ON SEMICONDUCTOR CORP

ON Semiconductor Corporation operates in the semiconductor industry, offering intelligent power and intelligent sensing solutions that drive electrification, energy efficiency, safety, and automation in automotive, industrial, and other end-markets, including AI data center. The company's intelligent power technologies enable the electrification of drivetrain in the automotive industry to allow for lighter and longer-range electric vehicles and empower efficient fast-charging systems. Its intelligent sensing technologies enable advanced safety applications in automotive through industry leading performance and reliability. In the industrial market, its intelligent power technologies propel sustainable energy for the highest efficiency solar strings and industrial power. In the medical field, its intelligent power technologies extend the life of personal diagnostic devices, such as continuous glucose monitors. Its intelligent sensing technologies support the next generation industry through automation, allowing for smarter factories and buildings, and are enabling robotics and humanoids. In the other market which includes AI data center products, its intelligent power technologies enable energy efficiency in a market in which energy needs are growing at an exponential rate, and AI data center operators are focused on reducing energy consumption. The company believes it has one of the most comprehensive portfolios of products and technologies for this market to address the complete power tree, and it is well positioned to benefit as new generation of AI data center processors and racks enter the market.

The company faces significant competition from major international semiconductor companies, as well as smaller companies focused on specific market niches. PSG's primary competitors include Infineon Technologies AG, STMicroelectronics N.V., Wolfspeed Inc., ROHM Semiconductor and Nexperia BV. Competitors for certain of AMG's products and solutions include Texas Instruments Incorporated, Analog Devices, Inc., Infineon, STMicroelectronics, Renesas Electronics Corporation, Monolithic Power Systems Inc. and NXP Semiconductors N.V. Competitors for certain of ISG's products and solutions include Sony Semiconductor Manufacturing Corporation, Samsung Electronics Co., Ltd., and Omnivision Technologies Inc. The company's competitive strengths include core competencies such as leading-edge fabrication technologies, micro and module packaging expertise, breadth of product line and IP portfolio, high-quality, cost-effective manufacturing and supply chain management. ISG differentiates itself from the competition through deep technical knowledge and close customer relationships to drive leading-edge sensing performance primarily in machine vision applications.

onsemi generates revenue primarily from the sale of semiconductor products to distributors and direct customers, and to a much lesser extent, from product development agreements. Sales to distributors accounted for approximately 54% ¹, 53% ² and 52% ³ of revenue in 2025, 2024 and 2023, respectively. Sales to direct customers accounted for approximately 46% ⁴, 47% ⁵ and 48% ⁶ of revenue in 2025, 2024 and 2023, respectively. The company had one distributor whose revenue accounted for approximately 11% ⁷ and 10% ⁸ of total revenue for the years ended December 31, 2025 and 2024, respectively. The company believes that its ability to offer a broad range of products, combined with its global manufacturing and logistics network, provides its customers with single source purchasing.

As of December 31, 2025, the company was organized into three operating and reportable segments: the Power Solutions Group (PSG), the Analog and Mixed-Signal Group (AMG) and the Intelligent Sensing Group (ISG). PSG provides a broad portfolio of discrete, module, and integrated semiconductor devices designed to enable high-efficiency and high-power conversion across AI data centers, energy infrastructure, automotive and industrial. PSG's offerings include power switching devices, signal conditioning products, and circuit-protection technologies. PSG's Silicon & WBG power technologies, spanning FETs and diodes, play a critical role in high-power conversion for energy infrastructure, energy storage, AI data centers, fast-charging systems, electric vehicles and industrial drives. AMG designs and develops a comprehensive range of analog and mixed-signal solutions including power-management, sensor-interface, connectivity, and standard products that serve automotive, industrial automation, AI data center, computing, and mobile end markets. AMG delivers advanced analog and mixed-signal technology through its Treo Platform, a single, scalable technology platform supporting a wide voltage range, high temperature and an ever-evolving SoC, like architecture accelerating time to market. ISG develops advanced imaging technologies that include high-performance CMOS image sensors, ISPs, SWIR sensors, and more, supporting high-dynamic-range, low-noise, and high-reliability imaging essential to automotive ADAS, industrial automation, robotics, and AI-enabled perception systems. Photon-counting technologies, including SPAD arrays and SiPM devices, continue to play a role in emerging applications such as depth sensing, factory automation, safety systems, and robotics. For the year ended December 31, 2025, PSG revenue was $2,805.1 million ⁹, AMG revenue was $2,261.9 million ¹⁰, and ISG revenue was $928.4 million ¹¹. PSG gross profit was $687.5 million ¹² with a gross margin of 24.5% ¹³, AMG gross profit was $1,156.5 million ¹⁴ with a gross margin of 51.1% ¹⁵, and ISG gross profit was $139.9 million ¹⁶ with a gross margin of 15.1% ¹⁷.

On January 14, 2025, the company completed the acquisition of the Silicon Carbide Junction Field-Effect Transistor (SiC JFET) technology business from Qorvo US, Inc., and certain of its subsidiaries, for $118.8 million ¹⁸ in cash. On October 27, 2025, the company completed the acquisition of rights to Vcore power technologies, including associated intellectual property licenses, from Aura Semiconductor, with total purchase consideration up to $144 million ¹⁹, subject to customary purchase price adjustments, with $7 million ²⁰ paid in cash at close. During the first quarter of 2025, the company announced restructuring and cost reduction initiatives, incurring total severance costs and related benefit expenses of $67.1 million ²¹ related to the termination of approximately 2,400 ²² employees, and recorded non-cash impairment charges of $496.0 million ²³ during the year ended December 31, 2025 related to previous investments in manufacturing equipment at certain manufacturing facilities pursuant to held-for-sale accounting guidance. Other charges of $103.9 million ²⁴ for the year ended December 31, 2025 were incurred as part of the program. The company also recorded $268.2 million ²⁵ relating to excess and obsolete inventory charges, of which $37.9 million ²⁶ and $230.3 million ²⁷ related to inventory primarily considered work in progress within the PSG and ISG reportable segments, respectively. Additionally, the company recorded $45.4 million ²⁸ related to write-off of consumables, manufacturing supplies and obligations for certain unfulfilled purchase commitments due to the manufacturing capacity reduction actions. During the year ended December 31, 2025, the company repurchased approximately 27.9 million ²⁹ shares of its common stock for an aggregate purchase price of approximately $1,375.0 million ³⁰, excluding fees, commissions and excise taxes. On December 31, 2025, the company repaid $375.0 million ³¹ that was outstanding on the Revolving Credit Facility. As of December 31, 2025, the company had approximately $1.5 billion ³² available under the Revolving Credit Facility for future borrowings, except for amounts utilized for the letters of credit.

Revenue for the year ended December 31, 2025 was $5,995.4 million ³³, representing a decrease of 15.3% ³⁴ from $7,082.3 million ³⁵ for the year ended December 31, 2024. Net income attributable to onsemi was $121.0 million ³⁶ compared to $1,572.8 million ³⁷ in 2024. Operating income totaled $84.2 million ³⁸ during 2025 compared to $1,767.7 million ³⁹ during 2024. Gross margin decreased by approximately 1,230 basis points to 33.1% ⁴⁰ in 2025 from 45.4% ⁴¹ in 2024. Cash flows from operating activities were $1,759.8 million ⁴² for the year ended December 31, 2025.

The company is focused on increasing profitable revenue through differentiated technologies to address the high-growth megatrends in automotive, industrial and other markets which include AI data centers. The company's product development efforts are directed towards addressing the need for solutions to manage and optimize the growing power demands and distribution within AI data centers; powering the electrification of the automotive industry with its intelligent power technologies that allow for lighter and longer-range electric vehicles and enable efficient fast-charging systems; propelling the sustainable energy evolution with its intelligent power technologies for the highest efficiency solar strings, industrial power and storage systems; enhancing the automotive mobility experience with its intelligent sensing technologies with imaging and depth sensing that make AD, ADAS, and advanced vehicle safety possible; and enabling robotics, humanoids, automation, and data exchange (Industry 4.0) with its intelligent sensing technologies for smarter factories and buildings. The company's extensive range of power technologies are used to help power AI data centers and it expects this part of its business to grow. The company believes the evolution of the automotive industry, with advancements in autonomous driving, ADAS, vehicle electrification, and the increase in electronics content for vehicle platforms is reshaping the boundaries of transportation. The company believes it is well positioned to benefit as new generation of AI data center processors and racks enter the market.

The company continues to optimize and right-size its manufacturing footprint to align its capacity with its long-term outlook, while focusing on generating efficiencies that result in meaningful gross margin expansion and operating cash flows. The company intends to achieve efficiencies in its operating and capital expenditures and invest in research and development initiatives to accelerate growth in high-margin products. The company continues to evaluate its employee workforce composition (both employee positions and locations) and manufacturing capacity and footprint for potential operational improvements and efficiencies. The company expects to incur additional accelerated depreciation and amortization of approximately $135 million ⁴³ in the first half of 2026. The company intends to continue cost-saving initiatives during 2026.

The company continues to implement cost-saving initiatives to be able to align its overall cost structure, capital investments and other expenditures with its expected revenue, spending and capacity levels to help offset softening demand and increased manufacturing and operating costs. The company has taken, and continues to take actions, including but not limited to, exiting product lines that do not enhance gross margin or satisfy strategic objectives. The company made meaningful progress in aligning internal manufacturing capacity and resources to external demand.

In 2026, based on current plans, the company expects capital expenditures to be approximately 5% ⁴⁴ of revenue. The company expects to continue to opportunistically repurchase its shares of common stock under its New Share Repurchase Program subject to market conditions, the price of its shares and other factors. In November 2025, the Board of Directors approved a New Share Repurchase Program under which the company may repurchase up to an aggregate of $6.0 billion ⁴⁵ of the company's common stock (exclusive of fees, commissions and other expenses) from January 1, 2026 through December 31, 2028. Through February 4, 2026, the company acquired 2.9 million ⁴⁶ shares for $175.6 million ⁴⁷ under the New Share Repurchase Program pursuant to a 10b5-1 trading arrangement.

During 2025, the semiconductor industry continued to experience a softening demand and uncertainty due to macroeconomic factors and the geopolitical environment. The company has experienced and expects to continue to experience fluctuations in its operating results due to macroeconomic conditions, as well as those within the semiconductor industry. The company's business is driven more by content gains within applications and secular growth drivers and not solely by macroeconomic and industry cyclicality. The company's power technologies designed for AI use may not capture market share as expected, and issues related to the responsible use of AI may adversely affect its business. The company may not be able to develop and offer the technology solutions that its AI-focused customers demand in a timely manner or effectively, which could have a materially adverse effect on its business. The imposition of or increase in tariffs, export controls and other trade restrictions as a result of international trade disputes or changes in trade policies or political conditions may adversely affect the company's sales and profitability. The global geopolitical uncertainty or escalation of geopolitical tensions involving countries where the company or its suppliers operate or any retaliatory actions from such governments could have a material adverse effect on the company's business and results of operations.

The company's manufacturing network includes multiple owned and third-party facilities, which may each produce one or more components necessary for the assembly of a single product, and an operational disruption at a single facility may have a disproportionate impact on its ability to produce many of its products. The company is also dependent upon a limited number of highly specialized third-party suppliers for required components and materials for certain of its key technologies. The company may be unable to implement certain business strategies and restructuring initiatives and the pursuit of such strategies and initiatives could materially adversely affect its business and results of operations. If the company is unable to accurately forecast demand for its products, it may purchase more or fewer parts than necessary or incur costs for canceling, postponing or expediting delivery of parts. If the company purchases or commits to purchase inventory in anticipation of customer demand that does not materialize, or such inventory is rendered obsolete by the rapid pace of technological change, or if customers reduce, delay or cancel orders, it may incur excess or obsolete inventory charges.

A significant portion of the company's revenue is derived from customers in the automotive and industrial end-markets, which represented approximately 51% ⁴⁸ and 28% ⁴⁹ of revenue, respectively, for the year ended December 31, 2025, and a downturn or lower sales in either end-market could materially adversely affect business and results of operations. The company's manufacturing efficiency is contingent upon the efficient operation of numerous interdependent processes, and any disruption in these processes could have a material adverse effect on its business and results of operations. The company faces significant competition within each of its product lines from major global semiconductor companies, and if it is unable to compete effectively, its competitive position could be weakened. The company had $3,004.9 million ⁵⁰ of outstanding principal relating to its indebtedness as of December 31, 2025, and the degree to which it is leveraged could have important consequences for its business and operations, including impacting its ability to obtain additional financing. The company may be unable to successfully make or integrate strategic acquisitions, joint ventures, collaborations or strategic investments, which could materially adversely affect its business, results of operations and financial condition.

Management's message emphasizes a focus on increasing profitable revenue through differentiated technologies to address high-growth megatrends in automotive, industrial and other markets which include AI data centers. The key strategic priorities emphasized are continuing to optimize and right-size the manufacturing footprint to align capacity with long-term outlook, focusing on generating efficiencies that result in meaningful gross margin expansion and operating cash flows, and achieving efficiencies in operating and capital expenditures while investing in research and development initiatives to accelerate growth in high-margin products. Management states that the company intends to continue cost-saving initiatives during 2026 and expects capital expenditures to be approximately 5% ⁵¹ of revenue in 2026 based on current plans.