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
FINANCIAL ANALYST DAY SCOTTSDALE, AZ March 8, 2019 1
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
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 STRONG COMPETITIVE MOAT & STRONG FREE CASH FLOW MEGATRENDS – SECULAR HIGHLY DIVERSIFIED BUSINESS GROWTH AND SOLID TRENDS DRIVING STRONG MODEL MARGIN EXPANSION GROWTH Highly differentiated power ~3.5x FCF growth in last five ADAS, EV/HEV
Slide 7: Enabling Key Megatrends
ENABLING KEY MEGATRENDS CLOUD POWER Image sensors, Radar and Image sensors for machine vision Analog power management AUTOMOTIVE INDUSTRIAL Lidar for ADAS and robotics applications for server CPUs for datacenter and enterprise applications Silicon Carbide and silicon MV and HV MOSFETs, and power pow
Slide 8: Exposed to Fastest Growing Markets
EXPOSED TO FASTEST GROWING MARKETS 2018 REVENUE BY MARKET AUTOMOTIVE Power semiconductors for electrification, sensors Consumer for ADAS, LED lighting, analog power 13% management for automotive processors Automotive Communications 31% 14% INDUSTRIAL Energy efficiency for industrial systems, machine
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 6,000 ON Total Revenue 2018 PRODUCT LONGEVITY MIX 5,800 5,600 0-3 Years 21% Revenue $m 5,400 7+ Years 5,200 47% 5,000 3-7 Years 32% 4,800 4,600 2016¹ 2017 2018 10 2019 Analyst Day ¹: FY2016 represents Q4’ 16 Annualized values.
Slide 11: Customer Diversity
CUSTOMER DIVERSITY 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 TOP 20 END CUSTOMERS REPRESENT 36% OF 2018 REVENUE 11 2019 Analyst Day
Slide 12: Results Support Accelerating Transformation
RESULTS SUPPORT ACCELERATING TRANSFORMATION 5,878 5,388 38.1% 36.9% 3,907 SOLID MARGIN PERFORMANCE 3,496 16.7% 400 bps non-GAAP gross margin & 500 bps 15.0% 35.0% non-GAAP operating margin expansion 34.1% during 2015-18 12.3% 11.7% IMPRESSIVE EPS & FCF GROWTH 2015 2016 2017 2018 2.3x non-GAAP EPS an
Slide 13: Growth Driven by High Value Revenue
GROWTH DRIVEN BY HIGH VALUE REVENUE Revenue ($m) 6,000 5,878 5,000 PROVIDING ENABLING TECHNOLOGIES Enabling EV/HEV, Autonomous driving, ADAS, Machine vision, factory automation, energy 4,000 3,496 efficiency 3,000 EMERGENCE AS POWER SEMI LEADER Emerged as #2 player in power semiconductors 2,000 and
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 Deals have to make solid M&A is critical part of create value for shareholders strategic sense ON’s strategy Transactions need to be Augment presence in Strong competency in accretive to stock price automotive, industrial, and M&A cloud power mark
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 World’s Most Ethical Companies® Companies ON Semiconductor has been named among world’s most ethical companies for four consecutive years by Ethisphere ON Semiconductor was ranked 59 on the list of 100 Most Institute. ON is one of only th
Slide 18: Target Model 2022
TARGET MODEL 2022 2016 2018 2022 MODEL REVENUE $3.9 BILLION $5.9 BILLION $7.1 BILLION $XXX MILLION GROSS MARGIN1 35.0% 38.1% 43.0% $XXX MILLION OPERATING EXPENSES1 22.7% 21.4% 21.0% XX.X% OPERATING MARGIN1 12.3% 16.7% 22.0% $XXX MILLION PROFIT BEFORE TAX1 $412 MILLION $893 MILLION $1,500 MILLION $XX
Slide 19: Summary
SUMMARY 1 Compelling value proposition – Secular growth, highly defensible model, expanding margins & free cash flow 2 Providing enabling technologies driving secular megatrends in automotive, industrial, and cloud power markets 3 Highly defensible business model with strong competitive position & d
Slide 20: Questions & Answers
Questions & Answers
Slide 21: David Somo
DAVID SOMO SENIOR VICE PRESIDENT STRATEGY, MARKETING & SOLUTIONS ENGINEERING
Slide 22: Key Takeaways
KEY TAKEAWAYS 1 Significant content increases in auto, industrial and cloud power key driver of ON’s revenue – approximately 65% of business exposed to these secular drivers 2 Automotive Growth Accelerators – Automated Driving (ADAS & Surround View), Vehicle Electrification and Advanced Lighting Sys
Slide 23: Key Megatrends to Drive Strong Growth
KEY MEGATRENDS TO DRIVE STRONG GROWTH CLOUD POWER Expected 4 year revenue CAGR Expected 4 year revenue CAGR of Expected 4 year revenue AUTOMOTIVE INDUSTRIAL of 9% 6% CAGR of 13% Strong relationships with Broad presence with leading Leveraging relationships with global tier-1 integrators and global i
Slide 24: Automotive – Expected Revenue CAGR 9%
AUTOMOTIVE – EXPECTED REVENUE CAGR 9% Revenue ($m) 2,000 1,800 ELECTRIC VEHICLES – 42% TAM CAGR FOR 2017-22 1,600 Up to $500 in power semiconductor content 1,400 LED LIGHTING – 24% TAM CAGR FOR 1,200 2017-22 1,000 LED Driver, Power Management, Motor Control and In- 1,834 Vehicle Networking 800 1,678
Slide 25: Steep Rise in Automotive Addressable Content
STEEP RISE IN AUTOMOTIVE ADDRESSABLE CONTENT LEVEL 2 EV LEVEL 4 EV $1,760$1,760 $1,000 $580 $580 $150 $500 $200 $230 $260 2018 2018 2022 2022 • Radar Sensors • Power Modules • Lidar • Wide-band Gap • Medium Voltage Discrete • Matrix / Pixel Lighting • Sensor Fusion • Laser lighting • High Voltage Di
Slide 26: Vehicle Electrification
VEHICLE ELECTRIFICATION Auxiliary Motor Control OBC IPMs Motor Drivers PHEV/BEV MOSFETs I.C.E. IGBTs, SiC FETs PIMs IVN DC-DC IVN Main Drive IGBTs, SiC FETs PIMs DC-DC IVN Starter- Generator HV-48V-12V MOSFETs MOSFETs Power Modules SiC, GaN Gate Driver, Power Modules Current DC-DC Sense ON Content O
Slide 27: Automated Driving
AUTOMATED DRIVING Power Level 0 Level 2 Level 4 Management Passive Safety Limited Autonomy High Automation PMIC , Drivers, DC- (Seat Belt & (ADAS, Viewing, ACC, (Self-driving with ability of DC, LDO, IVN Airbags) LDWS, Auto-Braking) driver to intervene) + Power Power MOSFETs, Discretes + Image Court
Slide 28: Advanced Lighting
ADVANCED LIGHTING HID & LED Interior and Rear Incandescent Lamps LED Drivers, Power Management, IVN, Discretes + Front Image Property of Mercedes Benz LED, Matrix Beam, Pixel, Laser drivers, Power Management, ON Content ON Content IVN, Discretes Up to $3 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 ENERGY INFRASTRUCTURE – 19% TAM 1,600 CAGR FOR 2017-22 1,400 Up to $650 content in solar inverter vs. none in coal Early stage of long-term infrastructure shift 1,200 1,000 INDUSTRIAL POWER & MOTORS – 5% TAM CAGR FOR 2017-22 800 1,588 Need for
Slide 30: Energy Infrastructure
ENERGY INFRASTRUCTURE Coal Power Plant Solar Farm Inverter Boost Converter PIMs PIMs SJ MOSFETs SiC FETs and Diodes + SJ MOSFETs SiC FETs and Diodes ON Content ON Content $0 $650 Gas Pump EV Charging Station DC-DC LLC Power Factor Correction IGBTs, SJ MOSFETs SJ MOSFETs SiC FETs & Diodes + 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 ON Content SJ MOSFETs SiC FETs & Diodes $0 $250 PFC Controllers MV MOSFETs 32 2019 Analyst Day PFC: Power factor correction,
Slide 33: Cloud Power – Expected Revenue CAGR 13%
CLOUD POWER – EXPECTED REVENUE CAGR 13% Revenue ($m) 350 300 5G INFRASTRUCTURE – 247% TAM CAGR 250 FOR 2017-22 5x the MOSFET usage in a 5G radio 3-5x the number of base stations as 4G 200 Analog power management $327 150 SERVER – 15% TAM CAGR FOR 2017-22 $248 Increasing rack power every generation 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 VR14 Digital Controller VR13 Server 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 SJ MOSFETS $45 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
ANALOG SOLUTIONS GROUP VINCE HOPKIN EXECUTIVE VICE PRESIDENT
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 AUTOMOTIVE Leader in LED front lighting, sensor interface ICs, Consumer ADAS power management 10% Automotive 31% Communications 17% INDUSTRIAL Leader in power conversion, power Client Computing safety (ground fault/arc fault 11% protection), and in
Slide 40: ASG Strategic Intent
ASG STRATEGIC INTENT Invest in analog power management Leverage synergistic portfolios with for automotive, industrial, and cloud ON’s other business groups to power markets with ultra low-power provide a total solution differentiation Expand margins through portfolio Enable disruption - Drive growt
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
Slide 42: Growth Opportunities in Strategic Markets
GROWTH OPPORTUNITIES IN STRATEGIC MARKETS CLOUD POWER 31% of ASG revenue 24% of ASG revenue 6% of ASG revenue AUTOMOTIVE INDUSTRIAL TAM (2022) of $30B TAM (2022) of $40B TAM (2022) of $2.7B 2017-22 TAM CAGR of 6.2% 2017-22 TAM CAGR of 7.1% 2017-22 TAM CAGR of 16% Key Solutions Key Solutions Key Solu
Slide 43: ASG Automotive Business
ASG AUTOMOTIVE BUSINESS 650 ASG Automotive Revenue LIGHTING 600 #1 supplier of LED lighting solutions Most competitive offerings in the industry 550 ULTRASONIC SENSOR INTERFACES Revenue $m Greater than 20% growth in sensor content/car 500 Greater than 35% revenue growth 2018/2017 ADAS POWER & AUTONO
Slide 44: ASG Key Automotive Growth Drivers
ASG KEY AUTOMOTIVE GROWTH DRIVERS ASG Automotive TAM ($m) 6,000 FRONT, INTERIOR AND CONVENIENCE 5,000 LIGHTING $25 per car: LED power, adaptive lighting 4,000 SAFETY AND DRIVE TRAIN SENSING 3,000 $50 per car: signal conditioning, 2,000 networking, and power management 1,000 INVESTING IN ADAS POWER $
Slide 45: New Content Driving Growth
NEW CONTENT DRIVING GROWTH Sensing Safety, Comfort Limited Ultrasonic Advanced LED lighting Assistance Pressure Driver Assistance HVAC motor drivers Position In Vehicle Network ADAS Power LIN/CAN/FlexRay Multi-phase Control ASG Content SBC ASG Content Power Stage Embedded MCU PoL $50 $500 45 2019 An
Slide 46: ADAS Power Management
ADAS POWER MANAGEMENT ADAS Power Tree $40/processor ONLY PROVIDER OF ASIL QUALIFIED MULTI- PHASE POWER SOLUTIONS FOR LEADING ADAS PROCESSORS Sub-PMIC $2/sensor #1 SUPPLIER OF BATTERY CONNECTED Pre-Reg 5V POWER CONVERSION SOLUTIONS Camera / Sensor ON’S AUTOMOTIVE IMAGE SENSING LEADERSHIP DRIVES OPPOR
Slide 47: ASG Industrial Business
ASG INDUSTRIAL BUSINESS 600 ASG Industrial Revenue WORLDS LOWEST POWER BLE 500 Strong opportunity funnel Connecting the Personal Area Network 400 ULTRA LOW POWER CONNECTIVITY Experiencing strong revenue growth Revenue $m 300 Multi-protocol software based radio 200 USB 3.X AND HIGH SPEED INTERFACES $
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 2018-22 500 Complete solutions for every power node 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 Instantaneous Peak Power 60.00 52.10 50.00 800 BOM Content $ 821 41.60 40.00 600 30.00 410 340 400 20.00 200 10.00 0.00 0 Grantley Haswell VR12.5 2014- Purley Skylake VR13 2017-2019 Whitley Copper Lake VR13.HC Eagle
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
Slide 53: ASG Margin Focus
ASG MARGIN FOCUS Focus on secular growth Portfolio management Operational Improvements applications High-value focused investments Cloud power solutions driving Scale strengthens ON rapid high margin growth Semiconductor’s buying Strategic divestitures and power rebalancing R&D spending to
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
Slide 56: Intelligent Sensing Group
INTELLIGENT SENSING GROUP TANER OZCELIK SENIOR VICE PRESIDENT
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 29% Inspection, Scanning, Automation, Security, Rob
Slide 59: ISG Strategic Intent and Goals
ISG STRATEGIC INTENT AND GOALS Sustain #1 position in Automotive Enable next generation ADAS by and Machine Vision markets through offering complete range of sensors continuous innovation and including Radar and cost effective technology leadership LiDAR Expand margins through portfolio Enable disru
Slide 60: Shift in ISG Product Mix & Margin Improvement
SHIFT IN ISG PRODUCT MIX & MARGIN IMPROVEMENT 800 42% STRONG AUTOMOTIVE GROWTH 700 40% 2014-18 ISG automotive revenue CAGR 24% 600 Gross Margin % EXIT LOW MARGIN MARKETS Revenue ($m) 38% 500 Mobile image sensors and low-end security 400 36% NEW DIFFERENTIATED PRODUCTS 300 New product performance and
Slide 61: ISG Strategic Positioning - How We Win
ISG STRATEGIC POSITIONING - HOW WE WIN 1 First mover’s advantage in automotive - Most automotive imaging/ADAS software tailored to ON image sensors – high switching costs 2 Leading the market in most critical performance metrics – High dynamic range (HDR), Low Light, LED flicker mitigation (LFM), Cy
Slide 62: ISG Growth Opportunities in Strategic Markets
ISG GROWTH OPPORTUNITIES IN STRATEGIC MARKETS 56% of ISG revenue 29% of ISG revenue 15% of ISG revenue AUTOMOTIVE INDUSTRIAL 2022 SAM of $2.6B 2022 SAM of $1.8B 2022 SAM of $1.2B 2017-22 SAM CAGR of 26% 2017-22 SAM CAGR of 10% 2017-22 SAM CAGR of 22% EDGE AI Key applications: Key applications: Key a
Slide 63: Strong Momentum in Automotive
STRONG MOMENTUM IN AUTOMOTIVE 500 ISG Automotive Revenue STRONG AUTOMOTIVE GROWTH 400 24% revenue CAGR during 2014-18 LEADER IN AUTO IMAGE SENSORS 300 62% share in overall market & 81% in ADAS Revenue $m 200 HIGHLY SUSTAINABLE COMPETITIVE POSITION Installed base of ADAS software written for 100 ON s
Slide 64: ISG Key Automotive Growth Drivers
ISG KEY AUTOMOTIVE GROWTH DRIVERS VIEWING ISG Auto TAM ($m) 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 2,000 Level 3 and higher needs driver monitoring 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 600 ADAS Level 4 1 1 22% 505 Camera 500 ADAS Level 3 1 8% 1 400 12% 370 27% ADAS Level 2 38% 1 Radar Rx (Mixer, BB, PA, ADC) SPU 300 1 Fusion To 44% 0 Processor Central 200 50% (CPU, DSP, IO) Proc
Slide 66: ON Semiconductor, the Automotive Image Sensor Leader
ON SEMICONDUCTOR, THE AUTOMOTIVE IMAGE SENSOR LEADER Automotive Imagers Automotive Imagers 2016 2018 Others Others 18% 10% Sony 8% ON Sensing Cameras Sensing Cameras Sony 14% Semiconductor 49% (ADAS, AD) 2016 Omnivision (ADAS, AD) 2018 20% ON Semiconductor Omnivision 62% Sony 19% Others 5% Others Om
Slide 67: Strong Technology Lead Over Competition
STRONG TECHNOLOGY LEAD OVER COMPETITION Competitor 1 Competitor 2 LARGEST AUTOMOTIVE PORTFOLIO Product Breadth Sensors for ADAS, AD, rear view, surround view, CMS, in-cabin ADAS/AD Products BROAD GLOBAL SHUTTER OFFERING System VGA, to 45MP, 2u to 9u pixel, high speed, low power Pixel Technology SENS
Slide 68: Highest Dynamic Range in Automotive
HIGHEST DYNAMIC RANGE IN AUTOMOTIVE ON Semiconductor 68 2019 Analyst Day
Slide 69: Most Comprehensive Automotive Portfolio
MOST COMPREHENSIVE AUTOMOTIVE PORTFOLIO Viewing + Sensing ADAS + AD GS / In Cabin SPU Radar, LiDAR 140dB HDR 140dB HDR Leading IQ Advanced Radar Technology ISP MIMO+ Clarity+ Short and Flicker Free Low Light Ecosystem Support long range Clarity + Scalable Platform RGB NIR O
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 - $90 CONTENT/CAR 2018 s
Slide 71: Industrial and Edge AI
INDUSTRIAL AND EDGE AI Object Avoidance 3D mapping Home Delivery Flat Panel Inspection Warehouse Automation Phone Display Inspection Inventory Tracking 71 2019 Analyst Day
Slide 72: ISG Industrial Business
ISG INDUSTRIAL BUSINESS ISG Industrial Revenue ($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 100 Harvest non-focus markets 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 SCANNING 1,500 Portable and
Slide 74: Leadership in Machine Vision Through XGS
LEADERSHIP IN MACHINE VISION THROUGH XGS Price Speed Performance Low Light Image Quality Frame Capture Speed Product sales price ON Semi Sony Pregius Footprint Portfolio Support / System Size of Camera # of Sensors Ease of Use Supports 29x29 camera format 74 2019 Analyst Day
Slide 75: ISG Margin Improvement Plans
ISG MARGIN IMPROVEMENT PLANS Manufacturing Optimization Portfolio Evolution Operating Expenses Continue yield and test time Focus on higher margin, Operating expense leverage improvements differentiated products and rationalization Packaging cost reductions ADAS, Autonomous driving, LiDAR,
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
Slide 77: Power Solutions Group
POWER SOLUTIONS GROUP SIMON KEETON EXECUTIVE VICE PRESIDENT
Slide 78: Key Takeaways
KEY TAKEAWAYS 1 PSG has established leadership in power semiconductor market – power is one of the most compelling growth opportunities in semiconductors 2 Well positioned to benefit from huge opportunity in Silicon & Silicon Carbide for electric 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 17% Automotive Silicon Carbide opportunity in EVs 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 Drive share gains with inflection in semiconductors and Modules for power semiconductor technology - automotive, industrial, and cloud Ownership of complete SiC supply power end-markets chain, including substrates and epi Position to benefit from im
Slide 81: PSG Strategic Positioning - How We Win
PSG STRATEGIC POSITIONING - HOW WE WIN 1 Leading technical capabilities in power semiconductor and modules - HV modules for EV and industrial market, MOSFET & IGBT performance leader, accelerating traction in Silicon Carbide 2 Broad product portfolio encompassing a vast voltage range – LV to HV, and
Slide 82: Move to Higher Value Products and Markets
MOVE TO HIGHER VALUE PRODUCTS AND MARKETS CLOUD POWER 25% of PSG revenue 28% of PSG revenue 7% of PSG revenue AUTOMOTIVE INDUSTRIAL TAM (2022) of $7.8B TAM (2022) of $15.7B TAM (2022) of $2.9B 2017-22 TAM CAGR of 2017-22 TAM CAGR of 2017-22 TAM CAGR of 7% 8.9% 7.5% Key applications: Key Applications
Slide 83: PSG Transformation Towards Power
PSG TRANSFORMATION TOWARDS POWER Non- Non- Power Power Power 2022 2018 2016 33% 24% 45% Non- Power Power Power 55% 67% 76% 83 2019 Analyst Day
Slide 84: PSG Automotive Business
PSG AUTOMOTIVE BUSINESS 780 PSG Automotive Revenue 760 740 HEV/EV 720 Super Junction FETs in on-board chargers, SiC diodes and MOSFETs in EVs 700 Revenue $m 680 BODY AND COMFORT 660 Medium voltage FETs for BLDC motors 640 620 ADAS & AUTONOMOUS DRIVING 600 Power management for sensors 580 560 2016¹ 2
Slide 85: PSG Key Automotive Growth Drivers
PSG KEY AUTOMOTIVE GROWTH DRIVERS PSG Automotive TAM ($m) 9,000 HEV & EV: 22% 2017-22 TAM CAGR $400 of addressable in power content in 8,000 an EV – ON leader in both silicon and SiC 7,000 6,000 BODY & COMFORT: 14% 2017-22 TAM CAGR 5,000 3x Power switches required for 4,000 redundant systems and inc
Slide 86: EV/HEV and Vehicle Electrification
EV/HEV AND VEHICLE ELECTRIFICATION I.C.E. HEV/EV Main Drive Motors, Pumps IPM & FET 1200V Auto Modules IGBT & Modules SiC FET ON-Board Charger 650V SJ, IGBT & SiC Gate Dr. & 12V-48V DC-DC Isolation 30, 40, 80 & 100 V MOSFETs Battery I-Sense Management eFuse HV Loads OA PSG Content PSG Content 40V FE
Slide 87: Power Semis Dominant Opportunity in EV
POWER SEMIs DOMINANT OPPORTUNITY IN EV Power Semi Silicon TAM in EV ($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 700 (PIM) for Solar Inverters 600 Revenue $m MOTOR EFFICIENCY 500 IPMs & FETs in Industrial Motors, C- 400 HVAC, Robotics 300 200 EV CHARGING STATIONS IGBTs & superjunction FETs in
Slide 90: Infrastructure Revolution
INFRASTRUCTURE REVOLUTION Reduce $0 Pollution $650 $0 Efficiency $40 Coal Solar/Wind Industrial Motor VSD Grid Coal-to- $0 Stabilization $836 $0 Elec. $30 - Energy Storage Coal Furnace C-HVAC Battery $0 HEV/EV $500 $0 Life $6 Gas Pump EV Charging Station Warehouse Robotics 90 2019 Analyst Day VSD: V
Slide 91: Silicon Carbide in Industrial Applications
SILICON CARBIDE IN INDUSTRIAL APPLICATIONS EV CHARGING STATIONS – 130% 2017-22 Silicon Carbide TAM in Industrial ($m) TAM CAGR 800 SiC enabling higher power charging stations in same size. 700 SOLAR INVERTER – 28% 2017-22 TAM 600 CAGR 500 SiC provides smaller and cheaper solution at same power 400 P
Slide 92: PSG Cloud Power Business
PSG CLOUD POWER BUSINESS 205 PSG Cloud Power Revenue 5G INFRASTRUCTURE 195 80-150V MOSFETs in BBU & RRU power 185 supplies 175 SERVER Revenue $m 165 25V to 650V MOSFETs in high power density power supplies 155 HIGH END COMPUTING 145 25-30V MOSFETs in high end graphic 135 cards 125 2016¹ 2017 2018 92
Slide 93: PSG Key Cloud Power Growth Drivers
PSG KEY CLOUD POWER GROWTH DRIVERS PSG Cloud Power TAM ($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 500 targets 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 650V SJ FETs & SiC - 48 VDC Fiber BBU 80-150V FETs PSG Content $9 PSG Content $144 … RRU/AAU 80-150V 5x FETs from FETs 4G to 5G 94 2019 Analyst Day Source: ON Semiconductor
Slide 95: PSG Margin Improvement Plans
PSG MARGIN IMPROVEMENT PLANS Aligned with high-growth strategic Providing higher value proposition Manufacturing innovation in markets product standard products Power Up to 35% Silicon HEV/EV Modules Carbide Increase in Die/Wafer Plasma Etched Industrial, Energy 5G Traditional Silicon 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
Slide 98: Bill Schromm
BILL SCHROMM CHIEF OPERATING OFFICER
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 4 Investing to extend ON’s competitive advantage - Be best in cl
Slide 100: Manufacturing as Competitive Advantage
MANUFACTURING AS COMPETITIVE ADVANTAGE One of the most formidable barriers Better control on quality and Enables development of new for competitors delivery technologies & products Scale matters – One of Quality and delivery are Accelerates time to market most cost effective key differentiator
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
Slide 102: Industry Leading Back-End Cost Structure
INDUSTRY LEADING BACK-END COST STRUCTURE PARALELLISM Driving parallelism in probe as high as SCALE 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 Exensi
Slide 104: Key Tenets on Industry 4.0 at ON Semiconductor Operations
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 Build a catalogue of Industry 4.0 technologies Smart Factory Experiment Scale pilots globally as per provided proof & busine
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 co
Slide 106: Manufacturing Gross Margin Drivers
MANUFACTURING GROSS MARGIN DRIVERS Scale Improving efficiency Absorption of fixed cost over larger Productivity and yield improvement revenue base Advanced test methods to reduce Leverage with external suppliers cost Target internal cost reductions above Equipment efficiency ASP declines
Slide 107: Key Areas of Investment
KEY AREAS OF INVESTMENT Front-End Back-end Substrates Cost effective capacity to Back-end has been an Expansion of internal support growth in power area of high investment to substrate capacity to offset semiconductors sustain ON’s leadership in increasing prices from packaging technologies ex
Slide 108: Outsourcing Strategy
OUTSOURCING STRATEGY 1 Target model – 80/20 • Target of 80 percent production in house 2 Outsource where it makes sense • Deep sub-micron • Image sensors • Packages/nodes in small volume 3 Flex capacity • • Maintain flex capacity to sustain utilization during slowdown Relationships with all front-en
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 4 Investing to extend ON’s competitive advantage - Be bes
Slide 110: Bernard Gutmann
BERNARD GUTMANN CHIEF FINANCIAL OFFICER
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 4 ON is going throu
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 Broad based strong demand for REVENUE CAGR of 3%1 - 2018 revenue was $5.9B, semiconductors Positive Positive as compared to 2020 target of $5.6B Variance Variance Pricing has been benign as compared to Strong demand and industr
Slide 114: Target Model 2022
TARGET MODEL 2022 2016 2018 2022 MODEL REVENUE $3.9 BILLION $5.9 BILLION $7.1 BILLION $XXX MILLION GROSS MARGIN1 35.0% 38.1% 43.0% $XXX MILLION OPERATING EXPENSES1 22.7% 21.4% 21.0% XX.X% OPERATING MARGIN1 12.3% 16.7% 22.0% $XXX MILLION PROFIT BEFORE TAX1 $412 MILLION $893 MILLION $1,500 MILLION $XX
Slide 115: Path to 2022 Target Model - Revenue
PATH TO 2022 TARGET MODEL - REVENUE 7,500 7,000 AUTOMOTIVE CAGR 9% INDUSTRIAL CAGR 6% 6,500 Revenue ($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 Comm. Client Consumer 2022 Power Computing 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 5,000 5,044 Providing highly differentiated products for 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 2022 REVENUE BY MARKET Consumer Consumer 10% 13% Communications Automotive 12% Communications 31% 14% Client Computing Automotive 6% 36% Client Computing Cloud Power 9% 8% Industrial 27% Industrial 28% Cloud Power 6% 118 2019 Analyst Day Communicatio
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
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% Opex Intensity % 4,000 3,496 3,162 Revenue $m 3,000 NEW MARKETS REQUIRE HIGHER R&D 22.7% 23% 23.1% INVESTMENTS 2,000 22.0% EV/HEV, SiC, Sensors (I
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 $XXX MILLION NET CASH INTEREST $67 MILLION $86 MILLION $50 MILLION $XXX MILLION CASH TAXES 17.5% 6.7% 6.0% XX.X% (% OF PRETAX INCOME) DEPRECIATION & $564 MILLION $364 MILLIO
Slide 122: Capital Expenditure
CAPITAL EXPENDITURE 600 12% CAPEX INTENSITY TARGET OF 8% 515 Investment need to strengthen leadership in 11% 500 strategic markets – automotive, industrial, & cloud power 388 10% 400 GROWTH NECESSITATES HIGHER Capex Intensity % 8.8% 9% INVESTMENTS Capex $m 300 271 7.7% 8% EV, cloud-power, & sensors
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, Capital will be deployed in a Exercise strong discipline in improve competitive position, manner to maximize
Slide 124: Capital Deployment Plan
CAPITAL DEPLOYMENT PLAN Organic growth of business – R&D, Inorganic growth initiatives – M&A Sales & Marketing, Capex • Significant opportunities for generating value through • M&A will continue to be a critical component of ON’s strategy organic investments • Industry consolidation presents attract
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 $2.64 $1,050 $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 Margi
Slide 126: Summary
SUMMARY 1 Strong business outlook – strong revenue growth coupled with solid margin expansion and 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 revenue
Slide 127: Questions & Answers
Questions & Answers
Slide 128: Energy Efficient Innovations
ENERGY EFFICIENT INNOVATIONS
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