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Economic value added or economic profit is the difference between revenues and costs,where costs include not only expenses, but also cost of capital.

Economic Profit
Net Operating Profit after Taxes (NOPAT)
Cash Operating Taxes
Invested Capital
Cost of Capital
Economic Spread Ratio
Economic Profit Margin

ON Semiconductor Corp., economic profit calculation

US$ in thousands

12 months ended:	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Net operating profit after taxes (NOPAT)¹	2,073,654)	1,991,931)	1,214,151)	262,790)	340,562)
Cost of capital²	24.70%	25.16%	24.04%	22.76%	19.49%
Invested capital³	10,925,400)	9,371,400)	7,560,500)	6,889,500)	6,857,500)

Economic profit⁴	(624,677)	(365,537)	(603,756)	(1,305,294)	(995,937)

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

¹ NOPAT. See details »

² Cost of capital. See details »

³ Invested capital. See details »

⁴ 2023 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 2,073,654 – 24.70% × 10,925,400 = -624,677

The financial performance from 2019 to 2023 is characterized by a substantial increase in operating profitability that has been offset by rising capital requirements and a high cost of capital, resulting in persistent negative economic profit.

Net Operating Profit After Taxes (NOPAT): A strong upward trajectory is observed in NOPAT, which grew from 340,562 thousand US$ in 2019 to 2,073,654 thousand US$ in 2023. The most significant growth occurred between 2020 and 2022, indicating a marked improvement in core operational efficiency and earnings power over the period.
Invested Capital and Cost of Capital: Invested capital expanded consistently, rising from 6,857,500 thousand US$ in 2019 to 10,925,400 thousand US$ in 2023. Simultaneously, the cost of capital exhibited a general upward trend, increasing from 19.49% in 2019 to a peak of 25.16% in 2022, before settling at 24.70% in 2023. The concurrent rise in both the volume of capital deployed and the cost of that capital has created a higher threshold for achieving positive economic value.
Economic Profit Trajectory: Economic profit remained negative throughout the entire analysis period, indicating that the company failed to generate returns in excess of its cost of capital. While a recovery trend was noted between 2020 and 2022, with the deficit narrowing from 1,305,294 thousand US$ to 365,537 thousand US$, this progress reversed in 2023 as the economic profit declined to 624,677 thousand US$. This suggests that the growth in NOPAT has been insufficient to compensate for the expanding capital base and the elevated cost of capital.

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ON Semiconductor Corp., NOPAT calculation

US$ in thousands

12 months ended:	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Net income attributable to ON Semiconductor Corporation	2,183,700)	1,902,200)	1,009,600)	234,200)	211,700)
Deferred income tax expense (benefit)¹	(121,000)	20,900)	90,500)	(114,500)	13,000)
Increase (decrease) in accrued restructuring charges²	13,500)	(6,400)	4,600)	6,000)	(300)
Increase (decrease) in equity equivalents³	(107,500)	14,500)	95,100)	(108,500)	12,700)
Interest expense	74,800)	94,900)	130,400)	168,400)	148,300)
Interest expense, operating lease liability⁴	12,672)	13,803)	7,521)	7,247)	6,156)
Adjusted interest expense	87,472)	108,703)	137,921)	175,647)	154,456)
Tax benefit of interest expense⁵	(18,369)	(22,828)	(28,963)	(36,886)	(32,436)
Adjusted interest expense, after taxes⁶	69,103)	85,876)	108,957)	138,761)	122,020)
Interest income	(93,100)	(15,500)	(1,400)	(4,900)	(10,200)
Investment income, before taxes	(93,100)	(15,500)	(1,400)	(4,900)	(10,200)
Tax expense (benefit) of investment income⁷	19,551)	3,255)	294)	1,029)	2,142)
Investment income, after taxes⁸	(73,549)	(12,245)	(1,106)	(3,871)	(8,058)
Net income (loss) attributable to noncontrolling interest	1,900)	1,600)	1,600)	2,200)	2,200)
Net operating profit after taxes (NOPAT)	2,073,654)	1,991,931)	1,214,151)	262,790)	340,562)

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

¹ Elimination of deferred tax expense. See details »

² Addition of increase (decrease) in accrued restructuring charges.

³ Addition of increase (decrease) in equity equivalents to net income attributable to ON Semiconductor Corporation.

⁴ 2023 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 264,000 × 4.80% = 12,672

⁵ 2023 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 87,472 × 21.00% = 18,369

⁶ Addition of after taxes interest expense to net income attributable to ON Semiconductor Corporation.

⁷ 2023 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 93,100 × 21.00% = 19,551

⁸ Elimination of after taxes investment income.

Net income attributable to ON Semiconductor Corporation: The net income shows a consistent upward trend over the five-year period. Starting from approximately 211.7 million US dollars in 2019, it increased modestly to 234.2 million in 2020. A significant jump occurred in 2021, with net income more than quadrupling to around 1.009 billion. This strong growth continued through 2022 and 2023, reaching about 1.902 billion and 2.184 billion US dollars respectively, indicating robust profitability improvement and operational performance over time.
Net operating profit after taxes (NOPAT): NOPAT values display some fluctuations initially but then show a marked increase from 2021 onward. In 2019, NOPAT was approximately 340.6 million US dollars but declined to 262.8 million in 2020. Starting 2021, there was a substantial rise to around 1.214 billion US dollars. The upward trajectory continued into 2022 and 2023 with NOPAT reaching roughly 1.992 billion and 2.074 billion US dollars respectively. This pattern suggests improved operational efficiency and effective tax management contributing to growing operating profitability.

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ON Semiconductor Corp., cash operating taxes calculation

US$ in thousands

12 months ended:	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Provision (benefit) for income taxes	350,200)	458,400)	146,600)	(59,800)	62,700)
Less: Deferred income tax expense (benefit)	(121,000)	20,900)	90,500)	(114,500)	13,000)
Add: Tax savings from interest expense	18,369)	22,828)	28,963)	36,886)	32,436)
Less: Tax imposed on investment income	19,551)	3,255)	294)	1,029)	2,142)
Cash operating taxes	470,018)	457,073)	84,769)	90,557)	79,994)

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

The financial data reveals notable fluctuations in both the provision for income taxes and cash operating taxes over the five-year period ending December 31, 2023.

Provision (benefit) for income taxes: This item shows significant volatility throughout the periods. In 2019, the provision was a positive value of 62,700 thousand US dollars, indicating income tax expense recognition for that year. In 2020, there was a reversal to a tax benefit of 59,800 thousand US dollars, suggesting the company recognized a tax benefit rather than an expense. Following this, 2021 experienced a sharp increase in tax provision to 146,600 thousand US dollars, more than doubling the 2019 figure. The upward trend continued markedly in 2022, reaching 458,400 thousand US dollars, the highest in the period under review. In 2023, the provision decreased somewhat to 350,200 thousand US dollars, although it remained substantially higher than the values reported in 2019 through 2021.
Cash operating taxes: Cash operating taxes demonstrate an overall increasing trend over the five years. Beginning at 79,994 thousand US dollars in 2019, the amount increased modestly to 90,557 thousand US dollars in 2020. In 2021, there was a slight decline to 84,769 thousand US dollars. However, a pronounced upward shift occurred in 2022, with cash operating taxes escalating dramatically to 457,073 thousand US dollars. This elevated level sustained into 2023 with a further slight increase to 470,018 thousand US dollars.

In summary, both the provision for income taxes and cash operating taxes experienced considerable growth from 2021 onwards, with particularly sharp increases in 2022 and 2023. The provision for income taxes fluctuated between an expense and a benefit in the early years but settled into a notably higher expense level in later years. The cash operating taxes overall trend upward, with a pronounced rise starting in 2022, possibly aligning with the increases in the provision for income taxes, indicating higher taxable income or changes in tax positions and payments during those years.

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ON Semiconductor Corp., invested capital calculation (financing approach)

US$ in thousands

	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Current portion of financing lease liabilities	800)	14,200)	12,700)	—)	—)
Current portion of long-term debt	794,000)	147,800)	160,700)	531,600)	736,000)
Long-term debt, excluding current portion	2,542,600)	3,045,700)	2,913,900)	2,959,700)	2,876,500)
Long-term financing lease liabilities	22,400)	23,000)	10,200)	—)	—)
Operating lease liability¹	264,000)	281,700)	174,900)	147,900)	114,000)
Total reported debt & leases	3,623,800)	3,512,400)	3,272,400)	3,639,200)	3,726,500)
Total ON Semiconductor Corporation stockholders’ equity	7,782,600)	6,188,500)	4,585,400)	3,538,500)	3,301,700)
Net deferred tax (assets) liabilities²	(562,100)	(342,600)	(323,100)	(371,600)	(247,600)
Accrued restructuring charges³	17,900)	4,400)	10,800)	6,200)	200)
Equity equivalents⁴	(544,200)	(338,200)	(312,300)	(365,400)	(247,400)
Accumulated other comprehensive (income) loss, net of tax⁵	45,200)	23,200)	40,600)	57,600)	54,300)
Non-controlling interest	18,000)	18,500)	19,000)	19,600)	22,400)
Adjusted total ON Semiconductor Corporation stockholders’ equity	7,301,600)	5,892,000)	4,332,700)	3,250,300)	3,131,000)
Marketable securities, classified as available-for-sale⁶	—)	(33,000)	(44,600)	—)	—)
Invested capital	10,925,400)	9,371,400)	7,560,500)	6,889,500)	6,857,500)

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

¹ Addition of capitalized operating leases.

² Elimination of deferred taxes from assets and liabilities. See details »

³ Addition of accrued restructuring charges.

⁴ Addition of equity equivalents to total ON Semiconductor Corporation stockholders’ equity.

⁵ Removal of accumulated other comprehensive income.

⁶ Subtraction of marketable securities, classified as available-for-sale.

Total Reported Debt & Leases: The total reported debt and leases showed a decreasing trend from 3,726,500 thousand USD at the end of 2019 to 3,272,400 thousand USD at the end of 2021. However, this downward trend reversed in the subsequent years, increasing to 3,512,400 thousand USD in 2022 and further to 3,623,800 thousand USD in 2023. Overall, the debt levels exhibit a moderate fluctuation with a reduction phase followed by a gradual increase.
Total ON Semiconductor Corporation Stockholders’ Equity: Stockholders' equity demonstrated consistent and considerable growth over the five-year period. Starting at 3,301,700 thousand USD in 2019, equity increased steadily each year, reaching 7,782,600 thousand USD by 2023. This reflects strong capital accumulation and possibly retained earnings or equity issuances that enhanced the company's net worth significantly over time.
Invested Capital: Invested capital showed a gradual upward trajectory throughout the period. Beginning at 6,857,500 thousand USD in 2019, it remained relatively stable through 2020 but increased notably to 7,560,500 thousand USD in 2021, followed by a sharper rise to 9,371,400 thousand USD in 2022 and 10,925,400 thousand USD in 2023. This trend indicates increasing investment in the company's operational assets, which may support business growth and expansion activities.

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ON Semiconductor Corp., cost of capital calculations

Dec 31, 2023

	Capital (fair value)¹	Weights					Cost of capital
Equity²	33,156,430)	33,156,430)	÷	37,417,230)	=	0.89	0.89	×	27.58%	=	24.44%
Long-term debt and financing lease liabilities, including current portion³	3,996,800)	3,996,800)	÷	37,417,230)	=	0.11	0.11	×	2.71% × (1 – 21.00%)	=	0.23%
Operating lease liability⁴	264,000)	264,000)	÷	37,417,230)	=	0.01	0.01	×	4.80% × (1 – 21.00%)	=	0.03%
Total:	37,417,230)					1.00					24.70%

Based on: 10-K (reporting date: 2023-12-31).

¹ US$ in thousands

² Equity. See details »

³ Long-term debt and financing lease liabilities, including current portion. See details »

⁴ Operating lease liability. See details »

Dec 31, 2022

	Capital (fair value)¹	Weights					Cost of capital
Equity²	34,730,220)	34,730,220)	÷	38,692,220)	=	0.90	0.90	×	27.58%	=	24.76%
Long-term debt and financing lease liabilities, including current portion³	3,680,300)	3,680,300)	÷	38,692,220)	=	0.10	0.10	×	4.91% × (1 – 21.00%)	=	0.37%
Operating lease liability⁴	281,700)	281,700)	÷	38,692,220)	=	0.01	0.01	×	4.90% × (1 – 21.00%)	=	0.03%
Total:	38,692,220)					1.00					25.16%

Based on: 10-K (reporting date: 2022-12-31).

¹ US$ in thousands

² Equity. See details »

³ Long-term debt and financing lease liabilities, including current portion. See details »

⁴ Operating lease liability. See details »

Dec 31, 2021

	Capital (fair value)¹	Weights					Cost of capital
Equity²	25,370,322)	25,370,322)	÷	29,510,322)	=	0.86	0.86	×	27.58%	=	23.71%
Long-term debt and financing lease liabilities, including current portion³	3,965,100)	3,965,100)	÷	29,510,322)	=	0.13	0.13	×	2.93% × (1 – 21.00%)	=	0.31%
Operating lease liability⁴	174,900)	174,900)	÷	29,510,322)	=	0.01	0.01	×	4.30% × (1 – 21.00%)	=	0.02%
Total:	29,510,322)					1.00					24.04%

Based on: 10-K (reporting date: 2021-12-31).

¹ US$ in thousands

² Equity. See details »

³ Long-term debt and financing lease liabilities, including current portion. See details »

⁴ Operating lease liability. See details »

Dec 31, 2020

	Capital (fair value)¹	Weights					Cost of capital
Equity²	17,237,223)	17,237,223)	÷	21,319,023)	=	0.81	0.81	×	27.58%	=	22.30%
Long-term debt and financing lease liabilities, including current portion³	3,933,900)	3,933,900)	÷	21,319,023)	=	0.18	0.18	×	2.96% × (1 – 21.00%)	=	0.43%
Operating lease liability⁴	147,900)	147,900)	÷	21,319,023)	=	0.01	0.01	×	4.90% × (1 – 21.00%)	=	0.03%
Total:	21,319,023)					1.00					22.76%

Based on: 10-K (reporting date: 2020-12-31).

¹ US$ in thousands

² Equity. See details »

³ Long-term debt and financing lease liabilities, including current portion. See details »

⁴ Operating lease liability. See details »

Dec 31, 2019

	Capital (fair value)¹	Weights					Cost of capital
Equity²	8,591,272)	8,591,272)	÷	12,863,272)	=	0.67	0.67	×	27.58%	=	18.42%
Long-term debt and financing lease liabilities, including current portion³	4,158,000)	4,158,000)	÷	12,863,272)	=	0.32	0.32	×	4.03% × (1 – 21.00%)	=	1.03%
Operating lease liability⁴	114,000)	114,000)	÷	12,863,272)	=	0.01	0.01	×	5.40% × (1 – 21.00%)	=	0.04%
Total:	12,863,272)					1.00					19.49%

Based on: 10-K (reporting date: 2019-12-31).

¹ US$ in thousands

² Equity. See details »

³ Long-term debt and financing lease liabilities, including current portion. See details »

⁴ Operating lease liability. See details »

ON Semiconductor Corp., economic spread ratio calculation, comparison to benchmarks

	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Selected Financial Data (US$ in thousands)
Economic profit¹	(624,677)	(365,537)	(603,756)	(1,305,294)	(995,937)
Invested capital²	10,925,400)	9,371,400)	7,560,500)	6,889,500)	6,857,500)
Performance Ratio
Economic spread ratio³	-5.72%	-3.90%	-7.99%	-18.95%	-14.52%
Benchmarks
Economic Spread Ratio, Competitors⁴
Advanced Micro Devices Inc.	-29.29%	-28.90%	27.67%	—	—
Analog Devices Inc.	-10.15%	-11.51%	-14.75%	-9.69%	—
Applied Materials Inc.	13.05%	23.03%	18.51%	6.87%	—
Broadcom Inc.	4.75%	3.50%	-5.73%	-10.95%	—
Intel Corp.	-20.02%	-13.23%	3.35%	—	—
KLA Corp.	19.95%	22.36%	10.81%	—	—
Lam Research Corp.	2.02%	17.05%	12.38%	—	—
Micron Technology Inc.	-29.79%	-2.16%	-6.77%	-12.20%	—
NVIDIA Corp.	-16.49%	25.71%	6.18%	—	—
Qualcomm Inc.	0.07%	26.51%	23.91%	8.98%	—
Texas Instruments Inc.	12.26%	32.84%	31.47%	—	—

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

¹ Economic profit. See details »

² Invested capital. See details »

³ 2023 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × -624,677 ÷ 10,925,400 = -5.72%

⁴ Click competitor name to see calculations.

Analysis of economic value metrics indicates a persistent period of negative economic profit and a negative economic spread ratio from 2019 through 2023. While the magnitude of value destruction fluctuated, the overall trend suggests a struggle to generate returns that exceed the cost of capital despite a significant and steady increase in the capital base.

Economic Profit: Economic profit remained negative throughout the analyzed period, reaching its lowest point in 2020 at -1,305,294 thousand USD. A recovery trend followed, with losses narrowing significantly to -365,537 thousand USD by 2022. However, this improvement was reversed in 2023, as economic profit declined to -624,677 thousand USD.
Invested Capital: A consistent upward trajectory is observed in invested capital, which rose from 6,857,500 thousand USD in 2019 to 10,925,400 thousand USD in 2023. This represents a substantial expansion of the capital base, indicating aggressive investment in assets over the five-year window.
Economic Spread Ratio: The economic spread ratio mirrors the movements of economic profit, remaining negative across the entire period. The ratio deteriorated to -18.95% in 2020 but trended toward zero, reaching a peak of -3.90% in 2022. The subsequent shift to -5.72% in 2023 indicates that the return on invested capital once again diverged further from the cost of capital.

The evidence suggests a pattern of capital expansion that has not yet resulted in positive economic value added. Although there was a notable improvement in capital efficiency between 2020 and 2022, the results from 2023 indicate a regression in the economic spread, signaling continued value erosion relative to the cost of funding.

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ON Semiconductor Corp., economic profit margin calculation, comparison to benchmarks

	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Selected Financial Data (US$ in thousands)
Economic profit¹	(624,677)	(365,537)	(603,756)	(1,305,294)	(995,937)
Revenue	8,253,000)	8,326,200)	6,739,800)	5,255,000)	5,517,900)
Performance Ratio
Economic profit margin²	-7.57%	-4.39%	-8.96%	-24.84%	-18.05%
Benchmarks
Economic Profit Margin, Competitors³
Advanced Micro Devices Inc.	-74.75%	-71.67%	10.43%	—	—
Analog Devices Inc.	-36.44%	-43.15%	-94.78%	-31.50%	—
Applied Materials Inc.	8.75%	13.30%	11.81%	5.22%	—
Broadcom Inc.	8.31%	6.55%	-13.49%	-30.22%	—
Intel Corp.	-34.00%	-18.61%	3.75%	—	—
KLA Corp.	15.85%	18.90%	10.66%	—	—
Lam Research Corp.	1.77%	12.58%	9.98%	—	—
Micron Technology Inc.	-102.50%	-3.70%	-11.32%	-24.08%	—
NVIDIA Corp.	-13.05%	17.23%	4.83%	—	—
Qualcomm Inc.	0.06%	17.66%	14.40%	6.77%	—
Texas Instruments Inc.	15.81%	28.80%	28.15%	—	—

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

¹ Economic profit. See details »

² 2023 Calculation
Economic profit margin = 100 × Economic profit ÷ Revenue
= 100 × -624,677 ÷ 8,253,000 = -7.57%

³ Click competitor name to see calculations.

The analysis of economic value added reveals a consistent trend of negative economic profit from 2019 through 2023, indicating that the company failed to generate returns exceeding its cost of capital throughout the period. However, a distinct recovery cycle is observable between 2020 and 2022, followed by a slight regression in 2023.

Revenue Growth Dynamics: Revenue followed a general upward trajectory, increasing from 5.52 billion US dollars in 2019 to 8.25 billion US dollars in 2023. Following a slight dip in 2020, substantial growth was recorded in 2021 and 2022, reaching a peak of 8.33 billion US dollars before plateauing in the final year of the analysis.
Economic Profit Trajectory: Economic profit remained negative across all five years, with the most significant value destruction occurring in 2020 at negative 1.31 billion US dollars. A period of improvement followed, with the deficit narrowing to negative 365.5 million US dollars by 2022. This progress was partially offset in 2023, as economic profit widened again to negative 624.7 million US dollars.
Economic Profit Margin Performance: The economic profit margin demonstrated significant volatility, hitting a low of -24.84% in 2020. A marked improvement was observed over the next two years, with the margin narrowing to -4.39% by 2022, suggesting a period of increased capital efficiency relative to revenue. The margin subsequently deteriorated to -7.57% in 2023, indicating that the cost of capital once again exerted more pressure on the company's operational returns.

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ON Semiconductor Corp. (NASDAQ:ON)

Economic Value Added (EVA)

Economic Profit

Net Operating Profit after Taxes (NOPAT)

Cash Operating Taxes

Invested Capital

Cost of Capital

Economic Spread Ratio

Economic Profit Margin