On May 16, 2023, Onsemi held its annual analyst day presentation, providing a detailed overview of the company’s exceptional performance over the past two years, as well as its future growth strategies and goals. The presentation, which lasted approximately two and a half hours, covered various aspects of the company’s business. This article will focus on the content related to image sensor technology discussed during the presentation.
Onsemi is a global leader in semiconductor manufacturing, specializing in innovative energy-efficient solutions for markets such as automotive, communications, computing, consumer electronics, industrial, medical, and aerospace. The company’s product portfolio includes power management, sensors, image processing, connectivity, and security solutions, enabling customers to achieve smarter, greener, and safer system designs. With over 30,000 employees worldwide and a presence in more than 100 countries, including North America, Europe, and Asia, Onsemi is well-positioned to cater to diverse customer needs.
During the 116-page presentation, Onsemi’s Chairman and CEO, Hassan El-Khoury, analyzed and predicted the company’s future technological and business landscape in various areas.
1、Remarkable Performance in the Past Two Years’ Transformation
Hassan El-Khoury, in the opening of his speech, emphasized that the company had successfully executed its established transformation plan over the past two years. Specific measures included shutting down several low-profit factories, divesting non-core businesses, and reducing inefficient costs. These strategies not only reduced operating costs but also freed up resources for core technology deployments.
El-Khoury pointed out that Onsemi had fully completed the two-year transformation blueprint set two years ago and achieved impressive financial performance. The company had achieved a compound annual growth rate (CAGR) of 26% during 2019-2022, optimizing cost structure through the fab-lighter strategy. Onsemi’s operating profit growth rate in the last two years was 5.3 times that of revenue growth, surpassing other semiconductor peers. The free cash flow also witnessed a tenfold increase.
However, Onsemi’s transformation journey was not yet complete, as the company had entered the next stage of development. Following this “major reshaping,” Onsemi’s financial resilience would become stronger, paving the way for the next wave of high-speed growth.
Market Opportunities in the Sustainable Ecosystem
The core growth opportunity for Onsemi’s future is the sustainable ecosystem, which includes high-growth areas such as electrified transportation, industrial automation, and renewable energy. Leveraging its leading positions in smart power and sensing technologies, Onsemi aims to provide forward-looking solutions to these customer-facing markets, achieving a three-fold revenue growth that far exceeds the overall semiconductor market’s growth rate.
2、Key Technological Area Deployment
El-Khoury made it clear that Onsemi had entered the “next wave of transformation” in the company’s development. Over the next five years, Onsemi will continue to focus on target markets such as automotive and industrial and make a full-fledged deployment in the smart power and intelligent sensing fields to seize the significant opportunities emerging from electrification and automation.
a.Silicon Carbide (SiC) Onsemi is currently one of the few semiconductor companies capable of controlling the upstream silicon material supply for silicon carbide. The company has signed long-term SiC supply agreements worth around $9 billion with customers. With the rapid growth in customer demand, Onsemi expects a staggering annual growth rate of 70% in SiC business revenue over the next five years.
b.Power Electronics Components In the standard power electronics component field, Onsemi has accumulated over 30 years of technical expertise and possesses strong design and manufacturing capabilities in products like IGBTs and MOSFETs. However, the company views these highly competitive standard components as commoditized products with limited profit margins. As a result, Onsemi is proactively exiting some low-margin high-volume standard power device businesses, which will reduce revenue by over $30 million. Instead, Onsemi will focus on the high-end power component market with technological barriers, providing customers with differentiated and customized high-value solutions. This strategy will enhance the overall profit margin of the company.
c.Power Management ICs Simon Keane, General Manager of Power Solutions Group, elaborated on Onsemi’s four advantages in Silicon Carbide (SiC) technology, including supply chain control, manufacturing scale effects, a wide product portfolio, and excellent technical strength. Onsemi is the only company in the industry that possesses the three core technologies of SiC wafers, packaging, and modules. The company is also continually innovating in wafer and advanced packaging technology, introducing multiple generations of new products. Onsemi is committed to providing customers with optimized and customized system solutions to improve efficiency and reduce costs. To further enhance system solutions and efficiency, Onsemi plans to invest heavily in the research and production of power management ICs, including gate drivers and digital controllers. The company has accumulated years of technical expertise in this field, and its gate driver market share ranks among the top. These power management ICs can fully leverage the performance of SiC and power devices in the system, creating additional value for customers. They can also reduce system size and costs while improving reliability. With a solid foundation in power management IC technology, this will be one of the company’s critical new opportunities to expand into the $14 billion market.
d.Image Sensors Onsemi holds an absolute leading position, occupying 68% of the automotive image sensor market. The company will continue to focus on the automotive image computing field and capture emerging application demands in industrial automation. In the sensor segment of the presentation, Sudhir Amin detailed Onsemi’s leading advantage in the image sensor field. He stated that Onsemi has achieved a 46% leading position in the automotive image sensor market and holds a 27% market share in the industrial image sensor market.
These advantages in the image sensor technology are attributed to four key factors:
Based on the product roadmap and market layout, Onsemi’s management is optimistic yet cautious about the company’s financial performance over the next five years.
Onsemi projects that its revenue CAGR over the next five years will be three times that of the overall semiconductor market growth rate, reaching approximately 10-12%, significantly higher than the semiconductor market’s overall 4% CAGR. The gross margin is expected to gradually increase from 49.2% in 2022 to 53% in 2027.
Regarding expenses, Onsemi will continuously reduce operating costs through digital process restructuring. The company expects its operating expenses to be controlled at around 13% of revenue by 2027, demonstrating the high operating leverage of the business.
On the capital expenditure side, Onsemi plans to invest $2 billion over the next five years to expand silicon carbide production capacity. This will keep the capital expenditure rate at around 15-20% until 2024, followed by a decrease to approximately 11% by 2027.
Considering multiple favorable factors, Onsemi expects its free cash flow to achieve nearly twice the growth rate over the next five years and surpass the $3.5-4 billion mark in 2027, with a free cash flow margin reaching the top benchmark level of 25-30%.