onsemi
ON
announced that EliteSiC is the name of its silicon carbide (SiC) family of solutions and it would launch three solutions — the 1700 V EliteSiC MOSFET and two 1700 V avalanche-rated EliteSiC Schottky diodes — at the Consumer Electronics Show (CES) in Las Vegas.
onsemi’s latest 1700 V EliteSiC MOSFET is a higher breakdown voltage SiC solution for high-power industrial applications. The two 1700 V avalanche-rated EliteSiC Schottky diodes will help designers achieve stable high-voltage operation at high temperatures.
ON has forayed into building these products to capitalize on the uptrend in the market for energy infrastructure.
onsemi has a well-diversified business and is addressing other megatrends such as factory automation and electric vehicles. The company generates a significant percentage of revenues from each of the computing, consumer, industrial, communications and automotive markets. onsemi reported revenues of $2.19 billion in the third quarter of 2022, which beat the Zacks Consensus Estimate by 3.6% and improved 26% on a year-over-year basis.
The company is reallocating capacity to strategic and high-margin products to drive a favorable mix shift and eliminate price-to-value discrepancies. To do so, onsemi is expanding its production capacity in strategic locations and closing fab locations in areas that are affecting its margin growth due to rising price surges in operating in those areas.
ON Semiconductor Corporation Price and Consensus
ON Semiconductor Corporation price-consensus-chart
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ON Semiconductor Corporation Quote
onsemi Boosting SiC Manufacturing Capacity to Drive Top Line
The entire Semiconductor – Analog and Mixed industry is reeling under various operational challenges due to a number of macroeconomic turmoils like raging inflation, the ongoing Russia-Ukraine war, forex market volatility and the looming recession. These can impact the performance capabilities and bottom-line growth of companies like onsemi, which has a significant debt burden.
As of Sep 30, 2022, onsemi had a cash balance of $2.45 billion, whereas total debt (including the current portion) was $3.21 billion. A high debt position increases the risk profile of the business. Thus, the company is required to constantly generate an adequate amount of cash flows to meet debt requirements. Onsemi currently carries a Zacks Rank #4 (Sell).
You can see
the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here
.
However, despite its leveraged balance sheet, onsemi has been expanding its SiC facilities domestically and internationally to diversify its product portfolio. Per
onsemi
, the SiC total addressable market is projected to grow from $2 billion in 2021 to $6.5 billion in 2026, witnessing a CAGR of 33%.
The company recently expanded its Hudson, NH-based facility, which will increase SiC boule production capacity by five times year over year. This will aid in meeting the rising demand for SiC-based solutions, which is critical for developing EVs and energy infrastructure, and is an important contributor to decarbonization.
ON recently expanded its SiC facility in Roznov, Czech Republic, to expand SiC production capacity by 16 times. So far, ON has invested more than $150 million in the Roznov site and will look to spend an additional $300 million through 2023.
onsemi, is not only expanding its production capacity. The company has recently completed the sale of its Niigata, Japan facility, which aligns with its fab liter strategy to expand the gross margin and reduce its fixed-cost footprint.
Also, positively impacting the domestic expansion of onsemi’s SiC facilities is President Biden’s decision to sign the CHIPS and Science Act. The act supports investments in domestic semiconductor manufacturing, and reducing dependence on foreign markets like China and Japan. Its peer
Microchip Technology
MCHP
is also looking to benefit from the recent declaration of the act by the government.
The government’s recent declaration will help Microchip to diversify income from its microcontroller business, which is riddled with supply-chain disturbances. Microchip continues developing, and introducing a wide range of innovative and proprietary new linear, mixed-signal, power, interface and timing products to spur growth in the analog business.
However, ON is facing stiff competition from
Texas Instruments
TXN
and
STMicroelectronics
STM
.
STMicroelectronics’ third-generation STPOWER SiC MOSFETs help meet the energy-saving efficiency requirements in EVs and are chief competitors of onsemi in the EV market. STMicroelectronics’ solutions will help EV makers achieve faster charging and reduce EV weight, helping STM win a significant market share in the industry.
Texas Instruments is also seeing success in certain fast-growing automotive market segments. TXN is focused on infotainment, safety and ADAS, body electronics (including lighting), hybrid electric vehicles and powertrain segments of the automotive market. It also experiences significant traction from the EV megatrend.
onsemi, however, signed long-term supply agreements with various customers for the next three years, which are expected to help secure $1 billion of committed SiC revenues in 2023.
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