ON Semiconductor Corp. Q1 FY2025 earnings call

Despite a challenging macroeconomic landscape, onsemi delivered Q1 revenue of $1.45 billion and non-GAAP earnings per share of $0.55, exceeding the midpoint of guidance. The focus is on the Fab-Right approach and R&D investment for gross margin expansion. Automotive revenue declined 26% sequentially, but industrial revenue was better than expected, decreasing only 4% sequentially. Medical and aerospace and defense also increased sequentially. AI data center revenue more than doubled year-over-year. In automotive, leading OEMs are adopting silicon carbide in next platform architectures, with onsemi securing a new 750-volt plug-in hybrid electric vehicle design. In AI data center, silicon carbide and silicon power devices are key, and the Treo Platform is enabling innovative solutions across multiple markets, with first production revenue recognized and progress towards the $1 billion commitment by 2030.

In the first quarter, onsemi reported revenue of $1.45 billion. Automotive revenue was $762 million, decreasing 26% sequentially. Industrial revenue was $400 million, down 4% sequentially. The Power Solutions Group (PSG) had revenue of $645 million, a 20% quarter-over-quarter decrease and 26% year-over-year decrease. The Analog and Mixed-Signal Group (AMG) had revenue of $566 million, a 7% quarter-over-quarter decrease and 19% year-over-year decrease. The Intelligent Sensing Group (ISG) had revenue of $234 million, a 23% quarter-over-quarter decrease and 20% year-over-year decrease. Other businesses increased 1% quarter-over-quarter, mainly driven by the client computing business, offset by normal seasonality in wireless.

onsemi's non-GAAP guidance for Q2 includes revenue in the range of $1.4 billion to $1.5 billion. Non-GAAP gross margin is expected to be between 36.5% and 38.5%. Non-GAAP operating expenses are expected to be in the range of $285 million to $300 million. Non-GAAP earnings per share is expected to be in the range of $0.48 to $0.58. Capital expenditures are expected to be in the range of $70 million to $90 million.

The semiconductor industry faces complex macroeconomic factors. Geopolitical environment and tariff policies could impact business. Inventory digestion persists, and customers remain cautious. Uncertainty regarding the impact of tariffs on the business.

Q: Ross Seymore asked about why onsemi's guide is below peers' upturn.

A: Hassane El-Khoury said it's due to different end markets exposed, with big focus on automotive EV outside China not recovered yet, but China has wins ramping in 2025 Q2.

Q: Ross Seymore followed up on gross margin metrics.

A: Thad Trent said taking 12% capacity offline, incremental utilization improvement per point is now 25-30 basis points of gross margin improvement, with $22 million annualized depreciation savings starting to hit P&L in Q4.

Q: Vivek Arya asked about pricing changes.

A: Hassane El-Khoury said it's a tool to defend and increase share in forward-looking programs, not specific to geography or product. Thad Trent added about $50 million of noncore business walked away in Q1, expecting $300 million for the year.

Q: Christopher Danely asked about silicon carbide growth and gross margin.

A: Hassane El-Khoury said still bullish on silicon carbide growth with market share leadership, and gross margin impacted by underutilization but still pricing on value. Thad Trent added about $300 million noncore business expected for the year.

Q: Joshua Buchalter asked about restructuring charge and inventory.

A: Thad Trent said restructuring charge included inventory write-down from manufacturing realignment, and distribution inventory is disciplined with weeks of inventory in the 9-11 week range.

Q: William Clarke asked about industrial segment trends and automotive demand by geography.

A: Hassane El-Khoury said industrial starting to show recovery, including consumer side, and automotive in China driven by EVs with silicon carbide ramps.

Q: Quinn Bolton asked about gross margin metrics post capacity actions.

A: Thad Trent said every point of utilization improvement is 25-30 basis points of gross margin improvement, with Q2 utilization expected to go down slightly.

Q: Gary Mobley asked about silicon carbide market share and pricing.

A: Hassane El-Khoury said 50% penetration in China EVs, not related to pricing but performance, and competition with global peers not local.

Q: Vijay Rakesh asked about pricing industry-wide and auto tariffs.

A: Hassane El-Khoury said pricing not onsemi-specific, and no direct tariff impact on business yet. Thad Trent added no material pull-ins/pushouts from tariffs.

Q: Harlan Sur asked about direct vs disti business.

A: Hassane El-Khoury said not much to read into, and order patterns more stable.

Q: Tore Svanberg asked about Treo platform and CapEx.

A: Hassane El-Khoury said Treo platform has broad exposure with revenue starting this year, and CapEx is mid-single-digit percentage of revenue.

Q: David Williams asked about revenue run rate and silicon carbide in China.

A: Thad Trent said revenue run rate depends on mix, and silicon carbide competition in China is with global peers on performance.

Q: Christopher Rolland asked about China tariffs and disti inventory.

A: Hassane El-Khoury said well positioned in China with existing footprint and foundry relationships, and disti inventory in 9-11 week range as sweet spot.