Onsemi’s EV-Driven Resurgence: A Semiconductor Leader’s Bold Bet on Electrification

The semiconductor industry is in a slump—global demand is down, inventories are bloated, and chip stocks are under pressure. But one company is defying the gloom: Onsemi (ON), a pioneer in power management and sensing solutions, has just delivered a Q1 2025 earnings beat and a bullish Q2 forecast, all thanks to one thing—electric vehicles (EVs). Let’s dive into why this stock could be a powerhouse in the EV revolution.

The Numbers: Outperforming in a Slump

Onsemi reported Q1 2025 revenue of $1.445 billion, a 22% year-over-year drop but a solid beat of analyst estimates ($1.40 billion). The decline is no surprise—semiconductor markets are in a cyclical downturn, and Onsemi’s automotive and industrial segments are no exception to the softness. But here’s the kicker: management guided Q2 revenue to $1.4–1.5 billion, a midpoint above consensus, signaling resilience in its core EV markets.

The real story isn’t just the top line. Free cash flow soared 72% year-over-year to $455 million, and Onsemi returned 66% of that cash to shareholders via buybacks. This isn’t a struggling company—it’s a lean, focused machine.

Why EVs Are the Secret Sauce

Onsemi’s chips aren’t just any semiconductors—they’re the lifeblood of EVs. Its silicon carbide (SiC) technology, which improves efficiency and range in electric vehicles, is a game-changer. Here’s why it matters:

1. SiC: The EV Efficiency Engine
2. SiC semiconductors cut energy loss in EV power systems, enabling faster charging and longer range. Onsemi’s EliteSiC MOSFETs are now in production at its New Hampshire and Czech facilities, supported by a $40 million investment from Magna, a major automotive supplier. This partnership ensures Onsemi’s SiC will power Magna’s eDrive systems for top automakers.
3. In 2023, Onsemi’s SiC revenue quadrupled year-over-year. CEO Hassane El-Khoury calls it a “decade-defining technology.”

1. Design Wins Galore
2. Onsemi’s “strong design win momentum” includes 18% revenue growth in China’s EV market in late 2023, driven by partnerships with local automakers. While Q1 2025 saw a slowdown due to the Chinese New Year and inventory corrections, the long-term pipeline remains robust.
3. The company is also a key supplier to North American EV manufacturers, including Tesla and GM, which are ramping up production despite macroeconomic headwinds.

The Risks: Navigating the Downturn

No investment is without risks. Onsemi faces two major hurdles:

1. Inventory Overhang

2. Automakers are still shedding excess semiconductor inventory, especially in traditional ICE vehicles. This has caused sequential declines in Onsemi’s automotive revenue. But here’s the twist: EVs are not the inventory problem—they’re the solution. As automakers shift to EV production, Onsemi’s SiC demand will surge.

3. Tariff Uncertainty

4. Trade policies, like potential tariffs on semiconductors, are creating hesitation among automakers. But Onsemi’s vertical integration (from SiC production to finished modules) gives it a competitive edge. Unlike competitors reliant on third-party foundries, Onsemi controls its supply chain.

The Bottom Line: Buy the Dip, but Mind the Horizon

Onsemi is playing a long game, and investors should too. Here’s why to consider it:
- Cash Flow King: With $455M in free cash flow (31% of revenue) and a fortress balance sheet ($2.76B in cash), Onsemi can weather downturns and snap up opportunities.
- EV Megatrend: The global EV market is set to hit 35 million units by 2030, per BloombergNEF. Onsemi’s SiC is a must-have for every EV, and its design wins are locking in multiyear revenue.
- Valuation: At 12x forward EV/EBITDA, Onsemi is dirt-cheap relative to peers like Infineon (IFX) or Texas Instruments (TXN).

Action Item: Buy ON on dips below $30, with a target of $40 by end-2025. The EV revolution isn’t slowing—Onsemi’s bets on SiC and automotive electrification will keep it charging ahead.

In a sector littered with losers, Onsemi stands out as a strategic winner. Its focus on EVs isn’t just a theme—it’s a dominant position in a $100 billion market. If you’re bullish on electric vehicles, this is the chip stock to own.