ON Semiconductor may not be a household name, but it’s player in semiconductors and a company that I’ve taken special interest in over the last several years due to its increased participation in sectors I focus on (namely autonomous vehicles) and impressive growth (it moved up 23 ranks on the 2019 fastest growing companies list). Recent success aside, it’s important to note that ON Semiconductor did not spring up overnight. As a matter of fact, this coming April it will be entering its 20th year as a public company and I wanted to reflect back on the history.
I took the occasion to talk with ON Semiconductor’s CEO since 2002 Keith D. Jackson to talk a bit about where the company’s been over the last 20 years, where it’s headed, and what its strategy for success is. I wanted to share some of my insights into the scrappy semiconductor manufacturer as it approaches this important 20-year milestone.
ON Semiconductor: A history
ON Semiconductor got its start when it spun off of Motorola as a high-volume, multi-source standard products group. At the time, it was lagging in the technology realm, and the semiconductor industry at large was reeling from the dot com bust. In the early 2000s, ON Semiconductor was nearly broke. Its key focus between 2002 and 2005, according to Keith was to get costs under control, pay its interest payments, and generate cash to grow with. When I asked Keith if there were any product lines ON Semiconductor walked away from, he said no—the company sold everything it could. I think this attitude is a big part of why ON Semiconductor got through the challenging early days to end up where it is today. It adopted an aggressive “play to win” strategy that paid off in big ways. Just how big is evident from its recent entry into the Fortune 500 and the $1 billion milestone it achieved in distribution resales in Q3 2018.
Over the last 20 years, ON Semiconductor grew and expanded the scope of its portfolio significantly, through organic innovation and an impressive series of acquisitions. Nowadays ON Semiconductor’s manufacturing purview includes power, analog, sensor and connectivity solutions across a number of growing fields—automotive, industrial, telecom, consumer, medical, defense, computing and more. Key acquisitions included AMI Semiconductor in 2008, which gave the company exposure in industrial and automotive, Aptina Imaging in 2014, a leader in image sensors, and Fairchild Semiconductor in 2015, which gave the company more medium and high voltage capabilities (think automotive, industrial, telecom and servers).
Another milestone worth noting was the company’s purchase of LSI’s 110nm facility in Gresham, OR, in 2005, which served as a significant runway for manufacturing capacity growth. Previously, the company had been running out of manufacturing capacity. Keith made the point that in the semiconductor industry, scale does matter, and if you’re not able to produce at volume, you will struggle—according to Keith, ON Semiconductor’s production is currently 74 billion parts, so it’s in good shape.
Automotive, as I mentioned earlier, has become one of the company’s primary focus areas in recent years, and one that I’m particularly attuned to. A self-driving vehicle’s ADAS is often segmented into three categories: LiDAR, radar and cameras. LiDAR is utilized to detect medium-distance objects, providing a high-res map of the objects surrounding the vehicle. Radar, on the other hand, is used for longer distances and velocity measurements. Cameras are typically utilized for short and medium distances. Part of ON Semiconductor’s self-driving vehicle value prop is that it is currently the only manufacturer that makes all three of these types of devices. The company has gained a foothold in the industry, and its chips can be found within several of the biggest self-driving ecosystems (Intel’s Mobileye GO and EyeQ, NVIDIA’s Drive PX and PX2, and Baidu Apollo).
Another recent noteworthy development for ON Semiconductor was the deal it struck with GLOBALFOUNDRIES this past May to take over ownership of Globalfoundries’ 300mm Fab 10 in East Fishkill, NY. The deal includes a technology transfer agreement that will purportedly have ON Semiconductor making its own 300mm wafers by 2020. This move should aid the company in its efforts in automotive electrification, 5G, cloud computing and more.
When evaluating businesses, in addition to product portfolios, I always like to take a look at the softer stuff—corporate social responsibility initiatives, company culture, and the like. ON Semiconductor’s company culture is based on a three-pronged approach—respect, integrity, and initiative. Respect revolves around the way employees and management treat each other in the workplace, with a respect for differences in backgrounds and experiences. Integrity revolves around the ethics and quality standards the company sets for itself in products and individual conduct. Initiative refers to the company’s valuing of people with positive, can-do attitudes. In addition, the company puts a strong emphasis on environmental sustainability, responsible sourcing of materials, philanthropy, and encouraging employee volunteerism.
I believe ON Semiconductor’s commitment to all these values appears to be more than just lip service. It’s made numerous lists and pulled down various awards, including being ranked number 42 on Barron’s 2018 list of the 100 Most Sustainable Companies in the U.S., inclusion on the North American Dow Jones Sustainability Index, certified gold rating on the EcoVadis Assessment of CSR initiatives, and drumroll—being named a World’s Most Ethical Company by the Ethisphere Institute for 2016, 2017, 2018 and 2019. In 2019, only three semiconductor companies received this designation.
Clearly ON Semiconductor has a lot to show for its 20 years of existence. Its scrappy and aggressive “play to win” mentality allowed it to succeed early on where many others failed. It invested wisely and shouldered its way into multiple strategic growth markets, such as automotive and industrial, which should continue to pay big dividends for the company as autonomous driving, industrial IoT and other next generation applications continue to take hold. Additionally, judging by the various recognitions it has received, ON Semiconductor’s aggressive growth didn’t come at the expense of the company’s commitment to sustainability and ethics. 20 years in, and ON Semiconductor continues to be going up and to the right.