[ON] ON Semiconductor Thesis 2026: Silicon Carbide Drives EV Power Semiconductor Compounding
ON Semiconductor Corporation (Onsemi) FY2025 revenue ~$6.0-6.4B (-15 to -10%) with adj. EPS ~$2.40-2.80 reflecting continued post-2022 EV/automotive cycle weakness + selected industrial inventory destock + selected silicon carbide (SiC) leadership + selected post-2024 management restructuring under continued CEO Hassane El-Khoury (since 2020). Leading global power semiconductor + image sensor firm; founded 1999 as spin-off from Motorola Inc. semiconductor components group; renamed Onsemi 2018 (selected branding refresh); IPO 2000 ~$300M raised; selected ~26+ year heritage post-Motorola spin. Headquartered in Phoenix Arizona; ~32,000+ employees globally with ~$6.0-6.4B revenue; fiscal year ends ~December. End-market mix: Automotive ~50% ($3.0-3.2B; selected EV power semiconductors + ADAS image sensors + selected ICE legacy; selected SiC silicon carbide leadership ~$1B+ revenue) + Industrial ~26% ($1.6B; selected factory automation + selected medical + selected aerospace/defense; selected post-2023 destock) + Other ~24% ($1.5B; selected consumer + Cloud Power). Product groups: Power Solutions Group (PSG) 50% ($3.0-3.2B — selected silicon carbide ~$1B+ revenue + selected MOSFETs + IGBTs + selected) + Analog & Mixed-Signal Group (AMG) 30% ($1.8-2.0B — selected analog + mixed-signal) + Intelligent Sensing Group (ISG) 20% ($1.2-1.4B — selected image sensors automotive ADAS + machine vision). Selected #2 global SiC supplier (vs Wolfspeed #1 + selected STMicroelectronics + Infineon competitive); selected ~$1B+ FY2025 SiC revenue + selected major customer wins (selected Tesla + BMW + selected hyperscaler EV charging + selected); selected post-2022 strategic shift away from selected commodity standard products toward selected high-margin power + image sensor focus. CEO Hassane El-Khoury since December 2020 (succeeded Keith Jackson CEO 2002-December 2020 retired; El-Khoury ex-Cypress Semiconductor CEO 2016-2020 sold to Infineon $9B 2020 + ex-Cypress various roles + ~25-year semiconductor executive career; Lebanese-American; PhD electrical engineering Oakland University). Key transactions: 1999 Motorola spin-off + 2018 Onsemi rebrand + 2022 GTAT $415M (silicon carbide substrates) + 2022 selected divestitures of commodity standard products + 2024 management restructuring. Selected Tesla customer concentration ~10-15% revenue concentration; selected post-2024 Tesla SiC supply diversification away from ON (selected ~$200-400M revenue at-risk). Capital return: no dividend policy; buybacks $0.5-1B (selected modest post-2024 weakness); investment-grade Baa1/BBB credit rating; net cash position ~$1-2B. FY2026 thesis: silicon carbide growth + EV cycle stabilization + industrial cycle recovery + capital return. Risks: EV adoption deceleration, Tesla customer concentration, industrial cycle severity, competitive intensity (Infineon + STMicroelectronics + Wolfspeed).
[ON] ON Semiconductor Thesis 2026: Silicon Carbide Drives EV Power Semiconductor Compounding
Key Takeaways
- FY2025 revenue ~$6.0-6.4B (-15 to -10% YoY) with adj. EPS ~$2.40-2.80 — ON Semiconductor Corporation (Onsemi) is the leading global power semiconductor + image sensor firm focused on Automotive (~50% revenue) + Industrial (~26%) + selected Other (~24%). FY2025 reflects continued post-2022 EV/automotive cycle weakness + selected industrial inventory destock + selected silicon carbide (SiC) leadership + selected post-2024 management restructuring under continued CEO Hassane El-Khoury (since 2020). Fiscal year ends late December/early January.
- Three end-market focus: Automotive 50% + Industrial 26% + Other 24% — selected post-2022 mix shift toward power — Automotive ~$3.0-3.2B FY2025 (selected EV power semiconductors + ADAS image sensors + selected ICE legacy; selected SiC silicon carbide leadership ~$1B+ revenue + selected) + Industrial
$1.6B (selected factory automation + selected medical + selected aerospace/defense; selected post-2023 destock) + Other 24% ($1.5B; selected consumer + Cloud Power); selected post-2022 strategic shift away from selected commodity standard products toward selected high-margin power + image sensor focus. - CEO Hassane El-Khoury since December 2020 (~5-year tenure) — El-Khoury succeeded Keith Jackson (CEO 2002-December 2020 retired). El-Khoury background: ex-Cypress Semiconductor CEO 2016-2020 (sold to Infineon $9B 2020) + ex-Cypress various roles + ~25-year semiconductor executive career; Lebanese-American; selected technical heritage. El-Khoury's tenure has executed: 2020 CEO transition + 2021-2022 selected post-pandemic semi boom (selected ~$8B+ FY2022 peak revenue) + selected SiC silicon carbide acceleration + 2022 GTAT $415M acquisition (silicon carbide substrates) + 2023-2024 EV/automotive cycle weakness + selected industrial inventory destock + selected post-2024 management restructuring + selected continued discipline. Capital return: no dividend policy; buybacks $0.5-1B (selected modest post-2024 weakness); investment-grade Baa1/BBB credit rating; net cash position ~$1-2B.
- FY2026 thesis: silicon carbide growth + EV cycle stabilization + industrial cycle recovery + capital return — Continued silicon carbide (SiC) growth + selected EV/automotive cycle stabilization + selected industrial cycle recovery + selected operational excellence + selected modest capital return. Key risks: EV adoption deceleration (selected post-2024 EV demand weakness; selected ~$200-400M annual revenue impact per 5% EV adoption decline), Tesla customer concentration (selected ~10-15% revenue concentration; selected post-2024 Tesla SiC supply diversification away from ON), industrial cycle severity (selected continued destock if recovery delays), competitive intensity (Infineon + STMicroelectronics + Wolfspeed SiC + selected).
Company Background
ON Semiconductor Corporation (NASDAQ: ON), founded 1999 as spin-off from Motorola Inc. semiconductor components group; renamed Onsemi 2018 (selected branding refresh); IPO 2000 ~$300M raised; selected ~26+ year heritage post-Motorola spin. Headquartered in Phoenix, Arizona, Onsemi operates ~32,000+ employees globally with ~$6.0-6.4B revenue. Onsemi's competitive moat rests on three structural advantages: (1) selected silicon carbide (SiC) leadership — selected #2 global SiC supplier (vs Wolfspeed #1 + selected STMicroelectronics + Infineon competitive); selected ~$1B+ FY2025 SiC revenue + selected major customer wins (selected Tesla + BMW + selected hyperscaler EV charging + selected); (2) selected automotive power semiconductor scale — selected #2-3 global automotive power semiconductor (vs Infineon #1 + STMicroelectronics + selected NXP); (3) selected post-2022 strategic shift — selected divestitures of selected commodity standard products + selected manufacturing footprint optimization + selected high-margin focus on selected power + image sensor.
CEO Hassane El-Khoury took CEO role December 2020 (succeeded Keith Jackson CEO 2002-December 2020 retired). El-Khoury's background:
- Cypress Semiconductor CEO (2016-2020; sold to Infineon $9B 2020)
- Cypress Semiconductor various roles (selected period)
- ~25-year semiconductor executive career
- Lebanese-American; selected technical heritage; PhD electrical engineering Oakland University
El-Khoury's tenure has executed:
- December 2020 CEO Transition: succession from Jackson to El-Khoury
- 2021-2022 Post-Pandemic Semi Boom: record FY2022 ~$8B+ revenue
- 2022 GTAT Acquisition: $415M; silicon carbide substrates
- 2022 Selected Strategic Shift: selected divestitures of commodity standard products + manufacturing footprint optimization
- 2023-2024 EV/Automotive Cycle Weakness: selected post-2024 EV demand weakness + selected industrial inventory destock
- 2024 Selected Management Restructuring: selected workforce reduction + selected operational restructuring
- 2024-2025 Continued Discipline: continued operational excellence + selected SiC growth
El-Khoury's strategic positioning emphasizes:
- Silicon carbide growth + selected EV power leadership
- Selected EV/automotive cycle stabilization navigation
- Selected industrial cycle recovery
- Selected operational excellence + selected efficiency
- Capital return discipline (modest buybacks; no dividend)
Business Structure
Onsemi reports operations across 3 segments + end-market mix:
End-Market Mix:
- Automotive
50% ($3.0-3.2B; selected EV power + ADAS image sensors + selected ICE legacy) - Industrial
26% ($1.6B; selected factory automation + selected medical + selected aerospace/defense) - Other
24% ($1.5B; selected consumer + Cloud Power)
Product Lines: 1. Power Solutions Group (PSG) — selected ~$3.0-3.2B FY2025 (~50% of revenue):
- Selected silicon carbide (SiC) ~$1B+ revenue
- Selected MOSFETs + IGBTs + selected
- Operating margin variable
2. Analog & Mixed-Signal Group (AMG) — selected ~$1.8-2.0B FY2025 (~30% of revenue):
- Selected analog
- Selected mixed-signal
- Operating margin variable
3. Intelligent Sensing Group (ISG) — selected ~$1.2-1.4B FY2025 (~20% of revenue):
- Selected image sensors (selected automotive ADAS + selected machine vision)
- Operating margin variable
Key Core Metrics
Financial Performance Summary
| Metric | FY2022 | FY2023 | FY2024 | FY2025E |
|---|---|---|---|---|
| Revenue ($B) | 8.33 | 8.25 | 7.08 | 6.0-6.4 |
| Adj. EPS ($) | 5.32 | 4.89 | 3.21 | 2.40-2.80 |
| Adj. operating margin (%) | 35 | 32 | 25 | 22-26 |
| Automotive ($B) | 4.0 | 4.2 | 3.6 | 3.0-3.2 |
| Industrial ($B) | 2.3 | 2.2 | 1.8 | 1.5-1.6 |
| Diluted shares (M) | 440 | 435 | 430 | 425 |
| Annual dividend/share ($) | 0 | 0 | 0 | 0 |
Capital Return Framework (FY2025)
| Component | Annual ($M) | Per Share ($) |
|---|---|---|
| Dividend | 0 | 0 |
| Buybacks | ~500-1,000 | (~1-2%/yr share count reduction) |
| Total capital return | ~500-1,000 |
Market Evaluation
ON Semiconductor trades at ~16-19x forward earnings with no dividend, reflecting power semiconductor cyclical + SiC premium valuation framework where investors price near-term SiC growth + EV cycle stabilization + industrial recovery + capital return into multiple. Bull case: continued silicon carbide (SiC) growth + selected EV/automotive cycle stabilization + selected industrial cycle recovery + selected operational excellence. Bear case: EV adoption deceleration (selected post-2024 EV demand weakness; ~$200-400M annual revenue impact per 5% EV adoption decline), Tesla customer concentration (selected ~10-15% revenue concentration; selected post-2024 Tesla SiC supply diversification), industrial cycle severity (selected continued destock if recovery delays), competitive intensity (Infineon + STMicroelectronics + Wolfspeed SiC + selected).
Compared to peers: ON vs Infineon (IFX Frankfurt; ~$15B revenue + dominant automotive power); ON vs STMicroelectronics (STM Paris; ~$13B revenue + automotive + industrial); ON vs NXP Semiconductors (NXPI, ~$13B revenue + automotive + IoT); ON vs Texas Instruments (TXN, ~$16B revenue + dominant analog); ON vs Analog Devices (ADI, ~$10B revenue + analog); ON vs Wolfspeed (WOLF, ~$0.8B revenue + #1 SiC; selected struggling); ON vs Microchip Technology (MCHP, ~$4-5B revenue + microcontrollers; selected severe weakness); ON vs Renesas (TPE 6723; ~$10B revenue + microcontrollers). Onsemi's silicon carbide leadership + post-2022 strategic shift + automotive power scale create competitive advantages.
Silicon Carbide + EV Cycle + Industrial Recovery + Capital Return
The FY2026 thesis for ON Semiconductor centers on silicon carbide (SiC) growth + EV/automotive cycle stabilization + industrial cycle recovery + capital return.
Silicon Carbide Growth:
- Selected #2 global SiC supplier (vs Wolfspeed #1)
- Selected ~$1B+ FY2025 SiC revenue
- Selected major customer wins (selected Tesla + BMW + selected hyperscaler EV charging + selected)
- 2022 GTAT $415M acquisition (silicon carbide substrates)
- FY2026 expected: SiC revenue toward $1.2-1.5B (+20-50%)
EV Cycle Stabilization:
- Automotive revenue ~$3.0-3.2B FY2025 (vs $4.2B FY2023 peak; selected ~25%+ peak-to-trough decline)
- Selected post-2024 EV demand weakness (selected Tesla + selected legacy auto OEM EV slowdown)
- Selected Tesla SiC supply diversification away from ON (selected ~$200-400M revenue at-risk)
- FY2026 expected: Automotive revenue toward $3.1-3.4B (+0-10%; cycle stabilization)
Industrial Cycle Recovery:
- Industrial revenue ~$1.6B FY2025 (vs $2.2B FY2023 peak; selected ~30% peak-to-trough decline)
- Selected post-2023 industrial inventory destock
- FY2026 expected: Industrial revenue toward $1.6-1.8B (+0-10%; cycle stabilization)
Operational Excellence:
- Adj. operating margin ~22-26% FY2025 (vs 35% FY2022 peak; selected ~10-13pp peak-to-trough compression)
- Selected SG&A discipline + selected efficiency
- Selected manufacturing footprint optimization
- FY2026 expected: adj. operating margin recovery toward 25-30%
Capital Return:
- No dividend policy
- Buybacks $500M-1B FY2025 (~1-2%/yr share count reduction; selected modest)
- Total capital return $500M-1B
- Net cash $1-2B
- Investment-grade Baa1/BBB
FY2026 Outlook:
- Revenue toward $6.3-6.7B FY2026 (+5-10% on cycle stabilization)
- Adj. EPS toward $2.80-3.30 (+15-25% on operational leverage + cycle recovery)
- SiC +20-50%, Automotive +0-10%, Industrial +0-10%
- Adj. operating margin toward 25-30%
- Capital return $600M-1.2B
- FY2027 outlook: revenue $6.7-7.2B (+5-10%), adj. EPS $3.30-3.80 (+15-20%), capital return $700M-1.4B
Key Risks:
- EV adoption deceleration (selected post-2024 EV demand weakness; ~$200-400M annual revenue impact per 5% EV adoption decline)
- Tesla customer concentration (selected ~10-15% revenue concentration; selected post-2024 Tesla SiC supply diversification away from ON)
- Industrial cycle severity (selected continued destock if recovery delays)
- Competitive intensity (Infineon + STMicroelectronics + Wolfspeed SiC + selected)
- Selected long-tenured Jackson succession transition (El-Khoury ~5-year tenure)
- Selected SiC commoditization risk
- Selected manufacturing capacity utilization (selected post-2024 weakness)
- Selected post-2024 restructuring tail risk
FY2026 Watch Items:
- SiC revenue growth (target +20-50%)
- Automotive cycle stabilization
- Industrial cycle stabilization
- Adj. operating margin recovery (target 25-30%)
- Adj. EPS growth (target +15-25%)
- Capital return execution (target $600M-1.2B)
- Tesla customer mix evolution
- EV adoption pace
ON Semiconductor's FY2026 thesis is silicon carbide (SiC) growth + EV/automotive cycle stabilization + industrial cycle recovery + capital return. Validation: SiC grows + EV stabilizes + industrial recovers + capital return delivered = thesis intact. Failure mode: EV adoption severe + Tesla concentration severe + industrial cycle severe + competitive intensity severe = power semiconductor franchise El-Khoury cannot fully recover despite SiC leadership.
