ON Semiconductor FY Conference Summary Company Overview - **Company**: ON Semiconductor (NasdaqGS:ON) - **Date**: December 09, 2025 - **Speakers**: Hassane El-Khoury (CEO), Thad Trent (CFO) Key Industry Insights - **Market Conditions**: The company has observed stabilization in both the industrial and automotive sectors after a period of decline, indicating a potential recovery phase [2][3][4] - **Inventory Management**: ON Semiconductor has proactively managed inventory levels, resulting in lean inventory on both the balance sheet and in the channel, which positions the company well for future demand increases [2][5] - **Replenishment Cycle**: The company is currently under shipping to burn off excess inventory, with expectations for a replenishment cycle to follow once demand increases [4][12] Financial Performance and Projections - **Utilization Rates**: Current factory utilization is around 70%-74%, with potential for significant gross margin improvement as utilization increases [32][33] - **Gross Margin Impact**: Each percentage point increase in utilization could lead to a 25-30 basis point improvement in gross margin, with a potential increase of 650-700 basis points if fully utilized [33] - **Free Cash Flow**: The company is generating approximately $1.5 billion in free cash flow, with plans to return 100% of it to shareholders through a $6 billion share repurchase program over three years [39][40] Competitive Landscape - **Chinese Competition**: ON Semiconductor has strategically exited low-margin businesses that faced competition from Chinese manufacturers, focusing instead on high-value products where competition is limited [21][22] - **Technological Differentiation**: The company emphasizes its unique technological capabilities, particularly in silicon carbide and GaN products, which are critical for high-voltage applications [28][29] Growth Opportunities - **Silicon Carbide Applications**: The company sees expanding opportunities in silicon carbide beyond automotive, including energy storage systems and data centers [24][25] - **AI Data Center Market**: Revenue from AI data center products has doubled year-on-year, with projections of reaching around $250 million by 2025 [28] - **Treo Platform**: The Treo platform, a 65-nanometer BCD mixed signal analog technology, is expected to generate significant revenue, with a target of $1 billion by 2030 [50][51] Strategic Focus - **Supply Resilience**: The company has maintained a strong supply resilience strategy, which has proven beneficial during market disruptions [16][18] - **R&D Investments**: Continued investment in R&D is a priority, with a focus on developing new products and technologies to drive long-term growth [39][44] Conclusion - ON Semiconductor is navigating a recovery phase in the semiconductor market, with a focus on inventory management, technological differentiation, and strategic growth opportunities in high-value segments. The company's proactive measures and strong financial position are expected to support its long-term objectives and shareholder returns.

Summary of Semiconductor Distributor Survey 3Q'25 Industry Overview - **Industry**: Semiconductors - **Region**: North America - **Survey Date**: September 2025 - October 2025 - **Participants**: 42 semiconductor distributors Key Insights General Performance and Expectations - Distributor survey responses showed a polarized outlook for December quarter (DecQ) performance, indicating mixed sentiment but no significant decline in recovery [2][42] - Long-term visibility for the semiconductor industry is expected to improve over several quarters, but immediate results for September quarter (SepQ) are anticipated to be strong [2][3] SepQ Performance - Strong performance is expected for SepQ, with analog products shipping in line with demand, while microcontroller units (MCU) are still undershipping by 6.8% [3][15] - The recovery in MCU has been slower, with a tepid overall rate of change since last year [3][15] - Expectations for SepQ earnings have been reset to a more conservative outlook, reflecting a significant adjustment from previous quarters [5][8] DecQ Outlook - The outlook for DecQ is mixed, with expectations for growth and decline both increasing among respondents [4][42] - For analog products, expectations for growth increased by 19 percentage points to 60%, while those expecting a decline rose to 19% [42] - For MCU, growth expectations increased by 6 percentage points to 46%, with declines also rising to 17% [42] Inventory and Supply Chain Dynamics - Supply constraints have increased from 40% to 45%, with analog supply constraints rising from 14% to 24% [42][62] - Shortages in select SKUs have been reported, contributing to the mixed responses from distributors [26][42] - Expedited ordering has significantly increased from 29% to 45%, indicating a shift towards short-term ordering patterns due to macroeconomic uncertainties [42][58] Inventory Management - Inventory destocking is slowing, with 55% of distributors looking to deplete inventory, down from 60% [42][60] - Lead times for suppliers have remained stable, with a slight decrease in the percentage of distributors expecting lead times to increase [42][62] Market Segmentation - Certain end markets, such as industrial and consumer, are recovering faster, while the automotive sector is still working through inventory digestion [11][42] - The overall sentiment reflects a cautious optimism, with a preference for stocks with defensive characteristics, such as ADI and NXP, while being cautious on TXN due to potential utilization pressures [10][11] Additional Observations - The survey indicates a potential for an inventory replenishment cycle, which could positively impact SepQ and DecQ estimates [3][29] - The semiconductor industry is facing challenges from macroeconomic factors, including tariff uncertainties and geopolitical tensions, which may affect demand curves [4][42] This summary encapsulates the key findings and insights from the semiconductor distributor survey for the third quarter of 2025, highlighting the mixed sentiment and cautious optimism within the industry.

Summary of Microchip's Conference Call Company Overview - **Company**: Microchip Technology Inc. - **Industry**: Semiconductor Key Points and Arguments Financial Performance and Guidance - Microchip recently updated its financial guidance, removing the low end of the range due to stronger-than-expected demand in the quarter [5][6] - Bookings in May reached the highest level seen in two years, indicating a rebound in demand [5] - Revenue fell to approximately $970.4 million last quarter, down from a peak of nearly $2.3 billion per quarter [10] Inventory Management - The company has been focusing on inventory reduction as part of its nine-point plan [6] - Inventory write-offs amounted to over $90 million in March, combined with underutilization charges of about $54 million, totaling nearly $145 million in charges [7] - Microchip aims to achieve a non-GAAP gross margin target of 65%, with underlying product gross margins reaching almost 67% when excluding inventory reserve charges [8] Demand Recovery - The current recovery is attributed to both improved end demand and the need for inventory replenishment after a period of depletion [10][11] - The recovery is broad-based across all end markets and geographies, with no significant distinction between industrial and automotive sectors [16][17] - Industrial markets account for about 30% of Microchip's business, with aerospace and defense contributing an additional 18% [18] Customer Relationships and Market Position - Microchip has been actively engaging with customers to rebuild relationships that may have been strained during previous cycles [29][30] - A survey indicated that 24% of customer relationships improved, while 12% were damaged, with efforts focused on the latter group [29][30] - The company is confident in its ability to regain market share and return to higher revenue levels [30] Pricing Environment - Pricing is expected to decline in the mid-single digits this fiscal year, with a return to more stable pricing conditions anticipated thereafter [48][49] - The company has adjusted its long-term gross margin target from 68% to 65% to reflect a more achievable model [48] Operational Efficiency - Microchip has implemented a reduction in force, with operational expenses (OpEx) expected to stabilize around $356 million, which is significantly lower than previous peaks [56][57] - The company aims to align OpEx with revenue growth, targeting 25% of revenue in the long term [58] Future Outlook - The company anticipates a gradual increase in factory output, which could positively impact gross margins in the coming quarters [64] - Microchip is committed to maintaining its dividend while focusing on reducing leverage before considering stock buybacks [75][76] Tariff Impact - Approximately 14% of Microchip's revenue is subject to US-China tariffs, but the direct impact on the company is expected to be minimal [70][71] - The company has flexibility in its supply chain to mitigate potential tariff impacts by shifting production as needed [71] Seasonality and Market Trends - Seasonality is not expected to significantly impact performance, as inventory replenishment may override typical seasonal trends [72] - The company is optimistic about multiple quarters of strong performance driven by inventory replenishment [73] Additional Important Insights - Microchip is utilizing AI and machine learning to better manage customer data and inventory, aiming to avoid past issues related to capacity and order management [43][44] - The company is focused on ensuring that its pricing strategies align with market conditions and competitive pressures [52][56]