View Annual Report
Total Page:16
File Type:pdf, Size:1020Kb
Providing Energy Efficient Innovations ON Semiconductor (Nasdaq: ON) is driving energy efficient innovations, empowering customers to reduce global energy use. The company is a leading supplier of semiconductor-based solutions, offering a comprehensive portfolio of energy efficient power management, analog, sensors, logic, timing, connectivity, We Are discrete, SoC and custom devices. The company’s products help engineers solve ON Semiconductor their unique design challenges in automotive, communications, computing, consumer, industrial, medical, aerospace and defense applications. ON Semiconductor operates a responsive, reliable, world-class supply chain and quality program, a robust compliance and ethics program, and a network of manufacturing facilities, sales offices and design centers in key markets throughout North America, Europe and the Asia Pacific regions. For more information, visit http://www.onsemi.com • Follow @onsemi on Twitter: www.twitter.com/onsemi • Follow @安森美半导体 on Weibo: www.weibo.com/onsemiconductor We Are ON Semiconductor ON Semiconductor delivered a record-setting year in 2016. Despite unfavorable macroeconomic environment, increased market consolidation and challenging industry conditions, we delivered record revenue and free cash flow. Letter to Last year, ON Semiconductor acquired Fairchild Semiconductor for $2.5 billion. By combining the two companies, Stockholders ON Semiconductor created a global power management leader and expanded its reach into the high and medium voltage power management market. With a product portfolio covering the entire voltage spectrum, ON Semiconductor has become increasingly important for its customers and partners. Our results for the fourth quarter of 2016 provide clear, early evidence of a successful integration of Fairchild and validate our strategic and financial rationale for the acquisition. We are also tracking significantly ahead of our planned synergy targets for Fairchild. With a diverse product portfolio of market-leading products, a highly competitive global manufacturing footprint and resilient customer relationships, ON Semiconductor is well positioned in its key focus markets. We continue to invest in our infrastructure, scale, technology and talent, which are yielding strong results as evidenced by our momentum and share gains in various end-markets. Our growth drivers remain intact, and we are well positioned to continue outperforming the industry in the coming year. Our design win pipeline continues to grow, driven by our innovative products in the automotive, industrial and communications end-markets. Examples of these products include power integrated modules, USB Type-C, image sensors for advanced driver assistance systems (ADAS) and industrial markets, LED lighting for the automotive market, server and cloud power management and other power management, analog and sensor products for our strategic end-markets. Sharp focus on strategic markets During the past year, we maintained our sharp focus on our strategic markets and outgrew the market in automotive, industrial and mobile markets. Total revenues for 2016 were $3,906.9 million, an increase of approximately 12 percent from $3,495.8 million in 2015. These three strategic focus end-markets comprised 76 percent of our total annual revenue for 2016. Automotive, industrial and communications contributed approximately 34 percent, 22 percent and 20 percent of revenue, respectively, in 2016. Consumer and computing each contributed 12 percent of revenue in 2016. As automotive, industrial and mobile markets are anticipated to grow faster than the overall semiconductor market in the next few years, ON Semiconductor will continue to invest in these areas to drive growth and profitability. The portfolio of our products and technologies for automotive applications allows us to address almost every electronic system in a modern vehicle, including body and interior applications, safety systems, lighting, fuel efficiency and emission reduction. Our momentum in CMOS image sensors for automotive application remained intact driven by steep adoption of ADAS and viewing cameras. We are leveraging our leadership in automotive image sensors to expand into adjacent areas such as power management for ADAS systems and are investing in radar technologies. Our design win pipeline for automotive continues to grow as we target new applications in fast growing segments of the market. We also continue to grow our presence with a broad range of automakers through share gains in existing products and applications. ON Semiconductor continues to excel in the industrial market. Our momentum continues in the machine vision market with our Python line of image sensors, and we are seeing a strong demand for our power integrated modules for the solar market. We saw noticeable strength in our medical imaging business as we closed the year. The addition of medium and high voltage MOSFETs and IGBTs from Fairchild will help accelerate our growth in the industrial market. In the smartphone market, we benefitted from the ramp of new platforms by global and Chinese OEMs. We are seeing increasing adoption of fast charging and USB Type-C in the smartphone market, and we are well positioned to benefit from accelerated penetration of these technologies. We are leveraging our relationships in the smartphone ecosystem to cross-sell Fairchild’s products, and customer reception of our combined portfolio has been favorable. Strong financial performance Our performance last year was strong. We delivered strong free cash flow performance in 2016 with year-over-year growth of approximately 85 percent. During 2016, our stock price appreciated by approximately 30 percent. The Fairchild integration is off to a solid start and progress thus far has exceeded our expectations. Customer interest in the portfolio of the combined company appears to be very strong, and we are seeing early evidence of positive revenue synergies. We expect to generate strong free cash flow and plan to aggressively de-lever our balance sheet. World’s Most Ethical Company® This year, we received the coveted World’s Most Ethical Company® designation from the Ethisphere Institute for a second year in a row. Ethisphere is a global leader in defining and advancing the standards of ethical business practices. We attribute this prestigious recognition to our long standing and active commitment to aligning our business objectives with ethical stewardship across the entire organization of more than 30,000 employees in 31 countries. Our principles of compliance, ethics and corporate social responsibility are modeled from the top and instilled in each employee in accordance with ON Semiconductor’s core values of integrity, respect and initiative. This commitment results in trust from customers and partners, who count on us to be honest and equitable, even in the toughest of times. Goals in the coming year 2017 is expected to be a pivotal year for ON Semiconductor. Following the close of Fairchild Semiconductor, ON Semiconductor is positioned as a power management market leader with over 84,000 products and technologies and serving a broad range of end-markets and applications. Realizing synergies from the acquisition of Fairchild, which is generating substantial value for our customers, stockholders and employees, remains a top priority for the company. During 2017, we will continue to work on improving our operating costs in order to maintain our competitiveness and to deliver strong financial results. We will build upon our momentum in the automotive, industrial and mobile end-markets and continue our efforts to increase our share in these markets, where our growth has outpaced the industry. We expect that design wins and new products will drive continued success in 2017. Generating stockholder value remains a key priority for ON Semiconductor. We will continue to generate stockholder value through strong operating results and diligent financial policies. This has been a top priority for Dan McCranie in his many years of service leading the Board of Directors and will remain a focus of Alan Campbell, who will succeed Mr. McCranie as Chair at the annual meeting. We would like to thank our employees for supporting our company's ethical framework and for their tremendous operational efficiencies, and our stockholders, customers, partners and suppliers for their continued support! Keith D. Jackson J. Daniel McCranie President and CEO Chairman of the Board ON Semiconductor (Retiring May 2017) ON Semiconductor Helping Customers Solve Their Unique Design Challenges ON Semiconductor works closely and collaboratively with its customers to solve their unique design challenges using innovative technologies, robust designs, and energy efficient products and solutions. The company operates a global network of Solutions Engineering Centers (SECs), on-site customer design facilities, and applications-focused design and test labs, all supported by global teams of field applications engineers working to meet the needs of an expanding customer base. Empowering Design Engineers to Reduce Global Energy Use ON Semiconductor has established itself as a market leader in high efficiency power solutions for automotive, high performance power conversion, industrial, wired and wireless communications, and computing applications. By working closely with associations, industry standards organizations, and government entities such as ENERGY STAR®, the China National Institute of Standardization, and the European Energy