- Earnings call transcript Q3 2022

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good day, and thank you for standing by. Welcome to the onsemi Third Quarter 2022 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Parag Agarwal, Vice President of Investor Relations and Corporate Development. Please go ahead.

Parag Agarwal

Liz. you, Thank thank quarterly and joining third onsemi's Good conference you call. XXXX results quarter morning, for I'm by Thad Trent, joined CEO; our and today CFO. Hassane El-Khoury, President our and of on This being the our website Investor call at webcast Relations is www.onsemi.com. section for with this and A XXXX earnings will the on website recorded third available conference following hour available our approximately replay webcast be webcast, X will approximately this quarter following this our of call. XX along days release, conference be call,

of inspection investor website. the on posted is information our Additional

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

of including filings such business, and conference Commission described other XX-K that and subject financial materially that XXXX. performance factors -- uncertainties make projections course the results in to factors the and regarding quarter Form our for recent third could events wish our results to cause the our of Securities differ from We statements actual statements, could from that company. differ projections. most affect cause we'll this to can or and Important or future call, caution in earnings for XX-Qs, are are of with actual the future our events statements other or forward-looking risks forward-looking During that to in Exchange earnings release the

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

over me to Hassane. Now it turn Hassane? let

Hassane El-Khoury

for thank joining and you, Parag, you, Thank call. the everyone,

now billion sixth our is EPS a non-GAAP third very $X.X $X.XX and have financial different We of quarter. consecutive in quarter Onsemi the a company. with of record revenue results of closed

of and commitment our confident one teams. are plans. has our their thank growth these we changes. Congratulations execution, your through and Our to on to our and to for dedication consistent and proven am to deliver long-term employees steadfast successful worldwide proud the continue excellence strategy will I I'm

me let demand automotive end and X%, increasing saw sequentially the quarter, demand we markets, address environment. Now the respectively. strong In in with third industrial continued the revenue current XX%,

As in last computing we and nonstrategic declining markets with mid-single consumer noted saw digits both markets quarter, we softening our sequentially. of end

We some design than our infrastructure. energy expect Today, these robust demand and the to a at revenue of of the and sales in ADAS revenue generated the and legacy for EV, the new industrial, XX% margins third more to activity accretive record weakness product company. is persist new markets while extend and quarter was remain areas for products of from

improve of last concerted and volatility the the business. to the we reduce a taken approach our XX have Over months, predictability

supply drove fixed We our of at planned agreements right the business fab-lighter of We strategy eventual products. rationalized structural capture and long-term operating attractive committed our We and outlook instill us our in to diluted eliminate transformed provide We our prepare $XXX with addressed financial company costs. fabs margins. one for company proactive secured to to profile resilient discipline that of changes made non-differentiated four products price-sensitive, the our gross an and have navigate the to legacy and growth sensing value exited to the from streamlined our planning grow XX% a OpEx and power reduce our We to seven These starts we equipped quarters. price-to-value headwinds. And intelligent the wins build into with executed the for differentiated through demand. short-term model, decreased customer discrepancies portfolio quarter-over-quarter. a efficiencies exits from million product target. QX below We weeks. control and increasing sustainable exposure solutions now long-term we under well all-time distribution to operations long-term for long-term peak set we and apart QX against wafer highly assurance by uncertainty, onsemi supply in demand coming We semiconductor changes continue the with while XX% are inventory and at to XX% with limit transparent and the now are design to low

driven on enable energy. with year-over-year the revenues long-term and intelligent grew market-leading In product their and are electric road solutions alternative of these our chain capabilities. Our the relying end-to-end accelerating supply power markets, by by and vehicles us XX% to X% in momentum customers maps efficiency our quarter-over-quarter, increasingly

progress leadership is our Our accelerating. silicon to carbide

capacity our to of in continue our just compared We the revenue install one-year chain. acquiring mark supply we since in we XXXX. expand to to the volt rate quarter growth across our passed silicon QX and remain the As GTAT, tripled exiting exit 'XX, third year-over-year by on entire carbide Xx and track we capacity

our related around in from fab with the capable, our and up output, revenue LTSAs. number by ramp year. year 'XX. we of this next wafer on on most are the triple remain track world wafer to qualification starts again also committed to limit to have track investments, revenue To and in revenue XXX-millimeter silicon on XXXX our of and CapEx XXXX which billion silicon in carbide We Xx based $X we revenue carbide are volt we is double plan We in equipment 'XX long-term for SiC installing a XXX-millimeter increased keep deliver

year-over-year infrastructure the a energy increase is in with quarter. Our of XX% third accelerating revenue

growth. a in driving And of energy. in a of silicon them. For and 'XX, in silicon energy with to accelerated year-over-year alternative an modules, we of power have a market market. XX The have with solar have now as LTSAs XX%, emerged top we markets leader and exceeding share the carbide revenue this expect grow target X providers signed is we world transition our collectively inverter volatility infrastructure of energy global to by XX%, broad portfolio The our XX%

greenhouse efficiency fossil our fuels, with solutions business. complemented associated gas and expect world is we the around to countries energy energy carbide can our our for or value axle. silicon rear third to who in of growth strong and by silicon power which axle As front XX% by silicon our solution a Customers power range customers and long-term strive offer our products, gain based in a emissions technologies. choose combination for see and wide Traction customers our quarter security EV across differentiating lower businesses a requirements. on alternative to and across key offer is silicon power onsemi for the advantage for solar range share solutions voltage our ability driven power of grew IGBT for silicon requirements. our carbide mega MOSFET a solution industrial. trends growth silicon of solutions Similarly, alone, us A and in enables to high-growth Many both year-over-year, market carbide In carbide use silicon ability silicon complete inverter use the automotive continued and solutions business.

capacity feature intelligent consistent performance the this accelerating the the our vehicles and high ADAS new year-over-year The we year back-end car detection to automotive us quarter range to local delivering growth are higher-resolution investments mitigation additional and in requirements level allowed and sensing by range, And of in industry-leading across business delivered of performance of been Japanese X quarter, Based market automotive OEMs. image for We Our deliver megapixel the X quarter-over-quarter. margins. provide view, driven LED of early outpacing by is to sensor, the enhance such winning the lighting and grow designs. from latest rating sensors all broader XX% new per for will of and semiconductor QX was sensors a applications. view sensors support automotive-grade a our conditions. megapixel more first dark continue ability flicker growth than as and to a and higher. at capacity supply, with our sensors increase, incumbent temperature shift expanded field shipped. well megapixel the Safety but increase wide automotive number required sensors XX% increased to also to we revenue to large the in continue industrial sensors, content was as Onsemi field systems as units ago. driving in The generation X noise in displayed ASPs in has ensure expansions sophistication the to an that XX% and applications third Demand dynamic of our our on internal both

across In manufacturing every image with sensors. the are capabilities supply automotive addition and stage to the we and industrial our technology of chain sensor external internal for only advantage, supplier

stronger XX our because We today and have months. are implemented transformation company structural we a the our to commitment much over last the changes of

our electrification in for infrastructure we've up energy by environments automation, the continue one leadership target of in secular world, We exposure have have not the ADAS, executed and Driven the the but to our ever set outgrow vehicle to we seen, only well factory challenging semiconductor our most to and we for positioned position markets. market. ourselves are trends mega of for strategy industry

over our financials Thad? Now provide on will call and turn the details I to Thad to guidance. additional

Thad Trent

Hassane. Thanks,

power tests and results Our get cash clearly . of The enabled Defining us transformation double but to we not short-term enable model operating we areas also our to on long flow. through strategy us have industrial and intelligent differentiation to has to with third volatility, the revenue, operating and sensing record and automotive market markets. will the technologies taken quarter our the propel to term. down where scale strengthen only lead free income demonstrate success bring in us of our focus primary

enable infrastructure in now us, billion are our LTS often and LTSAs Revenue are areas $X.X third agreements a new the strategic customers includes factory electric as the parts. entering automation. Customers of multiple partner over years such as $XX.X their hundreds now to energy and emerging ADAS, to even vehicles, onsemi supply. revenue through committed longer others Our while duration success expanding billion quarter increased LTSAs totals choose secure with in and and scope existing of in their disruptive with

additional rationalizing the our we price-sensitive non-differentiated exposure structural changes mentioned, products. eliminating of our to portfolio by product also to Hassane improve and sustainability As made margins

have away gross we at was of third margin $XXX far, the an million average quarter So of at million margin gross from revenue walked in $XX XX%. this of of revenue XX%.

We fab-lighter to manufacturing through strategy continue our the footprint. our of rationalization execute

in and our half entered the Portland also closed in agreement Belgium Niigata, X-inch we Idaho into in Following the to year, first and of the sell fabs of a of fab Pocatello, fab the definitive in sale X-inch our South we sale October, Japan.

We these fabs Niigata $XXX to will our fixed supporting by be quarter. plans. four reduce long-term gross million in these target close next transition other our years million. over $XXX will million, the transaction realized our cost in The of the exceeding annual network of divestitures $XXX Exiting fourth expect to the we several production full further expansion fabs margin benefit our to as

Turning to quarter. third results for the

a year levels. in Weakness was quarter at for QX sensing growth another sequential Intelligent industrial revenue as XX% intelligent which nonstrategic of year-over-year persisted by As of grew of grew and increase record an and end XX% end intelligent together results. the automotive for of XX% compared and our quarter reported and computing also XXXX in XX% accounted and Total I of of X% to industrial, XX% markets mentioned, revenue quarter-over-quarter. respectively. $X.X is both intelligent of record markets by year-over-year. automotive strategic Revenue ago. power quarter was from and We in our over X%, power billion, offset and revenue sensing third record XX% consumer, the

for revenue Additionally, of was $XXX Group, units XX% year-over-year. million, Group, $X.XX the Solutions Revenue $XXX third Intelligent XX% in increase reported was was Advanced or record of year-over-year. was quarter -- XX.X%. XX.X% non-GAAP all for ISG, Revenue revenue or Gross increase an an Solutions billion, the the of margin And for quarter. PSG, gross gross Power XX% ASG, GAAP margin three increase for margin year-over-year. business million, and was or an the third Sensing the Group,

XX% at slowed primarily of by an due declined quarter-over-quarter, year. from and beginning accelerating we factory wafer ramp carbide Our expected to in as non-GAAP basis the XX points as margin lower XX% silicon starts by the proactively utilization gross

to GAAP $X.XX high a a year-over-year. indicated quarter record was points the to and was previous ramp. compared quarter-over-quarter record share carbide operating as silicon and increase calls, XX flat As diluted basis to in for was approximately of initial points diluted margins basis XX.X% for $X.XX, be X,XXX in a start-up revenue of dilutive the quarter as costs during operating $X.XX an of XXX earnings conference the year margin to of Non-GAAP to basis GAAP points margin compared non-GAAP and at expect XXXX. earnings the per gross quarter was the ago. XX.X% per third share quarter third we XXX

the give models. were $XXX me million operating quarter the quarter operating some Non-GAAP in $XXX management million $XXX Non-GAAP compared fourth let the Now guidance operating numbers XXXX. as third of your for spending in for you to expenses GAAP as third expenses million the expenses proactive of compared $XXX a were additional to million were discretionary into due to pushout the hirings and across our programs delayed certain ago. below quarter year company. a of quarter,

tax the range. expect For our the to rate remain was non-GAAP in XX.X% we third and XX.X% XX.X%, quarter, to

we third on in million our various prices. XXX an We share table shares, count website million calculating assist Investor our was X.X share Please have share section you shares shares. note $XX.X count count the that to million million Relations Our our the was diluted reference XXX repurchased GAAP share and diluted quarter. updated diluted non-GAAP for of and

flow the and $XXX capital billion, Turning were XX.X%. equivalents to XX% free which was billion, from revenue was record on an a Cash LTM operations sheet. $X.XX cash during expenditures at and million million, was basis. third $X and of to equates cash a Cash the had of level $XXX quarter our billion on of balance undrawn Capital revolver. intensity $X.X we

XXX billion. million the days of rich X.X Accounts from capital portion weeks XXX-millimeter DSO down our QX. for from in As XX and by declined by to levels distribution we This Fishkill in manage total million Days XX we historically days indicated X.X carbide debt quarter-over-quarter. directing includes intending previously, towards carbide And days proactively ramp. declined receivable days X of we our of by at at XXX of a in inventory inventory transitions XX as days approximately $XXX silicon and the are East declined significant $X.X $XXX to inventory declined QX Distribution inventory silicon partners. our of weeks, support fab. low capability enabling to was expenditures

guidance Turning to and to press in table is third for the results. provided GAAP the release quarter our detailing the guidance quarter. fourth A our related non-GAAP

our elements provide now me the non-GAAP of Let for you guidance quarter. fourth

from demand markets, by strong see ADAS. to continue our and end automotive We electrification driven

We we our are our to in portfolio exit see nonstrategic increased industrial and weakness as in certain beginning end markets applications, that continue to softening we plan expect we rationalization.

the we a uncertainty, stance Given our quarter. the cautious fourth macro for in are guidance taking

As such, revenue the in will $X.XX to we anticipate be range of billion $X.XX billion.

between our $XX to million expect will and of We delayed million. utilization $XXX to the $X anticipate expenses project expect compensation and non-GAAP operating due XX% share-based we hiring non-GAAP factory and spending gross We of million. to third XX% increase million, $XXX lower margin million. in impact quarter, to compensation of Due to million $XX dilutive ramping to This share-based the carbide. non-GAAP be including silicon includes the be to OIE also $XX

rate fourth to results XX.X% is tax diluted share approximately the per be non-GAAP in XXX quarter shares. share in of the and our range to XX.X% account our million to be of $X.XX. be We for non-GAAP non-GAAP in $X.XX This expect expected to the range to

high-teen capital expect long-term expenditures $XXX expect intensity onsemi our our to as resilient million made invest the summary, our fourth more and in $XXX growth of We transformation to to company. to sustainable be capability carbide we percentage XXX-millimeter capital million In strategy mid- production support in a silicon we our continue the and in quarter ramp is to range.

Investor to by ESG have net drive for Best XXXX. to Companies recently We we named zero Daily’s Business as XXX been XXXX

while over open to performance for and extending for financial like invest I'd competitive that, positioned deliver our to the long-term With Liz well in are turn to shareholders to lead. call our our We Q&A. up

Operator

Bank. first the Instructions] line Deutsche comes Ross question [Operator from of Our with Seymore

Ross Seymore

I guess is on side the the revenue of equation. and the first the is one side demand on

segments Can weakness other in a you're aren't bit markets You then industrial market? weekend and demand industrial been understand you the you, seeing strong, of you but but and a your the maybe side mentioned linearity in talk about auto little I into little think people other is. focus have just deeper bit places. dive what staying uncertainties a for strategically about talked and the

on helpful. a would color metrics little of bit be those So

Hassane El-Khoury

Sure, Ross.

So in that we level, strength LTSA at renewed the that demand we're capacity about, Thad cover outlook the building the see we for. and LTSAs and automotive, that's -- the and a LTSAs all why see high I by been the we have we -- strength have, and the supported that including extended talking

ramp megatrends ramp the in electrification demand. that strength quarter our automotive outlook we changing ADAS. driving We the seen the even have. the our are business see Those we this we as as are don't that You've in

the you On industrial side, automation. factory see

our in You see really made business, the that in including that where strength see consumer. the energy, are bit we is little a what we to renewable closer softness medical of the segments industrial

I Obviously, it, think We're the the white that watching in kind but macro-driven goods softness it's pockets softness. a so. that's see see We that. like or of industrial. we

Ross Seymore

the just of the in the of side half equation, that back question? linearity Anything

Hassane El-Khoury

It's up into to the right.

Ross Seymore

are ramp. guess I Thad, number on follow-up, to the my silicon about margin from difficulty It's X but in competitors the the good of that of your you've X one headwind percentage And you gross sticking side heard talk as a point carbide things. still the with ramp, that guys for

confidence your $X over the So those billion two the in as you're if so little as intensity that to in CapEx move ramping rise revenues, what have demand side the it is, lines the up to doesn't shouldn't roughly more is sync? do staying as how high capital going us And If is same, accordingly? side significantly? of equation can maintaining and bit you're a in on color you the you gives hit revenue the

Hassane El-Khoury

first Yes. the as Look, I'll talk of Thad cover as far hard and is stuff. the CapEx. the Look, part difficulty that this about yes, let

it's easy ramping we issues they sympathize up. because to facing stuff had challenges, leverage with our experience competitors been scale to address manufacturing So not scale our the come as and I that standard and worldwide worldwide but to these we're do. We've able the

excellent that's day. experienced do team what operations have they and and We an very every

mature have processes. We

We very manufacturing scale have of a playbook. strong

seen minimal. they any is difficulties carbide ramp quickly, our do tackle and we're if what in able the we're our importantly, why That's excursion, you've able more resolve to always focusing against in. it silicon bring that always it confidence So on ramp quickly, and to impact that happen, of us ramp will the

our within So all on giving the risks manageable been we've revenue and targets that we've specifically strongly our we very targets do the our been us. capabilities, and that are -- are believe for ramp believe talking

Thad Trent

Yes. -- orders capital up. said to we're do Clearly, quarters. expect this prepared the high remarks, ramp, intensity our capital to the revenue go Ross, support in up as single intensity, mid- to on expect I to several to having to for but intensity out over next further the teens equipment mid- my high to we go our we capital place

Operator

question comes the line from with next Our of Danely Citi. Chris

Christopher Danely

as to over as of XXXX? end changed well? then And this the have bleed weakness weakness, into the So expect you your automotive for pricing expectations part do market

Hassane El-Khoury

outlook said Obviously, based volume of that does demand and No, certainty on on products are the any LTSAs products. we've on as LTSAs the the Hassane. provide not that don't we talking the about pricing. the the have value and both is and our change the we've strategic in This based pricing, past. And in of that been we movement see

the been would in we and be not that to pricing Obviously, and is not to exit that expect of even core strategy in equation, place would favorable any that be plan the potentially don't always I businesses that exit, has our industrial. part be volatile that to margin. are actually in automotive the where So

this we're not So worried point. environment the about at pricing

Thad Trent

that And we would our we input customers, are up, that do to passing is add as on Chris, costs I the continue one see as thing and to well. we'll going

the So stable. very is pricing environment

Christopher Danely

in -- are my the there those or And existing lead as you times? part seeing And your that, are any Great. then change have there of any follow-up, products? for any for are you are Or seen all shortages gone?

Hassane El-Khoury

Lead very is is flat consistent. and times

sustain XXXX. our yes, our ones those remain we technologies sure sure short we constrained supply our have make make year. far demand with remaining customers As new the in the shortages, customer -- have next expect we for with supply And that do in we're And LTSAs to customers to whole we those our to even that are BOM strategic as to have. technologies cover covered products in through the ramps order

Operator

next comes Arya the Vivek question of Our Bank with America. from line of

Vivek Arya

automotive which building rolling drop and question, year? you now? your semis. of you be next Hassane, the is to on first when is wanted could from on show What What I just right is also a inventory just towards automotive correction kind next are the at Tier customers supply-demand side. on Xs, to half balance about? auto this in Chris concern look follow especially hearing asked, balance they in up the supply-demand of Are There this OEMs the that the

Hassane El-Khoury

visibility something, golden inventory. we to then a next we it problem? will batch ahead or and We is sure there three work make weeks. because weeks build over our them Yes. we two few Are give screw they the there the with customers have, pockets to few Look, small no drain the when weeks

So -- our we not because worried with those about work those, are I'm customers directly.

no and the does, our content demand it's growing and you from, build SAAR demand then and EVs. what where going prediction. comes look OEM, next the OEM 'XX, EVs No on megatrends, of grow coming look will into is talk this our case, or cars. what environment based or matter where they our sensing thing pure-play the year customer you to If coming is remain our you EV what two this than from That's our SAAR report an where does more lot both a safety growth consistent. and do OEM, they more No matter matter a is coming in at one there's more broad even what at and Between year. That's the growth to in. through getting is power those from,

So what outlook confidence. we that the us Again, that's gives secured with have LTSAs.

of demand Potentially. that ICE worried going their or to again, to not going EV secure down? up on about I'm sure are focus EV rates going OEMs going Is the to So the it. ones we But want some because or part they're penetration have the that softness plants engine ones our they make of that lose share.

So anything, of that's it not for our we demand. it and what we point, If But EV. work potentially just it's on. at is don't because our But to any this inventory. business exposure see

Vivek Arya

last for range. And think margins. it. Thad, feel in this comfortable call, to I you follow-up, the XX% gross my staying Got on XX% you said on

QX you and we Fishkill right, at the XX% taking think you about East I when on course, perspective? be outlined look outlook, a you'll How at and from takes Because ramps. should fab, 'XX the for headwinds carbide then, which the are have So puts from of already. -- some calendar silicon

So there your right and headwind is some XX%. now is utilization

for -- next of year? in So margins what the kind gross puts of this you stay range can kind are and takes year? Just plus of for XX next

Thad Trent

of got Yes. to 'XX, to points provide by Look, here, as and mentioned, right, carbide. you've no headwinds, I'm basis -- for 'XX for trying silicon you a couple guidance XXX XXX basis points means but for a

for year. dilutive will points next foundry -- basis business that East XX to Fishkill for points be basis XX the are got that You've

for be of this anything, our more margins by market than what year. I pricing We're terms driven will dynamics do. next in will the comfortable very think in

to We're and I think I it environment, really down think down to going cautious. already. starts very In comes utilization we're utilization. be this

next conservatively. But a on floor very range. into can margins based our feel on the see year, gross As we than today anything. what the modeling we're think be here go market That sitting there's that more by in will mid-XX% it we driven comfortable pretty I we

Operator

Our comes from Ramsay question with Cowen. Matt of the next line

Joshua Buchalter

wanted on walk XX% to to the about like you CapEx. the particular, the can spending than there Matt. behalf Buchalter seems outlook. This running and Were I -- ask through materially next is in be it's quarters, next driving now? least Congrats going why couple It what's initial uptick higher Josh the us year of on or at increased any of result.

Thad Trent

clearly, the uptick will we But continue carbide more support I we're make locking we're lock-in. open to that's wins capital. Yes, we is increase -- LTSA we that to in to go and referred that continue that ramp had reason and the more investments. for and the the out And requirs additional that up the revenue to QX. the years

Hassane El-Khoury

make time, mentioned lead obviously, Then equipment stay we we of the Thad to want ahead sure it.

to So us We that's to. able our not forcing don't ramp. materially of need support typically run we risk to would place being than earlier to order want the

So proactive the we're being vendors. very given the and environment lead time equipment of

Joshua Buchalter

your specific made? of normal yield last that design week. one there. internal out curve? with of read-through the thinking at yields we any your up Can they a about questions just your on competitors then, been was we've mentioned getting sort And Since of of from the issue color own lot then appreciate there the you sort is you into the of I a it view, that to some ambitions? substrate your us Is it through coming part walk Or decisions there? found

Hassane El-Khoury

business we've given I should side the we the you they we're inclusive our over models cost our changed, idea them. had have headwinds give of them we and mentioned, made. that and what power as as Look, on since as on far scale our always targets consistent our we the the from our what can start-up not within doing. strong and and And ramp the I I same strong not are may that have with very only or very we from started have. with of been disclosing the process last the the Because and playbook a as all in far really reported the the all outlook include well that given those decisions or a our all decades scale two what last at comment are the IGBTs. baked Those may as giving over business comment ramp, an we margin quarters few confidence challenges We've and can't that results. for numbers products . -- manufacturing in. We've any capabilities, of of very assumptions

started power yield top and were meeting we And There's to ability line will walk and both where challenges through at we're the disclosing margins side. no from the our those the our we still So walk the change accretive. at that production be scale, products all scale all We're we ramp since have, through those and exactly margin. numbers.

Operator

Our next with Hari comes from Toshiya question line Sachs. Goldman of the

Toshiya Hari

that you you talked $XXX that revenue half in million consumer think, the some accelerated? in from exited guys Or end Thad, ago, the given mentioned QX. markets, about, million of the still incremental you this I second plan? an $XXX and million year Is months weakness in the Three could in in be initiatives $XX XXXX.

Thad Trent

exit the million we'd we could market And said you always referred better $XX exit, faster that be, We've the we as the would be off Yes. driven. exited to.

we as track the we to million And going we market still XXX to $XX we're to it exits XXX year million be again $XX think QX, somewhere next on As and but for this we will in to between well. forward for would we're dependent, exit in XXXX, of QX. think be neighborhood think

in that. on this capacity valuable We that's that this kind to market us more think we're think to of reallocate softness we So exit else somewhere the us. track supports allows for

the we numbers are line So right now. of that to sight have those

Toshiya Hari

said response QX? your and the a continues gross assumption into curious start kind is question utilization rate And move what to then in XX% there? from my be statement, what making margins. assumptions said, the utilization And it you wafer on in mid-XXs as prior follow-up, another margins. guessing 'XX? of I'm another In pricing to rate curious perspective question expect a QX. to floor you volume south, Great. plan You but one for for or to are that gross a making I'm what you

Thad Trent

Okay.

not business that we'll the you think terms of we guys to steady order out floor more think provide very, you when in next So so figure in that what the going the We start very I'll be here next let well, on a is mid-XXs on -- reverse downturn look, remains guidance is to Pricing back, what -- year. year. coming market-driven. of I'm one, in

will you guys model the question? way the first it the You was What it. model of part

Toshiya Hari

Utilization rates in QX, what are? the plans

Thad Trent

Yes. Thanks for the reminder.

QX, we in here XX% to QX. XX%. at dropped We So were

As again, here. into softness we incremental assume look we'd forward QX,

So in QX assumption. think down slightly our to flat we as it's

Operator

Our comes next Rajvindra line of with Needham. the Gill question from

Rajvindra Gill

any direction by kind top Question on you or line. nonstrategic on the strategic? guidance the Can of us give the

Thad Trent

down of Yes, And we is nonstrategic, Raji, kind we going by think the digits. Auto, single category, down guidance other me digits. kind That's is about industrial think low We up think, out break end think mid-single single it to the digits. there. mid- be kind is let of way our market. to of we that high

Rajvindra Gill

Got it.

relegated growth in curious think rate, of been heard So this kind we've of white goods has mid-single relegated to of is if industrial the particular percentage mid-single just softness to I'm quarter-over-quarter. still some industrial about of a that obviously, is a growth it's if the year-over-year segment from on rate the you your decline small you're that and relatively kind of softness kind if it quarter-by-quarter, the being seems commentary seeing even seeing just in a of in industrial market, be And -- that decelerating. decent And to competitors. market. deceleration kind down

of case? other are seeing in the your you Or medical that's with production of if energy, kind are indications alternative industrial different wondering Outside other or to respect seeing slower segments? just there you're customers? So that

Hassane El-Khoury

driven to very or these is alternative white that industrial the kind to of we're The up. consumer market goods, to call is areas. and softness we an Now real as The multiple broad, segment legacy estate. and even gave automation, starting in what the the going is I industrial of example see legacy consumer, that energy look, be spending by it is of factory the industrial -- closest meaning the industrial, industrial

alternative remains market. really through, broad investing in strong and what energy. we've obviously, that automation Our and a driving And industrial focus very or been growing. automotive is new that factory on But specifically is and in, that's remains products

Rajvindra Gill

appreciate my follow-up, I Hassane. And just for that

on quarter-by-quarter that of kind based the been Just on programs. of it's kind bold pushouts OpEx,

for So XX.X QX.

going ramp? continued there OpEx slows thinking Is As are I'm you you're OpEx there environment to an kind you same about R&D? how wondering of managing if go obviously be curious be where thing the managing demand into in to XXXX, just investment down, inventory. going you're that's -- system if conducive the

thinking XXXX? calendar OpEx the you're into how controls about curious Just

Thad Trent

managing very been Look, spending discretionary we've carefully. already Yes.

to is I R&D the my grow. of see with timing Some the lumpiness, of prepared in What as the into of you'll projects. continue us some do R&D as reallocate some remarks spending mentioned we

We've kind low As too well next we at set at think, model we've below think point. year, that, XX%. this of been our into running I

As into next to don't XX%. year, think I going get look we're I to

probably max would I year. going be end. of thinking next out top to think the around we're my be for at That XX.X%, XX% maybe somewhere

Operator

Tore Our next Stifel. Svanberg question comes from of the line with

Jeremy Kwan

Jeremy calling just quick questions is Kwan here. This Yes. for two I guess Tore.

any your long-term this? just have of kind are to there sense customers supply your with agreement, I commitments The peak of regarding given. want a that upfront first, cash associated financial commitments pace get any or

Thad Trent

the little your you bit? question, repeat you of up a Can broke part first

Jeremy Kwan

the these? Yes, if agreement, Sorry about it, with long-term supply there's prepayments any just wondering Thad. associated

Thad Trent

for Yes, It that us. can mean that with typical. be very on capital. R&D, it customers be to co-investing that's our a has be payments -- for absolutely. in been been I We've co-investing saying while. That's could have prepayments,

Jeremy Kwan

Any chance could quantify us? you that for

Thad Trent

agreement by duration. and vary They No.

want So try to put I wouldn't a it. and on number

Jeremy Kwan

Got it.

increases is price the in Okay. the might that Are question. to supply to chain? just And you're highlight along increase the versus to want way this you circling timing well? anything that -- as terms you're there there pricing that seeing passing back quantify of in of the price maybe any these then And

Hassane El-Khoury

not because passing we just whatever quantitative get. we're giving we're No,

think So outlook margin, can from being our as from about and it the neutral. you

pass get it on. So as it, we we

Operator

line Our of JPMorgan. Sur the next with Harlan from question comes

Harlan Sur

year. a image as solutions, group, outsourced capacity This business of sensing portfolio, intelligent sensor quite -- Your been bit it has which primarily which year. I back the was is constrained this last outperforming where remember is you have

higher just I nine Is you than you capacity from better for give allocation guys getting are up months. update tracking XX% initiatives? sensor assume first your foundry in-sourcing the an image it's the us on like supply can think and partners. demand I still

Hassane El-Khoury

based Yes. ICE of outpaces engines. Demand lot -- look, I'll demand agnostic give we in you the is supply the for Obviously, demand automotive, EVs on that of which or penetration a ADAS see still environment.

that importantly, environment very hold very position market. that So demand a more we healthy healthy in and

that some We new have that both markets also that well. and new our products a as ramps lot purpose of we've industrial in of are . launched, these product individually for is driving automotive fit and for

over of some mentioned I closer foundry my been internally, getting increasing foundry some as partners. in we demand as the wafers On our quarter, order also more the And incrementally get time. from partners to supply we've supply we expanding our for environment capacity prepared our remarks, more in -- side, been have with of road is more that what incrementally get get are. we to doing Every map our back-end

the because that our to that ASPs prepared through remarks. see the increasing talked to growth about going business have getting my to next capacity, these revenue wafers We're We the keep higher don't in you technology as more enabled to foundry of and we're driving even increase from our units that as advancements keep partners, slowing to down. in keep going given both year. So that's of going I us well

Harlan Sur

how Great. has team bit traction onboard and your been of about little successful EV a the for So in addition prepared this Hassane, guys in leader remarks. talked you right? solutions, to have Being silicon the MOSFET driver you the uses further in power, I portfolio pretty broad IGBT a a also inverter $X your represent carbide charging, in, the is pulling for which alongside but inverters? also gain carbide of front-wheel does opportunity. your drive, portfolio, silicon in sort not traction included and gate in it the pipeline, content This, billion sit module, example, assume, like solutions

pipeline? has how silicon in the attaching these other of components, team sort So successful been carbide two-year

Hassane El-Khoury

That's question. a good

team -- our has refer team been the sales business very the successful. I that well. what something we that as to So with What it's cross-selling, drives as unit I track

specifics, more purely talked billion including $XX we of Thad billion some give talked general carbide. being LTSAs the revenue in to the $X of silicon than $X about for just billion last quarter and on our the silicon north carbide, So more hundreds that's committed parts. and about increasing

LTSA. is everything we customer golden you cross-selling that's about have we The customer at that think and So parts, on is in BOM to a from you needs the screw have worst sure and can XX missing us thing that can XX. ship that the also, the can the where secured to want make you're

designs, So sensors I've will highly the image we per we them. that past, with also per with lot full our have mentioned advanced image even PMIC content new level a of other carry where And do and the that on sell. we a system sensors pull BOM. support new that content in

we power, Within business not So carry cross-selling. just it's even a power. power our as intelligent sensing

day. matter as of that a do we to day So

are our Our and on business it, focused team on sales it. units focused is

Operator

of the Arcuri Our next question Timothy from with line UBS. comes

Timothy Arcuri

could think margin from better us in you quantify get gross the then about underutilization maybe and in does if headwinds that or wondered help worse? I the QX QX,

Thad Trent

thinking the way we Well, now market about look, is the it right remains think we're soft.

of level, I as goes we stays maybe backwards even think into in slightly QX. kind this utilization go

in just don't expect all we're I news. to based So that what improve on seeing the

the In in And quantification, that. is XXX addition terms points to XXX silicon we dilutive factor basis is carbide of there. basis utilization the said to points a

Timothy Arcuri

sweeping -- of like any you're about how of LTSAs? question inside the I the moving lot skepticism quantify general to just LTSAs. carbide broadly in then, right revenue really much talked you just of an sounds inside an LTSA customer behavior LTSA? now And given of that goes of of talk a I versus guess change is about the just there's around that. can the maybe talk you typically billion importance content other can about moves increases of you just and kind business help most And $X.X of LTSAs, the silicon you Can inside guess, Okay. it the of -- outside

Thad Trent

said, as They customers Look, are them back and coming increasing their LTSAs. well. extending as Yes. I are

our here over has It clarify, committed revenue to just over -- up the supply. I billion. a very customers So think $X.X been multiyear in -- to trying now $XX with aim third LTSA billion lock in up $X our the was LTSA that consistent period over long-term billion our And is quarter.

LTSAs commitment you the the customers across So doing don't on is to we're because entire this silicon supply is we're want that see exit, on not business well a -- to we portfolio. have can there. locking obviously, doing beyond carbide, in What as that but looking not we're

Operator

of question Gerra from Baird. line with Tristan the comes next Our

Tristan Gerra

on Just a this. follow-up

earlier we So that in of companies year, implemented know industry-wide to. analog this another had LTSAs, outside in noncancelable orders

of So into are in or outside LTSAs? year at of first holding next terms those next how dealing with of your or half into year least the you're

Hassane El-Khoury

Yes. not and it's the Look, it's end multiyear. about just, customers. broader also view, with a it's LTSAs Obviously, is a

to very on that. visibility it and kept XX trying the always at to sure very, out control. balloon backlog. the had seven We've cautious As disciplined have we even have -- we months inventory -- We've an inventory be it it far remains at But doesn't it with disty weeks. of will make order, comfortable extend you we there's NCNRs us our depends. seen You've We're around as it? but ship have still NCNR, NCNR the of if that up outlook you

the orders are we quarter. that it We when that POS to of we day the the of ensure about have, we have to have end because we and support all much the ship during we very demand but does at ship disciplined it NCNR and cautious the how

with get above doesn't our far as it partners. as of So inventory weeks expectations our

Thad Trent

that does Yes. add billion orders. of NCNR not include Tristan, LTSA, it our the of $XX.X I would

the combine and two, you our backlog good when into have truly. very we're visibility we So what

Tristan Gerra

the some volt. based carbide silicon to your website, all other your on then That's suppliers the going on provided XXX for specs looks Okay. way follow-up, I carbide already there great. volts. X,XXX at And there's silicon my products from know out it products like

increases TAM about this assuming And voltage what's also of talk the Because specs? you your expectation? could that within I'm terms your So increasing in EVs.

Hassane El-Khoury

customers. Yes, to, but volts X,XXX I already supplying production have we referring and you're in don't know where to

our in road been. comfortable XXX breadth has our it very portfolio, X, and silicon map our production, volts is already and the in I'm but with of silicon and So carbide, both

Operator

the line Mizuho. Rakesh of comes Our next with Vijay from question

Vijay Rakesh

question. quick a Just

the carbide side, On you're silicon seeing pretty obviously, traction. solid

the Just idea you you motor, of give wondering cetera? car dollar can as quad content in of to if you could et an motor terms us you're range, from what if per dual the getting go a

Hassane El-Khoury

couple a Look, give for power inverter Yes. of and you so the on. or comments Vijay, I'll it drivetrain because on much depends the how

a an just range. it's give So broad But to reference. equivalent for idea you an

think EVs, And so you that far as an about chargers you For content, the it as add Obviously, EV $XXX onboard is ASP, it's can of about about then and can you think the us then the an on for incremental Xx versus as majority inverter, it carbide IGBT. about from silicon ASP on. ICE. traction of is the

an you a So specific of if on you as as output. that apples-to-apples power far normalize kind gives it

Vijay Rakesh

pipeline design at Got growing then it. the nicely. you win your And as is, very look second question is

talked displacing legacy suppliers You well some you're incumbents. how about as

through top there the go wins, number drive that things if the kind we of updated backlog could very you helpful? And an you be backlog would X helping well? that you if what had are wondering are cover Just design think I as can

Hassane El-Khoury

is all of wins forward-looking our confidence. driving things and two revenue technology. of are the product there One and design starts obviously, overall, an from always with So a the revenue new lot

about and and Our it's against a we've smaller the both in competitive smaller in and market why packaging carbide improving Obviously, very and today. as compelling, and efficiency. on area is far costs module, our we win, getting strategic technology of the what's the and as technology power and area and a on more talked lot silicon module, focus our reducing so

a a and give superior are of the lot few of I'll sign. in market is a So LED sensing, that's need silicon competitive a example detect camera our LED or where an examples. where standard flicker on great mitigation LED the technology carbide. a Image signs you camera cannot

what the us designs capture also we for new refresh we with us what, the specific needed that going problems puts always address one, technologies Global share. address is that have and the detection us in a and That's value. And is But Every starts after, tailored have. and puts capability. customers have made there's that's when automation. technology strategic number creates market single technology We to the for real with lead that. what factory shutter are are for lead in to design products and/or it that

Operator

session. closing El-Khoury, question-and-answer I'd That CEO, to like and President the Hassane turn remarks. back call concludes to today's for

Hassane El-Khoury

for you Thank us joining today. all

talented lead delivered I'm technology, and growth. the outstanding teams workforce in our to future the seeing you executing to we committed during And Our yet events a customers again not the in as have and various investor continue we to need excellence. long-term that at quarter. look quarter. will always, support we highest full to and consistent we fastest-growing have to with markets, reached you. superior expand third the remain everything results degree potential of our excited We our have as yet Thank forward committed about

Operator

for conference concludes This call. participating. you Thank today's

disconnect. You may now

ON Semiconductor (ON) 31 Oct 222022 Q3 Earnings call transcript