Release Date: February 10, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- ON Semiconductor Corp (ON, Financial) achieved a non-GAAP gross margin of 45.5% against revenue of $7.1 billion for the full year 2024.
- The company's automotive revenue increased 8% sequentially in the fourth quarter, driven by share gains and new customer ramps, particularly in China.
- ON Semiconductor Corp (ON) reported significant growth in AI data center and aerospace and defense sectors, with revenue increases of more than 40% and 50% respectively in 2024 over 2023.
- The company successfully closed the acquisition of Qorvo's silicon carbide junction field effect transistor business, enhancing its EliteSiC power solutions.
- ON Semiconductor Corp (ON) introduced the Treo platform, a new analog and mixed-signal platform, which is expected to unlock a $36 billion total addressable market opportunity with up to 70% gross margins.
Negative Points
- Fourth quarter revenue declined to $1.72 billion, with a non-GAAP gross margin of 45.3% and non-GAAP earnings per share of $0.95, impacted by a decline in demand.
- The company experienced a sequential decline in regional revenue, with Japan seeing the sharpest decline, and continued inventory digestion in key end markets.
- ON Semiconductor Corp (ON) anticipates continued volatility in the automotive sector due to geopolitical uncertainty and slower-than-expected EV ramp-up.
- The industrial revenue decreased 5% sequentially, with ongoing weakness in traditional parts of the business and a weak PMI across major regions.
- The company expects a significant decline in automotive revenue in Q1 2025, projected to be down 25% or more sequentially, primarily due to softness in China.
Q & A Highlights
Q: How much of the revenue decline is specific to ON Semiconductor versus the end market?
A: The significant decline is mainly due to the noncore business, which has seen the largest drop. ON Semiconductor has been consistent in not participating in volatile markets and is focusing on core products like Treo and silicon carbide for growth. (Hassane El-Khoury, CEO)
Q: What are the expected trends for automotive, industrial, and other segments in Q1?
A: Automotive is expected to decline by over 25% sequentially, while industrial and other segments are anticipated to decrease by mid- to high single digits. Visibility beyond Q1 is limited due to geopolitical uncertainties. (Thad Trent, CFO)
Q: Why is the Q1 automotive outlook worse than peers?
A: The decline is partly due to noncore components and the lumpiness of silicon carbide, particularly in China, where there is a temporary softness as inventory is digested. (Hassane El-Khoury, CEO)
Q: Are there any changes to the long-term gross margin targets?
A: ON Semiconductor remains committed to the 53% gross margin target. The current short-term impact is due to utilization, but structural changes and market recovery are expected to help achieve this target. (Thad Trent, CFO)
Q: How is the company managing inventory levels and demand visibility?
A: ON Semiconductor is managing inventory tightly, ensuring it does not overship demand. The company is negotiating LTSAs to align with real demand and is focused on maintaining discipline in inventory management. (Hassane El-Khoury, CEO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
