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ON Semiconductor Navigates Near-Term EV Demand Slowdown, Eyes Long-Term Growth in SiC Chips

Despite a slowdown in EV demand, ON Semiconductor's focus on silicon carbide chips and diverse product range sets it up for future growth. Its stock offers a margin of safety for investors.

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ON Semiconductor Navigates Near-Term EV Demand Slowdown, Eyes Long-Term Growth in SiC Chips

ON Semiconductor, a global supplier of semiconductor components, is facing near-term challenges due to a slowdown in electric vehicle (EV) and industrial demand. However, the company's exposure to silicon carbide (SiC) chips used in EVs and EV charging, along with its diverse product portfolio, positions it well for long-term growth.

ON Semiconductor's customer base primarily comprises automotive, industrial, communications, and consumer electronics industries. The company provides power and sensing solutions, with automotive accounting for 55% of its business. Its product portfolio includes power semiconductors, intelligent sensors, and analog/mixed-signal integrated circuits, catering to a wide range of electronic systems.

The company has key exposure to SiC chips, which are crucial for EVs and EV charging. ON Semiconductor is also an Nvidia partner in developing next-generation data centers. Despite these growth opportunities, ON Semiconductor is currently grappling with a slowdown in demand due to a decrease in EV and industrial activity. However, EVs remain the long-term growth market in the auto industry, presenting significant opportunities for the company.

While ON Semiconductor is navigating near-term challenges, its exposure to SiC chips and diverse product portfolio offer long-term growth prospects. The company's stock, trading at slightly over 14 times the Wall Street analyst consensus for free cash flow in 2025, provides a margin of safety for investors. Despite not being included in The Motley Fool's Stock Advisor list of the 10 best stocks to buy now, ON Semiconductor's strategic positioning in the semiconductor industry makes it an interesting watch for investors.

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