ON Semiconductor Corp at Citi Global TMT Conference Transcript

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

Question: Christopher Danely - Citi - Analyst : That's for [Q3 sequentially], just . REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 04, 2024 / 7:00PM, ON.OQ - ON Semiconductor Corp at Citi Global TMT Conference

Question: Christopher Danely - Citi - Analyst : So one thing you talked about that I did want to ask you about is, you guys lowered utilization rates. You were at least in the first two or three companies, if not first. So you seem like you're a little more aware of what was coming and infinitely better prepared for the correction. What did you see? Like what caused you to be so proactive.

Question: Christopher Danely - Citi - Analyst : So we're definitely keeping the LTSAs. I got that loud and clear. Would you say that most of your top 10, top 20 customers have them? Have you seen a decrease in the overall number of LTSAs? Or have you kept them but at a lower level? How has that sort of evolved as the year goes on?

Question: Christopher Danely - Citi - Analyst : Got it. What would you say your typical LTSA backlog coverages for the quarters in these days?

Question: Christopher Danely - Citi - Analyst : Okay. So a year ago it was still 60 --

Question: Christopher Danely - Citi - Analyst : And do you anticipate that remain at that level going forward, yes, I think so.

Question: Christopher Danely - Citi - Analyst : Okay. So just going back to the auto supply chain because I got a little off track. Whenever you say LTSAs, I get excited. How would you characterize inventory in the automotive supply chain? I think you're car guy. So I kind of rely on you more than almost every other exec as to what is really going on there, anything from the automotive industry. So what you take --

Question: Christopher Danely - Citi - Analyst : You mentioned that the in a conference call.

Question: Christopher Danely - Citi - Analyst : Suicide, yes. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 04, 2024 / 7:00PM, ON.OQ - ON Semiconductor Corp at Citi Global TMT Conference

Question: Christopher Danely - Citi - Analyst : If you took an amalgam of that constellation of auto OEMs, would you say that there is a general propensity to take inventory a little lower at this point or higher? Or do they feel like they have what they -- if you just took like an average because I know different folks are doing different things.

Question: Christopher Danely - Citi - Analyst : Yes.

Question: Christopher Danely - Citi - Analyst : And what else is there like the supply chain or distributors?

Question: Christopher Danely - Citi - Analyst : A couple more questions for the automotive Yoda. So EV versus ICE cars, what would you say your relative exposure is if you had to split out your automotive business between EV and ICE.

Question: Christopher Danely - Citi - Analyst : And so it seems like the EV growth prospects have slowed, but perhaps that's being taken up by hybrid getting a little stronger. Do you agree with that? And then do you think that there's like an ICE come back out there given the potential slowdown in EVs? Or how do you sort of assess the overall market?

Question: Christopher Danely - Citi - Analyst : A couple of questions on that. Do you think that EV like price/content needs to come down to drive more penetration?

Question: Christopher Danely - Citi - Analyst : On that point, it seems like most of the more affordable EVs are coming out of China. It seems like every other week, I see some new Chinese EV company who is launching a car for $20,000 or something like that. I mean do you think that most of the growth in EVs is going to come out of China? And then obviously, what's the impact on? Is that good? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 04, 2024 / 7:00PM, ON.OQ - ON Semiconductor Corp at Citi Global TMT Conference Is it bad? Is it indifferent?

Question: Christopher Danely - Citi - Analyst : 6-0?

Question: Christopher Danely - Citi - Analyst : One more is the big Volkswagen deal you guys signed up. When can we expect this to be a material impact to ON?

Question: Christopher Danely - Citi - Analyst : Great. Shifting gears, I guess, but to stay in automotive, let's touch on the silicon carbide market. So one of your dastardly competitors talked about 30%, 40% growth in silicon carbide in 2025. Does that make any sense. So we're in the right solar system. I won't even ask ballpark, but are we in the right solar system? And what do you think are going to be the key drivers up or down of the silicon carbon market in 2025.

Question: Christopher Danely - Citi - Analyst : Perhaps (inaudible)

Question: Christopher Danely - Citi - Analyst : Yes. And by the way, on the -- let's just take the EV market. Can we pretty much roughly map the silicon carbide content to the ASPs of these EVs? Like if there's a $80,000 EV would it have 3x the content of a $25,000 EV. That makes any sense?

Question: Christopher Danely - Citi - Analyst : Okay. One more, since we'll stop the forecasting there. How about your gross margin assumptions of silicon carbide, what's it going to take to get to accretion? I mean, granted you're whatever nonsilicon carbide margins move around. But give us some sort of milestones or timing on when we can expect silicon carbide to be accretive, let's just say, parity and then accretive to the overall model.

Question: Christopher Danely - Citi - Analyst : Can you define scale, give us some sort of revenue number?

Question: Christopher Danely - Citi - Analyst : Have your forward assumptions for silicon carbide in terms of pricing changed at all over the last three to six months? I'm not asking them what they were, but have they changed though at all? .

Question: Christopher Danely - Citi - Analyst : This seems like ASPs. And then maybe talk a little bit about customer concentration. It seems like more and more applications, say, on the industrial side are starting to use silicon carbide. Can you give us any sense of your customer concentration and then maybe auto versus industrial and how you expect that to change over the next three to five years?

Question: Christopher Danely - Citi - Analyst : Great. Before I switch gears and start to pester that over here, anybody in the audience have a question, I'm going once, I'm going twice so I'm fine (inaudible) Do you want to use the mic? Unidentified Participant When you talked in the Volkswagen press release about like the customization of the efficiency, like what do you kind of mean by that in terms of like achieving some of these unlocks, an efficiency unlocks for your customers? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 04, 2024 / 7:00PM, ON.OQ - ON Semiconductor Corp at Citi Global TMT Conference

Question: Christopher Danely - Citi - Analyst : Great. Is there another one. Over here. Unidentified Participant Thanks for this opportunity. So I just wanted to ask a bit about the silicon carbide growth of 2x of the market comment you had earlier. Could you comment a bit about where as you see that coming from. So I think I've heard from previous calls that I think largely is about the confidence about the performance that you have versus your peers in this product. Would you say you are more thinking about that penetrating into, let's say, the biggest North American player in EV? Or is that in China? Or is that maybe in the upcoming European players that are doing more EV? Or is it maybe more broad-based? I wonder if you have any comment there you can share?

Question: Christopher Danely - Citi - Analyst : Great. So Thad, you look little lonely over here. Maybe just run through the gross margin drivers going forward top two or 3, then we'll dig into it a little bit --

Question: Christopher Danely - Citi - Analyst : Would you say your overall visibility now versus, say, three months ago? Is it the same? Is it better? Is it worse? How would you characterize it?

Question: Christopher Danely - Citi - Analyst : And in terms of that gross margin utilization rate calculation, what sort of pricing does that assume-to-assume normal pricing, flat pricing, up pricing, down pricing?