Powering the Electrification Revolution
When discussing the trend of electrification, both technical experts and investors tend to focus on new products, such as EVs and batteries, as they are the core of what drives the trend forward.
However, as more processes become electrified, the more electric power needs to be measured, controlled, and routed in the right direction.
This is the task of powering electronic components. It is different from electrical systems because here we are talking of very intense and very variable power charges, which are required to be controlled very precisely to prevent damage to battery packs, solar inverters, and other critical systems.
An important material for this task is silicon carbide, a type of silicon-carbon compound used in high-energy electric systems. So the boom in EVs and renewables has also been a boom in demand for silicon carbide, with notably one company greatly benefiting from it: ON Semiconductor.
ON Semiconductor Corporation (ON +3.95%)
ON Semiconductor: Company Snapshot
ON Semiconductor is a semiconductor company specializing in electrification, including in automotive, but also in other sectors like solar energy, batteries, aerospace, telecommunication, data centers, and medical.
Most of On Semiconductor’s (Onsemi) markets are growing much faster than the rest of the economy, creating a quickly expanding total addressable market (TAM) for the company, worth $44B and growing at an 18% CAGR.
Source: ON Semiconductor
The company was initially a spin-off from Motorola back in 1999, with an IPO in 2000. At the time, Motorola was a pioneer in transistors and logic devices.
Another important part of the company came with the acquisition by Onsemi of Fairchild Semiconductor in 2016, which was a pioneer in silicon transistors and integrated circuits, but also in silicon carbide.
The company also acquired many other smaller businesses in the field of sensors and semiconductors over the past 2 decades, bringing together a wide array of related patents and technologies.
Source: ON Semiconductor
Onsemi’s string of acquisitions and consolidation of the industry’s silicon carbide market continues, notably with the recent acquisition of Qorvo Inc.’s Silicon Carbide Junction Field-Effect Transistor (SiC JFET) technology.
Today, silicon carbide technology forms the core of the company. It is used in power electronics for controllers and power transfer and also for many types of sensors that integrate with the power electronics components.
Source: ON Semiconductor
“Our broad portfolio of products has enabled us to become a one-stop shop for our customers and the source for the most optimized solutions.”
Hassane El-Khoury – On Semiconductor CEO
Key Metrics & Market Position
In 2024, Onsemi made $7.1B in revenues, employing 26,000+ people across 19 manufacturing sites worldwide spread in 9 countries, 8 engineering centers in 5 countries, and 43 design centers in 19 countries.
It has a very extensive catalog of semiconductor components, mostly focused on silicon carbide, with a total portfolio of 37,000+ items.
This extensive portfolio has made Onsemi the #1 in image sensors for automotive and industrial applications. It controls a 68% market share in Advanced Driver Assistance Systems (ADAS) and a 27% market share in industrial applications.
The company is one of the top 10 global semiconductor suppliers to the automotive industry. The automotive segment provided 60% of the company’s revenues, followed by industrial applications (24%).
This matches the company’s strategy of using vertical integration, end-to-end supply chain, and wide silicon carbide portfolio to target a control of more than 1/3rd of this market.
Source: ON Semiconductor
Core Technology: Silicon Carbide
Silicon Carbide: Advantages & Applications
Silicon carbide is unique in its ability to handle very large power loads, notably thanks to a 10x higher electric field capacity.
This allows for silicon carbide devices to be smaller, have much smaller losses, and be able to switch on and off more quickly.
It also has 3x the thermal conductivity of “normal” silicon, allowing for much quicker heat dissipation when exposed to high charges.
It is made of an intertwined network of both silicon and carbon atoms in a crystalline form.
Source: MRF Furnaces
Silicon carbide is remarkably hard and durable. It can be used for drills and as an industrial abrasive. It is also chemically inert, providing great resistance to corrosion.
Vertical Integration Strategy
A key focus of the company has been to vertically integrate all the steps of silicon carbide production, which are far from simple. From raw material production of ingots to the production of wafers, designs of chips, production of the components, and packaging, Onsemi keeps a tight control of every step.
Source: ON Semiconductor
This makes the company very different from other semiconductor companies in the silicon-based industry, where each supplier usually specializes only in a specific step, creating a very complex supply chain.
The vertical integration of SiC chip manufacturing for the EV market empowers manufacturers to lower costs, enhance quality control, drive innovation, and deliver more cost-effective products.
This level of vertical integration also reduces the risk of supply chain disruption and speeds up the development of new products.
Automotive & EV Charging Applications
The company’s largest segment of activity is cars, which have started to integrate more silicon carbide with the transition to hybrids and EV solutions. Onsemi products are now integrated into more than 500 different car models.
Source: ON Semiconductor
Charging and energy storage solutions are other adjacent segments where Onsemi is active, especially the high-power fast chargers for EVs. It can provide a wide range of solutions, from low-cost platforms for cheap vehicles to ultra-high performance for luxury car models.
In addition to power supply, Onsemi has an installed base of more than 450 million automotive sensors. This will likely keep growing, as silicon carbide sensors are both more energy efficient and perform better in low-light settings, which will be crucial for building safe self-driving cars.
Source: ON Semiconductor
Data Centers: Power & AI Growth
Silicon carbide components are vital to the data center, especially for the power racks, but also for the compute racks with power controllers at multiple levels.
As the volume of data centers being built or upgraded grows, so does the market for power electronics to supply them.
Source: ON Semiconductor
In total, Onsemi can hope for up to $5M per data center in potential sales in a new facility. As AI is radically boosting data center construction, this could prove a segment growing even faster than automotive for the company, with sales having grown 100% year-to-year in Q1 2025.
Source: ON Semiconductor
Industrial, Solar & Emerging Sectors
One major application for silicon carbide and other power electronics outside of computing and EVs is solar power. Onsemi can provide components for all levels of power, from residential installations to massive utility solar power plants.
Source: ON Semiconductor
While the company sales pitch focuses initially on scalability, speed of delivery, and price, it also provides high performance and small size & weight through an optimized mix of silicon and silicon carbide technologies.
Another important sector is industrial imaging and sensors. This includes image and light sensors of all sorts, as well as ultrasonic sensors, electrochemical sensors, and inductive sensors (metallic object detection).
Electrochemical sensing could be a new field for the company in the long run, such as its new CEM102, a continuous glucose monitoring (CGM) and blood gas sensor.
CEM102 can be combined to RSL15 – the industry’s lowest-power Bluetooth Low Energy-enabled MCU – to form a complete solution that allows for very low-power biosensors and environmental sensors to accurately measure chemically generated currents.
The company also produces MOSFET, or Metal-Oxide-Semiconductor Field-Effect Transistor.
They are used to optimize energy use, stability, and reliability of electric components of cars, power tools, drones, and telecom devices.
Source: ON Semiconductor
Mitigating Rare-Earth Risks with SiC
As trade wars, tariffs, and sanctions disrupt the USA-China trade relations, the automotive industry is facing the very serious issue of potentially running out of China-made rare earth materials.
This is a field where Onsemi can help, thanks to its silicon carbide allowing for separately excited synchronous motors, removing the need for permanent magnets requiring rare earth.
So while on the one hand, Onsemi’s business could suffer if the EV supply chain was severely disrupted, on the other hand, its solutions could be more widely adopted in new EV designs in the future, in order to reduce the reliance and dependencies on foreign rare earth supplies.
Strategic Partnerships & Major Customers
The company is part of the S&P 500 and Nasdaq 100 indexes. Its products are sold to a diverse pool of business customers, with more than 600+ silicon carbide customers. The top 20 customers represent approximately 40% of total sales, and they buy on average 600 different products each.
Among the recent interesting business relations established in the past few years can be mentioned:
- Strategic collaboration with the Volkswagen Group for next-generation EVs.
- Integration of Onsemi silicon carbide into BMW, Hyundai, Mercedes, and Nio cars.
- Advanced imaging system for ARRI, Ridevision, ZEEKR, and SensiML.
- Collaboration with Ampt for utility-scale solar providers.
Ultimately, the list of existing customers is so large that it includes most of the world’s manufacturers of EVs, computers, appliances, batteries, telecom equipment, data centers, scientific instruments, etc.
Source: ON Semiconductor
Financial Performance & Cash-flow Strategy
By reaching the scale it needed, Onsemi has seen its free cash flow grow very rapidly since 2019, with a goal to reach as much as $3.5-4B by 2027. The company has been redistributing up to 66% of free cash flow to shareholders through share repurchases in Q1 2025.
Source: ON Semiconductor
This is expected to be achievable thanks to still growing gross margins (currently 49%) with production scaling-up in silicon carbide, new products in auto and industrial applications, and optimization of the semiconductor foundries of the company, including ramping up the only US-based 300mm power semiconductor fab.
Source: ON Semiconductor
R&D & Future Innovations
To a wide extent, ON Semiconductor products are the result of a constant string of innovation and improvement over previous designs and manufacturing processes. This is not to say that the company has not several times revolutionized the field, but it has mostly focused on improving existing products and finding new applications for silicon carbide in new industries.
For example, silicon-carbide-based sensors for glucose and blood monitoring could enter into competition with legacy sensors in medical devices thanks to low power consumption.
An advanced depth sensor for industrial applications is also a new field explored by Onsemi with the release of the Hyperlux sensor, able to perform depth sensing up to 30 meters, or four times further than standard indirect time-of-flight (iToF) sensors. This could open new markets for Onsemi in robotics, logistics, drones, agriculture, and farming.
Another potential market could for example include aeronautics, with silicon carbide used by GE in electrical power systems, and avionics (aircraft electronics and computers).
In the long run, more radical innovation could become important, as silicon carbide has for example been used recently by researchers to develop graphene-semiconductors.
Latest ON Stock News and Developments
Conclusion: Sustaining the SiC Leadership
ON Semiconductor is a very important and advanced semiconductor manufacturing company that has early on specialized in non-silicon semiconductor manufacturing, especially silicon carbide.
This has given it an edge, as the sector was relatively small until the boom in EVs. So, Onsemi managed to consolidate into a vertically integrated company all the key technologies related to silicon carbide before EVs created a much larger and quickly growing market.
This resulted in a company that, in its niche, could be compared to the merging into a sole company of the equivalent in the silicon chip industry of the entire supply chain, like merging together Nvidia (NVDA +0.51%), TSMC (TSM +1.2%), ASML (ASML +2.93%), Applied Material (AMAT +2.06%), LAM Research (LRCX +2.69%), etc.
As silicon carbide technology is finding new applications in equally booming sectors, like solar energy and data centers, or even robotics and health monitoring, this gives ON Semiconductor a massive growth potential, even if it were to never grow its market share. Which seems unlikely considering the company’s track record in the past decade.
So, as long as electrification and more connected sensors remain a dominant trend, a phenomenon likely to last well into the 2050s, ON Semiconductor’s growth trajectory seems relatively safe.
The presence of unique Onsemi manufacturing facilities on the US territory should also help shield it from most of the consequences of tariffs. Instead, tariffs could become a potential help for the company’s sales, as industrial and automotive companies in the USA are looking for safer, local alternatives to Chinese suppliers.
(You can also check our Top 10 Semiconductor Equipment Stocks for more ideas on companies in the sector.)