ON Semiconductor Diversifies Supply Chain, Targets Savings With New Manufacturing Investments

ON Semiconductor Corp ON is taking decisive steps to diversify its supply chain, aiming to mitigate risks associated with the growing influence of Chinese chip suppliers.

The company, known for its power chips and sensors used in electric vehicles, recently unveiled plans for a new $2 billion manufacturing facility in the Czech Republic. It is also expanding its operations in South Korea.

Also Read: ON Semiconductor Seals Multi-Year Deal with Volkswagen for Advanced EV Solutions; Stock Gains

The decision to bolster its global manufacturing footprint comes as China intensifies its push to promote local chip suppliers, potentially sidelining foreign competitors, the Wall Street Journal reports.

Thad Trent, ON Semiconductor CFO, emphasized the importance of expanding existing manufacturing locations, noting that it saves the company around 40% in capital expenditures and accelerates development timelines by up to two years.

In July, ON Semiconductor reported a fiscal second-quarter 2024 revenue decline of 17.2% year-on-year. Revenue from the Power Solutions Group (PSG), Analog and Mixed-Signal Group (AMG), and Intelligent Sensing Group (ISG) segments posted double-digit revenue declines.

The company also posted a margin decline due to industry pricing pressures. ON Semiconductor stock plunged 19% in the last 12 months.

On a related note, critical artificial intelligence chip designer Nvidia Corp NVDA also grabbed attention as U.S. sanctions failed to cut off its supply to China, as it was smuggled to the country.

Investors can gain exposure to the semiconductor industry through VanEck Semiconductor ETF SMH and iShares Semiconductor ETF SOXX.

ON Semiconductor Stock Prediction For 2024

Equity research analysts on and off Wall Street typically use earnings growth and fundamental research as a form of valuation and forecasting. But many in trading turn to technical analysis as a way to form predictive models for share price trajectory.

Some investors look to trends to help forecast where they believe a stock could trade at a certain point in the future. Looking at ON Semiconductor, an investor could make an assessment about a stock's long term prospects using a moving average and trend line.

If they believe a stock will remain above the moving average, which many believe is a bullish signal, they can extrapolate that trend into the future using a trend line. For ON Semiconductor, the 200-day moving average sits at $73.6, according to Benzinga Pro, which is below the current price of $76.36. For more on charts and trend lines, see a description here.

Traders believe that when a stock is above its moving average, it is a generally bullish signal, and when it crosses below, it is a more negative signal. Investors could use trend lines to make an educated guess about where a stock could trade at a later date if conditions remain stable.

Price Action: ON stock traded higher by 0.44% at $76.15 at the last check on Wednesday.

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.