# ON Semiconductor (ON) Financial Model Free Excel 3-statement financial model and company analysis for ON Semiconductor. - Canonical: https://finamodel.com/companies/on-semiconductor - Industry: Semiconductors - Downloadable model: Yes - Excel download: https://finamodel.com/company-models/ON.xlsx ## Model Purpose This model evaluates ON Semiconductor's equity valuation and free cash flow generation capacity, focusing on its transition towards high-margin Silicon Carbide (SiC) and AI data centre products amidst cyclical automotive and industrial end-market headwinds. ## Company Overview ON Semiconductor Corporation (operating as onsemi) provides intelligent power and sensing solutions, primarily targeting the automotive and industrial markets. The company is transitioning from a traditional asset-heavy semiconductor manufacturer to a more optimised, hybrid manufacturing footprint through its "Fab Right" strategy. Business segments include: * Power Solutions Group (PSG): Approximately 47% of revenue. * Analog and Mixed-Signal Group (AMG): Approximately 38% of revenue (renamed from Advanced Solutions Group in 2024). * Intelligent Sensing Group (ISG): Approximately 15% of revenue. Key geographies include Hong Kong (27%), the United Kingdom (23%), Singapore (21%), and the United States (20%). The company holds a strong competitive position in Silicon Carbide (SiC) power devices and automotive image sensors, competing directly with Infineon, STMicroelectronics, and Texas Instruments. Recent major events include the 2025 Manufacturing Realignment Program (reducing fab capacity by 12%) and the January 2025 acquisition of Qorvo's SiC JFET technology business for $118.8 million. ## Revenue Deep Dive ### Power Solutions Group (PSG) * **Segment name:** Power Solutions Group (PSG) * **Revenue driver formula:** Automotive & Industrial Volume x Blended ASP per Power Device * **Historical growth rate:** Highly cyclical; grew significantly during the EV boom but contracted approximately 15% in 2025 due to inventory digestion. * **Key growth levers and headwinds:** Growth is driven by vehicle electrification, the Treo Platform, and AI data centre power needs. Headwinds include broader automotive market slowdowns. * **Pricing dynamics:** Contractual long-term supply agreements (LTSAs) for SiC products provide stability, while legacy discrete products face spot market pricing. * **Revenue recognition notes:** Recognised at a point in time upon transfer of control to OEMs or distributors (sell-in), net of estimated returns. * **Seasonality:** Q1 is typically the weakest quarter, with sequential growth building towards Q3 and Q4. ### Analog and Mixed-Signal Group (AMG) * **Segment name:** Analog and Mixed-Signal Group (AMG) * **Revenue driver formula:** End-market Volume x ASP per Analog IC * **Historical growth rate:** Contracted 15-20% recently. * **Key growth levers and headwinds:** Headwinds include the planned exit of non-core, low-margin products (exiting $50 million in Q1 2026 alone) and general weakness in consumer markets. * **Pricing dynamics:** Highly competitive standard analog pricing. * **Revenue recognition notes:** Point in time upon shipment. * **Seasonality:** Follows broader consumer and industrial electronics cycles. ### Intelligent Sensing Group (ISG) * **Segment name:** Intelligent Sensing Group (ISG) * **Revenue driver formula:** Sensor Volume x ASP per Sensor * **Historical growth rate:** Flat to slightly down recently, historically mid-single-digit CAGR. * **Key growth levers and headwinds:** Driven by increasing camera counts per vehicle for Advanced Driver Assistance Systems (ADAS) and machine vision for industrial automation. * **Pricing dynamics:** Premium pricing for high-resolution, automotive-grade sensors. * **Revenue recognition notes:** Point in time upon shipment. * **Seasonality:** Tied closely to global automotive production schedules. ## Cost Structure ### Variable Costs / COGS * **Line-by-line breakdown:** Silicon wafers, internal fab manufacturing overhead, outsourced assembly and test (OSAT) costs, depreciation of fab equipment, and inventory write-downs. * **Gross margin range:** 33.1% to 49.0% over the last 5 years. The 2025 GAAP gross margin fell to 33.1% due to excess and obsolete inventory charges, while non-GAAP gross margin was 38.4%. * **Key input costs and commodity exposures:** Raw silicon, energy costs for fabs, and precious metals for packaging. * **How COGS scales with revenue:** High operating leverage. Margins compress rapidly when fab utilisation drops, as seen in 2024 and 2025. ### Operating Expenses * **R&D:** Typically 10-12% of revenue. Covers development of the Treo Platform, SiC, and vertical GaN (vGaN) technologies. * **SG&A:** Typically 5-7% of revenue. The company maintains a lean corporate structure. * **Depreciation & Amortisation:** Significant due to internal fabs and historical acquisitions (Fairchild, Quantenna). * **Stock-Based Compensation:** Typically 1.5-2.5% of revenue. * **Restructuring / one-time charges:** Highly material. The company recorded significant asset impairments and severance charges in 2025 under the Manufacturing Realignment Program, dropping GAAP operating income to $84.2 million. ### Margin Profile * **Gross margin:** 33% to 49% (targeting 53% long-term). * **EBITDA margin:** 20% to 35%. * **Operating margin:** 15% to 34% (targeting 40% long-term non-GAAP). * **Net margin:** 2% to 25% (heavily skewed by 2025 restructuring). * **Margin trend:** Compressing in the near term due to cyclical underutilisation, but expected to expand as the "Fab Right" strategy eliminates sub-scale manufacturing. ## Balance Sheet Structure * **Total assets:** Approximately $10 billion to $11 billion. * **Key asset categories:** Cash and short-term investments (~$2.5 billion), Net PP&E, and Inventory. * **Goodwill & intangibles:** Material (historically 20-25% of assets) due to a history of acquisitions. * **Working capital profile:** * **Days Sales Outstanding (DSO):** 40 to 50 days. * **Days Inventory Outstanding (DIO):** Elevated at approximately 192 days in late 2025. * **Days Payable Outstanding (DPO):** 50 to 60 days. * **Net working capital as % of revenue:** Positive and historically high due to strategic inventory buffers. * **Working capital funding:** The company uses its strong cash balance rather than relying on negative working capital. * **PP&E:** Consists primarily of front-end wafer fabrication equipment and facilities. Useful lives range from 3 to 10 years for equipment. * **Right-of-use assets:** Present but not the primary driver of the asset base. ## Capital Expenditure & Investment * **Capex as % of revenue:** Historically 10-15% during the SiC capacity build-out, now dropping to 5-8%. * **Maintenance capex vs. growth capex:** Shifting heavily towards maintenance as large capacity investments are now complete. * **Major capex programmes:** Internal SiC boule growth and wafer manufacturing facilities in the US and Europe. * **Capitalised software:** Minimal compared to physical equipment. * **M&A pattern:** Bolt-on technology acquirer (e.g., Qorvo SiC JFET for $118.8 million). ## Debt & Capital Structure * **Total debt:** Approximately $3.0 billion in long-term debt as of 2025. * **Debt/EBITDA ratio:** Currently below 1.5x, indicating a conservative leverage profile. * **Credit rating:** Investment grade (BBB- / Baa3 equivalent). * **Key debt instruments:** $1.5 billion of 0.50% Convertible Senior Notes due 2029, Term Loans, and a $1.5 billion Revolving Credit Facility. * **Maturity profile:** Well-laddered with the major convertible maturity in 2029. * **Interest rate profile:** Mixed, with highly favourable fixed rates on the convertible notes. * **Covenants:** Standard leverage and interest coverage ratios on the credit facility. * **Share repurchase programme:** Highly active. The company repurchased $1.4 billion in 2025 and announced a new $6.0 billion authorisation. * **Dividend policy:** The company does not pay a regular dividend, preferring share repurchases. ## Cash Flow Characteristics * **Operating cash flow conversion:** Highly variable recently due to non-cash restructuring charges bridging GAAP net income to OCF. * **Free cash flow margin:** Reached a record 24% in 2025 due to tight expense control and declining CapEx. * **Major non-cash items:** Depreciation, stock-based compensation, and asset impairments from fab closures. * **Working capital cash flow impact:** Inventory reduction is expected to be a major source of cash in 2026. * **Capex intensity:** Decreasing rapidly as the SiC investment cycle concludes. * **Cash tax rate:** Generally lower than the statutory rate due to R&D tax credits and foreign manufacturing jurisdictions. ## Sheet Structure 1. **Assumptions**: Hardcoded inputs for segment growth, margin targets, working capital days, and capital allocation. 2. **Revenue Build**: Volume and ASP drivers for PSG, AMG, and ISG, including the phase-out of non-core revenue. 3. **Income Statement**: GAAP to Non-GAAP reconciliation, explicitly separating restructuring charges and excess inventory write-downs. 4. **Balance Sheet**: Standard asset and liability line items matching the 10-K, with a focus on inventory and PP&E. 5. **Cash Flow Statement**: OCF, CFI, and CFF, calculating Free Cash Flow (OCF less CapEx). 6. **Working Capital Schedule**: DSO, DIO, and DPO calculations driving the receivables, inventory, and payables balances. 7. **PP&E & Depreciation**: CapEx additions, fab divestiture reductions, and a depreciation waterfall. 8. **Debt & Interest Schedule**: Tracking the 0.50% Convertible Notes, Term Loans, and Revolver, calculating interest expense and cash interest. 9. **Equity & Shares**: Tracking the $6.0 billion share repurchase programme and its impact on the diluted share count. 10. **DCF Valuation**: Unlevered free cash flow, WACC calculation, and terminal value. ## Key Financial Relationships 1. `PSG Revenue = (Automotive Power Volume x Auto ASP) + (Industrial Power Volume x Industrial ASP)` 2. `AMG Revenue = AMG Volume x Blended ASP` 3. `ISG Revenue = ADAS Sensor Volume x Sensor ASP` 4. `Total Revenue = PSG Revenue + AMG Revenue + ISG Revenue` 5. `Non-GAAP Gross Profit = Total Revenue - (GAAP COGS - Excess/Obsolete Inventory Charges - Restructuring in COGS)` 6. `Inventory Balance = (GAAP COGS / 365) x Target DIO` 7. `Depreciation Expense = Beginning PP&E x Blended Depreciation Rate` 8. `Free Cash Flow = Operating Cash Flow - Capital Expenditures` 9. `Ending Share Count = Beginning Shares - (Share Repurchase Spend / Average Share Price) + Stock-Based Comp Dilution` 10. `Interest Expense = (Average Convertible Debt x 0.50%) + (Average Term Loan x Floating Rate)` ## Cross-Sheet Dependencies * The **Revenue Build** sheet feeds the top line of the **Income Statement**. * The **Working Capital Schedule** calculates changes in NWC, which feeds the **Cash Flow Statement**. * The **PP&E & Depreciation** sheet feeds D&A into the **Income Statement** and the Net PP&E balance into the **Balance Sheet**. * The **Debt & Interest Schedule** feeds Interest Expense into the **Income Statement** and ending debt balances into the **Balance Sheet**. * The **Equity & Shares** sheet uses Free Cash Flow from the **Cash Flow Statement** to determine available funds for buybacks, which then feeds the EPS calculation on the **Income Statement**. * *Circularity Warning*: Interest expense relies on average debt balances, which rely on revolver draws, which are driven by net cash flow that includes interest expense. ## Sign Convention * Revenue, Assets, and Equity are positive. * Expenses (COGS, SG&A, R&D) are entered as positive numbers on their respective schedules and subtracted in aggregation formulas. * On the Cash Flow Statement, cash inflows are positive. Cash outflows (CapEx, share repurchases, debt principal repayments) are negative. ## Things Most Likely to Go Wrong * Failing to separate GAAP vs. Non-GAAP gross margins; 2025 GAAP gross margin was 33.1% due to inventory charges, while Non-GAAP was 38.4%. * Overestimating CapEx; management explicitly stated large capacity investments are finished and CapEx is dropping significantly. * Mismodeling the share count; the new $6.0 billion repurchase programme will drastically reduce shares outstanding over the forecast period. * Ignoring the segment rename; the Advanced Solutions Group (ASG) was renamed to the Analog and Mixed-Signal Group (AMG) in 2024. * Over-projecting legacy revenue; onsemi is actively exiting non-core, low-margin products, which creates a structural drag on top-line growth. * Misinterpreting inventory days; DIO is currently elevated at approximately 192 days but is expected to normalise, which will generate significant cash flow. * Forgetting restructuring charges; the 2025 Manufacturing Realignment Program heavily depresses GAAP operating income and must be adjusted out for valuation purposes. * Miscalculating convertible debt dilution; the 0.50% Notes due 2029 have specific conversion price thresholds that impact the diluted share count. ## Validation Checks * Non-GAAP Gross Margin should remain between 37% and 40% in the near term, flagging if it exceeds 45% before 2027. * CapEx as a % of revenue should be below 10% based on management guidance. * Free Cash Flow margin should be greater than 20% (the company achieved 24% in 2025). * Debt/EBITDA should remain below 2.0x. * Balance sheet must balance: Total Assets = Total Liabilities + Equity in every period. * Inventory days (DIO) should trend downwards from 192 days towards the historical average of 140-150 days. * Share count must decrease year-over-year given the $1.4 billion annual repurchase run-rate. ## Key Assumptions (Default Values) | Assumption | Default Value | Unit | Rationale | |---|---|---|---| | PSG Revenue Growth | 5.0 | % | Assumes moderate recovery in automotive and industrial end-markets. | | AMG Revenue Growth | 2.0 | % | Muted growth due to planned exits of non-core legacy products. | | ISG Revenue Growth | 4.0 | % | Steady growth driven by ADAS camera adoption. | | Non-GAAP Gross Margin | 38.5 | % | Aligns with 2025 actuals and near-term management guidance. | | R&D as % of Revenue | 11.0 | % | Consistent with historical investment in SiC and Treo platforms. | | SG&A as % of Revenue | 5.5 | % | Reflects lean corporate structure and recent restructuring. | | Target DIO | 180 | Days | Gradual normalisation from the elevated 192 days in 2025. | | Target DSO | 45 | Days | Historical average for the business. | | CapEx as % of Revenue | 7.0 | % | Reflects management statement that large capacity investments are complete. | | Effective Tax Rate | 15.0 | % | Blended rate accounting for foreign jurisdictions and R&D credits. | | Share Repurchase Spend | 1,400 | $ Millions | Matches the 2025 actual return of capital run-rate. | | WACC | 9.5 | % | Standard discount rate for a cyclical semiconductor manufacturer. | | Terminal Growth Rate | 3.0 | % | Long-term GDP plus slight premium for electrification megatrends. | ## Data Sources & Benchmarks * **Filings:** SEC EDGAR for onsemi (10-K, 10-Q, 8-K) and the onsemi Investor Relations website. * **Key Peers:** Infineon Technologies (IFX), STMicroelectronics (STM), Texas Instruments (TXN), NXP Semiconductors (NXPI). * **Industry Data:** WSTS (World Semiconductor Trade Statistics) for broader analog and discrete market growth rates. * **Consensus Estimates:** FactSet or Bloomberg for near-term revenue and EPS consensus to validate model outputs. ## Sources * ON Semiconductor Corporation Form 10-K for the fiscal year ended December 31, 2024. * ON Semiconductor Corporation Form 10-K for the fiscal year ended December 31, 2025. * onsemi Q4 2025 Earnings Release and Conference Call Transcript (February 2026). * onsemi Q1 2025 Earnings Presentation (May 2025). * Macrotrends ON Semiconductor Long Term Debt Data. * GuruFocus ON Semiconductor Financial Health Analysis. --- ## Frequently asked questions ### What does ON Semiconductor (onsemi) do? ON Semiconductor, operating as onsemi, provides intelligent power and sensing solutions, primarily serving the automotive and industrial markets. The company is strategically transitioning its manufacturing footprint and focusing on high-margin Silicon Carbide and AI data center products. ### What are the main revenue drivers for ON Semiconductor? ON Semiconductor's revenue is primarily driven by its Power Solutions Group, which accounts for approximately 47% of revenue, and its Analog and Mixed-Signal Group, contributing about 38%. Key growth areas include Silicon Carbide power devices and automotive image sensors within the automotive and industrial sectors. ### What is ON Semiconductor's capital expenditure strategy? ON Semiconductor's capital expenditure, historically ranging from 10-15% of revenue during its Silicon Carbide capacity build-out, is now decreasing to 5-8%. This shift reflects a move from large growth investments to primarily maintenance capex, following the completion of major SiC manufacturing facility expansions. ### How does ON Semiconductor's working capital impact its free cash flow? ON Semiconductor maintains a positive and historically high net working capital as a percentage of revenue, driven by strategic inventory buffers. This profile means the company uses its strong cash balance to fund working capital rather than relying on negative working capital, which impacts its overall free cash flow generation. ### Can I download a financial model for ON Semiconductor (ON)? Yes, a downloadable Excel financial model is available for ON Semiconductor (ON). This model evaluates the company's equity valuation and free cash flow generation capacity, with a forecast horizon extending from FY2026 to FY2030. ### What is ON Semiconductor's strategic focus and competitive position? ON Semiconductor is strategically transitioning towards high-margin Silicon Carbide and AI data center products, while optimizing its manufacturing footprint through the "Fab Right" strategy. The company holds a strong competitive position in SiC power devices and automotive image sensors, competing with companies like Infineon and STMicroelectronics. [Interactive forecast calculator](https://finamodel.com/companies/on-semiconductor/forecast)