ON Semiconductor Corporation (ON) Bank of America 2023 Global Technology Conference (Transcript)

Financial Data and Key Metrics Changes - The company reported a gross margin of 49.2% for the year, with a target of reaching 53% in the long term, indicating a transition year in 2023 due to ramping silicon carbide and other factors [50][51] - The company aims to achieve more than 50% internal capacity by the end of the year, which is a strategic goal for operational efficiency [21] Business Line Data and Key Metrics Changes - The automotive business, excluding silicon carbide, is expected to grow at a stable rate of low-single digits, indicating resilience in the core business despite market uncertainties [47] - The company has divested four fabs, which is expected to save $160 million on an annualized basis, contributing to improved financial performance [51] Market Data and Key Metrics Changes - The demand environment is described as stable, with a decline in reschedules from customers, suggesting a positive outlook for the remainder of the year [9][10] - The company is gaining market share in the China EV market, although some softness has been observed compared to initial projections [12][13] Company Strategy and Development Direction - The company is focused on structural transformation, emphasizing operational efficiency and a rationalized portfolio, including investments in silicon carbide and image sensing technologies [3][4] - The strategy includes a competitive advantage through a diverse product portfolio, allowing the company to engage customers with tailored solutions rather than pushing a single technology [16][17] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding the macroeconomic environment, indicating readiness to navigate potential market fluctuations [8][9] - The company believes that the EV market will continue to grow, with a long runway for penetration, and expects to maintain a strong position in the market despite competition [38][39] Other Important Information - The company is not currently focused on M&A as a primary strategy, but remains open to strategic acquisitions that could enhance R&D or market position [54][55] - The company is actively engaging in long-term supply agreements (LTSAs) with customers, which provide stability and predictability in demand [44][45] Q&A Session Summary Question: How does the company view its transformation journey and future outlook? - The company is focused on structural transformation to enhance operational efficiency and deliver shareholder value, with a strong foundation for future growth [3][5] Question: What is the current state of demand compared to earlier in the year? - Management noted that demand is stable, with a decline in customer reschedules, indicating a positive outlook for the rest of the year [9][10] Question: How does the company plan to maintain its market share in silicon carbide? - The company leverages a diverse product portfolio to provide tailored solutions, ensuring it meets customer needs effectively [16][17] Question: What is the company's approach to M&A? - M&A is considered secondary to the company's current business strategy, with a focus on disciplined acquisitions that align with strategic goals [54][55] Question: How does the company view the competitive landscape in the EV market? - The company anticipates a consolidation in the market, with fewer players as barriers to entry remain high, positioning itself as a leader in the sector [38][39]