ON Semiconductor Corp (NASDAQ:ON) stock rose 0.83% (As on August 1, 11:17:43 AM UTC-4, Source: Google Finance) after the company forecast third-quarter revenue above market estimates, on optimism that strong demand from the automotive sector will offset broader weakness in the semiconductor industry. The rising adoption of electric vehicles has been a boon for chipmakers like Onsemi and NXP Semiconductors. Onsemi was considering investing over $2 billion to boost the production of silicon carbide chips used to extend the range of EVs. The company delivered record Automotive revenue exceeded $1 billion increased 35% year-over-year, Industrial revenue of $609.3 million increased 5% year-over-year and Silicon carbide revenue grew nearly 4x year-over-year. The company posted non-GAAP gross margin of 47.4 percent, GAAP operating margin and non-GAAP operating margin of 32.2 percent and 32.8 percent respectively. The company’s brownfield capacity expansion is creating an opportunity for onsemi to gain share in silicon carbide by capitalizing on the rapidly accelerating demand for electrification and renewable energy. There is significant growth in Free Cash Flow margin to 25-30% and expects $3.5-4.0B in Free Cash Flow in 2027.
ON in the second quarter of FY 23 has reported the adjusted earnings per share of $1.33, beating the analysts’ estimates for the adjusted earnings per share of $1.21, according to Refinitiv. For the second quarter ended June 30, the company’s revenue rose to $2.09 billion, ahead of analysts’ expectations of $2.02 billion. The revenue was boosted by Onsemi’s power solutions group, which provides power management chips, making up about 53% of total quarterly revenue.
Onsemi, which makes sensors and supplies chips to companies like Volkswagen, expects revenue between $2.10 billion to $2.20 billion in the third quarter. Analysts on average expect revenue of $2.07 billion, according to Refinitiv IBES data. Its forecast for adjusted earnings of $1.27 to $1.41 per share, was also above estimates of $1.21 per share.
On the other hand, the company has recently secured $1.95B in long-term supply agreements (LTSAs) for its intelligent power technologies with leading global manufacturers of solar inverters, contributing to onsemi’s position as the number one power semiconductor supplier in this rapidly growing market. The company has announced a long-term supply agreement (LTSA) for Magna to integrate onsemi’s EliteSiC intelligent power solutions into its eDrive systems. Simultaneous with the signing of the LTSA, the companies entered a separate agreement for Magna to also invest approximately $40 million for the procurement of new SiC equipment at onsemi’s New Hampshire and Czech Republic facilities to ensure access to future supply.