Analysis of Reportable Segments
ON Semiconductor Corp. operates in 3 segments: Power Solutions Group (PSG); Advanced Solutions Group (ASG); and Intelligent Sensing Group (ISG).
Segment Profit Margin
ON Semiconductor Corp., profit margin by reportable segment
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Power Solutions Group (PSG) | 47.46% | 47.39% | 38.33% | 30.76% | 35.00% |
| Advanced Solutions Group (ASG) | 45.49% | 51.90% | 43.99% | 38.24% | 40.30% |
| Intelligent Sensing Group (ISG) | 48.67% | 47.65% | 37.79% | 32.19% | 36.37% |
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).
Profit margins across all reportable segments exhibited a synchronized contraction in 2020, followed by a period of significant expansion through 2022. By 2023, a divergence in performance is observable, as two segments maintained elevated margins while one experienced a moderate decline.
- Power Solutions Group (PSG)
- A profit margin decline to 30.76% was recorded in 2020, followed by a period of robust recovery. Between 2021 and 2022, the margin expanded from 38.33% to 47.39%, eventually stabilizing at 47.46% by the end of 2023.
- Advanced Solutions Group (ASG)
- This segment showed a steady increase in profitability from 38.24% in 2020 to a peak of 51.90% in 2022. However, a subsequent contraction occurred in 2023, with the margin falling to 45.49%, indicating a reversal of the previous growth trend.
- Intelligent Sensing Group (ISG)
- Following a low of 32.19% in 2020, the segment demonstrated consistent and accelerated margin expansion. Profitability rose from 37.79% in 2021 to 48.67% in 2023, making it the most profitable segment by the end of the analyzed period.
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Segment Profit Margin: Power Solutions Group (PSG)
ON Semiconductor Corp.; Power Solutions Group (PSG); segment profit margin calculation
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | |||||
| Segment gross profit | 2,111,300) | 1,994,300) | 1,318,300) | 801,700) | 976,000) |
| Revenue from external customers | 4,449,000) | 4,208,200) | 3,439,100) | 2,606,100) | 2,788,300) |
| Segment Profitability Ratio | |||||
| Segment profit margin1 | 47.46% | 47.39% | 38.33% | 30.76% | 35.00% |
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 2023 Calculation
Segment profit margin = 100 × Segment gross profit ÷ Revenue from external customers
= 100 × 2,111,300 ÷ 4,449,000 = 47.46%
The Power Solutions Group demonstrated a strong upward trajectory in both top-line revenue and profitability between 2019 and 2023. Despite a brief contraction in 2020, the segment achieved substantial scale and significant margin expansion over the analyzed period.
- Revenue Growth Trends
- Revenue from external customers increased from US$ 2,788.3 million in 2019 to US$ 4,449.0 million in 2023. After a slight decline in 2020 to US$ 2,606.1 million, the segment experienced aggressive growth, particularly between 2020 and 2022, before stabilizing toward the end of the period.
- Segment Gross Profit Performance
- Gross profit followed a trajectory consistent with revenue, rising from US$ 976.0 million in 2019 to US$ 2,111.3 million by 2023. The total gross profit more than doubled over the five-year span, reflecting a strong increase in absolute earnings.
- Profit Margin Evolution
- The segment profit margin exhibited a volatile but generally positive trend. Following a decrease to 30.76% in 2020, margins expanded to 38.33% in 2021 and surged to 47.39% in 2022. The margin remained nearly flat into 2023, closing at 47.46%, indicating a period of stabilization at a significantly higher efficiency level than in previous years.
The simultaneous increase in revenue and profit margins suggests a shift toward higher-value product mixes or enhanced pricing power. The sharp acceleration in margin growth between 2021 and 2022 marks a pivot toward significantly improved operational profitability, which was maintained through the end of 2023.
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Segment Profit Margin: Advanced Solutions Group (ASG)
ON Semiconductor Corp.; Advanced Solutions Group (ASG); segment profit margin calculation
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | |||||
| Segment gross profit | 1,131,900) | 1,474,500) | 1,055,600) | 730,500) | 794,800) |
| Revenue from external customers | 2,488,500) | 2,841,300) | 2,399,900) | 1,910,400) | 1,972,300) |
| Segment Profitability Ratio | |||||
| Segment profit margin1 | 45.49% | 51.90% | 43.99% | 38.24% | 40.30% |
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 2023 Calculation
Segment profit margin = 100 × Segment gross profit ÷ Revenue from external customers
= 100 × 1,131,900 ÷ 2,488,500 = 45.49%
The Advanced Solutions Group (ASG) experienced a period of significant growth in both scale and profitability between 2020 and 2022, followed by a contraction in 2023. The segment demonstrated a strong ability to expand margins during the growth phase, although recent performance indicates a correction in both top-line revenue and operational efficiency.
- Revenue Performance
- Revenue from external customers remained relatively stable between 2019 and 2020, with a slight decrease from $1.97 billion to $1.91 billion. A period of rapid expansion followed, with revenue climbing to $2.40 billion in 2021 and peaking at $2.84 billion in 2022. This upward trajectory reversed in 2023, as revenue declined to $2.49 billion.
- Gross Profit Trends
- Segment gross profit mirrored the revenue trend, declining to a low of $730.5 million in 2020 before ascending sharply to $1.06 billion in 2021 and $1.47 billion in 2022. In 2023, gross profit fell to $1.13 billion, aligning with the broader reduction in segment revenue.
- Profit Margin Analysis
- The segment profit margin exhibited notable volatility over the five-year period. After a dip to 38.24% in 2020, the margin improved steadily, reaching a peak of 51.90% in 2022. This suggests a period of enhanced pricing power or optimized cost structures. Although the margin contracted to 45.49% in 2023, it remains higher than the levels recorded in 2019 and 2020, indicating a sustained improvement in the segment's baseline profitability relative to the start of the analyzed period.
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Segment Profit Margin: Intelligent Sensing Group (ISG)
ON Semiconductor Corp.; Intelligent Sensing Group (ISG); segment profit margin calculation
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | |||||
| Segment gross profit | 640,300) | 608,400) | 340,400) | 237,700) | 275,400) |
| Revenue from external customers | 1,315,500) | 1,276,700) | 900,800) | 738,500) | 757,300) |
| Segment Profitability Ratio | |||||
| Segment profit margin1 | 48.67% | 47.65% | 37.79% | 32.19% | 36.37% |
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 2023 Calculation
Segment profit margin = 100 × Segment gross profit ÷ Revenue from external customers
= 100 × 640,300 ÷ 1,315,500 = 48.67%
The Intelligent Sensing Group (ISG) demonstrated significant growth in both scale and profitability between 2019 and 2023. Following a brief contraction in 2020, the segment experienced a period of rapid expansion in revenue and a substantial improvement in operational efficiency, culminating in peak performance metrics by the end of 2023.
- Revenue Growth Trends
- Revenue from external customers showed a slight decline in 2020, dropping from US$ 757.3 million to US$ 738.5 million. This was followed by a strong recovery and accelerated growth, with revenue climbing to US$ 900.8 million in 2021, US$ 1.28 billion in 2022, and reaching US$ 1.32 billion by the end of 2023.
- Gross Profit Performance
- Segment gross profit mirrored the revenue trajectory, decreasing to US$ 237.7 million in 2020 before surging to US$ 640.3 million by 2023. The most substantial increase occurred between 2021 and 2022, during which gross profit increased by approximately 79%, rising from US$ 340.4 million to US$ 608.4 million.
- Profit Margin Expansion
- The segment profit margin exhibited a marked upward trend following a dip to 32.19% in 2020. The margin recovered to 37.79% in 2021 and then expanded sharply to 47.65% in 2022. By December 31, 2023, the margin reached a period high of 48.67%, suggesting significant improvements in cost structure or an increase in the average selling price of the segment's offerings.
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Revenue from external customers
ON Semiconductor Corp., revenue from external customers by reportable segment
US$ in thousands
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Power Solutions Group (PSG) | 4,449,000) | 4,208,200) | 3,439,100) | 2,606,100) | 2,788,300) |
| Advanced Solutions Group (ASG) | 2,488,500) | 2,841,300) | 2,399,900) | 1,910,400) | 1,972,300) |
| Intelligent Sensing Group (ISG) | 1,315,500) | 1,276,700) | 900,800) | 738,500) | 757,300) |
| Total | 8,253,000) | 8,326,200) | 6,739,800) | 5,255,000) | 5,517,900) |
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).
Total revenue exhibited a general upward trajectory between 2019 and 2023, despite a temporary contraction in 2020. After a period of rapid expansion that peaked in 2022, overall revenue stabilized in 2023. This growth period is characterized by a significant shift in the contribution levels of the three reportable segments.
- Power Solutions Group (PSG)
- PSG has emerged as the primary driver of growth and the largest revenue contributor. Following a slight decline in 2020, the segment experienced consistent and substantial growth, increasing from $2.61 billion in 2020 to $4.45 billion by the end of 2023. This represents the most significant absolute increase among all segments, reflecting a strengthening market position.
- Advanced Solutions Group (ASG)
- The ASG segment demonstrated moderate growth between 2020 and 2022, reaching a peak of $2.84 billion. However, this trend reversed in 2023, with revenue declining to $2.49 billion. This contraction indicates increased volatility or a cyclical downturn within this specific business line compared to the other reportable segments.
- Intelligent Sensing Group (ISG)
- ISG maintained a consistent growth pattern from 2020 onward. Revenue rose from $738.5 million in 2020 to $1.32 billion in 2023, with the most pronounced acceleration occurring between 2021 and 2022. Although it remains the smallest segment by total volume, it shows steady upward momentum.
- Revenue Composition and Diversification
- The overall revenue mix has shifted toward a higher concentration in Power Solutions. Total revenue grew from $5.52 billion in 2019 to $8.25 billion in 2023. During this period, PSG's dominance expanded, while ASG's relative contribution to the total revenue pool diminished, particularly following the 2023 decline.
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Segment gross profit
ON Semiconductor Corp., segment gross profit by reportable segment
US$ in thousands
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Power Solutions Group (PSG) | 2,111,300) | 1,994,300) | 1,318,300) | 801,700) | 976,000) |
| Advanced Solutions Group (ASG) | 1,131,900) | 1,474,500) | 1,055,600) | 730,500) | 794,800) |
| Intelligent Sensing Group (ISG) | 640,300) | 608,400) | 340,400) | 237,700) | 275,400) |
| Total | 3,883,500) | 4,077,200) | 2,714,300) | 1,769,900) | 2,046,200) |
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).
Total gross profit exhibited a volatile yet generally upward trajectory between 2019 and 2023. After an initial decline in 2020, total gross profit experienced significant growth, peaking in 2022 at 4,077,200 thousand US dollars before undergoing a slight contraction of approximately 4.7% in 2023.
- Power Solutions Group (PSG)
- This segment has emerged as the primary driver of gross profit. Following a dip in 2020, the PSG segment demonstrated consistent and aggressive growth, increasing from 801,700 thousand US dollars in 2020 to 2,111,300 thousand US dollars by 2023. Notably, it was the only segment to post a year-over-year increase in 2023, strengthening its position as the largest contributor to the total gross profit.
- Advanced Solutions Group (ASG)
- The ASG segment showed a growth pattern similar to the total gross profit, peaking in 2022 at 1,474,500 thousand US dollars. However, this segment experienced a notable decline in 2023, falling to 1,131,900 thousand US dollars. This represents a significant reduction in contribution compared to its 2022 performance, indicating increased volatility or market pressure within this specific business unit.
- Intelligent Sensing Group (ISG)
- While the smallest of the three segments, ISG has shown steady expansion since 2020. Gross profit grew from 237,700 thousand US dollars in 2020 to 640,300 thousand US dollars in 2023. The most substantial growth occurred between 2021 and 2022, where profit nearly doubled, reflecting a positive scaling trend.
- Aggregate Segment Dynamics
- The composition of gross profit has shifted toward the Power Solutions Group. In 2019, the PSG and ASG segments were more closely aligned in their contributions; by 2023, a wider gap developed as PSG's growth outpaced the others. The total gross profit retraction in 2023 is primarily attributable to the performance decline in the Advanced Solutions Group, which offset the gains made by the Power Solutions and Intelligent Sensing groups.
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