ON Semiconductor, a leading global supplier of semiconductor components, recently released its financial results for the first quarter of 2025, highlighting some significant challenges and strategic changes. 

The company's performance has been impacted by a decline in revenue across all three major business divisions, causing a sharp drop in its stock price. Here is a detailed breakdown of the company’s recent developments.

First Quarter 2025 Financial Overview

For the first quarter of 2025, ON Semiconductor reported a 22% year-over-year decline in revenue, bringing it down to $1.45 billion. Despite this, the company exceeded Wall Street’s earnings expectations with an adjusted earnings per share (EPS) of $0.55, which was higher than the expected $0.50. However, the company posted a net loss of $486 million, a stark contrast to a net profit of $453 million during the same period last year.

Decline Across Key Business Segments

ON Semiconductor's performance across its three key business segments has been disappointing:

• PSG (Power Solutions Group): This segment, which focuses on power management chips, experienced the most significant decline, with a drop of 26%.

• ISG (Integrated Power Solutions Group): This division, which specializes in integrated power management chips, saw a 20% decrease in revenue.

• AMG (Application Management Group): This sector, which deals with application-specific management chips, shrank by 19%.

These declines are indicative of broader challenges within the semiconductor industry, which has been grappling with fluctuating demand and global supply chain issues.

Outlook for Q2 2025

Looking ahead to the second quarter of 2025, ON Semiconductor is cautiously optimistic about the electric vehicle (EV) market. The company anticipates steady growth in the demand for silicon carbide (SiC) chips, which are crucial for electric vehicle powertrains. ON Semiconductor expects revenue for Q2 2025 to range between $1.4 billion and $1.5 billion, driven by the continued strength of the EV sector.

Recent Setbacks

ON Semiconductor has faced some setbacks recently, which have further impacted its outlook:

• Cancellation of Allegro Microsystems Acquisition: Last month, ON Semiconductor called off its $6.9 billion acquisition of Allegro Microsystems, a smaller competitor. The acquisition was initially intended to expand ON Semiconductor's market share in electric vehicle and traditional automotive power management systems, as well as gain critical chip technologies for vehicle braking and steering systems. With the termination of this acquisition, ON Semiconductor’s strategic plans in these areas have been temporarily put on hold.

• Global Workforce Reductions: In February 2025, ON Semiconductor announced plans to lay off approximately 2,400 employees globally. This move is expected to save the company between $105 million and $115 million annually, as part of its efforts to streamline operations and reduce costs.

Investment Termination in South Korea SiC Factory

ON Semiconductor also made a strategic shift by halting its investment in a planned silicon carbide (SiC) factory in South Korea. The company had announced in 2022 plans to invest 1.4 trillion Korean won (approximately $71.44 billion RMB) in a new production line in Pyeongtaek. This factory was expected to become the world’s largest SiC production facility. However, with the recent investment cancellation, ON Semiconductor has recalled most of the engineers from the site, retaining only a small team of researchers. It is likely that the remaining personnel will be reassigned to other projects.

Company Background

Founded in 1999 and headquartered in Phoenix, Arizona, ON Semiconductor is a global leader in the design, manufacture, and sale of semiconductor components used in a wide range of electronic systems and products. The company operates through three primary divisions: Application Products, Standard Products, and Systems Solutions. ON Semiconductor provides a variety of solutions, including analog, mixed-signal, and advanced logic circuits, as well as power management products and semiconductor technologies for applications in automotive, industrial, communications, and consumer electronics.

Throughout its history, ON Semiconductor has made several key acquisitions to strengthen its market position:

• In 2014, the company acquired high-performance imaging sensor manufacturer Truesense Imaging to enhance its industrial market presence.

• In 2014, it also acquired Aptina Imaging, a major CMOS image sensor manufacturer, for $400 million.

• In 2021, ON Semiconductor purchased GT Advanced, a U.S.-based producer of silicon carbide (SiC) for $415 million, to ensure a steady supply of SiC for electric vehicles, EV charging infrastructure, and sustainable energy solutions.

Conclusion

Despite facing some tough challenges in the first quarter of 2025, ON Semiconductor remains optimistic about its future, particularly with its focus on the growing electric vehicle market and the ongoing demand for advanced power solutions like silicon carbide. 

However, the recent strategic shifts—such as the cancellation of acquisitions and investment plans—highlight the volatility in the semiconductor industry and the company's efforts to adapt to changing market conditions. With its continued focus on innovation and operational efficiency, ON Semiconductor aims to maintain its leadership position in the semiconductor sector.

Stay tuned for further updates as ON Semiconductor navigates these challenges and prepares for its upcoming product releases and market strategies.