ON Semiconductor (ON) Morgan Stanley Technology, Media & Telecom Conference 2026 summary

Market environment and outlook

• Stabilization is underway, with KPIs such as book-to-bill and visibility improving over the last 90 days, but a full recovery and replenishment cycle have not yet begun.

• Year-over-year growth has returned for the first time in several quarters, with performance exceeding typical seasonality.

• In industrial markets, recovery is broad, supported by PMIs trending above 50 and strength in medical, aerospace, and defense segments.

• Automotive growth is driven by increased content per vehicle, especially from electrification and zonal architecture, resulting in a 70% revenue increase from 2019 to 2025.

• Exits from non-core markets will be completed by the end of 2026, with 2026 as a transitional year and growth resuming in 2027.

Strategic initiatives and technology

• Focus remains on high-value, differentiated products, with ongoing investment in advanced technologies like silicon carbide, JFET, and vertical GaN.

• The Treo platform, a 65nm BCD analog mixed-signal technology, targets automotive, AI data center, and medical markets, aiming for $1 billion in revenue by 2030.

• Silicon carbide and vertical GaN provide competitive advantages in both automotive and AI data center markets, with unique high-voltage capabilities and in-house manufacturing.

• Product families are defined internally, with customer feedback shaping new product development and ensuring alignment with customer roadmaps.

• Distribution and direct design-in sales approaches are used, with a strong emphasis on architectural engagement with customers.

Operational efficiency and financials

• Restructuring initiatives, including Fab Right and OpEx reductions, are driving permanent efficiency gains and lowering baseline costs.

• 12% of manufacturing capacity is being taken offline, with $45–$50 million in depreciation benefits expected in 2026 and further gross margin improvements anticipated.

• Utilization rates are projected to rise from 68% to the mid-70% range in 2025, with each point of utilization adding 25–30 basis points to gross margin.

• Free cash flow remains strong, with 24% margin and $1.4 billion generated, all returned to shareholders via buybacks.

• Capital allocation prioritizes R&D and CapEx, followed by balance sheet flexibility, selective M&A, and shareholder returns, with a $6 billion buyback program ongoing.