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| Statement |
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| So, for ADAS, obviously, we have a leadership position with our image sensor |
| So longer term, we feel really good |
| And because of that superior performance both on device and package and therefore, system-level performance translating to the OEM, we’re able to capitalize on that, and you’ve seen the growth at 4x |
| I’m very proud of the team for having done it so quickly, to be able to sample customers now, and that’s going to proliferate and you’ll hear more about it through 2024 |
| So I’m very excited |
| I’m very excited about that |
| And it has been impressive definitely |
| The positive catalyst is going to push it above what we thought |
| Today that business is all at favorable margins |
| The last few years, we’ve had positive catalysts in electrification where it was ahead of what we thought EVs are going to be |
| If you have better battery technology that allows fast charging, that is a positive catalyst |
| And to put it in perspective, the growth, the 4x from $200 million to over $800 million that we saw from 2022 to 2023 is the highest growth percent in the industry and the highest dollar growth of all our peers |
| So we’re not blind to kind of the world around us, but we still believe vertical integration is a competitive advantage |
| So we feel really good about where we are on the capital and the investment on that side of the house |
| Its 15 basis points of gross margin improvement |
| This company has much higher profitability than we had seen historically |
| You’ve had a really good progression there, I think, up about 4x last year to $800 million |
| And the benefit for a customer because you say, okay, great, well, if you have it, why would the customer change? Having our driver, for example, paired with our silicon carbide, you’re able to drive the silicon carbide switch much differently and extract even more efficiency back to the savings on the battery |
| I mean, this has been a big element of the margin improvement that you guys have seen, and now you’re kind of signaling, hey, we’re not walking away from anymore because it’s just good margin business |
| The reason for that is, obviously, silicon carbide is performing well |
| So our revenue in eight megapixel in Q4 doubled year-on-year |
| That’s the momentum that’s going to carry us forward as the mega trend of electrification continues in the future |
| As long as we don’t need that capacity for something else, it’s good business at Fairview [ph] market |
| However, if you look at overall industrial for Onsemi the results are more muted because within industrial we do have a lot of strength and growth |
| Sudhir did a great job presenting it in Analyst Day, which is a market expansion that we’re doing |
| So you got utilization, which will be a nice tailwind when the market starts to recover or normalize |
| Very happy to have the executive team from ON Semiconductor, Hassane El-Khoury, CEO; and Thad Trent, CFO |
| Exciting stuff |
| So in industrial we talked about the electrification megatrend in automotive there’s the same megatrend in industrial for energy storage system or renewable energy and the categories are energy storage systems you have a charging infrastructure and you have renewable itself and I’m talking not the residential which impacted a lot of my peers but more on the commercial and utility scale renewable so these two categories have lifted our industrial result I mean that business for the last two years have grown 60% to 70% year-on-year for two years |
| But the value in automotive can be extracted, and we’re able to do that |
| Statement |
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| As we’ve sort of seen sentiment fade a little bit on EVs in the United States, our auto team is pretty negative on that |
| Everybody drained the inventory to a subscale level, and they struggled with the way up |
| COVID hit, demand went down |
| I mean, you had worse numbers in 2001 and 2009 but there was demand destruction on a much bigger scale whereas we’re almost as weak now and it’s all inventory |
| What we’re dealing with today is what I call a negative catalyst, meaning, okay, there’s a price point disadvantage of EVs today |
| We saw the industrial softness because of LTSA’s in end of 2022 |
| So fast forward to Q3, I talked about we’re starting to see softness and I called the European Tier 1 at the beginning because from a market share perspective, they’re a big indicator for me of a worldwide auto demand picture |
| So you have to overcome these two hurdles |
| It is also true, though that your visibility is always worse at the bottom |
| That’s how margin gets degraded and there’s no recovery |
| Now it’s slightly below what we thought |
| You guys had signaled some weakness in the automotive business about a quarter ago |
| Now, I have elevated inventory and I still have to take utilization down |
| Over time, I don’t worry about the share loss or design loss because it’s China |
| Why change and go to potentially another risky supplier that has bad quality and jeopardize the business? So again, it goes back to customers perceive the value and therefore they pay for it |
| Hassane El-Khoury And let me – because I’d rather be wrong that way than plan for a recovery and be wrong the other way because planning for kind of a no recovery in 2024 we manage we’re very disciplined and very cautious about managing inventory, managing utilization and managing the expectation if we’re wrong and there’s a recovery |
| But the OEMs are seeing inventory levels getting drained below critical levels at the Tier 1s |
| And two, unfortunately in the short-term you have the geopolitical risk where you can talk about substrate sourcing in China |
| You mentioned you guys were earlier to see weakness there |
| Joe Moore I mean if you aggregate industrial across all of my coverage we’ve seen I would argue the worst inventory correction that we’ve ever seen |
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