ON Semiconductor Announces Second Quarter 2024 Results

Onsemi, a power semiconductor and image sensor major, released its financial results for the second quarter ended June 28, 2024 on July 29th. According to the data, the company realized $1,735.2 million in revenue for the quarter. On a GAAP (Generally Accepted Accounting Principles) basis, its gross margin was 45.2% and operating margin was 22.4%, while on a non-GAAP basis, diluted earnings per share was $0.96.

However, ON Semiconductor’s revenue last quarter fell 17% year-on-year and 7% quarter-on-quarter. From the perspective of business segmentation, the revenue of ON Semiconductor’s three main business units all suffered double-digit declines: the revenue of the Power Solutions Group (PSG) fell 15% year-on-year to $835.2 million; the revenue of the Advanced Solutions Group (ASG) fell 18% to $647.8 million; and the revenue of the Intelligent Sensing Group (ISG) declined 22% to $252.2 million. At the same time, gross profit margin and operating profit margin were both lower than the previous quarter and the same period last year. This situation may be attributed to the impact of intensified market competition and supply chain problems.

Thad Trend, the company’s chief financial officer, said that the decline in revenue in all business groups was due to the continued inventory consumption in the automotive and industrial markets. He expects that once market demand begins to recover, the company will be able to increase factory utilization to normal levels, “our gross profit margin will benefit from this.” He also expects that for every percentage point increase in the company’s capacity utilization, the gross profit margin will increase by 15 to 20 basis points.

Despite this, ON Semiconductor’s performance this quarter still exceeded market expectations. Analysts’ average estimates for ON Semiconductor’s second-quarter revenue and non-GAAP diluted earnings per share were $1.73 billion and $0.92, respectively, while the company’s actual performance was stronger. On the same day, ON Semiconductor’s stock price soared 14.1% to $80.05, the largest single-day gain since November 10, 2022. However, it is worth noting that the stock has fallen about 6% in its overall performance this year.

The report pointed out that ON Semiconductor’s performance once again highlighted the difficulty Wall Street faces in judging whether the chip industry has recovered from the plight of global oversupply. Just less than a week ago, another chipmaker, STMicroelectronics, lowered its revenue forecast and pointed out that market demand continued to be weak, causing its stock price to suffer the biggest drop in four years during the session. Dutch chip supplier NXP Semiconductors is also facing the dilemma of reduced revenue due to a decline in orders for its automotive business. In addition, the sales outlook released by Texas Instruments Inc. last week showed that the inventory surplus situation is about to end.

However, ON Semiconductor is optimistic about future development, and expects revenue in the third quarter to be between $1.7 billion and $1.8 billion, which is in line with the average analyst expectation of $1.78 billion; at the same time, adjusted earnings per share are expected to be between $0.91 and $1.03, which also meets the expected value of $0.97. This forecast is expected to drive its stock price to create another good performance.

Hassane El-Khoury, President and CEO of ON Semiconductor, said: “We remain committed to driving growth by expanding market share, doubling investment in strategic markets, and expanding our industry-leading product portfolio (covering analog and mixed-signal solutions). As our recent supply agreement with Volkswagen Group shows, as we expand production in Europe, North America and China with the world’s leading vehicle manufacturers (OEMs), this also further consolidates our leadership in silicon carbide technology in the automotive field.”

It is understood that ON Semiconductor announced last week that it had reached a multi-year agreement with Volkswagen Group to become the main supplier of the next generation of main drive inverters for its Scalable System Platform (SSP), providing it with a complete power box solution. The solution uses silicon carbide technology in the integrated module, which is highly scalable and can cover all main drive inverter power levels from high power to low power, perfectly adapting to various types of vehicles. In addition, ON Semiconductor’s new chip factory with an investment of $2 billion in the Czech Republic is about to be completed. This investment aims to establish an end-to-end production base for main drive inverter power systems in Europe. The geographical proximity advantage of ON Semiconductor’s factory will improve the supply chain efficiency and responsiveness of the Volkswagen Group.

In summary, although ON Semiconductor’s second quarter performance in 2024 showed certain pressure and challenges, the company still worked hard to promote growth through strategic adjustments and market investment, and was recognized and supported by market investors. In future development, ON Semiconductor needs to continue to pay attention to market changes, strengthen internal management and continue to innovate to meet customer needs.