ON Semiconductor Corporation (ON) Nasdaq 49th Investor Conference (Transcript)

ON Semiconductor Corporation Conference Call Summary Company Overview - Company: ON Semiconductor Corporation (NASDAQ: ON) - Date: December 5, 2023 - Participants: - Hassane El-Khoury - President & CEO - Thad Trent - CFO - Joseph Moore - Senior Analyst Key Industry Insights - Automotive Market: - Experienced a sudden weakness due to inventory digestion, particularly among European Tier 1 suppliers [5][6] - Demand softness has led to elevated inventory levels [5] - Industrial Market: - Remains stable with no significant changes noted; performance aligns with previous expectations [6][46] - Specific segments such as renewable energy and medical devices are showing growth, with renewable energy growing 70% year-over-year [49] Core Company Strategies and Performance - Margin Improvement: - Structural changes over the past two years have led to improved margins, with current margins in the mid-40s compared to low 30s in 2019 [9][51] - Utilization is expected to remain in the high-60s, maintaining a margin floor in the mid-40s [9][51] - Long-Term Supply Agreements (LTSAs): - LTSAs provide predictability in volume and pricing, allowing better management of customer demand and inventory [8][15] - Customers are proactive in communicating demand changes, reducing the risk of excess inventory [15][36] Financial Performance and Projections - Revenue Growth: - Achieved a 4x increase in revenue from silicon carbide technology in 2023 compared to 2022 [22] - Revenue shortfall in Q4 due to a single OEM's demand issues, but overall market share is expected to grow [29][30] - Future Outlook: - Confidence in sustaining mid-40s gross margins even in a weak environment, with potential for improvement as utilization increases [51][52] - Anticipated benefits from divesting four fabs and managing fixed costs effectively [52] Competitive Landscape - Chinese Competition: - Investments in trailing-edge analog capacity in China are noted, but ON Semiconductor emphasizes competition based on product performance rather than capacity alone [18][19] - Successful engagement with Chinese OEMs, such as NEO, highlights the importance of product value and performance [20] Additional Considerations - Inventory Management: - ON Semiconductor is focused on managing inventory levels to avoid excess, leveraging LTSAs for better visibility and planning [39][41] - Market Trends: - Continued enthusiasm for the EV market, with expectations for growth despite potential fluctuations in overall vehicle production [33][34] - Sector-Specific Growth: - Notable growth in energy storage and distribution, as well as medical devices, indicating diversification in demand [49] This summary encapsulates the key points discussed during the conference call, highlighting ON Semiconductor's strategic focus, market conditions, and financial outlook.