Onsemi (ON) to cut 900 jobs as slowing EV demand hints at sluggish 4Q

Onsemi (NASDAQ: ON), a semi-conductor chip maker with customers in the auto sector, announced Monday that they will be reducing their workforce by 900 jobs as they foresee a sluggish 4Q. The move feeds growing fears in the sector that slowing EV demand has begun to hurt orders for chips.

The announcement sent Onsemi shares tumbling more than 18% on Monday.

Onsemi serves clients such as the European automaker Volkswagen, supplying chips essential for the drive trains of electric vehicles, as well as aiding driver-assistance systems like cameras and sensors.

"We are starting to see pockets of softness, with tier 1 customers in Europe working through their inventory and increasing risk to automotive demand due to high interest rates," said Onsemi CEO Hassane El-Khoury during an earnings call.

Onsemi previously laid off 1,360 employees so far this year, and forecasts revenue of $1.95B to $2.05B, below the street’s expectations of $2.18B.

El-Khoury stated in an interview that the company continues to expect gradual growth in electric vehicle (EV) demand. The job cuts that were revealed on Monday were previously scheduled as a component of a broader strategic shift to internally produce its more lucrative chips and reduce costs by outsourcing other chip manufacturing.

"The timing of it seems like it's a reaction to the macro (economic environment), but the timing has always been part of the strategy," El-Khoury said.

Onsemi estimates that its adjusted diluted EPS for the 4Q will be $1.13 to $1.27, lower than the average estimate of $1.36.

In the third quarter, the company's revenue reached $2.1B, slightly surpassing the projected figure of $2.1B. Additionally, its adjusted earnings amounted to $1.39 per share, outperforming the estimated value of $1.34.

Shares of ON are down 20.41% in afternoon trading on Monday.

By Michael Elkins | [email protected]

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