ON Semiconductor Corporation

Good day, and thank you for standing by. Welcome to the OnSemi third quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the call over to Parag Agarwal, Vice President of Investor Relations and Corporate Development. Please go ahead.

Parag Agarwal, Vice President of Investor Relations and Corporate Development Thank you, Tanya. Good morning, and thank you for joining OnSummit's Third Quarter 2024 Quarterly Results Conference Call. I am joined today by Hassan Al 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.ownsemi.com a replay of this webcast along with our 2024 third quarter's earnings release 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 is posted on the investor relations section of our website Our earnings release and this presentation include certain non-GAAP financial measures. Reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures and a discussion of certain limitations when using non-GAAP financial measures 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 will make projections or other forward-looking statements regarding future events or the future financial performance of the company. 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 materially from our forward-looking statements, are described in our most recent Form 10-K, from 10Qs and other filings with the Securities and Exchange Commissions, and in our earnings release for the third quarter of 2024. Our estimate or other forward-looking statements might 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. Let me turn it over to Hassan. Hassan?

Thank you, Parag. Good morning, and thanks to everyone for joining us on the call. Our third quarter results once again demonstrated the structural changes we have made to the business with revenue, gross margin, and earnings per share all above the midpoint of our guidance. With a sharp focus on execution and operational excellence, we have delivered on our commitments amid continued softness in the markets. Over the last several quarters, we've talked about an L-shaped recovery, and as expected, the demand environment remains muted with ongoing inventory digestion and slow end demand. Our outlook for all markets remains unchanged as uncertainty persists among our customers. Automotive continues to be soft with slowing EV sell-through. Industrial, which slowed first, has not broadly recovered except for pockets in utility-scale solar and aerospace and defense. Regionally, China and Japan are recovering with strength in XEVs, but North America and Europe remain soft in both automotive and industrial. Despite the current slowdown, we are confident in our strategy. We are in the markets that matter, the fastest growing segments of the automotive, industrial, and AI data center that will continue to outpace the growth of the semiconductor market overall, and we are committed to delivering value to our customers through product and system level innovation. The breadth and performance of our portfolio continues to be a differentiator, enabling us to optimize energy efficiency for our customers' applications as a one-stop source for intelligent power and sensing solutions. In Q3, our silicon carbide revenue increased sequentially, driven by utility-scale solar and share gains in China BEVs. Outside of China, although programs went into production, the sell-through is expected to be below our forecast for the second half of this year. We will continue to cautiously monitor and demand to avoid building inventory on our customers' shelves that would impact 2025. For the full year, 2024, we don't expect meaningful market growth as third-party reports would suggest. We expect our silicon carbide revenue to be in the low to mid single-digit growth over 2023. On the technology development front, we have qualified our 200-millimeter M3 silicon carbide ahead of schedule. Our 8-inch wafers are running in the fab at 350 micron thickness, and yields are equivalent to those on our 6-inch wafers. We are sampling from both internal and external sources for substrates. We remain very deliberate with our silicon carbide strategy. We are focused on vertically integrating up where our advanced packaging solutions deliver system optimization for our customers. We will participate where we are differentiated and where our margin levels match the value we provide to our customers. In automotive, China is driving the pace of innovation and leading the transition to 800-volt architectures, where silicon carbide is critical to enabling faster charging, extended range, and better energy efficiency in vehicles. Our 1,200-volt M3E silicon carbide is well-positioned to be used in China's extended-range electric vehicles as they transition to 800-volt architectures where a small internal combustion engine can recharge the battery. We expect to exit the year with approximately 50% of China's best silicon carbide market share based on our design-win activity as we continue to broaden our penetration with the top OEMs. In industrial, we lead the market with our silicon carbide portfolio. Our industrial SICK customer count over the last four quarters increased 17% as compared to the previous four quarters. Beyond silicon carbide, we have been investing in the performance of our power portfolio to address emerging trends in renewable energy. Global solar installations are expected to reach 552 gigawatts in 2024, versus 433 gigawatts in 2023 at a 27% year-on-year increase, and global energy storage system installation are expected to reach 178 gigawatts with a year-over-year increase of 69%. We continue to gain momentum in these markets based on the leading performance and power density realized using our high-density F5BP IGBT and hybrid SICK and IGBT modules we announced in the quarter. We are designed in with the four of the top five utility scale manufacturers with our latest generation of FieldStop 7 modules delivering application optimized solutions that increase power density and efficiency with voltages ranging from 650 to 1200 volts. Our intelligent sensing business grew 11% quarter over quarter with strength in ADAS and industrial imaging across a range of applications, such as machine vision, robotics, and scanning. We are proliferating our portfolio to access new industrial applications, enabling our customers to select and optimize a feature set for their needs. Over the last year, we have released 10 new image sensors across four product families, and we are getting traction in applications that include medical imaging, biometrics, autonomous mobile robots, and automated guided vehicles, to name a few. Our 5- and 8-megapixel HyperLux LP image sensors, for example, are an excellent choice for entry-level 4K video surveillance camera with industry-leading low power, low light sensitivity, and wake-on motion. In 2025, we plan to introduce a new family of image sensors to further broaden our offerings. We've also received positive feedback from our customers and channel partners on this weird technology we acquired last quarter. This differentiated technology enables us to expand our industrial offering into agriculture, medical imaging, inspection, and aerospace and defense applications. In data centers, we have a tremendous opportunity as we expect the power delivery market for enterprise, cloud, and AI servers to double from $2.2 billion in 2024 to $4.4 billion by 2028. As power requirements in racks continue to scale from 40 kilowatts to 120 kilowatts, we expect our addressable content per rack to continue to increase. We have invested in this space through the downturn, delivering a silicon and silicon carbide portfolio capable of meeting the ever increasing demands of AI data centers across the entire power tree. We have released multi-phase controllers, which combine with our industry-leading smart power stages to deliver full vCore solutions to power NVIDIA and ARM-based CPUs. We continue to gain traction with our T10 power trench MOSFETs, eFuse, point-of-load, and vCore products, securing design wins with three of the top four hyperscalers in North America, which are expected to contribute to revenue in 2025. We have also been investing to broaden our portfolio of analog mixed signal products, and we look forward to Electronica next month when we plan to share more detail about our new portfolio. Let me now turn it over to Thad to give you more details on our results.