UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM
CURRENT REPORT
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| Item 7.01. | Regulation FD Disclosure. |
On August 5, 2021, ON Semiconductor Corporation (the “Company”) will present business and financial information to institutional investors, analysts, members of the press and the general public at a publicly available webcast meeting (the “Analyst Day Meeting”). Attached hereto as Exhibit 99.1 and Exhibit 99.2 and incorporated by reference herein are the Analyst Day Meeting presentations (the “Presentation”) that will be made by (i) Hassane S. El-Khoury, President and Chief Executive Officer, and (ii) Thad Trent, Executive Vice President, Chief Financial Officer and Treasurer.
During the course of the Analyst Day Meeting, Messrs. El-Khoury and Trent will discuss the Company’s corporate strategy, financial performance and business updates. The Presentation includes forward-looking statements and cautionary statements identifying important factors that could cause actual results to differ materially from those anticipated, as well as certain non-GAAP financial measures and reconciliations of such non-GAAP measures to applicable GAAP financial measures.
The information in Item 7.01 of this Current Report on Form 8-K, including Exhibit 99.1 and Exhibit 99.2, is being furnished under Item 7.01 and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to liability under that section, nor shall such information be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, regardless of any general incorporation language in such filing, except as shall be expressly set forth by specific reference in such filing.
The Company intends to use its website at www.onsemi.com as a means of disclosing material non-public information and for complying with its disclosure obligations under Regulation FD. Such disclosures will be included in the “Investor Relations” section of the website. Accordingly, investors should monitor the Investor Relations section of the website, in addition to following our press releases, SEC filings and public conference calls and webcasts.
| Item 9.01. | Financial Statements and Exhibits. |
| (d) | Exhibits |
The below exhibits are furnished as part of this report.
| Exhibit No. |
Description | |
| 99.1 | Analyst Day Meeting Presentation by CEO dated August 5, 2021 | |
| 99.2 | Analyst Day Meeting Presentation by CFO dated August 5, 2021 | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) | |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| ON SEMICONDUCTOR CORPORATION (Registrant) | ||||||
| Date: August 5, 2021 |
By: |
/s/ Thad Trent | ||||
| Thad Trent Executive Vice President, Chief Financial Officer and Treasurer | ||||||
2021 Analyst Day August 5, 2021 | New York City Enabling a Sustainable Ecosystem Follow Us @onsemi Exhibit 99.1
This presentation contains “forward-looking statements,” as that term is defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical facts, included or incorporated in this presentation could be deemed forward-looking statements, particularly statements about the future financial performance of ON Semiconductor, including financial guidance for the year ending December 31, 2021. Forward-looking statements are often characterized by the use of words such as “believes,” “estimates,” “expects,” “projects,” “may,” “will,” “intends,” “plans,” or “anticipates” or by discussions of strategy, plans, or intentions. All forward-looking statements in this presentation are made based on our current expectations, forecasts, estimates, and assumptions and involve risks, uncertainties, and other factors that could cause results or events to differ materially from those expressed in the forward-looking statements. You should carefully consider the trends, risks, and uncertainties described in this presentation, our 2020 Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on February 16, 2021, our Quarterly Report on Form 10-Q for the second quarter of 2021 filed on August 2, 2021 and other reports filed with or furnished to the SEC, before making any investment decision with respect to our securities. If any of these trends, risks, or uncertainties actually occurs or continues, our business, financial condition, or operating results could be materially adversely affected, the trading prices of our securities could decline, and you could lose all or part of your investment. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by this cautionary statement. This presentation contains historical non-GAAP financial measures, including free cash flow (FCF), non-GAAP earnings per share (EPS), non-GAAP profit before taxes, and ratios based on them. See the Appendix for a description of these financial measures and a reconciliation of all such non-GAAP financial measures to GAAP. This presentation also contains forward-looking non-GAAP financial measures that are adjusted for certain special items. These special items are out of our control and could change significantly from period to period. As a result, we are not able to reasonably estimate and separately present the individual impact of these special items, and we are similarly unable to provide a reconciliation of the non-GAAP measures. The reconciliation that is unavailable would include a forward-looking income statement, balance sheet, and statement of cash flows prepared in accordance with GAAP. Safe Harbor Statement
Governments are asking Employees are demanding Companies are investing Shareholders are requiring It’s just the right thing to do!
Greenhouse Gas Emission Trend Global Greenhouse Gas Emissions by Economic Sector 10% 25% 21% 24% 14% 6% Industrial and Automotive account for 66% of all Global Greenhouse Gas emissions Source: IPCC (2014) Global Greenhouse Gas Emissions by Economic Sector Automotive 14% Industrial 52%
5G Infrastructure Advanced Safety Energy Infrastructure Vehicle Electrification Cloud Power Medical Auto ICE Automation ADAS Lidar Machine Vision Automotive Lighting EV Charging
5G Infrastructure Advanced Safety Energy Infrastructure Vehicle Electrification Cloud Power Medical Auto ICE Automation ADAS Lidar Machine Vision Automotive Lighting EV Charging Sustainability drives a common theme across all markets
Power Sensing Power Sensing
Sensing is Everywhere Industrial automation driving output efficiency Automotive OEMs increasing the pace of adoption of autonomy features – L2+ Power is the New Frontier Climate and Sustainability are main demand drivers for electrification & power efficiency Efficient power production, distribution and consumption will be key Automotive and Industrial accelerating electrification and automation Power Sensing Innovative companies with disruptive technologies and strong ecosystems will win
Synergistic goals drive investments in industrial automation for all industries including automotive Customers value innovation and differentiation, to develop a sustainable ecosystem Trends in adjacent markets present new opportunities to leverage similar technologies – e.g. Cloud Power Power and Sensing go hand-in-hand. Together, they are driving massive disruption in industrial and automotive markets Power and Sensing are a Winning Combination
Sources:OMDIA – Power Discrete and Module Market Tracker – Preliminary – 2020, Jul ’21 OMDIA – Power IC Market Tracker – Preliminary 2020, May ’21 Intelligent Intelligent Power 6% 2021-2025 TAM CAGR Sensing 10% 2021-2025 TAM CAGR
Sources:OMDIA – Power Discrete & Module Market Tracker – Preliminary – 2020, Jul ’21 OMDIA – Power IC Market Tracker – Preliminary 2020, May ’21 Use 2021-24 CAGR as growth rate for 2025 Power IC in Power Machine Vision ADAS Lidar Energy Infrastructure Automotive Lighting 5G Infrastructure EV Charging Auto ICE Vehicle Electrification Cloud Power Advanced Safety Automation Medical Intelligent Sensing 10% 2021 – 2025 TAM CAGR Intelligent Power 6% 2021 – 2025 TAM CAGR
Advanced Safety Automation Medical Sources:OMDIA – Power Discrete & Module Market Tracker – Preliminary – 2020, Jul ’21 OMDIA – Power IC Market Tracker – Preliminary 2020, May ’21 Use 2021-24 CAGR as growth rate for 2025 Power IC in Power Machine Vision ADAS Lidar Energy Infrastructure Automotive Lighting 5G Infrastructure EV Charging Auto ICE Vehicle Electrification Cloud Power Intelligent Sensing 10% 2021 – 2025 TAM CAGR Intelligent Power 6% 2021 – 2025 TAM CAGR Intelligent Power Intelligent Sensing 10% 2021 – 2025 TAM CAGR 6% 2021 – 2025 TAM CAGR $64B $10B
Commercial sensors fail to address required use cases Night driving, smoke and fog, and distance object detection, to name a few, are features that drive cost to “maybe” achieve safety Slow image sensing reduces factory throughput and kills efficiency WEIGHT / FORM FACTOR COST EFFICIENCY Power tradeoffs impede optimal system performance Low efficiency power products meet aggressive cost targets … … that reduce battery-to-drivetrain conversion efficiency, resulting in lower range or power… … offset by additional batteries, which add weight
onsemi’s intelligent sensing offers the most advanced features to achieve optimal results Integration drives efficiency by delivering performance in the smallest footprint… …and reducing system latency to increase safety and throughput… by providing a proprietary feature set to solve all use cases onsemi’s intelligent power solutions give customers the power of the “AND” Through sensing integration, onsemi’s intelligent power solutions achieve the highest efficiency compared to our peers… …to allow lower temperature operation, reducing cooling requirements, saving cost and minimizing weight …delivering the required power with less die per module while achieving higher range for a given battery capacity onsemi’s intelligent power allows OEMs to exceed range targets with lower weight and reduce system cost through unparalleled efficiency onsemi’s intelligent sensing solutions offer proprietary features in the smallest packages that support all use cases customers require to solve their complex problems WEIGHT / FORM FACTOR COST EFFICIENCY
Energy Infrastructure Factory Automation Electric Vehicles Charging 5G & Cloud Power Advanced Safety Energy Infrastructure Factory Automation Electric Vehicles Charging 5G & Cloud Power Advanced Safety
5G & Cloud Power Accelerated pace of data center deployments Increase in power consumption with every new processor generation and higher physical density 5G deployments worldwide 5G & Cloud Power
5G & Cloud Power 5G & Cloud Power > $300 per platform Accelerated pace of data center deployments Increase in power consumption with every new processor generation and higher physical density 5G deployments worldwide onsemi wins with high efficiency intelligent power solutions to optimize power consumption in cloud and telecom infrastructure
Energy Infrastructure Factory Automation Charging Aggressive push towards de-carbonization of power grid Coal-generated power contributed 30% of greenhouse gas emissions Renewable energy contribution quadrupled over the last decade with 50% growth expected over the next 5 years driven by climate actions Energy storage systems required to bridge daily cycles Investments by governments, private operators and EV OEMs in charging infrastructure Need for fast charging drives power content – targeting a full charge in 20 to 30 minutes Focus on increasing productivity and throughput Ensure quality, safety and efficiency in industrial processes Intelligence – autonomous systems to make decisions based on programmed parameters and AI – robots and collaborative robots (cobots) Energy Infrastructure Factory Automation Charging Sources: Emissions – Global Energy & CO2 Status Report 2019 – Analysis – IEA https://www.ehn.org/renewable-energy-growing-2640193068.html - Last 10 yrs data https://www.theguardian.com/environment/2019/oct/21/renewable-energy-to-expand-by-50-in-next-five-years-report - Next 5 yrs data
Global Shutter Enhances Machine Vision… 120fps for Machine Vision applications High Quantum Efficiency (QE) at Near Infra-Red (NIR) light Reduces active illumination power Increases range for depth applications Leading shutter efficiency in the smallest package onsemi Global Shutter Rolling Shutter QE: Quantum efficiency. A measure of ability to convert photons to electrons NIR: Near Infra-Red. Scanning, Driver monitoring, Wavelength below what the human eye can detect Only Global Shutter can detect eyes blinking in Automotive Safety Systems
Aggressive push towards de-carbonization of power grid Coal-generated power contributed 30% of greenhouse gas emission Renewable energy contribution quadrupled over the last decade with 50% growth over the next 5 years driven by climate actions Energy storage systems required to bridge daily cycles Investments by governments, private operators and EV OEMs in charging infrastructure Need for fast charging drives power content – targeting a full charge in 20 to 30 minutes. Focus on increasing productivity and throughput Ensure quality, safety and efficiency in industrial processes Intelligence – autonomous systems to make decisions based on programmed parameters and AI – robots and collaborative robots (cobots) Energy Infrastructure Factory Automation Charging onsemi wins with high-speed intelligent sensing for robotics, scanning and inspection and the widest intelligent power portfolio across voltages and technologies onsemi wins with high efficiency intelligent power solutions with SiC for charging a car in 20-30 minutes $3,000 – $10,000 per factory > $600 per inverter $2,000 – $4,000 per charger onsemi wins with high efficiency intelligent power solutions with both IGBT and SiC for increased power throughput
Consumer demand for safety features and government mandates for features such as frontal collision avoidance drives faster adoption System must achieve highest safety level (ASIL D) for both Intelligent Power and Sensing Unique Automotive use cases require feature integration and intelligent sensing that cannot fail Advanced Safety Advanced Safety
State of the Art Functional Safety Analyzed over 4,000 failure modes to ensure corrective action during failure Combined Intelligent Power with our Intelligent Sensing for achieving ASIL D Functional Safety Perception and Sensing cannot fail More coverage than the competition onsemi is saving 9 lives per hour Best-in-Class Vision beyond the human eye – our image sensors are saving lives Larger market share than all competitors combined
Long Distance Multiple Object Detection onsemi’s 8MP Automotive Sensor at 185 Meters Vehicle Boulder (12” height) Pedestrian
Vehicle Boulder (12” height) Pedestrian Long Distance Multiple Object Detection onsemi’s 8MP Automotive Sensor at 185 Meters
Long Distance Multiple Object Detection onsemi’s 8MP Automotive Sensor at 185 Meters 100x Human Eye… under all conditions
Humans perceive the world in 3 Dimensions Why should our cars be limited to 2? …and going beyond what a human can see
$200 – $1,000 per L2+ vehicle Consumer demand for safety features and government mandates for features such as frontal collision avoidance drive faster adoption System must achieve highest safety level (ASIL D) for both Intelligent Power and Sensing Unique Automotive use cases require feature integration and intelligent sensing that cannot fail onsemi wins with the highest level of efficiency and functional safety for a total ADAS solution Advanced Safety
Electric Vehicles Accelerated pace of electrification, due to regulations and consumer acceptance Automotive OEMs expanding EV offerings, competing on range and performance Electric Vehicles
2030 Auto OEMs Accelerating EV Rollout 2025 15 New Launches 50% of Global Sales $7.4B US Investment Enhanced Production Facilities & Smart Mobility Solutions 30 Model Launches 1M Unit Sales 15-25% of Sales 10+ New Models 50% of Global Deliveries 2025: 38% Europe, 31% US 2030: 70% Europe, 35% US > 70% of Europe, 50% of China and US €16B investments in hybridization, e-mobility, & digitalization up to 2025 100% in Europe, 40%+ globally $1B for EV manufacturing center in Cologne. Planned electrification spending to be $30B+ 40% of Global Sales
By 2028, xEV will be >50% of vehicle sales Sources:EV/ IC breakdown: Credit Suisse – Mar 26 2021 – Global Semiconductor Sector – Automotive semis – Powering the EV megatrend – Report Sensor: TSR_Automotive_Sensing_System_Market_Analysis_2019_English_b (002) Breadth of portfolio will enable fastest content growth
ADAS, Infotainment, HUD Doors, Seating, Keyless entry, Gateway Modules DC/DC HV-LV, 48V-12V HV Loads E-Compressor, Pump ON Board Chargers, HV Loads Battery Management 48V BSG, Loads HV Powertrain Traction Inverter onsemi’s most comprehensive solutions are going to win the content battle
SiC MOSFETs IGBTs 10M 1M 100k 10k 1k 1k 10k 100k 1M fsw [Hz] Pout [W] Breadth of technology is the foundation to win Innovation in switching technologies is key to driving power efficiency onsemi is the leader in Silicon and investing to lead the competition in SiC
Customers require depth and breadth of solutions… TO-247-HV TO-247-3L SO8FL LFPAK D2PAK-7L PQFN8x8 TOLL APM19 Q1 F1 F2 DIP26 F5 Single-Sided 6-Pack (IGBT, SiC MOSFET) Dual-Side Direct Cooled (IGBT) Single-Sided Indirect Cooled (SiC MOSFET) Discretes Modules Traction Modules onsemi offers customers what they need to win
… and you need a scalable solution … 100kW to 300kW scalable / stackable power solution Luxury SUV 250kW Mid-Size Sedan 150kW … to meet the wide range of OEM vehicle platforms
…and you keep innovating to maintain the power leadership Innovative cell and trench structure → High efficiency → Longer range Efficient interconnect and direct cooling → High power density → Less weight Fewer Chips to deliver same power → Lower cost 210kW Drive Switch 4 Chips 3 Chips 2 Chips SiC Technology ▼ 16% ▼ 25% Hex Cell Strip Cell Trench Cell ▼ 15% Package Technology ▼ 20%
INTELLIGENT POWER Gate Driver + Boost + Basic Protection Heatsink I,V,T Sensors POWER Gate Driver + Boost + Basic Protection Heatsink I,V,T Sensors … and you add intelligence through integration to create value An intelligent module is one that not only senses critical parameters, but also acts intelligently on the data, to protect itself from failure at any operating condition
> $750 of power content per vehicle Electric Vehicles Accelerated pace of electrification, due to regulations and consumer acceptance Automotive OEMs expanding EV offerings, competing on range and performance onsemi wins with high efficiency power solutions for extending the driving range
xEV – L2+ $750 Dual Growth Vectors Fuel Future Growth ICE 48V xEV L0 / 1 L2+ L4/5 xEV – L4 / 5 $1,600 Advanced Safety Source: onsemi internal estimates Drivetrain Actual Customer Content ICE / L1 2019 $131 48 / L2+ 2020 $160 xEV/ L2+ 2022 $715 ICE – L0 / 1 $50 48V – L2+ $280
xEV – L2+ $750 Dual Growth Vectors Fuel Future Growth ICE 48V xEV L0 / 1 L2+ L4/5 xEV – L4 / 5 $1,600 Advanced Safety Source: onsemi internal estimates Drivetrain Actual Customer Content ICE / L1 2019 $131 48 / L2+ 2020 $160 xEV/ L2+ 2022 $715 ICE – L0 / 1 $50 48V – L2+ $280 Electrification and ADAS drive 30x more content for
> $600 per inverter $2,000 – $4,000 per charger $200 – $1,000 per L2+ vehicle > $300 per platform > $750 per vehicle $3,000 – $10,000 per factory Energy Infrastructure Charging Advanced Safety Electric Vehicles 5G & Cloud Power Factory Automation drives content in every growth market in the sustainable ecosystem
We will push innovation to create intelligent power and sensing technologies that solve the most challenging customer problems Powering the electrification of the Automotive industry with our intelligent power technologies that allow for lighter and longer-range electric vehicles and enable efficient fast-charging systems Enhancing the Automotive mobility experience with our intelligent sensing technologies with imaging and depth sensing that make advanced vehicle safety and automated driving systems possible Propelling the sustainable energy evolution with our intelligent power technologies for the highest efficiency solar Strings, Industrial power and storage systems Enabling Industry 4.0 with our intelligent sensing technologies for smarter factories, buildings and homes Mission
Intelligent Sensing Intelligent Power Manufacturing Integration Channel Modules
Play to Win Focus on high-growth megatrends in Automotive and Industrial and win with onsemi intelligent power and sensing Double down and don’t dabble Invest in disruptive innovation to drive higher margin growth Implement Structural Changes Optimize organizational structure to reduce complexities Streamline manufacturing to match the strategy and not the other way around Attract and retain the best, diverse talent across the board Engage and empower employees to make expeditious, data-driven decisions Capture Value Focus on highly differentiated products that enable disruptive innovation Optimize manufacturing footprint and leverage expertise Eliminate price-to-value discrepancies Execute Leverage new leadership team with history of strong execution Drive accountability throughout the organization Reward employees for delivering superior results Winning Formula
Significant gross margin expansion driven by manufacturing consolidation, portfolio optimization and mix New leadership with history of execution and driving transformation Significant growth in Free Cash Flow – disciplined and shareholder-friendly investment policy Disciplined execution to drive sustainable results Aligned to fast-growing secular megatrends in automotive and industrial end markets Creating Shareholder Value Exhibit 99.2
Significant gross margin expansion driven by manufacturing consolidation, portfolio optimization and mix New leadership with history of execution and driving transformation Significant growth in Free Cash Flow – disciplined and shareholder-friendly investment policy Disciplined execution to drive sustainable results Creating Shareholder Value Aligned to fast-growing secular megatrends in automotive and industrial end markets Revenue Growth 2x the Semiconductor Industry
Intelligent Power and Sensing Drive 2X Market Growth CAGR 2021-2025 Market growth projected at 3.5-4.0% based on OMDIA and Gartner Intelligent Power – includes Power discrete, power modules, Analog Power IC Intelligent Sensing – includes image sensors, LIDAR, Ultrasonic sensor interface, image processors Other – includes connectivity, logic, MCU, Optocouplers, EEPROMs, small signal products, Zener diodes, etc. Intelligent Power Enabling Electric Vehicles Driving Power Efficiency in Industrial Systems Accelerating the pace of de-carbonization of power grid Intelligent Sensing Enabling automotive safety and autonomous driving Enabling intelligent automation to drive productivity improvement and energy efficiency Intelligent Power 15% Intelligent Sensing 13% Other -6% 7-9% Other Attractive cash flow focused businesses including connectivity, EEPROM, etc.
Automotive and Industrial to Fuel Growth CAGR 2021-2025 Auto 17% Industrial 7% Other -1% 7-9% Automotive Electrification – SiC and IGBT ADAS – Image sensors and LiDAR Power – LED and ADAS power Industrial Alternative energy Factory automation EV fast charging stations Other Cloud / 5G expected to grow at 11% CAGR Includes consumer, compute and communications Exit non-core, low margin businesses in highly competitive markets Auto and Industrial to Grow to 75% of Revenue from 60% in 2021
CAGR 2021-2025 Strategic 13% Non-Core -15% 7-9% Strategic Invest in Product Leadership with 100% of R&D focused on Strategic products 13% CAGR drives long-term growth and margin expansion Non-Core 50% of Non-Core is Low-margin business in highly competitive markets Expect to exit 10-15% of current revenue over the next 2 years causing total company growth to be at market growth in 2022-2023 Focus on Product Leadership and Exit Non-Core Businesses
Percentage of 2021 revenue Highly Diversified Customer Base and Broad Channel Reach Highly diversified customer base across all end-markets, products and geographies No 10% customer Customer roadmap and future technology alignment provide stickiness Engaging with strategic customers on long-term agreements provides greater visibility and less volatility Channel Strength Engaged with strategic global and regional distribution partners to drive demand creation Highly fragmented base of highly profitable end-customers Strengthens presence in Industrial market worldwide
Deep engagement with all market disrupters Top 20 customers each purchase an average of 24 onsemi product families
New leadership with history of execution and driving transformation Significant growth in Free Cash Flow – disciplined and shareholder-friendly investment policy Disciplined execution to drive sustainable results Aligned to fast-growing secular megatrends in automotive and industrial end markets Creating Shareholder Value Execution Drives 45% Gross Margin Significant gross margin expansion driven by manufacturing consolidation, portfolio optimization and mix
Mix Shift Portfolio Optimization Manufacturing Optimization Execution Drives 45% Gross Margin Mix Shift Product leadership drives shift to higher margin automotive and industrial end-markets Investing R&D in highly differentiated products at accretive margin Portfolio Optimization Monetize non-core businesses Non-Core Exit - 10-15% of revenue by 2022-2023 Manufacturing Optimization Consolidate manufacturing footprint to reduce fixed cost footprint and minimize volatility in gross margins Invest in efficient 300mm Fab in East Fishkill for improved cost structure Manufacturing optimization expected to provide half of gross margin improvement 2021 E GM 38.6% 2025 Target GM 45.0%
Legacy IDM Model – fab filler strategy Excessive capacity expansion Collection of many sub-scale sites Low return on capital investments Flexible manufacturing strategy with low fixed cost footprint Minimize Gross Margin Volatility Invest in internal capacity for differentiated technologies and strategic growth areas (Intelligent Power and Silicon Carbide) Utilize external manufacturing for non-proprietary technologies with flex capacity internally and externally Strengthen Competitive Advantage Exit sub-scale Fabs and shift to 300mm capacity Increase back-end flexibility for common packages – external volume to increase to ~45% from 34% in 2021 Improve Cost Structure Optimize capex – Rely on external partners for common packages and technologies Maximize Returns Shifting to Fab-Liter Manufacturing Shifting to Fab-Liter Manufacturing
Exit smaller inefficient fabs to reduce fixed cost footprint by $125-150 million Front-end Sites Consolidate capacity in larger fabs to drive reduction in unit cost 300mm Capacity Per Factory Adopt a flexible manufacturing model with capex investment for differentiated and critical technologies such as Power and SiC Total Capacity 300mm
New leadership with history of execution and driving transformation Disciplined execution to drive sustainable results Aligned to fast-growing secular megatrends in automotive and industrial end markets Significant gross margin expansion driven by manufacturing consolidation, portfolio optimization and mix Creating Shareholder Value 20-25% Free Cash Flow Margin Significant growth in Free Cash Flow – disciplined and shareholder-friendly investment policy
Targeting $2B Free Cash Flow in 2025 ~$1B ~15% of Revenue ~$2B 20-25% of Revenue FCF to increase >2X revenue growth
Capital Expenditures Drive Differentiation & Leadership 300mm will provide significant cost advantage in front-end costs Accelerate fab consolidation process Enabling 300mm capabilities at East Fishkill Expansion in die capacity Grow competitive advantage in modules Silicon Carbide Expand capacity for power products Invest to expand competitive advantage in packaging Power and Packaging Capital Intensity to be ~12% in Near Term and Moderate to 9% by 2025
Investment and Capital Allocation Strategy Portfolio expansion for revenue growth and margin expansion – R&D and Capital Expenditure RoIC based investment decisions Investment in Organic Growth Adjacent and complimentary to core competencies Accelerate organic initiatives and developments Accretive to the Financial Model M&A Maintain financial flexibility to pursue organic and inorganic growth Target net leverage of 1.5-2.0X Maintain existing credit ratings of BB+/Ba1 Maintain Flexible Balance Sheet Return 50% of Free Cash Flow through share repurchases Shareholder Returns
New leadership with history of execution and driving transformation Aligned to fast-growing secular megatrends in automotive and industrial end markets Significant gross margin expansion driven by manufacturing consolidation, portfolio optimization and mix Creating Shareholder Value Significant growth in Free Cash Flow – disciplined and shareholder-friendly investment policy Operating income growth >2x revenue growth Disciplined execution to drive sustainable results
Focus on Profitable growth – Reduce reliance on revenue to drive margins Exit volatile and highly-competitive businesses and markets Long-term Supply Agreements (LTSA) improve visibility for investments and capacity planning Fab-Liter strategy and manufacturing optimization improves gross margin stability Tight cost control – operating expense growth to lag revenue growth Invest R&D for product leadership and high returns Driving Sustainable Performance Sustainable Performance Drives Shareholder Value
2025 Target Model 2021 Estimated Revenue $6.6B Gross Margin 38.6% Operating Expenses 19.1% Operating Margin 19.5% CAPEX 8% Free Cash Flow ~15% 2025 Target 7-9% CAGR Grow at 2X the semiconductor industry 20-25% ~$2B of Free Cash Flow in 2025 45% Manufacturing consolidating, mix shift, portfolio optimization 17% Operating expense growth to significantly lag revenue growth 28% Operating Income growth >2X revenue growth 9% Expand 300mm capacity, invest to grow SiC and Power capabilities
New leadership with history of execution and driving transformation Aligned to fast-growing secular megatrends in automotive and industrial end markets Significant gross margin expansion driven by manufacturing consolidation, portfolio optimization and mix Creating Shareholder Value Significant growth in Free Cash Flow – disciplined and shareholder-friendly investment policy Disciplined execution to drive sustainable results Operating income growth >2x revenue growth … with a sustainable and climate-responsible focus
is committed to ESG and Sustainability 100+ individual projects focused on conservation, reduction and recycling in 2020 Recognized as “Prime” in 2021 (top 20% of semiconductor companies) Top 1% of 768 companies in the “Manufacture of electronic components and boards industry” Most Sustainable Company in the semiconductor industry in 2020 World Finance awards Ranked #10 among Barron’s 100 Most Sustainable Companies in the U.S. for 2021 Second consecutive year, #38 out of 399 U.S.-based companies across 14 industries One of 3 semiconductor companies included in the electronics and semiconductor industry in 2021 for 6 consecutive years Three consecutive years in Dow Jones Sustainability Index
onsemi commits to NET ZERO by 2040 onsemi commits to NET ZERO by 2040
Play to Win Focus on high-growth megatrends in Automotive and Industrial and win with onsemi intelligent power and sensing Double down and don’t dabble Invest in disruptive innovation to drive higher margin growth Implement Structural Changes Optimize organizational structure to reduce complexities Streamline manufacturing to match the strategy and not the other way around Attract and retain the best, diverse talent across the board Engage and empower employees to make expeditious, data-driven decisions Capture Value Focus on highly differentiated products that enable disruptive innovation Optimize manufacturing footprint and leverage expertise Eliminate price-to-value discrepancies Execute Leverage new leadership team with history of strong execution Drive accountability throughout the organization Reward employees for delivering superior results Improve Capital Efficiency Optimize Cost Structures Expand Gross Margin and Cash Flow Deliver Shareholder Value Winning Formula