No bad stock

ON Semiconductor Corporation
CEO : Mr. Hassane S. El-Khoury

Quarterly earnings growth(YoY,%)

Period	Revenue	Operating Income	EPS	Release Date
2023 Q2	0.5% YoY	15.5%	27.6%	2023-07-31

Thad Trent says,

Stellar Q2 Results and Outlook

• Q2 results exceeded midpoint of guidance
• Revenue grew 7% sequentially
• Gross margin expanded by 60 basis points to 47.4%
• Earnings per share increased 12% quarter-over-quarter to $1.33

Revenue Breakdown

• Q2 revenue was $2.09 billion, roughly flat compared to Q2 2022
• Automotive revenue hit a new record of over $1 billion, growing 8% quarter-over-quarter and 35% year-over-year
• Industrial revenue grew 5% year-over-year and 10% sequentially

Silicon Carbide Business

• Ramping silicon carbide production to support increasing demand
• Nearly doubled gross margins sequentially
• Achieved first profitable quarter with high-teen operating margin

Exiting Non-Core Businesses

• Exited $57 million in Q2 revenue, bringing total year-to-date exited revenue to over $100 million
• Plan to exit $350 million to $400 million in 2023

Guidance for Q3 2023

• Anticipate revenue in the range of $2.095 billion to $2.195 billion
• Expect non-GAAP gross margin between 46% and 48%
• Non-GAAP operating expenses of $300 million to $315 million
• Non-GAAP tax rate in the range of 15.5% to 16.5%
• Non-GAAP diluted earnings per share in the range of $1.27 to $1.41

Hassane El-Khoury says,

Onsemi’s Q2 Revenue and Gross Margins

• Q2 revenue of $2.09 billion
• Non-GAAP gross margins of 47.4%, both above the midpoint of guidance

Growth in Silicon Carbide Business

• Ramped a new and highly complex technology
• Q2 silicon carbide revenue grew nearly 4x over Q2 ’22
• On track to achieve first $1 billion revenue year
• More than 50% of substrates coming from internal production by end of Q4
• Significant wins with Vitesco, BorgWarner, and Magna
• Over $11 billion of committed Silicon Carbide revenue through LTSA

Market Dynamics

• Automotive and industrial segments remained healthy in Q2
• Automotive revenue surpassed $1 billion mark in a single quarter
• New regional regulations driving demand for higher resolution image sensors
• Expect 2023 revenue for eight megapixel image sensors to more than double year-over-year
• Expanded intelligence sensing portfolio with Hyperlux Family of image sensors
• Sampling of automotive-grade image sensor from U.S. based fab

Growth in Industrial Segment

• Industrial revenue grew 5% year-over-year and 10% sequentially
• Strength in medical applications and energy infrastructure
• Energy infrastructure increased nearly 70% year-over-year in Q2
• $1.95 billion in long-term supply agreements for power modules in solar inverters
• Number one market share position in solar inverters

Growth in Medical Segment

• Market expansion for continuous glucose monitors (CGMs)
• Number one in CGMs with sensor interface portfolio
• Expect CGM market to grow at a 20% CAGR over the next five years
• Partnership with innovative customers in hearing aids market
• Accelerated adoption in the market with over the counter solutions

Q & A sessions,

Silicon Carbide Business

• About 90% of the silicon carbide business is focused on the auto industry, while 10% is focused on the industrial sector.
• The $1.95 billion LTSA (Long-Term Supply Agreement) includes both silicon and silicon carbide, and it is driven by the hybrid modules that the company provides.
• The company is strategically focused on growth markets within the industrial sector, such as energy infrastructure (including renewables and charging) and medical applications.
• The specific focus on these markets sets the company apart from its general peers.

Capacity Expansion and Fab Strategy

• The company is on track to exit the year with the majority of its capacity expansion coming internally.
• There is currently no need to pursue greenfield expansion, as the company’s existing fab and backend exposure can support its current wins and future growth.
• If business conditions improve significantly, greenfield expansion may be considered in the future.
• The company’s ability to support its expansion plans with existing capacity highlights its good return on invested capital (ROIC).

Substrate Manufacturing and Strategic Engagements with Customers

• The company’s focus on substrate manufacturing is for internal consumption only, and it is increasing capacity in tandem with the ramp-up of customer demand.
• The company’s ability to scale quickly and deliver on commitments has made it the preferred supplier for silicon carbide, which has led to expanded agreements with customers.
• Strategic engagements with customers involve co-investments, which offset depreciation and do not change the company’s cost structure.
• These investments are strategic in nature and are specific to each customer’s needs and opportunities.

Consideration of Locations for Silicon Carbide Manufacturing

• The company is considering locations in the U.S., Europe, and Korea for its $2 billion end-to-end silicon carbide manufacturing facility.
• The final decision will be based on economic and financial factors, including government funding and the ability to achieve the best return on invested capital.
• The decision is expected to be made between now and the end of the year.

Financial Position and Funding

• The company can afford its own investments and capacity expansion due to its strong cash flow from operations.
• Funding from customers in the form of co-investments is a testament to the high level of commitment and strategic partnerships.
• These co-investments offset depreciation and do not change the company’s cost structure.
• The company’s ability to self-fund its growth sets it apart from other companies reliant on external funding.