ON
ON Semiconductor Corp
On Semiconductor...
A flanker asked me to study $ON, so let's take a look!
The big megatrend: electrification + efficiency
The reason $ON gets so much attention is simple: the world is electrifying, and electrification is basically a giant demand engine for power semiconductors.
EVs in particular use far more power electronics than traditional cars, and one of the key enabling technologies is silicon carbide (SiC). SiC can improve efficiency, reduce heat, and support high-voltage systems, which can help with EV range and charging performance. This is why so many investors treat SiC as a “picks and shovels” bet on the EV transition.
Beyond EVs, the same efficiency theme shows up everywhere:
industrial automation
power supplies
renewable energy and grid systems
charging infrastructure
What ON actually does
onsemi sells “intelligent power and sensing” components, with a big focus on automotive and industrial markets.
They operate across three major segments:
Power Solutions (discretes, modules, integrated power products)
Analog and Mixed-Signal (power management ICs + signal chain)
Intelligent Sensing (image sensors and related sensing products)
So the story is less “consumer gadgets” and more “infrastructure inside machines.”
The bull case (why this could be a compounding winner)
The bull case is that ON is positioned in parts of semiconductors that are:
essential for electrification
sticky (design wins can last years)
supported by long-term efficiency needs
If SiC adoption continues to expand through EV platforms and industrial systems, ON can ride a secular demand wave, not just a short-term cycle.
The bear case (what can go wrong)
The biggest risk is that even a great megatrend can look ugly during a downcycle.
Recent results and commentary suggest customers have been cautious and automotive demand has been uneven... esp EVs.
If auto and industrial stay soft, earnings can compress even if the long-term story remains intact.
Also, in their annual report, the CEO says they are committing 50% of their free cash flow to buying back stock. I don't love that. You should find a better use of capital, especially with how much opportunity is presenting itself in the AI-era for power.
Overall, ON is slightly outside of my circle of competence, but I they do constantly state they are primarily focused on automotive industry, specifically EVs... which I think are going through a bit of an "EV Winter" right now due to softening demand.
Sentiment: Too hard