The News: Phoenix-based onsemi, maker of tiny semiconductor components, released its fourth quarter (Q4) and fiscal year (FY) 2023 financial results with a record automotive revenue of $4.3 billion in 2023 increased 29% year-over-year (YoY). Read the press release on the onsemi website.
onsemi Earnings Report: Q4 and Fiscal Year 2023 Financials
Analyst Take: A recent release of the onsemi earnings report of its Q4 and FY 2023 financial results unveiled a record automotive revenue of $4.3 billion in 2023, an increase of 29% compared with the previous year. This growth is particularly significant as it underscores onsemi’s strategic focus on high-growth areas such as electric vehicles (EVs), autonomous vehicles, industrial automation, and renewable energy. onsemi is a leading semiconductor manufacturer offering automotive solutions, industrial solutions, 5G and cloud power, medical solutions, and aerospace and defense. The company primarily serves the automotive and industrial markets.
“Our momentum continued this past year as we achieved record automotive revenue and 4x year-over-year growth in silicon carbide revenue. We continue to transform the business by building resilience into our model, enabling us to navigate uncertain market conditions and deliver more predictable and sustainable results,” said Hassane El-Khoury, president and CEO of onsemi. “Our consistent performance has validated our long-term strategy. Looking ahead, we are driving innovation beyond silicon and silicon carbide with our upcoming analog and mixed signal platform to further our leadership in intelligent power and sensing solutions.”
In the onsemi earnings report, the company reported non-Generally Accepted Accounting Principles (non-GAAP) diluted earnings per share (EPS) of $1.25 on revenue of $2.02 billion for Q4, which beat Wall Street projections. Analysts surveyed by FactSet had projected earnings of $1.20 per share on $2 billion in sales. On a YoY basis, onsemi’s profits fell 5% while revenue dropped 4%. Thus, onsemi has now posted four consecutive quarters of declining earnings compared with the previous year. Sales have also declined for two quarters in a row.
By the numbers:
- Q4 2023 revenue: $2.02 billion
- Q4 2023 GAAP and non-GAAP gross margin: 46.7%
- GAAP operating margin and non-GAAP operating margin of 30.3% and 31.6%, respectively
- GAAP diluted EPS and non-GAAP diluted EPS of $1.28 and $1.25, respectively
- FY 2023 record automotive revenue: $4.3 billion, increased 29% YoY
- FY 2023 share repurchases of $564 million, representing 140% of free cash flow
onsemi Looks to the Future
2023 was a landmark year for AI, providing a needed boost to the semiconductor sector. As companies in many industries continue to develop AI solutions or integrate AI into existing solutions, this demand should further propel chipmakers going forward into 2024. Governments worldwide recognize the strategic importance of semiconductor technology leadership resulting in an increase in public investment in the chip sector, especially as more advanced AI capabilities require processors with greater computing power. Semiconductor demand in 2024 will be driven by new applications such as generative AI and high-performance computing (HPC) and a rebound in overall demand for microchips.
“Resurging demand and rising government incentives across key chipmaking regions underpin the projected 6.4% annual capacity growth for 2024,” commented Ajit Manocha, president and CEO of SEMI. “The heightened global focus on the strategic economic importance of semiconductor manufacturing is a key driving force.” SEMI is the global industry association serving the electronics manufacturing and design supply chain.
CEO El-Khoury said that onsemi’s stake in leading-edge sectors such as EVs, advanced manufacturing, and alternative energy has the company poised for solid growth ahead. onsemi is set to benefit from major trends such as the electrification and enhanced safety features of vehicles, renewable energy grids, factory automation, and 5G and cloud computing infrastructure.
For the Q1 2024, onsemi expects revenue between $1.80 billion and $1.90 billion. Non-GAAP gross margin is projected in the range of 44.5% to 46.5%. Non-GAAP operating expenses are expected in the range of $305 to $320 million, and non-GAAP earnings are projected between $0.98 and $1.10 per share.
While the semiconductor industry faced challenges in 2023, the decline was not as severe as anticipated earlier in the year, thanks to stronger second and third quarter performance. The forecast is brighter in 2024, which is anticipated to see sales rebound. Volatility in the memory chip market was also a major contributing factor, with memory chip sales up in 2022 and plummeting in 2023. The market is predicted to recoup most of those losses in 2024, with memory sales expected to return to 2022 levels.
onsemi is well-positioned for stronger 2024 financial results in its target markets. Although the company expects continued softness across all end markets through a period of normalizing inventory levels and slowing end demand, El-Khoury said the company is expected to grow at two times the market growth in 2024.
Disclosure: The Futurum Group is a research and advisory firm that engages or has engaged in research, analysis, and advisory services with many technology companies, including those mentioned in this article. The author does not hold any equity positions with any company mentioned in this article.
Analysis and opinions expressed herein are specific to the analyst individually and data and other information that might have been provided for validation, not those of The Futurum Group as a whole.
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Daniel is the CEO of The Futurum Group. Living his life at the intersection of people and technology, Daniel works with the world’s largest technology brands exploring Digital Transformation and how it is influencing the enterprise.
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