ON Semiconductor Corp Investor Webinar: Treo Platform Launch Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Ross Seymore - Deutsche Bank AG - Analyst : Thanks for asking the question. And congrats on launching the platform. Two questions. I guess the first one, probably for Sudhir, if I just look at this technology and think why haven't others done it before? Is it more the ability to have the BCD process on the 300-millimeter at 65-nanometer. So it's the core technology that's different? Or is it more that you're -- how you're putting it together, that's truly a differentiated approach?

Question: Ross Seymore - Deutsche Bank AG - Analyst : Thanks. For my second question, whether it be for you or Thad. On the gross margin side of things, up to 70% is obviously very impressive. Is there a rough range these tend to be 50% to 70%, you have that 50% to 53% gross margin target overall for the company. Just is there a range around that? And is it really scale based where you don't start off at these gross margins, you have to work your way up over time as you get more of the volume and cover the fixed cost, those sorts of things? How do I think about how this folds into the company from a gross margin perspective over time?

Question: Gary Mobley - Loop Capital - Analyst : Hi, guys. I wanted to ask about the R&D intensity of the analog and mixed single group, I presume since this group was formed a while ago, it's already in the baseline R&D investment. But as most people on this line know you're going after some pretty good players that have pretty good R&D scale. So maybe if you can just talk about if, in fact, we're at a baseline R&D spend for this business already. And what you really have to do to compete against those guys, whether it be for more efficiency or just trying to outspend them on certain niches?

Question: Gary Mobley - Loop Capital - Analyst : Thank you for that. If I can ask a quick follow-up. This modular approach to putting together different IP blocks, does this involve a partnership with a network of IP partners or is this all homegrown IP blocks within onsemi?

Question: Vivek Arya - BofA Global Research - Analyst : Thanks for taking my question. I wanted to go back to this competitive differentiation. So is the argument that none of your competitors are able to have 300-millimeter plus 65 BCD plus an SoC format? And if they aren't, then why are you only targeting 2% or 3% market share, right? You mentioned a $36 billion TAM and only $1 billion. So in sales, if this thing is so kind of breakthrough, why not target much higher market share?

Question: Vivek Arya - BofA Global Research - Analyst : Okay. And I think you mentioned we could expect to see some revenue contribution in '25. Any kind of rough sense? Is it like low tens of millions, $50 million? Like any rough sense of how we should track sort of more intermediate milestones of what the revenue contribution might be in '25 or '26 for that matter? Thank you.

Question: Joshua Buchalter - TD Cowen - Analyst : Hey guys, thank you for taking my question. I wanted to ask a big picture about how you feel about your cost basis and competitiveness in this market. So totally here, you want a 300-millimeter facilities being a competitive advantage from a cost basis. But I would imagine being on REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 18, 2024 / 9:30PM, ON.OQ - ON Semiconductor Corp Investor Webinar: Treo Platform Launch 65-nanometer and competing against primarily peers manufacturing on 130 or even 180 nanometers on BCD would be a more expensive process geometry. Could you maybe speak to how you feel you can merge into traffic in this market? And how you feel about your cost basis with those two vectors. Thank you.

Question: Joshua Buchalter - TD Cowen - Analyst : Okay. And to follow up, I wanted to ask about your go-to-market. Is this primarily verticals do you expect to be more catalog-based or more design socket based? And maybe you could talk about your visibility into sort of the near-term or medium-term trajectory as you ramp the initial revenues? And how much of that is, I guess, a socket that you expect to compete with on a design win basis? Thank you.

Question: Joshua Buchalter - TD Cowen - Analyst : Thank you.

Question: Quinn Bolton - Needham & Company LLC - Analyst : Hey guys. Thanks for taking my question. I just wanted to step back. I know BCD processes from foundries have been available for a while. But could you just kind of level set us? What -- typically, what nodes are the foundry processes available on? Are those like 180-nanometer or higher? And similarly, what kind of voltage range could you get off of commercial BCD process just to try to give us some sense of how much further ahead you may be? And then I've got a follow-up. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 18, 2024 / 9:30PM, ON.OQ - ON Semiconductor Corp Investor Webinar: Treo Platform Launch

Question: Quinn Bolton - Needham & Company LLC - Analyst : Got it. And then just you had mentioned sort of an example is the smart power devices. And wondering how integrated would your platform be, would you have the gate driver and high side and low side fits all integrated on a Monolithic BCD process, would you start with discrete fabs. How much integration can you bring to that kind of a device? And then I think one of the advantages of higher levels of integration in those types of devices would be switching speed. Could you compare what switching speed you might be able to achieve in that device versus, say, a discrete solution from some of the competitors on the market? Thanks.

Question: Quinn Bolton - Needham & Company LLC - Analyst : Got it. Thank you.

Question: Christopher Rolland - Susquehanna Financial Group LLP - Analyst : Hey guys. Thanks for the question. And this might be a broader one for management. But you guys mentioned licensing MCU, IP. And I was wondering if this might open the door to more microcontroller SKUs, either specialized or general purpose. Just as Hassane and Thad, you guys had a lot of experience here at your last company, a lot of success, could this be another step in the evolution for on moving more towards the processor side? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 18, 2024 / 9:30PM, ON.OQ - ON Semiconductor Corp Investor Webinar: Treo Platform Launch

Question: Christopher Rolland - Susquehanna Financial Group LLP - Analyst : Okay. And then just basically, as I look at all of these different IP blocks, there's a ton. I just think about all the permutations and combinations. And so, I guess, are you going to have just a ton of different SKUs with all these different combinations or is there something configurable through the use of memory and software or something like that where you can change these different blocks so you don't have as many SKUs?

Question: Jeremy Kwan - Stifel, Nicolaus & Co., Inc - Analyst : Yes, good afternoon. This is Jeremy on the line for Tore. I guess first question would be the Treo platform. You talked about a 1 volt to 90 volt range. Is there plans to expand beyond that range to maybe address different markets? Or is this kind of with that AC to DC conversion application is going after?

Question: Jeremy Kwan - Stifel, Nicolaus & Co., Inc - Analyst : Got it. Thank you. And I guess, you know, if for those 10 products that you mentioned your sampling currently and that doubling a few by mid-2025, can you just give us a little bit more in to, you know, maybe which product categories these are initially coming from? Is it all one product category? Is it all one application? And where are you seeing the most traction at this stage? Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 18, 2024 / 9:30PM, ON.OQ - ON Semiconductor Corp Investor Webinar: Treo Platform Launch

Question: Jeremy Kwan - Stifel, Nicolaus & Co., Inc - Analyst : Got it. Thank you. And one final question, if I could. Regarding the fish co fab that this is being installed into, can you just give us a sense of how much capacity you currently have, maybe what kind of CapEx you might need to get to that $1 billion target? And if it's all brownfield, would you need to kind of expand the site? And finally, related to that, is there any benefit from the chip back that you can get for this project? Thank you.

Question: Jeremy Kwan - Stifel, Nicolaus & Co., Inc - Analyst : Very helpful. Thank you.

Question: Kevin Cassidy - Rosenblatt Securities - Analyst : Yeah. Thanks for taking the time to explain to us about this new platform, very interesting. And maybe two years ago when you started in on this, was there a pull coming from some of your customers saying that these (inaudible), can you help invent this for us? Or maybe can you say how you started into this R&D?

Question: Kevin Cassidy - Rosenblatt Securities - Analyst : Okay. Great. And along with that, as of being a brand-new design do your customers need to buy new test systems and just to be able to see if this device is working as expected? Or is there equipment out there already that would support it?

Question: William Stein - Truist Securities - Analyst : Great. Thank you for taking my question. Typically, when we see companies enter sort of these new technology areas, they go after a very well-understood opportunity at least to start. So I wonder if you could clarify for us the stuff that you're sampling now where you say that's going to generate revenue in the first half, should we think about those parts as being sort of pin-for-pin compatible with existing parts that are being delivered by competitors where they're just going to potentially swap out some portion and qualify you as a new vendor? Or are these brand-new opportunities that were never delivered before that your customers really taking a bigger risk on.

Question: William Stein - Truist Securities - Analyst : That's helpful clarification. Thank you. Maybe one other, if I can. I wonder the degree to which this would be complementary to the rest of your portfolio. Or is it possible that this would be -- this could cannibalize some of your existing portfolio, maybe still mix up in margins? But does it REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 18, 2024 / 9:30PM, ON.OQ - ON Semiconductor Corp Investor Webinar: Treo Platform Launch remove or consolidate revenue from other parts of the portfolio? Does it fit with some other thing that you do now that makes the sale easier? Thank you.