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ON Semiconductor (ON) faces a challenging environment marked by cyclical downturns in key markets and macroeconomic uncertainties. While recent performance has been underwhelming, strategic initiatives and long-term growth opportunities in automotive and industrial markets, particularly with silicon carbide (SiC) technology, position the company for a potential rebound. However, near-term risks and market dynamics warrant a cautious approach.
ON Semiconductor's revenue growth is currently hampered by a cyclical downturn, with recent results showing a year-over-year decline. BofA analysts noted muted sales recovery, weakness in U.S./European auto sales, and reliance on China EV sales, which are harder to track and sustain. The company's Q2 revenue of $1.47B exceeded guidance midpoint, but 2026 sales growth is projected to be around 5% due to non-core exits, impacting near-term profitability.
ON Semiconductor is strategically focusing on high-value product lines, including silicon carbide solutions, and exiting non-core businesses to reshape the company with a distinct value proposition. The company's CEO emphasized ongoing structural improvements and disciplined cost management to prepare for market recovery. However, analysts express concern over sequential revenue declines, particularly in automotive, and seek clarity on inventory and pricing strategies. The company's reliance on China EV, while showing growth, introduces tracking and sustainability concerns.
ON Semiconductor's stock has experienced significant volatility, including a recent 9% drop following Q2 results and a 15% decline after Q2 results and outlook. The stock's performance is sensitive to market sentiment, trade developments, and company-specific news. Despite some positive days, the overall trend indicates investor caution due to cyclical pressures and uncertain recovery timing.
ON Semiconductor faces several risks, including ongoing uncertainty in automotive demand, especially in Europe and North America. The company is executing product exits and repositioning that will reduce revenue by 5% in 2026. Elevated inventory levels and potential delays in recovery for EV markets outside of China also pose risks. Tariffs and macroeconomic headwinds could further affect demand and pricing.
ON Semiconductor is partnering with Nvidia to accelerate the transition to 800 VDC power solutions for AI data centers, showcasing innovation in intelligent power solutions. The company's EliteSiC technology is featured in Xiaomi's electric SUV models, demonstrating its advanced silicon carbide technology. However, BofA analysts noted limited gross margin recovery and dilutive SiC margins due to lower utilization.
ON Semiconductor faces intense competition in the semiconductor market, particularly in silicon carbide. The company's reliance on China EV exposes it to competition from local suppliers. Pricing strategies are being used to defend or grow market share, which may impact gross margins. The company's lag in revenue growth compared to peers is attributed to its exposure in specific markets like EVs, which are slower outside China.
ON Semiconductor is sensitive to geopolitical and macroeconomic uncertainties affecting demand and pricing. Potential risks from tariffs and macroeconomic headwinds were acknowledged, but management stated, "We expect no material change in 2025 due to the one big beautiful bill, while we see a positive impact in 2026 and beyond."
ON Semiconductor's Q2 2025 results reflect stabilization in core markets and early signs of recovery, particularly in automotive and AI data center businesses. The company is moving ahead with portfolio rationalization, operational efficiency, and next-generation technology investments, while guiding Q3 revenue between $1.465 billion and $1.565 billion. Strategic exits and repositioning are expected to shape a higher-margin, more resilient business.
ON Semiconductor faces risks related to tariffs and trade tensions, particularly with China. The company's reliance on China EV exposes it to regulatory changes and market dynamics in that region. However, the company's global manufacturing footprint and diversified customer base mitigate some of these risks.
ON Semiconductor Corporation provides intelligent sensing and power solutions in Hong Kong, Singapore, the United Kingdom, the United States, and internationally. The company operates through three segments Power Solutions Group, Analog and Mixed-Signal Group, and Intelligent Sensing Group. The Power Solutions Group segment offers discrete, module and integrated semiconductor products that perform multiple application functions, including power switching, signal conditioning, and circuit protect...