On Semiconductor Corporation · NASDAQ:ON
On Semiconductor — Investor Day (March 2019)
131 slides from On Semiconductor's investor day presentation, Mar 8, 2019
Slide 1: Financial Analyst Day, Scottsdale, March 8, 2019
On Semiconductor® FINANCIAL ANALYST DAY SCOTTSDALE, AZ March 8, 2019
Slide 2: Agenda
AGENDA Introduction – Parag Agarwal 8:00-8:05 Strategic Overview – Keith Jackson 8:05-8:30 Q&A Markets and Revenue – David Somo 8:40-9:05 Analog Solutions Group – Vince Hopkin 9:05-9:30 Break Intelligent Sensing Group – Taner Ozcelik 9:45-10:10 Power Solutions Group – Simon Keeton 10:10-10:35 Busine
Slide 3: Safe Harbor Statement and Non-GAAP and Forecast Information
SAFE HARBOR STATEMENT AND NON-GAAP AND FORECAST INFORMATION This presentation contains “forward-looking statements,” as that term is defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statem
Slide 4: Keith Jackson, President and CEO
THINK ON. KEITH JACKSON PRESIDENT AND CEO
Slide 5: Key Takeaways
KEY TAKEAWAYS 1 ON’s structural transformation is accelerating and showing strong results 2 Enabling secular megatrends in automotive, industrial, and cloud power markets 3 Strong competitive moat – highly defensible & highly diversified business model 4 Strong & consistent execution – expanding mar
Slide 6: Accelerating Structural Transformation
ACCELERATING STRUCTURAL TRANSFORMATION ON IS ENABLING KEY MEGATRENDS – SECULAR TRENDS DRIVING STRONG GROWTH ADAS, EV/HEV, Machine Vision, Robotics, 5G infrastructure, Server Power management, Alternative energy, Energy efficiency in automotive and industrial systems Exposed to fastest growing semico
Slide 7: Enabling Key Megatrends
ENABLING KEY MEGATRENDS Image sensors, Radar and Image sensors for machine vision Analog power management Lidar for ADAS and robotics applications for server CPUs for datacenter and enterprise applications AUTOMOTIVE Silicon Carbide and silicon MV and HV MOSFETs, and power power semiconductors for m
Slide 8: Exposed to Fastest Growing Markets
EXPOSED TO FASTEST GROWING MARKETS 2018 REVENUE BY MARKET Consumer 13% Automotive 31% Communications 14% Client Computing 9% Industrial 27% Cloud Power 6% 2018 REVENUE $5.878B | GROSS GIN 38.1% AUTOMOTIVE Power semiconductors for electrification, sensors for ADAS, LED lighting, analog power manageme
Slide 9: Strong Competitive Moat
STRONG COMPETITIVE MOAT Leading Technical Capabilities Long Life Cycle Products Broad and Synergistic Portfolio Power semiconductors, Silicon Sticky portfolio with long life cycle Broad and synergistic product portfolio Carbide, Auto/Industrial image products for critical applications for power, ana
Slide 10: Sticky Products with Strong Growth
STICKY PRODUCTS WITH STRONG GROWTH ON Total Revenue 6,000 5,800 5,600 5,400 5,200 5,000 4,800 4,600 2016¹ 2017 2018 Revenue $m 2018 PRODUCT LONGEVITY MIX 0-3 Years 21% 7+ Years 47% 3-7 Years 32% 10 2019 Analyst Day ¹: FY2016 represents Q4’ 16 Annualized values. ON
Slide 11: Customer Diversity
CUSTOMER DIVERSITY 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 TOP 20 END CUSTOMERS REPRESENT 36% OF 2018 REVENUE 11 2019 Analyst Day ON
Slide 12: Results Support Accelerating Transformation
RESULTS SUPPORT ACCELERATING TRANSFORMATION 5,878 5,388 38.1% 36.9% 3,907 3,496 16.7% 15.0% 35.0% 34.1% 11.7% 12.3% 2015 2016 2017 2018 Sales¹ ($m) Gross Margin¹ % Operating Margin¹ % 759 707 1.96 1.46 370 200 0.91 0.83 2015 2016 2017 2018 FCF1 ($m) Non-GAAP EPS1 ($) SOLID MARGIN PERFORMANCE 400 bps
Slide 13: Growth Driven by High Value Revenue
GROWTH DRIVEN BY HIGH VALUE REVENUE Revenue ($m) 6,000 5,878 5,000 4,000 3,496 3,000 2,000 1,000 0 2015 (GM 34.1%) 2018 (GM 38.1%) Low Gross Margin Corporate Average Gross Margin Attractive Gross Margin PROVIDING ENABLING TECHNOLOGIES Enabling EV/HEV, Autonomous driving, ADAS, Machine vision, factor
Slide 14: Strategic Intent
STRATEGIC INTENT Leadership in power, analog Deliver consistent business and sensor semiconductors performance and strong for automotive, industrial & execution cloud power end-markets Enable disruption - Drive Improve margins, capital growth by providing enabling efficiency, and free cash flow tech
Slide 15: M&A Strategy
M&A STRATEGY Value based approach - Goal is to create value for shareholders Transactions need to be accretive to stock price Return on investment has to be significantly above cost of capital Deals have to make solid strategic sense Augment presence in automotive, industrial, and cloud power market
Slide 16: Thoughts on Industry Consolidation
THOUGHTS ON INDUSTRY CONSOLIDATION Large Companies as a % of Beginning Progression of Consolidation 15 Years of Consolidation We are here 100.0% 107 94 86 75.0% 2013 73 70 68 61 50.0% 53 48 38 35 31 25.0% 27 17 15 0.0% T+1 T+2 T+3 T+4 T+5 T+6 T+7 T+8 T+9 T+10 T+11 T+12 T+13 T+14 T+15 Semiconductor C
Slide 17: Sustainability and ESG
SUSTAINABILITY AND ESG 2019 Barron’s 100 Most Sustainable Companies ON Semiconductor was ranked 59 on the list of 100 Most Sustainable Companies in the U.S. The company was scored on 5 key areas: shareholders, employees, customers, community and planet. 2018 North America Dow Jones Sustainability In
Slide 18: Target Model 2022
TARGET MODEL 2022 2016 2018 2022 MODEL REVENUE $3.9 BILLION $5.9 BILLION $7.1 BILLION GROSS MARGIN1 35.0% 38.1% 43.0% OPERATING EXPENSES1 22.7% 21.4% 21.0% OPERATING MARGIN1 12.3% 16.7% 22.0% PROFIT BEFORE TAX1 $412 MILLION $893 MILLION $1,500 MILLION CASH TAX RATE 6.7% 6.0% 17.5% NON-GAAP EPS1 $0.9
Slide 19: Summary
SUMMARY 1 Compelling value proposition – Secular growth, highly defensible model, expanding margins & free cash flow 2 Providing enabling technologies driving secular megatrends in automotive, industrial, and cloud power markets 3 Highly defensible business model with strong competitive position & d
Slide 20: Questions & Answers
Questions & Answers ON
Slide 21: David Somo, SVP Strategy, Marketing & Solutions Engineering
THINK ON. DAVID SOMO SENIOR VICE PRESIDENT STRATEGY, MARKETING & SOLUTIONS ENGINEERING ON
Slide 22: Key Takeaways
KEY TAKEAWAYS 1 Significant content increases in auto, industrial and cloud power key driver of ON’s revenue – approximately 65% of business exposed to these secular drivers 2 Automotive Growth Accelerators – Automated Driving (ADAS & Surround View), Vehicle Electrification and Advanced Lighting Sys
Slide 23: Key Megatrends to Drive Strong Growth
KEY MEGATRENDS TO DRIVE STRONG GROWTH AUTOMOTIVE Expected 4 year revenue CAGR of 9% Strong relationships with global tier-1 integrators and OEMs Providing enabling technologies for EV/HEV, ADAS, Surround View, LED lighting and connectivity INDUSTRIAL Expected 4 year revenue CAGR of 6% Broad presence
Slide 24: Automotive – Expected Revenue CAGR 9%
AUTOMOTIVE – EXPECTED REVENUE CAGR 9% Revenue ($m) 2,000 1,800 1,600 1,400 1,200 1,000 1,834 1,678 800 1,314 600 1,162 400 952 200 0 2014 2015 2016 2017 2018 ELECTRIC VEHICLES – 42% TAM CAGR FOR 2017-22 Up to $500 in power semiconductor content LED LIGHTING – 24% TAM CAGR FOR 2017-22 LED Driver, Pow
Slide 25: Steep Rise in Automotive Addressable Content
STEEP RISE IN AUTOMOTIVE ADDRESSABLE CONTENT LEVEL 2 EV LEVEL 4 EV $1,760 $1,000 $580 $150 $500 $200 $230 $260 2018 2022 Radar Sensors Medium Voltage Discrete High Voltage Discretes Power Modules Matrix / Pixel Lighting Body Convenience & Passive Safety Lidar Sensor Fusion Wide-band Gap Laser lighti
Slide 26: Vehicle Electrification
VEHICLE ELECTRIFICATION I.C.E. OBC IGBTs, SiC FETs PIMs DC-DC IVN PHEV/BEV Auxiliary Motor Control IPMs Motor Drivers MOSFETs IVN Main Drive IGBTs, SiC FETs PIMs DC-DC IVN HV-48V-12V MOSFETs SiC, GaN Power Modules DC-DC Starter- Generator MOSFETs Power Modules Gate Driver, Current Sense ON Content U
Slide 27: Automated Driving
AUTOMATED DRIVING Level 0 Passive Safety (Seat Belt & Airbags) Level 2 Limited Autonomy (ADAS, Viewing, ACC, LDWS, Auto-Braking) Level 4 High Automation (Self-driving with ability of driver to intervene) Power Management PMIC , Drivers, DC- DC, LDO, IVN + Power Power MOSFETs, Discretes + Sensors & F
Slide 28: Advanced Lighting
ADVANCED LIGHTING HID & Incandescent Lamps LED Interior and Rear LED Drivers, Power Management, IVN, Discretes + Front LED, Matrix Beam, Pixel, Laser drivers, Power Management, IVN, Discretes Image Property of Mercedes Benz ON Content Up to $3 ON Content Up to $30 28 2019 Analyst Day HID: High inten
Slide 29: Industrial – Expected Revenue CAGR 6%
INDUSTRIAL – EXPECTED REVENUE CAGR 6% Revenue ($m) 1,800 1,600 1,400 1,200 1,000 800 1,588 1,415 600 971 881 400 752 200 0 2014 2015 2016 2017 2018 ENERGY INFRASTRUCTURE – 19% TAM CAGR FOR 2017-22 Up to $650 content in solar inverter vs. none in coal Early stage of long-term infrastructure shift IND
Slide 30: Energy Infrastructure
ENERGY INFRASTRUCTURE Coal Power Plant Solar Farm Inverter PIMs SJ MOSFETs SiC FETs and Diodes + Boost Converter PIMs SJ MOSFETs SiC FETs and Diodes ON Content $0 ON Content $650 Gas Pump EV Charging Station DC-DC LLC SJ MOSFETs SiC FETs & Diodes + Power Factor Correction IGBTs, SJ MOSFETs Power Mod
Slide 31: Industrial Power and Motors
INDUSTRIAL POWER AND MOTORS Power Conversion AC Induction Drive Variable Frequency Drive IGBTs, SJ MOSFETs SiC FETs & Diodes PFC Controllers + Power Factor Correction IGBTs, SJ MOSFETs Power Modules SiC FETs and Diodes + Motor Inverter ON Content ON Content $0 $40 IGBTs, SJ MOSFETs Power Modules SiC
Slide 32: Industrial Automation
INDUSTRIAL AUTOMATION Machine Vision Human Manufacturing Robotic Manufacturing Image Sensors + Motor Drive MV MOSFETs Motor Drivers Power Modules + Power Conversion ON Content SJ MOSFETs ON Content SiC FETs & Diodes $0 PFC Controllers $250 MV MOSFETs 32 2019 Analyst Day PFC: Power factor correction,
Slide 33: Cloud Power – Expected Revenue CAGR 13%
CLOUD POWER – EXPECTED REVENUE CAGR 13% Revenue ($m) 350 300 250 200 150 $327 $248 100 152 50 0 2016 2017 2018 5G INFRASTRUCTURE – 247% TAM CAGR FOR 2017-22 5x the MOSFET usage in a 5G radio 3-5x the number of base stations as 4G Analog power management SERVER - 15% TAM CAGR FOR 2017-22 Increasing r
Slide 34: 5G Networks
5G NETWORKS Digital & Auxiliary Power 4G: 2x2 TxRx 5G: MMIMO & Beamforming MV MOSFETs Power Stages Point of Load PMICs + Radio Power IGBTs, SJ MOSFETs Power Modules SiC FETs and Diodes + AC-DC Power Supply ON Content ON Content SJ MOSFETS $9 $170 SiC FETs & Diodes PFC Controllers MV MOSFETs 34 2019
Slide 35: Servers
SERVERS Core & Memory Power VR13 Server VR14 Digital Controller Smart Power Stage VR12 Server VR14 Server + Auxiliary Power MV MOSFETs Point of Load eFuse + ON Content ON Content AC-DC Power Supply $0 ON Content $75 $45 SJ MOSFETS SiC FETs & Diodes PFC Controllers 35 2019 Analyst Day PFC: Power fact
Slide 36: Summary
SUMMARY 1 High exposure to key secular growth applications in Automotive, Industrial and Cloud Power drives significant content increase leading to outsized growth 2 Positioned for leadership in automated driving and vehicle electrification with industry’s best sensor and power portfolio 3 Comprehen
Slide 37: Analog Solutions Group – Vince Hopkin
THINK ON ANALOG SOLUTIONS GROUP VINCE HOPKIN EXECUTIVE VICE PRESIDENT ON
Slide 38: Key Takeaways
KEY TAKEAWAYS 1 Driving secular growth through content increase in automotive, industrial and cloud power 2 Differentiation through ultra low power consumption, integration and high reliability 3 Leveraging analog power management expertise in auto and cloud markets 4 Margin expansion through portfo
Slide 39: Analog Solutions Group (ASG)
ANALOG SOLUTIONS GROUP (ASG) 2018 REVENUE BY MARKET Consumer 10% Automotive 31% Communications 17% Industrial 24% Cloud Power 6% Client Computing 11% AUTOMOTIVE Leader in LED front lighting, sensor interface ICs, ADAS power management INDUSTRIAL Leader in power conversion, power safety (ground fault
Slide 40: ASG Strategic Intent
ASG STRATEGIC INTENT Invest in analog power management for automotive, industrial, and cloud power markets with ultra low-power differentiation Leverage synergistic portfolios with ON’s other business groups to provide a total solution Expand margins through portfolio optimization and operational im
Slide 41: ASG Strategic Positioning—How We Win
ASG STRATEGIC POSITIONING—HOW WE WIN 1 Participate in product categories in which we have competitive advantage—High volume analog, highly efficient and robust power management 2 Leverage differentiation in ultra low power consumption, power efficiency, integration, and high reliability 3 Focus on a
Slide 42: Growth Opportunities in Strategic Markets
GROWTH OPPORTUNITIES IN STRATEGIC MARKETS AUTOMOTIVE 31% of ASG revenue TAM (2022) of $30B 2017-22 TAM CAGR of 6.2% Key Solutions ADAS Power Solutions Sensor Interfaces LED Lighting Intelligent Power INDUSTRIAL 24% of ASG revenue TAM (2022) of $40B 2017-22 TAM CAGR of 7.1% Key Solutions Ultra Low Po
Slide 43: ASG Automotive Business
ASG AUTOMOTIVE BUSINESS ASG Automotive Revenue Revenue$m 650 600 550 500 450 400 2016¹ 2017 2018 LIGHTING #1 supplier of LED lighting solutions Most competitive offerings in the industry ULTRASONIC SENSOR INTERFACES Greater than 20% growth in sensor content/car Greater than 35% revenue growth 2018/2
Slide 44: ASG Key Automotive Growth Drivers
ASG KEY AUTOMOTIVE GROWTH DRIVERS ASG Automotive TAM ($m) 6,000 5,000 4,000 3,000 2,000 1,000 0 2019 2020 2021 2022 ADAS Sensing Lighting FRONT, INTERIOR AND CONVENIENCE LIGHTING $25 per car: LED power, adaptive lighting SAFETY AND DRIVE TRAIN SENSING $50 per car: signal conditioning, networking, an
Slide 45: New Content Driving Growth
NEW CONTENT DRIVING GROWTH Limited Assistance ASG Content $50 Sensing Ultrasonic Pressure Position In Vehicle Network LIN/CAN/FlexRay SBC Embedded MCU Advanced Driver Assistance ASG Content $500 Safety, Comfort LED lighting HVAC motor drivers ADAS Power Multi-phase Control Power Stage PoL 45 2019 An
Slide 46: ADAS Power Management
ADAS POWER MANAGEMENT ADAS Power Tree Solution with all pieces discrete Solution Integrates all into 1 PMIC $40/processor $2/sensor $5/module ONLY PROVIDER OF ASIL QUALIFIED MULTIPHASE POWER SOLUTIONS FOR LEADING ADAS PROCESSORS #1 SUPPLIER OF BATTERY CONNECTED POWER CONVERSION SOLUTIONS ON’S AUTOMO
Slide 47: ASG Industrial Business
ASG INDUSTRIAL BUSINESS ASG Industrial Revenue Revenue$m 600 500 400 300 200 100 0 20161 2017 2018 WORLDS LOWEST POWER BLE Strong opportunity funnel Connecting the Personal Area Network ULTRA LOW POWER CONNECTIVITY Experiencing strong revenue growth Multi-protocol software based radio USB 3.X AND HI
Slide 48: ASG Key Industrial Growth Drivers
ASG KEY INDUSTRIAL GROWTH DRIVERS IOT EDGE CONNECTIVITY Edge connectivity 2018-22 revenue CAGR of 15% ASG Industrial Market TAM ($m) Rapid Growth in Industrial Connectivity 25,000 SMART BUILDING & HOME CONTROL 20,000 More than 8% 2018-22 revenue CAGR Voice control solutions adding more than 15,000 $
Slide 49: ASG Cloud Power Business
ASG CLOUD POWER BUSINESS 140 ASG Cloud Power Revenue MULTI-PHASE POWER CONTROL 120 $600M of new opportunity in 2019 Greater than $75 per server in 2021 100 SMART POWER STAGE Revenue $m 80 The 2nd largest silicon content after processor Greater than $150 content per AI Accelerator 60 POINT OF LOAD 40
Slide 50: ASG Key Cloud Power Growth Drivers
ASG KEY CLOUD POWER GROWTH DRIVERS AI ACCELERATORS Growing more than 115%/year during 2018-22 ASG Cloud Power Market TAM ($m) Smart power stage for high performance GPU’s 900 800 5G and Data Networking 700 Growing more than 110%/year during 600 2018-22 Complete solutions for every power node 500 400
Slide 51: Steep Growth in Addressable Server Content
STEEP GROWTH IN ADDRESSABLE SERVER CONTENT 80.00 76.04 1,200 1,107 70.00 60.90 1,000 I 60.00 52.10 50.00 800 821 41.60 40.00 BOM Content $ 600 30.00 410 Instantaneous Peak Power 340 400 20.00 10.00 200 0.00 0 Grantley Haswell VR12.5 2014- Purley Skylake VR13 2017-2019 Whitley Copper Lake VR13.HC Eag
Slide 52: Server Power Management Delivers Solid Value
SERVER POWER MANAGEMENT DELIVERS SOLID VALUE Hyper Scale Data Center Processor Smart Power Stage Number of servers in a typical data center—3M After processor, smart power PUE (Power Usage Effectiveness)—1.8 stages are the second largest Server Operating Lifetime—4.5 years component of silicon BOM L
Slide 53: ASG Margin Focus
ASG MARGIN FOCUS Portfolio management High-value focused investments Strategic divestitures and rebalancing R&D spending to accelerate mix improvements Focus on secular growth applications Cloud power solutions driving rapid high margin growth Low power connectivity Embedded solutions ADAS Medical O
Slide 54: Summary
SUMMARY 1 Secular content increase in auto, industrial and cloud applications to drive strong growth 2 Drive towards leadership position in markets in which we participate – differentiate through power management and reliability expertise 3 Accelerating traction in cloud power and ADAS power markets
Slide 55: Break
Break ON
Slide 56: Intelligent Sensing Group – Taner Ozcelik
INTELLIGENT SENSING GROUP TANER OZCELIK SENIOR VICE PRESIDENT ON
Slide 57: Key Takeaways
KEY TAKEAWAYS 1 Accelerating momentum in ADAS due to increasing content and expanding portfolio 2 Further strengthening leadership position in automotive – extending competitive lead through innovation 3 Leadership in industrial with growth in machine vision and robotics 4 Rapidly improving margin p
Slide 58: Intelligent Sensing Group (ISG)
INTELLIGENT SENSING GROUP (ISG) 2018 Revenue by Market AUTOMOTIVE Edge AI #1 market share 15% Technology leadership Broadest product and customer portfolio INDUSTRIAL #1 market share in machine vision Automotive 56% Technology leadership Industrial Inspection, Scanning, Automation, Security, Robotic
Slide 59: ISG Strategic Intent and Goals
ISG STRATEGIC INTENT AND GOALS Sustain #1 position in Automotive and Machine Vision markets through continuous innovation and technology leadership Expand margins through portfolio optimization and operational Improvements 59 2019 Analyst Day ADAS: Advanced driver-assistance systems, Enable next gen
Slide 60: Shift in ISG Product Mix & Margin Improvement
SHIFT IN ISG PRODUCT MIX & MARGIN IMPROVEMENT 800 42% STRONG AUTOMOTIVE GROWTH 700 2014-18 ISG automotive revenue CAGR 24% 40% 600 Gross Margin % 38% EXIT LOW MARGIN MARKETS 500 Mobile image sensors and low-end security 400 36% NEW DIFFERENTIATED PRODUCTS Revenue ($m) 300 New product performance and
Slide 61: ISG Strategic Positioning - How We Win
ISG STRATEGIC POSITIONING - HOW WE WIN First mover’s advantage in automotive - Most automotive imaging/ADAS software tailored to ON image 1 sensors – high switching costs Leading the market in most critical performance metrics – High dynamic range (HDR), Low Light, LED 2 flicker mitigation (LFM), Cy
Slide 62: ISG Growth Opportunities in Strategic Markets
ISG GROWTH OPPORTUNITIES IN STRATEGIC MARKETS 62 2019 Analyst Day 56% of ISG revenue 29% of ISG revenue 15% of ISG revenue 2022 SAM of $2.6B 2022 SAM of $1.8B 2022 SAM of $1.2B AUTOMOTIVE 2017-22 SAM CAGR of 26% 2017-22 SAM CAGR of 10% EDGE AI 2017-22 SAM CAGR of 22% Key applications: Key applicatio
Slide 63: Strong Momentum in Automotive
STRONG MOMENTUM IN AUTOMOTIVE 500 ISG Automotive Revenue STRONG AUTOMOTIVE GROWTH 400 24% revenue CAGR during 2014-18 300 LEADER IN AUTO IMAGE SENSORS 62% share in overall market & 81% in ADAS HIGHLY SUSTAINABLE COMPETITIVE POSITION 200 Revenue $m Installed base of ADAS software written for 100 – ON
Slide 64: ISG Key Automotive Growth Drivers
ISG KEY AUTOMOTIVE GROWTH DRIVERS ISG Auto TAM ($m) VIEWING Surround view 1MP and 2MP, rearview VGA moving to 1MP 3,000 ADAS Driver assist 1MP to 8MP, requires performance, ON is #1 2,500 IN-CABIN & CMS Level 3 and higher needs driver monitoring 2,000 Occupancy monitoring growing Mirror-less systems
Slide 65: Autonomous Driving Portfolio Expansion
AUTONOMOUS DRIVING PORTFOLIO EXPANSION Radar, LiDAR & Image Sensor Fusion – Potential SAM growth of 10x ADAS Level 2 ADAS Level 3 ADAS Level 4 600 500 400 300 200 100 0 Camera 40% Radar 60% LiDAR Fusion Total BOM 100 Camera 50% Radar 38%LiDAR Fusion 12% Total BOM 370 Camera 44% Radar 27% LiDAR 8% Fu
Slide 66: The Automotive Image Sensor Leader
ON SEMICONDUCTOR, THE AUTOMOTIVE IMAGE SENSOR LEADER Automotive Imagers 2016 Others 18% ON Sensing Cameras Sony Semiconductor (ADAS, AD) 2016 14% 49% Omnivision 19% Others 15% Sony 14% ON Semiconductor 63% Omnivision 8% Automotive Imagers 2018 Others 10% Sony 8% Sensing Cameras Omnivision (ADAS, AD)
Slide 67: Strong Technology Lead Over Competition
STRONG TECHNOLOGY LEAD OVER COMPETITION Product Breadth ADAS/AD Products System Pixel Technology Global Shutter IQ Image Quality @ High Temp Customer Support Competitor 1 Competitor 2 LARGEST AUTOMOTIVE PORTFOLIO Sensors for ADAS, AD, rear view, surround view, CMS, in-cabin BROAD GLOBAL SHUTTER OFFE
Slide 68: Highest Dynamic Range in Automotive
HIGHEST DYNAMIC RANGE IN AUTOMOTIVE SONY ON Semiconductor ON 68 2019 Analyst Day
Slide 69: Most Comprehensive Automotive Portfolio
MOST COMPREHENSIVE AUTOMOTIVE PORTFOLIO Viewing + Sensing ADAS + AD GS / In Cabin SPU Radar, LiDAR ADAS: Advanced driver-assistance systems, AD: Autonomous Driving, GS: Global Shutter, SPU: Sensor Processing Unit , HDR High Dynamic Range, SiPM: Silicon PhotoMultiplier, MiMO: Multiple-Input Multiple
Slide 70: Strong Progress on Automotive Radar
STRONG PROGRESS ON AUTOMOTIVE RADAR 2018 1st PRODUCT, DIFFENTIATED FEATURES MIMO+ enables higher resolution Level 2+/3: 360º 3D Map 1st in market with 4 simultaneous transceivers Scalable design supports short and long Radar Cascade for flexible configurations GROWING MARKET-$90 CONTENT/CAR 2018 sys
Slide 71: Industrial and Edge AI
INDUSTRIAL AND EDGE AI Home Delivery Object Avoidance 3D mapping Warehouse Automation Phone Display Inspection Inventory Tracking 71 2019 Analyst Day ON
Slide 72: ISG Industrial Business
ISG INDUSTRIAL BUSINESS ISG Industrial Revenue ($m) 350 300 GROWTH Expanding PYTHON Machine Vision products 250 Strong showing by XGS products & global shutter product families 200 Continued flat panel inspection from CCD 150 LEGACY Harvest non-focus markets 100 Exit low margin product lines 50 0 20
Slide 73: ISG Industrial & Edge AI Growth Drivers
ISG INDUSTRIAL & EDGE AI GROWTH DRIVERS INDUSTRIAL VISION ISG MV & EDGE AI TAM ($m) Robotics, Inspection 3,500 FACTORY AUTOMATION 3,000 High speed capture, Cobot, Quality control 2,500 INTELLIGENT TRAFFIC SYSTEMS High resolution imaging, New machine vision features 2,000 1,500 SCANNING Portable and
Slide 74: Leadership in Machine Vision Through XGS
LEADERSHIP IN MACHINE VISION THROUGH XGS Price Speed Performance Size of Camera Product sales price Footprint cameraformat Supports 29x29 # of Sensors Frame Capture Speed Portfolio Ease of Use Low Light Image Quality Support/System ON Semi Sony Pregius 74 2019 Analyst Day
Slide 75: ISG Margin Improvement Plans
ISG MARGIN IMPROVEMENT PLANS Manufacturing Optimization • Continue yield and test time improvements • Packaging cost reductions • Manufacturing insourcing Portfolio Evolution • Focus on higher margin, differentiated products • ADAS, Autonomous driving, LiDAR, Radar, Machine Vision, Edge AI Operating
Slide 76: Summary
SUMMARY 1 Accelerating growth in ADAS – Building on leadership position 2 Extending competitive lead through leadership in sensor fusion 3 Leadership in industrial - Increasing momentum in machine vision and robotics 4 Margin expansion through operational improvements and mix 76 2019 Analyst Day ON
Slide 77: Power Solutions Group – Simon Keeton
THINK ON. POWER SOLUTIONS GROUP SIMON KEETON EXECUTIVE VICE PRESIDENT ON
Slide 78: Key Takeaways
KEY TAKEAWAYS PSG has established leadership in power semiconductor market – power is one of the most 1 compelling growth opportunities in semiconductors Well positioned to benefit from huge opportunity in Silicon & Silicon Carbide for electric 2 vehicles 3 Power content to continue to grow in indus
Slide 79: Power Solutions Group (PSG)
POWER SOLUTIONS GROUP (PSG) 2018 REVENUE BY MARKET AUTOMOTIVE Leadership in most product categories Well positioned to benefit from Silicon and Consumer Automotive Silicon Carbide opportunity in EVs 17% 25% INDUSTRIAL Communications Leadership in power modules, IGBTs, 14% Power MOSFETs Benefitting f
Slide 80: PSG Strategic Intent and Goals
PSG STRATEGIC INTENT AND GOALS Leadership in Power semiconductors and Modules for automotive, industrial, and cloud power end-markets Drive share gains with inflection in power semiconductor technology - Ownership of complete SiC supply chain, including substrates and epi 80 2019 Analyst Day Positio
Slide 81: PSG Strategic Positioning - How We Win
PSG STRATEGIC POSITIONING - HOW WE WIN Leading technical capabilities in power semiconductor and modules - HV modules for EV and industrial 1 market, MOSFET & IGBT performance leader, accelerating traction in Silicon Carbide Broad product portfolio encompassing a vast voltage range – LV to HV, and s
Slide 82: Move to Higher Value Products and Markets
MOVE TO HIGHER VALUE PRODUCTS AND MARKETS 25% of PSG revenue 28% of PSG revenue 7% of PSG revenue TAM (2022) of $7.8B TAM (2022) of $15.7B TAM (2022) of $2.9B AUTOMOTIVE 2017-22 TAM CAGR of 2017-22 TAM CAGR of 2017-22 TAM CAGR of 7% 8.9% 7.5% Key applications: Key Applications Key Applications HEV/E
Slide 83: PSG Transformation Towards Power
PSG TRANSFORMATION TOWARDS POWER 2016 Power 45% Non-Power 55% 2018 Power 67% Non- Power 33% 2022 Power 76% Non-Power 24% 83 2019 Analyst Day ON
Slide 84: PSG Automotive Business
PSG AUTOMOTIVE BUSINESS 780 PSG Automotive Revenue 760 740 Junction FETs in on-board chargers, 720 and MOSFETs in EVs 700 Revenue $m 680 AND COMFORT 660 voltage FETs for BLDC motors 640 620 AUTONOMOUS DRIVING 600 management for sensors 580 560 2016¹ 2017 2018 84 2019 Analyst Day ¹: 2016 represents Q
Slide 85: PSG Key Automotive Growth Drivers
PSG KEY AUTOMOTIVE GROWTH DRIVERS PSG Automotive TAM ($m) HEV&EV: 22% 2017-22 TAM CAGR 9,000 $400 of addressable in power content in 8,000 an EV - ON leader in both silicon and SiC 7,000 BODY & COMFORT: 14% 2017-22 TAM CAGR 6,000 5,000 3X Power switches required for 4,000 redundant systems and incre
Slide 86: EV/HEV and Vehicle Electrification
EV/HEV AND VEHICLE ELECTRIFICATION I.C.E HEV/EV PSG Content $40 PSG Content $400 Motors,Pumps IPM & FET Modules Main Drive 1200V IGBT & SiC FET Auto Modules ON- Board Charger 650V SJ, IGBT &SiC Gate Dr. & Isolation Battery Management 40V FETs HV Loads 650V SJ, IGBT & SiC Auto Modules 12V-48V DC-DC 3
Slide 87: Power Semis Dominant Opportunity in EV
POWER SEMIs DOMINANT OPPORTUNITY IN EV Power Semi Silicon TAM in EV ($m) 4,000 POWER SEMIs PRESENT THE BIGGEST OPPORTUNITY IN EV 3,500 TAM of $3.7B in 2022 with 2017-22 3,000 CAGR of 22% TRACTION INVERTERS ARE LARGEST 2,500 EV OPPORTUNITY 2,000 IGBT traction invertors likely to be dominant in mid to
Slide 88: Silicon Carbide in EV
SILICON CARBIDE IN EV SiC TAM for EV/HEV ($m) ACCELERATED ADOPTION 1,400 Adoption of Silicon Carbide in EVs likely to be faster than most expectations 1,200 GROWTH IN UNITS AND CONTENT 1,000 Content could be more than double of current content of $300 800 COMPELLING VALUE PROPOSITION 600 20% increas
Slide 89: PSG Industrial Business
PSG INDUSTRIAL BUSINESS 1,000 PSG Industrial Revenue 900 ALTERNATIVE ENERGY 800 Leadership in power integrated modules (PIM) for Solar Inverters 700 Revenue$m 600 MOTOR EFFICIENCY IPMs & FETs in Industrial Motors, C- HVAC, Robotics 500 400 300 EV CHARGING STATIONS 200 IGBTs & superjunction FETs in L
Slide 90: Infrastructure Revolution
INFRASTRUCTURE REVOLUTION Reduce Pollution $0 $650 $0 Efficiency $40 Coal Solar/Wind Industrial Motor VSD $0 $836 $0 $30 Coal-to- Elec. Grid Stabilization Energy Storage Coal Furnace C-HVAC Battery Life $0 HEV/EV $500 $0 $6 Gas Pump EV Charging Station Warehouse Robotics 90 2019 Analyst Day VSD: Var
Slide 91: Silicon Carbide in Industrial Applications
SILICON CARBIDE IN INDUSTRIAL APPLICATIONS EV CHARGING STATIONS – 130% 2017-22 Silicon Carbide TAM in Industrial ($m) TAM CAGR 800 SiC enabling higher power charging stations in same size. 700 600 SOLAR INVERTER – 28% 2017-22 TAM CAGR SiC provides smaller and cheaper solution at same power 500 400 P
Slide 92: PSG Cloud Power Business
PSG CLOUD POWER BUSINESS 205 PSG Cloud Power Revenue 195 5G INFRASTRUCTURE 80-150V MOSFETs in BBU & RRU power supplies 185 175 SERVER Revenue $m 25v to 650v MOSFETs in high power density power supplies 165 155 145 high end COMPUTING 25-30v MOSFETs in high end graphic cards 135 125 2016¹ 2017 2018 92
Slide 93: PSG Key Cloud Power Growth Drivers
PSG KEY CLOUD POWER GROWTH DRIVERS PSG Cloud Power TAM ($m) 3,500 3,000 2,500 5G INFRASTRUCTURE – 247% CAGR 17-22 5x the MV MOSFET usage in a 5G radio 2,000 1,500 SERVER POWER SUPPLY – 5% CAGR 17-22 1,000 Requiring high performance superjunction FETs to meet efficiency targets 500 0 2017 2018 2019 2
Slide 94: Cloud-Power Content Increase
CLOUD-POWER CONTENT INCREASE 4G: 2x2 TxRx 5G: mMIMO & Beamforming 48V Rectifier 80-150V FETs 650V SJ & SiC - 48 VDC Fiber BBU 80-150V FETs PSG Content $9 PSG Content $144 RRU/AAU 80-150V FETs 5x FETs from 4G to 5G 94 2019 Analyst Day Source: ON Semiconductor ON
Slide 95: PSG Margin Improvement Plans
PSG MARGIN IMPROVEMENT PLANS Aligned with high-growth strategic markets Providing higher value proposition product Manufacturing innovation in standard products Power Modules Up to 35% Increase in Die/Wafer Silicon HEV/EV Silicon Carbide Plasma Etched Industrial, Energy 5G Traditional Wafer 95 2019
Slide 96: Key Takeaways
KEY TAKEAWAYS 1 PSG has established leadership in power semiconductor market 2 Huge opportunity in SiC for automotive applications 3 Power content to continue to grow in automotive, industrial and cloud applications 4 Headroom for margin improvement driven by higher value products and operational im
Slide 97: Questions & Answers
Questions & Answers ON
Slide 98: Bill Schromm, Chief Operating Officer
BILL SCHROMM CHIEF OPERATING OFFICER THINK ON. ON
Slide 99: Key Takeaways
KEY TAKEAWAYS 1 ON manufacturing prowess presents one of the most formidable barriers for competitors 2 Scale matters – ON’s vast network drives its industry leading cost structure 3 ON’s investment in 300mm will be driven by economics Investing to extend ON’s competitive advantage—Be best in class
Slide 100: Manufacturing as Competitive Advantage
MANUFACTURING AS COMPETITIVE ADVANTAGE One of the most formidable barriers for competitors Scale matters – One of most cost effective manufacturing networks in the Industry Network of 12 wafer fabs and 9 Assembly & Test sites Flexibility – Able to add capacity and source from multiple sites Better c
Slide 101: Formidable Manufacturing Capabilities
FORMIDABLE MANUFACTURING CAPABILITIES Scale provides industry leading cost structure -76 billion units shipped in 2018 Front-end capabilities key source of competitive advantage in power and analog Internal capacity to manufacture 150mm and 200mm silicon substrates One of world’s largest and most ef
Slide 102: Industry Leading Back-End Cost Structure
INDUSTRY LEADING BACK-END COST STRUCTURE PARALELLISM SCALE Driving parallelism in probe as high as x256 in EEPROM technology Scale drives assembly cost savings up to 70% as compared to outsourced OSAT companies PATENTS Patented lowest cost thinning methodology in the industry VERTICAL INTEGRATION HI
Slide 103: Transformation Timeline – Global Manufacturing
TRANSFORMATION TIMELINE – GLOBAL MANUFACTURING Tools Selected Systems and Data Integration ◾ Proactive Safety◾ CDEP/yBORG◾ eOCAP◾ AOI/ILM ◾ Camstar, FDC ◾ Camstar◾ FabGuard FDC◾ Barcode Systems◾ Phased implementation◾ RTD◾ SPACE SPC◾ FabTime◾ Fab TV◾ Operational integration teams◾ Exensio Yield◾ APC
Slide 104: Key Tenets on Industry 4.0
KEY TENETS ON INDUSTRY 4.0 AT ON SEMICONDUCTOR OPERATIONS Shift AIM use from control to efficiency: Automation Speed of decision making and automation of decision making Experiment è Scale pilots globally as per provided proof & business case (ROI) Build a catalogue of Industry 4.0 technologies Glob
Slide 105: Thoughts on 300mm
THOUGHTS ON 300MM 1 300mm fabs can make sense at right price • Open to acquiring used 300mm fab if economics are right • Greenfield 300mm fab is not an option – return on $1 .5B investment challenging 2 Very competitive cost structure with current network • Back-end scale key source of competitive c
Slide 106: Manufacturing Gross Margin Drivers
MANUFACTURING GROSS MARGIN DRIVERS Scale Improving efficiency ➣ Absorption of fixed cost over larger revenue base ➣ Productivity and yield improvement ➣ Advanced test methods to reduce cost ➣ Leverage with external suppliers ➣ Target internal cost reductions above ASP declines ➣ Equipment efficiency
Slide 107: Key Areas of Investment
KEY AREAS OF INVESTMENT Front-End Cost effective capacity to support growth in power semiconductors Analog cloud power is another area of investment Implementation of new tools and systems to improve productivity Expansion of low-cost sites to improve costs Back-end Back-end has been an area of high
Slide 108: Outsourcing Strategy
OUTSOURCING STRATEGY Flex capacity 3 Maintain flex capacity to sustain utilization during slowdown Relationships with all front-end and back-end providers Dual-sourcing and risk mitigation 4 Qualify external suppliers to mitigate the risk of supply disruptions Many OEMs demand dual source of supply
Slide 109: Summary
SUMMARY 1 ON manufacturing prowess presents one of the most formidable barriers for competitors 2 Scale matters – ON’s vast network drives its industry leading cost structure 3 300mm fab not critical for success, but beneficial at right price Investing to extend ON’s competitive advantage—Be best in
Slide 110: Bernard Gutmann, Chief Financial Officer
BERNARD GUTMANN CHIEF FINANCIAL OFFICER THINK ON. ON
Slide 111: Key Takeaways
KEY TAKEAWAYS 1 Raising financial targets significantly to align with our market and profitability outlook 2 Solid and consistent financial results – strong progress towards prior target model 3 Efficient deployment of shareholders’ capital to maximize returns & shareholder value ON is going through
Slide 112: Progress Report – 2018 vs. Prior Target Model
PROGRESS REPORT – 2018 VS. PRIOR TARGET MODEL1 2016 2018 2020 MODEL1 REVENUE $3.9 BILLION $5.9 BILLION $5.6 BILLION GROSS MARGIN2 35.0% 38.1% 40.0% OPERATING EXPENSES2 22.7% 21.4% 21.0% OPERATING MARGIN2 12.3% 16.7% 19.0% PROFIT BEFORE TAX2 $412 MILLION $893 MILLION $950 MILLION CASH TAX RATE 6.7% 6
Slide 113: Key Drivers of Variance from 2020 Model
KEY DRIVERS OF VARIANCE FROM 2020 MODEL Revenue growth exceeded expected REVENUE CAGR of 3%1 - 2018 revenue was $5.9B, as compared to 2020 target of $5.6B Broad based strong demand for semiconductors Positive Variance Pricing has been benign as compared to historic trend Strong demand and industry d
Slide 114: Target Model 2022
TARGET MODEL 2022 2016 2018 2022 MODEL REVENUE $3.9 BILLION $5.9 BILLION $7.1 BILLION GROSS MARGIN1 35.0% 38.1% 43.0% OPERATING EXPENSES1 22.7% 21 .4% 21 .0% OPERATING MARGIN1 12.3% 16.7% 22.0% PROFIT BEFORE TAX1 $412 MILLION $893 MILLION $1,500 MILLION CASH TAX RATE 6.7% 6.0% 17.5% NON-GAAP EPS1 $0
Slide 115: Path to 2022 Target Model - Revenue
PATH TO 2022 TARGET MODEL - REVENUE 7,500 AUTOMOTIVE CAGR 9% 7,000 INDUSTRIAL CAGR 6% 6,500 Revenue ($m) CLOUD POWER CAGR 13% 6,000 COMMUNICATIONS CAGR 0% CLIENT COMPUTING CAGR -2% 5,500 CONSUMER CAGR -2% 5,000 2018 Auto Industrial Cloud Power Comm. Client Computing Consumer 2022 REVENUE CAGR OF 5%,
Slide 116: Path to 2022 Target Model – Gross Margin
PATH TO 2022 TARGET MODEL – GROSS MARGIN 44% 43% MIX – 120 BPS 42% Improving mix of automotive, industrial, and cloud-power 41% MANUFACTURING OPTIMIZATION – 130 BPS 40% Production transition to more efficient facilities 39% FALLTHROUGH – 200 BPS 38% 50% fallthrough on incremental revenue 37% PORTFOL
Slide 117: Mix and Portfolio Optimization Having Impact
MIX AND PORTFOLIO OPTIMIZATION HAVING IMPACT Revenue ($m) 6,000 5,878 GROWTH DRIVEN BY HIGH QUALITY REVENUE 5,044 Providing highly differentiated products for 5,000 automotive, industrial, and cloud power markets 4,000 DIVESTITURE/CLOSURE OF NON-CORE 3,000 BUSINESSES Divested and end of life of low
Slide 118: Change in Mix 2018 to 2022
CHANGE IN MIX 2018 TO 2022 2018 REVENUE BY MARKET Consumer 13% Automotive Communications 31% 14% Client Computing 9% Industrial 27% Cloud Power 6% 118 2019 Analyst Day Communications include only smartphone related revenue 2022 REVENUE BY MARKET Consumer 10% Communications 12% Client Computing Autom
Slide 119: Path to 2022 Target Model – Operating Margin
PATH TO 2022 TARGET MODEL – OPERATING MARGIN 23% 21% 19% GM FALLTHROUGH – 490 BPS 17% Gross margin improvement 15% 13% OPEX LEVERAGE – 40 BPS 11% Leverage from revenue growth 9% 7% 5% 2018 GM Fallthrough Opex Leverage 2022 119 2019 Analyst Day on
Slide 120: Operating Expenses
OPERATING EXPENSES1 7,000 26% 5,878 6,000 5,388 OPEX INTENSITY TARGET OF 21% 25% 21% opex. intensity needed to leverage new 5,000 opportunities 3,907 24% 4,000 3,496 3,162 3,000 n NEW MARKETS REQUIRE HIGHER R&D INVESTMENTS 22.7% 23% Revenue $m Opex intensity % 23.1% 2,000 EV/HEV, SiC, Sensors (Image
Slide 121: Path to 2022 Target Model – Free Cash Flow
PATH TO 2022 TARGET MODEL – FREE CASH FLOW 2016 2018 2022 MODEL OPERATING CASH FLOW $581 MILLION $1,274 MILLION $1,800 MILLION NET CASH INTEREST $67 MILLION $86 MILLION $50 MILLION CASH TAXES 6.7% 6.0% 17.5% (% OF PRETAX INCOME) DEPRECIATION & $364 MILLION $509 MILLION $564 MILLION AMORTIZATION CAPI
Slide 122: Capex Intensity Target of 8%
CAPEX INTENSITY TARGET OF 8% Investment need to strengthen leadership in strategic markets – automotive, industrial, & cloud power GROWTH NECESSITATES HIGHER INVESTMENTS Capex $m Capex intensity% EV, cloud-power, & sensors expected to drive strong growth INVESTMENTS NEEDED FOR NEW MATERIALS AND TECH
Slide 123: Capital Allocation Strategy
CAPITAL ALLOCATION STRATEGY ACCELERATE VIRTUOUS ABSOLUTE COMMITMENT BALANCE RISKS AND REWARDS IN INVESTMENT CYCLE TO CAPITAL EFFICIENCY CAPITAL ALLOCATION Invest to strengthen ON’s business, improve competitive position, increase free cash flow, repeat Capital will be deployed in a manner to maximiz
Slide 124: Capital Deployment Plan
CAPITAL DEPLOYMENT PLAN Organic growth of business – R&D, Sales & Marketing, Capex Significant opportunities for generating value through organic investments Investments geared towards differentiated products in auto, industrial, and cloud power markets Capex investments to improve profitability and
Slide 125: Revenue Sensitivity to 2022 Target Model
REVENUE SENSITIVITY TO 2022 TARGET MODEL Non-GAAP Earnings / Share¹ Free Cash Flow¹ $1,398 $3.55 $1,339 $3.36 $1,283 $3.18 $1,223 $3.00 $1,163 $2.82 $1,106 $1,050 $2.64 $2.47 2% 3% 4% 5% 6% 7% 8% 2% 3% 4% 5% 6% 7% 8% 2018A—2022E Revenue CAGR 2018A—2022E Revenue CAGR Gross Margin¹ Operating Margin¹ 4
Slide 126: Summary
SUMMARY 1 Strong business outlook – strong revenue growth coupled with solid margin expansion and 1 accelerating FCF 2 Sharp focus on capital deployment – goal is to maximize returns and shareholder value 3 Company specific margin drivers in place – majority of margin expansion independent of revenu
Slide 127: Questions & Answers
Questions & Answers ON
Slide 128: Energy Efficient Innovations
ENERGY EFFICIENT INNOVATIONS ON
Slide 129: Appendix: Non-GAAP Definitions and Reconciliations
APPENDIX: NON-GAAP DEFINITIONS AND RECONCILIATIONS Some data in this presentation includes non-GAAP financial measures. Following is the reconciliations of non-GAAP financial measures used in this presentation to the most directly comparable measures under GAAP. (in $millions, except per share data)
Slide 130: Appendix Continued: Non-GAAP Definitions and Reconciliations
APPENDIX CONTINUED: NON-GAAP DEFINITIONS AND RECONCILIATIONS Some data in this presentation includes non-GAAP financial measures. Following is the reconciliations of non-GAAP financial measures used in this presentation to the most directly comparable measures under GAAP. (in $millions, except per s
Slide 131: ON Semiconductor – For Additional Information
ON SEMICONDUCTOR FOR ADDITIONAL INFORMATION VISIT THE ON SEMICONDUCTOR CORPORATE WEBSITE WWW.ONSEMI.COM OR FOR OFFICIAL FILINGS VISIT THE SEC WEBSITE WWW.SEC.GOV 131 2019 Analyst Day ON