ON Has 10% Revenue Decline; Sees Q3 Wireless Weakness From 'Delayed Launches'

COVID-19 continues to be a “significant headwind” at ON Semiconductor, which reported a 10% revenue drop in Q2 to $1.2 billion, said Chief Financial Officer Bernard Gutmann in the quarterly statement Monday. ON had “moderate improvement in business conditions” on a pickup in global macroeconomic activity, Gutmann said. The company is having “strong momentum” in its power, analog and sensor products.

Networking and wireless accounted for $255 million, 21% of Q2 revenue, up 3% year on year on strength in 5G, but Q3 volume will be down due to “delayed launches of certain platforms and geopolitical issues related to a specific customer,” said CEO Keith Jackson on a call. The broad-based customer “impacted several of the segments,” including industrial, said Jackson in Q&A. The company doesn’t expect “any further meaningful decline in revenue from this customer” beyond Q3, he said.

Responding to a question on whether the semiconductor company is concerned about risks that the U.S. will expand targets in China beyond Huawei, Jackson said, “We are very concerned about some of the increasing tensions on global trade.” Much of global trade is “essential for technology and the growth of semiconductors,” he said, “so clearly, would not like to see further there.”

The consumer end-market contributed $126 million in the quarter, 10% of revenue, dropping 22%, due to consumer tech market weakness from the pandemic and ON’s “selective participation” in the category. Jackson said residual pandemic-related supply constraints are “much less” in Q3 and the company is hopeful there will be none before year-end. He cautioned “everything is still unknown: If there's flare-ups or changes around the world; there's still risk.”

The company wants to sell its 6-inch fab in Niigata, Japan; production will be transitioned to other fabs in the company’s network, said Jackson. The planned sale follows a February announcement that ON hopes to transition out of its 6-inch automotive-based fab in Belgium (see 2002030017).

ON began production at its East Fishkill, New York, fab in Q2 and is sampling 300mm products to customers, with first revenue due in Q3. The company forecasts Q3 revenue of $1.2 billion-$1.3 billion compared with $1.38 billion in Q3 2019. The stock closed 5.2% higher Monday at $21.92.