A Legacy Forged from Semiconductor Roots
Founded in 1999 as a spin-off from Motorola’s Semiconductor Components Group, ON Semiconductor—now stylised as onsemi—was built on a legacy of innovation. Its DNA includes not only Motorola’s semiconductor heritage but also technologies inherited through acquisitions of Fairchild, SANYO Semiconductor, Aptina Imaging, AMI Semiconductor, Cherry Semiconductor, and more—many of them storied names in electronics history. This diverse lineage underscores ON Semiconductor’s tech depth across multiple component categories.
Headquartered in Scottsdale, Arizona, the company has grown into a workforce of over 26,000, is ranked among the Fortune 500, and is represented on the Nasdaq-100.
From Components to Intelligent Solutions
onsemi didn’t just manufacture chips—it transformed into a solutions provider across three business segments:
- Power Solutions Group (PSG): Driving innovation in silicon carbide (SiC), GaN, power modules, and energy-efficient systems for EVs, industrial automation, and cloud infrastructure.
- Analogue & Mixed-Signal Group (AMG): Offering signal conditioning, logic, power management, and voltage regulation for automotive, computing, and industrial devices.
- Intelligent Sensing Group (ISG): Creating CMOS and image sensors, signal processors, and single-photon detectors for automation, medical imaging, and industrial vision systems.
This portfolio makes ON Semiconductor a foundational enabler across critical trends—EV electrification, industrial connectivity, cloud energy, IoT, and sensor-driven automation.
Resilience Amid Challenges: Financial and Market Performance
Q1 FY2025 was a challenging quarter, with revenue dropping 22% YoY to $1.45 billion. Automotive sales fell 25%, and industrial slipped, but onsemi held onto a non-GAAP gross margin of around 40%, notably above trough-industry levels. Despite the revenue hit, free cash flow rose by 72% to $455 million, representing 31% of revenue. The company also boosted shareholder returns, sending 66% of that cash back via buybacks.
Despite a sharp YoY revenue decline, onsemi’s Q2 FY2025 results exceeded expectations, with revenue ranging between $1.47B and $1.50B and adjusted EPS of 53¢—meeting consensus. Yet, weak automotive demand caused a sharp 11% drop in stock price. Analysts noted stabilising signs but flagged margin recovery as key amid 68% plant utilisation.
CEO Hassane El-Khoury delivered a cautiously optimistic message, noting that the second half of the year would likely be a turnaround point, especially supported by EV-related chip demand. Indeed, onsemi projected Q3 EPS of 54¢–64¢ and revenue of $1.47B–$1.57B, both slightly above street estimates.
Repositioned for Growth: EVs, SiC, and Global Reach
The biggest growth driver? Electric vehicles and silicon carbide (SiC) technology. As EV semiconductor content rises—estimates suggest a jump from ~$160 to over $700 per vehicle by 2025—onsemi’s power- and thermal-efficient chips are in high demand.
To scale for this growth, onsemi is investing aggressively in global manufacturing resiliency. It’s ploughing $2 billion into a new SiC fab in the Czech Republic and expanding in South Korea to reduce overdependence on any one region.
Onsemi also revealed a bold strategic move—a $6.9 billion hostile bid to acquire Allegro MicroSystems—intended to consolidate their footprint in EV-sensing and analogue components. Though the bid was resisted, it sent a clear signal of ambition.
Navigating Risks and Market Realities
Despite promising signs, onsemi navigates several headwinds:
- Cyclic and cautious markets, especially in automotive and industrial verticals, continue disrupting demand patterns.
- Geopolitical tensions and U.S. tariff shifts introduce supply chain uncertainty and customer hesitation.
- Margin expansion depends on utilisation, which remains modest amid uneven demand and fixed costs.
- Competitive pressure in SiC, particularly from Chinese and European rivals, challenges onsemi’s leadership in the key EV supply chain.
- The failed Allegro acquisition reminds us that execution of strategic bets is complex and politically sensitive.
Power That Adapts: onsemi’s Human and Strategic Story
onsemi is more than chips. It’s empowering vehicles to go farther, factories to run smarter, data centres to manage power better, and sensors to bring automation and safety to life. Its turnaround-focused leadership, financial discipline, global expansion, and bold M&A moves reflect a company thinking long-term while acting decisively.
Summary: Why onsemi Matters—A Balanced Snapshot
- Deep heritage evolving from Motorola to a solutions-orientated tech leader.
- Strategic lineup tailored to high-growth end-markets: EVs, industrial automation, sensing, and energy.
- Financial adaptability during downturns—strong margins, cash flow, and cost control despite revenue dips.
- Global expansion and manufacturing resilience to support long-term growth.
- Bold growth moves, including targeted M&A attempts and R&D acceleration.
- Watchpoints: cyclic demand, competitive dynamics, margin recovery, and strategic execution.