ON Semiconductor Corporation (ON) Presents at Citi 2022 Global Technology Conference (Transcript)

ON Semiconductor Corporation Conference Call Summary Company Overview - Company: ON Semiconductor Corporation (NASDAQ:ON) - Event: Citi 2022 Global Technology Conference - Date: September 8, 2022 - Participants: - Hassane El-Khoury - CEO - Chris Danely - Citigroup Semiconductor Analyst Key Industry Insights Silicon Carbide Market - Growth Drivers: The growth in silicon carbide is primarily driven by the megatrend of electrification, which includes not only electric vehicles (EVs) but also charging infrastructure and renewable energy integration [3][5][19] - Total Addressable Market (TAM): The automotive sector represents the largest TAM for silicon carbide, but there is significant growth potential in adjacent markets such as industrial applications [3][19] - Vertical Integration: ON Semiconductor is the only fully vertically integrated silicon carbide manufacturer, which enhances supply assurance and allows for better control over production processes [9][11] Competitive Landscape - Market Position: ON Semiconductor has established a strong market position through strategic investments and acquisitions, such as the acquisition of GTAT, which supports their silicon carbide production capabilities [7][21] - Competitors: Key competitors include Infineon, STMicroelectronics, and Wolfspeed, each with their strengths and weaknesses in the silicon carbide space [22][23] Financial Performance and Projections Revenue and Margins - Committed Revenue: ON Semiconductor has $4 billion in committed revenue, with expectations to achieve over$1 billion in silicon carbide revenue by 2023 [12][50] - Gross Margin Expectations: The company anticipates that silicon carbide will transition from being dilutive to accretive to corporate margins by 2024, contingent on scaling production and improving pricing strategies [27][29] Capacity and Production - Capacity Management: The company is optimizing its manufacturing footprint to enhance capacity without incurring excessive capital expenditures. This includes moving existing production lines to more efficient fabs [44][45] - Lead Times and Shortages: ON Semiconductor is addressing lead time issues through long-term supply agreements (LTSAs) with customers, which help mitigate risks associated with supply chain disruptions [41][62] Strategic Initiatives Long-Term Supply Agreements (LTSAs) - Purpose: LTSAs are designed to provide customers with supply assurance and help ON Semiconductor manage capacity investments more effectively [15][41] - Customer Engagement: The company emphasizes the importance of maintaining strong relationships with customers while navigating pricing and supply challenges [62] Market Trends - EV Penetration: The penetration of EVs is expected to increase significantly, with projections of 50% market share by 2028, which will drive demand for silicon carbide and related technologies [32][37] Additional Insights - Technology Differentiation: The competitive advantage lies in ON Semiconductor's ability to provide superior technology and packaging solutions, which are critical for customer design wins [11][12] - Market Dynamics: The semiconductor market is expected to grow, with enough demand to support multiple players without leading to overcapacity in the near term [23][32] This summary encapsulates the key points discussed during the conference call, highlighting ON Semiconductor's strategic positioning in the silicon carbide market, financial outlook, and competitive landscape.