ON - Earnings call transcript Q4 2018 | ON Semiconductor Corporation

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Operator

Good day, ladies and gentlemen. Welcome to the ON Semiconductor Fourth Quarter 2018 earnings conference call. At this time, all participants are in a listen-only mode.

Following management's prepared remarks, we will have a question and answer session and instructions will be given at that time. [Operator Instructions] It is now my pleasure to turn the conference over to your host, Parag Agarwal, VP of Investor Relations and Corporate Development. ahead. go Please

Parag Agarwal

and Good section Semiconductor will Hade. release along I'm thank for www.onsemi.com. on of and you today call replay XXXX one CFO. call. of XX Thank posted being A our and channels quarter markets, available is conference on fourth morning. our Web and and quarter with approximately fourth for ON webcast CEO, President are the this our count broadcast The share approximately site Corporation's Keith Investor Web call. broadcast be today's Gutmann, end call business XXXX site. joining earnings our by available This additional hour Relations you, the Jackson, call, segments, And conference Bernard of our quarterly this our for joined days at on also conference site Web following for this information geographies, following script our will related the recorded be to

earnings financial which non-GAAP our measures. include the are Reconciliations certain posted under in in release, on site release Relations Investor is the non-GAAP our most GAAP separately these measures to earnings financial presentation Web of and section. Our comparable directly measures this

Form The We should will, we identify statements to wish believe, course of expect, events company. projections. business, expressions actual our this Form performance estimate, statements. make During may, future the other similar the to that project, intend, plan, conference factors XX-Qs Exchange will words other to results statements financial such are or the can Securities forward-looking of regarding call, with anticipate, events are our forward-looking that projections or could or to future caution intended the and our are that from and XX-Ks, uncertainties and Important could including to subject Commission. actual cause differ statements, in affect or differ which from filings described factors forward-looking cause results materially risks

Additional quarter our release earnings fourth factors in for XXXX. of are described

update Our and other to estimates law. change, reflect actual may the factors to changed required or assumes results, except as by no forward-looking statements obligation company assumptions,

earlier, XXXX will Scottsdale, on Day Arizona. in host we As announced Analyst March our Xth

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Bernard Gutmann

Thank you, and drivers as evidenced quarter We performance secular in by delivered everyone of today. challenging joining several financial despite And Parag. on remain business results thank you our yet margin solid our remains us another strong macroeconomic intact, quarters. conditions. operations execution for Key powering

a in strengthen continues Our call upbeat be Greater about slowdown slowdown last channel. This accelerated the region. weeks, a from appears seen course reversed modest we and when our competitive include last in slowdown have steep especially this early of automotive, design with in we win This year, significant noticed pipeline our industrial, decline bookings pick-up. further our in over demand of geographies strategic our the continue and grow last distribution to markets. those We in cloud-power, in seasonality. has Demand we November noticed line markets, year, Since other position a which couple China in earnings remain bookings, have future. to to from we and from sharp

continue applications the from foreseeable our on we decline in of in revenue we grow we XXXX, to margins automotive, future. challenges to expect in expect remain and current and these should driving benefit industrial, XXXX. Key in Although, outlook, Based year. current sequentially and weakening outlook, believe we of after to first greater on second macroeconomic in our quarter power growth megatrends quarter content cloud intact, trends our pose to in macroeconomic conditions expand could current than our continue that based seasonal grow

outlook, Although, business to confident are rapidly macroeconomic slowing we our growth. in we adjust remain our to prudently managing

capital our and measures adjust grow to cash highly with our flow, intend despite our in We current semiconductor and fastest products, customer free we base, many of revenue. slowdown. life growing to margin taking believe are and diversified to slowdown expenses macroeconomic control We that our exposure the line in current to of our navigate plan a us long markets, expected demand. continue to our working help expand should cycle end the We

Our largest X% was our customer XXXX of in approximately revenue.

results. compared of our $X.XXX XXXX billion on $XX to details a was revenue $X.XXX of additional known you from included Aizu, million revenue of in fourth quarter X% ON contribution provide an as Semiconductor OSA. of me the XXXX fourth XXXX. of revenue also as the for Total fourth of let XXXX Now, quarter billion, quarter quarter increase Fourth

the points As manufacturing our quarter margin. share Japan. margin the increase quarter as on GAAP this was quarter fourth net and improved XX.X. fourth fourth $X.XX XXXX to of basis of Aizu-Wakamatsu, the announced OSA. quarter of had diluted non-GAAP compared venture by was in points XX gross a year-over-year. quarter in is for net compared XXXX XXXX. margin quarter $X.XX per basis, in we basis $X.XX wafer year-over-year fourth our OSA gross earnings call, our XX share negative fab to On quarter XXXX. fourth negatively income per our joint impacted OSA basis Again, $X.XX for as diluted third was Non-GAAP impact X-inch quarter XX fourth an for located gross points fourth GAAP by and non-GAAP in was our in by of the GAAP income

gross our been impacted costs. input XXXX in has certain year-over-year negatively a quarter factor derived Another margin basis fourth on

performance gross improving by by was year-over-year execution margin mix. and solid strong driven operational Our

quarter of was operating the XXXX. XXXX in the compared as quarter GAAP fourth margin XX.X% Our for to XX.X% of fourth

quarter fourth to Our compared the of GAAP the in for of XXXX XXXX. XX.X% fourth was operating XX.X% margin quarter as

to increase our for operating year-over-year X% increased the were for quarter million operating $XXX compared fourth performance by the XXXX. $XXX of compared fourth and strength strong fourth a XXXX. by million free flow impacted demonstrated the expenses our operating of negatively the quarter of This as of fourth operating quarter and operating operating non-GAAP was in $XXX to fourth in OSA. operating model. XX%. as quarter revenue Our of XXXX by the million fourth quarter income points leverage $XXX Fourth and million. non-GAAP the $XXX quarter basis cash cash GAAP $XXX quarter in expenses On million were Non-GAAP was million was margin XX XXXX flow

equates of full in our of million products capital range XXX to raw million X%. were our the XXXX. is quarter. of XX of year. steep and for the as million, end during a compared meet by rising demands Capital We to we quarter For compared capital expect of Recall level flow the million the end XXXX. At of over quarter, XXXX, the for cash XX weeks. of at of up in weeks in fourth to terms price days free $XXX fourth to of to four on of to used the cash cash stock increased shares inventory days million third increasing exited in within We $XXX equivalents intensity the that of million expenditures were quarter $XXX the year which compared to of fourth generated of we as fourth days, $XXX third current and of $X,XXX the higher toXXX intensity quarter XXXX inventory quarter repurchase mitigate cash in impact as quarter, but fourth quarter. Distribution $XXX the the with of hand days wafers, million the our it XX.X quarter

expect to We remain within distribution XX XX term. the our normal to in range near weeks inventories of

we managing the in inventory indicated we inventory channel. to the proactively earlier, of distribution excessive are As the risk mitigate in channel,

that We carry what have ensure inventory is the weeks needed of more to distributors support implemented than systems retail. to XX XX to can

our million. Analog revenue you fourth with provide an $XXX units, starting was million. for performance on Group Revenue the Revenue the PSG. the Solutions XXXX the for me for for let update Group fourth of was Sensing of or quarter $XXX $XXX and Group million quarter Solutions for Intelligent PSG Power Now, was the business

Jackson, like I Keith? the environment. would over for call comments Now, turn to Keith additional business to on the

Keith Jackson

fourth upbeat Semiconductor. we the expect economic our meaningful outlook macro demand from Despite revenue Greater yet to that we outlook, Group will we in meaningful believe our a China delivered The the prospects. region, trends and remain was Power broader markets impacted about continue and of revenue Bernard. driving slowdown XXXX Semiconductor the strong for current a mid Thanks, long outgrow key Though ON has We quarter to another term manner. strong strengthen and to our performance. in near-term quarter in margin Analog our secular

pace. strong pipeline in strategic our design growing win is markets a at Our

and engagements customer is Our improving positioning are competitive strengthening significantly. our

infrastructure In industrial steep is power in driving cloud-power power business of market, power products XG our content, are In earlier, for driving growth safety strengthen. markets. mentioned seeing megatrends management key the businesses. electric we for growth industrial adoption driven I the our accelerating systems. robust growth and automotive requirements are by our for As power In efficiency the to semiconductor active vehicles market, for power higher we markets, semiconductor semiconductors seeing servers and continue and our analog sensor in strong

and was lay I quarter, a highlight XXXX XXXX. year the for business details ON let out results Semiconductor performance fourth me fronts. all we delivered get on solid and into of the XXXX for for strong Before priorities

Our XXXX year-over-year. excluding revenue, OSA, X% by grew

this expanded year-over-year. Our basis points in year-over-year by expansion significant achieved gross margin costs raw strong material XXXX We despite non-GAAP XXX increases XXXX. margin in gross

non-GAAP points by Our operating X%, our year-over-year XX% basis year-over-year. non-GAAP revenue margin expanded XXXX. operating in XXX by increase income On increased non-GAAP of

million $XXX cash XXXX. free $XXX XXXX in to Our as million compared was flow

slowing us analog likely semiconductor of And diligently sensing markets. Customers cloud our in relying to leading-edge grow strong technologies. XXXX, a power industrial analog faster are will macroeconomic and increasingly peer growth rate. as customers. and in success headwinds we continue semiconductor, to although intend working our than power to expect on We from of driven We momentum environment automotive, to impact our and key power by ensure group, our grow are provider

we the continued raw-material headwinds mix gross our On expect from XXXX, and products. increases incremental XXXX. improving we expect of in Furthermore, margins driven industrial in in operational not do expansion in ongoing improvements front, cloud-power costs and by related automotive, margin

of light we in our changing front, to manage macroeconomic expense operating the expenses On conditions. tightly intend

Our free deliver we strong revenue to XXXX. growth coupled strong solid XXXX. In with cash margin performance result in all-around should in flow performance above generation industry intend summary, in

export-import comment earnings November have order continued in steep with me we consumer is softening macroeconomic data. Decline last in on by in region. business demand decline Industrial China region, in across let our and there year, indicators, now have environment. rates China and end-markets. weakening of GDP, end-markets such demand as Now, from Greater Greater last seen corroborated especially weak all Since PMI been the announcement further in

noted remarks, in Bernard As is modest geographies have his seen bookings by from Demand Greater in days, Region. we from pickup stabilization, other in historic China trends. seasonal along a followed recent

are experiencing We global much in weakness also market. publicized smartphone

Although, with our fourth expectations. was revenue related smartphone in-line quarter

are But the order distributors healthy. inventories based in China appears On Region generally it are inventory. that reducing side, on Greater supply their channel patterns, aggressively

softening have We expect outlook. will conditions macroeconomic growth impact an near-term that on our

current on in based momentum automotive pace in at industrial, a grow outlook to cloud-power However, we and XXXX. our markets, macroeconomic reasonable expect and

Fourth in Now, the the by represented Revenue million the fourth XX% the XXXX. revenue for automotive market I'll quarter. of various of our the of for our $XXX year-over-year. end-markets quarter automotive X% fourth and in details revenue was grew provide quarter in quarter progress fourth

$XX our China market in the quarter We fourth automotive contribution noted X% weakness automotive revenue fourth Excluding year-over-year. grew million quarter. by the in OSA, in from of significant

to at Our design win pipeline continues pace. solid market grow a in automotive

expect strong and in gate our are safety outlook, and in We various our electrification, meaningful modules content seeing growth power adoption seeing to power automotive power in management continuing electrification. Despite vehicle, IGBTs, momentum applications. in in economic the our high increase MOSFETs, We were traction we in see analog strong vehicle especially active applications. for drivers products, of and slowdown products,

Silicon segment we expanding And invertors our for with Carbide Momentum to and we semiconductors momentum ramp customers term. continue are traction that market, in portfolio. other In product we our capitalize China in with our expected ADAS steep expect from Carbide IGBT EV strong the many on are products To to seeing FET EV power for seeing firm, sensor We customers TSR, excitement in market. competitive invest report our is overall the market XX%. our market automotive markets, complete ADAS near to growth significant in are products. Silicon our related by to extending and margin. market China automotive viewing is and are us applications a market imaging and sensor the and market latest them edge accelerating, by in provide relying image that now leading we According applications. meaningfully the to lead independent imaging on for our product market technologies leading research in with automotive and huge in increasingly Customers is of portfolio XX%, share share

I've to us the portfolio megapixel X sensors. design image win OEM megapixel, ADAS the provider a major X megapixel systems X and for As megapixel image only The automotive secure and before, indicated breadth enabled of X we with a of X German level complete X portfolio fourth with X level in sensors quarter. image the automotive for our of are our megapixel and sensors

for programs management analog automotive on to front, progress processors. management power power we continue Our make our

applications. are all automotive leading We with for providers processor engaged

the military, X% and represented our seeing lighting market industrial also quarter to includes in revenue. of aerospace is meaningful. quarter than to sequential slightly Industrial the the automotive the which in strong Contribution primarily business from Industrial OSA of our is to first our opposed the Revenue $XXX fourth revenue year-over-year. traction for seasonally and be end quarter. market to growth in end driven LED revenue in expected market, contributed quarter by higher down fourth in applications. not automotive by million the quarter-over-quarter market. drivers softness China Weaker fourth as was and for grew end are for revenue XX% Greater medical, flat We seasonal

was our secular industrial our increased traction down seasonally no revenue industrial of and flat power demand market. the the to industrial slowing strong Despite area and strength personal China our of health fourth power of strong modules range medium in semiconductor market a networking represented quarter-over- for in customer end in an and year-over-year. fourth modules softness see and increased well revenue. products primarily quarter Communications our revenue to quarter. on semiconductors from quarter positioned slightly the and to hearing to is million XX% expand. efficiency to We're and high-voltage for The power as engagements the seeing first broad the Within contribution in the communications to in seasonal revenue wireless which was includes by for power requirements trend semiconductors OSA the for Fourth of XX% the toward contributed tractions in sequential fourth expected are Revenue of continue and for market business our to continue quarter Greater quarter in diagnostics strong for We end we Weaker macroeconomic With market. There be of revenue. $XXX communications medical conditions, quarter. industrial market. modules, higher capitalize XXXX our quarter. solid communications driven by continued industrial, end products growth end than opposed fourth systems. is market, both

infrastructure see in voltage ramp our beginning XG to MOSFETs We in market. medium are strong

up point to this XXXX as indications of a few in with systems in in accelerate XG a start rate XG better the from Current early to than near-term. for ramp our world. deployment of expect deployments parts expected customers We

significantly we indicated power in XG systems As expected higher our the Furthermore, infrastructure participation in to XG participation be our our many XG times is earlier, that systems. is systems systems. XG in in the content than

end quarter due in Revenue global quarter-over-quarter the declined expected to Computing of growth grew the computing will only market in smartphone by end to year-over-year. by the offset There $XXX the than the in increases fourth be toward for strength our business. in weakness quarter, normal front, primarily XX% fourth revenue. quarter million end Revenue smartphone XXXX market down no driven contributed XX% quarter. market. revenue the market first revenue in quarter greater quarter-over-quarter. our year-over-year the computing in our quarter units. revenue in decline On of first significantly quarter decline from seasonality be the OSA is in the and content The server the helped represented The revenue as slightly fourth was fourth fourth was contribution communications computing

to strength in expect into computing continue XXXX. We

capital revenue generations market service increase future providers. computing expect quarter in we in In consumer we be and Revenue of first our down Although, is expenditures expected the content. quarter-over-quarter consumer expect our due end end moderation server the XX% in to leading of seasonality normal meaningful cloud conditions. for end platforms, to million revenue softening quarter. fourth by quarter. The represented market The contributed macroeconomic $XXX the fourth in in of market

down XXXX Revenue to million of China XX% The quarter to as from Excluding is the due fourth down consumer our the normal and the decline to in region. areas was consumer be fourth have consumer In Greater market XXXX. quarter Greater consumer contribution China weakness of seen of China due market. demand in in electronic continuing revenue $X.X for OSA, certain first selective summary, in and from weakness quarter was end expected Greater to we region compared participation weakness revenue region in seasonality. quarter-over-quarter, in primarily

markets However, medium secular industrial, these The despite we key in in intact, increase significant current driver long-term underlying content and weakness macroeconomic end unit automotive, upbeat our driving in of remain in applications are many as about prospects. business is business opposed cloud our markets. our to power megatrends to end environment, growth

are with believe leadership emerging and provider newly and expenses as managing prudently focus To analog are us semiconductor slowing on technologies adjust end-markets. business highly established relying key sensor for working applications capital. a we customers and disruptive on industrial power, sharp have cloud-power that differentiated We macro and we in automotive, and solutions, in increasingly environment, enabling our of to

execution remains solid. operational Our

free continued to generate flow. expand We strong and our have cash margins

over it for guidance. like Bernard would Bernard? back to I forward-looking to Now, turn

Bernard Gutmann

Keith. ON million trends, Thank revenue of quarter million product guidance first is revenue you, estimated and backlog $X,XXX to services $XX total levels, on quarter Included be to the in in estimate Semiconductor that first in from revenue turn Based OSA. approximately our range levels booking provided the million expected is of we XXXX. $X,XXX manufacturing by

quarter I no indicated Greater in region. is the we in the than on to first outlook, primarily by seasonal of current greater Based weakness macroeconomic conditions, sequentially assuming earlier, expect in driven the decline in decline second As XXXX. further quarter our grow China

of XXXX, in quarter first the to to For expect XX.X% XX.X%. range be of margin the we gross

includes from margin OSA. quarter services XX Our manufacturing of the negative first guidance gross impact provided basis by points the

expect We expenses total million. GAAP operating to $XXX $XXX million of

Our GAAP charges, $XX amortization to million operating which restructuring, are include and the $XX expenses of be expected asset million. intangibles, to impairments other

We We including the quarter interest $XX $XXX expense expense, net anticipate quarter. to other $XX GAAP which in operating interest $X non-GAAP non-cash total expect million expenses XXXX first and of of million income million will $XXX expense, to be includes million, first $XX $XX $XX including be the of million $XX million. for our to income taxes million. million to first expense, Cash We is $XX will to expense, XXXX for income other million paid non-GAAP and quarter net expected interest anticipate to be million.

total the to expect quarter We million in of million XXXX. expenditures first of $XXX capital $XXX

expense in We to expected expect amount goods be cost of million and of million the sold, of remaining expenses. compensation XXXX expect X%.We be This based in included $XX is in which $XX XXXX. capital also approximately $X Of non-GAAP be our is million in to approximately share operating intensity financial for first expected to quarter is measures. the to

Further XXXX stock per are on Q&A With to Our count and on details to that, count annual earnings for shares, million quarter share share XXX and Hade you our and share the and quarterly expected would first of be based questions. line price. please the Thank diluted provided the current calculations reports for Form in on session. XX-K. start XX-Q up I open like regularly is Form

Operator

of instructions] [Operator comes Our Citigroup. Chris first question Danley from

Your line is now open.

Chris Danley

for you've talk what's disties, and just to you pickup giving orders? the if order recently in the and rates talked the in they the customers the about Can are reasoning recovery then

Bernard Gutmann

after we December color January, Again, decline saw really start pickup lot up last against don't a would and happen. that. in the it in beyond did early here about. there's the And of didn't talk see to We normally end have more pick know a no I week, and at then in to it orders

Chris Danley

can gross the what and how you us And up for get on then take just to the rates for do XX%? follow-up, my plans give your are margins we utilization

Bernard Gutmann

the gross So in grow in fall short-term elements in QX the the slightly continue nice and significant revenue, low about. moderation compared we have in utilization incremental the expect in XXXX. that help cost being are down in The probably rates mix to A we the on talked do to headwinds flattish we increase it's the from XX% that same margin not XX%. products. through from about increases had in the will our the that of And continue XXXX to

Operator

Thank you.

next Bank. comes Our from question Deutsche Ross of Seymore

Your open. is now line

Ross Seymore

one first as the you, What bookings, believe for XXXX and and month-to-month. Keith, you described whole? week-to-week given of can gives it the grow XQ as into the you a confidence volatility you to

Keith Jackson

indicates at QX is this year. from as stage certainly, customers ramp support wins, reported us, ramp to their dates the Well, our and and backlog this that onwards and reported design

Ross Seymore

one for coming or the guys In benefits the actually The revenue there mentioned is your back? you controlling guided to Bernard. tightly. And run hold one can that rate get until that you I that follow on for any OpEx the about guess amount the my quarter, in you is growth you for on you side time first

Bernard Gutmann

XX% some But of have that there. is in getting gradually and little bit driving expect our date, one to can do to target sense At first cuts. shorter the time. be you same in to long that on call time, our expect also run, We the permanent we quarter continue so a

Operator

you. Thank

question Vivek America Bank of Arya of comes from next Lynch. Our Merrill

now is line open. Your

Vivek Arya

segments? non-autos see but exposure that with X% the outlined? other going And of I'm sales overall business that of that kind Sensing you flat. of segment? interesting it's be autos versus Intelligent will sales Group Keith, were the to some on grew in needed your And year, last grow when you more curious, the what ADAS that to benefits in-line make what's is

Keith Jackson

automotive very grow So to continues piece the significantly.

the As about some in for, total the market, we in end of that which really see you us of there it's participating flatness number have group. sensors security low half is year-over-year. intelligent set not The declined expectations

Vivek Arya

could us also of infrastructure? And give there much And handsets the way you side, XXXX? versus a seeing? XG rates you a communications, to in exposure your breakdown be how on what can XG is content in then And quantify are

Keith Jackson

take as X% kind try is handsets XX% best So sales, of and those I total. can do. of of About infrastructure the XX% is

mostly it's it just perspective, to Depending on So, XG It starts significant of can that's or $XX, be the now. obviously, installation, be From handsets. for from so. $XXX type small a us. It anywhere infrastructure can ramp. XG very

Operator

Thank you.

Harrison Longbow Our Research. Shawn comes next from of question

is open. now line Your

Shawn Harrison

Keith, or maybe XXXX, one you trying? to maybe expect if guess end at grow a markets look which to we're you would hazarding just that versus year-over-year able be

Keith Jackson

probably not in industrial, the very XG, server expect growing I would will that handset much. And as will and the grow business business not consumer very grow nicely. So, automotive be cloud-power, expect would I nicely.

Shawn Harrison

the want in up. I a looking year come or target capital progress of bit. think mentioned Do my net you as XXXX? then make entire to half to days either of terms a down you you first And have follow working in the little Bernard, to just out for

Bernard Gutmann

cash free we flow. about, as talked which have seasonality we have historically So is some pattern, do

the typically grow we is but expect half than lower to half second First year-over-year.

Shawn Harrison

flow? cash free Grow

Bernard Gutmann

Yes.

Operator

you. Thank

of Vijay comes next Our Mizuho. from question Rakesh

open. Your line is

Vijay Rakesh

looks compute like at grew at looking it site, pretty the XX% Just nicely year-on-year.

you actually how basis? 'XX you as into at on look that or in market a is your Just going up cash do wondering look And exiting exiting segment your XXXX, 'XX? share share

Keith Jackson

very on quite significant roughly on we're share low to server we notebook expect we rapidly. So But growing because where we're side, the increase the share remaining before. desktop and and side, flat had

Vijay Rakesh

on about But side? think XG the XG market And what on year-on-year? the how talked see there share you you do growth I briefly side, it your do in XXXX know you've is And here.

Keith Jackson

in half. quite XXXX, very should significantly double our There was you in growth. see low. will second little So grow was in presence XG digit revenues the And so XG

the for switch very us, significant. So should be XG

Operator

Thank you.

Kevin Our of next Stifel. question from Cassidy comes

open. now is line Your

Kevin Cassidy

that front China. pick-up some New past Chinese of The pointed how when to of in Or compare to you you've just Year? be Chinese does Could that seen, New ordering Year? years especially ahead

Keith Jackson

December see normally fill we January, declining. bookings come basically and is in Actually, because

see normally pattern. now couple it a And of early normal to something returning is there weeks so we January didn't We more would expect of that.

Kevin Cassidy

And the on and seeing or on increases about chiplet multi-chip power that? you're servers, changes What in content going the to talked Intel with both devices. AMD package a has control a

Keith Jackson

doesn't been dramatically because power really there. change nor out. in total the the piece control determination The content, for That's does dollars it a is power

Operator

you. Thank

question next Hallum. comes Our from Craig with Anthony Stoss

Your line is now open.

Anthony Stoss

expect on talk year-over-year? and that terms what Silicon EVs you in of you the about follow-up QX can throughout Carbide you also contribution Keith, Thanks. similar how expect to ramp XXXX, in a and

Keith Jackson

I and year, of last Carbide young the ramping is us. in couple still mentioned talking call tens of next to itself the Silicon ramping hundreds of last We're for millions So in as millions years.

both in EV Silicon high-double-digit third products our nicely be early expecting automobiles and this I'm first I with number our an to quarters. all going in very that. So, it's still certainly did pretty to usage Carbide year. for numbers. quite but in of fourth it's don't EV have related ramp exact We see growth

Operator

Thank you.

Riley of B. from question FBR. Our Ellis next Craig comes

line now is open. Your

Craig Ellis

how is time of long-term quarter? an and on typically pricing out company this Keith, do how you faired negotiations pricing would us in update the give is that fourth updates customers. the playing the and Can with its where when year

Keith Jackson

quite the here, should our not as you in be provide were our had a not for So books mentioned. ASP annual contracts are the than better quarter. first first we've in usually the in quarter Those show-up in and or should completed numbers declining decline benign,

Craig Ellis

fourth full a in Bernard. basis, year quarter follow-up and paid strong get And buyback about share million. were On the the is buyback quarter Bernard, share for XXX split. very equally on

As how Thank two those flow free we across to you. your think redeployment of we about parameters? look should cash

Bernard Gutmann

locations these having And continue balanced the advantage to buybacks. we'll approach. of in it definitely, relates So a take market share as we'll

Operator

question next of Harlan Sur Morgan. from Our JP comes

Your is now line open.

Harlan Sur

Greater in year seen recent you inventory you seeing of are is China this replenishment actually demand guys distribution this the sentence out the this pick-up On also well? bookings. more well? re-sales more or pick-up in the as if a Is as bookings, through or to are want pull get a replenishment Just

Keith Jackson

you don't But items I suggest low would mean, from just might have need exact consumption. for grown on data distribution, they've and pattern them as we the certain guess.

Harlan Sur

for segment market power the data And then better I that the think was is power even think sequentially just within industry. year-to-year. it overall MOSFETs semiconductor of was we the the the of down only better. up stood transistor SIA And got This even significantly month I X.X%, than XX% December and

strong So a Is also guys or function market just a portfolio have all exposure? gain of driven end here. just you content pretty

Keith Jackson

higher cloud and Clearly, the power We've about valuing efficiency. the end to also infrastructure, communications are markets relative but automotive. talked those

And vehicles. on so is key those really that are the The parameter. electric mileage for a factors key you get charge

very drives, dollar performance MOSFETs, MOSFETs, not so from gain. which using but using perspective, more good And high they're a they're just content

Operator

you. Thank

question comes Gerra Tristan of from Baird. next Our

Your line is now open.

Tristan Gerra

underutilization come reduction trends, help capacity external first And like are without us assume end shift this Given to And that fair could your weather demand to quantify markets half? the times much the in any could can plans also these What slowdown down auto. lead you how incurring to internal you it fabs? in even is charges?

Keith Jackson

that bringing the inside. in point we bring a in change amount things back you We outsourcing won't inside. could do. have see So we significant three or everything do But flexibility of

through able So are not times, amount. capacity, the expect the perhaps we see non-power equipment lead area. as somewhat help the the year, is in lead do mid-year. it in of hopefully, much times, improvements in as we But coming some half be Relative our to area, power go to now in and to significant by first deliveries we'll

Tristan Gerra

this really inventory going Is am And how I Chinese is the the going mentioned be to stabilization board. fair industries if China long the then inventory in some in high to You quantify us sequentially think could do digit? up, also my that mode? the doesn't follow down assuming auto be deleveraging you recently. across address to And levels double are it in slowdown QX. help market assume it you the

Keith Jackson

Okay, lot there. of questions

they the imagine but double reasons doing customers. in There So, can't in not that in the much demand be digits autos, service though. lots don't as to have than distribution they a their side, I is Relative decline quarter, first because mode might quarter expect is they China to far. I off on it, all of longer of know. are being first their them still us the weak

much. not normally is a again backlog QX, but weaker Our for little than seasonal

Operator

you. Thank

from Our of next Needham Gill Rajvindra and Company. question comes

is line open. Your now

Rajvindra Gill

out Europe, also you respect And and automotive of by emission does are light U.S.? thank rebuilding and break have business? to the that standard with seeing they the affect the part how new a of OEMs solid of across was after congrats transitioned and Europe maybe you, the Europe, exposure that on to if you I on wondering volatility. this in Yes, your automotive results A could the China, well. as question auto

Keith Jackson

basically market, flattish at still this ranked, is market significant third. our our not Europe is In Europe. second kind in slightly U.S. They're it China, of stage. we're And anything seeing China is and largest down. So

Rajvindra Gill

And because year, was sensor mainly sensor last my flat the side, segment of the follow-up nonautomotive. the on

mentioned us And sense segments how you grew in about business. have business will if sensor year the details? last make up half the auto? When of sensor being sensor You you are that that automotive business of the auto other for a those what give outside the

Keith Jackson

are the then were nearly segment quite portions has not that camera very piece segments some other home a but is usage et had XX% strong. the things usage. strong drone which other grew security as auto And consumer in vision, machine industrial, So and cetera, year-on-year, like

Operator

you. Thank

comes John Our next Pitzer Suisse. of question Credit from

is line open. Your now

John Pitzer

some weaker freeing bit up guys to little on you of to headwinds. this see little because sounds for the cost It side spending on year can saw like could and year you quantify demand side you calendar on a What guys tailwinds kind holding you well? the we try Bernard, And the curious, pricing a year? environment 'XX, up headwinds are of you just I'm because in bit is supplies throughout still either as is offset cost these 'XX? go and/or CapEx calendar the fairly help

Bernard Gutmann

around meaningful headwinds combination that should have and So a number we pricing basis but a a less with we recover the Maybe was somewhere points that some number, lost I we we don't it XX fairly in think and precise think of one. XXXX. XXXX in of this on

John Pitzer

then, relative full your to just Keith, curious. And year growth, comments sequential for QX and growth I'm

to you're you as to to to see up think that Or growth? question. above full half like earlier the in top-line see we'll you do an quarter outsized for year. to get do phenomenon? And you as best bottoms markets growth Do evidence year grow feel start seasonal What that QX? I of have most mostly see positioned a You every some this second think to

Keith Jackson

think of in time. will about that seasonal, be pick XG outsized the infrastructure normal. in server starting up above purchases the in We also I above some QX growth think that would slowdown

and So significantly. goes ramping The significant. start those in think automobile be should we up QX, content two markets new quite models that

growth QX question So significantly some QX yet for or me to good think it is, certainly, in or early will be indicates too perspective, outsized outsized. QX. simple from your But not, I will tell. outsized backlog little do more answer it's content a a be more to

Operator

Thank you.

Our from next comes Ambrish Srivastava BMO. of question

Your line is now open.

Ambrish Srivastava

your times are currently? what on commented You lead

Keith Jackson

They They remained extended not have in changed significantly. teens. the

Ambrish Srivastava

just trying And enlighten in Can lot, are different you several a than helping now also the then trends think my what which to and is And cycles you where about that your a I up you doing on recover? lot have confidence past your are comments should LTAs the us follow gives that throw is you second up just more all should QX order or cancellations visibility? front that that quarter. tie have signed, guidance

Keith Jackson

net the LTA January definitely the change month. end we early saw reflect of The we in cancellations stability. is providing pickup of And absence cancellations. toward the The rates here some talk in order of about the

seem us. be largely to So they behind

Operator

you. Thank

Sachs. comes question Goldman Delaney next of Mark from Our

Your open. is now line

Mark Delaney

and more your customers. models your not on question a Is think longer may your near you to to that a sense customers need had months on there how expected in any that I about the the may And to with smartphone at on increasing for much be business over had based that inventory lower the maybe market. six Do your start ago? then be cost smartphone as opportunities we have you term? discussions side term content guys as the work to focus intermediate preference XX customers there much as you through about

Keith Jackson

we're content Okay, they put XG perspective, there. forward, handsets. a as lot questions increases expecting of going From the in

advance. with is actual from they of that So nice making, mix in they don't the a share And what the pickup. XG us systems, plan on

downturn So, greater I we're the strategies. normal no can't perspective, comment that on And But their an seeing those on in to assume indication little is quarter. QX, we which inventory continue inventories. then than be from first we'll a really here address

Operator

you. Thank

Our next question Chris Rolland comes of from Susquehanna.

line open. Your now is

Chris Rolland

relatively think downturn from one something's Do a for know consolidation industry. industry, you and What perhaps do this for or just are fall? games there? think the are power cycle? lack adds changed the for better probably Perhaps of Or results but Keith. the content some down it here. puts across of your, takes not management We've capacity that more you or driver severe is I broadly you great this guys, seen

Keith Jackson

on mean last years. to has relatively I think I capital compared the content slowly few the come gains for

capacity, is industry on the very in clearly, So tight general.

earlier, much support XG some continue the and just in however, content vehicles continued and that have unit the we the faster efficiency power gains, I markets based in that very think on significant to I electric than mentioned the we'll as momentum in infrastructure. increase requirements

got growing a constrained and you've market think I you've rapidly relatively So, got supply.

Chris Rolland

move upcycle are external Aizu capacity would after planning preference? pretty for preferences or into on do you JVs, What a by -- be XXXX, or control guys here. a plans guys more you good you your to do rather And we you internal, but have if

Keith Jackson

strong for we internal. versus cost the inside use that JVs. know, don't effective JV in adding get. can I of capacity we preference have outside most combination We a we a for And look

So heading. find where best deal we'll be whatever we the can is

Operator

Thank you.

comes question Chris from Caso of next James. Our Raymond

open. now is line Your

Chris Caso

you of of some other of the some end whatever spoke Just if some a of that and broader at it's about lead give geographically? wonder folks For and markets? some month. presume the geographically say Was example, the weakness seen based about and side difference components power the longer some cancellations there. a could the talked been that space that I we've And components more your weakness or you in then start about you color it of China, lot anything have have color the of also particular provide? little on can perhaps, the times handset between Was

Keith Jackson

in From perspective weakness the Most the which is China. also is as mostly of you in side, a would build smartphone guess.

like to mostly does that side, want And so it. it on still look way weakness China any slice you

market more the and stable seemed appear secure. of So, rest relatively patterns the their order

Chris Caso

or So side those the isolated to smartphone were more less? basically cancellations

Keith Jackson

also Well, China as consumer the of some mostly well. in markets smartphone. But

Chris Caso

follow-up with a as to Just distribution. then, regard

how up cleaned about be You talked the first you much, you increasing during and to talked distribution in it that inventory QX about and expect quarter? sounds like

Keith Jackson

the a relatively to in but few days nothing quarter. significant. stable QX, first I it It by in be expect expanded

Operator

from [Operator Morgan of Hettenbach Instructions] Craig comes Stanley. Our next question

open. Your line is now

Craig Hettenbach

trends the times the around some in Keith, seeing. you're just question context a of lead of

So analog lead bit, looking has year-over-year other some even have at a companies, as guidance. down up I still you're mid-teens though they're business X% to shorter about weakened high-single-digits they much the for and If look time. as

doing you're and up seeing demand the anything matching perspective? So from scrubbing terms versus what lead of you're in a times

Keith Jackson

by need We lead lead that distributors pattern immediate out. are for order and some been with we've to time delivery some for to an make they not a for sure times So for times, things pipeline. and we their do basically getting looking at that get working our our don’t time trying

just products. extended our a really pipeline good of our of lead part is times So of management

on ordered we've that just the basically within lead have us just keeps times -- and forward. folks they so rolling And given them

that certainly but So that. mean do company there, expect we I specific

about consumption that so in other we not understanding you're our consumption, China. the having the is reflection changes And inventory major is ones talked a QX of in really than

Craig Hettenbach

the and first and to as weakness there up first, first those had you if recover last particularly they China Any you of the a since them and well? in in year, hit And far seen thoughts industrial. would then along at just expect terms got as how this markets right appliances are follow

Keith Jackson

in up. any light has that shown that's piece so pick are increased We the seeing the orders piece, good far but only

Operator

session Thank remarks. closing and ladies you. at question-and-answer And this call for conclude gentlemen, for our any like the back this does I Parag to over would turn time, to today.

Parag Agarwal

Analyst you Day Thank at to today. call Xth March forward joining on for everyone seeing our you the Good-bye. look We Scottsdale. in

Operator

disconnect. Ladies a and great does and day. conference. today's the now may for This gentlemen, program conclude have in participating you Everyone, thank you

ON Semiconductor (ON) 4 Feb 192018 Q4 Earnings call transcript