ON Semiconductor Focuses On AI Chip Growth, To Cut 2,400 Jobs to Stay Competitive

On Monday, ON Semiconductor Corp ON initiated a company-wide restructuring plan to impact all business groups, including the worldwide manufacturing organization. The restructuring consisted of cost-reduction initiatives.

ON Semiconductor plans to reduce its global workforce by ~2,400 employees. According to its annual report, the company had 26,400 regular full-time employees as of December 31, 2024. 

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The company expects to complete this reduction by 2025.

It expects to incur $50 million-$60 million in employment-related charges and record them during calendar year 2025. ON Semiconductor expects the reductions to generate savings of $105 million-$115 million on an annualized basis.

The move marks the start of CEO Hassane El-Khoury's attempt to stay competitive with Chinese rivals amid the artificial intelligence boom. El-Khoury told the Wall Street Journal that he is pausing side projects that would help the company scale up its business.

Powering 112,000 GPUs requires about 12 million of Onsemi's power chips, the company told the WSJ. As more AI projects ramp up, companies will depend on companies like ON Semiconductor to power them.

ON Semiconductor reported a fiscal fourth-quarter 2024 revenue decline of 15% to $1.72 billion, missing the analyst estimate of $1.76 billion.

The adjusted EPS of $0.95 missed the consensus estimate of $0.97.

The adjusted gross margin declined by 140 bps to 45.3%, implying semiconductor industry pricing pressures.

ON Semiconductor expects first-quarter adjusted revenue of $1.35 billion-$1.45 billion, below the consensus of $1.69 billion.

The company expects adjusted EPS of $0.45–$0.55 below the consensus of $0.89 and an adjusted gross margin of 39.0%-41.0%.

ON Semiconductor stock lost 34% in value in the last 12 months. At least 24 Wall Street firms reduced their price targets on the stock in 2025, including a rating downgrade from Truist Securities.

In January, Needham's N. Quinn Bolton noted weak end demand across the company's critical industrial and automotive end markets and continued inventory digestion. The analyst expects management to reduce fab utilization rates further, leading to lower adjusted gross margins in the first half of 2025. However, he noted ON Semiconductor as a semiconductor cycle recovery play.

Price Action: ON stock closed lower by 4.08% at $51.22 Tuesday.

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