Onsemi Faces Challenges as CEO Warns of Market Weakness

 

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Onsemi, formerly recognized as ON Semiconductor, recently presented a rather somber outlook for the ongoing quarter. The company witnessed a drop in sales and operating margins, resulting in a substantial decrease in the value of its shares. CEO Hassan Al-Khoury emphasized the existence of "pockets of weakness" within the market and highlighted the risks associated with the surge in interest rates.

The share prices of Onsemi (ON) plummeted by over 18% during early trading on Monday, marking their lowest level since the beginning of the year.

In its latest guidance for the current quarter, Onsemi revealed earnings per share (EPS) in the range of $1.13 to $1.27, with revenue expected to range from $1.95 billion to $2.05 billion. These figures significantly undershot analysts' expectations, who had anticipated earnings per share of $1.36 and revenue of $2.18 billion.

In the third-quarter report, Onsemi disclosed earnings per share of $1.39, a decrease from the previous year's $1.45. Revenue also took a hit, declining by 0.5% to $2.18 billion. The operating margin witnessed a drop from 35.4% to 32.6% over the year. Sales within the Analog Solutions group fell by 15%, while the Smart Sensors group experienced a 4% decline. On the flip side, the Energy Solutions group managed to secure a 10% increase in sales.

CEO Hassan Al-Khoury acknowledged that these results reflected the "resilience in our business amid market weakness" and underscored the potential threats posed by elevated interest rates to overall demand.

Onsemi's challenges aren't solely internal; external factors have also weighed on its performance. Escalating tensions between the United States and China have had an impact. The Biden administration's crackdown on semiconductor exports to China has affected Onsemi significantly, as the company derived nearly a third of its revenue from the Chinese market in 2022.

The company's shares witnessed a sharp decline of about a fifth during the morning session, trading at their lowest level since January.