Onsemi CEO Rejects 'De-Emphasizing' Auto Label, Blames Supply Shift To AI As Auto Revenue Slips
Onsemi expects fourth-quarter automotive revenue to fall by a high single-digit percentage as chips go to AI data center and industrial buyers.
Onsemi, which makes power and sensing chips for cars, factories and AI data centers, expects automotive revenue to fall by a high single-digit percentage in the fourth quarter, CFO Thad Trent said on the company's third-quarter earnings call on Monday. CEO Hassane El-Khoury, on the same call, rejected an analyst's suggestion that the company is pulling back from cars.
"Not de-emphasizing" autos
A Bank of America analyst asked whether underserving the auto market would cost onsemi share. El-Khoury first corrected the wording: "We're not de-emphasizing the automotive market." He called the cutback "supply-driven, not strategically driven" and said onsemi is not losing share.
Onsemi is covering all of its automaker customers' end demand, he said, but not their inventory replenishment. "It is purely a replenishment, not an end demand, and it's short-term in nature," he said. Shipments resume in the first quarter, and he expects 2027 auto growth to match the company's long-term target.
Automotive revenue was $777 million in the third quarter, down 1% from the prior quarter and the prior year, Trent said, mainly because supply was reallocated to AI data center and industrial customers.
Why the chips went elsewhere
Industrial and AI data center results beat onsemi's own guidance, El-Khoury said, so the company shifted its mix in the short term. Third-quarter revenue was $1.72 billion, up 7% sequentially and 11% from a year earlier. AI data center revenue was $180 million, up 39% sequentially, and the company now expects about $620 million for 2026. Industrial revenue was $467 million.
Trent said the output now leaving the fabs reflects utilization two quarters ago, when it was 77%. Utilization was 83% last quarter and is expected to stay there in the fourth quarter, so the supply shortfall is a catch-up, he said. Capacity is already in place, and Trent said he does not expect to come near capping out in 2027.
A $600 million AI bet
Onsemi also announced the purchase of Ferric, a maker of integrated voltage regulators for AI processors, for $600 million plus up to $175 million in earnouts tied to revenue milestones. Trent said it should close in the fourth quarter. The company raised its 2030 AI data center revenue target by $500 million to more than $3 billion, an increase El-Khoury said is tied to the acquisition.
Trent said 2027 capital spending should be about 5% of revenue, against about 2% this year. After closing the pending Synaptics acquisition, paying down debt will be the top priority, he said, with share buybacks opportunistic.
Management guided fourth-quarter revenue of $1.715 billion to $1.815 billion, and says automotive shipments return to normal levels in the first quarter.
Sources
- ON Semiconductor sinks on Q3 results, guidance; announces $600M deal for Ferric (ON:NASDAQ) | Seeking Alpha — seekingalpha.com
- ON Semiconductor Corp. (ON) Q3 Earnings and Revenues Top Estimates — Yahoo Finance
- ON Semiconductor Non-GAAP EPS of $0.90 beats by $0.02, revenue of $1.72B beats by $10M (ON:NASDAQ) | Seeking Alpha — seekingalpha.com
- ON Semiconductor Earnings Are Imminent; These Most Accurate Analysts Revise Forecasts Ahead Of Earnings Call — benzinga.com
- Onsemi to Report Q3 Earnings: What's in Store for the Stock? — Yahoo Finance
