:17]**  |
| Details                  | The program allows for repurchase at the company's discretion, subject to market conditions and other factors. It can be modified, suspended, or terminated by the Board of Directors at any time without prior notice.  **[0001628280-24-003201_on-20231231.htm:128]** **[0001628280-24-033229_on-20240628.htm:17]** **[0001628280-24-018814_on-20240329.htm:13]**  |

e8ffe66a9b0fdd46261c01a6cc735a3547b01eceabdece4312fd83502b1d071f

**Quarterly guidance for Q4 2024:**
- **Revenue**: $1.71B to $1.81B  **[ON_3404198_5]**  (no prior guidance)  
- **Non-GAAP Gross Margin**: 44% to 46%  **[ON_3404198_5]**  (no prior guidance)  
- **Utilization**: flat to slightly down  **[ON_3404198_5]**  (no prior guidance)  
- **Non-GAAP Operating Expenses**: $300M to $315M  **[ON_3404198_5]**  (no prior guidance)  
- **Non-GAAP Other Income**: net benefit of $12M  **[ON_3404198_5]**  (no prior guidance)  
- **Non-GAAP Tax Rate**: approximately 16%  **[ON_3404198_5]**  (no prior guidance)  
- **Non-GAAP Diluted Share Count**: approximately 427M shares  **[ON_3404198_5]**  (no prior guidance)  
- **Non-GAAP Earnings Per Share (EPS)**: $0.92 to $1.04  **[ON_3404198_5]**  (no prior guidance)  
- **Capital Expenditures (CapEx)**: $130M to $170M  **[ON_3404198_5]**  (no prior guidance)  

c406e9df50effde8af278fef91284c82d595f3d80322de0efb5ee0b26bb5e73f

| Name                          | Start Date | End Date | Reason for Change |
|-------------------------------|------------|----------|-------------------|
| PricewaterhouseCoopers LLP    | 1999  **[0001628280-24-003201_on-20231231.htm:96]**    | Present  | Current auditor   |

9ea1840f786835bba971b7b40973e44755018c88672cd2435e3230ed6e7746e8

23794d91c53ae875c8e247d72561e35d9d06ee07c70c9e0dbcc977a6d161504a

28a2429b851d8e71ad488c331c783884c50e1cc65e0763f9cc4cd2989b647e91

345953b433260c1d207d875626ed073b768fc6ba87d4eb399dcc3752c3eb94aa

Total Remaining Performance Obligations for Long-term Supply Agreements (USD billions)

Percentage of Remaining Performance Obligations for Long-term Supply Agreements Recognized in Next 12 Months (percentage)

3a7527730eff42e0e0316e91b14c726884417c4ad3d668c137970d29e90117a3

1. **SiC Business Outlook**  
   **Q:** Is SiC weakness cyclical or secular?  
   **A:** Management believes the weakness is cyclical, not secular. The long-term trend for electrification and EV adoption remains unchanged. Designs expected to ramp did go into production but didn't reach anticipated levels due to short-term demand issues. They expect continued adoption of EVs in China, followed by the U.S. and Europe.  **[ON_3404198_6]** 

2. **Margin Targets**  
   **Q:** Can you maintain the 45% margin floor and 53% peak?  
   **A:** Yes, they believe they can hold the mid-40% margin floor. Utilization is at about **65%**, historically low. They're optimizing the manufacturing footprint, focusing on cost reductions, and at current levels, they can maintain margins.  **[ON_3404198_7]** 

3. **Capital Intensity and CapEx**  
   **Q:** Has anything changed structurally in your manufacturing footprint with lower CapEx?  
   **A:** CapEx target is now **5%** of revenue, down from 11%. Manufacturing footprint optimization has exceeded expectations. No structural changes; moving into maintenance capital. SiC capacity will increase through low CapEx conversion from 6-inch to 8-inch wafers, boosting output without new investments.  **[ON_3404198_11]** 

4. **Distribution Inventory Levels**  
   **Q:** Why are you expanding distribution inventory despite softer macro?  
   **A:** They're expanding distribution inventory to grow mass market customers, a high-margin business. Mass market customer count is up **15%** year-over-year. They monitor inventory closely to avoid overhang, with strategic products placed in the channel and a tight process to manage FIFO levels.  **[ON_3404198_9]** 

5. **China EV Market**  
   **Q:** How is your positioning in China EV market affecting growth?  
   **A:** Growth in auto and SiC was driven by China, with share gains in key customers. They're in 800-volt platforms now in vehicles, ramping into 2025. Expect strength in China to continue, benefiting from increased penetration and market share.  **[ON_3404198_14]** 

6. **East Fishkill Margin Impact**  
   **Q:** Is East Fishkill still a 100 bps margin headwind?  
   **A:** Yes, it's about a **100 basis points** dilutive to corporate gross margin, continuing in Q4. Improvement will be linear in 2025, and by year-end, most of that 100 bps impact will be gone as they exit that business for GLOBALFOUNDRIES.  **[ON_3404198_17]** 

7. **Data Center Revenue**  
   **Q:** When will data center revenue ramp up?  
   **A:** They already have design wins and early revenue in the data center segment. Expect revenue growth in **2025** as products like the T10 TrenchFET get qualified and customers ramp up. New product introductions will boost their portfolio offered to customers.  **[ON_3404198_15]** 

8. **Inventory Targets**  
   **Q:** Will distribution inventory levels increase further?  
   **A:** Their new target range is **9 to 11 weeks** of inventory, with **10 weeks** being the sweet spot. They don't expect levels to go beyond 11 weeks as they focus on mass market customers and manage inventory tightly.  **[ON_3404198_25]** 

9. **Pricing Strategy**  
   **Q:** How will pricing discussions take place amid macro concerns?  
   **A:** They price on value and won't chase the market or engage in low-price competition. They've walked away from business that doesn't meet their margin targets. Focused on reaching a **53%** margin model by creating differentiated products that hold value and avoid frequent pricing negotiations.  **[ON_3404198_8]** 

10. **SiC Market Penetration**  
    **Q:** How will SiC business grow next year?  
    **A:** They expect SiC business to grow in **2025**, driven by EV unit growth and increasing SiC penetration, currently around **6%**. Penetration is expected to rise, especially with new 800-volt EV models in China using SiC. Long-term view remains unchanged.  **[ON_3404198_27]** 

39f93e7526c0001419b36d531ed77d0ee659f7ce97fdc9881f4a9ea32e311d43

- The company's **automotive revenue declined 11% sequentially**, which was **worse than expected** and **lagged behind some peers**, indicating potential market share loss or weakening demand in this key segment.  **[ON_3394871_7]** **[ON_3394871_16]**
- **Inventory digestion** is ongoing, and the company acknowledges they are **shipping below end demand**, suggesting that **revenue may remain under pressure** until inventories are cleared, which could **take more time**.  **[ON_3394871_7]** **[ON_3394871_16]**
- The company is **not providing quarterly details** on its **silicon carbide (SiC) business**, citing revenue **lumpiness**, which may indicate **uncertainty or volatility** in this important growth area.  **[ON_3394871_11]**

148198b47029bb5d3c5ad724343354799958e672b533099a5179506023d4d200

1. **Silicon Carbide Outlook**  
   **Q:** How will your SiC business perform this year, and why tie guidance to market rates rather than absolute numbers?  
   **A:** We expect our SiC business to grow at **twice the market rate** in 2024, based on our design-ins and customer ramps. Tying guidance to market rates allows for flexibility amid end demand variability, but we remain confident due to qualified platforms and a broad customer base. Our pricing remains consistent under long-term agreements, and we anticipate reduced customer concentration as we diversify our customer base.  **[ON_3371877_9]** **[ON_3371877_10]** **[ON_3371877_24]** 

2. **Gross Margin Expectations**  
   **Q:** Can you discuss your gross margin outlook and the impact of utilization rates?  
   **A:** We plan to maintain a gross margin floor of **mid-40%**, with utilization bottoming around **mid-60%**. Each point of utilization affects gross margin by about **15 basis points**. Our Fab Liter strategy has worked effectively, and we expect tailwinds from improved utilization as the market recovers.  **[ON_3371877_7]** **[ON_3371877_21]** 

3. **Automotive and Industrial Markets**  
   **Q:** What are your expectations for the automotive and industrial markets, and which might recover sooner?  
   **A:** Both markets are experiencing inventory digestion and slowing demand. We expect both to be down **high single digits** quarter-on-quarter in Q1, and we are not seeing recovery yet. We're managing cautiously, reducing utilization to match outlook, and will benefit from tailwinds when demand returns.  **[ON_3371877_11]** 

4. **Avoiding Larger Corrections**  
   **Q:** How have you avoided deeper corrections seen by peers, and is Q1 the trough?  
   **A:** Our long-term supply agreements provided early visibility into demand softness, allowing us to proactively reduce utilization and manage inventory. While it's hard to call a bottom, we are prepared to capitalize when markets recover.  **[ON_3371877_8]** 

5. **Inventory and Utilization Levels**  
   **Q:** Are you cutting production enough given peers' larger reductions, and how long might excess inventory last?  
   **A:** We've been disciplined in managing utilization and inventory, starting to reduce utilization in late **2022**. Our base inventory is at optimal levels, and we believe current utilization rates are appropriate without overcorrecting.  **[ON_3371877_23]** **[ON_3371877_14]** 

6. **Long-Term Gross Margin Targets**  
   **Q:** Can you achieve your **53%** gross margin target without significant revenue growth?  
   **A:** Yes, reaching the **53%** gross margin is not dependent on revenue growth alone. Factors such as utilization improvements, efficiency gains from East Fishkill, monetization of divested fabs, and ramping new accretive products will drive margins higher.  **[ON_3371877_13]** 

7. **Channel Inventory Refill**  
   **Q:** When will you start refilling channel inventory, and what revenue impact will it have?  
   **A:** We will begin replenishing channel inventory to reach **7 to 9 weeks**, starting now. This will support mass market and long-tail customers previously underserved. The increase will be gradual over several quarters, providing support without a significant immediate revenue impact.  **[ON_3371877_17]** 

8. **China Market Position**  
   **Q:** How are you positioned in the China EV market?  
   **A:** We are well-positioned in China, with long-term agreements with **four of the top five** Chinese OEMs. Our engagement includes both SiC and IGBT products, and we anticipate growth in both automotive and industrial applications like energy storage.  **[ON_3371877_20]** 

9. **Analog and Mixed Signal Platforms**  
   **Q:** What's the status and outlook for your analog and mixed signal platforms?  
   **A:** We're on track with technology development, ahead of schedule. We've taped out lead products and will sample in early **2024**, targeting highly competitive mixed-signal analog markets with products synergistic with our power portfolio.  **[ON_3371877_15]** 

10. **Non-Core Customer Exits**  
     **Q:** Are you done exiting non-core customers, and do any remain?  
     **A:** We've exited about **$475 million** over multiple years, with **$180 million** in the past year. Remaining business is healthy and at corporate average margins. We consider the exit program complete unless capacity is needed.  **[ON_3371877_19]** 

8d50b2970385c7462b171dca45f71c34e981343326ae8ac95ef901fb23e65d28

- **ON Semiconductor expects to grow its silicon carbide revenue at twice the market growth in 2024** due to significant design wins and share gains, being designed into more than 2x the sockets deployed this year.  **[ON_3381346_17]**
- **ON Semiconductor is successfully expanding into the top 10 leading Chinese OEMs**, with design wins in newly announced **900-volt EV platforms** set to ramp in the second half of 2024, leveraging their superior product value and vertically integrated supply chain to compete effectively against local competition.  **[ON_3381346_26]** **[ON_3381346_17]** **[ON_3381346_14]** **[ON_3381346_12]**
- **ON Semiconductor achieved a 30% quarter-over-quarter increase in design wins**, supporting their long-term revenue growth targets of **10%-12%**, demonstrating strong demand and customer adoption of their products.  **[ON_3381346_15]**

f9ec2da811848fb10c325dd31758b6d7efecfccb05ecbed6a50f0a4fd17d9798

| Year | Amount Due (in millions) | Debt Type                  | Interest Rate | % of Total Debt |
|------|--------------------------|----------------------------|---------------|-----------------|
| 2024 | $804.9 **[0001628280-24-043880_on-20240927.htm:15]**           | 0% Notes                   | 0.00% **[0001628280-24-043880_on-20240927.htm:15]** | 23.8% = (804.9 / 3,379.9) * 100 **[0001628280-24-043880_on-20240927.htm:15]** |
| 2028 | $375.0 **[0001628280-24-043880_on-20240927.htm:15]**           | Revolving Credit Facility  | 6.60% **[0001628280-24-043880_on-20240927.htm:15]** | 11.1% = (375.0 / 3,379.9) * 100 **[0001628280-24-043880_on-20240927.htm:15]** |
| 2028 | $700.0 **[0001628280-24-043880_on-20240927.htm:15]**           | 3.875% Notes               | 3.875% **[0001628280-24-043880_on-20240927.htm:15]**| 20.7% = (700.0 / 3,379.9) * 100 **[0001628280-24-043880_on-20240927.htm:15]** |
| 2029 | $1,500.0 **[0001628280-24-043880_on-20240927.htm:15]**         | 0.50% Notes                | 0.50% **[0001628280-24-043880_on-20240927.htm:15]** | 44.4% = (1,500.0 / 3,379.9) * 100 **[0001628280-24-043880_on-20240927.htm:15]** |

fb26afb15e642850eba3f4cd24618ffd66c8fa9da54b6a2a79126ec13730a031

- **ON Semiconductor is gaining a competitive advantage in the AI data center market by offering a comprehensive portfolio of **silicon carbide**, **silicon**, and **GaN** technologies, optimizing efficiency in the power tree, which is crucial for hyperscalers seeking to reduce utility costs associated with even **1% efficiency loss**.**  **[ON_3404198_27]**
- **The company is strategically preparing for a recovery in demand by strengthening customer relationships and focusing on **new design wins**, particularly in the automotive sector where **design activity remains strong**, indicating continued commitment to **electrification** and long-term growth.**  **[ON_3404198_29]**
- **With major capital investments in **silicon carbide production** and the **East Fishkill fab** now behind them, ON Semiconductor is well-positioned to grow capacity and revenue with **reduced capital expenditure**, enhancing **free cash flow** and potential for **margin expansion**.**  **[ON_3404198_25]**

eb2ec72c7b8468e6c1a80c94d6973ee1ea1b3f231c4deefdef458fd1785cc153

- **ON Semiconductor has strong revenue visibility with $4.8 billion in Long-Term Supply Agreements (LTSAs) over the next 12 months, with approximately 80% in automotive and 17% in industrial, providing stability in uncertain markets.**  **[ON_3371877_18]**
- **The company expects its silicon carbide revenue to grow at twice the market rate in 2024, benefiting from diversification of customer base and stable pricing tied to LTSAs, and is on track with 200mm silicon carbide production for qualification in 2024 and revenue ramp in 2025.**  **[ON_3371877_24]** **[ON_3371877_10]** **[ON_3371877_18]**
- **ON Semiconductor maintains strong operational efficiency, expecting to hold gross margins above the mid-40% floor despite lower factory utilization, demonstrating resilience and better demand management than peers, resulting in more favorable guidance.**  **[ON_3371877_23]** **[ON_3371877_7]**

4588ac2e4b82d53b5be44da2d84aa83f291b0e01fff0dbf354bd247e8417ddfe

1. **Silicon Carbide Outlook Amid EV Demand Softness**  
   **Q:** How does EV demand softness impact your SiC outlook?  
   **A:** Despite some short-term lumpiness in battery electric vehicle (BEV) demand, we expect the BEV market to remain healthy. Long-term, BEV and silicon carbide (SiC) penetration is still in the mid-single digits. We reiterate our **2024 SiC growth at 2x the market**, and our SiC design wins support this trajectory. In China, our SiC penetration is about **60%**, ahead of the rest of the world.  **[ON_3394871_9]** **[ON_3394871_11]** 

2. **Gross Margin Drivers and Outlook**  
   **Q:** Can you walk us through the evolution of gross margin drivers?  
   **A:** Utilization is the key driver in the short term; every point of utilization adds **15 to 20 basis points** to gross margin. East Fishkill operations are about **100 basis points** dilutive and will continue through the rest of this year but will moderate in 2025. Fab divestitures will start to benefit us as demand picks up, contributing **$160 million** in fixed cost savings. Additionally, ramping new products at accretive gross margins will help us reach our long-term gross margin target of **53%**.  **[ON_3394871_8]** 

3. **Revenue Recovery and L-Shaped Outlook**  
   **Q:** Is your revenue expected to remain flat due to inventory digestion?  
   **A:** Yes, we anticipate an L-shaped recovery, meaning our revenue will be relatively flat in the near term. We believe we are still undershipping natural demand due to inventory digestion, particularly at our direct customers. As inventory levels normalize, our revenue should recover to align with end demand.  **[ON_3394871_14]** **[ON_3394871_18]** 

4. **Volkswagen Win and SiC Wafer Quality**  
   **Q:** Does the VW win address SiC wafer quality concerns?  
   **A:** Absolutely. Any rumors about yields and quality are unfounded. A company like Volkswagen Group doesn't award contracts on a whim; they conduct thorough audits and reviews. We are the **primary supplier** for VW Group's SiC needs, covering the breadth of their electrification platforms.  **[ON_3394871_28]** 

5. **China Market Stabilization**  
   **Q:** Are you seeing stabilization or improvement in China?  
   **A:** Yes, we're seeing China stabilizing and growth resuming in both automotive and industrial sectors. The demand pickup is broad-based and driven by end-market demand rather than specific government incentives. Our exposure to China allows us to benefit quickly from this recovery.  **[ON_3394871_12]** **[ON_3394871_24]** **[ON_3394871_26]** 

6. **Inventory Levels and Distribution Management**  
   **Q:** How are you managing inventory levels in the channel?  
   **A:** We exited the quarter at **8.9 weeks** of inventory, as expected. We plan to maintain this level, focusing on replenishing the mass market while managing it tightly due to market uncertainty. Historically, inventory levels were **11 to 13 weeks**, so we're significantly below past levels. The increase is strategic, aiming to serve a growing number of mass market customers.  **[ON_3394871_12]** **[ON_3394871_20]** 

7. **Long-Term Supply Agreements and Pricing Stability**  
   **Q:** Have there been changes to LTSAs or pricing assumptions?  
   **A:** LTSAs are stable, with a lifetime value of **$14.7 billion**, and about **$4.4 billion** shippable over the next 12 months. Pricing remains stable within these agreements, and we haven't experienced any significant pushouts or renegotiations.  **[ON_3394871_22]** 

8. **Automotive Business Decline and Outlook**  
   **Q:** What caused the decline in automotive revenue, and what's the outlook?  
   **A:** The automotive business declined due to timing and inventory burn at customers, but it played out as we expected. We anticipate automotive and industrial revenues to be flat to slightly up in the third quarter. Inventory digestion is ongoing, but as demand accelerates, inventory burn will accelerate as well.  **[ON_3394871_7]** **[ON_3394871_9]** **[ON_3394871_14]** 

9. **Data Center and AI Market Opportunities**  
   **Q:** Can you size the SiC opportunity in data center and AI markets?  
   **A:** While we aren't breaking out the AI market at this level yet, we see significant opportunities as SiC penetrates power stages of AI data centers. At our Analyst Day last year, we projected data center growth at **22%** over a multiyear period, and with AI ramping, it could be higher. We'll provide more details as the market becomes more meaningful for us.  **[ON_3394871_22]** 

10. **Intelligent Sensing Group Business Outlook**  
    **Q:** What's the outlook for the ISG business amid recent declines?  
    **A:** The ISG business is closely tied to the automotive market. While we have a strong market share in automotive ADAS, recovery depends on market demand. Content uplift through higher ASPs and increased penetration rates will boost revenue. Additionally, we're expanding into the industrial market with new products and leveraging recent acquisitions to enhance our technology leadership.  **[ON_3394871_15]** 

b4d9a5cb639c0cd852c74b66f4e229c358bb7c00b9bbfa0b9652ab4f6651510c

1. **Silicon Carbide (SiC) Business Outlook**  
   **Q:** How is the silicon carbide business performing?  
   **A:** SiC sales are expected to grow over **2x** the market this year, driven by share gains based on design wins and increased content in vehicles  **[ON_3381346_6]** ,.  **[ON_3381346_17]**  The company is on track with SiC ramps in China and Europe for the second half of the year  **[ON_3381346_12]** , **[ON_3381346_17]** ,.  **[ON_3381346_26]**  Gross margins for SiC are stable now and are expected to improve as utilization increases and internal substrates ramp up, moving towards the target of over **50% gross margins**.  **[ON_3381346_10]** 

2. **Automotive Market Weakness**  
   **Q:** Is automotive demand weakening?  
   **A:** Yes, the company observed incremental softness in automotive demand in Q1, which persists into Q2, affecting both silicon carbide and silicon products.  **[ON_3381346_11]**  However, they are starting to see stabilization and expect this to continue into the second half  **[ON_3381346_8]** ,.  **[ON_3381346_11]** 

3. **China Competition in SiC**  
   **Q:** How will you compete with local SiC suppliers in China?  
   **A:** The company competes on product value, offering superior efficiency that saves customers more on battery costs than any savings from cheaper local suppliers  **[ON_3381346_14]** ,.  **[ON_3381346_17]**  They have proven their ability to compete in China by maintaining technology leadership and providing value to customers.  **[ON_3381346_14]** 

4. **Gross Margin Outlook**  
   **Q:** What is the outlook for gross margins?  
   **A:** Gross margins are expected to improve due to increased utilization, which adds **15 to 20 basis points** per point of utilization.  **[ON_3381346_7]**  The East Fishkill fab is about **100 basis points** dilutive this year but will become accretive as utilization increases.  **[ON_3381346_7]**  New products, including SiC, are also accretive to gross margins, supporting progress towards the long-term target of **53% gross margins**.  **[ON_3381346_7]** 

5. **Second Half Recovery**  
   **Q:** Is demand expected to recover in the second half?  
   **A:** The company is seeing signs of demand stabilization, particularly in industrial markets, and expects this to continue into the second half  **[ON_3381346_8]** ,.  **[ON_3381346_18]**  They remain cautious but note that requests for order revisions and pushouts have slowed down, indicating potential stabilization.  **[ON_3381346_18]** 

6. **Inventory Levels and Management**  
   **Q:** Are you comfortable with inventory levels?  
   **A:** The company is comfortable with inventory levels, having taken actions to reduce inventories and adjust utilization rates.  **[ON_3381346_16]**  They expect distributor inventories to increase in the second half to support new product ramps, including SiC.  **[ON_3381346_16]**  Internal inventory remains disciplined, with strategic increases for capacity transfers.  **[ON_3381346_16]** 

7. **Customer Diversification in SiC**  
   **Q:** How are you diversifying your SiC customer base?  
   **A:** The company expects more diversified SiC revenue in 2024, with ramps in automotive OEMs in Europe and further proliferation in Chinese EVs.  **[ON_3381346_12]**  They remain on track with long-term supply agreements and expect increased diversification across all geographies.  **[ON_3381346_12]** 

8. **Pricing Stability**  
   **Q:** Are you seeing any pricing pressure?  
   **A:** Pricing remains stable, supported by long-term supply agreements (LTSAs)  **[ON_3381346_16]** ,.  **[ON_3381346_22]**  Discussions with customers focus on volumes rather than pricing, and the company expects this to continue  **[ON_3381346_16]** ,.  **[ON_3381346_22]** 

9. **Data Center and AI Exposure**  
   **Q:** How significant is your data center and AI exposure?  
   **A:** The company is investing in cloud and data center markets, introducing new products in power discretes and controllers, with a targeted **22% CAGR** over the next five years.  **[ON_3381346_13]**  While they have made progress, they have not yet sized this exposure publicly.  **[ON_3381346_13]** 

10. **Design Win Trends**  
    **Q:** Are design win trends supporting long-term growth?  
    **A:** Yes, design wins increased **30% quarter-over-quarter**, and the trends support the **10% to 12%** long-term revenue growth targets.  **[ON_3381346_15]**  The layering effect of the base business, new products, and new design wins contributes to this growth.  **[ON_3381346_15]** 

11. **Hybrid Car Opportunity**  
    **Q:** What is your opportunity in hybrid cars?  
    **A:** The company sees opportunities in plug-in hybrids and non-BEV electrification, with content of about **$350** per vehicle in powertrain compared to **$750** in full BEVs, versus **$50** in internal combustion engines.  **[ON_3381346_21]** 

12. **Chinese Revenue Decline**  
    **Q:** Why has China revenue declined significantly?  
    **A:** The decline in China revenue is largely due to the company's strategic exits from non-auto and industrial businesses targeting that market.  **[ON_3381346_19]**  They have offset this with share gains in automotive and industrial markets in China, particularly in silicon carbide and renewable energy.  **[ON_3381346_19]** 

13. **Image Sensor Business Demand**  
    **Q:** How is the image sensor business performing?  
    **A:** Demand for image sensors follows automotive trends. The company is seeing growth in **8-megapixel** sensors due to migration to higher-resolution cameras.  **[ON_3381346_20]**  They maintain both internal manufacturing and foundry partnerships for supply assurance.  **[ON_3381346_20]** 

14. **200mm SiC Substrate Progress**  
    **Q:** What's the update on 200mm SiC substrates?  
    **A:** The company remains on track to qualify 200mm SiC substrates in 2024 and ramp production in 2025  **[ON_3381346_26]** ,.    There are no changes to this timeline, which is a positive development for their SiC efforts.   

15. **Capital Return to Investors**  
    **Q:** Will elevated cash returns to investors continue?  
    **A:** While the company's policy is to return **50%** of free cash flow over the long term, they have returned over **100%** in the last 12 months due to opportunistic share repurchases during market dislocations.  **[ON_3381346_25]**  They will continue to be opportunistic but expect to return to the 50% target over time.  **[ON_3381346_25]** 

fe338f717b9ff58dce637b28a619f1b5964497bb21bb49c2713b8e4124d1387d

- **ON Semiconductor observed incremental softness in the automotive market**, not only in silicon carbide but also in the broader **silicon products** segment, indicating potential weaker demand in this key market.  **[ON_3381346_22]**
- The company's **utilization rates decreased** from 66% to **65%**, and they expect to continue running at this lower utilization level until the market recovers, suggesting a **slowdown in demand**.  **[ON_3381346_20]**
- **Lead times decreased** slightly to approximately **40 to 41 weeks**, which could indicate a loosening supply-demand balance and potential future pricing pressure.  **[ON_3381346_20]**

b3bbca52ff5e7bc7ee4e372476b41db92ad247927de30d612dc1e14397b18049

- **Excess inventory and lackluster end demand** persist, with customers unsure when demand will recover; **interest rates could be impacting consumer confidence and spending**.  **[ON_3404198_29]**
- **Silicon carbide market growth is slowing and flattening**, raising potential risks associated with ON's **bridge inventory** and possible impact on **pricing and obsolescence**.  **[ON_3404198_13]**
- **Market share in China's 800-volt EV market** appears to have decreased from **approaching 60%** to **50%**, which may indicate reduced expectations in share gains.  **[ON_3404198_23]**

da693c426a2518f0d619cd2553fcd62d917a418241559db84a583097e29a7ebc

- The company is seeing **stabilization and recovery in China**, particularly in both automotive and industrial markets, which is leading to growth and is expected to be **sustainable**.  **[ON_3394871_25]** ,  **[ON_3394871_9]** ,  **[ON_3394871_26]**
- **ON Semiconductor has secured a significant win with Volkswagen Group**, becoming the primary supplier for their silicon carbide power solutions across all VW brands, indicating strong demand and market confidence in their technology.  **[ON_3394871_11]** ,  **[ON_3394871_28]**
- The company expects to **outgrow the silicon carbide market by 2x in 2024**, driven by strong design wins and growth in units, which supports their revenue growth and positions them well for future opportunities.  **[ON_3394871_11]** ,  **[ON_3394871_17]**

19ab3e5be7120f6c8eee8e667ff11267eb5ab000e4be966254ca2ac9a403cf98

- **ON Semiconductor anticipates continued softness across all end markets, with no recovery expected in the near term.** Both automotive and industrial revenues are projected to be down high single digits quarter-over-quarter in Q1 2024.  **[ON_3371877_11]**
- **Lower factory utilization rates (mid-60%) are expected to negatively impact gross margins.** Each point of utilization reduction equates to approximately 15 basis points decrease in gross margin, putting pressure on profitability.  **[ON_3371877_7]**
- **Reliance on a few key customers in the silicon carbide business remains a risk.** Customer concentration may impact revenue if major customers reduce orders, as was experienced in Q4.  **[ON_3371877_10]**

6665f60a41377e245e0c87ef87aa87e1a201502473ace9d71fd0f3007a454a1b

ON Semiconductor Corp (ON)

Financials