ON - Earnings call transcript Q1 2024 | ON Semiconductor Corporation

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Operator

Good day and thank you for standing by. Welcome to the onsemi First Quarter 2024 Earnings Conference Call. [Operator Instructions] Please be advised today's conference is being recorded. I would now like to hand the conference over to your speaker today, Parag Agarwal. Please go ahead.

Parag Agarwal

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

the Investor on section of Additional posted information Relations our website. is

and earnings in which financial financial GAAP non-GAAP certain Our posted is Investors most measures includes measures. of Reconciliation this our using release, section. Relations comparable release presentation to measures separately on certain are of measures directly the financial discussion when non-GAAP and included a these website in non-GAAP limitations earnings the our

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

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

Hassane? hand me to over let Now Hassane. it

Hassane El-Khoury

billion, [ ], the Thank In $X.XX the first you, all share delivered of midpoint XX.X% of earnings the our call. on for thank us $X.XX our revenue Good worldwide of gross and all non-GAAP non-GAAP margin per guidance. team Parag. quarter, you joining of and morning above

to win our growth in silicon our breadth continue technology. Customers of support continue with have on We QX Leading superior platform plan wins. and with of favorable market laser we the of revenue quarter-over-quarter new outgrow indicators scale. to product at to in and share intelligent focused carbide company total fuel the and increasing remained our and XX% and the outpace growth sensing future power it gross of driving X% new industrial technologies, portfolio based strength performance to on in value expect revenue the and year-over-year, to design our of automotive margins gaining our which execution, silicon

OEMs, the our performance in the vertically to we integrated believe supply silicon quarter. us business production in a substrates best our the loaded coming customer basis solutions, of are with of financial from chain, industry raplify the the carbide we internal second start just with to carbide gain our where confident more top XX have newly announced to ramping we Beijing, ] to XXXX. [ China Auto expanding remain platforms share Chinese into in already from and set Show the returned are that leading I in base. Having half into are EV on XX% than enabling Specifically, performance The designed and the of combined fully first XXX-volt continuing our

TAM, is total volumes flat market, XXXX, previously incremental by carbide SAAR is primarily anticipated. the although even an than rate increase a still EVs silicon produced The we the whole slightly for As down. projected expect to as lower globally at increase of in over driven

in Xx expect industrial XXXX. our markets, market was market to in market We continue industrial and incremental carbide, growth the revenue silicon the to share all part the to of levels softness first in across half of markets diversify automotive cautious and still gain Outside the and there the outlook, normalize the but carbide in stabilize. about across persisted inventory increase expect remain Question silicon to we in traditional customer business. quarter. We stabilization and second the

our demonstrated. will current the environment predictable also results maintain the our to disciplined leadership to environment, to cloud, expect approach this as we including. and Through and automotive, of deliver further investing navigating We megatrends high-growth we're in have industrial

best opportunity made Day unique During the mixed intent, for have value and growth of by for strategic of these our management high-margin technologies. the our onsemi Analyst sensing. portfolio align packaging our proposition expanding would markets. Electrification we opportunity will high-powered TAM billion the be we our and formed ATV. last May, a remains from solutions analog signal serviced which We IGBT $XX To power that deliver with solutions silicon xEVs to and wide along with carbide full across largest BEV with industry-leading system a provide range group,

carbide performance by XX% higher-resolution xEV we with Our the silicon grew production, year-over-year, significantly continue sensing, sensor better and with options. ADAS approximately automotive BEV. In primarily products moving shift systems revenue silicon share customers from in our outpacing for to gain towards to image unit and continues

commitment. in are than in our and experience, X-megapixel to to increased carbide. to in competitive the Analyst drive than progress silicon technology our are for market. With for environment user's we trend the leveraging hearing demonstrating margins, remain XX% make new XXX-millimeter and In more XX% higher aids Our a and systems. towards extend market revenue on focus in and over-the-counter of unique above-market continue products hearing processors adapt sensors with than actively year-over-year, designed image listening towards are on favorable improved growth more revenue investing advantage for our we medical, to resolution we hearing XX% relentless for Day more aids AI innovation, technology an quarter-over-quarter ADAS and track We and currently at the consistent available

already are are portfolio differentiation new across we mixed-signal We on sampling technology. the of share and based the gaining products, our

to enabled in of benefit cloud from rapid has the over investment AI. centers seeing the rise are us we years Our incremental last and opportunity from the data X

XXX will server of kilowatts as require as racks to positive XXX the EV. much in power, AI Next-generation

to full present suite the the as Our CPU high-efficiency or expansion solve to density the GPU us solutions look content unit to their centers. the PSU data or supply problems tree continues consuming of customers power opportunity power from power and to power

consistent maintaining forward As disciplined, we the for with execution will customer-centric, our current to we value while continue deliver look navigate and stakeholders. the environment

Thad Let me to over now turn results. it Thad? details on more give our to you

Thad Trent

Hassane. Thanks,

focus been relentless expectations. again on operational pursuit teams delivered excellence. predictable to first that Our have sustainable execution results exceeded Their and their more drive quarter results in of once

in demonstrates the the the $X.XX and downturn quarter-over-quarter over resiliency down environment respond in continued to market than year-over-year. built the QX industrial, into deliver of billion, digestion we've down ability and to and Our current we ever revenue X business reported automotive X% X% years. Amid better last results a inventory

in quarter Our to business. drivers and long-term quarter-over-quarter, automotive [ ] business expectations. advanced declined year with of Vehicle $X the X% a X% and the for electrification this as remain ago our applications billion growth compared line grew safety

for down down revenue the XX% industrial million, was quarter and Our versus $XXX first X% of sequentially. XXXX

come medical our than automation is early we industrial opportunities less term, We business, of applications. which slightly signs are factory in industrial our and industrial. expect from total Long to of in stabilization half traditional infrastructure, energy seeing

business and our the XX% our accounted to industrial of shift our for QX. of a in for sustainable As result to revenue high-growth megatrends strategy automotive the ecosystem,

Group, by higher Power units. an between Looking of ] at from automotive year-over-year Mixed in was Signal declines Analog and $XXX the and operating split a PSG, industrial silicon automotive. Revenue the revenue products. Revenue power by Group, carbide X% decline Solutions of [ increase was the AMG, for in offset million, applications XX% or coming year-over-year a $XXX driven silicon million, and decline or industrial

year gross fourth The Most from and notably, continue. the opportunities. results was prior well industrial East or solutions. to period XX% is as reach underway, formed the margin continue system available even gross optimizing utilization These Relations to approximately in XX%, cost revenue has and quarter an analog the at margin XX% was in decrease QX. In AMG other GAAP website. Revenue industry-leading downturns, Fishkill, was ISG, XXX gross expansions million, excellence or utilization year-over-year improved for to expectations, XXX the wafer Gross with $XXX decrease of cost the our is operational the a our section margin compared quarter a drive mixed-signal the As of in and quarter. fixed we on Prior the first XX.X% a points and improvement non-GAAP ago. in we Fab and dilutive strategy been reducing deliver similar previous, to our was XX%. XX.X% costs margin fab, have Sensing Right points due automotive. To and levels, in have basis impact operational Intelligent decline our was XX.X% our Investor efficiency exceeded margin with full to reclassified was QX me and teams aggressively gross at slight to footprint existing compared At our in variable parity Group, XX.X% -- though QX basis fabs. of utilization in

to basis foundry GLOBALFOUNDRIES. for remainder the year with of We business roughly dilutive ongoing the expect XXX be this points the for

our will points utilization margin XX now we XX of X basis Fab result As across network expect approximately efforts and a our in cost-reduction gross of EFK initiatives, manufacturing Right at result improvement. point improvement to our of

first the additional was numbers [ XXXX. models. your million operating quarter compared to some million were expenses as you give ] quarter the me ago. in Non-GAAP $XXX $XXX first let $XXX a million as in to expenses for million year for compared GAAP quarter of the Now $XXX

to position to quarter margin was and markets. GAAP As non-GAAP the invest continue Hassane our margin further leadership XX%. operating was operating mentioned, for focus we XX.X% our in

count XX%. non-GAAP $X.XX was per repurchases. to worth XXX share back for $X.XX QX, shares year cash months, was shareholders. was was share compared of cash QX and and the end deployed to in of share million at returned million compared ago. we flow $XXX non-GAAP the Non-GAAP $X.XX our $X.XX guidance per GAAP share last as near first have quarter repurchased In in the rate rate our earnings as In $XXX count XX was our of our tax XXXX. GAAP diluted tax high free we GAAP share to XXX million our Our XX% free XXX% was shares. shares, earnings million for quarter of of flow diluted nearly the XX.X% or a and

balance to which representing Cash $X.X a the we from free Cash during capital cash to our of $X.X XX% revenue. year-over-year billion, $XXX and $XXX to and million, on was billion million, million, $XXX revolver. operations XX%. Xx sheet. undrawn equates was of expenditures were cash QX and Capital have increased intensity equivalents Turning flow

XX by XXXX teens intensity increased be bridge includes we by increased million to of days capital year. Inventory XXX. expect indicated, This to to carbide fab and days brand. full previously sequentially, silicon the inventory transition low As XX the for support $XX days in

these inventory million days. XXX strategic approximately base sequentially Excluding $XX builds, decreased to our

the QX. to proactively weeks million weeks at continue was of manage distribution weeks as inventory. X.X expected in Thus inventory sequentially week versus down with We -- X at inventory $XX

we the few mentioned, to expect service approximately inventory XXXX customers normalize levels to inventory mass-market previously the replenish next start increasing As X to expect and in quarters. channel with to to over weeks

Now the first the let to provided press guidance A elements guidance our quarter. in key for provide our the our GAAP of results. detailing related and table you non-GAAP non-GAAP second release quarter me is

across to the $X.XX revenue will in the demand QX anticipate end billion our environment and macro softness billion of visibility, range Given be markets. with we $X.XX all current

We to and XX.X% expect between gross margin XX.X%. non-GAAP be

As are the proving mid-XX% range. mid-XX% -- changes sustainable, shown, and for we our the utilization with to expect structural margin hold in have we gross

million. non-GAAP Our margin $X.X QX includes compensation gross of share-based

million income expense. income interest $XX operating We $XXX share-based $XXX our expect expenses interest non-GAAP with to to million, compensation be net $XX.X our million benefit non-GAAP We other of a of million. including anticipate of exceeding

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

$XXX the range in million. million expenditures of We $XXX expect capital to

Our unchanged. targets financial strategy and long-term remain

our our on drive leaning organization. We while across efficiencies future to for operational the investing are playbook

cash We allocation committed over also to to long the bringing term. our flow strategy free shareholders remain capital of our of XX%

management employees Wall different thank unlocked The recognized I'd a our opportunity during this ranking our for are the published Street were effectively value top world take today, Their efforts most the journey. Journal, We to transformation company like businesses. identifies to the XXX recently by most the around which managed and by

operating and it that, company to of We back the I'd the over up for strive been proud Q&A. excellence as coming Kevin continue are to quarters. With for have to any to as to we posting open we the call biggest turn like named will gain navigate

Operator

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

Ross Seymore

I Hassane, you in first saw thus linearity second maybe demand and want to what you're question, the First of far get quarter the into specifically just seeing. the and in quarter

Hassane El-Khoury

didn't or and specifically recovery see some to incremental we back linearity talked -- that's softness we to Slight in auto. of where about that the started

year carbide, are as the still, today, maybe we're know what I'm that comment sell-through year a designed share to the and in. it's specifically that socket-by-socket need early I and on the early the it's is of call vehicles. there. What growth, Xx the we market. a and my the like said, designs bottoms-up silicon As in far of platforms these vehicle-by-vehicle basing is on, see And to based gain the sockets so out in is and the really we have What

As get this than of half more the as year, as answer yes. at year, a will get we're the bit right we now, the as are it Xx But designed that clearer. picture in sockets more what and far would through deployed looking get do. for accurate are the the I'll little that second we market is

Ross Seymore

Can sorts and exiting follow-up, my what of gross what that and for things. of margin sort tastes Congrats XX% for on know we you I the for guess of margin through all you as But the pluses go impact going I what -- be utilization of the Thad, revenues said are things, will think floor. of Fishkill those the you one fabs, minuses puts and year? holding when idiosyncratic some walk forward? about just the East all gross up. the side

Thad Trent

sure. Sure,

just So with starting the utilization.

being basis improvement.So prepared X the XXs, there. XX we utilization margin mid-XXs. math So think point at of you gross to do can the in is low us tailwind get remarks, on the back mentioned as I XX of the into If the points about up

For East rest go through business. basis about as XXX foundry of Fishkill, the it's we we expect That's year, this dilutive points the year. the

the As parity I have mentioned, our now fabs. other with cost we

the we've made is That So underutilized. gap we're happy with there. progress

benefit, I get on as So that you mentioned, the utilization.

million won't our we'll but the 'XX is in and to fabs. annualized we That nice of be fab That's it XXXX, costs. margins. to from that all start move gross The the that network. other component tailwind. And divestitures recognize outer-years monetized ramping to fab got that's it into see That's carbide. We X then are starting another We see in XXXX. in 'XX, includes accretive as $XXX products production the the we've to silicon of new start

further, growing, As scale as accretive carbide product becomes products, new Hassane we accretive. all is that scale in to at 'XX is the revenue and continue silicon that new well. mentioned, And as all

our target. math So there, close to to pretty the to do you start get

Operator

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

Vivek Arya

like distribution That I to weaker you that message, the to a heard doesn't the pace we we get weaker half the to if second about like positive understand thought from should towards of Thad increase, I message say think, that a Hassane, Because outlook but plan here? the end think things message. inventory. headwinds positive of the I sound for, and for how the that and started trying I'm QX, but get recovery sounds the --

second fluid just we half. I'm we today? trying QX And are So a for trying Is should environment. what what bottom? from think to Obviously, know how to you signal understand the it's about the QX

Hassane El-Khoury

clarify to try me let -- here. I'll Yes.

And digestion for we to that But I'm what clear are to we it the believe -- off, other I'll outlook very call did time, seeing we when slowdown on see bottom. last the for But X the demand. QX. I related in on are demand. the slowdown sitting -- First side. inventory top -- and persisted are I stabilization call going in the see our second starting not I'm was the

I as we're that meaning stabilization, But seeing L everybody it's it if were I further. to use meaning recovery, think Now a we're a seeing as calling wouldn't point, not go deteriorating this recovery. it's at letter talks about, I far an

that's Now But that. pick demand in up, whether our stabilization outlook. to we not close see too or will least call at

Vivek Arya

then the term X then of the or X And just near and Okay. on longer carbide, kind silicon term.

ON's term, EVs. On you think or silicon positive U.S. the that carbide and And wondering of I'm your year-on-year? what so-called both in carbide. China sales the an guys And there's Would EVs, silicon if discussion there exposure? the lower-priced did either move do near to or And neutral sequentially low-priced be have what's market? then your silicon power about industry towards in especially lot industry QX, I is And a opportunity?

Hassane El-Khoury

Yes.

the talked question, carbide breaking the The not and on we we're competitive last not reasons, we're first we a up -- annual it What is, for towards both update of for year, about, silicon up quarterly year breaking as end annual XXXX-XXXX, obviously the or get said results the will year. the XXXX will we we increase we have annual in but quarterly.

As an market. the it's for EVs, interesting the in dynamic low-cost

and of want the have on at Those package the also they we lot will carbide highlight pushing it a where we've carbide will it's have benefited where technology onsemi's the be customers, going have both, more dynamic of to I dollar in silicon efficiency carbide, the them is same see, silicon benefit and customer you with to been OEMs the in argue designed we point or battery that our regardless from we've you position, announced we that what a to will the IGBT. packaging at we're can specifically with a than save because generation silicon the year, that Our in customer or the get uses, just IGBT. in seen platform. What perspective, even silicon this both same efficiency ramping benefit the are or new second China EV. device module -- account with the whether And onsemi's using that whether silicon they were way they giving half from low-price carbide of from from low-cost carbide areas

battery the of is that. what So of can technology they whether level biggest bond. IGBT. the do what we they customers carbide benefit, win by If optimize, want a of battery they any seen will solution, on silicon regardless save using it's or the system-level law. But cost We've technology, from and the to

Operator

comes question Danely next with Our Chris from Citi.

Christopher Danely

Just silicon another question on carbide.

So revenue, the if to doing? about year? you not Have us Or are changed? to level going they quarterly your revenue need pricing then target? And for you're the And that rest the of margin gross XX% pricing give they get what margins expectations Are are your what how gross going to stabilizing? down? expectations do

Hassane El-Khoury

Yes. The silicon stable. is the gross -- I is for margin -- think carbide

year, will capacity. as last added As stable remain increase it we revenue, about talked but also we've we

other utilization of will So growth of give into in term, installed kind the the course, us the the our margin. Longer grow you gross that we as utilization and offset stability footprint. got to each

give will nice that us a So gross upside on the margin.

will XX% for we to the march we margin as term. model ramp closer gets that level -- internal above substrates, long that the As talked about. incremental be to XX% the us And the at that corporate gross model give us we

same efficiency power that means on that are to also level highlight I the smaller service require of are want our improvements we a making thing side, customer incremental with to die. we do one which is the Now able

to system-level in our also cost. order cost, technology improve from are a making improvements So we

see going give products you And capacity, standard if to where we margin. new the earlier that grow between margin the and into cost, that's take growing the talked we're So it in underutilization. what into. that's to us incremental out the We about going that's the

we'll comfortable and we're on with pretty our silicon So execute. continue trajectory to carbide margin,

Christopher Danely

Or little of auto market stabilizing, silicon Great. the it a is And all to the in appears and of follow-up, weakness carbide? silicon my there be automotive X markets, that say bit weakness be but then would industrial to is for between big is in your weaker? fair carbide? that outside market getting And auto industrial,

Hassane El-Khoury

last you didn't the Sorry, -- out it. I blanked catch

Christopher Danely

guys Oh, okay okay. you Can Yes. me hear now?

Hassane El-Khoury

Chris. Yes,

Jonathan Harper

Okay. Great.

automotive the a carbide? So that market big weakness fair it bit industrial, little X to just fair the then for all And business? stabilizing? speaking, to in weakness say between markets, is industrial the broadly is it's incremental say incrementally on And you it automotive is market, is end Or weaker? there silicon guys that the is auto carbide getting and nonsilicon

Hassane El-Khoury

Yes.

I part track think Silicon market, between level, from the a really carbide of comment silicon general think the just the market. side, But the automotive a silicon understood the total from that. more side in been of incremental very far specific I it's carbide, on is still as see TAM. we your on as on your share think the on that. high consistent But broader more softness automotive question, aspect don't overall And it's gains we've is is don't -- automotive. true. in carbide. than growth for second I well on I think XXXX our well, at to the rather which as silicon is on only about did

Operator

Hari question with Toshiya next comes Our Goldman Sachs. from

Toshiya Hari

I as the carbide had a on business silicon question well.

importantly, could Hassane, speak between to And what's your year, the you automotive I more split and industrial? hoping this efforts. was For rough diversification

a I been investor has from think of an issue bit concentration perspective. customer an

was last customer largest Your year. significant

SiC I should your going in about think how year, be mix think forward? to they'll this specifically, we customer significant and broadening, base but continue customer your

Hassane El-Khoury

Yes.

first So It's been the question. of part the consistent. pretty

little give XX% Depending as industrial, can a about the they're based happens, take. asynchronous end ramps think and ramp on on You when XX-XX, the market. quarter the or bit it auto, XX%

those X in going to ramp I efforts the will OEMs consistent silicon production. what Very EV, to in that's us be case. starting is I The of remains was. market EV That Xx diversified called we today talked Chinese quarter, second electrification the started to our about, penetration half Last further XXXX originally the geographies. As Europe the as to ramps where in automotive XXXX Between proliferation comment out consistent LTSAs were with have light onsemi in and with further across far that where been more as that ramps we've very diversification, diversification which on carbide. the ramp than come vehicle occur. getting today all these made biggest in is with

So executing predictable, and we're that. to consistent

Toshiya Hari

more And Great. as the us, follow-up, than you to a about I today? over have you end exposure AI a talked data like more the growth the on prior And bit on to there To or center broadly your how set feel focus are you profile you infrastructure little years center thinking across coming customers? AI given can calls. level spend about speak data the

Hassane El-Khoury

Yes.

and organized Day, being outlook CAGR has We've on products around a our load we years. Ciner, it, go about back the X we've years where call and talked is side, about discrete that and to point automotive, Analyst cloud next he what on, cloud Mixed-Signal industrial talked and and coming intelligent investment Group the very on, and in thesis so been. That's [ in power the which about about both being controllers center. And XX% over been our our in from more power that over effort. talked introducing of Analog the our that X furthermore on success data we've prepared If Day penetration We've auto the power data last center. lot tree at our to comments, and and similar his the you ] and our and focus last industrial, shifted Analyst

coming has We're all further lot very our group. these about even of about I talked because sampling, customers. quarter about been. I it. and together I'm our in with did products our I Last than So of it put where quarter, talked just sampling this quarter investment success that of last engaging a more are these from progress. bullish

we about and You'll on But is that industrial, through hear cloud are auto year. it data markets centers. but more the of the target top the get as

Toshiya Hari

you Are to for there? Any it low mid-singles? it today? us Is singles, able hints size

Hassane El-Khoury

yet. Not

Operator

Wells Mobley question from Gary Securities. with next comes Our Fargo

Gary Mobley

your against helpful. investors longer And systems? but ] market? already, most focus But on compete silicon, China Is XX a be share this term, OEMs. automotive investment silicon battery worried realized color Is you're what's ability higher-voltage gaining probably it top your about successful that hybrid carbide the you that on there was it front China are in local China competition. solution? messaging it Is in market suppliers non-China silicon Hassane, to that hook clear the for [ into to Any marketplace? remain carbide would the local

Hassane El-Khoury

it's Look, consistent compete we business as case, Yes. that year win that willing is long I've geography, and you vendor. to less vendors to on competition Chinese value That's the product, somebody have with on can by not value silicon what China we to products. maintaining in I always maintaining will good the the if have save of carbide don't the maintain have we our after do very proven our our what competition value aggressive on and if doing we If the I of on leadership we've then provides year. margin this use I is day, any road the dollars just a why or best compete of somewhere to technology. We've in. it hundreds financial in onsemi, irrelevant cost versus battery. has for at -- to at on our or Therefore, by cheaper locally, business maybe which above enough. end internal the in structured market strategy integrated share. local been and proven European The grow is the our vertically add more, that whether Because -- customer and need as is use customer. From the gaining an battery the the it's And been take ability no map lower we're investments and for if somebody a perspective, I they to looking be for

are leading long tackle these and of short term. were All going the that the indicators of to in we term how both the continue to business

Gary Mobley

win a your about to ask As wanted metrics. I design follow-up,

value. But XX-month to lifetime in of XX% targets a looking long-term more you're revenue basis, You trends there, maybe the called that value wins. you long-term XX% on what design a seeing the that's trailing XX% increase is growth presume at lifetime a supportive out it as outlined? quarter-over-quarter have -- I guys basis,

Hassane El-Khoury

That's the right. that. model. do kind of based see That's We on

to lifetime right, is outlook XX%. put at together, XX% supporting of annual is look But You're our to I on the the the next is continue a new the to overlaid it products support I guess, base, way on grow. it, to the, I these top XX%, it top If the of XX% revenue the that all revenue. of

you take design of add the to us top add wins and So base, the you and that gives XX% that products XX% growth. new you effect it, layering on new

Operator

from Our Sandler. next Harsh Piper question with comes Kumar

Harsh Kumar

had that very pricing inventory you're pricing. at the up products? Are And for and guess color you question question the this which for for a the generally distri, I is OEM the inventory distribution you're Hassane, I you you you test And inventory inventory. point this give with is, at is also, environment your one hold raising you the good but partner you well then bigger? on quick OEM mentioned a holding? Clearly, of partners? are comfortable seeing on would us some pretty

Hassane El-Khoury

Yes.

given back win-win. demand That's we of what on had That the pricing. capacity. start the me saying the is been do with lot on on the rather of conversations -- in do pricing. goes LTSA. been to -- Let stable. We has the than volumes environment customers is we've pricing we've invested Pricing A the more with power the

it and support softer in be discussion. will not it We pricing pricing has been discussion, market. expect we a a But customers to don't a

the changes market. the based We As it. it been we've look, far on industrial of believe inventory, side -- the as

If at back reducing industrial down taking and shipments end you utilization XXXX. in recall, our start we the of

So even of peers, we've the about, their the that Thad than that XXXX, industrial kind longer for business. better industrial had period stabilization we're most standard part and That's our we've where our drain coste of in market seeing drain held a why talked in of inventory. outlook

So the that's industrial. on

done. don't think automotive, I We in the that QX. On softness we're saw

that think QX. in for second stabilization it the is the As But I in there year. further do earlier, the mentioned you half outlook of I see

feel remind of of tells to the demand. drain I If accelerates. we minute of feel a that customers. But will customers you half level and about up, the kind the If picks feel second at inventory like also is where customer inventory, the inventory longer. it the call So it But the inventory demand everybody, have we will for healthy related take good stays stable, we to stabilization.

run second do As have we the We always inventory. ramp disciplined for far that a disti, products as new about. talked distribution half very we've

Remember, this going prior us we click You're the the -- or up. in to quarter, million $XX quarter channel. that the on drained inventory see

of weeks Although came the although slightly beat inventory dollars down, went up, guide. we

we'll on that The gives pushing reason. we've the the the at we So But the drained go good carbide new base with utilization we been readying disciplined a inventory. other the It's a that, inventory expect and do declining approach and disti all have for, that went silicon aggressively to that. for products to strategic been just that up transfers. some in inventory taken for disciplined. that you cap continue based inventory is a has do utilization. ramps, We've the very only to up maintain We half. Internal second both

Harsh Kumar

Got had sort question multipart a it. I silicon on carbide. of a

or then outsourced kind wafers? wafers Are where your is internal design guess, in of customers, of about any you when on Xx what is wild your based bottoms-up and they in Are XXXX talk talked talked China. these to the growth kind own relative you possibility? growth implying? And flat You based secondly, carbide just situation are market you And approach. your to on wafers? based wins, see about on silicon then external wins they there I

Hassane El-Khoury

in this that platforms are I know are on we Look, to now, just to about it can shipping are don't because possibility. We grow We know ramping and wild we what want specifically qualified I know year. by -- and only think grow all to XXXX. And going what about and is can on customers Xx. we those and comment the what talk say it's the stuff the market the we market is we products going commented are see is. Silicon carbide is earlier: I I the where ramping. the platforms in What putting about in. and platforms

the where TAM ship those that's far out. I'm that, TAM as is, in comes commenting until you to the on have a based cars well, Xx not So the in. What on call don't market, as really

for reason the that's that. So

of is gets manufacturing. or are China because XX% what mix, inventory the no different a gets that I a a We ship, whether it's customer based substrates device remains at the as now, run a XX% it's of is don't said is need at our It a going where it of has substrates we I the XX% -- mix internal. mix, ship level. to to going far As going substrates come what But our Europe. qualified U.S. the -- need not to substrates or of level. our out over from to customer requirement internal. qualified to we right are And guess, on But over customer

Operator

with next Our question Sur comes from JPMorgan. Harlan

Harlan Sur

to at With do in cancellations start stabilize, revised are activity decline ahead view going the or stabilization? business, starting out customer half these continue that push second half non-LTSA the shipment levels to stabilize second volumes, to levels of levels? dynamics to here on high calls the pretty are Or to these are normalize activity remain or the LTSA

Hassane El-Khoury

right you're in comment. No, Yes. that

customers tool slowdown But and with in market we're a in the just for call changing same down, on, they been the that amendments talked that out that tool So us have softness have other doing it's discussion to requests half LTSAs the that that stabilization so and -- the earlier, they gives are side we gives the pushouts, comfort and of seeing like it requests about. it. volumes us slowed that yes, for which for second basically

Thad Trent

if look you And getting would add, order Harlan, I is pattern orders, at non-LTSA the stronger. the

seeing. couple seeing quarters. than less and saw less over what of that's cancellations we're So last we the pushouts stabilization We're the

Harlan Sur

is from past China moving terms away the just dollar low-margin, is over your declined just to down over weakness? which from has about is XX% Then you've it X%. decline is years? in ex China it Or past the is lean which strategy? total commodity-focused which of much much How primarily company, a Perfect. China, Asia several related been perspective, China the much of How Japan, of how broad-based business, geographical X years distribution the versus

Hassane El-Khoury

Yes.

I I the don't industrial. But were because is breakdown. in have think exits we lot those you the -- yes, a and majority that it a talked recall, if about exits non-auto of the of

those all year-on-year, that which exits do targeting if you and up are where is the it you it So been. market, then has add demand

renewable in in So X gains, automotive. Actually, carbide, on that's expected on about with obviously, LTSAs years -- of in out most automotive. those in We've the we've or the called But and silicon growth energy that prior are to storage talked had markets share industrial in seen quarters, vendors, I've 'XX top last over about 'XX XX industrial the tremendous we energy I even. China. the few talked

But is today semis these China. all hold yes, the market structurally. is for everybody of the specifically onsemi, weakness So the sees helping big we are that general is the which And But they are are in share how offset. where gains. are margin one with exits, it for

Operator

Susquehanna. question next comes with Rolland Christopher from Our

Christopher Rolland

sensor foundry kind also about my internalizing guess those well. the GLOBFO of your is of first could plans inventories wafers on you demand as if and sell-through but some I into talk primarily -- business, there one on image and from

Hassane El-Khoury

Yes.

in we -- have a think image demand So sensors. look, -- market I for high share

demand talked the that So believe cameras growth that I getting seen is about. specific the really a megapixel demand is to I made under migration better. automotive. on inventory overall the sensor image to do we've that situation specifically follows about we commentary X put general that for automotive. But We higher-resolution the

out. been calling Over the last X to X it quarters, we've

growth trend can the based to starting That's see the numbers clearly come So even that that a of on in that business production of up. light are vehicle continues. light we

assurance strategy and than this introduce together a So to will you perspective, to of can a business, and XXX% we in from do do think it's just internally to externally. work an it shift coming that partners out we that fab. internal. internal. have go effort foundry not We about have the value But clear. We It new products is rather continue supply in as

Christopher Rolland

guys Great. And cumulative also next then housekeeping. Did give and/or utilizations just XX-month a LTSAs? times, and lead couple you of LTSAs

Thad Trent

Chris, Thad. Yes. it's

Let through me that. get

with is So months just LTSA the order, lifetime ] in is [ reverse billion. $XX.X about billion the that next starting XX over value $X.X

weeks. times you heard remarks, slightly of in prepared I XX change just from XX with quarter And slightly, off about consistent down that's what It's things. big side roughly a XX%. what Lead last decreased to you think rolled mention QX. not are if did I the think that on in to utilization XX% around

of kind remainder year be of We to range, running the or plus a until minus, market expect recovery. see we for this of start the in to more

the kind of the the of this we see believe for As stabilization, can remainder utilization we we keep year.

Christopher Rolland

And Thad, do I LTSAs well? as you, have have since you SiC

Thad Trent

that. have don't I

Operator

Stanley. Joseph with question next comes from Our Morgan Moore

Joseph Moore

you talk I wonder the opportunity cars. in could to hybrid if

what's that? you the As to IGBT opportunity? just it opportunity to sort from see of hybrid, Is of the talk battery it power you Can shifting for demand carbide? some ON? silicon Is

Hassane El-Khoury

Yes.

hybrid electrification non-BEV in the parallel both on both I part IGBT. in, hybrid, the -- plug-in effort So opportunity say, the the mobility or is would of

the are full us for vehicle of on still content in in in prior That's then depending customers content opportunity internal to some in $XX called that there putting out carbide $XXX And worth for is the a the I quarters about non-BEV. only And silicon combustion. compared powertrain. about powertrain But in drivetrain. BEV $XXX

ballpark So we've those are about. kind of numbers that talked the

Joseph Moore

current for then -- the new customers, new in way terms than is have see you Great. pricing, new in your that any -- LTSA embedded agreements, you is said, is the holding pricing in the conversation, what up. different what do seen model? pricing When designs, And of you've pricing the past, you

Hassane El-Khoury

Those if -- of to model. industry our say is it benefit of smaller it's a But value it's ASP don't an way see customer doesn't change, we new benefit, see a value we the pricing normal you there price business, mean is I given we introduce, where different -- margin get product on, to No. much the Where technologies runs. see die the a a is product-by-product want a of are design. us, where But we the the the movement efficiency to but design on you incremental also for new moving that's but delta. it's that we the whether may whether course do basis, a gets product. what

Thad Trent

And Joe, Thad. it's

that Just $XXX we million market. walked price-sensitive away from remember, highly of volatile

not So think some don't ]. have this situation, probably Obviously, that that. seeing on I business a pricing see today. we're [ you beach in pressure We

Operator

TD with Buchalter Joshua from Cowen comes question next Our

Joshua Buchalter

would curve because is forecast? the for volatility quarters apologize you driving volatile But granular maybe in volatility say, because of been, reluctant a pushouts base Or adopters or unit forecast silicon the beating has few give increased there's market of early customers? more lot understand EV a of meaningful adoption I dynamics right carbide the now. ago, because compare it it we a to and a But that market, the broad of you're change in industry I that's the to across horse. the at lower of and a

Hassane El-Khoury

call So a I specific can't out customer.

a that tell I thought design to go sitting we about would meaning think production But everybody every is customers what are. going it's were I and read pushout, here what we in is can would XXXX outlooks specific not when still their to you talk what specific production.

long-term the not sacrificing view on they just So short-term not a pushout volatility. it's BEVs of because of the OEMs are models. have that

are I starting of plan Europe in to well. ramp half in the about already. seeing ramp with design the I we as called -- So design this talked second China What qualify, a year. out

is would comment So about volumes pushout. What TAM those TAM the is the it's not a say -- are. I my what

to different that the plant volumes still year are year but market. this the given they environment, going models planned last are than the same were planned are So

in longevity we're is a other it's the macro and of the and strategy reacting the to OEMs, because just So environment important is that today. one the very distinction one a

Joshua Buchalter

for maybe helpful. Thad. And That's

spending? returned to sort remain over as and expect it out Was free Or back that to to of go you the of because it formal trend should through market capital which XX%? XX%. last the than you expect we XX dislocation months, peak in elevated cash flow period particular called XXX% we this You more saw, you've of your towards the should policy investors, in of of some here over is

Thad Trent

Yes.

above you XX And will advantage over back sense. there. months, our longer look our XX% target and That be right? we said the that QX, bought million. term, term dislocation, was the but $XXX is take back in makes was policy last long If where over we We've the opportunistic it

Operator

Quinn Our comes Needham. from with Bolton next question

Quinn Bolton

the yet vehicle know the in a of half Hassane, imply second I perhaps not recovery second you're of market. ramps carbide silicon the electric sees half. second battery calling that a the on in for certainly your half the But comments year better

keep ramps electric wondering half second what's I'm the So revenue offset I'm would comments in stable the sort that of about reading the more the your correctly. in vehicle battery if half, second

Hassane El-Khoury

Yes.

only demand we back that's carbide at look we of -- of ramps quarter guide not offset that the the -- as higher silicon time. silicon be guide about going I Where correct, the absolutely to and than And go normalization. we for the you is, the about half it half, that's normal the talk and first because demand. supply and That's again, carbide. you But is second don't called at X a to or think stabilization, can what's I half. out. When second If

demand not. pinpoint or is to early to But demand carbide that silicon too recover on we it's So increase can definitely call going specifically to. there's

Quinn Bolton

you into us progress just quickly sense. to it Makes XXX-millimeter think and needs year? on the manufacturing give update you prepared comments, the just it. substrates And the can I in next on but look -- touched then Got

Hassane El-Khoury

on is about Still we're exactly on 'XX, What to and we that qualifying still track. ramp track talked line. Yes. 'XX time in

obviously no our carbide So there, a changes positive efforts. which silicon of development is

Operator

El-Khoury, of closing today's the does this conclude Hassane like for turn presentation. gentlemen, any and portion and to Ladies CEO, the over call Q&A back now remarks. President to I'd

Hassane El-Khoury

to and our changing We've remain onsemi. of our dedicated company, commitments for ecosystem. Thanks enabling to everyone customers, our results. of the sustainable the tremendous We to strategy improved call sustainable to effort and to market conditions our financial the adapted global supporting the joining deliver Thanks teams. and financial resiliency transformed on our

Operator

gentlemen, Ladies conclude does this and presentation. today's

disconnect, wonderful day You now have a may and

ON Semiconductor (ON) 29 Apr 242024 Q1 Earnings call transcript