ON Semiconductor Corporation

Ladies and gentlemen, thank you for standing by and welcome to OnSemi first quarter 2022 earnings conference call. At this time, all participants are in listen-only mode. After the presentation, there will be a question and answer session. To participate, simply press star 1 on your telephone. And please be advised that today's program is being recorded. I would now like to hand the conference over to Parag Awarwal, Vice President of Investor Relations, and corporate development. Please go ahead.

Thank you, Carmen. Good morning, and thank you for joining OnSummit's First Quarter 2022 Quarterly Results Conference Call. I'm joined today by Hassan El Khoury, our President and CEO, and Pat Tran, our CFO. This call is being webcast on the Investor Relations section of our website at www.onsummit.com. A replay of this webcast, along with our 2022 first quarter earning series, will be available on our website approximately one hour following this conference call, and the recorded webcast will be available for approximately 30 days following this conference call. Additional information related to our end markets, business segments, geographies, channel, share count, and 2022 earnings fiscal calendar is posted on the investor relations section of our website. Our earnings list and this presentation include certain non-GAAP financial measures. Reconciliation of these non-GAAP financial measures to the most directly comparable measures under GAAP are included in our earnings release, which is posted separately on our website in the investor relations section. During the course of this conference call, we'll make projections or other forward-looking statements regarding future events or the future financial performance of the company. The words believe, estimate, project, anticipate, intend, may, expect, will, plan, should, or similar expressions are intended to identify forward-looking statements. We wish to caution that such statements are subject to risk and uncertainties that could cause actual events or results to differ materially from projections. Important factors that can affect our business, including factors that could cause actual results to differ from our forward-looking statements, are described in our most recent Form 10-K, Form 10-Q, and other filings with the Securities and Exchange Commission. Additional factors are described in our earnings list for the first quarter of 2022. Our estimates or other forward-looking statements may change and the company assumes no obligation to update forward-looking statements to reflect actual results, change assumptions, or other events that may occur except as required by law. Now, let me turn it over to Hasan. Hasan?

Thank you, Parag, and thank you, everyone, for joining us today. I will start off by saying how extremely proud I am of our team's execution in the first quarter. Our employees worldwide continue to push through challenging times, and their efforts have delivered yet another quarter of outstanding results. We had strong revenue growth of 31% year-over-year, driven by solid performance of our intelligent power and sensing solutions in the automotive and industrial end markets. Key megatrends such as vehicle electrification, ADAS, energy infrastructure, and factory automation are accelerating, and we expect to see sustained growth as we service our customers under long-term supply agreements and expand our pipeline of new intelligent power and sensing products at favorable margins. Along with our strong revenue performance in the first quarter, we achieved a gross margin of 49.4%, an increase of 1,420 basis points from a year ago. This outstanding margin performance was driven by improvements we implemented in 2021 including manufacturing efficiencies, reallocation of capacity to strategic and high-margin products to drive favorable mix shift, and continued elimination of price-to-value discrepancies. On the market environment, despite an overhang of unfavorable macroeconomics and geopolitical dynamics, demand for products in our focus and markets of automotive and industrial continues to be strong. In the first quarter, automotive and industrial grew 8% quarter over quarter, and 42% year-over-year to 65% of our revenue, both delivering record quarters. The growth in our automotive revenue, while SAR was revised down, highlights the strength of our portfolio and supports the content growth we expect per vehicle driven by ADAS and vehicle electrification. Lead times are flat quarter-over-quarter, and we do not see meaningful customer push-outs or increasing cancellation trends. We are fully cognizant of potential risks from inflation, higher interest rates, and ongoing geopolitical tensions. We are monitoring the business environment diligently and have been managing our inventory, manufacturing, and customer engagements to support our long-term financial targets and sustain our gross margin within our target range of 48% to 50%. As of now, the COVID-related lockdowns in China have not had any meaningful impact on our business. However, there is potential risk in the second quarter if the lockdowns extend much longer and our current guidance already accounts for a few percentage points of growth of risk we are seeing at this point. 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 for our customers. We have been making selective investments to expand our capacity in strategic areas and relieve bottlenecks especially in back-end factories for our imaging products. We are improving the efficiency of our factories and are reallocating capacity to strategic products and end markets, allowing us to expand our margin by driving favorable mix shift. We have been able to secure additional capacity from our external manufacturing partners and our qualifying products in our 300-millimeter fab to meet the long-term capacity needs. In 2022, we are on track to ship more than twice the number of 300-millimeter wafers we shipped in 2021, and the continued ramp in our East Fishkill FAB should improve the efficiency of our FAB network over the next few years as we execute our FAB lighter strategy by consolidating our FAB footprint. We have redeployed capacity to strategic higher-margin products, and over the last 12 months, we have exited approximately $200 million in revenue at an average gross margin of 21%, of which $32 million occurred in the first quarter at an average gross margin of 22%. Some of these losses are already being offset with new product revenue, which increased 31% year over year at favorable gross margin and will continue to ramp through 2023 and beyond. Our customer engagement remains strong as we see our increased customer base drive an approximately 100% year-over-year growth in our design wins. This increase is driven by wins in intelligent power and sensing, with design wins for both doubling year-over-year. Our intelligent power and sensing revenue makes up 65% of total revenue, up from 62% a year ago. We are continuing to make progress on our silicon carbide growth and remain on track to more than double our silicon carbide revenue in 2022, as we ramp shipments to customers who have signed long-term supply agreements with us. At this pace, exiting 2023, Onsemi will be on a $1 billion run rate for silicon carbide revenue. In addition to market-leading efficiency of our products, our end-to-end vertically integrated solution in a supply-constrained environment is a compelling and differentiated competitive advantage. I am extremely happy with the progress of our GTAT operation, and since we closed the acquisition, We have already expanded to a second building as we increased our substrate capacity and are still on track to more than quadruple exiting 2022 in support of our LTSA customers and the broader SICK market. From the engineering side, all yields and outputs are meeting our committed production levels, and we are making fast progress on our 200-millimeter substrate development and release to production. We continue to expand our silicon carbide engagement beyond automotive traction and have made inroads into the energy infrastructure market with our power modules. In the first quarter, our revenue for energy infrastructure grew 64% year-over-year, and we secured significant wins for our silicon carbide and silicon power modules with key market leaders. We are currently shipping to seven of the top ten global providers of solar inverters, and we have signed LTSAs with three of the top five players. The energy infrastructure market will be a long-term driver for our business as utility-scale power plant installations are expected to grow worldwide to reduce the climate impact of fossil fuel-based power plants. In the first quarter, our 5G cloud point-of-load revenue and design wins both increased 33% year-over-year as we displaced an incumbent to secure a design win at a leading 5G infrastructure OEM with a new product based on our superior technical performance and security of supply. In cloud power, we secured a major win with our high performance power management solution delivering over 94% of peak energy efficiency. They were adopted by one of the largest cloud providers in the world to power their next generation Intel servers and their data centers refresh and expansion. Our best-in-class energy efficiency, together with supply assurance and technical support, enabled us to secure this win, delivering both market share gains and favorable gross margins in the second half of this year. On the intelligent sensing front, we continue to sustain our momentum in automotive imaging with 44% revenue growth year over year. Our strong presence on most leading ADAS software platforms and broad ecosystem we have built over time have been a key driver of our strong market position. We further strengthen our position in the ADAS ecosystem through a key win with a leading ADAS software platform provider in China. We expect this platform to proliferate at all OEMs in China with our content in excess of $150 per vehicle. 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 in the next five years. In fact, we have designed in 28 cameras per vehicle in a level five autonomous vehicle already. Our industry leading eight megapixel camera has already been adopted by eight car OEMs and will quadruple in revenue in 23 over 22. In addition to ADAS applications in light vehicles, we are seeing traction for our image sensors in the industrial market for warehouse automation, autonomous delivery robot, and agriculture applications. In the first quarter, we secured a win for our image sensors for use in robotic drive units in fulfillment centers with $70 of imaging content ramping in 2023 at a leading e-commerce player. In addition, we continue to win new designs in the growing intelligent agribusiness segment for improving crop yields, which uses 36 image sensors per machine with revenue starting this year. Customers select our sensors based on superior imaging performance, market-leading global shutter efficiency, and a strong ecosystem comprising of players that provide supporting software and hardware solutions to rapidly enable complete imaging solutions. Our intelligent sensing products are long-lived and design wins tend to be sticky. Awarded projects typically span multiple years with lifetime in excess of 15 years as customer value the programmability and leverage their software architecture over multiple platforms and end products. This longer lifecycle and sticky nature of our products gives us greater revenue stability and visibility. Now I will turn the call over to Thad to provide additional details on our financials and guidance. Thad?