Onsemi Moves Capacity to Manila, Singapore as Hedge Against China Lockdowns

Onsemi is “fully cognizant of potential risks” from inflation, higher interest rates and the “ongoing geopolitical tensions,” and it's "monitoring the business environment diligently,” said CEO Hassane El-Khoury on an earnings call Monday for fiscal Q1 ended April 1.

The COVID-19 lockdowns in China didn't have “any meaningful impact on our business” in Q1, but there’s “potential risk in the second quarter if the lockdowns extend much longer,” said El-Khoury. The company baked in a “few percentage points” of lost revenue to account for the exposure, he said. “To mitigate any chance of supply disruptions to our customers due to these lockdowns, we have initiated capacity transfers to our Manila and Singapore locations to maintain supply continuity.”

The lockdowns cause uncertainty about "logistics," said El-Khoury. "Think about getting material in and out of factories. We're able to mitigate some of that by rerouting, but the lack of mobility is what is hard to judge."

Onsemi reported a 31% revenue increase in Q1 to $1.95 billion, at the high end of its Feb. 7 guidance, including 44% revenue growth from automotive image-sensing components for advanced driver-assistance systems (ADAS), said El-Khoury. “The growth in our image-sensing revenue and design wins is attributed to a doubling of the average number of cameras per vehicle over the past five years, and a doubling again over the next five years,” he said. Eight automotive OEMs have adopted onsemi’s 8-megapixel camera for their ADAS offerings, he said. Revenue in its automotive-imaging segment is expected to quadruple in 2023 over 2022, he said.

There was no change in Q1's demand-supply imbalance from Q4, and "we don't see that changing materially over the next few quarters," said El-Khoury. "We do have some manufacturing efficiencies and some supply coming online from investments we've done in 2021, but not to the level to meet demand. So we'll still be supply constrained through 2022 and even with the outlook we have for 2023."