ON - Earnings call transcript Q3 2024 | ON Semiconductor Corporation

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Operator

Good day, and thank you for standing by. Welcome to the onsemi Third Quarter 2024 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the call over to Parag Agarwal, Vice President of Investor Relations and Corporate Development. Please go ahead.

Parag Agarwal

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

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

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

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

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

Now let to me Hassane? it over Hassane. turn

Hassane El-Khoury

thanks for and call. the everyone us you, to morning, joining on Good Parag. Thank

the midpoint per we softness structural on have above on of delivered to and amid focus we revenue, with With a our results and third margin earnings the in quarter demonstrated guidance. again share commitments have sharp gross market. Our changes made execution once excellence, the all business, the operational our continued

several inventory an L-shaped the ongoing slow talked last recovery, end digestion with demand the and expected, and remains environment quarters, muted demand. Over as about we've

all as our Automotive recovered broadly for continues unchanged uncertainty slowing for in slowed aerospace not markets with outlook has be pockets sell-through. Our soft remains among Industrial, in defense. customers. utility-scale persists to EV and solar first, which except

Despite Europe are recovering but are our confident soft Regionally, we in with the current and America in North Japan China and in strategy. automotive and remained xEVs, slowdown, industrial. strength both

the in of We outpace segments continues fastest-growing value our breadth innovation. are and solutions. be center our we markets applications enabling and product one-stop semiconductor will to The a that market growth industrial and that sensing customers of and matter, as to our efficiency system-level for AI data of to us the to differentiator, overall, through source to customers' continue the are portfolio committed intelligent performance automotive, power the for optimize delivering and the a energy

of driven this BEVs. our below to programs sequentially, and for scale increased by China In share second forecast revenue QX, our utility half the gains expected be China, production, silicon into in Outside is sell-through carbide of solar the went although year.

XXXX. We customers' our demand continue that inventory and shelves will cautiously on to building avoid to monitor impact would

as would year meaningful market growth, suggest. full reports don't we third-party the For XXXX, expect

carbide over to in silicon revenue to growth the XXXX. our expect We low- be mid-single-digit

carbide schedule. silicon the qualified our XXX-millimeter development front, of ahead On have technology MX we

fab running X-inch Our X-inch wafers in are our XXX-micron and those yields thickness, at are to on the equivalent wafers.

deliberate for substrates. with and We remain carbide both from silicon internal strategy. sampling We our sources very are external

where system optimization We for up, solutions packaging advanced are integrating customers. our focused on our delivers vertically

provide our to where and differentiated are we value where we participate our levels customers. the will We margin match

and is China carbide faster the efficiency is leading extended pace driving to critical where range vehicles. architectures, to energy enabling innovation charging, silicon of automotive, transition In better the XXX-volt in and

electric Our architectures, X,XXX-volt be small MXe combustion silicon where carbide transition range China's vehicles extended the used engine a XXX-volt to they as positioned well is internal battery. to can in recharge

We approximately OEMs. of the penetration market on exit to to carbide as design share BEV China's expect silicon the based broaden with our year our continue activity win with XX% we top

market lead industrial, carbide the In our silicon we portfolio. with

previous the X customer last XX% Our to compared SiC X count quarters over quarters. industrial increased as the

in to been gigawatts year-on-year Beyond reach gigawatts investing system installation of in to emerging silicon with XX%. at expected to global XXX solar and address versus are reach increase, are in a energy. expected year-over-year increase the have our XXXX trends XXX in gigawatt power installations performance carbide, renewable XX% energy XXXX we XXX portfolio Global a of storage

We continue based and FXBP high-density IGBT in realized quarter. in these to momentum and the power on performance modules IGBT and markets announced we gain our using the leading density SiC hybrid

X efficiency, volts. our the with X with ranging from optimized field in power utility application voltages and generation [ with to designed delivering manufacturers scale latest modules, of ] XXX that increase X density top the top are of solutions We X,XXX

business Intelligent with industrial ADAS strength imaging Sensing XX% in and such of machine robotics range across quarter-over-quarter, vision, Our and as applications a grew scanning.

to new the applications, needs. access to optimize set portfolio our proliferating their and enabling feature customers industrial select are for We our

sensors getting across last are year, automated guided we image and new applications families, in X medical few. XX name traction and vehicles, product to a the autonomous have biometrics, imaging, Over robots, mobile that we released include

wake light low we XXXX, image LP and family acquired example, also differentiated excellent defense sensors image sensitivity surveillance power, applications. channel offering. and expand introduce positive feedback from to inspection Our the technology We've partners This customers us offering broaden of our further for received agriculture, enables Hyperlux to video and X technology our medical choice an quarter. X to our into a are aerospace we industrial on SWIR new In plan with entry-level motion. imaging, last XK and sensors, and megapixel low on for camera industry-leading

the XXXX. tremendous for expect cloud we a to from AI market enterprise by we billion $X.X XXXX opportunity power to in as centers, servers billion $X.X and delivery double data In have

scale [ content ] racks increase. from kilowatts [ continue we to XXX kilowatts, in requirements our to to per continue power As to rack addressable ] expect XX

We silicon silicon the of trees. power in carbide portfolio through this invested demands a have entire across delivering the and AI capable downturn, centers space ever-increasing meeting the of data

We solutions smart Vcore have ARM-based released industry-leading combined NVIDIA full deliver and multiphase to with our stages, [ controllers, which power CPUs. ] to power

X our are in hyperscalers MOSFETs, with traction in gain revenue North Vcore XXXX. to the top point load to ] products, with to continue and contribute ] PowerTrench [ EU's wins of TXX securing of X design which expected America [ We

more also our signal about of portfolio. forward next have broaden look been to plan analog investing to we Electronica We mixed new to we share portfolio products, when our detail month, and

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

Thad Trent

Thanks, Hassane.

operational high-growth results of the of another our focus than ongoing deliver to us. delivered sequentially megatrends, business market excellence we behind to structural gross prior able on market largely for demonstrate results and increased flow our customers. as These share in where resilience on free target The in challenges team's company cash We guidance. CapEx built per can achieved execution the have focused margin lead capacity achieve expansion revenue, the schedule, with quarter of our investing remain model. value earnings our improvements above we're QX midpoint footprint, continue better we XX% the and for we the face to Our and were add ahead optimizing was of our in manufacturing our consistency downturns. our

a third X% the $X.XX we carbide revenue for quarter, offset into If increase we sequential dive to silicon by broad-based resulted softness which billion. in saw growth,

Hassane was increased industrial, accounted silicon sequentially, inventory image $XXX groups million, which revenue. across As X% driven automotive for by in revenue persists which of and our XX% our Automotive mentioned, carbide digestion ADAS business sensors. and

China gains to in continue this but are content demand, silicon softness by driving growth market. We driven in in our see carbide

the compared to of XXXX, third automotive As revenue down was XX%. quarter

stable Revenue third Industrial aerospace saw and sequentially the defense of million, X% utility $XXX industrial scale remained relatively growth pockets the in in for and was while solar year-over-year. quarter. XX% business, our traditional and down We

to have recently foundry our ] business. trusted will received defense which We East our and allow at expand [ Fishkill us accreditation fab, aerospace

units. decreased increase an or Revenue Group, XX% PSG, quarter-over-quarter was of $XXX Group, split and a quarter-over-quarter for or $XXX same XX% XX% was decrease was million, ISG, decrease XX% revenue million, year-over-year. between the increase of business of an for Intelligent the X% the Solutions by X% the quarter or Revenue year-over-year. year. AMG, and Signal over Analog at Looking the ISG Revenue ADAS. and Sensing million, Power a quarter-over-quarter, driven Group, the $XXX Mixed last for

QX in was GAAP compared in was the quarter and gross XX.X% gross year margin margin a ago. XX.X% XX.X% and XX.X% non-GAAP to

by it improved and mid-XX% XX%. utilization QX, the above margin basis gross our flat maintained remaining over have at We points XX with

our downturns, As margin a prior XX% at gross around had these reminder, been utilization in levels.

across drive the begins company the through expansion to strategy, Fab from we to As once continue our to are positioned margin recover. we well market gross benefit efficiencies Right

of us. XXXX capacity previous the over work period. CapEx the the earlier, the improve mid-single-digit our capital our investments Republic in across network. compared largely now in are behind making As to new target We the have our brownfield our is anticipate done Czech I efficiencies mentioned of excellent for manufacturing target includes result investments This our teams our multiyear be XX%. range expect in target as to intensity to This we expansion a and percentage beyond,

capital Lowering will our increase XX% our intensity to targeted XX%. margin cash flow towards free

committed of target of to remain also shareholders. flow cash to long-term our free We XX% returning

shareholders. of Over February returned Since share the billion returned in XXXX, the in million repurchase over last have XX% initiating our we billion in cash with XX $X share months, we have to just flow $X our free program third buybacks of $XXX quarter.

lower quarter margin margin for XX.X%. Now Non-GAAP million in let non-GAAP operating variable million than million the compared for the quarter Non-GAAP for year $XXX me ago. a $XXX the the lower operating $XXX compared were and operating expenses quarter as and control some to GAAP due million give of in XXXX. you the to expenses models. was guidance of expenses our were cost third were compensation. midpoint active $XXX quarter operating numbers third operating GAAP was to your XX.X%,

compared quarter earnings was as of and $X.XX Non-GAAP XX%. quarter was GAAP second as Diluted XXX Our $X.XX our per non-GAAP earnings count And diluted $X.XX GAAP year share the share was to in ago. $X.XX million million tax tax XXX shares, for share was and the rate rate to compared was XX.X%, in share non-GAAP XXXX. GAAP diluted a per shares. QX count was

a to in by to short-term days. increased with intensity XX% increased flow equates cash $X.X operations XX% silicon Capital investments on undrawn which billion, total billion liquidity to was support million representing million, X Cash billion sequentially the and to to bridge revolver. of day XX%. balance $XX sequentially our was of capital free revenue. $X.X days Cash from $X.X and Turning Inventory of the including million, expenditures sheet. and $XXX of XXX carbide transitions were ramp. includes fab decreased during QX $XXX million, by inventory XXX This $XXX

million our $XX days, within days. to range continues bills, by inventory base to target XXX or sequentially strategic X our these XXX days be Excluding decreased to XXX of which

of customer to have market in this we as minus year-over-year grew inventory plus inventory continue were support weeks Distribution expect mass count Our XX% tail in channel QX, inventory been QX see and distribution X.X versus in as to to quarter, weeks third X.X the long customers. we weeks this or to in XX growth. distribution increasing high-margin of increase we the

some let our of fourth forward, for you elements the quarter. give guidance non-GAAP Looking me key

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

down expect slightly XX% includes gross with We of between flat million. margin to and share-based XX% utilization. non-GAAP $X compensation to be This

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

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

We range $XXX table million as And million. a to capital expenditures today's $XXX expect release contains our reminder, in and detailing GAAP press non-GAAP of a the guidance.

a near-term in future, for market macro, and generations to products the sensing While strategy. position long-term are for both the and power invest remained about cautious to to disciplined scale and to company committed our We've remain new of the continue we intelligent we recovery. efficiently

and the To portfolio segments wrap address breadth the and investing the are energy in of ecosystems. renewable energy, we proliferation our of shifts industry world as for up, the and performance efficiency growing the need electrification, towards AI. fastest-growing sensor-driven automation The of

we hard the across the want the value. to to resiliency the open the employees onsemi, to work to our be turn With Our I over like committed back the and globe acknowledge to as Q&A. I'd that, continue foundation of of to shareholder call teams for of unlocking Tanya remain call

Operator

Certainly. Our Bank. Deutsche question of Ross Seymore Instructions] from [Operator first will come

Ross Seymore

I that cyclical is sorts people pace more just those have competition but weakness? it's carbide little evidence up a it's silicon Hassane, talked guess about incredibly of the business. mid-single first and concerned -- secularly EV strategically, and something is of I to low as not growth, the your you hugest that commoditization one part not Do believe you on the but total When on started being dynamics? of revenues, only coming a has of important. Or gotten digits. change to the know in

Hassane El-Khoury

that's didn't cyclical. change those in And even We designs to canceled back demand, short-term electrification to level Yes, general, we has that not for made the in models or or and and have a Otherwise, Ross. into it's they it's EV did the still a which the that says important to I ramp EV that been to of strategy long-term do changed. not production, we adoption megatrend ramp go Therefore, trend a not or the the that why launched. comment expected, note, lumpiness type. believe models the very will just expected

and quarter therefore, saw launch will strategic QX in as monitoring is sell-through, the expected, nothing our in So OEMs, that. of from for we during expected But to be cautiously adopted. plays customers the the SiC Europe, importance changes and did continue in importance we're of coming as not as EVs term, nothing the and followed China, changing long U.S. the EVs, by and you

Ross Seymore

for changed But hold margin Thad my utilization X anything and of the be things. to it didn't. XX%? hand. in gross to side quarter ability down look on guide, you I said your And you forward, guess Obviously, your follow-up, for Has to the on in going is X as flat

You also coming down. CapEx weak. be talked is about demand to the But also continuing

seems. both moving XX% what on the different the of lots you've parts, floor anything said the conclusion Is than peak? So it XX% before net and

Thad Trent

No.

initiative holding at mid-XX% you where is low think or of if that's point. a us. at minus, today, a has kind utilization we've margin XX%, I look at plus our historically, And been where that been for major

mix As forward, our in QX, guidance you -- we look lower. which is why some get obviously slightly

footprint. to But look continuing no, focused as we forward, We're we're optimizing Right. on cost out. manufacturing We're take that Fab

can levels, these at So we hold.

Operator

Our next will Securities. Bank Vivek America from question come of of Arya

Vivek Arya

is, some supply QX forward, with tend your some benefits imagine at discussions long-term these question look of of have the to is if off. I when point, pricing some And we of agreements My tail you right, customers.

you take seasonality the environment? your comments about made discussions So about how all we will early Hassane, pricing Just macro what's I'm curious, QX of how think should kind preview given these place? on the

Hassane El-Khoury

give don't kind strategy we set we not kind happen view, throughout and off, but first quarter. approach quarter. cliff. our quarters out, me in any where is this a of happened to, is back my Look, which guide -- the happens of let wins, you Negotiations X pricing, industry design you during because, new QX And any going ramps how Yes.

seen, always it historically as of So have I a you a believe QX, kind pricing click. don't is

not lot -- actually X value. and chase after of been since away from going ago we've we the on we're is that market. said -- to that, We price Having -- walked a business. approach our that going to with I consistent years very since started We're

into pursue will soon means quarterly to to strategic prior that to continue margin that that XX% on to in price differentiate, Which provide comment add the focus Which the create means we as where therefore, an we is focus is to discussion, wins, and opportunities that business a a reiterated value. annual us, not getting or to We the price and value, we a want products negotiations for we pricing in. get will as is and customer, lowest this price on opportunity strategically model Thad meaning levels. continue will and that even our the win hold not continue value margin

Vivek Arya

the follow-up, is my in softer, and deciding is going if QX it think, is would environment inventory? below is the weeks thought up distribution assumption goes but to macro I for the was ON I QX. prior And that it that weeks, you why inventory, expand around X thinking X up in keep or

into And of the go So what's half thinking that first an create overhang and can next we the behind that? the as trend year?

Hassane El-Khoury

Yes.

good a that's very So question.

for of So ago, customers expand and [ to expand we market customers behind the to have general start strategy inventory, or high-margin ] a typically that And business. the we're lot a high-volume started, key servicing the going the market us. over have started the a and last seeing really mentioned years, customers disti we in few few quarters that the is that's we that mass the mass which

done higher products mass we've very wanted, really has count which been results putting is Therefore, into properly channel. the margin quarters mass customer our that customer very what we the we started market, favorable. mix channel. yielded strategic is strategy So and customer higher executed And has count, into been X the market the and count ago

to So that. we do will continue

the products in Which stays are the and inventory FIFO out? that What we not meaning And creates there that is, out? how building disti POSing monitor POSing [ they just over in, many they put quarters we course, overhang. that level, of ] are we're means

that that strategy started with market very we So a of We the growing have customers. process. mass tight intent

not see would you able pretty to that. therefore, typically the overhang And that a be environment. do that have in good recipe market to We inventory while have slow distribution in a building done we

Thad Trent

Yes. up the has customer year-over-year. And Vivek, count XX% mass been market

of inventory is So working. moving you can there in strategy see that the that

base, inventory that ] shelf. just need [ you customer disti For on the

[ ] we than it but are still more distis them, willing Our would ship we're controlling take tightly. to inventory

Operator

come Hari And of Toshiya from our question next will Goldman Sachs.

Toshiya Hari

I guess XX% a your something XX% and looks looked Hassane, think I over-indexed auto, what versus customer. like mix question And you like North very it XXXX a what today auto, then application first silicon my mix into I'm were business. customer was X the it to American carbide ago? or ago, is industrial. going year year on like curious within

prior mix on had to and think on talked automotive I customers you in calls, the Europe out about particularly that broadening in companies side. China,

I'm what broadens that curious into more So today, looks it importantly, out like and XXXX? how

Hassane El-Khoury

Sure.

auto industrial So between about and the same. the overall is mix

not there's softness of automotive the quarter-on-quarter think can that -- on take, You market change. -- strength ramps on in And softness means give that happened, and the other the the about to the year-on-year. to and don't in XX-XX, we both over X a talked even depending on kind or that we change quarter expect industrial or Because which about. in -- over softness look, or that mix

the So about XX-XX, that matches TAM to same, market. we which expect of be -- that the total the

market So as stands. it we're to indexed the mix

is carbide. key diversification, really we've as customers always the We happen. which we share half. ramps did expected. in about talked the far difference not those talked As seen We've That seen end gains what talked the strength about Europe happening. in yes, That's China in penetration EV, in share been ramping also that The second about and I already. gaining silicon accounts. I volume is within is,

everything is in to units going wins gains are But it where from schedule we're happening end expect share sockets. design we production, not and from actually So these be, is goes these which to market again, Ross' the and see on that that upside does benefit to volume earlier. it's recover that sockets back goes in we're When qualified. to going already on the we're because question up and all the

So look that's we're to, forward that's staging to what we what and have for.

Toshiya Hari

-- follow-up this X maybe then as capital my And on is Thad. and it. for intensity Got

mid-single is So a now versus percentage revenue big pretty your I change. is target medium to which long XX%, think term, digits of

you guys productivity some of gains. some being being able and about identify behind reasons the capacity expansion to talked you You and

been versus Any in internal whether broadly, there has But think versus it foundry for or how test? [ you how any your -- SiC, you substrates changes structural external internal, in packaging and silicon processing footprint? think changes subsidies to about, be wafer example, about ]

Thad Trent

long-term be new just X% Toshi, And our target. right? Yes. we've So the achieved clear, now is to target, our

Czech fact getting XX%. coming just now on as footprint was is We this target in talked going where footprint here, But about capital to phase last into down that a the to the quarter we're Republic. lot that Fab right? and starts have continue achieved original manufacturing the Right Our focus a So that, moved we we've still we invest become to now optimized we maintenance of on strategy. our below is the

I as say structural expectations. wouldn't there's here has a our change the performance much So exceeded as

Hassane El-Khoury

Yes.

silicon that -- be purely where light. prior recovers furnaces we we is market growth to on the as going convert my in capacity not the the sites. get the an to of more output with large going obviously, A new X- keep carbide carbide, uptick, from conversion. new installed silicon CapEx kind expecting building with a you're CapEx On as going of it a as We're mentioned It's already on I or very and shift X-inch the comments. to we're going to on X-inch, goes

going we to with supporting Republic to boost X, going convert then a investments. to from the As follow just keep that the get That's of you're X up and our number in die. from growth, capacity Czech

But be externally. do internal. going XXX% procure we said We was never to also it

is our and very fab, into internal performing time X-inch which expansion. and We today. XXX-micron on been go our internally mix. have as The external has well, basically already will mix over best-in-class our we at And internal based change CapEx an going

the expect mentioned. with that that CapEx to we continue level Thad So

forward-looking efficient, expansion So very support a to revenue growth.

it of So going a to the you're see line. to lot going bottom

Operator

from Our next will Chris of Danely Citi. Instructions] coming question be [Operator

Christopher Danely

Sopranos Maybe couple Danely. put me, questions. again. A that's I longer-term think my of should Chris accent on I

you And do So mentioned expect years just you Can going CapEx is several tails talk down. peaking that and next what depreciation for off? 'XX the 'XX? you it like then for about versus as Thad, depreciation to

Thad Trent

Yes, consistent we where with are it's really today.

If we roll in right? And few what what on and years, hitting in we're that already the you've Czech brought as then about Republic. think bringing some we off continue last got P&L, to you on it's on the the bring capacity

So it's it's roughly line to in where be. to going

look As that 'XX X% headwind. don't I of we into that range. as for kind revenue 'XX, It's in roughly it a 'XX. see expect And I changing don't or

Christopher Danely

down lower go depreciation CapEx? with the Wouldn't

Thad Trent

will, out coming capacity Yes, this eventually, it should don't it But you down. got that into right? look But year, start you 'XX, when it. yes, right? some still that's I coming on has think So

Christopher Danely

Okay. carbide. silicon then follow-up, just Great. for longer-term another And on question my --

of or -- flattening growth inventory out and the a do market like like all any is that? So expect Is anything X bridge go you we we And Or slowing over risk quarters? market what is pricing there do get inventory? about where if to little is if bit, next of have? that the guys the that rid then how this bridge

Hassane El-Khoury

Yes.

talking When So there's substrates carbide, and the on about inventory we the no about concern silicon bridge talk build in only. strategic pricing. we're

customer can build we whatever comes So demand to basically it in.

epi ] doesn't it yet. defined even of hold it, Most it have voltage purely even is we So not [ in so substrates. in

create goods. auto it's that So it is and where from whole industrial, we is launching most denominator or at whether the finished customer, our common of

to nor no So risk pricing. obsolescence, to risk there's

inventory on keep based don't to build why just good when get to and demand optionality. anywhere hold that's will closer that we outlook. on And finished we to to and the based that add value it We it

Operator

of will question Jefferies. And coming our [Operator Instructions] Blayne Curtis be next from

Blayne Curtis

auto into carbide. positioning geography just are thought saw in double share the of I'm drove gain is but growth -- to share, good I now, you're click on talk this If in I mean going heard what by wanted that kind expectation or globally, that the in sequentially talked design. seeing kind China just been do driven happens geography? And to you I about strength? by segment. of drill just I you you that what you? Can that's -- extent there's want drove to I EVs. just bad say to what I take those the was auto XX% for your China about share the EVs if curious it that silicon there.

Hassane El-Khoury

Yes.

think, in us, China obviously, had in we're in in, would to driven So refer kind today. When auto share design the wins actually and win. I strength, from comment, carbide XXX-volt last Show the China that silicon where the it's talk and based platforms I also quarter Auto gains by share was the about on in Beijing vehicles say and of I design my for we've further specifically. or I design about wins, It's

the from start as that already which our So we market with that these ramp, market strength. both we China, a should have. that the penetration 'XX, and vehicles see in in they did But started strength now seeing extended they designs will and ramp total into

We 'XX. expect in that continue to

Blayne Curtis

wrap said a for that? you of about been was wins first around the long see data it mentioned center. of And frame I the terms just getting just could for of kind in curious, you've on you design -- in terms that some And to you maybe time you think timing when revenue? here. What's working right Can time

Hassane El-Khoury

Yes.

that qualified customers revenue We ramp. early as now, expect get in the and So revenue. XXXX in Obviously, but it's look, segment. you already have wins. products we there design launched already revenue have products that is revenue, The we have time

the we qualified we at did example, last hyperscalers. -- quarter. design Pad TXX the on For that ] [ Trench announced being We wins already have

already on XXXX, have year. revenue we in that expect we from these but existing talked So this or products products about already I revenue product

are going the the So working our offer new boost And to designs. platforms. in portfolio on able we're new with to we We're working introduction, product really that We're that's new customers. market. on

Operator

[Operator next of coming will question be Instructions] Bolton Our from Company. Quinn Needham &

Quinn Bolton

Hassane, follow just that on wanted mentioned. to data center the wins just AI I up you

[ two, voltage CPU for it at you said then a is Or wondered, you one, think I've got does And ]. include X individual AI clarify? hyperscalers wins more case, follow-up. or the and GPU rigs X the that's I power? of And that multi-phase for accelerator? if had I just controllers also

Hassane El-Khoury

power Yes. We portfolio which didn't power target need you cohesive tree, account you to to able rattled we -- the we're because be specifying into general and when That not the both course. the the I beginning and with way or for the started ARM. product PSU, show with exactly distribution off an go really approach coherent the specifically. the the NVIDIA why end. to the we is have, all the That's that from to SiC, we

Quinn Bolton

to And I it. East then East to that's about Fishkill taper QX, still way was of right Thad, to to expected Fishkill a overhang? for the next QX, margins Just headwind about sure and point think want the XXX basis year? be into off then think make Got sort

Thad Trent

Yes, that that GLOBALFOUNDRIES in XXX by improvement. dilutive points year, basis QX. -- XXX into of most company corporate will points basis margin, business be of the that When the the will continue as in think we ]. gross end be being that's way about point And to [ to exited it you terms fairly correct. It's for will still at as linear the of look that be it about we 'XX, off

Operator

question next Cowen. Our from Instructions] TD Buchalter [Operator coming Josh will be of

Joshua Buchalter

Can at single-digit commentary and of you sort silicon the -- versus non-auto lead gains reconcile belaboring was us any on by about growth. customer on growing? stabilized auto for a China looks your lead for it some walking buckets the share what single-digit each ask used through in of the I then customer. helpful wanted like probably to outlook give of guidance details you're those are it now. again? growth trying Sorry low carbide, but with Because to low with Can the your I'm to what you ongoing

Hassane El-Khoury

Sure.

So share platforms and I and we But gain. breaking we're model and us. America diversification and diversification not a America diversification made within customers' industrial North I China will see you we look, up as on North get the up. customers' talked our our offset for and both by as the on of was the that auto. to general, before, In both and leave commentary. model. to lumpiness growth our was to guide outlook more that's ramp earnings based about regional within is get commentary us up. more And we for designs, customer the customer more into

the OEMs the ramp everything regionally So are of very as at indication expected, far of by was little shares as we the penetration well and these level publicized a within up demand, you you where design as to due the the that is and being expected But not the which just end for see can second gives wins half themselves. accounts. year up

Joshua Buchalter

seeing be about that market. could there bit in since what or idiosyncrasies might gotten guessing pull-in that on Because kind you're Got you we've vertical talk XX% with I'm maybe won't it. And up talked quarter. on but their X large give that, following specifically? the auto little this a sequentially China you business some up a then of there, your peers about of that earnings, metric going us concern

to curious what I'd expand seeing bit. auto the a hear you're China in market be on So you

Hassane El-Khoury

Yes.

I who you're think referring know I to.

earnings that already. only there's think X did I

buckets. not in we're the same So

electrification, when where silicon refer electrification not which necessarily to drivetrain, For is general. I the us, really in carbide plays, is

is regionally as thing in business regional discrepancy, only, be which grow the growth. well. may grow driven a it growed from with overall We're automotive, the our mix by not did did carbide. breaking it But in and EVs silicon China So but specifically strength -- China a out growth

Operator

Susquehanna. Rolland of question [Operator Christopher Instructions] Next from will coming be

Christopher Rolland

and break is you just into us? down I Europe, guess my for automotive larger for Japan us some first between can China buckets geographically

Hassane El-Khoury

to trying I'm So think.

Thad Trent

strong. is China Well,

I it's... think

Hassane El-Khoury

strong, yes. is China

Thad Trent

Hassane, walk... just

Christopher Rolland

as a revenue, just of mean, percent sorry. I

Hassane El-Khoury

country? we're a it -- of it not and -- does or because shift by gets confusing. -- there's leave and lumpy down regional lot We're through percentages. breaking No, the It too markets too

we or was just So it up from at behaved, through strength market get a by the look is you indication, whether to of as how where region it strength this a it we as L-shape. coming give

Christopher Rolland

It bucket? markets. TI larger but sure. how of guess approaching if broader you other about could can't okay. like more customers, guys back kind was I a I that's percentages just to consumer you that But talking my you're are sounds to provide be for you question, might your I'm warm second these markets. roughly, talk with like comments, distribution not going Okay. that, little

Hassane El-Khoury

Yes...

Christopher Rolland

Price, but are you a little more open? Yes.

Hassane El-Khoury

market wouldn't I talk about consumer or not. Yes. open

when When because a put as said, -- this value and has seeding distribution is as buy we customer We're the market. those -- Any We is Thad those margin inventory market. the provide. or that the -- it focus market it mass products that value. provided can I products shelf that at about looking ship. talk with look mass like long on on the market Our not for be to market as it's at us for to

I But the very clear will very, call. on be

of strategy top margin, no of is chasing -- utilization the not part Our expense our just longer markets get line of strategy. to or other at

So revenue. into need to this We're little on value. get utilization focusing trap, on to pricing what maybe we a we're actually squint not get go, on going and let's bit

and the going not are product not. maintain we mass We to going market value, dilute through it's our will value, or whether

Operator

coming Instructions] next Our will be Rakesh question Mizuho. from [Operator Vijay of

Vijay Rakesh

Let me quick normal levels look [ where ] and the Hassane December versus disti to inventory, side. talk on inventory question follow-up. Thad, you And those and When just you can then ask what be would a inviting levels question. a are? a at OEM

Thad Trent

lot end quicker. There's going that customers, or disti on monitor, we If of remarks, really end weeks, think about out prepared definitely there. you mass When the the digestion to that focus on XX depend right? for Look, Yes. hard it demand. inventory is increase I as of is demand minus, that weeks said on the But ongoing. that's disti talk inventory us burns market. my in expect inventory picks a end up, through to in to We look, slightly, plus we side, inventory

Hassane El-Khoury

thing, One commentary Yes. just not to it's either. be an -- industry

-- much trying much some We're have about of bring a to inventory they're low that And have that talking down. then others You couple you very inventory. and longer larger customers have weeks. that have low

commentary not industry and where earnings, position they're everywhere. it's X if -- to look what an stating and related So to is trying the And their we more can their inventory you Tier they're say you that's inventory at listen very obviously, it the From accounts a that's we're end to inventory, our also trying good with triangulate the lot directly, well to. get publicized. to finished OEMs side, of into we're The And get OEMs able that. to have the it's demand.

it's So say It's that's why customer. wouldn't I by customer -- an it's industry-wide. a

it's to drain. do to it So long many say hard we take weeks how or does believe how

Vijay Rakesh

hear internal When good millimeters your is -- carbide? XXX Got XXXX, looking at you of look question. ramping say, say, would well. But [ out, then and it. silicon let's And XXX-millimeter -- ] what to a you last mix as let's be exiting

Hassane El-Khoury

are managing Well, we we lines about are into mix baseline or because factory we quality if feed all are driving internally, an the more the always like across our XX-XX to really able would we do to external XX-XX. Even keep actually fresh sources. and just to to the have

we outlook expect that don't So to change.

Vijay Rakesh

a XX or... But internal it's

Hassane El-Khoury

Internal.

Operator

[Operator be Instructions] Stifel. coming of Svanberg Our next question Tore from will

Tore Svanberg

volt. EV for a I on the had question XXX gain China in Yes. share

XX%, did change said Is I quarter, that quarter-over-quarter? I you a Or something think technicality? said XX%. I think approaching think last you now just

Hassane El-Khoury

same design No, the same -- changed. Nothing it's everything. wins, nothing changed. It's

start you to ramp, As -- -- design, the uptick going from ramp as that actual well, going getting you're to start it. you you're

Tore Svanberg

that. Perfect. clarify I just wanted to

market inventory. Second staging mass is the the on question of and

highest how XX as the it staging? over go you go? that expect quarters? will next you few would should we weeks So far Is sort beyond continue of that Or the

Thad Trent

as XX. sweet Look, XX to us or range is right I don't think of our you're But normalized to a Yes. going of about the kind So weeks, I think that right? is minus, we in X XX north spot. think weeks, market go target new see plus

Operator

Caso Research. coming Wolfe And from Instructions] [Operator our be next of Chris question will

Christopher Caso

guess, the Or The structural moving function the just on that is mentioned that and utilization in you a right I anything is fact you is given the should lower. be this are is intensity that question existing is there where of very we now first you contemplating? the into grow can utilization that capacity? where revenue there perhaps revenue with now, much? CapEx without capacity could a particular grow that, sort levels And of increasing into the right capital

Thad Trent

Yes. Thad. Chris, it's

several primarily years. period. of Republic investments the big have do go Czech last to but those made now we we've Those over that's Thinking us. silicon went more forward. right? investments investments that as over So silicon in look, investment, multiyear We both behind about carbide and carbide So EFK, are a

many on I structural, more And drive up, gets and I've optimize of capacity. obviously, this the look out our of early, achieving at performance look that times, cost to and have manufacturing continue utilized, wouldn't we based would out. XX% this I target efficiency it's a we the at drive lot So which as footprint that and said units at footprint.

other The a So there be this silicon bring will for of the to isn't capacity need than strategic carbide. of primarily on, rest nature maintenance.

Hassane El-Khoury

yes. -- And And about level our as CapEx growth hindering wouldn't future at I -- wouldn't I think all. growth any

a which boost will answer, again is I by Fishkill, give in volume low going landing a going that's the is mentioned X. X you in prior new be very to carbide conversion products CapEx signal support fab in We'll just capacity, or my capacity new East analog grow to to silicon from mixed As our growth.

at comfortable with our So look investment. where to footprint optimizing continue our we'll very is, we're and brownfield

Christopher Caso

follow-up, And silicon at as But next a I'll is year. tough you interested your is point. silicon And I I that part on this other rate carbide, because this of on carbide. low. still another carbide view recognize question guess volume penetration into silicon market where the where Got it. penetration a is question the in relatively ask goes goes

got there design on you've think wins. some I visibility

then this growth of where And just first of is, comes versus guess grow that do EV you So penetration potential growth next much you from part question units? think year? the business I secondly, the how can

Hassane El-Khoury

you That of Yes. cause does lumpy, got long-term is carbide or to X of us any that, Look, in the that up. call have you that why penetration continue no. Because view to outlook? question The growth carbide unchanged. the I with the was started are answer of silicon then year-on-year points silicon or within is brought change view you of The we on statement top general, our it of grow. exactly agree the but our still EVs. of going And growth. to market remains will Ross's electrification rate with EVs be

American today, about leader, an penetrated EVs. the industry, market out -- take X% we're carbide mentioned, -- North if a you As we're I only as market silicon into

Auto last the were If driven all comments carbide. refer most, the if Show, not new Beijing that model with silicon were quarter of China XXX-volt to my about in you specifically introduced

will the to grow So will grow and that market much volume define continue carbide unit of of EV penetration then of 'XX. into into how silicon will the XXXX. EVs into

I expect also given those we that carbide trends to XXXX grow us, in silicon mentioned. X For

Operator

coming next [Operator be ] William [ our Dorsheimer question Instructions] Blair. of Jed will from And

Jonathan Dorsheimer

to then to that I was relate follow-up. EVs? on that silicon the I the versus your question, elaborate wondering you the shift see does tree it center asking the in be power modules able carbide what nitride might a Hassane, -- And data guess you solution are proposition I if in specifically? going the first there? value you be have that about to customers and to And confidence how gives is efficiency gallium you Do

Hassane El-Khoury

to and the a I make I try the right things, just couple sure question just and will get I answer. to of you There's Okay. give reiterate

from AI power the in general, is the efficiency. tree So

it, the You lose call PSU from, most can in. the most efficient at the then way conversion all GPU. have it And you the can of

loss rack. that seeing. benefit getting they be So efficiency. and but tree. X% module or server efficiency by hyperscaler. about That's more a that getting more the the for the bill the X% maker, we Think power a to on that Think otherwise more tree efficiency the are power not on becoming that That's important. the about is of would important not loss utility

X about about different product are question ]. talk that versus we carbide, the If carbide quarter high-voltage power [ the all and Those we carbide grid tree next power think silicon when tree. silicon closer things. more that's that's last I in GaN XXX-volt, Your the is the announced conversion. in to more GPU, at PSU to PSU way the Silicon grid the

]. get GaN you closer, get you [ and As silicon

products where, TXX that As get as want efficiency. you Pad have Trench silicon for efficient, ] you wins. That's frequency, voltage are gaining you [ that's higher the where lower and are closer, example, what's which

versus GaN provide branches It's the [ that different these that really versus optimal of in give is And us portfolio customer. needs all and technology tree most carbide silicon that about ability to at to fit. the ] not it's So competitive power silicon. our advantage where a

we on look same how by it. or There's -- comment way, we EVs, that's have And electrification So at in the concept EVs. to your still IGBT.

IGBT. We for need hybrid, we the XXX% on focus benefit the performance We us the automotive way, cost optimized don't customer. you same we where getting the is the and into have SiC silicon where look XXX% formula or providing to carbide, for best efficiency have and power at with power same tree most The the AI. tree

Jonathan Dorsheimer

in Got helpful. I'll queue. back it. jump That's

Operator

from of question be Kumar Our Sandler. Piper will next coming Instructions] [Operator Harsh

Harsh Kumar

you. what job environment. tough had for in a control this X you good controlling Thad, I can Saw

key Your takes of be last I guiding about? mix end there and some what markets, flattish, of puts quarter? can to sort same Or the revenue kind and it flattish. between was is industrial, as X automotive think the the I just that Should basically assume

Thad Trent

digits the silicon is just to Industrial continuing to mid-single automotive No. down. kind We with flattish, low carbide is think up ramp. to be going of maybe slightly

total. But overall The bucket likely think outgrow the down. will other will be auto we

Harsh Kumar

what inventory. It both. some is get Hassane, I'm lackluster -- with then maybe seems kind to And like customers. X seems I have for like It like curious, seems Great. Hassane. when it's there talk there's conversations you excess of want end your demand, you to on visibility

when much then guys CHIP in my of is customers, to at of that simply here was a turn X do more would got the And don't your a in into all your the separate, to economy? I And know? of you lot they to happen or part competitors thought. kick spectrum? have last factor money, starts a rate talk was basically it stand they interest I curious envision where question, you Act when So as than

Hassane El-Khoury

Sure.

ball customer, conversation crystal dialogue a customers. got Look, the has on the with first, the So better with nobody the other. than the

strategic happens for around versus conversation a visibility the here. for recovery really dialogue how we we is XXXX, that example, really going ready get XX% of And That's example, is going I both say happened? how the recovery dialogue ready be relationship would to if last the shortages week, of was important where I are with the the about customers Europe, demand. the of to quickly, for are in was, really communication, the where in So tightness that.

is designs. XX% new The other

as tells not the OEMs at activity and electrification long-term on. in also into in you a nobody which driven so down, by X that design strategy, OEMs, the change taking this has the So is a Tier the slowed

is be it demand. everybody to their that its plans. confidence acknowledges So it's that's the going economy, committed absolutely, the to Everybody there's consumer interest could the spend. way curve We rates, by remains But we But what along to react ready. do through that waiting. when because lumpiness we're consumer knee in helped the to play in talked and quicker, strategic things carbides can now sure inventory can our These customers are cetera. et do we're with be is about us making ready. builds we on silicon It for

get won't for do as make of is where the ] money, us need investments to do a some to always have far [ CHIPS as we we on Act specifically. very we comment we're support what offset We've As said going are company. to the build to be welcome it after I the And back going CHIPS from running. not capacity path. once and We're We're need. on have just we the going the but will fabs Because you'll to you that down end that pay funding, America. building new going it not North not you otherwise in may for new to build

model, about and that to we're going our work parameters. heard new these You our within our CapEx in investments

competitors As preliminary luck. that far got, of X I would call terms I the wish him as what our

struggles struggles but luck. to related not I I him The the funding. to think operational, wish were were related

Harsh Kumar

Thanks, Fair enough. Thad. Thanks, Parag. Thanks, Hassane.

Operator

call over for our session. to turn I remarks. And and back this the President CEO, would to Hassane Q&A concludes now like El-Khoury, closing

Hassane El-Khoury

of all continue to this to Thank uncertainty. period navigate our I And stakeholders and focusing our joining this us value our excellence. want on We'll morning. you pushing the call prolonged and through operational to by environment market for employees for deliver Thank on thank the you. execution

Operator

And Thank participating. this concludes for today's you conference call.

now disconnect. You may

ON Semiconductor (ON) 28 Oct 242024 Q3 Earnings call transcript